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NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R.1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5119-14T4
IN THE MATTER OF JOSEPH ISAACSON
AND TOWNSHIP OF HARDYSTON.
_________________________________
Argued December 21, 2016 – Decided February 27, 2017
Before Judges Simonelli, Carroll and Gooden
Brown.
On appeal from the Superior Court of New
Jersey, Law Division, Sussex County, Docket
No. L-0640-12.
Eric L. Harrison argued the cause for
appellant Township of Hardyston (Methfessel &
Werbel, attorneys; Mr. Harrison, of counsel
and on the briefs; Jennifer M. Herrmann, on
the briefs).
Jeffrey D. Catrambone argued the cause for
respondent Joseph Isaacson (Sciarra &
Catrambone, L.L.C., attorneys; Mr. Catrambone,
of counsel and on the brief).
PER CURIAM
Appellant Township of Hardyston (Township) appeals from the
May 20, 2015 Law Division order, which vacated the termination of
respondent Joseph Isaacson from his employment as a police officer,
imposed a ten-day suspension, and reinstated Isaacson with back
pay and benefits. The Township also appeals from the June 10,
2015 order, which awarded Isaacson attorney's fees pursuant to
N.J.S.A. 40A:14-155. We reverse both orders.
I.
The procedural history and factual background of this case
are set forth in our opinion in Isaacson v. Public Employment
Relations Commission, No. A-2991-14, issued simultaneously with
this opinion and incorporated herein. We reiterate some of those
facts and add facts that are pertinent to this appeal.
In 2008, Isaacson began his employment as a police officer
with the Township of Hardyston Police Department (HPD). During
his tenure, he had always been at the top of the HPD's list for
issuing the most summonses.
On May 16, 2012, Isaacson was on duty when he stopped at a
delicatessen on Route 23 in Franklin Borough (Franklin). After
leaving the delicatessen, he proceeded onto Route 23 south in
Franklin, where he saw a vehicle with a cracked windshield turning
onto the roadway. Isaacson followed the vehicle and entered the
license plate number into the mobile data terminal in his patrol
vehicle. After discovering that the driver, Christopher Smith,
had an outstanding warrant and suspended license, Isaacson stopped
the vehicle in the parking lot of a restaurant located in Franklin.
Despite knowing he was in Franklin and that he never observed
Smith's vehicle in Hardyston, Isaacson falsely informed the HPD
2 A-5119-14T4
dispatcher that his location was "23 on the mountain," referring
to a location in Hardyston. Approximately eleven minutes later,
Isaacson falsely informed the HPD dispatcher that he was moving
into the parking lot of the restaurant. When HPD Police Officer
Andrew Norman arrived at the scene, Isaacson twice lied to him
about where he first saw Smith's vehicle.
The HPD has a standard operating procedure (SOP) that
prohibits its police officers from serving or attempting to serve
legal process in another jurisdiction without being accompanied
by an officer from that jurisdiction (the out-of-jurisdiction
SOP). Isaacson requested that an officer from the Franklin Police
Department respond to the scene, but no officer responded.
Isaacson made no further request and, without being accompanied
by a Franklin police officer, issued two summonses to Smith from
the Hardyston Municipal Court, on which he falsely certified that
Smith unlawfully operated his motor vehicle in Hardyston. Isaacson
placed Hardyston municipal codes on the summonses and marked the
word "rural" in the area designation. Isaacson also filed a police
report with the HPD, which falsely stated that the stop occurred
on Route 23 in Hardyston. He also collected bail from Smith for
the outstanding warrant, completed a bail recognizance form, and
submitted the bail form and summonses to the HPD.
3 A-5119-14T4
Suspecting that Isaacson had lied about the location of the
stop, the HPD began an internal affairs investigation. During his
internal affairs interview, Isaacson initially lied about where
he first observed Smith's vehicle and first called in the stop to
the HPD dispatcher. He eventually admitted that he never observed
Smith's vehicle in Hardyston; knew the location of the Hardyston
town line; knew he was in Franklin when he stopped Smith; and knew
he was required to notify the out-of-jurisdiction agency of the
stop, but did not do so.
After the investigation was completed, the Township suspended
Isaacson with pay and charged him with violating several HPD rules
and regulations (HPDRR) and SOPs by: (1) leaving his patrol vehicle
running while unoccupied; (2) operating the mobile data terminal
on his patrol vehicle while driving; (3) serving a warrant on a
person in Franklin without requesting backup from the Franklin
police; (4) lying and/or making a misrepresentation while on a
motor vehicle stop and in connection with an internal affairs
investigation; and (5) intentionally falsifying documents relating
to a motor vehicle stop and arrest in Franklin. The Township
sought Isaacson's termination.
A hearing was held before a neutral hearing officer, who
sustained all of the disciplinary charges against Isaacson. The
hearing officer found that Isaacson: (1) knew the traffic violation
4 A-5119-14T4
he observed occurred outside the boundaries of Hardyston; (2)
admitted he was in another jurisdiction when he observed Smith's
vehicle; and (3) despite knowing he was outside of Hardyston,
still served a summons in Franklin without being accompanied by a
Franklin police officer. The hearing officer concluded that
Isaacson violated the out-of-jurisdiction SOP.
The hearing officer found several instances where Isaacson
lied during both the motor vehicle stop and his internal affairs
interview. The hearing officer determined that despite never
observing Smith's vehicle in Hardyston, Isaacson issued two
Hardyston summonses to Smith. The hearing officer noted it was
undisputed that Isaacson observed Smith's vehicle only in
Franklin, and thus, was legally required to issue appropriate
summonses on a Franklin summons book. The hearing officer also
noted that writing a summons for a violation that occurred outside
Hardyston "would be the equivalent to a false official public
record." The hearing officer also found that Isaacson knowingly
and willfully made false entries on the two summonses. The hearing
officer concluded that Isaacson violated the HPDRR that required
HPD police officers to be truthful at all times whether under oath
or not, and the HPDRR that prohibited HPD police officers from
knowingly and willfully making a false entry in a departmental
report or record.
5 A-5119-14T4
In determining the appropriate penalty, the hearing officer
cited to the Township's Law Enforcement Code of Ethics, which
requires police officers to be honest and exemplary in obeying the
law. The hearing officer concluded as follows:
The evidence, in this case, overwhelmingly
proves Isaacson is no longer true to the
ethics of police service because Isaacson's
conduct is proven, by the preponderance of all
credible evidence presented in this case, to
have violated the honorable calling of being
a law enforcement officer.
Based on the seriousness of Isaacson's
conduct, offering individual penalties for the
sustained charges would be senseless;
therefore, wavering adherence to such a moral
philosophy will earn for Isaacson the
disrespect and ill-support of the public and
once that trust is shattered (as it is in this
case), the only acceptable resolution is
separating the law enforcement officer from
their publically held position. As a result,
Isaacson's actions unthinkably undermined a
fundamental prerequisite for being a law
enforcement officer; honesty. Therefore, the
only acceptable penalty for any irreversible
sworn employee's incredible behavior is
termination.
The Township adopted the hearing officer's decision and
terminated Isaacson, effective September 19, 2012. Following his
termination, Isaacson filed a request with the Public Employment
Relations Commission (PERC) for special disciplinary arbitration
and the appointment of an arbitrator pursuant to N.J.S.A. 40A:14-
150, -209, and -210, and N.J.A.C. 19:12-6.1. On February 18,
6 A-5119-14T4
2013, the arbitrator rendered an order and final decision
sustaining only the less serious charges of leaving a patrol
vehicle running while unoccupied, and operating the mobile data
terminal on the patrol vehicle while driving. The arbitrator
rescinded Isaacson's termination, imposed a ten-day suspension
without pay, and required the Township to immediately reinstate
him with full back pay, rights, and benefits.
On February 21, 2013, Isaacson filed an order to show cause,
seeking temporary restraints and a preliminary injunction to
enforce the arbitration award. The Township opposed the order to
show cause and filed a motion to vacate the arbitration award.
Following a de novo review, the trial judge affirmed the
arbitration award and denied the Township's motion to vacate. On
April 17, 2013, the judge entered an order requiring the Township
to immediately reinstate Isaacson with back pay and full benefits.
On June 27, 2013, the judge entered an order awarding Isaacson
attorney's fees pursuant to N.J.S.A. 40A:14-155.
The Township appealed both orders. We reversed PERC's
appointment of an arbitrator and the arbitration award, and
remanded to PERC to determine whether the matter was arbitrable
under either N.J.S.A. 40A:14-209 or -210. Twp. of Hardyston v.
Isaacson, Nos. A-3425-12 and A-4180-12 (App. Div. July 9, 2014)
(slip op. at 12), certif. denied, 220 N.J. 98 (2014). We also
7 A-5119-14T4
reversed the award of attorney's fees, finding that Isaacson was
not entitled to attorney's fees under N.J.S.A. 40A:14-155 because
he was not acquitted of all charges. Id. at 13-14. On remand,
PERC determined that Isaacson was not eligible for arbitration and
dismissed his request for arbitration. We affirmed PERC's decision
in the opinion filed simultaneously with this opinion. See
Isaacson v. Pub. Emp't Relations Comm., supra, (slip op. at 18).
The matter returned to the same judge, who held a hearing at
which Isaacson testified. On direct examination, Isaacson
testified that he was never trained with respect to out-of-
jurisdiction motor vehicle stops; there was no written HPD policy
for out-of-jurisdiction stops; and he was not trained in the police
academy on how to conduct an out-of-jurisdiction stop. On cross-
examination, however, Isaacson conceded that he had admitted
during his internal affairs interview that he was required to
notify the out-of-jurisdiction agency of the Smith stop, but did
not do so.
Isaacson also testified on cross-examination about two
documents that he had prepared two years prior to the Smith stop.
One document concerned an incident that occurred in Franklin,
where Isaacson asked the HPD dispatcher to request that a Franklin
police officer respond to the scene. Isaacson admitted that this
document showed he knew he had to notify the Franklin Police
8 A-5119-14T4
Department for an incident that occurred in Franklin. The second
document concerned an incident that occurred in Hamburg, where
Isaacson notified the Hamburg Police Department and remained on
the scene until they arrived. Isaacson admitted that he knew he
was not in Hardyston and had to call the Hamburg Police Department
for backup.
In his oral opinion, the judge criticized the involvement of
the Sussex County Prosecutor's Office in this matter, stating it
had the capacity to deprive Isaacson of his rights. This criticism
was unwarranted and not supported by the record. Because this
matter indicated the possibility of a criminal act, the
Prosecutor's involvement was required. See Isaacson v. Pub. Emp't
Relations Comm., supra, (slip op. at 7-9).
More importantly, however, the judge found that Isaacson had
a full evidentiary hearing before a "neutral" hearing officer who
made "very specific findings" by a preponderance of the evidence.
The judge determined that the hearing officer's factual findings
were "fully supported by the evidence[,]" and affirmed the hearing
officer's conclusions that Isaacson violated the HPDRRs and SOPs;
lied numerous times during the motor vehicle stop and his internal
affairs interview; and knowingly and willfully falsified public
documents.
9 A-5119-14T4
Despite this ruling, the judge determined that the penalty
of termination was excessive. The judge found that the lack of
training with regard to this out-of-jurisdiction situation
mitigated Isaacson's conduct, and thus, progressive discipline was
appropriate. The judge viewed Isaacson's conduct as less serious
than police conduct that warranted termination, such as violence
perpetrated on individuals or efforts to deprive citizens of their
civil rights.
The judge entered an order on May 20, 2015, vacating the
Township's removal of Isaacson; imposing a ten-day suspension
without pay; and ordering Isaacson's reinstatement with full
benefits, among other things. The judge stayed the order pending
appeal. On June 10, 2015, the judge entered an order awarding
Isaacson attorney's fees pursuant to N.J.S.A. 40A:14-155.
II.
On appeal, the Township argues that the judge erred in
disregarding the penalty imposed by the Township and in imposing
a ten-day suspension despite the hearing officer's findings that
Isaacson lied multiple times and knowingly and willfully falsified
10 A-5119-14T4
public documents. The Township concludes that Isaacson's proven
dishonesty warranted his termination.1 We agree.
We begin with a review of the relevant statutes governing
police disciplinary proceedings, N.J.S.A. 40A:14-147 to -151. A
police officer cannot be removed "for political reasons or for any
cause other than incapacity, misconduct, or disobedience of rules
and regulations" and may not "be suspended, removed, fined or
reduced in rank" without "just cause[.]" N.J.S.A. 40A:14-147. An
officer must be apprised of any such charges by way of written
complaint and is entitled to a hearing. Ruroede v. Borough of
Hasbrouck Heights, 214 N.J. 338, 354 (2013).
If the hearing officer upholds the charges, the police officer
can seek review from the Superior Court, which hears the matter
de novo on the record below. Id. at 355 (citing N.J.S.A. 40A:14-
150). The court may allow the parties to supplement the record,
but its powers are statutorily limited in that it may reverse,
affirm or modify the conviction; it may not remand to the hearing
officer for a new disciplinary hearing. Id. at 355, 360; see also
N.J.S.A. 40A:14-150.
1
We decline to address Isaacson's responding arguments that he
did not commit the alleged violations and the hearing officer was
not independent, neutral, and unbiased. The trial judge found
that the hearing officer was "neutral" and affirmed the hearing
officer's findings and conclusions that Isaacson was guilty of the
disciplinary charges. Isaacson did not appeal the judge's ruling.
11 A-5119-14T4
On de novo review, the trial court makes its own findings of
fact. In re Phillips, 117 N.J. 567, 578 (1990). Our role in
reviewing the de novo proceeding is limited. Id. at 579. Unlike
the trial court, we do not ordinarily make new factual findings,
but merely "decide whether there was adequate evidence before the
. . . [c]ourt to justify its finding[s]." Ibid. We should not
disturb the trial court's de novo findings unless we find that the
court's decision was arbitrary, capricious or unreasonable or
"[un]supported by substantial credible evidence in the record as
a whole[.]" Ibid. (alteration in original) (citations omitted).
Our review of the court's legal conclusions is plenary. Manalapan
Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
Applying these principles, we reverse the judge's decision to
vacate Isaacson's termination.
"[A] police officer is a special kind of public employee"
held to a higher standard of personal integrity and dependability
than a civilian employee because he is a sworn law enforcement
officer. Twp. of Moorestown v. Armstrong, 89 N.J. Super. 560, 566
(App. Div. 1965), certif. denied, 47 N.J. 80 (1966). A police
officer's "primary duty is to enforce and uphold the law." Ibid.
The officer "represents law and order to the citizenry and must
present an image of personal integrity and dependability in order
to have the respect of the public[.]" Ibid.
12 A-5119-14T4
Although the concept of progressive discipline, which
promotes uniformity and proportionality in the discipline of
public employees, has long been a recognized and accepted
principle, West New York v. Bock, 38 N.J. 500, 523 (1962), our
courts have also long acknowledged that "some disciplinary
infractions are so serious that removal is appropriate
notwithstanding a largely unblemished prior record." In re Carter,
191 N.J. 474, 484 (2007). "[T]he question for the courts is
whether such punishment is so disproportionate to the offense, in
light of all the circumstances, as to be shocking to one's sense
of fairness". Ibid. (citation omitted). In cases involving police
discipline, "public safety concerns may also bear upon the
propriety of the dismissal sanction." Id. at 485. In such cases,
the court must be careful not to substitute its judgment for the
judgment exercised by those charged with making disciplinary
decisions. Id. at 486.
Here, there was no credible evidence in the record supporting
a mitigation of the penalty of termination based on a lack of
training for out-of-jurisdiction stops. Contrary to Isaacson’s
self-serving testimony, the credible evidence showed that he knew
of the out-of-jurisdiction SOP prior to the Smith stop and followed
it on two prior occasions. In addition, he admitted during his
internal affairs interview that he knew he was required to notify
13 A-5119-14T4
the out-of-jurisdiction agency of the Smith stop, but did not do
so. Isaacson was not a rookie police officer with limited
experience. He had approximately five years' experience with the
HPD at the time he stopped Smith and was consistently at the top
of the HPD list for issuing the most summonses. Having years of
experience, he knew or should have known of the out-of-jurisdiction
SOP.
The hearing officer concluded, and the judge affirmed, that
Isaacson lied numerous times, violated the HPDRRs and SOPs, and
knowingly and willfully falsified public documents. The record
established that Isaacson acted inappropriately for a person
holding the public trust as a police officer, knew or should have
known of the HPDRRs and SOPs he violated, and knew or should have
known not to lie or make misrepresentations during the stop and
course of the internal affairs investigation and not to falsify
public documents. Isaacson's egregious conduct "call[ed] into
question his honesty, integrity, and truthfulness, essential
traits for a law enforcement officer." Ruroede, supra, 214 N.J.
at 362. His dishonesty was significant and potentially criminal.
See Isaacson v. Pub. Emp't Relations Comm., supra, (slip op. at
14-15). His conduct, and the disciplinary charges for which he
was convicted, clearly supported termination of his employment as
a police officer.
14 A-5119-14T4
III.
The Township argues that the judge erred in awarding Isaacson
attorney's fees under N.J.S.A. 40A:14-155. We agree.
We determined the attorney's fee issue on the merits in Twp.
of Hardyston v. Isaacson, supra, (slip op. at 14). If an issue
has been determined on the merits in a prior appeal, it cannot be
re-litigated in a later appeal of the same case, even if of
constitutional dimension. Washington Commons, LLC v. City of
Jersey City, 416 N.J. Super. 555, 564 (App. Div. 2010) (citation
omitted), certif. denied, 205 N.J. 318 (2011).
In any event, we reiterate that to be entitled to
reimbursement of attorney's fees under the statute for a
disciplinary matter, the police officer must be acquitted of all
charges. Twp. of Waterford v. Babli, 158 N.J. Super. 569, 572,
(Cty. Ct. 1978), aff'd o.b., 168 N.J. Super. 18 (App. Div. 1979).
Because Isaacson was not acquitted of all disciplinary charges,
he was not entitled to attorney's fees under N.J.S.A. 40A:14-155.
Reversed.
15 A-5119-14T4
|
Citation Nr: 0424969
Decision Date: 09/10/04 Archive Date: 09/16/04
DOCKET NO. 03-00 762 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in Winston-
Salem, North Carolina
THE ISSUE
Whether new and material evidence has been received to reopen
a claim for service connection for chronic sinusitis.
REPRESENTATION
Appellant represented by: Disabled American Veterans
WITNESSES AT HEARING ON APPEAL
The appellant and his wife
ATTORNEY FOR THE BOARD
Hallie E. Brokowsky, Associate Counsel
INTRODUCTION
The veteran had active service from July 1958 to February
1959.
This case comes before the Board of Veterans' Appeals (BVA or
Board) on appeal from an August 2002 rating decision of the
Department of Veterans Affairs (VA) Regional Office (RO) in
Winston-Salem, North Carolina. The RO denied the veteran's
petition to reopen his claim for service connection
for chronic sinusitis.
FINDINGS OF FACT
1. The veteran was notified of the evidence needed to
substantiate his claim, apprised of whose responsibility-his
or VA's, it was for obtaining the supporting evidence, and
all relevant evidence necessary for an equitable disposition
of his appeal has been obtained.
2. In an unappealed June 1994 rating decision, the RO denied
the veteran's petition to reopen his previously denied claim
of entitlement to service connection for chronic sinusitis.
3. The additional evidence submitted or otherwise obtained
since that June 1994 rating decision is cumulative of
evidence previously of record and does not provide the facts
necessary to substantiate the claim of service connection for
chronic sinusitis.
CONCLUSION OF LAW
New and material evidence has not been received to reopen the
claim of entitlement to service connection for chronic
sinusitis. 38 U.S.C.A. §§ 5108, 7104 (West 2002);
38 C.F.R. §§ 3.104, 3.156, 20.1103 (2003).
REASONS AND BASES FOR FINDINGS AND CONCLUSION
As a preliminary matter, on November 9, 2000, the Veterans
Claims Assistance Act (VCAA) became law. The VCAA
potentially applies to all claims for VA benefits and
provides, among other things, that VA shall make reasonable
efforts to notify a claimant of the evidence necessary to
substantiate a claim for benefits under laws administered by
VA. The VCAA also requires that VA assist a claimant in
obtaining that evidence unless there is no reasonable
possibility that assisting him will aid in substantiating his
claim. See 38 U.S.C.A. §§ 5103, 5103A (West 2002);
38 C.F.R. § 3.159 (2003).
First, VA has a duty under the VCAA to notify the veteran and
his representative of any information and evidence needed to
substantiate and complete his claim. The August 2002 rating
decision appealed, the December 2002 statement of the case,
and the April 2003 supplemental statement of the case, as
well as a July 2002 letter to the veteran, notified him of
the evidence considered and the pertinent laws and
regulations. The RO also indicated it would review the
information of record and determine what additional
information was needed to process his claim. And the July
2002 letter, in particular, apprised him of the type of
information and evidence needed from him to support his
claim, what he could do to help in this regard, and what VA
had done and would do in obtaining supporting evidence.
See, e.g., Charles v. Principi, 16 Vet. App. 370, 373-74
(2002). This type of notice is what is specifically
contemplated by the VCAA.
Second, VA has a duty to assist the veteran in obtaining
evidence necessary to substantiate his claim. In this
regard, the veteran's service medical records and VA medical
records have been obtained, and the veteran was afforded a
hearing before a hearing officer at the RO. Also, the
veteran was afforded several opportunities to submit
additional evidence in support of his claim. But he and
his representative have not made the Board aware of any
additional evidence that should be obtained prior to
appellate review. So the Board finds that the duty to assist
has been satisfied and the case is ready for appellate
review. See Quartuccio v. Principi, 16 Vet. App. 183, 187
(2002).
In addition, the July 2002 letter apprising the veteran of
the provisions of the VCAA was sent prior to adjudicating his
petition to reopen his previously denied claim of entitlement
to service connection for chronic sinusitis in August 2002.
So there was due process compliance with the holding and
mandated sequence of events specified in a recent precedent
decision. See Pelegrini v. Principi, No. 01-944, 2004 U.S.
App. Vet. Claims LEXIS 370 (June 24, 2004) ("Pelegrini
II"), where the United States Court of Appeals for Veterans
Claims (Court) vacated its previous decision in
Pelegrini v. Principi, 17 Vet. App. 412 (2004) ("Pelegrini
I"). See also VAOGCPREC 7-2004 (July 16, 2004) discussing
the Court's holding in Pelegrini II. In Pelegrini II, just
as in Pelegrini I, the Court held, among other things, that
VCAA notice must be provided to a claimant before an initial
unfavorable decision by the agency of original jurisdiction
(AOJ) on the claim. Id. The AOJ in this case is the RO in
Winston-Salem, and the RO did just that. Consequently, there
is no issue insofar as the timing of the VCAA notice.
And the content of the VCAA notice is sufficient for the
reasons stated above. See Bernard v. Brown, 4 Vet. App. 384,
392-94 (1993). See also VAOPGCPREC 16-92 (July 24, 1992).
With respect to the VCAA letter of July 2002, the veteran was
requested to respond within 60 days, but was informed that he
had up to one year to submit evidence. And, it has been more
than one year since the July 2002 letter. Nonetheless,
38 C.F.R. § 3.159(b)(1) (2003) was invalidated by the United
States Court of Appeals for the Federal Circuit in Paralyzed
Veterans of America (PVA) v. Secretary of Veterans Affairs,
345 F.3d 1334 (Fed. Cir. September 2003). The offending
regulatory language suggested that an appellant must respond
to a VCAA notice within 30 days and was misleading and
detrimental to claimants whose claims were prematurely denied
short of the statutory one-year period provided in 38
U.S.C.A. § 5301(a). Thus, that regulatory provision, which
is similar to the 60-day notice alluded to above, was invalid
because it was inconsistent with the statute.
The PVA decision created some confusion about whether VA
could actually decide claims prior to the expiration of the
one-year statutory period. See PVA; see also 38 U.S.C.A. §
5103(b)(1)(2002). This is significant because, previous to
this, VA had issued implementing regulations that allowed VA
to decide a claim 30 days after sending a VCAA notification
letter, see 38 C.F.R. § 3.159(b)(1).
In response, on December 16, 2003, the President signed H.R.
2297, the Veterans Benefits Act of 2003 (the Act). Veterans
Benefits Act of 2003, Pub. L. No. 108-183, 117 Stat. 2651
(Dec. 16, 2003). Section 701 of the Act contains amendments
to 38 U.S.C.A. §§ 5102 and 5103, the provisions of law that
deal with VA's duties to notify and assist claimants. See
VCAA, Pub. L. No. 106-475, 114 Stat. 2096 (2000); 38 U.S.C.A.
§§ 5100, 5102, 5103, 5103A, 5106, 5107, 5126 (West 2002); 38
C.F.R. §§ 3.102, 3.156(a), 3.159 and 3.326.
In particular, the Act clarifies that VA may make a decision
on a claim before the expiration of the one-year VCAA notice
period. Veterans Benefits Act of 2003, Pub. L. No. 108-183,
§ ___, 117 Stat. 2651, ___ (Dec. 16, 2003) (to be codified at
38 U.S.C.A. § 5103(b)(3)). The effective date of that
provision is November 9, 2000, the date of enactment of the
VCAA. Veterans Benefits Act of 2003, Pub. L. No. 108-183, §
___, 117 Stat. 2651, ___ (Dec. 16, 2003) (to be codified at
38 U.S.C.A. § 5103(c)). The new law does not require VA to
send a new notice to claimants. Veterans Benefits Act of
2003, Pub. L. No. 108-183, § ___, 117 Stat. 2651, ___ (Dec.
16, 2003) (to be codified at 38 U.S.C.A. § 5103(e)).
Because Congress made the new amendments effective
retroactive to the date of the VCAA, they effectively
overturn, or invalidate, the Federal Circuit's holding in PVA
and, thus, preclude any possible due process violations, even
if the veteran's appeal was ongoing during this change in the
law. Cf. VAOPGCPREC 7-2003 (Nov. 19, 2003); Bernard v.
Brown, 4 Vet. App. 384 (1993).
The veteran's claim for service connection for chronic
sinusitis was first considered and denied by the RO in a
March 1959 rating decision. The claim originally was denied
on the basis that the chronic sinusitis was not shown to have
been incurred or aggravated during service by the evidence of
record. The RO, in denying the veteran's claim, relied upon
his service medical records. The veteran's service medical
records showed that the veteran reported a history of
sinusitis at the time of his July 1958 induction examination,
but that clinical evaluation of the veteran's sinuses at the
time was normal. In August 1958, November 1958, and
January 1959, the veteran was seen for sinus headaches and
post-nasal drainage, and a long history of sinus disease was
noted. Diagnoses included upper respiratory infection and
acute sinusitis. In February 1959, the veteran was
hospitalized for persistent nasal congestion and discharge
with facial and frontal headaches. A history of chronic
sinusitis since age 13 was noted and physical examination
showed that the under surface of the middle turbinates was
coated with pus and that there was a polypoid degeneration of
the left middle turbinate. X-rays of the sinuses showed
opaque maxillary sinuses with cloudiness of the right frontal
sinus. The diagnosis was chronic, purulent maxillary and
frontal sinusitis, existed prior to service, not incurred or
aggravated in the line of duty.
In November 1981, the veteran submitted a medical examination
report stating he had an episode of sinusitis in the
military, which had worsened since his discharge from
service. The diagnosis was chronic sinusitis. In a
September 1982 rating decision, the RO confirmed and
continued the previous denial of the veteran's claim of
entitlement to service connection on the basis that the
examination report was insufficient to show that the
veteran's chronic sinusitis was incurred or aggravated as a
result of his military service.
A July 1987 rating decision was issued following the receipt
of a May 1987 statement from A. Ross Wilson, Jr., M.D. The
statement indicated the veteran was treated for chronic
sinusitis and underwent surgery in November 1983. In this
decision, the RO confirmed and continued the previous rating
decision. The veteran filed a notice of disagreement, and a
statement of the case was issued in September 1987, but the
veteran did not perfect his appeal, e.g., with a VA Form 9.
In March 1988, the veteran again petitioned to reopen his
previously denied claim of entitlement to service connection.
At that time, the veteran did not submit any new evidence,
but he repeated his belief that the evidence of record, in
particular, his service medical records showed that he was
entitled to service connection for chronic sinusitis. And in
an April 1988 decision, the RO confirmed the denial of
service connection on the basis that the veteran did not
submit any new and material evidence to reopen his claim.
In January 1994, the veteran submitted a statement from his
wife and treatment records from Dr. Wilson, dated 1983
through 1991, in attempt to reopen his previously denied
claim of entitlement to service connection for chronic
sinusitis. According to the treatment records, the veteran
was treated for a right earache, right Eustachian tube
dysfunction, sinus congestion, rhinitis, and wheezing.
The statement from the veteran's wife indicated that the
veteran did not have any sinus complaints from 1949 until his
entrance into service and that he had sinus problems after
his discharge from the military. The RO, in a June 1994
rating decision, denied the veteran's petition to reopen his
claim on the basis that the statement from the veteran's wife
and the treatment records from Dr. Wilson did not provide any
new medical evidence suggesting that the veteran's sinusitis
was aggravated during his service.
The veteran filed his current petition to reopen his
previously denied claim of entitlement to service connection
for chronic sinusitis in July 2002. The RO approached his
claim properly, as an issue of whether new and material
evidence had been received to reopen this previously denied
claim. And in an August 2002 decision, the RO found that the
evidence received since the prior denials was new, but still
not material, as the VA medical records obtained on behalf of
the veteran did not show that his chronic sinusitis was
aggravated by his service in the military. This appeal
ensued.
The Board must address the issue of new and material evidence
in the first instance because it determines the Board's
jurisdiction to reach the underlying claim to adjudicate it
on a de novo basis. See qmiller@example.org. See, too,
Butler v. Brown, 9 Vet. App. 167, 171 (1996). If the Board
finds that no such evidence has been submitted, then the
analysis must end, and the RO's determination in this regard
becomes irrelevant, as further analysis, beyond the
evaluation of whether the evidence submitted in the effort to
reopen is new and material, is neither required nor
permitted. See qmiller@example.org.
As the Board may find no new and material evidence even where
the RO found that there was such evidence, reopened the
veteran's claim, and adjudicated it on its merits, without
violating due process, any finding on the merits entered when
new and material evidence has not been submitted "is a legal
nullity." See Butler, 9 Vet. App at 171 (applying an
identical analysis to claims previously and finally denied,
whether by the Board or the RO). See also Jackson v.
Principi, 265 F. 3d 1366 (Fed. Cir. 2001) (the statutes make
clear that the Board has a jurisdictional responsibility to
consider whether it was proper for a claim to be reopened,
regardless of whether the previous action denying the claim
was appealed to the Board). In this regard, the Board notes
that the RO, as previously mentioned, adjudicated the
veteran's claim in the August 2002 rating decision as an
issue of whether new and material evidence had been submitted
to reopen his previously denied claim. But still, the
appropriate method of analysis for the Board is to first make
this determination, itself, and only then-if the Board
agrees that new and material evidence has been submitted, can
the Board reopen the claim and adjudicate it on the full
merits.
As a general rule, within one year from the date of mailing
the notice of the RO's decision, a notice of disagreement
(NOD) must be filed in order to initiate an appeal of any
issue adjudicated by the RO. See 38 U.S.C.A. § 7105(a),
(b)(1). If an NOD is not filed within one year of notice of
the decision, the RO's determination becomes
final and binding on the veteran based on the evidence then
of record. See 38 U.S.C.A. § 7105(c). In addition, where
the veteran files a NOD, but fails to perfect his appeal
within sixty days of the date on which the statement of the
case (SOC) was mailed or within one year from the date of
mailing the notice of the decision (by filing a VA Form 9 or
equivalent statement), the RO's determination becomes final
and binding on him based on the evidence then of record. See
38 U.S.C.A. § 7105(d)(3) (West 2002); 38 C.F.R. §§ 20.204(b),
20.302(b), 20.1103. Once an RO's decision becomes final,
absent submission of new and material evidence, the claim may
not be reopened or readjudicated by the VA. See 38 U.S.C.A.
§ 5108.
In this case, the veteran did not file an NOD after the June
1994 rating decision. Therefore, that rating decision is
final and binding on him based on the evidence then of
record, and it is not subject to revision on the same factual
basis. See 38 U.S.C.A. § 5108; 38 C.F.R. §§ 3.104 (a),
3.156, 20.302, 20.1103. However, if there is new and
material evidence since that decision, the claim must be
reopened and the former disposition reviewed.
See 38 U.S.C.A. § 5108; 38 C.F.R. § 3.156.
When determining whether a claim should be reopened, the
credibility of the newly submitted evidence is presumed. See
Justus v. Principi, 3 Vet. App. 510 (1992). In order for
evidence to be sufficient to reopen a previously denied
claim, it must be both new and material. That is to say, if
the evidence is new, but not material, the inquiry ends and
the claim cannot be reopened. See Smith v. West, 12 Vet.
App. 312, 314 (1999).
The question of whether evidence is "new and material" is
determined under 38 C.F.R. § 3.156(a). The Board notes that
new regulations redefine what constitutes "new and material
evidence" and clarify the types of assistance VA will provide
to a claimant attempting to reopen a previously denied claim.
See 38 C.F.R. §§ 3.156(a), 3.159(c) (2003). These specific
provisions are applicable only to claims filed on or after
August 29, 2001. See 66 Fed. Reg. At 45,620. And as the
current claim was filed after this date, the new version of
the regulation is applicable in this case.
Under the revised version of 38 C.F.R. § 3.156(a), new
evidence is existing evidence not previously submitted to
agency decision-makers. Material evidence is existing
evidence that, by itself or when considered with the previous
evidence of record, relates to a fact, not previously
established, which is necessary to substantiate the claim.
New and material evidence can be neither cumulative nor
redundant of the evidence of record at the time of the last
final denial of the claim sought to be reopened, and must
raise a reasonable possibility of substantiating the claim.
See 38 C.F.R. § 3.156(a) (2003). If all of these tests are
satisfied, the claim must be reopened.
Additional evidence has been added to the record since the
RO's June 1994 rating decision denying the veteran's petition
to reopen his previously denied claim of service connection
for chronic sinusitis. This evidence consists of VA medical
records and the transcript from the veteran's hearing at the
RO in February 2003.
February and April 2002 treatment notes indicate the veteran
had mucous of the nares bilaterally, purulence of the left
ethmoid and maxillary sinuses, a patent right maxillary
sinus, and pus of the right ethmoid. In February 2002, he
also had pain with palpation of the frontal area. The
impression was chronic sinusitis.
A May 2002 treatment note indicates the veteran complained of
chronic sinusitis, with 3 to 4 infections per year. He also
complained of frontal pressure and discharge for years. He
reported a history of sinus surgery in 1980,
with improvement, but which had gradually worsened.
A May 2002 VA operation report and associated treatment
records state the veteran underwent bilateral endoscopic
maxillary sinus antrostomy, total ethmoidectomy,
sphenoidectomy, and frontal sinusectomy for his chronic
sinusitis.
A June 2002 VA treatment note indicates the veteran was seen
for follow-up of his status-post bilateral endoscopic
maxillary sinus antrostomies, ethmoidectomies, frontal
sinusotomies, and sphenoidotomies. The evaluating physician
noted that the veteran's sinuses and nose were doing well,
and that his congestion and headaches were resolved.
Physical examination showed that the veteran's septum was
straight and that his maxillary sinuses, ethmoid, and frontal
areas were open.
A September 2002 treatment note indicates the veteran
reported that he had experienced chronic sinus infections and
problems since his military service in the 1950s and that his
first sinus surgery was in 1980. He brought "disability
paperwork" with him and requested that his VA provider
"document the problem," but the VA provider explained that
VA can only document the veteran's chronic sinusitis since he
began receiving care at the VA medical center. Upon
examination there was significant crusting at the maxillary
antrostomies bilaterally, but the antrostomies were open.
His ethmoids had inflammatory disease, but there was no
evidence of an active infection. The impression was chronic
sinusitis.
A September 2002 VA medical record indicates the veteran was
being treated for chronic sinusitis, for which he underwent
surgery in May 2002. Subsequent visits for follow-up
demonstrated that he healed, but that he still had persistent
crusting for which he received nasal irrigations and
antibiotics as needed for recurrent sinus infections.
During his February 2003 hearing at the RO, the veteran
denied having any problems with his sinuses upon his entrance
into service. He also said he did not remember having
indicated that he had sinus problems on his induction Report
of Medical History. He also testified that he started having
sinus problems while stationed at Fort Jackson in the winter
of 1958, when he was forced to go outside for fire drills
without getting dressed and to sleep outside in cold tents,
which caused his sinuses to act up. He related that he
started to get headaches and that he sought treatment several
times. He also related that he received pills as treatment,
which helped, but that his problems kept recurring, so he was
put in the hospital for an examination and X-rays. He stated
that he was able to do his duties prior to his
hospitalization, but that eventually his sinus problems
became incapacitating, such that he was discharged from the
service following his hospitalization. He also stated that
following his service, his sinus problems continued, but that
he used over-the-counter medication to treat his symptoms and
that his treating provider from immediately after his
discharge had died.
This additional evidence does not provide a basis for
reopening the claim because it is not both new and material.
Although the veteran's VA medical records are new, in that
they were not previously of record, these records are not
material to his claim for service connection for chronic
sinusitis because these records do not address what was
missing at the time of the June 1994 rating decision even
when considered with the other evidence as a whole. What was
missing at the time of the June 1994 rating decision, and all
prior rating decisions denying the claim, was evidence
suggesting the veteran's chronic sinusitis was either
incurred or aggravated during his military service. The VA
medical records refer only to the evaluation and treatment,
i.e., the current diagnosis and severity, of his current
chronic sinusitis. See Morton v. Principi, 3 Vet. App. 508
(1992) (per curiam) (medical records describing veteran's
current condition are not material to issue of service
connection and are not sufficient to reopen claim for service
connection based on new and material evidence.). In short,
the VA medical records are not both new and material because
they do not show a causal relationship between his service in
the military and any symptomatology or diagnoses related to
his chronic sinusitis, nor do they otherwise verify the
circumstances of his service. See Hickson v. West,
11 Vet. App. 374, 378 (1998); Spalding v. Brown, 10 Vet. App.
6, 11 (1996); Moray v. Brown, 5 Vet. App. 211, 214 (1993).
The Board also acknowledges the veteran's arguments that he
should be entitled to service connection because he was
hospitalized for treatment of his sinus problems during his
service. However, merely reiterating previously made
arguments, without this independent verification, is
insufficient grounds to reopen his claim. Cf. Bostain v.
West, 11 Vet. App. 124 (1998) (lay hearing testimony that is
cumulative of previous contentions considered by
decisionmaker at time of prior final disallowance of the
claim is not new evidence). See also Reid v. Derwinski,
2 Vet. App. 312 (1992).
Accordingly, the Board finds that the veteran has not
submitted new and material evidence sufficient to reopen his
claim of entitlement to service connection for chronic
sinusitis. And in the absence of new and material evidence,
the benefit-of-the-doubt rule does not apply. See Annoni v.
Brown, 5 Vet. App. 463, 467 (1993).
ORDER
The petition to reopen the claim for service connection for
chronic sinusitis is denied.
____________________________________________
KEITH W. ALLEN
Veterans Law Judge, Board of Veterans' Appeals
Department of Veterans Affairs
YOUR RIGHTS TO APPEAL OUR DECISION
The attached decision by the Board of Veterans' Appeals (BVA or Board) is
the final decision for all issues addressed in the "Order" section of the
decision. The Board may also choose to remand an issue or issues to the
local VA office for additional development. If the Board did this in your
case, then a "Remand" section follows the "Order." However, you cannot
appeal an issue remanded to the local VA office because a remand is not a
final decision. The advice below on how to appeal a claim applies only to
issues that were allowed, denied, or dismissed in the "Order."
If you are satisfied with the outcome of your appeal, you do not need to do
anything. We will return your file to your local VA office to implement
the BVA's decision. However, if you are not satisfied with the Board's
decision on any or all of the issues allowed, denied, or dismissed, you
have the following options, which are listed in no particular order of
importance:
? Appeal to the United States Court of Appeals for Veterans Claims
(Court)
? File with the Board a motion for reconsideration of this decision
? File with the Board a motion to vacate this decision
? File with the Board a motion for revision of this decision based on
clear and unmistakable error.
Although it would not affect this BVA decision, you may choose to also:
? Reopen your claim at the local VA office by submitting new and
material evidence.
There is no time limit for filing a motion for reconsideration, a motion to
vacate, or a motion for revision based on clear and unmistakable error with
the Board, or a claim to reopen at the local VA office. None of these
things is mutually exclusive - you can do all five things at the same time
if you wish. However, if you file a Notice of Appeal with the Court and a
motion with the Board at the same time, this may delay your case because of
jurisdictional conflicts. If you file a Notice of Appeal with the Court
before you file a motion with the BVA, the BVA will not be able to consider
your motion without the Court's permission.
How long do I have to start my appeal to the Court? You have 120 days from
the date this decision was mailed to you (as shown on the first page of
this decision) to file a Notice of Appeal with the United States Court of
Appeals for Veterans Claims. If you also want to file a motion for
reconsideration or a motion to vacate, you will still have time to appeal
to the Court. As long as you file your motion(s) with the Board within 120
days of the date this decision was mailed to you, you will then have
another 120 days from the date the BVA decides the motion for
reconsideration or the motion to vacate to appeal to the Court. You should
know that even if you have a representative, as discussed below, it is your
responsibility to make sure that your appeal to Court is filed on time.
How do I appeal to the United States Court of Appeals for Veterans Claims?
Send your Notice of Appeal to the Court at:
Clerk, U.S. Court of Appeals for Veterans Claims
625 Indiana Avenue, NW, Suite 900
Washington, DC 20004-2950
You can get information about the Notice of Appeal, the procedure for
filing a Notice of Appeal, the filing fee (or a motion to waive the filing
fee if payment would cause financial hardship), and other matters covered
by the Court's rules directly from the Court. You can also get this
information from the Court's web site on the Internet at
www.vetapp.uscourts.gov, and you can download forms directly from that
website. The Court's facsimile number is 951-573-3000.
To ensure full protection of your right of appeal to the Court, you must
file your Notice of Appeal with the Court, not with the Board, or any other
VA office.
How do I file a motion for reconsideration? You can file a motion asking
the BVA to reconsider any part of this decision by writing a letter to the
BVA stating why you believe that the BVA committed an obvious error of fact
or law in this decision, or stating that new and material military service
records have been discovered that apply to your appeal. If the BVA has
decided more than one issue, be sure to tell us which issue(s) you want
reconsidered. Send your letter to:
Director, Management and Administration (014)
Board of Veterans' Appeals
810 Vermont Avenue, NW
Washington, DC 20420
VA
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Remember, the Board places no time limit on filing a motion for
reconsideration, and you can do this at any time. However, if you also plan
to appeal this decision to the Court, you must file your motion within 120
days from the date of this decision.
How do I file a motion to vacate? You can file a motion asking the BVA to
vacate any part of this decision by writing a letter to the BVA stating why
you believe you were denied due process of law during your appeal. For
example, you were denied your right to representation through action or
inaction by VA personnel, you were not provided a Statement of the Case or
Supplemental Statement of the Case, or you did not get a personal hearing
that you requested. You can also file a motion to vacate any part of this
decision on the basis that the Board allowed benefits based on false or
fraudulent evidence. Send this motion to the address above for the
Director, Management and Administration, at the Board. Remember, the Board
places no time limit on filing a motion to vacate, and you can do this at
any time. However, if you also plan to appeal this decision to the Court,
you must file your motion within 120 days from the date of this decision.
How do I file a motion to revise the Board's decision on the basis of clear
and unmistakable error? You can file a motion asking that the Board revise
this decision if you believe that the decision is based on "clear and
unmistakable error" (CUE). Send this motion to the address above for the
Director, Management and Administration, at the Board. You should be
careful when preparing such a motion because it must meet specific
requirements, and the Board will not review a final decision on this basis
more than once. You should carefully review the Board's Rules of Practice
on CUE, 38 C.F.R. 20.1400 -- 20.1411, and seek help from a qualified
representative before filing such a motion. See discussion on
representation below. Remember, the Board places no time limit on filing a
CUE review motion, and you can do this at any time.
How do I reopen my claim? You can ask your local VA office to reopen your
claim by simply sending them a statement indicating that you want to reopen
your claim. However, to be successful in reopening your claim, you must
submit new and material evidence to that office. See 38 C.F.R. 3.156(a).
Can someone represent me in my appeal? Yes. You can always represent
yourself in any claim before VA, including the BVA, but you can also
appoint someone to represent you. An accredited representative of a
recognized service organization may represent you free of charge. VA
approves these organizations to help veterans, service members, and
dependents prepare their claims and present them to VA. An accredited
representative works for the service organization and knows how to prepare
and present claims. You can find a listing of these organizations on the
Internet at: www.va.gov/vso. You can also choose to be represented by a
private attorney or by an "agent." (An agent is a person who is not a
lawyer, but is specially accredited by VA.)
If you want someone to represent you before the Court, rather than before
VA, then you can get information on how to do so by writing directly to the
Court. Upon request, the Court will provide you with a state-by-state
listing of persons admitted to practice before the Court who have indicated
their availability to represent appellants. This information is also
provided on the Court's qmiller@example.org.
Do I have to pay an attorney or agent to represent me? Except for a claim
involving a home or small business VA loan under Chapter 37 of title 38,
United States Code, attorneys or agents cannot charge you a fee or accept
payment for services they provide before the date BVA makes a final
decision on your appeal. If you hire an attorney or accredited agent within
1 year of a final BVA decision, then the attorney or agent is allowed to
charge you a fee for representing you before VA in most situations. An
attorney can also charge you for representing you before the Court. VA
cannot pay fees of attorneys or agents.
Fee for VA home and small business loan cases: An attorney or agent may
charge you a reasonable fee for services involving a VA home loan or small
business loan. For more information, read section 5904, title 38, United
States Code.
In all cases, a copy of any fee agreement between you and an attorney or
accredited agent must be sent to:
Office of the Senior Deputy Vice Chairman (012)
Board of Veterans' Appeals
810 Vermont Avenue, NW
Washington, DC 20420
The Board may decide, on its own, to review a fee agreement for
reasonableness, or you or your attorney or agent can file a motion asking
the Board to do so. Send such a motion to the address above for the Office
of the Senior Deputy Vice Chairman at the Board.
VA
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JOURNAL ENTRY and OPINION
{¶ 1} Anthony Jackson appeals from a judgment of the common pleas court entered pursuant to a jury verdict finding him guilty of kidnaping, felonious assault, and improperly discharging a firearm into a habitation, each count with a firearm specification. On appeal, Jackson has asserted nine assignments of error claiming denial of due process in that the court failed to instruct the jury as to his privilege to discharge a weapon in his own home; permitted the state to call witnesses at trial despite its failure to provide discovery until the day of trial; failed to instruct the jury on "serious physical harm" and intervening cause, and diluted the requirement of purpose in its jury instructions; asserted claims of insufficiency of evidence and error in imposing consecutive sentences. After a thorough review of the record, we reject his assignments and we affirm the judgment of the trial court.
{¶ 2} The record reveals that, on August 16, 2001, 15 year old Briana Holland and 17 year old Tiera Price visited 20 year old Anthony Jackson's home, the second floor of a double home his mother rented at 598 Eddy Road in Cleveland. Jackson became angry over a dispute about money and discharged his handgun several times terrorizing the girls and forcing one at gunpoint to reenter the home. Jackson was arrested on the scene by Cleveland SWAT and a grand jury indicted him for attempted murder, kidnaping, felonious assault, and improperly discharging a firearm into a habitation, each count containing a firearm specification.
{¶ 3} At trial Price stated she went to Jackson's home to drink vodka with him, when he accused her of stealing money which she had been holding for him. When Jackson went into his bedroom, Price heard gunshots. She then saw him walk through the house with a gun onto the front porch where he fired off several more rounds. He became angry, proceeded to the kitchen, fired his gun again and demanded that Price hand over his money. A frightened Price then called her cousin Holland to see if she could pick her up and help bring clothes home from Jackson's house. Holland arranged to be dropped off at Jackson's home and then sat down at the dining room table with them and observed his gun. Holland then asked if she could take the gun off the table and she claimed he agreed. However, he became angry again and asked where she put his gun. At that point, the girls felt threatened and ran out of the house and hid behind a truck in a parking lot across the street.
{¶ 4} Price then ran to call police. Jackson appeared out of his front door and called to Holland. She stated that she feared Jackson would use the gun so she complied and approached him. Jackson then ran out of the house and put his gun in her back and told her to "get her ass upstairs." Holland went into the house and up the stairs as ordered. Jackson told her to sit on the floor. Jackson then proceeded to storm through the apartment screaming profanities.
{¶ 5} Holland then asked him if she could use the bathroom and he agreed. After she went in he fired his gun through the wall narrowly missing her. She testified she felt the bullet pass by her head.
{¶ 6} Price then called Jackson and learned that Holland had returned to the home. She heard Holland yell "Tiera, help me." Price then ran into the house to help her cousin. Ringing the doorbell, she pushed Jackson aside and ran up the stairs to find Holland, but could not find her. When police arrived, Price told them her cousin was upstairs. Police then moved to the house to free Holland and arrest Jackson.
{¶ 7} When Jackson went downstairs to answer the door, Holland jumped up, ran to the front porch, climbed over the outside bannister, and jumped from the second floor to the ground fracturing her ankle in three places. Jackson refused to leave his house and the SWAT team arrived and arrested Jackson after a short standoff.
{¶ 8} In his defense, Jackson presented the testimony of his mother, Gloria Hammond, who testified that the property had holes in the walls when she rented it.
{¶ 9} After deliberation, the jury returned verdicts finding Jackson not guilty of attempted murder but guilty on all other charges.
{¶ 10} Jackson appeals and has presented nine assignments of error. The first states:
{¶ 11} "DEFENDANT WAS DENIED DUE PROCESS OF LAW WHEN THE COURT FAILED TO INSTRUCT THE JURY AS TO DEFENDANT'S PRIVILEGE TO DISCHARGE A FIREARM IN HIS OWN DWELLING."
{¶ 12} Jackson contends the court failed to instruct the jury as to his privilege to discharge a firearm in his own dwelling. The state argues that R.C. 2923.161 provides a privilege, but that the privilege does not include the discharge of a firearm at another person.
{¶ 13} Here, the court instructed the jury as follows:
{¶ 14} "Now, the defendant is charged with improperly discharging a firearm at or into a habitation or school. Before you can find the defendant guilty, you must find beyond reasonable doubt that on or about the 16th day of August, 2001, * * * the defendant, without privilege to do so, knowingly discharged a firearm at or into an occupied structure that is a permanent or temporary habitation."
{¶ 15} The trial court's instruction regarding improperly discharging a firearm into a habitation does properly state Jackson's right of privilege. This assignment of error is without merit and therefore Jackson's first assignment of error is overruled.
{¶ 16} The second assignment of error states:
{¶ 17} "DEFENDANT WAS DENIED DUE PROCESS AND HIS RIGHT TO PREPARE HIS DEFENSE WHEN THE STATE OF OHIO DID NOT PROVIDE DISCOVERY TO DEFENSE COUNSEL UNTIL THE DAY OF TRIAL."
{¶ 18} Jackson posits that the court erred in allowing the state to present witness testimony when it did not produce the witness list or the medical report of Holland until the day of trial. The state does not dispute that it produced a written witness list on the day of trial, but maintains that Jackson had orally received its witness list. It also asserts that the hospital caused the delay in producing the medical report.
{¶ 19} It is within a trial court's discretion to decide which sanction to impose for a violation of Crim.R. 16. State v. Apanovitch
(1987), 33 Ohio St. 3d 19. When a party fails to comply with a discovery request, Crim.R. 16(E)(3) provides that:
{¶ 20} "The court may order such party to permit the discovery or inspection, grant a continuance, or prohibit the party from introducing in evidence the material not disclosed, or it may make such other order as it deems just under the circumstances."
{¶ 21} An appellate court reviewing the trial court's admission or exclusion of evidence must limit its review to whether the lower court abused its discretion. State v. Finnerty (1989), 45 Ohio St. 3d 104, 107. Here, the issue for us to consider is whether Jackson was denied due process by the late disclosure of witnesses and the disclosure of the medical report on time.
{¶ 22} A review of the transcript shows that the state did in fact produce the written witness list on the day of trial. The court addressed the issue and noted that Jackson had been told the state's witnesses and that they were obvious to both sides. The state never offered the medical report into evidence, and Jackson did not demonstrate any prejudice from it as he knew Holland jumped from the second floor porch and required medical attention due to her fall. The trial court did not err in denying Jackson's motion to suppress the state's witness testimony. This assignment of error is overruled.
{¶ 23} The third assignment of error states:
{¶ 24} "DEFENDANT WAS DENIED DUE PROCESS OF LAW WHEN THE COURT DID NOT DEFINE SERIOUS PHYSICAL HARM TO THE JURY."
{¶ 25} Jackson contends the trial court erred in failing to instruct the jury on the definition of serious physical harm concerning the felonious assault charge. The state argues that Jackson waived this argument as Jackson did not handerson@example.com.
{¶ 26} A review of the record reveals, however, that the trial court did instruct the jury on serious physical harm as follows:
{¶ 27} "Serious physical harm. Serious physical harm to persons means any of the following:
{¶ 28} "One, any mental illness or condition of such gravity as would normally require hospitalization or prolonged psychiatric treatment;
{¶ 29} "Two, any physical harm which carries a substantial risk of death;
{¶ 30} "Three, any physical harm which involves some permanent incapacity whether partial or total, or which involves some temporary, substantial incapacity;
{¶ 31} "Four, any physical harm which involves some permanent disfigurement or which involves some temporary, serious disfigurement;
{¶ 32} "Five, any physical harm which involves acute pain of such duration as to result in substantial suffering or which involves any degree of prolonged or intractable pain."
{¶ 33} Accordingly, the court did not err in failing to instruct the jury. This assignment of error is without merit and is overruled.
{¶ 34} The fourth assignment of error states:
{¶ 35} "DEFENDANT WAS DENIED DUE PROCESS WHEN THE COURT DILUTED THE REQUIREMENT OF PURPOSE IN ITS JURY INSTRUCTIONS."
{¶ 36} Jackson asserts the court erred in its instructions on purpose, claiming the use of the word "gist" negates the instruction by diluting the requirement of purpose. The state again argues that Jackson has waived any argument because he failed to handerson@example.com.
{¶ 37} In reviewing jury instructions upon appeal, we must examine the specific charge at issue in the context of the entire charge, not in isolation. State v. Thompson (1987), 33 Ohio St. 3d 1, 13. Jury instructions are within the trial court's discretion, which we will not disturb absent an abuse of that discretion. State v. Guster (1981),66 Ohio St. 2d 266, 271. Jackson bases his "gist" argument on the holding in State v. Wilson, (1996), 74 Ohio St. 3d 381, where the court held:
{¶ 38} "Admittedly, the `gist of the offense' language is confusing in a murder prosecution which requires `purpose.' In the context of all the instructions given the jury, the court provided adequate instructions on the element of specific intent to kill. Given the evidence, including Wilson's confession, the jury could not have based its decision on the `gist of the offense' language. No `outcome-determinative' plain error occurred. We, therefore, reject proposition of law nineteen." (Citations omitted).
{¶ 39} Although the Wilson court found the "gist of the offense" language confusing, it found that in the context of all the instructions given to the jury, the instructions were adequate on the element of specific intent to kill. handerson@example.com.
{¶ 40} A review of the record reveals the following instruction given by the court:
{¶ 41} "A person acts purposely when it is his specific intention to cause a certain result, or when the gist of the offense is a prohibition against conduct of a certain nature, regardless of what the offender intends to accomplish thereby, it is his specific intention to engage in the conduct of that nature.
{¶ 42} "When the central idea, essence or gist of the offense is a prohibition against or forbidding of conduct of a certain nature, a person acts purposely if his specific intention was to engage in conduct of that nature, regardless of what he may have intended to accomplish by his conduct.
{¶ 43} "Purpose is a decision of the mind to do an act with a conscious objective of producing a specific result or engaging in specific conduct. To do an act purposely is to do it intentionally and not accidentally. Purpose and intent mean the same thing. The purpose with which a person does an act is known only to himself, unless he expresses it to others or indicates it by his conduct.
{¶ 44} "How determined. The purpose with which a person does an act or brings about a result is determined from the manner in which it is done, the means in which it is done, the means or weapon used, and all the other facts and circumstances in evidence."
{¶ 45} The record also reveals that prior to using the language at issue, the trial court instructed the jury on the definition of "kidnaping" as contained in R.C. 2905.01. Immediately following this definition, the trial court defined the culpable mental state of "purposely" as contained in R.C. 2901.22(A). A review of all the jury instructions indicates the court correctly instructed on the essential element of "purpose." Therefore this assignment is overruled.
{¶ 46} The fifth assignment of error states:
{¶ 47} "DEFENDANT WAS DENIED DUE PROCESS OF LAW WHEN THE COURT DID NOT INSTRUCT ON AN INTERVENING CAUSE."
{¶ 48} Jackson argues that the court should have instructed the jury on intervening cause relating to the reason Holland jumped from the front porch of his home, asserting he did not order her to jump or push her. The state again argues that Jackson's argument is waived because he failed to handerson@example.com.
{¶ 49} A "criminal defendant is entitled to have the trial court give complete and accurate jury instructions on all the issues raised by the evidence." State v. Sneed (1990), 63 Ohio St. 3d 3, 9. A requested jury instruction should ordinarily be given if it is a correct statement of law applicable to the facts in the case and it is not covered by the general charge. Id. However, the trial court is not required to give a proposed jury instruction in the exact language requested by its proponent, even if it properly states an applicable rule of law, so long as the substance of the request is included in the instructions which are given. Id. Moreover, a court's failure to give a specific instruction is reversible error only if the trial court abused its discretion. State v.Wolons (1989), 44 Ohio St. 3d 64.
{¶ 50} A review of the record reveals that Jackson did not request an instruction on intervening cause, nor did he object to the failure to include that instruction at trial, and at a sidebar conference the court asked for additions or deletions to the charge but the defense expressed its satisfaction.
{¶ 51} Crim.R. 30 precludes a party from assigning as error the failure to give jury instructions unless a timely objection has been made in the trial court. Jackson did not do that in this case.
{¶ 52 We thus review this claim for plain error only. Here, the evidence revealed that Jackson forced Holland into his home at gunpoint, forced her to sit on the floor, discharged his weapon in her presence, and shot at her while she used the lavatory, narrowly missing her in the head. His argument that she jumped off the front porch of his home of her own volition, thus requesting a charge of intervening cause is, therefore, not supported by the evidence handerson@example.com. Accordingly this assignment of error is not well taken and is overruled.
{¶ 53} The sixth assignment of error states:
{¶ 54} "DEFENDANT WAS DENIED DUE PROCESS OF LAW WHEN IT ALLOWED DEFENDANT TO BE CONVICTED OF CAUSING SERIOUS PHYSICAL HARM TO BRIANA HOLLAND WHEN THERE WAS NO EVIDENCE THAT DEFENDANT CAUSED THE SERIOUS PHYSICAL HARM."
{¶ 55} Jackson contends the state's evidence is insufficient to establish his actions caused Holland to jump from his front porch. The state disagrees.
{¶ 56} As to the claim of insufficient evidence, Crim.R. 29(A) states, in relevant part:
{¶ 57} "The court on motion of a defendant or on its own motion, after the evidence on either side is closed, shall order the entry of a judgment of acquittal of one or more offenses charged in the indictment, information, or complaint, if the evidence is insufficient to sustain a conviction of such offense or offenses."
{¶ 58} The test for sufficiency raises a question of law to be decided by the court before the jury may receive and consider the claimed offense. In State v. Martin (1983), 20 Ohio App. 3d 172, the court summarizes the standard of review for an insufficiency claim:
{¶ 59} * * * [T]he test is whether after viewing the probative evidence and inferences reasonably drawn therefrom in the light most favorable to the prosecution, any rational trier of fact could have found all the essential elements of the offense beyond a reasonable doubt. The claim of insufficient evidence invokes an inquiry about due process. It raises a question of law, the resolution of which does not allow the court to weigh the evidence." (Citations omitted.)
{¶ 60} An accused is presumed to intend the natural, reasonable, and probable consequences of his acts. State v. Carter (1992),64 Ohio St. 3d 218, 226. One consequence of holding an individual at gunpoint is escape. Here, the jury properly considered Holland's injuries, sustained while escaping from Jackson's home. Thus, there is sufficient evidence that Holland sustained injuries while escaping from Jackson's home and that she suffered serious physical harm. This assignment is not well taken and is overruled.
{¶ 61} The seventh assignment of error states:
{¶ 62} "DEFENDANT WAS DENIED DUE PROCESS OF LAW AND HIS FIFTH AMENDMENT RIGHT NOT TO BE SENTENCED TO MULTIPLE PUNISHMENTS FOR THE SAME CONDUCT WHEN HE WAS SENTENCED SEPARATELY OF ACTS THAT OCCURRED AS PART OF A SINGLE COURSE OF CONDUCT."
{¶ 63} Jackson argues that the court erred in sentencing him for both the kidnaping and the felonious assault of Briana Holland, contending that in accordance with State v. Logan (1979),60 Ohio St. 2d 126, his kidnaping conviction should be reversed because there was no separate animus sufficient to sustain the charge. The state argues the court correctly sentenced him because these are different offenses and a separate animus exists for each. Logan held:
{¶ 64} "In establishing whether kidnaping and another offense of the same or similar kind are committed with a separate animus as to each pursuant to R.C. 2941.25(B), this court adopts the following guidelines:
{¶ 65} "(a) Where the restraint or movement of the victim is merely incidental to a separate underlying crime, there exists no separate animus sufficient to sustain separate convictions; however, where the restraint is prolonged, the confinement is secretive, or the movement is substantial so as to demonstrate a significance independent of the other offense, there exists a separate animus as to each offense sufficient to support separate convictions;
{¶ 66} "(b) Where the asportation or restraint of the victim subjects the victim to a substantial increase in risk of harm separate and apart from that involved in the underlying crime, there exists a separate animus as to each offense sufficient to support separate convictions."
{¶ 67} The guidelines set forth in Logan establish that a separate offense of kidnaping can occur if there is a prolonged restraint, a secretive confinement, or substantial movement of the victim. The offense can also occur if the asportation or restraint of the victim subjects the victim to a substantial increase in risk of harm separate and apart from that involved in the underlying crime. See, also, State v. Simko (1994),71 Ohio St. 3d 483, 488, citing Logan, 60 Ohio St.2d at 135, ("the test to determine whether the kidnaping was committed with a separate animus and thus amounts to a separate offense is `whether the restraint or movement of the victim is merely incidental to a separate underlying crime, or instead, whether it has a significance independent of the other offense'").
{¶ 68} Applying Logan, the record supports the jury's finding that Jackson kidnaped Holland. He charged her, grabbed her from behind and put his gun in her back, forcibly leading her back into his house, up the stairs, and finally forcing her to sit on the bare floor. These actions constitute the crime of kidnaping in that he forcibly removed her from the place he found her and deprived her of her liberty for the purpose of terrorizing her. Thereafter, he began discharging his weapon and a bullet almost struck her in the head, causing her to jump from the second floor porch. In addition, the evidence indicates he knowingly attempted to cause physical harm to her by means of a deadly weapon. Jackson committed these offenses, with a separate animus toward each.
{¶ 69} This assignment of error is therefore not well taken, and is overruled.
{¶ 70} The eighth assignment of error states:
{¶ 71} "DEFENDANT WAS DENIED DUE PROCESS OF LAW AND SUBJECTED TO A CRUEL AND UNUSUAL PUNISHMENT WHEN THE COURT IMMEDIATELY IMPOSED CONSECUTIVE SENTENCES."
{¶ 72} Jackson argues that the court erred in imposing consecutive sentences when it made a "rote" statement that "tracked the statutory language." The state argues the court does not need to use the exact words of the statute.
{¶ 73} When a court imposes consecutive sentences, it must look to R.C. 2929.14(E)(4) and R.C. 2929.19(B)(2). R.C. 2929.14(E)(4) sets forth the factors for imposition of consecutive or multiple prison terms and provides:
{¶ 74} "If multiple prison terms are imposed on an offender for convictions of multiple offenses, the court may require the offender to serve the prison terms consecutively if the court finds that the consecutive sentence is necessary to protect the public from future crime or to punish the offender and that consecutive sentences are not disproportionate to the seriousness of the offender's conduct and to the danger the offender poses to the public * * *."
{¶ 75} Further, the trial court is required to find that the offender's behavior fits into one of the categories listed in R.C.2929.14(E)(4)(a), (b), or (c), that the offenses had been committed
{¶ 76} awaiting trial or sentence, or the harm caused is so great that no single term adequately reflects the seriousness of the offender's conduct or that consecutive sentences are necessary to protect the public from future crime. In addition, the trial court must give its reason for imposing consecutive sentences. See R.C. 2929.19(B)(2).
{¶ 77} Thus, a court may impose consecutive sentences only if it finds that the consecutive sentences are necessary to protect the public from future crime or to punish the offender, and that the consecutive sentences are not disproportionate to the seriousness of the offender's conduct and to the danger the offender poses to the public; also the court must make additional findings, as outlined above.
{¶ 78} The court at sentencing made these statements:
{¶ 79} "Well, Anthony, let me get into your mind a little bit. I mean, what's going on with you? Now, you were put on probation last year in a serious case. I gave you a big break, and you repaid it by going crazy in August, 2001 with these girls that testified. * * * Well, you had a 15 year old in your house. * * * Just a minute. What did you think you were doing with her. * * * She looks about twelve years old, handerson@example.com. I mean, what did you think she was, 25? * * * Well, Anthony, you're just out of control. * * * You got guns in your place, you're shooting up houses, what do you think you're doing? * * * So she jumped off the porch because she felt like jumping down from a second story house? * * * Well, you heard her testimony. She thought you were going to kill her."
{¶ 80} The court further stated:
{¶ 81} "Well Anthony, I don't know where your mind is, but obviously it's not going in the proper direction. The court makes a finding that you're a threat to the community. Consecutive sentences are necessary to protect the public from future crimes and to punish the offender. The sentences are not disproportionate to the seriousness of the conduct and the danger posed to the public, and the harm caused by the offenses were so great, no single prison term would be an adequate response."
{¶ 82} The record does not support Jackson's claim that the trial court failed to articulate the necessary findings to impose consecutive sentences. The court gave reasons for imposing consecutive sentences and found necessity to protect the public from future crimes which it believed Jackson would commit, and when it determined that no leniency could be granted, it thereby determined its sentences are not disproportionate to the seriousness of his conduct and the danger he posed to the victim, her family, and the public. Accordingly, the trial court properly imposed consecutive sentences. This assignment is overruled.
{¶ 83} The ninth assignment of error states:
{¶ 84} "DEFENDANT WAS DENIED DUE PROCESS OF LAW WHEN THE COURT OVERRULED HIS MOTION FOR JUDGMENT OF ACQUITTAL AS TO THE OFFENSE OF DISCHARGING A FIREARM INTO A HABITATION OR SCHOOL."
{¶ 85} Jackson argues that the court should have acquitted him of the firearm charge because he fired his gun inside his own home and the court should have instructed the jury that he is privileged to shoot a firearm in his own home in accordance with R.C. 2923.162.
{¶ 86} R.C. 2923.162(B)(4) provides that the prohibition against discharging a firearm does not apply to one who owns any type of property and who, while on that enclave, discharges a firearm.
{¶ 87} Jackson misreads this code section. Initially, we note, he lived with his mother who rented the Eddy Road premises, he did not own it and this "privilege" does not apply to him.
{¶ 88} Here, the state assumed the burden to prove that Jackson, without privilege to do so, discharged a firearm at or into an occupied structure that is a permanent habitation of an individual. He did, the state proved this through Holland, and the court properly overturned his motion for acquittal.
{¶ 89} This assignment of error is overruled.
Judgment affirmed.
It is ordered that appellee recover of appellant its costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the Cuyahoga County Court of Common Pleas to carry this judgment into execution. The defendant's conviction having been affirmed, any bail pending appeal is terminated. Case remanded to the trial court for execution of sentence.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure.
TIMOTHY E. McMONAGLE, A.J., and FRANK D. CELEBREZZE, JR., J., CONCUR. |
EXHIBIT 10.1
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
By and among
1ST FRANKLIN FINANCIAL CORPORATION
as Borrower
______________________
WELLS FARGO BANK, N.A.
as Agent
________________________
FIRST HORIZON BANK
as Syndication Agent
________________________
Each of the financial institutions
now or hereafter a party hereto
as Lenders
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TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS1
Section 1.1Certain Definitions1
Section 1.2Rules of Construction14
ARTICLE 2 THE REVOLVING CREDIT FACILITY14
Section 2.1The Loan14
Section 2.2The Notes15
Section 2.3Method of Payment15
Section 2.4Extension and Adjustment of Maturity Date16
Section 2.5Use of Proceeds16
Section 2.6Interest.16
Section 2.7Advances.16
Section 2.8Prepayment.19
Section 2.9Fees19
Section 2.10Regulatory Changes in Capital Requirements; Replacement of a
Lender20
Section 2.11Sharing of Payments20
Section 2.12Pro Rata Treatment21
Section 2.13Accordion21
Section 2.14Existing Indebtedness22
ARTICLE 3 SECURITY22
Section 3.1Security Interest22
Section 3.2Financing Statements23
Section 3.3Documents to be Delivered to Agent23
Section 3.4Collections23
Section 3.5Additional Rights of Agent; Power of Attorney.23
Section 3.6Additional Collateral Provisions.24
ARTICLE 4 REPRESENTATIONS AND WARRANTIES25
Section 4.1Representations and Warranties as to Receivables.25
Section 4.2Organization and Good Standing26
Section 4.3Perfection of Security Interest26
Section 4.4No Violations26
Section 4.5Power and Authority.26
Section 4.6Validity of Agreements27
Section 4.7Litigation27
Section 4.8Compliance27
Section 4.9Accuracy of Information; Full Disclosure.27
Section 4.10Taxes.28
Section 4.11Indebtedness28
Section 4.12Investments28
Section 4.13ERISA28
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Section 4.14Hazardous Wastes, Substances and Petroleum Products.28
Section 4.15Solvency29
Section 4.16Business Location29
Section 4.17Capital Stock29
Section 4.18No Extension of Credit for Securities29
Section 4.19Sanctions29
Section 4.20Anti-Money Laundering and Anti-Corruption Laws30
Section 4.21Beneficial Ownership Certification30
ARTICLE 5 CONDITIONS TO LOAN30
Section 5.1Documents to be Delivered to Agent Prior to Effectiveness30
Section 5.2Conditions to all Advances31
ARTICLE 6 AFFIRMATIVE COVENANTS31
Section 6.1Place of Business and Books and Records31
Section 6.2Reporting Requirements.32
Section 6.3Books and Records33
Section 6.4Financial Covenants33
Section 6.5Compliance With Applicable Law.34
Section 6.6Notice of Certain Events35
Section 6.7Existence, Properties35
Section 6.8Payment of Indebtedness; Taxes35
Section 6.9Notice Regarding Any Plan35
Section 6.10Other Information35
Section 6.11Litigation, Enforcement Actions and Requests for Information36
Section 6.12Business Location, Legal Name and State of Organization36
Section 6.13Operations36
Section 6.14Further Assurances36
Section 6.15Chattel Paper/Jurisdictions.36
ARTICLE 7 NEGATIVE COVENANTS37
Section 7.1Payments to and Transactions with Affiliates37
Section 7.2Restricted Payments37
Section 7.3Indebtedness38
Section 7.4Guaranties38
Section 7.5Nature of Business38
Section 7.6Negative Pledge38
Section 7.7Investments38
Section 7.8Compliance with Formula38
Section 7.9Mergers, Divestitures 38
Section 7.10Use of Proceeds.38
Section 7.11Ownership and Management38
Section 7.12Amendment to Subordinated Debt39
Section 7.13Bulk Purchases39
Section 7.14Guarantor Dividends39
Section 7.15Asset Sales39
Section 7.16Deposit Accounts39
Section 7.17Source of Repayment and Collateral39
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Section 7.18Franklin Securities, Inc.39
ARTICLE 8 EVENTS OF DEFAULT39
Section 8.1Failure to Make Payments.39
Section 8.2Information, Representations and Warranties39
Section 8.3Covenants40
Section 8.4Collateral40
Section 8.5Defaults Under Other Agreements40
Section 8.6Certain Events40
Section 8.7Possession of Collateral41
Section 8.8Guarantor41
Section 8.9Credit Documents41
Section 8.10Hedging Agreements41
Section 8.11Material Adverse Change41
Section 8.12Level Two Regulatory Event41
ARTICLE 9 REMEDIES OF AGENT AND WAIVER41
Section 9.1Agent’s Remedies41
Section 9.2Waiver and Release by Borrowers42
Section 9.3No Waiver42
Section 9.4Application of Proceeds42
ARTICLE 10 MISCELLANEOUS43
Section 10.1Indemnification and Release Provisions43
Section 10.2Amendments.43
Section 10.3APPLICABLE LAW45
Section 10.4Notices45
Section 10.5Termination and Release46
Section 10.6Counterparts46
Section 10.7Costs, Expenses and Taxes46
Section 10.8Participations and Assignments.46
Section 10.9Effectiveness of Agreement49
Section 10.10JURISDICTION AND VENUE49
Section 10.11WAIVER OF JURY TRIAL49
Section 10.12REVIEW BY COUNSEL49
Section 10.13Exchanging Information49
Section 10.14Acknowledgment of Receipt49
Section 10.15Patriot Act Notice50
Section 10.16Recognition of the U.S. Special Resolution Regimes.50
ARTICLE 11 AGENT50
Section 11.1Appointment of Agent.50
Section 11.2Nature of Duties of Agent.51
Section 11.3Lack of Reliance on Agent.51
Section 11.4Certain Rights of Agent52
Section 11.5Reliance by Agent52
Section 11.6Indemnification of Agent52
Section 11.7Agent in its Individual Capacity52
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Section 11.8Holders of Notes53
Section 11.9Successor Agent.53
Section 11.10Collateral Matters.53
Section 11.11Delivery of Information54
Section 11.12Defaults54
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made as of the 19th day
of November, 2019 by and among 1ST FRANKLIN FINANCIAL CORPORATION, a Georgia
corporation, and such other Persons joined hereto from time to time as borrowers
pursuant to written agreement by the parties hereto (collectively, the
“Borrowers” and each individually is referred to as a “Borrower”), WELLS FARGO
BANK, N.A., as agent for Lenders (“Agent”), and the financial institutions from
time to time party hereto (collectively, the “Lenders” and each individually is
referred to as a “Lender”).
BACKGROUND
A.Wells Fargo Bank, N.A., as agent and lender, and 1st Franklin Financial
Corporation are parties to that certain Loan and Security Agreement dated as of
September 11, 2009 (as amended or modified from time to time, the “Existing
Agreement”) and certain instruments, documents and agreements executed in
connection therewith (together with the Existing Agreement, the “Existing Loan
Documents”).
B.Agent, Lenders and Borrowers desire to amend and restate the Existing
Agreement in its entirety pursuant to the terms and conditions hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby, the
parties covenant and agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Definitions. The terms defined in this
Section 1.1, whenever used and capitalized in this Agreement shall, unless the
context otherwise requires, have the respective meanings herein specified.
“Access Agreement” shall mean the access agreement, in form and substance
acceptable to Agent, executed and delivered to Agent by Borrowers and a Person
reasonably acceptable to Agent (including DHI Computing Service, Inc., doing
business through a division known as GOLDPoint Systems).
“Adjusted Tangible Net Worth” means Tangible Net Worth minus (a) any deficits
from the amount required as Allowance for Loan Losses under Section 6.4(c)
hereof and (b) the amount of any accounts to be charged-off, that have not been
charged-off, under Section 6.4(e) hereof.
“Advance” means each advance of the Loan made to Borrowers pursuant to
Section 2.1 of this Agreement.
“Advance Rate” means 70%.
“Affiliate” means (i) any Person who or entity which directly or indirectly
owns, controls or holds 5.0% or more of the outstanding beneficial interest in a
Borrower; (ii) any entity of which 5.0% or more of the outstanding beneficial
interest is directly or indirectly owned, controlled, or held by a
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Borrower; (iii) any entity which directly or indirectly is under common control
with a Borrower; or (iv) any officer, director, partner or employee of a
Borrower or any Affiliate. For purposes of this definition, “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of an entity, whether through the
ownership of voting securities, by contract, or otherwise.
“Agreement” means this Amended and Restated Loan and Security Agreement and all
exhibits and schedules hereto, as the same may be amended, modified or
supplemented from time to time.
“Allowance for Loan Losses” means, at all times, the sum of allowance for loan
losses, as calculated in accordance with GAAP (inclusive of discounts, Dealer
Reserves and dealer holdbacks).
“Anti-Corruption Laws” means: (a) the U.S. Foreign Corrupt Practices Act of
1977, as amended; (b) the U.K. Bribery Act 2010, as amended; and (c) any other
anti-bribery or anti-corruption laws, regulations or ordinances in any
jurisdiction in which any Borrower or any member of the Borrowing Group is
located or doing business.
“Anti-Money Laundering Laws” means applicable laws or regulations in any
jurisdiction in which any Borrower or any member of the Borrowing Group is
located or doing business that relates to money laundering, any predicate crime
to money laundering, or any financial record keeping and reporting requirements
related thereto.
“Anti-Terrorism Laws” means any laws relating to terrorism or money laundering
(including Anti-Money Laundering Laws), including the Patriot Act.
“Applicable Margin” means (a) initially 2.75% and (b) commencing with Agent’s
receipt of the monthly financial statements and other documentation and reports
required pursuant to Section 6.2 of this Agreement for the calendar month ending
November 30, 2019, the following percentage as set forth in the matrix below (no
downward rate adjustment being permitted if an Event of Default or Default is
outstanding):
Funded Debt to
Adjusted Tangible Net Worth Ratio
Applicable Margin
Less than 2.75 to 1.0
2.75%
Greater than or equal to 2.75 to 1.0
3.00%
For purposes of the foregoing (i) the Applicable Margin shall be adjusted
monthly in accordance with the matrix above, based upon Agent’s receipt of
monthly financial statements and other documentation and reports required
pursuant to Section 6.2 of this Agreement, and effective the first (1st) day of
the month of the delivery of such financial statements and other documentation
and reports and (ii) if Borrowers fail to timely deliver the applicable
financial statements, documentation and reports or any other Event of Default
then exists, then at Agent’s option, the Applicable Margin will be increased to
the highest rate of interest pursuant to the above matrix, which rate of
interest shall continue in effect until the applicable financial statements are
delivered. In the event that any financial
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2
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statement, covenant compliance certificate, documentation and reports delivered
pursuant to Section 6.2 of this Agreement is shown to be inaccurate (regardless
of whether this Agreement is in effect when such inaccuracy is discovered), and
such inaccuracy, if corrected, would have led to the application of a higher
Applicable Margin for any period (an “Applicable Period”) than the Applicable
Margin applied for such Applicable Period, and only in such case, then Borrowers
shall immediately (i) deliver to Agent a corrected covenant compliance
certificate for such Applicable Period, (ii) determine the Applicable Margin for
such Applicable Period based upon the corrected covenant compliance certificate,
and (iii) pay to Agent the accrued additional interest owing as a result of such
increased Applicable Margin for such Applicable Period.
“Asset Quality” means, as of the date of determination, the sum of the following
percentage: (a) Net Charge-Offs of Receivables for the 12 month period ending on
such date, as a percentage of Principal Receivables outstanding during such 12
month period, plus (b) Receivables more than 60 days past due on a contractual
basis on such date, as a percentage of gross Receivable on such date.
“Assignment and Acceptance” means an assignment and acceptance entered into by
an assigning Lender and an assignee Lender, accepted by Agent, in accordance
with Section 10.8 in form and substance satisfactory to Agent (in its sole and
absolute discretion).
“Annual Compliance Certificate” means the certificate in the form of Exhibit A
attached hereto and made a part hereof to be delivered by Borrowers to Agent
pursuant to Section 6.2(f) hereof.
“Availability Statement” means the certificate in substantially the form of
Exhibit B attached hereto and made part hereof to be submitted by Borrowers to
Agent in accordance with the provisions of this Agreement.
“Bankruptcy Code” means the United States Bankruptcy Code as now constituted or
hereafter amended and any similar statute or law affecting the rights of
debtors.
“Bank Products” means any one or more of the following types of services or
facilities extended to a Borrower by the Agent or any Wells Fargo Affiliate: (a)
Cash Management Services; (b) products under Hedging Agreements; (c) commercial
credit card and merchant card services; and (d) leases and other banking
products or services as may be requested by any Borrower.
“Beneficial Ownership Certification” means a certification regarding beneficial
ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and
shall be interpreted in accordance with, 12 U.S.C. §1841(k).
“Books and Records” means all of Borrowers’ original ledger cards, payment
schedules, credit applications, contracts, lien and security instruments,
guarantees relating in any way to the Collateral and other books and records or
transcribed information of any type, whether expressed in electronic form in
tapes, discs, tabulating runs, programs and similar materials now or hereafter
in existence relating to the Collateral.
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3
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“Borrowers’ Loan Account” has the meaning assigned to that term in Section 2.1
of this Agreement.
“Borrowing Base” means, as of the date of determination, and subject to change
from time to time as described below, an amount equal to the Advance Rate
multiplied by the aggregate balance of outstanding Eligible Receivables.
Notwithstanding the foregoing, Agent may adjust the above rates in the
Borrowing Base from time to time and at any time in Agent’s commercially
reasonable discretion, upon 10 days notice to Borrowers if, in Agent’s
commercially reasonable judgment, there has been an adverse change with respect
to Borrowers’ Receivables, business operation or regulatory affairs related to
Borrowers’ Receivables or business operations.
“Borrowing Group” means: (a) Borrowers, (b) the parent of Borrowers, (c) any
Affiliate or Subsidiary of Borrowers, (c) any Guarantor, (d) the owner of any
collateral securing any part of the credit (including the Collateral), any
guaranty (including the Guaranties), or this Agreement, and (e) any officer,
director or agent acting on behalf of any of the parties referred to in items
(a) through (d) with respect to the credit, this Agreement or any of the other
Credit Documents.
“Business Day” means any day except a Saturday, Sunday or other day on which
national banks are authorized by law to close including, without limitation,
United States federal government holidays.
“Cash Management Services” means any services provided from time to time by
Agent or any Wells Fargo Affiliate to any Borrower or Subsidiary in connection
with operating, collections, payroll, trust, or other depository or disbursement
accounts, including automated clearinghouse, e-payable, electronic funds
transfer, wire transfer, controlled disbursement, overdraft, depository,
information reporting, lockbox and stop payment services.
“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and regulations with respect thereto in effect from time to time.
“Collateral” means:
(i)All of each Borrower’s Receivables, now owned or existing or hereafter
arising or acquired;
(ii)All collateral, security and guaranties now or hereafter in existence for
any Receivables;
(iii)All insurance related to any Receivables, to any collateral or security for
any Receivables or to any obligor in respect of any Receivables and all proceeds
of such insurance to which a Borrower has a right of receipt (including, without
limitation, all non-filing insurance, credit insurance and credit life insurance
related to any Receivables, to any collateral or security for any Receivables,
or to any obligor in respect of any Receivables and all proceeds of such
insurance);
(iv)All of each Borrower’s Books and Records related to any Receivables
including tapes and software;
(v)All notes, drafts, deposit accounts, acceptances, documents of title, deeds,
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policies and policies or certificates of insurance (including without limitation
credit insurance, credit life insurance, non-filing insurance and title
insurance) and securities (domestic and foreign) and letter of credit rights now
or hereafter owned by each Borrower or in which a Borrower has or at any time
acquires an interest in connection with any Receivables;
(vi)All of each Borrower’s Accounts, Documents, Instruments, General
Intangibles, Investment Property (including, without limitation, equity
interests in and capital stock of each Entity Guarantor) and Chattel Paper, now
owned or existing or hereafter arising or acquired, and all payment obligations
owed to a Borrower, now owned or existing or hereafter arising or acquired;
together with all collateral, security and guaranties now or hereafter in
existence for any of the foregoing; and
(vii)All cash and non-cash proceeds of all the foregoing.
“Collections” means payment of principal, interest and fees on Receivables, the
cash and non-cash proceeds realized from the enforcement of such Receivables and
any security therefor, or the Collateral, proceeds of credit, group life or
non-filing insurance, or proceeds of insurance on any real or personal property
which is part of the collateral for the Receivables.
“Commercial Paper” means the short term promissory notes issued by Borrowers
from time to time in connection with their commercial paper program.
“Commitment” means, with respect to each Lender, a commitment of such Lender to
make its portion of the Advance in a principal amount up to each such Lender’s
Commitment Percentage of the Maximum Principal Amount.
“Commitment Percentage” means, for any Lender, the percentage identified as the
Commitment Percentage on Schedule I, as such percentage may be modified in
connection with any assignment made in accordance with Section 10.8.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. Section 1 et
seq.), as amended from time to time, and any successor statute.
“Consumer Finance Laws” means all applicable laws and regulations, federal,
state and local, relating to the extension of consumer credit, and the creation
of a security interest in personal property or a mortgage in real property in
connection therewith, as the case may be, and laws with respect to protection of
consumers’ interests in connection with such transactions, including without
limitation, any usury laws, the Federal Consumer Credit Protection Act, the
Federal Fair Credit Reporting Act, RESPA, the Magnuson-Moss Warranty Act, the
Federal Trade Commission’s Rules and Regulations and Regulations B and Z of the
Federal Reserve Board, as any of the foregoing may be amended from time to time.
“Consumer Purpose Loans” means amortizing loans to one or more individuals the
proceeds of which are used for personal use including to purchase goods,
services or merchandise for personal, household or family use.
“Control Agreement” means that certain deposit account control agreement among
Borrowers, Agent and South State Bank (in form and substance satisfactory to
Agent and South State Bank).
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“Covered Entity” means any of the following: (i) a “covered entity” as that term
is defined in, and interpreted in accordance with, 12 C.F.R. §252.82(b); (ii) a
“covered bank” as that term is defined in, and interpreted in accordance with,
12 C.F.R. §47.3(b); or (iii) a “covered FSI” as that term is defined in, and
interpreted in accordance with, 12 C.F.R. §382.2(b).
“Credit Documents” means this Agreement, the Notes, the Guaranties, the
Subordination Agreement, the Control Agreement and any and all additional
documents, instruments, agreements and other writings executed and delivered
pursuant to or in connection with this Agreement.
“Dealer Reserves” means a reserve on Borrower’s Books and Records for charges
and claims against dealers.
“Debt” means as of the date of determination, all outstanding indebtedness
(other than deferred loan origination fees of Borrowers) including without
limitation (a) all loans made hereunder to Borrowers; (b) accounts payable as of
the date of determination; (c) income tax liabilities; (d) mortgages;
(e) deposits, debenture instruments, and other instruments, including all
accruals of interest and fees related thereto; (e) all other obligations which
in accordance with GAAP would be classified upon a balance sheet as liabilities
(except capital stock and surplus earned or otherwise); (f) Subordinated Debt
and (g) Other Debt.
“Default” means an event, condition or circumstance which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.
“Default Right” has the meaning assigned to that term in, and shall be
interpreted in accordance with, 12 C.F.R. §§252.81, 47.2 or 382.1, as
applicable.
“Deficiency Balance Receivable” means a Receivable for which a balance remains
after any collateral associated with such Receivable has been sold and the
remaining balance has not been charged off.
“EBITDA Ratio” means the ratio of such Person’s (a) earnings before payments of
interest, taxes, depreciation and amortization expense for the twelve month
period ending on the date of determination, net of any deficits from the amount
required as an Allowance for Loan Losses under Section 6.4(c) hereof and the
amount of any accounts to be charged off, that have not been charged off, in
Section 6.4(e) hereof, to (b) interest expense during such twelve month period
in accordance with GAAP principles pursuant to Section 6.4 of this Agreement.
“Eligible Receivables” means, as of the date of determination, Receivables (net
of unearned interest, fees, dealer reserves, holdbacks, discounts, insurance
premiums and commissions thereon), which conform to the warranties set forth in
Section 4.1 hereof, in which Agent has a validly perfected first priority Lien,
and which are not any of the following: (i) Receivables for which a payment is
more than 60 days past due on a contractual basis; (ii) Receivables subject to a
bankruptcy proceeding, litigation, foreclosure, repossession or other legal
proceeding; (iii) Receivables from employees (unless payments with respect
thereto are automatically deducted from such employee’s paycheck) or
shareholders of any Borrower or any Affiliate; (iv) Receivables which have been
deferred, restructured, extended, renewed, modified or altered not in compliance
with Borrowers’ Modification Policy; (vi) Receivables not in compliance with
Borrowers’ Underwriting Policy; (vii) if Borrowers have elected to note their
first priority Lien on the applicable certificate of title, Receivables for
which Agent or
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Borrowers have not received a valid certificate of title or notification of a
valid certificate of title with the Lien of a Borrower noted thereon, if
applicable, within 120 days after the origination of the Receivable;
(viii) Receivables arising from balloon payment accounts, non-amortizing
accounts or Interest-Only Accounts; (ix) Receivables arising from assignments
for repossession; (x) Real Estate Related Accounts for which the original term
exceeds 120 months; (xi) Receivables which were originated to support the
acquisition of commercial vehicles; (xii) RESERVED; (xiii) Deficiency Balance
Receivables; (xiv) Receivables serviced, collected or enforced by a Person other
than a Borrower without prior written consent of Agent; (xv) Real Estate Related
Accounts for which the amount, when aggregated with all other Real Estate
Related Accounts exceeds the lesser of (A) $55,000,000 or (B) 10% of all total
Receivables of Borrowers then outstanding, to the extent of such excess; (xvi)
Receivables with any deferred payments; (xvii) Receivables constituting “premier
loans” with a credit score of less than 640; (xviii) Receivables for which the
original term exceeds 60 months (other than Real Estate Related Accounts); (xix)
Receivables with an original principal balance in excess of $15,000 (other than
Real Estate Related Accounts); and (xx) Receivables which, in Agent’s
commercially reasonable discretion, do not constitute acceptable collateral
following 10 days’ notice from Agent to Borrowers.
“Entity Guarantors” means, collectively, Frandisco Life Insurance Company, a
Georgia corporation, and Frandisco Property & Casualty Insurance Company, a
Georgia corporation.
“Environmental Control Statutes” means any federal, state, county, regional or
local laws governing the control, storage, removal, spill, release or discharge
of Hazardous Substances, including without limitation CERCLA, the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
and the Hazardous and Solid Waste Amendments of 1984, the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1976, the Hazardous
Materials Transportation Act, the Emergency Planning and Community Right to Know
Act of 1986, the National Environmental Policy Act of 1975, the Oil Pollution
Act of 1990, any similar or implementing state law, and in each case including
all amendments thereto and all rules and regulations promulgated thereunder and
permits issued in connection therewith.
“EPA” means the United States Environmental Protection Agency, or any successor
thereto.
“ERISA” means the Employee Retirement Income Security Act of 1974, all
amendments thereto, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed to refer to any successor sections.
“Event of Default” has the meaning assigned to that term in Article 8 of this
Agreement.
“Excess Availability” means, as of any date of determination, an amount equal to
(a) the lesser of the Borrowing Base and the Maximum Principal Amount, minus (b)
the amount of outstanding Advances.
“Excluded Swap Obligation” means, with respect to any Person, any Swap
Obligation if, and to the extent that, all or a portion of the agreement of such
Person to be obligated with respect of, or the grant by such Person of a Lien to
secure, such Swap Obligation (or any Guaranty thereof) is or becomes illegal or
unlawful under the Commodity Exchange Act or any rule, regulation or order of
the Commodity Futures Trading Commission (or the application or official
interpretation of any
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thereof) by virtue of such Person’s failure for any reason not to constitute an
“eligible contract participant” as defined in the Commodity Exchange Act at the
time the agreement of such Person to be obligated with respect of such Swap
Obligation would otherwise have become effective with respect to such related
Swap Obligation but for such Person’s failure to constitute an “eligible
contract participant” at such time. If a Swap Obligation arises under a master
agreement governing more than one swap, such exclusion shall apply only to the
portion of such Swap Obligation that is attributable to swaps for which such
agreement of such Person to be obligated or Lien is or becomes illegal or
unlawful.
“Funded Debt” means, with respect to any Person on any day, without duplication,
the following Debt: (i) all indebtedness or guarantees of such Person for
borrowed money or for the deferred purchase price of property or services (other
than current liabilities incurred in the ordinary course of business and payable
in accordance with customary trade practices) or which is evidenced by a note,
bond, debenture or similar instrument or which accrue interest or are a type
upon which interest charges are customarily paid (specifically excluding all
obligations of such Person under capital leases), (ii) liabilities secured by
any Lien on any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof (provided that the
amount of such liabilities included as Funded Debt shall be the lesser of the
amount of such liabilities and the fair market value of the property of such
Person securing such liabilities), (iii) the net amount of all indebtedness,
obligations or liabilities of that Person in respect of Hedge Agreements, (iv)
all obligations, contingent or otherwise, of such Person as an account party in
respect of undrawn letters of credit and undrawn letters of guaranty, (v) all
obligations, contingent or otherwise, of such Person in respect of bankers’
acceptances, and (vi) guaranties of any of the foregoing
“Funded Debt to Adjusted Tangible Net Worth Ratio” means the ratio of Funded
Debt to Adjusted Tangible Net Worth.
“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States, consistently applied; provided, however, that all
calculations relative to liabilities shall be made without giving effect to
Statement of Financial Accounting Standards No. 159.
“Governmental Authority” means any federal, state, local, or other governmental
or administrative body, instrumentality, board, department, or agency or any
court, tribunal, administrative hearing body, arbitration panel, commission, or
other similar dispute-resolving panel or body (including, without limitation,
Local Authorities).
“Guarantors” shall mean, collectively, Entity Guarantors.
“Guaranty” means individually, and “Guaranties” means collectively, the limited
and unlimited guaranty agreements in form and substance satisfactory to Agent,
as the same may be amended, modified, restated or extended from time to time.
“Hazardous Substance” means any toxic, reactive, corrosive, carcinogenic,
flammable or hazardous pollutant or other substance, including without
limitation petroleum and items defined in Environmental Control Statutes as
“hazardous substances,” “hazardous wastes,” “pollutants” or “contaminants.”
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“Hedging Agreement” an agreement relating to any interest rate hedge, exchange,
swap, cap, floor, collar, option, forward, cross right or obligation, or
combination thereof or similar transaction, with respect to interest rate,
foreign exchange, currency, commodity, credit or equity risk (including, without
limitation, any ISDA Master Agreement).
“Insurance Premium Dividend” means distribution to shareholders of Borrowers
used solely to pay life insurance premiums.
“Intangible Assets” means all assets of any Person which would be classified in
accordance with GAAP as intangible assets, including without limitation (a) all
franchises, licenses, permits, patents, applications, copyrights, trademarks,
trade names, goodwill, experimental or organization expenses and other like
intangibles, and (b) unamortized debt discount and expense and unamortized stock
discount and expense.
“Interest-Only Accounts” means those Receivables on which collections are
applied entirely to interest and expense charges, with no portion thereof being
required to reduce the principal balance on the loan prior to the stated
maturity of such accounts.
“Level One Regulatory Event” means the formal commencement by written notice by
any federal or state Governmental Authority of any inquiry, investigation, legal
action or similar proceeding against any Borrower or any of their Subsidiaries
challenging its authority to originate, hold, own, service, collect or enforce
Receivables generally or any category or group of Receivables that is material
to the business of such Borrower or such Subsidiary, or otherwise alleging any
material non-compliance by any Borrower or any of their Subsidiaries with any
applicable laws related to originating, holding, collecting, servicing or
enforcing Receivables generally or any category or group of Receivables that is
material to the business of such Borrower or such Subsidiary (which shall
include, without limitation, the issuance of a civil investigative demand by the
Consumer Financial Protection Bureau that meets the criteria set forth above),
which inquiry, investigation, legal action or proceeding is not released or
terminated in a manner reasonably acceptable to Agent within thirty (30)
calendar days of commencement thereof.
“Level Two Regulatory Event” means the issuance or entering of any stay, order,
judgment, cease and desist order, injunction, temporary restraining order, or
other judicial or non-judicial sanction, order or ruling against any Borrower or
any of their Subsidiaries related in any way to the originating, holding,
pledging, collecting, servicing or enforcing of Receivables generally or any
category or group of Receivables that is material to the business of such
Borrower or such Subsidiary.
“LIBOR Rate” means the greater of (a) 0.75% per annum or (b) the one-month
London Interbank Offered Rate as found in the Wall Street Journal, Interactive
Edition, or any successor edition or publication and selected by Agent in its
sole discretion for its entire loan portfolio for all borrowers for any day
during a given month. The LIBOR Rate shall be adjusted on the first day of each
calendar month based upon the LIBOR Rate as of the last day of the immediately
preceding calendar month. In the event such rate ceases to be published or
quoted, LIBOR Rate shall mean a comparable rate of interest reasonably selected
by Agent for its entire loan portfolio for all borrowers. Agent’s determination
of the LIBOR Rate shall be conclusive and binding on Borrowers, absent manifest
error.
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“Lien” means any mortgage, deed of trust, pledge, lien, security interest,
charge or other encumbrance or security arrangement of any nature whatsoever,
including without limitation any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended as, or
having the effect of, security.
“Liquidity” means the sum of unencumbered cash of Borrowers, Excess Availability
and availability under the Reinsurance Credit Facilities.
“Loan” means the aggregate principal amount advanced by Lenders to Borrowers
pursuant to Section 2.1 of this Agreement, together with interest accrued
thereon and fees and costs owing hereunder in connection therewith.
“Loan Availability” means the amount available for Advances under this Agreement
on any date as determined in accordance with the Availability Statement
submitted to Agent pursuant to the terms hereof.
“Local Authorities” means individually and collectively the state and local
governmental authorities which govern the business and operations owned or
conducted by Borrowers or any of them.
“Maturity Date” means February 28, 2022, as such date may be extended from time
to time in accordance with the provisions of Section 2.4 of this Agreement.
“Maximum Principal Amount” means $200,000,000.
“Modification Policy” means that certain policy of Borrowers attached hereto as
Exhibit E.
“Net Charge-Offs” means Principal Receivables which have been charged off (net
of bad debt recoveries).
“Notes” mean collectively, the promissory notes to this Agreement of Borrowers
in favor of each Lender in form and substance satisfactory to Agent, evidencing
the joint and several obligation of Borrowers to repay the Loan, and any and all
amendments, renewals, replacements or substitutions therefor, and each is
referred to individually as a “Note.”
“Obligations” means (a) each and every draft, liability and obligation of every
type and description which Borrowers may now or at any time hereafter owe to
Agent and Lenders (whether such debt, liability or obligation now exists or is
hereafter created or incurred, whether it arises in a transaction involving
Agent and/or any Lender alone or in a transaction involving other creditors of
Borrowers, or any of them, and whether it is direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or sole, joint, several or joint and several), and including
specifically, but not limited to, all indebtedness of Borrowers arising under
this Agreement, the Notes, any fee letter or any other loan or credit agreement
between or among a Borrower or Borrowers and Agent and/or any Lender, whether
now in effect or hereafter entered into and including, without limitation, all
Loans and (b) payment or performance, as the case may be, of all obligations of
Borrowers with respect to Bank Products. Notwithstanding anything to the
contrary contained herein, the Obligations shall specifically exclude Excluded
Swap Obligations.
“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the
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Treasury.
“Other Debt” means Senior Demand Notes, Commercial Paper and Variable Rate
Subordinated Debentures.
“Participant” has the meaning assigned to that term in Section 10.8 of this
Agreement.
“Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA Patriot
Act of 2001).
“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.
“Permitted Indebtedness” means (a) borrowings from Agent and Lenders hereunder;
(b) trade indebtedness in the normal and ordinary course of business for value
received; (c) indebtedness and obligations incurred to purchase or lease fixed
or capital assets, (d) the other indebtedness and obligations described on
Schedule II attached hereto and made part hereof, (e) indebtedness in connection
with Bank Products, (f) Other Debt, (g) real property leases entered into by
Borrowers with respect to the branch offices and other buildings in the ordinary
course of their business and (h) unsecured Debt permitted to be drawn with the
prior written consent of Agent owing under the Reinsurance Credit Facilities.
“Permitted Liens” means (a) Liens granted to Agent by Borrowers pursuant to this
Agreement, (b) Liens existing as of the date hereof described on Schedule III
attached hereto and (c) Liens granted to real property landlords by Borrowers on
furniture, fixture and equipment.
“Permitted Tax Distributions” shall mean as to any taxable year of a Borrower
during which such Borrower makes an S corporation election with the Internal
Revenue Service and appropriate state agency, an annual distribution necessary
to enable each shareholder of such Borrower to pay federal or state income taxes
attributable to such shareholder resulting solely from the allocated share of
income of such Borrower for such period.
“Person” means all natural persons, corporations, limited partnerships, general
partnerships, joint stock companies, limited liability companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
federal and state governments and agencies or regulatory authorities and
political subdivisions thereof, or any other entity.
“Plan” means any employee benefit plan subject to the provisions of Title IV of
ERISA which is maintained in whole or in part for employees of Borrowers or any
Affiliate of Borrowers.
“Principal Receivables” means net Receivables less unearned interest and
insurance commissions (including discounts).
“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
“Real Estate Related Accounts” means Receivables arising from loans (a) the
proceeds of which are used to purchase or improve real property; or
(b) collateralized or secured by an interest in real property; and shall include
without limitation home equity accounts.
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“Receivables” means all lien, title retention and security agreements, chattel
mortgages, chattel paper, bailment leases, installment sale agreements,
instruments, consumer finance paper and/or promissory notes securing and
evidencing loans made, and/or time sale transactions acquired, by a Borrower.
“Regulatory Event” means either a Level One Regulatory Event or a Level Two
Regulatory Event.
“Reinsurance Credit Facilities” means the unsecured credit facilities
established for the benefit of Borrowers pursuant to two Line of Credit Loan
Agreements with Borrowers’ Subsidiaries, Frandisco Life Insurance Company and
Frandisco Property and Casualty Insurance Company, the documentation of which
are in form and substance acceptable to Agent, and which shall have (w) maturity
dates thereunder at least five (5) months after the Maturity Date, (x) no
financial or negative covenants, (y) a per annum rate of interest no more than
25 basis points greater than the interest accruing on the principal balance of
the Obligations and (z) an aggregate commitment of at least $92,000,000.
“Replacement Lender” has the meaning assigned to that term in Section 2.10(b) of
this Agreement.
“Reportable Event” has the meaning assigned to that term in Section 4.13 of this
Agreement.
“Required Lenders” means, at any time, Lenders which are then in compliance with
their obligations hereunder and holding in the aggregate at least seventy five
percent (75%) of (a) the Commitment Percentage (and participation interest) or
(b) if this Agreement has been terminated, the outstanding Loans and
participation interest; provided, however, if there are less than three (3)
Lenders at any time, Required Lenders shall mean one hundred percent (100%) of
Lenders which are then in compliance with their obligations hereunder.
“Restricted Payments” means payments by Borrowers, or any of them, which
constitute (a) redemptions, repurchases, dividends or distributions of any kind
with respect to a Borrower’s stock or any warrants, rights or options to
purchase or otherwise acquire any shares of Borrower’s capital stock or
(b) payments of principal or interest on Subordinated Debt.
“Sanction” or “Sanctions” means any and all economic or financial sanctions,
sectoral sanctions, secondary sanctions, trade embargoes and restrictions and
anti-terrorism laws imposed, administered or enforced from time to time by any
Sanctioned Entity: including, without limitation: (a) the United States of
America, including those administered by the U.S. Department of the Treasury’s
Office of Foreign Assets Control (OFAC), the U.S. Department of State, the U.S.
Department of Commerce, or through any existing or future statute or Executive
Order, (b) the United Nations Security Council, (c) the European Union, (d) the
United Kingdom, (e) any other governmental authority with jurisdiction over
Borrower or any member of the Borrowing Group.
“Sanctioned Entity” means (a) a country or a government of a country, (b) an
agency of the government of a country, (c) an organization directly or
indirectly controlled by a country or its government, (d) a Person resident in
or determined to be resident in a country, in each case, that is subject to a
country sanctions program administered and enforced by OFAC.
“Sanctioned Target” means any target of Sanctions, including: (a) Persons on any
list of targets
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identified or designated pursuant to any Sanctions, (b) Persons, countries, or
territories that are the target of any territorial or country-based Sanctions
program, (c) Persons that are a target of Sanctions due to their ownership or
control by any Sanctioned Target(s), or (d) otherwise a target of Sanctions,
including vessels and aircraft, that are designated under any Sanctions program.
“Schedule of Receivables and Assignment” means a Schedule of Receivables and
Assignment to be submitted by Borrowers to Agent pursuant to the terms hereof,
describing the Receivables assigned and pledged to Agent, for the benefit of
Agent, on the date hereof and thereafter for the period to which such schedule
relates and confirming the assignment and pledge of such Receivables.
“Senior Demand Notes” means the Senior Demand Notes issued by Borrowers from
time to time, as more fully described in the most current prospectus with
respect to the Senior Demand Notes as filed with the Securities and Exchange
Commission, as the same may be amended, modified, supplemented, increased or
restated from time to time.
“Subordinated Debt” means any indebtedness for borrowed money which shall
contain provisions subordinating the payment of such indebtedness and the liens
and security interests securing such indebtedness to Obligations, in form,
substance and extent acceptable to Agent in its sole discretion. For purposes
hereof, Subordinated Debt includes, without limitation, the Variable Rate
Subordinated Debentures.
“Subordination Agreement” means, individually, and “Subordination Agreements”
means, collectively, the Subordination Agreements executed in connection with
the Subordinated Debt, from time to time, each in the form of Exhibit D attached
hereto and made part hereof.
“Subsidiary” of any entity means any corporation, limited liability company,
partnership or other legal entity of which such entity directly or indirectly
owns or controls at least a majority of the outstanding stock or other equity
interest having general voting power. For purposes of this definition,
“control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of an entity, whether
through the ownership of voting securities, by contract, or otherwise.
“Swap Obligation” means, with respect to any Person, any obligation to pay or
perform under any agreement, contract or transaction that constitutes a “Swap”
within the meaning of Section 1a(47) of the Commodity Exchange Act.
“Tangible Net Worth” means, at any date, the amount of the capital stock
liability of such Person on a consolidated basis (but excluding the effect of
intercompany transactions) plus (or minus in the case of a deficit) its capital
surplus and earned surplus minus, to the extent not otherwise excluded (i) the
cost of treasury shares; (ii) the amount equal to the value shown on its books
of Intangible Assets, including the excess paid for assets acquired over their
respective book values on the books of the corporation from which acquired; and
(iii) investments in and loans to any Subsidiary or Affiliate or to any
shareholder, director or employee of such Person, any Subsidiary or any
Affiliate.
“Termination Date” means the earlier of: (a) the Maturity Date, or (b) the date
on which the Commitments are terminated and the Loan becomes due and payable
pursuant to Section 9.1.
“U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance
Act and the regulations promulgated thereunder and (ii) Title II of the
Dodd-Frank Wall Street Reform and
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Consumer Protection Act and the regulations promulgated thereunder.
“Underwriting Policy” means that certain policy of Borrowers attached hereto as
Exhibit F.
“UCC” means the Uniform Commercial Code as in effect in the State of New York
from time to time.
“Variable Rate Subordinated Debentures” means the Variable Rate Subordinated
Debentures issued by Borrowers from time to time under the Subordinated
Indenture (that certain Indenture dated as of October 31, 1984, as the same may
be amended, modified, supplemented, restated, renewed, refinanced or replaced
from time to time), the repayment of which are subordinate in right of payment
to the Obligations, the Senior Demand Notes, the Commercial Paper and any other
Indebtedness of Borrowers.
“Wells Fargo Affiliate” means in relation to Agent, any entity controlled,
directly or indirectly, by Agent, any entity that controls, directly or
indirectly, Agent or any entity directly or indirectly under common control with
Agent (including, without limitation, Wachovia Bank, National Association and
its subsidiaries and affiliates). For this purpose, “control” of any entity
means ownership of a majority of the voting power of the entity.
Section 1.2 Rules of Construction.
(a)Accounting Term. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP; provided, however, that if at any time any
change in GAAP would affect the computation of any covenant (including the
computation of any financial covenant) and/or pricing grid set forth in this
Agreement or any other Credit Document, Borrowers and Agent shall negotiate in
good faith to amend such covenant and/or pricing grid to preserve the original
intent in light of such change; provided further, that until so amended,
(i) such covenant and/or pricing grid shall continue to be computed in
accordance with the application of GAAP prior to such change and (ii) Borrowers
shall provide to Agent a written reconciliation in form and substance reasonably
satisfactory to Agent, between calculations of such covenant and/or pricing grid
made before and after giving effect to such change in GAAP. Whenever the term
“Borrowers” is used in respect of a financial covenant or a related definition,
it shall be understood to mean Borrowers and their Subsidiaries on a
consolidated basis, unless the context clearly requires otherwise.
(b)Uniform Commercial Code. Except as otherwise provided herein, terms used in
the foregoing definitions or elsewhere in this Agreement that are defined in the
Uniform Commercial Code, including without limitation, “Accounts”, “Documents”,
“Goods”, “Instruments”, “Investment Property”, “General Intangibles” and
“Chattel Paper” shall have the respective meanings given to such terms in the
UCC.
ARTICLE 2
THE REVOLVING CREDIT FACILITY
Section 2.1 The Loan. Until the Termination Date, Borrowers may
request Lenders to make Advances to Borrowers and, subject to the terms and
conditions of this Agreement, each Lender severally and not jointly agrees to
lend such Lender’s Commitment Percentage of each requested Advance up to such
Lender’s Commitment which Borrowers may repay and reborrow from time to
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time. The aggregate unpaid principal amount at any one time outstanding of all
Advances shall not exceed the lesser of the Maximum Principal Amount or the
Borrowing Base in effect as of the date of determination.
(a)Agent shall establish on its books an account in the name of Borrowers (the
“Borrowers’ Loan Account”). A debit balance in Borrowers’ Loan Account shall
reflect the amount of Borrowers’ indebtedness to Agent and Lenders from time to
time by reason of Advances and other appropriate charges (including, without
limitation, interest charges) hereunder. At least once each month, Agent shall
provide to Borrowers a statement of Borrowers’ Loan Account which statement
shall be considered correct and accepted by Borrowers and conclusively binding
upon Borrowers unless Borrowers notify Agent to the contrary within 30 days of
Agent’s providing such statement to Borrowers.
(b)Each Advance made hereunder shall, in accordance with GAAP, be entered as a
debit to Borrowers’ Loan Account, and shall be in a principal amount which, when
aggregated with all other Advances then outstanding, shall not exceed the lesser
of the then effective Borrowing Base or Maximum Principal Amount.
(c)The Loan shall be due and payable on the Termination Date. Upon the
occurrence of an Event of Default, Agent shall have rights and remedies
available to it under Article 9 of this Agreement.
(d)Agent has the right upon 10 days prior notice to Borrowers at any time, and
from time to time, in its commercially reasonable discretion exercised in good
faith (but without any obligation), to set aside reasonable reserves against the
Borrowing Base in such amounts as it may deem commercially reasonable,
including, without limitation, a reserve equal to the amount of outstanding
indebtedness in connection with Bank Products and with respect to Regulatory
Events.
Section 2.2 The Notes. The indebtedness of Borrowers to each Lender
hereunder shall be evidenced by a separate Note executed by Borrowers in favor
of such Lender in the principal amount equal to each such Lender’s Commitment
Percentage of the Maximum Principal Amount. The principal amount of the Notes
will be the Maximum Principal Amount; provided, however, that notwithstanding
the face amount of the Notes, Borrowers’ liability under the Notes shall be
limited at all times to the actual indebtedness (principal, interest and fees)
then outstanding and owing by Borrowers to Agent and Lenders hereunder.
Section 2.3 Method of Payment. Borrowers shall make all payments of
principal and interest on the Notes in lawful money of the United States of
America and in funds immediately available by wire transfer or funds transfer,
to Agent at its address referred to in Section 10.4 of this Agreement or at such
other address as Agent otherwise directs. Whenever any payment is due on a day,
which is not a Business Day, the date for payment shall be extended to the next
succeeding Business Day and interest shall be paid for such extended time. As
soon as practicable after Agent receives payment from Borrowers, but in no event
later than 1 Business Day after such payment has been made, subject to Section
2.7, Agent will cause to be distributed like funds relating to the payment of
principal, interest or fees (other than amounts payable to Agent to reimburse
Agent for fees and expenses payable solely to Agent pursuant to the terms of
this Agreement) or expenses payable to Agent and Lenders in accordance with the
terms of this Agreement, in like funds relating to the payment of any such other
amounts payable to Lenders. Borrowers’ obligations to Lenders with
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respect to such payment shall be discharged by making such payments to Agent
pursuant to this Section 2.3 or, if not timely paid or any Event of Default or
Default then exists, may be added to the principal amount of the Loans
outstanding. Borrowers hereby authorize Agent to charge the line of credit
established hereunder for any amounts that are due and owing pursuant to the
terms of this Agreement with such amounts added to the principal amount of the
Loans outstanding and Agent may elect to utilize such right in its sole
discretion.
Section 2.4 Extension and Adjustment of Maturity Date. Upon the
written agreement of Borrowers, Agent and Lenders, the Maturity Date may be
extended.
Section 2.5 Use of Proceeds. Advances shall be used to finance
Borrowers’ portfolios of Consumer Purpose Loans, for general working capital
purposes and for other lawful corporate purposes except as limited under this
Agreement.
Section 2.6 Interest.
(a)In the absence of an Event of Default or Default hereunder, and prior to
maturity, the outstanding balance of the Loan will bear interest at an annual
rate at all times equal to the LIBOR Rate plus the Applicable Margin.
(b)Interest shall be payable monthly in arrears on the first day of each month
commencing on the first such date after the first Advance under the Loan and
continuing until the Commitments are terminated and the Obligations are
indefeasibly paid in full. Interest as provided hereunder will be calculated on
the basis of a 360 day year and the actual number of days elapsed.
(c)Notwithstanding the foregoing, upon the occurrence and during the continuance
of an Event of Default hereunder, including after maturity and before and after
judgment, Borrowers hereby agree to pay to Lenders interest on the outstanding
principal balance of the Loan and any other obligations and, to the extent
permitted by law, overdue interest with respect thereto, at the rate of 2.50%
per annum above the rate otherwise applicable to the Loan.
Section 2.7 Advances.
(a)Borrowers shall notify Agent in writing not later than 3:00 P.M. eastern
time, on the date of each requested Advance, specifying the date and amount of
the Advance. Such notice shall submitted electronically via Agent’s online
system (or in such other manner as acceptable to Agent in its sole discretion)
and shall contain the following information and representations, which shall be
deemed affirmed and true and correct as of the date of the requested Advance:
(i)the aggregate amount of the requested Advance, which shall be in an minimum
amount of at least $25,000 or the unborrowed balance of the Borrowing Base;
(ii)confirmation that no Event of Default or Default exists either immediately
prior to or after making such Advance; and that there has been no material
adverse change in Borrowers’ financial condition, operations or business since
the date of the monthly and audited annual financial statements most recently
delivered by Borrowers to Agent pursuant to this Agreement; and
(iii)statements that the representations and warranties set forth in Article 4
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are true and correct as of the date of the Advance in all material respects.
(b)Agent shall give to each Lender prompt notice of each request for Advance
submitted via Agent’s online automatic advance request system. Unless Agent
shall have been notified by any Lender at least 5 Business Days prior to the
date of Advance that such Lender does not intend to make available to Agent its
portion of the Advance to be made on such date, Agent may assume that such
Lender will make such amount available to Agent as required above and Agent may,
in reliance upon such assumption, make available the amount of the Advance to be
provided by such Lender. Upon fulfillment of the conditions set forth in
Sections 2.7(a) and 5.2 for such Advance, and as soon as practicable after
receipt of funds from Lenders Agent will make such funds as have been received
from Lenders available to Borrowers at the account specified by Borrowers from
time to time in writing to Agent.
(c)Because Borrowers anticipate requesting Advances on a daily basis, resulting
in the amount of outstanding Advances fluctuating from day to day, in order to
administer the Loan in an efficient manner and to minimize the transfer of funds
between Agent and Lenders, Lenders hereby instruct Agent, and Agent may (in its
sole discretion, without any obligation) (i) make available, on behalf of
Lenders, the full amount of all Advances requested by Borrowers, without giving
each Lender prior notice of the proposed Advance and of such Lender’s Commitment
Percentage thereof and (ii) if Agent has made any such amounts available as
provided in clause (i), upon repayment of Loans by Borrowers, first apply such
amounts repaid directly to the amounts made available by Agent in accordance
with clause (i) and not yet settled as described below. If Agent makes an
Advance on behalf of Lenders, as provided in the immediately preceding sentence,
the amount of outstanding Loans and each Lender’s Commitment Percentage thereof
shall be computed weekly rather than daily and shall be adjusted upward or
downward on the basis of the amount of outstanding Loans as of 5:00 P.M.,
Central time on the Business Day immediately preceding the date of each
computation; provided, however, that Agent retains the absolute right at any
time or from time to time to make the afore-described adjustments at intervals
more frequent than weekly. Agent shall deliver to each of Lenders at the end of
each week, or such lesser period or periods as Agent shall determine, a summary
statement of the amount of outstanding Loans for such period (such week or
lesser period or periods being hereafter referred to as a “Settlement Period”).
If the summary statement is sent by Agent and received by Lenders prior to
12:00 Noon, Central time on any Business Day each Lender shall make the
transfers described in the next succeeding sentence no later than 3:00 P.M.,
Central time on the day such summary statement was sent; and if such summary
statement is sent by Agent and received by Lenders after 12:00 Noon, Central
time on any Business Day, each Lender shall make such transfers no later than
3:00 P.M., Central time no later than the next succeeding Business Day after
such summary statement was sent. If in any Settlement Period, the amount of a
Lender’s Commitment Percentage of the Loans is in excess of the amount of Loans
actually funded by such Lender, such Lender shall forthwith (but in no event
later than the time set forth in the next preceding sentence) transfer to Agent
by wire transfer in immediately available funds the amount of such excess; and,
on the other hand, if the amount of a Lender’s Commitment Percentage of the
Loans in any Settlement Period is less than the amount of Loans actually funded
by such Lender, Agent shall forthwith transfer to such Lender by wire transfer
in immediately available funds the amount of such difference. The obligation of
each of Lenders to transfer such funds shall be irrevocable and unconditional,
without recourse to or warranty by Agent and made without setoff or deduction of
any kind. Each of Agent and Lenders agree to mark their respective books and
records at the end of each Settlement Period to show at all times the dollar
amount of their respective Commitment Percentages of the outstanding Loans.
Because Agent on behalf of Lenders may be advancing and/or may be repaid Loans
prior to
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the time when Lenders will actually advance and/or be repaid Loans, interest
with respect to Loans shall be allocated by Agent to each Lender (including
Agent) in accordance with the amount of Loans actually advanced by and repaid to
each Lender (including Agent) during each Settlement Period and shall accrue
from and including the date such Advance is made by Agent to but excluding the
date such Loans are repaid by Borrower in accordance with Section 2.3 or
actually settled by the applicable Lender as described in this Section 2.7(c).
All such Advances made by Agent on behalf of Lenders hereunder shall bear
interest at the interest rate applicable hereunder for Advances.
(d)If the amounts described in subsection (b) or (c) of this Section 2.7 are not
in fact made available to Agent by a Lender (such Lender being hereinafter
referred to as a “Defaulting Lender”) and Agent has made such amount available
to Borrowers, Agent shall be entitled to recover such corresponding amount on
demand from such Defaulting Lender. If such Defaulting Lender does not pay such
corresponding amount forthwith upon Agent’s demand therefor, Agent shall
promptly notify Borrowers and Borrowers shall immediately (but in no event later
than 10 Business Days after such demand) pay such corresponding amount to Agent.
Agent shall also be entitled to recover from such Defaulting Lender and
Borrowers, (i) interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by Agent to Borrowers to
the date such corresponding amount is recovered by Agent, at a rate per annum
equal to either (A) if paid by such Defaulting Lender, the overnight federal
funds rate or (B) if paid by Borrowers, the then applicable rate of interest,
calculated in accordance with Section 2.6, plus (ii) in each case, an amount
equal to any costs (including reasonable legal expenses) and losses incurred as
a result of the failure of such Defaulting Lender to provide such amount as
provided in this Agreement. Nothing herein shall be deemed to relieve any
Lender from its obligation to fulfill its commitments hereunder or to prejudice
any rights which Borrowers may have against any Lender as a result of any
default by such Lender hereunder, including, without limitation, the right of
Borrowers to seek reimbursement from any Defaulting Lender for any amounts paid
by Borrowers under clause (ii) above on account of such Defaulting Lender’s
default.
(e)The failure of any Lender to make its portion of the Advance to be made by it
as part of any Advance shall not relieve any other Lender of its obligation, if
any, hereunder to make its Advance on the date of such borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Advance. The amounts payable by
each Lender shall be a separate and independent obligation.
(f)Each Lender shall be entitled to earn interest at the then applicable rate of
interest, calculated in accordance with Section 2.6, on outstanding Loans which
it has funded to Agent from the date such Lender funded such Advance to, but
excluding, the date on which such Lender is repaid with respect to the Loan.
(g)RESERVED.
(h)Nothing contained in this Section 2.7 or otherwise in this Agreement shall
impair or limit any claim of Borrowers against a Defaulting Lender (including,
without limitation, expenses incurred by Borrowers by reason of any such
default) who breaches its commitment to fund Advances hereunder.
(i)Each request for an Advance pursuant to this Section 2.7 shall be irrevocable
and binding on Borrowers.
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Section 2.8 Prepayment.
(a)Optional Prepayments. Borrowers may prepay the Loan from time to time, in
full or in part without premium or penalty, provided that (i) in the event
Borrowers prepay the Loan in full and terminate this Agreement prior to the
Maturity Date, Borrowers shall provide at least 3 Business Days prior notice to
Agent and pay a sum equal to 1.0% of the Maximum Principal Amount as a
prepayment fee; (ii) prepayments shall be in a minimum amount of $25,000 and
$25,000 increments in excess thereof; and (iii) partial prepayments prior to the
Termination Date shall not reduce Lenders’ Commitments under this Agreement and
may be reborrowed, subject to the terms and conditions hereof for borrowing, and
prior to the occurrence of an Event of Default, partial prepayments will be
applied first to outstanding Advances and thereafter to other Obligations owing
hereunder. Each Borrower acknowledges that the above described fee is an
estimate of Lenders’ damages in the event of early termination and is not a
penalty. In the event of termination of the credit facility established
pursuant to this Agreement, all of the Obligations shall be immediately due and
payable upon the termination date stated in any notice of termination. All
undertakings, agreements, covenants, warranties and representations of Borrowers
contained in the Credit Documents shall survive any such termination, and Agent
shall retain its liens in the Collateral and all of its rights and remedies
under the Credit Documents notwithstanding such termination until Borrowers have
paid the Obligations to Agent and Lenders, in full, in immediately available
funds, together with the applicable termination fee, if any. Notwithstanding
the foregoing, in the event that (y) Borrowers repay the Loan in full and
terminate this Agreement within 60 days of making a payment under Section
2.10(a), Borrowers shall not be obligated to pay to the specific Lender
receiving such payment under Section 2.10(a) the prepayment fee contained in
this Section 2.8(a) and (z) Borrowers request an increase to the Maximum
Principal Amount in writing and Agent and Lenders fail to approve such increase
within 45 days of such request, Borrowers shall not be obligated to pay the
prepayment fee to Lenders if (i) the amount of such increase is supported by
Borrowers’ financial statement projections of availability and usage, (ii)
Borrowers refinance the Obligations with a larger credit facility agented by a
financial institution other than Wells Fargo Bank, N.A. within one hundred
twenty (120) days thereafter and (iii) no Event of Default then exists.
(b)Mandatory Prepayments. In the event that amounts outstanding hereunder at
any time exceed the Borrowing Base (whether established by an Availability
Statement or otherwise) Borrowers shall pay to Agent immediately and without
demand or notice of any kind required, the amount by which Borrowers’
indebtedness hereunder exceeds the Borrowing Base then applicable, together with
all accrued interest on the amount so paid and any fees and costs incurred in
connection therewith.
Section 2.9 Fees. Borrowers shall pay to Agent, at Agent’s offices,
the following:
(a)Administrative Fee. A non-refundable administrative fee of $2,000 shall be
due and payable monthly in arrears on the first day of each month solely for the
account of Agent, commencing on the first such date after the funding of this
Agreement and continuing until the Commitments are terminated and the
Obligations are indefeasibly paid in full, in which event a pro-rated monthly
installment of the administrative fee shall be paid on the date of such
termination.
(b)Unused Line Fee. A non-refundable unused line fee at the rate of 0.50% per
annum (computed on the basis of a 360 day year and the actual number of days
elapsed) on the daily unused Commitments. Such fee shall be payable to Agent,
for the account of Lenders in accordance
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with their Commitment Percentages, monthly in arrears on the first day of each
month, and on the Termination Date, unless the Commitments are terminated on an
earlier date, in which event the unused line fee shall be paid on the date of
such termination.
Section 2.10 Regulatory Changes in Capital Requirements; Replacement of
a Lender.
(a)Regulatory Changes in Capital Requirements. If any Lender shall have
determined that the adoption or the effectiveness after the date hereof of any
law, rule, regulation or guideline regarding capital adequacy, or any change in
any of the foregoing or in the interpretation or administration of any of the
foregoing by any governmental authority, central lender or comparable agency
charged with the interpretation or administration thereof, or compliance by such
Lender (or any lending office of such Lender) or such Lender’s holding company
with any industry wide request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central lender or
comparable agency, has or would have the effect of reducing the rate of return
on such Lender’s capital or on the capital of such Lender’s holding company, if
any, as a consequence of this Agreement, to a level below that which such Lender
or its holding company could have achieved on the portion of the Loans made by
such Lender pursuant hereto but for such adoption, change or compliance (taking
into consideration such Lender’s policies and the policies of such Lender’s
holding company with respect to capital adequacy) by an amount deemed by such
Lender to be material and Lender has made such determination with respect to all
or substantially all of the loans in its loan portfolio, then from time to time
Borrowers shall pay to such Lender on demand such additional amount or amounts
as will compensate such Lender or its holding company for any such reduction
suffered together with interest on each such amount from the date demanded until
payment in full thereof at the rate of interest otherwise applicable to the
Obligations. Agent will notify Borrowers of any event occurring after the date
of this Agreement that will entitle a Lender to compensation pursuant to this
Section 2.10(a) as promptly as practicable after it obtains knowledge thereof
and determines to request such compensation.
(b)Replacement of a Lender. If Borrowers become obligated to pay additional
amounts to any Lender pursuant to Section 2.10(a), then Borrowers may within 120
days thereafter designate another bank that is acceptable to Agent in its
reasonable discretion (such other bank being called a “Replacement Lender”) to
purchase the Loans of such Lender and such Lender’s rights hereunder, without
recourse to or warranty by, or expense to, such Lender, for a purchase price
equal to the outstanding principal amount of the Loans payable to such Lender
plus any accrued but unpaid interest on such Loans and all accrued but unpaid
fees owed to such Lender and any other amounts payable to such Lender under this
Agreement, and to assume all the obligations of such Lender hereunder, and, upon
such purchase and assumption (pursuant to an Assignment and Acceptance), such
Lender shall no longer be a party hereto or have any rights hereunder (other
than rights with respect to indemnities and similar rights applicable to such
Lender prior to the date of such purchase and assumption) and shall be relieved
from all obligations to Borrower hereunder, and the Replacement Lender shall
succeed to the rights and obligations of such Lender hereunder. In addition to
the foregoing, if a Replacement Lender purchases such Loans and assumes all such
obligations of a Lender hereunder pursuant to this Section 2.10(b), each such
replaced Lender shall reimburse Borrowers for all amounts previously paid
pursuant to Section 2.10(a) within 30 days of such replacement.
Section 2.11 Sharing of Payments. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
setoff or otherwise) on account of the
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Loans made by it in excess of its pro rata share of such payment as provided for
in this Agreement, such Lender shall forthwith purchase from the other Lenders
such participations in the Loans made by them as shall be necessary to cause
such purchasing Lender to share the excess payment accruing to all Lenders in
accordance with their respective ratable shares as provided for in this
Agreement; provided, however, that if all or any portion of such excess is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and each such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender’s ratable share (according to the proportion of (a) the amount of
such Lender’s required repayment to (b) the total amount so recovered from the
purchasing Lender) or any interest or other amount paid or payable by the
purchasing Lender in respect to the total amount so recovered. Borrowers agree
that any Lender so purchasing a participation from another Lender pursuant to
this Section 2.11 may, to the fullest extent permitted by law, exercise all of
its rights of payment (including the right of setoff) with respect to such
participation as fully as if such Lender were the direct creditor of Borrowers
in the amount of such participation.
Section 2.12 Pro Rata Treatment. Subject to Section 9.4 hereof, each
payment or prepayment of principal of the Loan, and each payment of interest on
the Loans, actually received by Agent shall be allocated pro rata among Lenders
in accordance with the respective principal amounts of their outstanding Loans;
provided, however, that the foregoing fees payable hereunder (other than the
fees payable under Section 2.9(a) hereof) to Lenders shall be allocated to each
Lender based on such Lender’s Commitment Percentage.
Section 2.13 Accordion. Subject to the terms and conditions set forth
herein below, Borrowers shall have a right at any time to increase the amount of
the Maximum Principal Amount (the “Accordion Increase”) in an amount acceptable
to Agent in its sole and absolute discretion; provided, however, that the
aggregate amount of the Accordion Increase shall not exceed $100,000,000. The
following additional terms and conditions shall apply to the Accordion
Increase:
(a)the Accordion Increase shall constitute additional Obligations and shall be
secured and guaranteed with the other Obligations on a pari passu basis by the
Collateral;
(b)Borrowers shall execute a new Note in favor of any new Lender or any existing
Lender whose Commitment is increased, as well as any other legal documentation
and modification documents reasonably requested by Agent to consummate the
Accordion Increase;
(c)unless otherwise provided by Agent, the Accordion Increase shall be subject
to the same terms (including interest rate and maturity date) as the existing
Loan;
(d)all documents, organizational documents and other documents evidencing and
contemplated by the Accordion Increase shall be in form and substance acceptable
to Agent and Borrowers;
(e)Borrowers shall have delivered all due diligence materials and other
deliverables reasonably requested by Agent;
(f)each of the closing conditions set forth in Article 5 shall have been
satisfied;
(g)no Default or Event of Default shall have occurred that has not been waived
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by Lenders pursuant to the terms hereof;
(h)Agent shall have received from Borrowers updated financial statements and
projections and a certificate, in each case in form and substance reasonably
satisfactory to Agent, demonstrating that, after giving effect to the Accordion
Increase on a pro forma basis, Borrowers will be in compliance with all
financial covenants set forth herein;
(i)the Accordion Increase shall be subject to the ability of Agent to syndicate
the Accordion Increase as determined by Agent in its sole and absolute
discretion; and
(j)Agent shall have received such other due diligence and credit committee
approvals as it may require with results satisfactory to Agent in its sole and
absolute discretion.
Participation in the Accordion Increase shall be offered first to each of the
existing Lenders in an amount equal to each Lender’s Commitment Percentage of
the Accordion Increase, but no such Lender shall have any obligation to provide
all or any portion of the Accordion Increase. If the amount of the Accordion
Increase requested by Borrowers shall exceed the Commitments which the existing
Lenders are willing to provide with respect to the Accordion Increase, then
Agent may invite other banks or lending institutions acceptable to Agent and
Borrowers to join this Agreement as Lenders hereunder for the portion of such
Accordion Increase not provided by the existing Lenders; provided, however, that
such other banks, or financial institutions shall enter into such joinder
agreements to give effect thereto as Agent and Borrowers may reasonably request.
Agent is authorized to enter into, on behalf of Lenders, any amendment to this
Agreement or any other Credit Document as may be necessary to incorporate the
terms of the Accordion Increase in accordance with the terms hereof.
Section 2.14 Existing Indebtedness. This Agreement amends and restates
the Existing Agreement and the existing indebtedness under the Existing
Agreement (“Existing Indebtedness”) shall be deemed to constitute an Advance
hereunder. The execution and delivery of this Agreement and the other Credit
Documents, however, does not evidence or represent a refinancing, repayment,
accord and/or satisfaction or novation of the Existing Indebtedness. All of the
obligations of Agent and Lenders to Borrowers with respect to Advances to be
made concurrently herewith or after the date hereof are set forth in this
Agreement. All liens and security interests previously granted to Agent (or its
predecessors in interest), pursuant to the Existing Loan Documents are
acknowledged and reconfirmed and remain in full force and effect and are not
intended to be released, replaced or impaired.
ARTICLE 3
SECURITY
Section 3.1 Security Interest. To secure the payment and performance
of the Obligations, each Borrower hereby grants to Agent, for the benefit of
Lenders, a continuing general Lien on and a continuing security interest in all
of the Collateral, wherever located, whether now owned or hereafter acquired,
existing or created, together with all replacements and substitutions therefor,
and the cash and non-cash proceeds thereof, subject to Permitted Liens. The
Liens and security interests of Agent in the Collateral shall be first and prior
perfected Liens and security interests, subject only to Permitted Liens, and may
be retained by Agent until all of the Obligations
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have been indefeasibly satisfied in full and the Commitments have expired or
otherwise have been terminated.
Section 3.2 Financing Statements. Agent is hereby authorized by each
Borrower to file any financing statements covering the Collateral or any
amendment adding collateral to any financing statement in each case whether or
not a Borrower’s signature appears thereon. Borrowers agree to comply with the
requirements of all state and federal laws and requests of Agent in order for
Agent to have and maintain a valid and perfected first security interest in the
Collateral.
Section 3.3 Documents to be Delivered to Agent. All Receivables of
Borrowers originated on or after the date hereof shall be stamped or watermarked
with the following:
This document is pledged as collateral to Wells Fargo Bank, N.A., as agent.
Borrowers shall (a) upon request of Agent following the occurrence of an Event
of Default, deliver to Agent or its designee any other property in which
Borrowers have granted Agent a security interest hereunder; and (b) execute and
deliver to Agent, for the benefit of Lenders, such assignments, endorsements,
allonges to promissory notes, mortgages, financing statements, amendments
thereto and continuation statements thereof, in form satisfactory to Agent, and
such additional agreements, documents or instruments as Agent may, from time to
time, require to evidence, perfect and continue to perfect Agent’s liens and
security interests granted hereunder.
Section 3.4 Collections. Notwithstanding the security interest granted
hereunder with respect to the Collateral by Borrowers to Agent, until notice to
the contrary is provided to Borrowers by Agent following the occurrence of an
Event of Default, Borrowers may service, manage, enforce and receive Collections
on Receivables. Borrowers shall have no power to make any unusual allowance or
credit to any obligor without Agent’s prior written consent. Upon notice by
Agent at any time following the occurrence of an Event of Default, Agent may
require Borrowers to endorse and deposit all Collections within 1 Business Day
of receipt thereof and in the original form received (except for the endorsement
of Borrowers, if necessary, to enable the collection of instruments for the
payment of money, which endorsements Borrowers hereby agree to make) in such
account maintained with such depository as Agent may from time to time specify,
such account to limit withdrawals by Borrowers therefrom only to the order of
Agent, but to permit withdrawals by Agent therefrom without the co-signature of
a Borrower. Agent may also require Borrowers to enter into an appropriate lock
box agreement with Agent or another financial institution acceptable to Agent,
in form and content acceptable to Agent, with respect to opening and maintaining
a lock box arrangement for the Collections. Such lock box agreements shall be
irrevocable so long as Borrowers are indebted to Agent under this Agreement and
this Agreement remains in effect.
Section 3.5 Additional Rights of Agent; Power of Attorney.
(a)In addition to all the rights granted to Agent hereunder, Agent shall have
the right, at any time following the occurrence and during the continuance of an
Event of Default, to notify the obligors and account debtors of all Collateral
to make payment thereon directly to Agent, and to take control of the cash and
non-cash proceeds of such Collateral. When Collections received by Agent have
been converted into cash form, Agent shall forthwith apply the same first to
discharge all expenses, fees, costs and charges including reasonable attorneys’
fees and costs of Collections owing hereunder; second to pay all interest
accrued under the Notes and this Agreement; third to pay
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principal due under the Notes and this Agreement; fourth to pay any other sums
due to Agent and Lenders under the terms of this Agreement and fifth to whoever
is entitled to such amounts under applicable law.
(b)Each Borrower irrevocably appoints Agent its true and lawful attorney, with
power of substitution, to act in the name of such Borrower or in the name of
Agent or otherwise, for the use and benefit of Agent, but at the cost and
expense of Borrowers, without notice to Borrowers to do any of the following
after the occurrence of an Event of Default: to demand, collect, receipt for and
give renewals, extensions, discharges and releases of any Collateral; to
institute and to prosecute legal and equitable proceedings to realize upon any
Collateral; to settle, compromise, or adjust claims; to take possession and
control in any manner and in any place of any cash or non-cash items of payment
or proceeds thereof; to endorse the name of such Borrower upon any notes,
checks, drafts, money orders, or other evidences of payment of Collateral; to
sign such Borrower’s name on any instruments or documents relating to any of the
Collateral or on drafts against account debtors; to do all other acts and things
necessary, in Agent’s commercially reasonable judgment, to effect collection of
the Collateral or protect its security interest in the Collateral; and generally
to sell in whole or in part for cash, credit or property to others or to itself
at any public or private sale, assign, make any agreement with respect to or
otherwise deal with the Collateral as fully and completely as though Agent were
the absolute owner thereof for all purposes, except to the extent limited by any
applicable laws and subject to any requirement of notice to Borrowers or other
Persons under applicable laws.
(c)Each Borrower hereby agrees to indemnify and hold Agent and Lenders harmless
from and against any and all expenses, costs, liabilities or damages (including
reasonable attorneys fees) sustained by Agent and each Lender by reason of any
misrepresentation, breach of warranty or breach of covenant by Borrowers whether
caused by Borrowers or Guarantors, or whether caused by any other Person if
Borrowers knew of or reasonably should have known that facts, circumstances or
information on which Borrowers relied were false, incorrect or incomplete in any
material respect, and also all court costs and all other expenses Agent and each
Lender incurred in enforcing or attempting to enforce payment of the Loan or any
Collateral, in supervising the records and proper management and disposition of
the collection of Collateral or in prosecuting or defending any of Agent’s and
Lenders’ rights under this Agreement.
Section 3.6 Additional Collateral Provisions.
(a)Borrowers will defend the Collateral against all Liens (other than Permitted
Liens), and claims and demands of all Persons at any time claiming the same or
any interest therein. Borrowers agree to comply with the requirements of all
state and federal laws and requests of Agent in order for Agent to have and
maintain a valid and perfected first security interest and/or mortgage Lien in
the Collateral.
(b)In addition to the foregoing, Borrowers shall perform all further acts that
may be lawfully and reasonably required by Agent to secure Agent and effectuate
the intentions and objects of this Agreement.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants and shall continue to represent and
warrant to Agent and Lenders until the Obligations hereunder have been
indefeasibly satisfied in full and the Commitments have expired or otherwise
have been terminated as follows:
Section 4.1 Representations and Warranties as to Receivables.
(a)As to the Receivables generally:
(i)Each Borrower or, where a Borrower was not the original lender, to the best
of such Borrower’s knowledge, the original lender or seller had full power and
authority to make the loans (or other extensions of credit) evidenced by the
Receivables and all such Receivables and all Books and Records related thereto
are genuine, based on enforceable contracts and are in all respects what they
purport to be;
(ii)All Receivables have been duly authorized, executed, delivered by the
parties whose names appear thereon and are valid and enforceable in accordance
with their terms; any chattels described in any Receivable are and will be
accurately described and are and will be in the possession of the parties
granting the security interest therein; and (A) any applicable filing, recording
or lien notation law with respect to any collateral securing a Receivable will
have been complied with to the extent such filing or recording is necessary
under applicable law to create or perfect such Borrower’s security interest in
such collateral consistent with its present policy; or (B) a Borrower shall have
procured non-filing insurance from a reputable insurer in an amount not less
than the value of the collateral securing such Receivables.
(iii)The form and content of all Receivables and the security related thereto
and the transactions from which they arose comply in all material respects (and
in any event in all respects necessary to maintain and ensure the validity and
enforceability of the Receivables) with any and all applicable laws, rules and
regulations, including without limitation, the Consumer Finance Laws;
(iv)The original amount and unpaid balance of each Receivable on Borrowers’
Books and Records and on any statement or schedule delivered to Agent and/or any
Lender, including without limitation the Schedule of Receivables, is and will be
the true and correct amount actually owing to a Borrower as of the date each
Receivable is pledged to Agent, is not subject to any claim of reduction,
counterclaim, set-off, recoupment or any other claim, allowance or adjustment;
and no Borrower has any knowledge of any fact which would impair the validity or
collectability of any Receivables;
(v)All security agreements, title retention instruments, mortgages and other
documents and instruments which are security for Receivables contain a correct
and sufficient description of the real or personal property covered thereby,
and, subject to the rights of Agent hereunder and the interests of Borrowers as
holder of such security agreements, title retention instruments or mortgages or
other documents or instruments, are or create security interests and Liens;
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(vi)Borrowers have made an adequate credit investigation of the obligor of each
Receivable and has determined that his or her credit is satisfactory and meets
the standards generally observed by prudent finance companies and is in
conformity in all material respects with Borrowers’ policies and standards; and
(vii)A Borrower has good and valid indefeasible title to the Receivables, free
and clear of all prior assignments, claims, liens, encumbrances and security
interests, and has the right to pledge and grant Agent, for the benefit of
Lenders, a first priority security interest in the same, in the manner provided
in this Agreement; the parties specifically agree and acknowledge that from time
to time Borrowers make loans based upon a subordinate lien status (such as but
not limited to a second lien on a motor vehicle or real property) and such
ordinary-course loans secured by subordinate lien status shall not be and are
not in violation of this representation and warranty; and
Notwithstanding the provisions of this Section 4.1, the parties agree and
acknowledge that in the ordinary course of Borrowers’ business, Borrowers from
time to time (w) make loans on an unsecured basis (such as with Borrowers’ "Live
Checks" loan product), (x) elect not to perfect their security interests, (y)
make errors that defeat the viability of perfecting a security interest in
collateral pledged by a customer, and (z) unaffiliated first lienholders refuse
to give effect to Borrowers’ second liens (especially regarding motor vehicles)
and that in each such instance such decisions, mistakes, or failures to
recognize Borrowers’ lien status by Borrowers’ branch offices or third parties
shall not be considered to be in breach of this Section 4.1.
Section 4.2 Organization and Good Standing. Each Borrower is duly
organized and validly existing in good standing under the laws of the state
identified on Schedule 4.2 attached hereto and made part hereof and has the
power and authority to engage in the business it conducts and is qualified and
in good standing in those states wherein the nature of business or property
owned by it requires such qualification, is not required to be qualified in any
other state; or if not so qualified, no adverse effect would result therefrom.
Section 4.3 Perfection of Security Interest. Upon filing of
appropriate financing statements in all places as are necessary to perfect the
security interests granted in Article 3 of this Agreement, Agent will have a
first perfected security interest in the Collateral which can be perfected by
the filing of a UCC-1 financing statement in each Borrower’s state of
organization, superior in right of interest to any other Person (including,
without limitation, purchasers from, or creditors or receivers or a trustee in
bankruptcy of, Borrowers).
Section 4.4 No Violations. The making and performance of the Credit
Documents do not and will not violate any provisions of any law, rule,
regulation, judgment, order, writ, decree, determination or award or breach any
provisions of the charter, bylaws or other organizational documents of any
Borrower or any Guarantor, or constitute a default or result in the creation or
imposition of any security interest in, or lien or encumbrance upon, any assets
of any Borrower or any Guarantor (immediately or with the passage of time or
with the giving of notice and passage of time, or both) under any other
contract, agreement, indenture or instrument to which a Borrower or a Guarantor
is a party or by which a Borrower or a Guarantor or its property is bound with
failure to comply resulting in a material adverse change in the business,
operations, property (including the Collateral), prospects or financial
condition of any Borrower or any Guarantor.
Section 4.5 Power and Authority.
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(a)Each Borrower and each Guarantor has full power and authority under the law
of the state of its organization and under its organizational documents to enter
into, execute and deliver and perform the Credit Documents; to borrow monies
hereunder, to incur the obligations herein provided for and to pledge and grant
to Agent, for the benefit of Lenders, a security interest in the Collateral;
and
(b)All actions (corporate or otherwise) necessary or appropriate for each
Borrower’s and each Guarantor’s execution, delivery and performance of the
Credit Documents have been taken.
Section 4.6 Validity of Agreements. Each of the Credit Documents is,
or when delivered to Agent will be, duly executed and constitute valid and
legally binding obligations of each Borrower and each Guarantor enforceable
against such Borrower and such Guarantor, as applicable, in accordance with
their respective terms.
Section 4.7 Litigation. As of the date hereof, there is no order,
notice, claim, action, suit, litigation, proceeding or investigation pending or,
threatened against or affecting any Borrower or any Guarantor where the amount
in controversy is in excess of $100,000, whether or not fully covered by
insurance, except as identified and described on Schedule 4.7 attached hereto
and made part hereof.
Section 4.8 Compliance. As of the date hereof, each Borrower and each
Guarantor is in compliance in all material respects with all applicable material
laws and regulations, federal, state and local (including all Consumer Finance
Laws and those administered by the Local Authorities), material to the conduct
of its business and operations; each Borrower and each Guarantor possesses all
the franchises, permits, licenses, certificates of compliance and approval and
grants of authority necessary or required in the conduct of its business and the
same are valid, binding, enforceable and subsisting without any defaults
thereunder or enforceable adverse limitations thereon, and are not subject to
any proceedings or claims opposing the issuance, development or use thereof or
contesting the validity thereof; and no approvals, waivers or consents,
governmental (federal, state or local) or non-governmental, under the terms of
contracts or otherwise, are required by reason of or in connection with such
Borrower’s and such Guarantor’s execution and performance of the Credit
Documents.
Section 4.9 Accuracy of Information; Full Disclosure.
(a)All financial statements, including any related schedules and notes appended
thereto, delivered and to be delivered to Agent and/or any Lender pursuant to
this Agreement have been or will be prepared in accordance with GAAP with
respect to Borrowers and on a statutory basis with respect to Guarantors and do
and will fairly present the financial condition of each Borrower, its
consolidated Subsidiaries, if any, and Guarantors on the dates thereof and
results of operations for the periods covered thereby and discloses all
liabilities (including contingent liabilities) of any kind of such Borrower and
such Guarantor.
(b)Since the date of the most recent financial statements furnished to Agent
and/or any Lender, there has not been any material adverse change in the
financial condition, business or operations of any Borrower or any Guarantor.
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(c)All financial statements and other statements, documents and information
furnished by Borrowers or Guarantors, or any of them, to Agent and/or any Lender
in connection with this Agreement and the Notes and the transactions
contemplated hereunder do not and will not contain any untrue statement of
material fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading. Each Borrower and each Guarantor
has disclosed to Agent in writing any and all facts which materially and
adversely affect the business, properties, operations or condition, financial or
otherwise, of such Borrower or such Guarantor, or such Borrower’s or such
Guarantor’s ability to perform its obligations under this Agreement and the
Notes.
Section 4.10 Taxes. Each Borrower and each Guarantor has filed and
will file all tax returns which are required to be filed and has paid or will
pay when due all taxes, license and other fees with respect to the Collateral
and the business of such Borrower and such Guarantor except taxes contested in
good faith for which adequate reserves have been established by such Borrower on
its Books and Records.
Section 4.11 Indebtedness. No Borrower has presently outstanding
indebtedness or obligations including contingent obligations and obligations
under leases of property from others, except Permitted Indebtedness.
Section 4.12 Investments. No Borrower has direct or indirect
Subsidiaries or Affiliates, or investments in or loans to any other Person
(other than Consumer Purpose Loans), except as described in Schedule 4.12
attached hereto and made part hereof.
Section 4.13 ERISA. Each Borrower, any Subsidiary, and Guarantors and
each member of the controlled group of corporations (as such term “controlled
group of corporations” is defined in Section 1563 of the Internal Revenue Code
of 1986, as amended) of which such Borrower and such Guarantor is a member, is
in compliance in all material respects with all applicable provisions of ERISA
and the regulations promulgated thereunder. No reportable event, as such term
(hereinafter called a “Reportable Event’) is defined in Title IV of ERISA, has
occurred with respect to, nor has there been terminated, any Plan maintained for
employees of any Borrower, any Subsidiary, any Guarantor or any member of the
controlled group of corporations of which a Borrower or a Guarantor is a
member.
Section 4.14 Hazardous Wastes, Substances and Petroleum Products.
(a)Each Borrower (i) has received all permits and filed all notifications
necessary to carry on its respective business; and (ii) is in compliance in all
respects with all Environmental Control Statutes.
(b)No Borrower has given any written or oral notice to the Environmental
Protection Agency (“EPA”) or any state or local agency with regard to any actual
or imminently threatened removal, spill, release or discharge of hazardous or
toxic wastes, substances or petroleum products or properties owned or leased by
such Borrower or in connection with the conduct of its business and operations.
(c)No Borrower has received notice that it is potentially responsible for costs
of clean-up of any actual or imminently threatened spill, release or discharge
of hazardous or toxic wastes
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or substances or petroleum products pursuant to any Environmental Control
Statute.
Section 4.15 Solvency. Each Borrower is, and after receipt and
application of the first and each subsequent Advance will be, solvent such that
(a) the fair value of its assets (including without limitation the fair salable
value of such Borrower’s Intangible Assets) is greater than the total amount of
its liabilities, including without limitation, contingent liabilities, (b) the
present fair salable value of its assets (including without limitation the fair
salable value of its Intangible Assets) is not less than the amount that will be
required to pay the probable liability on its debts as they become absolute and
matured, and (c) it is able to realize upon its assets and pay its debts and
other liabilities, contingent obligations and other commitments as they mature
in the normal course of business. No Borrower intends to, or believes that it
will, incur debts or liabilities beyond its ability to pay as such debts and
liabilities mature, and is not engaged in a business or transaction, or about to
engage in a business or transaction, for which its property would constitute
unreasonably small capital after giving due consideration to the prevailing
practice and industry in which it is engaged. For purposes of this
Section 4.15, in computing the amount of contingent liabilities at any time, it
is intended that such liabilities will be computed at the amount which, in light
of all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual matured liability.
Section 4.16 Business Location. As of the date hereof, each Borrower’s
address set forth on Schedule 4.16 attached hereto and made part hereof is the
location of such Borrower’s principal place of business and such address,
together with the addresses set forth on Schedule 4.16 attached hereto and made
part hereof, and the location of all other places of business of each Borrower
and the names in which each Borrower conducts business at each such location are
set forth in Schedule 4.16 attached hereto and made part hereof.
Section 4.17 Capital Stock. All of the issued and outstanding capital
stock or other ownership interest of each Borrower is owned as described on
Schedule 4.17 attached hereto and made part hereof, and all such ownership
interests are fully paid and non-assessable.
Section 4.18 No Extension of Credit for Securities. No Borrower is,
nor will it be, engaged principally or as one of its important activities in the
business of extending credit for the purpose of purchasing or carrying or
trading in any margin stocks or margin securities (within the meaning of
Regulations T, U and X of the Board of Governors of the Federal Reserve System)
or other securities, and no part of the proceeds of the Loan hereunder has been
or will be applied for the purpose of purchasing or carrying or trading in any
such stock or securities or of refinancing any credit previously extended, or of
extending credit to others, for the purpose of purchasing or carrying any such
margin stock, margin securities or other securities in contravention of such
Regulations.
Section 4.19 Sanctions. (a) No member of the Borrowing Group is a
Sanctioned Target; (b) no member of the Borrowing Group is owned or controlled
by, or is acting or purporting to act for or on behalf of, directly or
indirectly, a Sanctioned Target; (c) each member of the Borrowing Group has
instituted, maintains and complies with policies, procedures and controls
reasonably designed to assure compliance with Sanctions; and (d) to the best of
Borrowers’ knowledge, after due care and inquiry, no member of the Borrowing
Group is under investigation for an alleged violation of Sanction(s) by a
Governmental Authority that enforces Sanctions. Borrowers shall notify Agent in
writing not more than one (1) Business Day after first becoming aware of any
breach of this Section.
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Section 4.20 Anti-Money Laundering and Anti-Corruption Laws. (a) Each
member of the Borrowing Group has instituted, maintains and complies with
policies, procedures and controls reasonably designed to assure compliance with
Anti-Money Laundering Laws and Anti-Corruption Laws; and (b) to the best of
Borrowers’ knowledge, after due care and inquiry, no member of the Borrowing
Group is under investigation for an alleged violation of Anti-Money Laundering
Laws or Anti-Corruption Laws by a Governmental Authority that enforces such
laws.
Section 4.21 Beneficial Ownership Certification. As of the date of this
Agreement, the information included in the Beneficial Ownership Certification is
true and correct in all respects.
ARTICLE 5
CONDITIONS TO LOAN
Section 5.1 Documents to be Delivered to Agent Prior to Effectiveness.
Prior to the effectiveness of this Agreement, Borrowers shall deliver or cause
to be delivered to Agent (all documents to be in form and substance satisfactory
to Agent in its sole and absolute discretion):
(a)Credit Documents. This Agreement, the Notes and all other Credit Documents
duly and properly executed by the parties thereto;
(b)Searches. Uniform Commercial Code, tax, judgment, PBGC and EPA searches
against each Borrower in those offices and jurisdictions as Agent shall
reasonably request which shall show that no financing statement, liens, or
assignments or other filings have been filed or remain in effect against each
Borrower or any Collateral except for Permitted Liens and those other Liens,
financing statements, assignments or other filings with respect to which the
secured party or existing lender (i) has delivered to Agent Uniform Commercial
Code termination statements or other documentation evidencing the termination of
its Liens and security interests in Collateral, (ii) has agreed in writing to
release or terminate its Lien and security interest in Collateral upon receipt
of proceeds of the Advances or (iii) has delivered a Subordination Agreement to
Agent with respect to its Lien and security interest in the Collateral, all in a
form and substance satisfactory to Agent in its sole discretion;
(c)Organizational Documents. A copy of each Borrower’s and Entity Guarantor’s
(A) organization documents, certified as of a recent date by such Person’s
secretary (or other appropriate officer), and (B) bylaws, partnership agreement
or operating agreement, as applicable, certified as of a recent date by such
Person’s secretary (or other appropriate officer); together with certificates of
good standing in such Person’s state of organization and in each jurisdiction in
which such Person is qualified to do business, each dated within 30 days from
the date of this Agreement;
(d)Authorization Documents. A certified copy of resolutions of each Borrower’s
and Entity Guarantor’s board of directors, members, managers or partners, as
applicable, authorizing the execution, delivery and performance of the Notes,
this Agreement and all other Credit Documents, the pledge of the Collateral to
Agent as security for the Loan made hereunder and the borrowing evidenced by the
Notes and designating the appropriate officers to execute and deliver the Credit
Documents;
(e)Incumbency Certificates. A certificate of each Borrower’s and Entity’s
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Guarantor’s secretary (or other appropriate officer) as to the incumbency and
signatures of officers of such Person signing this Agreement, the Notes and
other Credit Documents, as applicable;
(f)Opinion of Counsel. Agent shall have received a written opinion of
Borrowers’ and Guarantors’ counsel addressed to Agent and Lenders in form and
substance satisfactory to Agent in its sole discretion;
(g)Officer’s Certificate. A certificate, dated the date of this Agreement,
signed by the President of each Borrower, to the effect that (i) all
representations and warranties set forth in this Agreement are true and correct
as of the date hereof in all material respects and (ii) no Default or Event of
Default hereunder has occurred, each Borrower’s seal being affixed to such
certificate and each Borrower’s secretary attesting thereto;
(h)Guaranties. The Guaranties duly executed by each Guarantor;
(i)Financial Statements. A copy of each of the reports required pursuant to
Section 6.2 of this Agreement for the period most recently ended prior to the
date hereof together with a covenant compliance certificate;
(j)Availability Statement. A completed Availability Statement;
(k)Insurance. Evidence of Borrowers’ self-insurance and other insurance issued
by a reputable carrier with respect to each Borrower’s fire, casualty,
liability, and other insurance covering its Property, and any key owner/operator
insurance;
(l)Access Agreement. The Access Agreement duly executed by the parties thereto;
and
(m)Other Documents. Such additional documents as Agent reasonably may request.
Section 5.2 Conditions to all Advances. The obligation of Lenders to
make each subsequent Advance hereunder pursuant to Section 2.1 is conditioned
upon (a) the continuing accuracy of the representations and warranties made by
Borrowers under this Agreement in all material respects; and (b) the absence,
after giving effect to such Advance and the receipt of the proceeds thereof and
the retirement of any indebtedness then being retired out of the proceeds of
such Advance, of any Default or Event of Default.
ARTICLE 6
AFFIRMATIVE COVENANTS
In addition to the covenants contained in Article 3 and 4 of this Agreement
relating to the Collateral, until all Obligations have been indefeasibly
satisfied in full and the Commitments have expired or otherwise have been
terminated, each Borrower covenants and agrees as follows:
Section 6.1 Place of Business and Books and Records. Each Borrower
will promptly advise Agent in writing of (a) the establishment of any new places
of business by such Borrower and of the discontinuance of any existing places of
business of such Borrower; (b) the creation of any new
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Subsidiaries and (c) the acquisition and or use of any trade name or trade
style.
Section 6.2 Reporting Requirements. Borrowers will deliver to Agent:
(a)within 30 days after the end of each month, company prepared consolidated and
consolidating financial statements of Borrowers’ business for such previous
month, consisting of a balance sheet, income statement and consolidating
schedules as of the end of such month, all in reasonable detail, prepared in
accordance with GAAP consistently applied, subject to year-end adjustments,
together with a covenant compliance certificate;
(b)within 120 days after the close of each fiscal year, (i) consolidated and
consolidating financial statements of Borrowers and their consolidated
Subsidiaries for the fiscal year then ended consisting of a balance sheet,
income statement and statement of cash flow of Borrowers and their consolidated
Subsidiaries as of the end of such fiscal year, all in reasonable detail,
including all supporting schedules and footnotes, prepared in accordance with
GAAP consistently applied, and shall be audited and certified without
qualification by an independent certified public accountant selected by
Borrowers and acceptable to Agent and accompanied by the unqualified opinion of
such accountant; (ii) cause Agent to be furnished at the time of completion
thereof, a copy of any management letter for Borrowers and their consolidated
Subsidiaries prepared by such certified public accounting firm, (iii) a covenant
compliance certificate and (iv) an Annual Compliance Certificate executed by the
president or chief executive officer of each Borrower;
(c)on or before June 1 of each calendar year, (i) consolidated financial
statements of Guarantors for the fiscal year then ended consisting of a balance
sheet, income statement and statement of cash flow of Guarantors as of the end
of such fiscal year, all in reasonable detail, including all supporting
schedules and footnotes, prepared in accordance with statutory accounting
requirements consistently applied, and shall be audited and certified without
qualification by an independent certified public accountant selected by
Guarantors and acceptable to Agent and accompanied by the unqualified opinion of
such accountant and (ii) cause Agent to be furnished at the time of completion
thereof, a copy of any management letter for Guarantors prepared by such
certified public accounting firm;
(d)within 30 days after the end of each month (or more frequently as requested
by Agent from time to time), an Availability Statement (together with all
supporting schedules), a Schedule of Receivables and Assignment, an aging of
Receivables, a covenant compliance certificate, delinquency reports, books and
records consisting of data tape information (which shall include, without
limitation, credit scores), static pool report, and such other documentation as
and information Agent may require;
(e)on or before May 31 of each calendar year, a copy of the operating budget or
plan prepared by management of Borrowers including, without limitation, a
balance sheet and profit and loss statement of Borrowers for the greater of two
(2) years or through the Maturity Date, in form and detail reasonably acceptable
to Agent, together with a summary of the material assumptions made in the
preparation of such annual budget or plan;
(f)on or before November 20 of each calendar year after calendar year 2019, and
on or before December 1, 2019 for calendar year 2019, copies of documentation
submitted to the applicable Governmental Authority in the State of Georgia with
respect to the Reinsurance Credit
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Facilities and authorization of Entity Guarantors to make extraordinary
dividends and/or lines of credit;
(g)at Agent’s request from time to time and at any time, copies of Borrowers’
and Guarantors’ corporate income tax returns, including any schedules attached
thereto, filed with the Internal Revenue Service or applicable state
governmental agency;
(h)at Agent’s request from time to time and at any time, such other financial
information and reports concerning Borrowers, Guarantors and their businesses
and property.
Section 6.3 Books and Records. Borrowers will keep accurate and
complete Books and Records concerning the Collateral and all transactions with
respect thereto consistent with sound business practices (including, without
limitation, accurately account for insurance commissions) and will comply with
Agent’s reasonable requirements, from time to time in effect, including those
concerning the submission of reports on all items of Collateral including those
which are deemed to be delinquent. The form of delinquency reports, the
frequency with which such reports shall be submitted to Agent (which in any case
shall be no less frequently than monthly) and the standards for determining
which Collateral transactions are deemed delinquent for this purpose, shall at
all times be satisfactory to Agent. Agent shall have the right at any time and
from time to time during regular business hours, at Borrowers’ expense, to
inspect, audit, and copy the Books and Records of Borrowers and inspect and
audit any Collateral.
Section 6.4 Financial Covenants. Borrowers shall maintain, or cause to
be maintained, the following financial covenants (based on consolidated
financial statements of Borrowers and their consolidated Subsidiaries unless
otherwise indicated):
(a)EBITDA Ratio. As of the end of each calendar month, an EBITDA Ratio of not
less than 1.75 to 1.00.
(b)Asset Quality. As of the end of each calendar month, an Asset Quality of not
more than 20%.
(c)Allowance for Loan Losses. At all times the aggregate value of their
Allowance for Loan Losses, as calculated in accordance with GAAP, in an amount
not less than an amount acceptable to the independent certified public
accountant auditing Borrowers’ financial statements.
(d)Liquidity. As of the end of each calendar month, Liquidity of at least
$100,000,000.
(e)Charge-off Policy. Receivables must be charged off (on a monthly basis) with
respect to which no payment due and owing thereunder has been made for a period
that is equal to or greater than 180 days, as determined on a contractual
basis.
(f)Minimum Tangible Net Worth. As of the end of each calendar month, a minimum
Tangible Net Worth of at least $200,000,000 (such amount to be increased on an
annual basis upon Agent’s receipt of Borrowers’ audited financial statements by
an amount equal to 75% of Borrowers’ net income (less Permitted Tax
Distributions, Insurance Premium Dividends and dividends permitted pursuant to
Section 7.2(e)) for the prior fiscal year, commencing with the fiscal year
ending December 31, 2019).
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(g)Funded Debt to Adjusted Tangible Net Worth Ratio. As of the end of each
calendar month, a Funded Debt to Adjusted Tangible Net Worth Ratio of not more
than 3.00 to 1.00.
Notwithstanding the foregoing, (x) Borrowers’ failure to comply with Section
6.4(c) or Section 6.4(e) shall not, in itself, constitute an Event of Default so
long as such shortfalls or losses are deducted, as contemplated by the terms of
this Agreement, in the determination of the other financial covenants contained
herein, (y) the determination of the covenants contained in this Section 6.4
shall exclude any asset or liability associated with Statement of Financial
Accounting Standard No. 133 and (z) Borrowers’ failure to comply with (i)
Section 6.4(a) as a result of maintaining an EBITDA Ratio of no more than 25
basis points less than the required EBITDA Ratio, (ii) RESERVED, (iii) Section
6.4(f) as a result of maintaining a minimum Tangible Net Worth of not less than
99% of the required minimum Tangible Net Worth or (iv) Section 6.4(g) as a
result of maintaining a Funded Debt to Adjusted Tangible Net Worth Ratio greater
than 3.00 to 1.00 but not more than 3.25 to 1.00, shall not constitute an Event
of Default under Section 8.3(b) unless such failure continues for more than 1
consecutive calendar month; provided, however, clause (z) shall not in any event
be effective as an exception to the Event of Default described in Section 8.3(b)
more than 2 times per calendar year.
Section 6.5 Compliance With Applicable Law.
(a)All Receivables shall comply in all material respects with all applicable
material federal, state and local laws, rules, regulations, proclamations,
statutes, orders and interpretations at the time when Agent obtains any interest
therein pursuant to this Agreement.
(b)Each Borrower shall comply in all material respects with all applicable
material local, state and federal laws and regulations applicable to its
business including without limitation the Consumer Finance Laws, Environmental
Control Statutes, and all laws and regulations of the Local Authorities, and the
provisions and requirements of all franchises, permits, certificates of
compliance and approval issued by regulatory authorities and other like grants
of authority held by Borrowers; and notify Agent immediately (and in detail) of
any actual or alleged failure to comply with or perform, breach, violation or
default under any such laws or regulations or under the terms of any of such
franchises or licenses, grants of authority, or of the occurrence or existence
of any facts or circumstances which with the passage of time, the giving of
notice or otherwise could create such a breach, violation or default or could
occasion the termination of any of such franchises or grants of authority.
(c)With respect to the Environmental Control Statutes, Borrowers shall notify
Agent when, in connection with the conduct of Borrowers’ business or operations,
any Person (including, without limitation, EPA or any state or local agency)
provides oral or written notification to any Borrower or any Subsidiary with
regard to an actual or imminently threatened removal, spill, release or
discharge of hazardous or toxic wastes, substances or petroleum products; and
notify Agent immediately (and in detail) upon the receipt by any Borrower of an
assertion of liability under the Environmental Control Statutes, of any actual
or alleged failure to comply with or perform, breach, violation or default under
any such statutes or regulations or of the occurrence or existence of any facts,
events or circumstances which with the passage of time, the giving of notice, or
both, could create such a breach, violation or default.
(d)In addition to the foregoing, each Borrower shall, and each Borrower shall
ensure that each member of the Borrowing Group will, comply with Sanctions,
Anti-Money
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Laundering Laws, and Anti-Corruption Laws.
Section 6.6 Notice of Certain Events. Borrowers will promptly notify
Agent of (a) the occurrence of any Default or Event of Default or (b) any change
in the information provided in the Beneficial Ownership Certification that would
result in a change to the list of beneficial owners identified in such
certification.
Section 6.7 Existence, Properties. Borrowers will (a) do or cause to
be done all things necessary to preserve and keep in full force and effect its
existence, rights and franchises and comply with all laws applicable to it;
(b) maintain, preserve and protect all franchises, licenses and trade names and
preserve all the remainder of its property used or useful in the conduct of its
business; and (c) maintain in effect insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
shall be consistent with prudent business practices in the industry or otherwise
self-insure each business location of Borrowers in a manner reasonably
acceptable to Agent, and furnish to Agent from time to time, upon their request
therefor, evidence of same.
Section 6.8 Payment of Indebtedness; Taxes. Borrowers will (a) pay all
of their indebtedness and obligations promptly and in accordance with normal
terms; and (b) pay and discharge or cause to be paid and discharged promptly all
taxes, assessments, and governmental charges or levies imposed upon it or upon
its income and profits, or upon any of its property, real, personal or mixed, or
upon any part thereof, before the same shall become in default, as well as all
lawful claims for labor, materials and supplies or otherwise which, if unpaid,
might become a lien or charge upon such properties or any part thereof;
provided, however, that Borrowers shall not be required to pay and discharge or
to cause to be paid and discharged any such indebtedness, tax, assessment,
charge, levy or claim so long as the validity thereof shall be contested in good
faith by appropriate proceedings and Borrowers shall have set aside on their
books adequate reserves (as may be required in accordance with GAAP) with
respect to any such indebtedness, tax, assessment, charge, levy or claim, so
contested.
Section 6.9 Notice Regarding Any Plan. Borrowers shall furnish to
Agent:
(a)as soon as possible, and in any event within 10 days after any senior officer
of Borrowers know or have reason to know that any Reportable Event has occurred
with respect to any Plan maintained in whole or in part for the employees of a
Borrower or any of their Subsidiaries, a statement of the President or Treasurer
of Borrowers setting forth details as to such Reportable Event and the action
which is proposed to be taken with respect thereto, together with a copy of the
notice of such Reportable Event given to the Pension Benefit Guaranty
Corporation; and
(b)promptly after receipt thereof, a copy of any notice which a Borrower may
receive from the Pension Benefit Guaranty Corporation relating to the intention
of a Borrower to terminate any Plan maintained in whole or in part for the
benefit of employees of any Borrower or any of their Subsidiaries or to appoint
a trustee to administer any such Plan.
Section 6.10 Other Information. From time to time upon request of
Agent, Borrowers will furnish to Agent such additional information and reports
regarding the Collateral and the operations, businesses, affairs, prospects and
financial condition of Borrowers and their Subsidiaries as Agent may request.
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Section 6.11 Litigation, Enforcement Actions and Requests for
Information. Borrowers will promptly notify Agent (a) of any litigation or
action instituted or, to Borrowers’ knowledge, threatened in writing against any
Borrower or any of their Subsidiaries or Guarantors where the amount in
controversy, in Borrowers’ reasonable judgment, will or may exceed $100,000; (b)
of the entry of any judgment or lien against any property of Borrower, in an
amount of $100,000 or more as to any separate action, litigation, judgment or
lien instituted, threatened or entered or in an aggregate amount of $300,000 or
more as to all actions, litigation, judgments, or liens instituted, threatened
or entered; (c) any enforcement action or investigation instituted or, to
Borrowers’ knowledge, threatened, in writing, against any Borrower or any of
their Subsidiaries by any Governmental Authority, including without limitation
any proceeding or action to be commenced by the filing of a stipulation and
consent; (d) receipt by any Borrower or any of their Subsidiaries of an “Early
Warning Notice,” “Notice and Opportunity to Respond and Advise” or “Civil
Investigative Demand” from the Consumer Financial Protection Bureau or similar
notice or request from any other Governmental Authority; or (e) the occurrence
of a Regulatory Event.
Section 6.12 Business Location, Legal Name and State of Organization.
Borrowers shall notify Agent: at least 30 days prior to: (i) any proposed
change in a Borrower’s principal place of business, a Borrower’s legal name or a
Borrower’s state of organization; (ii) the change in the names in which a
Borrower or any Subsidiary conducts business at each such location; and (iii)
the change of a Borrower’s jurisdiction of organization.
Section 6.13 Operations. Borrowers shall maintain satisfactory credit
underwriting and operating standards, including, with respect to each obligor of
each Receivable, the completion of an adequate investigation of such obligor and
a determination that the credit history and anticipated performance of such
obligor is and will be satisfactory and meets the standards generally observed
by prudent finance companies.
Section 6.14 Further Assurances. Borrowers shall from time to time
execute and deliver to Agent such other documents and shall take such other
action as may be requested by Agent in order to implement or effectuate the
provisions of, or more fully perfect the rights granted or intended to be
granted by Borrowers to Agent pursuant to the terms of this Agreement, the Notes
or any other Credit Documents.
Section 6.15 Chattel Paper/Jurisdictions.
(a) Borrowers represent and warrant to Agent and Lenders that (i) Borrowers are
sophisticated consumer lenders and reinsurance corporations, (ii) Borrowers
employ attorneys with regulatory experience, and (iii) Borrowers’ internal
attorneys regularly consult with multiple different attorneys at outside law
firms on regulatory matters including but not limited to the content and form of
Borrowers’ Receivable documentation. If Agent has reasonable cause (which it
articulates in writing to Borrowers) to believe it necessary for Borrowers to
undertake a regulatory review of Receivable documentation of Borrowers and their
Subsidiaries, then Borrowers shall employ one or more of these firms to provide
such review at Borrowers sole cost and expense (which firm shall be reasonably
acceptable to Agent). However, in no event shall Agent request such a review
more than one (1) time per calendar year so long as no Event of Default has
occurred. Borrowers shall provide Agent with copies of such review within sixty
(60) days after each such request with the results of such documentation.
(b)Borrowers shall promptly (i) notify Agent of either (A) Borrowers or any of
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their Subsidiaries conducting business in any new jurisdiction, and (B)
Borrowers or any of their Subsidiaries making any material modifications to its
respective Receivable documentation outside of the ordinary course of business
and (ii) upon the request of Agent, provide Agent a list of jurisdictions in
which Borrowers and their Subsidiaries conduct business and licenses held in
each such jurisdiction.
Section 6.17Reinsurance Credit Facilities; Extraordinary Dividends. Borrowers
shall (a) furnish to Agent promptly after receipt thereof copies of any notices
or other communications received from Governmental Authorities in the State of
Georgia with respect to Reinsurance Credit Facilities and authorization of
Entity Guarantors to make extraordinary dividends and (b) have the ability to
fully access $92,000,000 of extraordinary dividends and/or lines of credit from
Entity Guarantors, and the applicable Governmental Authorities in the State of
Georgia shall not have disapproved any such payment.
ARTICLE 7
NEGATIVE COVENANTS
Each Borrower covenants and agrees with Agent and Lenders that until all
Obligations have been indefeasibly satisfied in full and the Commitments have
expired or otherwise have been terminated, no Borrower will do any of the
following without the prior written consent of Agent:
Section 7.1 Payments to and Transactions with Affiliates. (a) Make any
loan, advance, extension of credit or payment to any Affiliate, officer,
employee, member, manager, shareholder or director of any Borrower or any
Affiliate outside the ordinary course of business, except as described in
Schedule 4.12 attached hereto and made part hereof and the payment of insurance
premiums for a split dollar insurance policy for Roger Guimond, or (b) enter
into any other transaction, including, without limitation, the purchase, sale,
lease or exchange of property, or the rendering or any service, to or with any
Affiliate or any shareholder, officer, or employee of any Borrower or any
Affiliate, and except for other transactions with or services rendered to any
Affiliate of a Borrower in the ordinary course of business and pursuant to the
reasonable requirements of the business of such Affiliate and upon terms found
by the board of directors of a Borrower to be fair and reasonable and no less
favorable to a Borrower than such Borrower would obtain in a comparable arms’
length transaction with a Person not affiliated with or employed by a Borrower;
provided, however, that Borrowers may in any event pay reasonable compensation
to any such employee or officer in the ordinary course of Borrowers’ business
consistent and commensurate with industry custom and practice for the services
provided by such Person.
Section 7.2 Restricted Payments. Make any Restricted Payment except
for (a) Permitted Tax Distributions, (b) Insurance Premium Dividends, (c)
payments of principal and interest on Subordinated Debt not otherwise prohibited
under the subordination provisions applicable to such Subordinated Debt, (d)
payments of principal and interest on Other Debt, (e) payments of principal and
interest on the Reinsurance Credit Facilities and (f) an annual distribution to
the shareholders of Borrowers the proceeds of which shall be used solely for
contributions to the Cheek Family Foundation in an amount not to exceed the
lesser of (i) $10,000,000 or (ii) twenty five percent (25%) of the annual net
income of Borrowers as determined in accordance with GAAP based upon the annual
audited financial statements delivered to Agent pursuant to Section 6.2(b),
provided immediately prior to and after giving effect to any distribution or
payment no Default or Event of Default shall exist.
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Section 7.3 Indebtedness. Borrow any monies or create any Debt except
for Permitted Indebtedness.
Section 7.4 Guaranties. Guarantee or assume or agree to become liable
in any way, either directly or indirectly, for any additional indebtedness or
liability of others except to endorse checks or drafts in the ordinary course of
business.
Section 7.5 Nature of Business. Engage in any business other than the
business in which such Borrower currently is engaged or make any material change
in the nature of the financings which such Borrower extends, (including without
limiting the generality of the foregoing, matters relating to size, type, term,
nature and dollar amount).
Section 7.6 Negative Pledge. Assign, discount, pledge, grant a Lien in
or otherwise encumber any Receivables or the Collateral except as contemplated
by Section 7.15 of this Agreement.
Section 7.7 Investments. Make any investments in any other Person
except as described in Schedule 4.12 attached hereto and made part hereof; or
enter into any new business activities or ventures not related to such
Borrower’s business existing as of the date of this Agreement; or create or form
any Subsidiary.
Section 7.8 Compliance with Formula. Permit the aggregate amount of
all Advances outstanding at any time to exceed the Borrowing Base.
Section 7.9 Mergers, Divestitures. Except as permitted by Section 7.13
of this Agreement, acquire all or substantially all of the assets or shares of
stock of or other equity interest in any Person, or be a party to any
consolidation or merger.
Section 7.10 Use of Proceeds.
(a)Use the proceeds of any Advance or other extension of credit made hereunder
for any purpose other than consistent with the terms and conditions hereof, for
their lawful and permitted purposes (including that no part of the proceeds of
the loans made to Borrowers will be used to purchase or carry any margin stock
or to extend credit to others for the purpose of purchasing or carrying any
margin stock or for any purpose that violates the provisions of Regulation T, U
or X of the Board of Governors of the United States Federal Reserve).
(b)Use, and shall ensure that each member of the Borrowing Group will not,
directly or indirectly use any of the credit to fund, finance or facilitate any
activities, business or transactions: (i) that are prohibited by Sanctions, (ii)
that would be prohibited by U.S. Sanctions if conducted by a U.S. Person, or
(iii) that would be prohibited by Sanctions if conducted by Agent or any Lender,
or any other party hereto. Borrowers shall notify Agent in writing not more
than one (1) Business Day after first becoming aware of any breach of this
Section.
(c)Use, and shall ensure that each member of the Borrowing Group will not,
directly or indirectly use any of the credit to fund, finance or facilitate any
activities, business or transactions that would be prohibited by Anti-Money
Laundering Laws or Anti-Corruption Laws.
Section 7.11 Ownership and Management. Allow any Borrower to be owned
and controlled directly or indirectly by any Person other than shareholders,
members and senior
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management that own and control such Borrower as of the date of this Agreement.
Section 7.12 Amendment to Subordinated Debt. (a) Amend or permit the
amendment of any of the documents and instruments evidencing Subordinated Debt
or (b) make any prepayment on account of such Subordinated Debt which is not
otherwise allowed to be made under the subordination provisions applicable to
such Subordinated Debt. Notwithstanding anything in this Agreement to the
contrary, Borrowers are permitted to amend their Proxy Statements and related
documents in connection with its Senior Demand Notes, Variable Rate Subordinated
Debentures and Commercial Paper.
Section 7.13 Bulk Purchases. In any purchase transaction, purchase
Receivables in an aggregate amount exceeding $5,000,000 without prior written
consent of Agent.
Section 7.14 Guarantor Dividends. Permit any Guarantor to make any
redemptions, repurchases, dividends or distributions of any kind with respect to
a Guarantor’s stock to any Person other than a Borrower.
Section 7.15 Asset Sales. Sell, transfer or otherwise dispose of any
Property (including the Collateral) other than sales in the ordinary course of
business, of ineligible Receivables which have been charged-off pursuant to
Section 6.4(e) so long as no Event of Default or Default then exists.
Section 7.16 Deposit Accounts. Open or maintain any primary operating
deposit account other than the primary operating deposit account maintained with
South State Bank listed on Schedule 7.16 attached hereto without the prior
written consent of Agent.
Section 7.17 Source of Repayment and Collateral. Fund any repayment of
the credit with proceeds, or provide as collateral any property, that is
directly or indirectly derived from any transaction or activity that is
prohibited by Sanctions, Anti-Money Laundering Laws or Anti-Corruption Laws, or
that could otherwise cause Agent or any Lender to be in violation of Sanctions,
Anti-Money Laundering Laws or Anti-Corruption Laws.
Section 7.18 Franklin Securities, Inc. Permit Franklin Securities,
Inc. to conduct any business or operations or own any Property other than
Property with an aggregate value not to exceed $1,000.
ARTICLE 8
EVENTS OF DEFAULT
Each of the following events shall constitute an Event of Default under this
Agreement:
Section 8.1 Failure to Make Payments. The failure of Borrowers to make
any payment of (a) principal when due or (b) interest under the Notes or this
Agreement or any other payment hereunder or in respect of any other Obligation
within 5 days of when due.
Section 8.2 Information, Representations and Warranties. Any financial
statement, written information furnished or representation or warranty,
certificates, document or instrument made or given by any Borrower or any
Guarantor or furnished in connection herewith shall be false, misleading or
incorrect in any material respect, provided, however, that should any
representation or
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warranty by Borrowers under Section 4.1(a) be false, misleading or incorrect
with respect to the Receivables, such default shall not, in itself, constitute
an Event of Default so long as the aggregate amount of such Receivables failing
to meet the representations and warranties in Section 4.1(a) at any time does
not exceed 1.0% of the gross Receivables of Borrowers.
Section 8.3 Covenants. The failure of any Borrower or any Guarantor to
observe, perform or comply with (a) any of the covenants contained Sections 6.3
(first sentence), 6.5, 6.7 or 6.8 of this Agreement and such failure continues
for 30 days following the earlier of notice from Agent to Borrowers of such
failure or Borrowers’ knowledge of such failure or (b) any other covenant
contained in this Agreement or any other Credit Document.
Section 8.4 Collateral. At any time after the grant to Agent for the
benefit of Lenders of a security interest in or Lien upon any Collateral,
Agent’s interest therein shall for any reason cease to be a valid and subsisting
first priority Lien in favor of Agent and/or a valid and perfected first
priority security interest in and to the Collateral purported to be covered
thereby having the priority set forth therein.
Section 8.5 Defaults Under Other Agreements. Any default by any
Borrower or any Guarantor under any agreement to which such Borrower or such
Guarantor is a party and with respect to which the amount claimed exceeds
$2,500,000, singly or in the aggregate.
Section 8.6 Certain Events. The occurrence of any of the following
with respect to any Borrower or any Guarantor:
(a)Voluntary Proceedings. It shall (i) apply for or consent to the appointment
of a receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) be generally not paying its debts as such
debts become due as defined in the United States Bankruptcy Code, (iii) make a
general assignment for the benefit of its creditors, (iv) commence a voluntary
case under the Bankruptcy Code, (v) fail to controvert in a timely or
appropriate manner, or acquiesce in writing to, any petition filed against it in
any involuntary case under the Bankruptcy Code, or (vi) take any corporate
action for the purpose of effecting any of the foregoing.
(b)Involuntary Proceeding. A proceeding or case shall be commenced against it
without its application or consent in any court of competent jurisdiction,
seeking (i) the liquidation, reorganization, dissolution, winding up, or
composition or readjustment of debts, of it, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like for it or of all or any substantial
part of its assets, or (iii) similar relief in respect of it under any law
providing for the relief of debtors, and such proceeding or case shall continue
undismissed or unstayed and in effect, for a period of 90 days, or an order for
relief against it shall be entered in an involuntary case under the Bankruptcy
Code.
(c)Reportable and Other Events. (i) The occurrence of any Reportable Event
which Agent determines in good faith constitutes grounds for the termination of
any Plan by the Pension Benefit Guaranty Corporation (“PBGC”) or for the
appointment by the United States District Court of a trustee to administer any
Plan; (ii) the institution by the PBGC of proceedings to terminate any Plan; or
(iii) the failure of Borrower, or any Subsidiary to meet the minimum funding
standards established in Section 412 of the Internal Revenue Code of 1986, as
amended.
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Section 8.7 Possession of Collateral. A judgment creditor of any
Borrower shall take possession or file proceedings to attempt to take possession
of any of the Collateral with a value in excess of an amount equal to 1.0% of
the gross Receivables of Borrowers by any means including without limitation, by
levy, distraint, replevin, self-help, seizure or attachment.
Section 8.8 Guarantor. Any Guarantor shall repudiate, purport to
revoke or fail to perform any such Guarantor’s obligations under such
Guarantor’s Guaranty.
Section 8.9 Credit Documents. An event of default following the
expiration of any cure period (however defined) shall occur under any Credit
Document or under any other security agreement, guaranty, mortgage, deed of
trust, assignment or other instrument or agreement securing or supporting any
obligation of any Borrower under this Agreement or under the Notes.
Section 8.10 Hedging Agreements. Any default by Borrowers under any
Hedging Agreement.
Section 8.11 Material Adverse Change. Agent or Required Lenders
determine in good faith that a material adverse change in the business,
operations, property (including the Collateral), prospects or financial
condition of any Borrower or any Guarantor shall occur.
Section 8.12 Level Two Regulatory Event. The occurrence of a Level Two
Regulatory Event which remains unvacated, undischarged, unbonded or unstayed by
appeal or otherwise for a period of thirty (30) days from the date of its entry
which Agent or Required Lenders determine in good faith that a material adverse
change in the business, operations, property (including the Collateral),
prospects or financial condition of any Borrower or any Guarantor shall occur as
a result thereof.
ARTICLE 9
REMEDIES OF AGENT AND WAIVER
Section 9.1 Agent’s Remedies. Upon the occurrence of any Event of
Default or Default, Agent may, or at the direction of Required Lenders shall,
cease making Advances hereunder. Upon the occurrence of an Event of Default,
Agent may, or at the direction of Required Lenders shall, (i) immediately
terminate this Agreement or (ii) declare the Obligations immediately due and
payable. Upon such occurrence and/or declaration, Agent shall have, in addition
to the rights and remedies given to it by the Notes, this Agreement and the
other Credit Documents, all the rights and remedies of a secured party as
provided in the UCC (regardless of whether such Code has been adopted in the
jurisdiction where such rights and remedies are asserted) and without limiting
the generality of the foregoing, Agent may, in addition to all the rights
conferred upon it by law, exercise one or more of the following rights
successively or concurrently: (a) to take possession of the Collateral, or any
evidence thereof, proceeding without judicial process or by judicial process,
(b) to lawfully dispose of the whole or any part of the Receivables or any other
Collateral, or any other Property, instrument or document pledged as security
for any Obligation at public or private sale, without advertisement or demand
upon Borrowers, or upon any obligor of Receivables, the Collateral, or any other
security, the same being hereby waived, except to the extent otherwise required
by law, with the right on the part of Agent or their respective nominees to
become the purchaser thereof as provided by law absolutely freed and discharged
from any equity of redemption, and all trusts and other claims whatsoever;
(c) after deduction of all reasonable legal and other costs and expenses
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permitted by law, including attorneys’ fees, to apply the Collateral or all or
any portion of proceeds thereof on account of, or to hold as a reserve against,
all Obligations; (d) terminate any Interest Period; and (e) to exercise any
other rights and remedies available to it by law or agreement. Any remainder of
the proceeds after indefeasible satisfaction in full of the Obligations shall be
distributed as required by applicable law. Notice of any sale or disposition of
Collateral shall be given to Borrowers at least 10 Business Days before any
intended public sale or the time after which any intended private sale or other
disposition of the Collateral is to be made, which Borrowers agree shall be
reasonable notice of such sale or other disposition. Notwithstanding the
foregoing, upon the occurrence of an Event of Default described in
Section 8.6(a) or (b) hereof, the Commitments shall immediately terminate and
the Loan made pursuant to this Agreement and all other Obligations, together
with all accrued interest, shall be immediately due and payable in full without
presentment, demand, or protest or notice of any kind, all of which Borrowers
hereby expressly waive.
Section 9.2 Waiver and Release by Borrowers. To the extent permitted
by applicable law, each Borrower: (a) waives each of the following in connection
with Agent’s exercise of rights and remedies following the occurrence of an
Event of Default under this Agreement: (i) presentment and protest of the Notes
and this Agreement or any Receivables held by Agent on which any Borrower is any
way liable and (ii) notice and opportunity to be heard, after acceleration in
the manner provided in Article 9 of this Agreement, before exercise by Agent of
the remedies of self-help or set-off permitted by law or by any agreement with
any Borrower, and except where required hereby or by law, notice of any other
action taken by Agent; and (b) releases Agent, Lenders and their respective
officers, attorneys, agents and employees from all claims for loss or damage
caused by any act or omission on the part of Agent, Lenders or their respective
officers, attorneys, agents and employees, except willful misconduct or gross
negligence.
Section 9.3 No Waiver. Neither the failure nor any delay on the part
of Agent or any Lender to exercise any right, power or privilege under the Notes
or this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude any other further
exercise of any right, power or privilege.
Section 9.4 Application of Proceeds. Notwithstanding any other
provisions of this Agreement or any other Credit Document to the contrary,
following acceleration of the Obligations after the occurrence of an Event of
Default, all amounts collected or received by Agent or any Lender on account of
the Obligations (whether in an insolvency or bankruptcy case or proceeding or
otherwise) or any other amounts outstanding under any of the Credit Documents or
in respect of the Collateral shall be paid over or delivered as follows:
FIRST, to the payment of all costs, fees, expenses, and other amounts owing to
Agent, pursuant to Section 10.7, in connection with enforcing the rights of
Agent and Lenders under the Credit Documents, any protective advances made by
Agent with respect to the Collateral under or pursuant to the terms of the
Credit Documents;
SECOND, to payment of any costs, fees or expenses owed to Agent or to any Wells
Fargo Affiliate hereunder or under any other Credit Document;
THIRD, to the payment of all costs, fees, expenses of each of Lenders owing
hereunder in connection with enforcing its rights under the Credit Documents;
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FOURTH, to the payment of all Obligations consisting of accrued fees and
interest payable to Lenders hereunder (excluding amounts relating to Bank
Products);
FIFTH, to the payment of the outstanding principal amount of the Obligations
(excluding amounts relating to Bank Products);
SIXTH to the payment of all liabilities and obligations now or hereafter arising
from or in connection with respect to any Bank Products, any fees, premiums and
scheduled periodic payments due with respect thereto and any interest accrued
thereon;
SEVENTH, to all other Obligations which shall have become due and payable under
the Credit Documents and not repaid pursuant to clauses “FIRST” through ‘SIXTH”
above; and
EIGHTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.
In carrying out the foregoing, (a) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; and (b) each of Lenders shall receive an amount equal to
its pro rata share (based on the proportion that its then outstanding Loans and
Obligations outstanding of amounts available to be applied pursuant to clauses
“THIRD,” “FOURTH,” “FIFTH,” “SIXTH” and “SEVENTH” above).
ARTICLE 10
MISCELLANEOUS
Section 10.1 Indemnification and Release Provisions. Each Borrower
hereby agrees to defend Agent, Lenders and their directors, officers, agents,
employees and attorneys from, and hold each of them harmless against, any and
all losses, liabilities (including without limitation settlement costs and
amounts, transfer taxes, documentary taxes, or assessments or charges made by
any governmental authority), claims, damages, interests, judgments, costs, or
expenses, including without limitation, reasonable fees and disbursements of
attorneys, incurred by any of them arising out of or in connection with or by
reason of this Agreement, the making of the Loan or any Collateral, or any other
Credit Document, or related transaction, including without limitation, any and
all losses, liabilities, claims, damages, interests, judgments, costs or
expenses relating to or arising under any Consumer Finance Laws or Environmental
Control Statute or the application of any such statute to Borrowers’ properties
or assets. Each Borrower hereby releases Agent, Lenders and their respective
directors, officers, agents, employees and attorneys from any and all claims for
loss, damages, costs or expenses caused or alleged to be caused by any act or
omission on the part of any of them, other than such loss, damage cost or
expense which has been determined by a court of competent jurisdiction to have
been caused by the breach of contract, gross negligence or willful misconduct of
Agent and Lenders. All obligations provided for in this Section 10.1 shall
survive any termination of this Agreement or the Commitments and the repayment
of the Loan.
Section 10.2 Amendments.
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(a)Neither the amendment or waiver of any provision of this Agreement or any
other Credit Document, nor the consent to any departure by Borrowers therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Required Lenders, or if Lenders shall not be parties thereto, by the
parties thereto and consented to by the Required Lenders, and each such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided that no amendment, waiver
or consent shall unless in writing and signed by all Lenders, do any of the
following except as expressly provided in this Agreement: (a) modify the
definition of Maximum Principal Amount, (b) modify the Commitments of Lenders or
subject Lenders to any additional obligations, (c) reduce the interest on any
Note, (d) postpone any date fixed for any payment in respect of principal of, or
interest on, any Note or any fees hereunder, (e) change the percentage of the
Commitments, or any minimum requirement necessary for Lenders or the Required
Lenders to take any action hereunder, (f) amend or waive this Section 10.2, or
change the definition of Required Lenders, (g) except as otherwise expressly
provided in this Agreement, and other than in connection with the financing,
refinancing, sale or other disposition of any Property of Borrowers permitted
under this Agreement, release any Liens in favor of Lenders on any portion of
the Collateral, (h) permit Borrowers or any Guarantor to delegate, transfer or
assign any of its obligations to any Lender, (i) release or compromise the
obligations of Borrowers or any Guarantor to any Lender, or (j) amend the
definition of “Advance Rate” or “Borrowing Base” (or any defined term used in
either such definition), or increase any advance rate, or (k) amend or waive
Section 7.11 and, provided, further, that no amendment, waiver or consent
affecting the rights or duties of Agent under any Credit Document shall in any
event be effective, unless in writing and signed by Agent, as applicable, in
addition to Lenders required hereinabove to take such action. Notwithstanding
any of the foregoing to the contrary, the consent of Borrowers shall not be
required for any amendment, modification or waiver of the provisions of Article
11. In addition, Borrowers and Lenders hereby authorize Agent to modify this
Agreement by unilaterally amending or supplementing Schedule I from time to time
in the manner requested by Borrowers, Agent or any Lender in order to reflect
any assignments or transfers of the Loans as provided for hereunder; provided,
however, that Agent shall promptly deliver a copy of any such modification to
Borrowers and each Lender. Without regard to any other provision hereof, if any
Lender (for such purpose, a “Dissenting Lender”) dissents to any action Agent
desires to take requiring either the unanimous consent of Lenders or the consent
of Required Lenders or fails to respond to Agent within 5 Business Days of
Agent’s request for a consent, either Borrowers (if no Event of Default or
Default is outstanding and with the prior written consent of Agent) or Agent may
compel such Dissenting Lender to assign its entire Commitment (either to one or
more existing Lenders or other financial institution(s) who is to become a
Lender pursuant to the terms hereof) so long as (i) such Dissenting Lender
receives written notice of such intended assignment (and the proposed effective
date thereof) within 120 days of its providing its dissent to Agent or such
Dissenting Lender failing to respond to Agent within the required 15 Business
Day period and the effective date of such intended assignment is not later than
10 days thereafter and (ii) the Dissenting Lender receives full payment on the
effective date of such assignment of its entire portion of the outstanding
Obligations, with accrued interest and unpaid fees to such date (but excluding
any otherwise applicable early termination fee under Section 2.8(a) hereof).
(b)Notwithstanding anything contained in clause (a) above, any other provision
of this Agreement or whether there exists a Default or Event of Default, Agent
may at its discretion and without the consent of Required Lenders, voluntarily
permit the outstanding Advances at any time to exceed the Borrowing Base by up
to 1.0% of the Borrowing Base (the “Out of Formula Loans”).
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(c) If Agent is willing in its sole and absolute discretion to permit such Out
of Formula Loans, such Out of Formula Loans shall be payable on demand and shall
bear angelaburns@example.com% per annum above the rate otherwise applicable to the
Advances; provided, however, that, if Agent, on behalf of Lenders, permits Out
of Formula Loans (and thereafter continues to make, on behalf of Lenders,
Advances under such conditions), neither Agent nor Lenders shall be deemed to
have changed the limits contained in Section 2.1. If Agent permits such Out of
Formula loans, then any payment or prepayment made by Borrowers shall be applied
first to the amount of the Out-of-Formula Loan principal, then to the
Out-of-Formula Loan interest, and then as provided in Section 2.8.
Section 10.3 APPLICABLE LAW. THIS AGREEMENT AND ALL DOCUMENTS EXECUTED
IN CONNECTION HEREWITH SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE
IN THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
Section 10.4 Notices. All communications provided for hereunder shall
be in writing and shall be deemed to have been delivered, if delivered in
person, or sent by certified mail, postage pre-paid, return receipt requested,
by reliable overnight courier, by facsimile or by e-mail (with a copy by other
method permitted hereunder), as follows:
If to Agent:
Wells Fargo Bank, N.A.
123 South Broad Street, 5th Floor
MAC: Y1379-059
Philadelphia, Pennsylvania 19109
Attn: Mr. William M. Laird, Senior Vice President
Facsimile: (408)483-4155
E-mail: angelaburns@example.com
With a copy to:
Blank Rome LLP
One Logan Square
Philadelphia, Pennsylvania 19103
Attn: Kevin J. Baum, Esquire
Facsimile: (408)483-4155
E-mail: angelaburns@example.com
If to Borrowers:
1st Franklin Financial Corporation
135 East Tugalo Street
Toccoa, Georgia 30577
Attn:Mr. A.R. Guimond
Facsimile: (408)483-4155
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E-mail: angelaburns@example.com
With a copy to:
1st Franklin Financial Corporation
1019 S. Perry Street
Montgomery, AL 36104-5049
Attn: C.E. Vercelli, Jr., General Counsel
Facsimile: (408)483-4155
E-mail: angelaburns@example.com
or to such other address as any party shall specify to the other party in
writing in accordance with this Section 10.4.
Section 10.5 Termination and Release. This Agreement shall not
terminate until all amounts due under the Notes, this Agreement and any other
Credit Document and other Obligations, together with all interest and costs due,
shall have been indefeasibly paid in full and the Commitments have expired or
otherwise have been terminated. Upon such termination and payment, the
Collateral securing the Loan, the Notes, this Agreement and the other
Obligations shall be released from the provisions of this Agreement and any
right, title and interest of Agent in or to the same shall cease. Thereafter,
Agent agrees to deliver to Borrowers such documents as Borrowers reasonably
request to release of record any security interest or lien of Agent in the
Collateral.
Section 10.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart. Signature by facsimile or electronic transmission
shall bind the parties hereto.
Section 10.7 Costs, Expenses and Taxes. Borrowers agree to pay
immediately upon demand legal fees and out-of-pocket expenses of Agent related
to the preparation, negotiation, documentation, execution, filing or delivery of
this Agreement or any other Credit Document and any and all waivers, amendments
or modifications of any of the Credit Documents or any of the terms and
provisions thereof and, following any Default or Event of Default hereunder, any
and all audits and required inspections permitted under this Agreement or any
other Credit Documents. Borrowers shall also pay immediately upon demand
therefor all fees (including without limitation, legal fees and expenses), costs
and other expenses incurred by Agent and Lenders in connection with collection
of the Loan, the maintenance or preservation of the security interest in the
Collateral, the sale, disposition or other realization on the Collateral, or the
enforcement of Agent’s and Lenders’ rights hereunder or under any Credit
Document. In addition, Borrowers shall also pay any and all stamp and other
taxes or filing fees payable or determined to be payable in connection with the
execution and delivery of the Notes and this Agreement, the Collateral and other
documents to be delivered hereunder, and agrees to save Agent and Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay in payment or omission to pay such taxes.
Section 10.8 Participations and Assignments.
(a)This Agreement shall bind and inure to the benefit of each signatory, its
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successors and assigns; provided, however that, Borrowers shall not have the
right to assign or delegate their obligations and duties under this Agreement or
any other Credit Documents or any interest therein except with the prior written
consent of Agent and Lenders.
(b)Notwithstanding subsection (c) of this Section 10.8, nothing herein shall
restrict, prevent or prohibit any Lender from (i) pledging its Loans hereunder
to a Federal Reserve Bank in support of borrowings made by such Lender from such
Federal Reserve Bank or (ii) granting assignments or participations in such
Lender’s Loans hereunder to its parent and/or to any affiliate of such Lender or
to any existing Lender or affiliate thereof. Any Lender may make, carry or
transfer Loans at, to or for the account of, any of its branch offices or the
office of an affiliate of such Lender except to the extent such transfer would
result in increased costs to Borrower.
(c)Each Lender may, with the prior written consent of Agent and (if no Default
or Event of Default is outstanding) with the consent of Borrowers, assign to one
or more banks or other financial institutions all or a portion of its rights and
obligations under this Agreement and the Notes; provided that Wells Fargo Bank,
N.A. may assign to one or more banks or other financial institutions up to fifty
percent (50%) of its Commitment as of the date hereof without the prior written
consent of Lenders or Borrowers. In connection with each assignment: (i) the
parties thereto shall execute and deliver to Agent, for its acceptance (if
properly completed and executed in accordance with the terms hereof) and
recording in its books and records, an Assignment and Acceptance, together with
any Note or Notes subject to such assignment and a processing and recordation
fee of $3,500 to be paid by the assignee, (ii) no such assignment shall be for
less than $10,000,000 or, if less, the entire remaining Commitment of such
Lender, each such assignment shall be of a uniform, and not a varying,
percentage of all rights and obligations under and in respect of both the
Commitment of such Lender and all Loans of such Lender. Upon such execution and
delivery of the Assignment and Acceptance to Agent, from and after the date
specified as the effective date in the Assignment and Acceptance (“Acceptance
Date”), (x) the assignee thereunder shall be a party hereto, and, to the extent
that rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, such assignee shall have the rights and obligations
of a Lender hereunder and (y) the assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights (other than any rights it may
have pursuant to Section 10.1 which will survive) and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender’s rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(d)Within 10 days after demand by Agent, Borrowers shall execute and deliver to
Agent in exchange for any surrendered Note or Notes (which the assigning Lender
agrees to promptly deliver to Borrowers) a new Note or Notes to the order of the
assignee in an amount equal to the Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
hereunder, a new Note or Notes to the order of the assigning Lender in an amount
equal to the Commitment retained by it hereunder. Such new Note or Notes shall
re-evidence the indebtedness outstanding under the old Notes or Notes and shall
be in an aggregate principal amount equal to the aggregate principal amount of
such surrendered Note or Notes and shall otherwise be in substantially the form
of the Note or Notes subject to such assignments.
(e)Each Lender may, with the prior written consent of Agent, but without the
consent of any other Lender or Borrowers, sell participations to one or more
parties (a “Participant”)
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in or to all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitments, the Loans
owing to it and the Note or Notes held by it); provided that if such Lender
obtains the consents required under this clause (e) then (i) such Lender’s
obligations under this Agreement (including, without limitation, its Commitment
to Borrowers hereunder) shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of any such Note for all
purposes of this Agreement, (iv) Borrowers, Agent, and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement and (v) such Lender shall
not transfer, grant, assign or sell any participation under which the
Participant shall have rights to approve any amendment or waiver of this
Agreement.
(f)Each Lender agrees that, without the prior written consent of Borrowers and
Agent, it will not make any assignment or sell a participation hereunder in any
manner or under any circumstances that would require registration or
qualification of, or filings in respect of, any Advance, Note or other
Obligation under the securities laws of the United States of America or of any
jurisdiction.
(g)In connection with the efforts of any Lender to assign its rights or
obligations or to participate interests, Agent or such Lender may disclose any
information in its possession regarding Borrowers, their finances and/or
Property. By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto; (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrowers or the performance or observance by the Borrowers of any of their
obligations under this Agreement or any other Loan Document furnished pursuant
hereto; (iii) such assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee appoints and authorizes Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(h)Notwithstanding anything in this Agreement to the contrary, under no
circumstances shall Agent or any Lender provide any information regarding this
Agreement (including related documents), the Receivables, the financial
statements, affairs, policies, or business operations of Borrower to any
Affiliate or otherwise related company that competes with Borrower or is engaged
in the business of consumer finance lending outside the ordinary course of
Agent’s or such Lender’s business in administering loans in such Person’s
portfolio. Without limiting the generality of the preceding sentence, Agent and
Lenders shall not disclose any information about Borrower of any kind
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or character to Wells Fargo Financial Resources, Inc., Wells Fargo Financial, or
any other consumer finance company outside the ordinary course of Agent’s or
such Lender’s business in administering loans in such Person’s portfolio;
provided, however, prior to the occurrence of an Event of Default, Agent shall
not disclose any customer specific information to such Affiliates.
Section 10.9 Effectiveness of Agreement. Anything to the contrary in
this Agreement notwithstanding, the provisions hereof shall not be effective
until this Agreement is: (a) duly executed, and delivered by authorized officers
of Borrowers to Agent; and (b) duly signed by an authorized officer of Agent.
Section 10.10 JURISDICTION AND VENUE. IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY CREDIT DOCUMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER,
BORROWERS HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED IN MANHATTAN, NEW YORK AND AGREE NOT TO RAISE ANY
OBJECTION TO SUCH JURISDICTION OR TO THE LAYING OR MAINTAINING OF THE VENUE OF
ANY SUCH PROCEEDING IN SUCH COUNTY. BORROWERS AGREE THAT SERVICE OF PROCESS IN
ANY SUCH PROCEEDING MAY BE DULY EFFECTED UPON IT BY MAILING A COPY THEREOF BY
REGISTERED MAIL, POSTAGE PREPAID, TO BORROWERS. THE PREVAILING PARTY IN ANY
SUCH JUDICIAL PROCEEDING SHALL BE ENTITLED TO THE PAYMENT OF ITS LEGAL FEES AND
EXPENSES IN CONNECTION THEREOF BY THE OTHER PARTY.
Section 10.11 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF OR RELATED TO THIS AGREEMENT OR ANY CREDIT DOCUMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR AGENT AND
LENDERS TO ENTER INTO THIS AGREEMENT.
Section 10.12 REVIEW BY COUNSEL. BORROWERS ACKNOWLEDGE THAT THEY HAVE
HAD THE ASSISTANCE OF COUNSEL IN THE REVIEW AND EXECUTION OF THIS AGREEMENT AND,
SPECIFICALLY, SECTIONS 10.10 AND 10.11 HEREOF, AND FURTHER ACKNOWLEDGE THAT THE
MEANING AND EFFECT OF THE FOREGOING WAIVER OF JURISDICTION AND VENUE OBJECTION
AND JURY TRIAL HAVE BEEN FULLY EXPLAINED TO BORROWERS BY THEIR COUNSEL.
Section 10.13 Exchanging Information. Subject to Section 10.8(h),
Agent, Lenders, Wells Fargo & Company and all direct and indirect subsidiaries
of Agent, Lenders or Wells Fargo & Company may exchange and share any and all
information they may have in their possession regarding Borrowers and their
Affiliates with Agent’s and Lenders’ prospective participants, affiliates,
accountants, lawyers and other advisors, Agent, Lenders, Wells Fargo & Company
and all direct and indirect subsidiaries of Agent, Lenders or Wells Fargo &
Company, and Borrowers waive any right of confidentiality it may have with
respect to such exchange of such information.
Section 10.14 Acknowledgment of Receipt. Each Borrower acknowledges
receipt of a
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copy of this Agreement, the Notes, each Credit Document and each other document
and agreement executed by Borrowers in connection with the Agreement or the
Obligations.
Section 10.15 Patriot Act Notice. Each Lender that is subject to the
requirements of the Patriot Act hereby notifies Borrowers that pursuant to the
requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies Borrowers, which information includes the name and
address of Borrowers and other information that will allow such Lender to
identify Borrowers in accordance with the Patriot Act. In addition, if Agent is
required by law or regulation or internal policies to do so, it shall have the
right to periodically conduct (a) Patriot Act searches, OFAC/PEP searches, and
customary individual background checks for Borrowers and Guarantors and (b)
OFAC/PEP searches and customary individual background checks for the Borrowers’
senior management and key principals, and Borrowers agree to cooperate in
respect of the conduct of such searches and further agrees that the reasonable
costs and charges for such searches shall constitute expenses hereunder and be
for the account of Borrowers.
Section 10.16 Recognition of the U.S. Special Resolution Regimes.
(a)In the event that any Lender that is a Covered Entity becomes subject to a
proceeding under a U.S. Special Resolution Regime, the transfer from such Lender
of this Agreement, and any interest and obligation in or under this Agreement,
will be effective to the same extent as the transfer would be effective under
the U.S. Special Resolution Regime if this Agreement, and any such interest and
obligation, were governed by the laws of the United States of America or a state
of the United States of America.
(b)In the event that any Lender that is a Covered Entity or a BHC Act Affiliate
of such Lender becomes subject to a proceeding under a U.S. Special Resolution
Regime, Default Rights under this Agreement that may be exercised against such
Lender are permitted to be exercised to no greater extent than such Default
Rights could be exercised under the U.S. Special Resolution Regime if this
Agreement were governed by the laws of the United States of America or a state
of the United States of America.
ARTICLE 11
AGENT
Section 11.1 Appointment of Agent.
(a)Each Lender hereby designates Wells Fargo Bank, N.A. as Agent to act as
herein specified. Each Lender hereby irrevocably authorizes, and each holder of
any Note by the acceptance of a Note or participation, shall be deemed
irrevocably to authorize Agent to take such action on its behalf under the
provisions of this Agreement and the Notes and any other Credit Documents and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of Agent by the terms hereof and thereof
and such other powers as are reasonably incidental thereto. Agent shall hold
all Collateral and all payments of principal, interest, fees (other than the
administrative fee payable solely for the account of Agent pursuant to Section
2.9 hereof), charges and expenses received pursuant to this Agreement or any
other Credit Document for the ratable benefit of Lenders except as otherwise
provided herein. Agent may perform any of its duties hereunder by or through
its agents or employees.
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(b)The provisions of this Article 11 are solely for the benefit of Agent and
Lenders, and Borrowers shall not have any duties under this Section 11 or any
rights as a third party beneficiary of any of the provisions hereof (except for
the applicable provision of Section 11.9(a)). In performing its functions and
duties under this Agreement, Agent shall act solely as agent of Lenders and does
not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for Borrowers.
(c)Borrowers, Agent and Lenders hereby covenant and agree that First Horizon
Bank shall be the syndication agent (“Syndication Agent”), but that in such
capacity, Syndication Agent shall have no rights, duties, responsibilities,
obligations, liabilities, responsibilities or duties, except for those received,
undertaken or incurred by Syndication Agent in its capacity as a Lender. No
duty, responsibility, right or option granted to Agent in this Agreement and
Credit Documents is delegated or transferred, in whole or in part, to
Syndication Agent and no compensation payable to Agent shall be shared with, or
paid to, Syndication Agent. Syndication Agent shall not be entitled to any fees
or reimbursement of expenses except as Syndication Agent shall otherwise be
entitled in its capacity as a Lender.
Section 11.2 Nature of Duties of Agent. Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement. Neither
Agent nor any of its officers, directors, employees or agents shall be liable
for any action taken or omitted by it as such hereunder or in connection
herewith, unless caused by its or their gross negligence or willful misconduct.
The duties of Agent shall be mechanical and administrative in nature; Agent
shall not have by reason of this Agreement a fiduciary relationship in respect
of any Lender; and nothing in this Agreement, expressed or implied, is intended
to or shall be so construed as to impose upon Agent any obligations in respect
of this Agreement except as expressly set forth herein.
Section 11.3 Lack of Reliance on Agent.
(a)Independently and without reliance upon Agent, each Lender, to the extent it
deems appropriate, has made and shall continue to make (i) its own independent
investigation of the financial or other condition and affairs of Borrowers in
connection with the taking or not taking of any action in connection herewith
and (ii) its own appraisal of the creditworthiness of Borrowers, and, except as
expressly provided in this Agreement, Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto, whether coming into
its possession before the making of Advances or at any time or times thereafter.
In addition to the foregoing, Agent agrees to provide summary reports to
Lenders in connection with inspections and audits performed under Section 6.3
for informational purposes only and Agent shall not be responsible for the
accuracy of any information contained therein.
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(b)Agent shall not be responsible to any Lender for any recitals, statements,
information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith or for the
execution, effectiveness, genuineness, validity, enforceability, collectability,
priority or sufficiency of this Agreement, the Notes, the Credit Documents or
the financial or other condition of Borrowers. Agent shall not be required to
make any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement or the Notes, or the financial
condition of Borrowers, or the existence or possible existence of any Default or
Event of Default, unless specifically requested to do so in writing by any
Lender.
Section 11.4 Certain Rights of Agent. Without limiting Agent’s rights
and discretion under any provision hereof, Agent shall have the right to request
instructions from the Required Lenders or, as required, each of Lenders. If
Agent shall request instructions from the Required Lenders or each of Lenders,
as the case may be, with respect to any act or action (including the failure to
act) in connection with this Agreement, Agent shall be entitled to refrain from
such act or taking such action unless and until Agent shall have received
instructions from the Required Lenders or each of Lenders, as the case may be,
and Agent shall not incur liability to any Person by reason of so refraining.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
hereunder in accordance with the instructions of the Required Lenders or each of
Lenders, as the case may be.
Section 11.5 Reliance by Agent. Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, facsimile, telex teletype or telecopier message, e-mail
or other electronic transmission, cablegram, radiogram, order or other
documentary, teletransmission or telephone message believed by it to be genuine
and correct and to have been signed, sent or made by the proper person. Agent
may consult with legal counsel (including counsel for Borrowers with respect to
matters concerning Borrowers), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
Section 11.6 Indemnification of Agent. To the extent Agent is not
reimbursed and indemnified by Borrowers, each Lender will reimburse and
indemnify Agent, in proportion to its respective Commitment, for and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including reasonable counsel fees and
disbursements) or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against Agent in any way relating to or
arising out of this Agreement, provided that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from Agent’s
gross negligence or willful misconduct.
Section 11.7 Agent in its Individual Capacity. With respect to its
obligation to lend under this Agreement, the Advances made by it and the Notes
issued to it and all of its rights and obligations as a Lender hereunder and
under other Credit Documents, Agent shall have the same rights and powers
hereunder as any other Lender or holder of a Note or participation interests and
may exercise the same as though it was not performing the duties specified
herein; and the terms “Lenders”, “Required Lenders”, “holders of Notes”, or any
similar terms shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity. Agent may accept deposits from, lend money
to, acquire equity interests in, and generally engage in any kind of banking,
trust, financial
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advisory or other business with Borrowers or any Affiliate of Borrowers as if it
were not performing the duties specified herein, and may accept fees and other
consideration from Borrowers for services in connection with this Agreement and
otherwise without having to account for the same with Lenders.
Section 11.8 Holders of Notes. Agent may deem and treat the payee of
any Note as the owner thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been filed with Agent.
Any request, authority or consent of any Person who, at the time of making such
request or giving such authority or consent, is the holder of any Note, shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
Section 11.9 Successor Agent.
(a)Agent may, upon 5 Business Days notice to Lenders and Borrowers, resign at
any time (effective upon the appointment of a successor Agent pursuant to the
provisions of this Section 11.9(a)) by giving written notice thereof to Lenders
and Borrowers. Upon any such resignation, the Required Lenders shall have the
right, upon 5 days notice, to appoint a successor Agent. If no successor Agent
shall have been so appointed by the Required Lenders, and shall have accepted
such appointment, within 30 days after the retiring Agent’s giving of notice of
resignation, then, upon 5 days notice, the retiring Agent may, on behalf of
Lenders, appoint a successor Agent, which shall be a bank or other financial
institution which maintains an office in the United States, or a commercial bank
organized under the laws of the United States of America or of any State
thereof, or any affiliate of such bank or trust or other financial institution
which is engaged in the banking business, having a combined capital and surplus
of at least $500,000,000; provided, however, that Required Lenders may, upon 5
days notice, replace any such successor Agent appointed by a retiring Agent.
(b)Upon the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent’s resignation hereunder as Agent, the
provisions of this Article 11 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement. In the
event Agent or its assets are taken over by any state or federal agency having
jurisdiction over Agent or its assets, a majority of the Lenders other than
Agent may appoint a successor to Agent.
Section 11.10 Collateral Matters.
(a)Each Lender authorizes and directs Agent to accept the other Credit Documents
for the benefit of Lenders. Agent is hereby authorized, on behalf of all
Lenders, without the necessity of any notice to or further consent from any
Lender, from time to time prior to an Event of Default, to take any action, in
its sole discretion, with respect to any Collateral or Credit Document which may
be necessary or appropriate to perfect and maintain perfected or enforce the
Liens upon the Collateral granted pursuant to this Agreement.
(b)Lenders hereby authorize Agent, at its option and in its discretion, to
release any Lien granted to or held by Agent upon any Collateral (i) upon
termination of the Commitments
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and payment in immediately available funds and satisfaction of all of the
Obligations at any time arising under or in respect of this Agreement or the
Credit Documents or the transactions contemplated hereby or thereby, (ii)
constituting Property being sold or disposed of upon receipt of the proceeds of
such sale by Agent if the sale or disposition is permitted under this Agreement
or any other Credit Document or is made by Agent in the enforcement of its
rights hereunder following the occurrence of an Event of Default or (iii) if
approved, authorized or ratified in writing by the Required Lenders, unless such
release is required to be approved by all Lenders hereunder; provided, however,
that Agent may, in its discretion, upon request by Borrowers, release Agent’s
Liens on Collateral value in the aggregate not in excess of $1,000,000 during
any one year period without the prior written approval or authorization of any
of the other Lenders. Upon request by Agent at any time, Lenders will confirm
in writing Agent’s authority to release particular types or items of Collateral
pursuant to this Section 11.10(b).
(c)Agent shall have no obligation whatsoever to Lenders or to any other Person
to assure that the Collateral exists or is owned by Borrowers or is cared for,
protected or insured or that the Liens granted to Agent herein or pursuant
hereto have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
or to continue exercising at all or in any manner or under any duty of care,
disclosure or fidelity any of the rights, authorities and powers granted or
available to Agent in this Section 11.10 or in any of the Credit Documents, it
being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, Agent may act in any manner it may deem
appropriate, in its sole discretion, given Agent’s own interest in the
Collateral as one of Lenders and that Agent shall have no duty or liability
whatsoever to Lenders, except for its gross negligence or willful misconduct.
Section 11.11 Delivery of Information. Agent shall not be required to
deliver to any Lender originals or copies of any documents, instruments,
agreements, notices, communications or other information received by Agent from
Borrowers, the Required Lenders, any Lender or any other Person under or in
connection with this Agreement or any other Credit Document except (a) as
specifically provided in this Agreement or any other Credit Document and (b) as
requested from time to time in writing by any Lender with respect to documents,
instruments, notices or other written communications from Borrowers received by
and in the possession of Agent.
Section 11.12 Defaults. Agent shall not be deemed to have knowledge of
the occurrence of a Default or Event of Default (other than the non-payment of
principal of or interest on the Loan to the extent the same is required to be
paid to Agent for the account of Lenders) unless Agent has actual knowledge
thereof or has received notice from a Lender or Borrowers specifying such
Default or Event of Default and stating that such notice is a “Notice of
Default.” In the event that Agent has such knowledge of or receives such a
notice of the occurrence of a Default or Event of Default, Agent shall give
prompt notice thereof to Lenders. Agent shall (subject to Article 9) take such
action with respect to such Default or Event of Default or refrain from taking
such action, with respect to such Default or Event of Default as Agent shall
deem advisable in the best interest of Lenders and shall, without limiting
Agent’s rights or discretion under this Agreement, use reasonable efforts under
the circumstances to consult with Lenders before taking any material enforcement
action; and provided further that Agent shall not be required to take any such
action which it determines to be contrary to law.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE(S)]
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IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS
OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
Dated the date and year first set forth above
BORROWER:
1ST FRANKLIN FINANCIAL CORPORATION
By:/s/ A. R. Guimond, Jr.
Name:A. Roger Guimond,
Jr.
Title:Executive Vice President and CFO
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[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]
S-1
116549.01097/122059808v.9
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--------------------------------------------------------------------------------
AGENT:
WELLS FARGO BANK, N.A.
By:/s/ William M.
Laird
Name:William M.
Laird
Title:SVP
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[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]
S-2
116549.01097/122059808v.9
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LENDERS:
WELLS FARGO BANK, N.A.
By:/s/ William M.
Laird
Name:William M.
Laird
Title:SVP
FIRST HORIZON BANK
By:/s/ Jake
McCrary
Name:Jake
McCrary
Title:Vice
President
--------------------------------------------------------------------------------
[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]
S-3
116549.01097/122059808v.9
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EXHIBITS
Exhibit A:Form of Annual Compliance Certificate
Exhibit B:Form of Availability Statement
Exhibit C:RESERVED
Exhibit D:Form of Subordination Agreement
Exhibit E:Modification Policy
Exhibit F:Underwriting Policy
Exhibit G:Charge-off Policy
SCHEDULES
Schedule I:Lenders
Schedule II:Permitted Debt
Schedule III:Permitted Liens
Schedule 4.2:Organization and Good Standing
Schedule 4.7:Litigation
Schedule 4.12:Investments and Subsidiaries
Schedule 4.16:Locations of Borrower
Schedule 4.17:Capital Stock
Schedule 7.16:Deposit Accounts
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SCHEDULE I
Commitments
Lenders
Commitment Percentage
Commitment Amount
Wells Fargo Bank, N.A.
123 South Broad Street, 5th Floor
MAC: Y1379-059
Philadelphia, Pennsylvania
Attn: Mr. William M. Laird, Senior Vice President
Facsimile: (408)483-4155
75%
$150,000,000
First Horizon Bank
165 Madison Avenue, Suite 1000
Memphis, Tennessee 38103
Attn: Mr. Jake McCrary, Vice President
Facsimile: (408)483-4155
25%
$50,000,000
TOTAL
100%
$200,000,000
-------------------------------------------------------------------------------- |
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 08-5188
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
JASON CUMMINGS,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond. Henry E. Hudson, District
Judge. (3:08-cr-00226-HEH-1)
Submitted: July 7, 2009 Decided: July 22, 2009
Before WILKINSON and NIEMEYER, Circuit Judges, and HAMILTON,
Senior Circuit Judge.
Affirmed by unpublished per curiam opinion.
Michael S. Nachmanoff, Federal Public Defender, Nia Ayanna
Vidal, Assistant Federal Public Defender, Richmond, Virginia,
for Appellant. Dana J. Boente, Acting United States Attorney,
Peter S. Duffey, Assistant United States Attorney, Richmond,
Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Jason Cummings appeals his 225-month sentence for
possession with intent to distribute heroin. Cummings raises
three issues on appeal. First, Cummings contends that the
district court’s use of his post-arrest statements in
calculating his sentence violated due process. Next, Cummings
argues that the district court erred in finding Cummings’s post-
arrest statements corroborated and reliable. Finally, Cummings
asserts that his 225-month sentence was unreasonable, as the
district court failed to adequately consider Cummings’s history
and personal characteristics, or otherwise address the arguments
Cummings’s attorney made during sentencing. Finding no merit in
these arguments, we affirm.
We review a sentence for reasonableness under an
abuse-of-discretion standard. Gall v. United States, 552 U.S.
38, , 128 S. Ct. 586, 597 (2007). This review requires our
consideration of both the procedural and substantive
reasonableness of a sentence. 128 S. Ct. at 597.
In determining whether a sentence is procedurally
reasonable, we first assess whether the district court properly
calculated the defendant’s advisory guideline range. Id. at
596-97. We then consider whether the district court failed to
consider the 18 U.S.C. § 3553(a) factors and any arguments
presented by the parties, selected a sentence based on “clearly
2
erroneous facts,” or failed to sufficiently explain the selected
sentence. Gall, 128 S. Ct. at 597.
When imposing sentence, the district court “‘must make
an individualized assessment based on the facts presented.’. . .
That is, the sentencing court must apply the relevant § 3553(a)
factors to the specific circumstances of the case before it.
Such individualized treatment is necessary ‘to consider every
convicted person as an individual and every case as a unique
study in the human failings that sometimes mitigate, sometimes
magnify, the crime and the punishment to ensue.’” United
States v. Carter, 564 F.3d 325, 328 (4th Cir. 2009) (quoting
Gall, 128 S. Ct. at 598).
Finally, we review the substantive reasonableness of
the sentence, “taking into account the ‘totality of the
circumstances, including the extent of any variance from the
Guidelines range.’” United States v. Pauley, 511 F.3d 468, 473
(4th Cir. 2007) (quoting Gall, 128 S. Ct. at 597). When
reviewing the district court’s application of the sentencing
guidelines, this Court reviews findings of fact for clear error
and questions of law de novo. United States v. Osborne, 514
F.3d 377, 387 (4th Cir.), cert. denied, 128 S. Ct. 2525 (2008).
A sentence within the properly calculated guideline range may be
afforded an appellate presumption of reasonableness. Rita v.
3
United States, 551 U.S. 338, ___, 127 S. Ct. 2456, 2459, 2462
(2007).
Cummings first asserts that the district court
violated his due process rights when it used his post-arrest
statements about drug trafficking as relevant conduct in
calculating the drug weight attributable to him. Specifically,
though Cummings was arrested with approximately ninety grams of
heroin, the district court found him responsible for eighteen
kilograms.
We find no error by the district court. We have
expressly authorized lower courts to consider acquitted or
uncharged conduct in establishing drug amounts in sentencing, as
long as the quantities are established by a preponderance of the
evidence. United States v. Perry, 560 F.3d 246, 258 (4th Cir.
2009). Accordingly, Cummings’s due process argument fails.
Cummings next argues that the district court erred in
adopting the probation officer’s calculation of the attributable
drug weight, as the post-arrest statements were uncorroborated
and lacking sufficient indicia of reliability. We disagree.
After twice being advised of his Miranda * rights, Cummings
admitted that he had distributed one and a half kilograms of
heroin per month in the year prior to his arrest. These
*
Miranda v. Arizona, 384 U.S. 436 (1966).
4
statements were corroborated by the fact that Cummings was
arrested while driving en route from New York to North Carolina,
in a rental car leased neither in Cummings's name nor in the
names of the other passengers. Cummings was arrested with
ninety grams of heroin, which he informed police would be used
in determining whether to expand his drug business to another
region. Finally, the information Cummings gave regarding the
procedures used to transport drugs for his business was
corroborated by the testimony of an agent of the Drug
Enforcement Administration, based on his general knowledge of
drug distribution and his conversation with a law enforcement
officer in New York. “[T]he exclusion of reliable evidence
hampers the ability of sentencing courts to consider all
relevant information about the defendant in selecting an
appropriate sentence.” United States v. Nichols, 438 F.3d 437,
444 (4th Cir. 2006). Given the established reliability of
Cummings’s post-arrest statements, the district court did not
err in using these statements to determine Cummings’s
appropriate offense level.
Finally, Cummings argues that his 225-month sentence
was procedurally and substantively unreasonable. Concerning
procedural reasonableness, Cummings does not contend that the
district court incorrectly calculated his advisory guideline
range, with the exception of the district court’s consideration
5
of Cummings’s post-arrest statements, discussed supra. Our
review of the record convinces us that the district court
correctly calculated Cummings’s advisory guidelines range at 188
to 235 months.
Instead, Cummings asserts that the district court
failed to adequately consider Cummings’s history and personal
characteristics. This argument lacks merit. The district court
took into account Cummings’s history and characteristics, as
demonstrated by its classification of Cummings as a “major drug
trafficker” who had been “involved in distributing major
quantities of heroin for quite a period of time.” In light of
Cummings’s extensive involvement in the drug trade, the district
court determined that a sentence toward the upper end of the
guideline range was appropriate.
The explanation offered by the district court was
sufficient to demonstrate its individualized assessment of the
circumstances of Cummings’s case prior to pronouncing the
sentence. Indeed, “when a judge decides to simply apply the
[g]uidelines to a particular case, doing so will not necessarily
require lengthy explanation.” Rita, 127 S. Ct. at 2468.
Instead, where “[c]ircumstances . . . make clear that the judge
rests his decision upon the Commission’s own reasoning that the
[g]uidelines sentence is a proper sentence,” extensive
explanation of the sentence is unnecessary. Id. Here, the
6
court indicated it had considered all the guideline factors, and
delineated specific factors it found to be of particular
importance. It then pronounced a sentence within the guidelines
range. See Rita, 127 S. Ct. at 2459, 2462 (approving appellate
presumption of reasonableness to sentence within guidelines
range). Accordingly, we find that the court adequately
considered and explained the factors that led to the sentence
imposed. Cummings’s challenge to his sentence is accordingly
without merit.
Therefore, we affirm Cummings’s conviction and
sentence. We dispense with oral argument because the facts and
legal contentions are adequately presented in the materials
before the court, and further argument will not aid the
decisional process.
AFFIRMED
7
|
COURT OF APPEALS FOR THE
FIRST DISTRICT OF TEXAS AT HOUSTON
ORDER
Appellate case name: Victor Keith Wilson v. The State of Texas
Appellate case number: 01-18-00509-CR
Trial court case number: 95CR0904
Trial court: 10th District Court of Galveston County
Appellant appeals from the denial of his motion for post-conviction DNA testing.
Appellant’s court-appointed counsel has filed a motion to withdraw along with a brief concluding
that the above-referenced appeal is frivolous. See Anders v. California, 386 U.S. 738, 744 (1967).
Appellant filed a pro se response. Although the supplemental record indicates that a copy of the
record was sent to appellant by the trial court clerk, appellant subsequently asserted that he did not
receive a copy of the record and that his pro se response was filed without the record. Another
copy of the record was ordered to be provided to appellant and appellant was granted an additional
extension of time to amend his pro se response. The record demonstrates that appellant has been
provided another copy of the record.
Appellant now requests additional documents from the underlying trial that were not
included in the appellate record. The motion is denied. The additional documents requested by
appellant are neither necessary nor relevant to filing a pro se response to counsel’s Anders brief in
this appeal from the denial of post-conviction DNA testing. To the extent that appellant still desires
to amend his pro se response, an amended response must be filed no later than 30 days from the
date of this order. No further extensions will be granted.
It is so ORDERED.
Judge’s signature: ___/s/ Sarah B. Landau___
Acting individually
Date: ___July 9, 2019___
|
Fourth Court of Appeals
San Antonio, Texas
July 5, 2018
No. 04-16-00630-CR & 04-16-00631-CR
Cody Lon SMITH,
Appellant
v.
The STATE of Texas,
Appellee
From the 198th Judicial District Court, Kerr County, Texas
Trial Court No. B-07-057 & B-15-631
Honorable Rex Emerson, Judge Presiding
ORDER
On June 6, 2018, this court issued a written order setting the due date for the State’s
brief as July 6, 2018. The State has filed a motion for a forty-five day extension of time to file
its brief. We grant the motion in part and order the State’s brief due August 6, 2018.
_________________________________
Luz Elena D. Chapa, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 5th day of July, 2018.
___________________________________
KEITH E. HOTTLE,
Clerk of Court
|
Case 1:18-cv-03140-WFK-RML Document 35 Filed 05/26/20 Page 1 of 1 PageID #: 345
LISA M. CASA, ESQ.
danielruiz@example.net
May 26, 2020
VIA ECF
Honorable Robert M. Levy, U.S.M.J.
United States District Court
Eastern District of New York
225 Cadman Plaza East
Brooklyn, New York 11201
Re: Extension of Time to File Cheeks Motion
Oswaldo v. Seung Ho Kim, et al.
Case No. 18-cv-3140
Dear Judge Levy,
Our office is counsel to defendants, Seungho Kim, Jeewha Kim and Delta Contracting,
Inc. (“Delta Contracting”) (collectively, “Defendants”) in the above referenced matter. We
submit this letter, together with Plaintiffs’ counsel, to respectfully request that the parties time to
submit a settlement agreement for approval pursuant to Cheeks v. Freeport Pancakes House, be
extended by thirty days from May 27, 2020 to June 29, 2020. The reason for this extension is
that the parties are still in the process of finalizing the language in the agreement and circulating
it for signatures, a process that has been hampered by the ongoing and persistent COVID-19
pandemic. This is the parties’ first request for an extension of time to submit the settlement for
Cheeks approval, and is made on the consent of both parties.
Thank you.
Respectfully submitted,
Forchelli Deegan Terrana LLP
By: ________/s/_____________
Lisa M. Casa, Esq.
cc: Jason Mizrahi, Esq. (via ECF)
The Omni 333 Earle Ovington Blvd., Suite 1010 Uniondale, NY 11553 224-486-9043 forchellilaw.com
|
FIRST PACTRUST BANCORP, INC. COMMON STOCK SUBSCRIPTION AGREEMENT THIS SUBSCRIPTION AGREEMENT (this “Subscription Agreement”) dated as of July 19, 2010 is made by and among the undersigned subscriber or subscribers (the “Subscriber”), and First PacTrust Bancorp, Inc., a Maryland corporation (the “Company”), that owns all of the issued and outstanding capital stock of Pacific Trust Bank, a federally-chartered stock savings association (the “Bank”). RECITALS: WHEREAS, in connection with a contemplated recapitalization of the Company (the “Transaction”) the Company intends to conduct a private placement (the “Offering”) of newly issued shares of its common stock (as further described herein) to certain accredited investors; WHEREAS, in order permit Subscriber and other subscribers in the Offering to structure their respective investments in the Company to ensure compliance with regulatory requirements and policies applicable to such Subscriber, the board of directors of the Company (the “Board of Directors”) intends to reclassify, pursuant to the Company’s Articles of Incorporation, as amended, such number of shares of its common stock, par value $.01 per share (the “Voting Common Stock”) into a new class of common stock as necessary to carry out the purposes of this Agreement (the “Class B Non-Voting Common Stock” and, with the Voting Common Stock, the “Common Stock”), such Class B Non-Voting Common Stock to possess identical rights, preferences and privileges as the Voting Common Stock, except with respect to voting rights; WHEREAS, the Company has engaged Hovde Securities, LLC as placement agent (the “Placement Agent”) (and the Placement Agent has engaged Cappello Capital Corp. to assist it in its role as Placement Agrent) in the Offering; and WHEREAS, Subscriber wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, shares of Voting Common Stock (the “Voting Shares”) and Class B Non-Voting Common Stock (the “Class B Shares”) in the aggregate numbers indicated below such Subscriber’s name on the signature page of this agreement (and subject to Section 1 hereof); and NOW THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I PURCHASE AND SALE OF SECURITIES 1.1Sale of Securities. Subject to the terms and conditions hereof and on the basis of the representations and warranties hereinafter set forth, the Company hereby agrees to issue and sell to the Subscriber and the Subscriber agrees to purchase from the Company, upon Closing (as such term is defined in Section 1.3 of this Article I), shares of Common Stock and a warrant in the form attached hereto as Exhibit A to purchase shares of Common Stock (the “Warrant Shares”), as described herein for an aggregate purchase price all as set forth by the Subscriber on the signature page hereto (the“Purchase Price”).This Offering is only being made to the Subscriber on the condition that the Subscriber qualifies as an “accredited investor” (as defined in Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”)). To the extent that, as of and giving effect to the consummation of the Offering on the terms described herein, Subscriber would be deemed for purposes of the Bank Holding Company Act of 1956 (“BHCA”) or the Change in Bank Control Act (“CBCA”) to own, control or have the power to vote voting securities (as such term is defined in the regulations under the BHCA) equal to 5.0% or more of the aggregate number of outstanding shares of Voting Stock (the “Voting Ownership Limit”), Subscriber’s Subscription for Voting Shares in excess of the Voting Ownership Limit, unless otherwise instructed by Subscriber, shall be deemed to be, automatically and without further action on the part of Subscriber or the Company, a Subscription for Class B Shares in an amount equal to such excess; provided, that in no event shall Subscriber be obligated to purchase a number of shares of Common Stock which would cause Subscriber to own or control in excess of 24.99% of the total stockholder’s equity of the Company.Subscriber understands that, subject only to the provisions of Articles 7 and 8 of this Agreement, Subscriber (i) is not entitled to cancel, terminate or revoke this Agreement or any of the agreements, representations or warranties of Subscriber hereunder, and (ii) acknowledges that this subscription is irrevocable. The purchase of the Common Stock is referred to in this Agreement as the “Purchase.”Neither the Purchase Price nor the aggregate number of shares of Common Stock issuable to Subscriber pursuant to this Agreement shall be reduced without Subscriber’s prior written consent if the aggregate subscriptions to the Offering (including Subscriber’s subscription) at the Closing exceed $60,000,000. 1.2Escrow. Immediately following the execution of this Agreement, the Subscriber will deposit with Chicago Title Company (the “Escrow Agent”) immediately available United States funds representing two and one-half percent (2.5%) of the aggregate Purchase Price (the “Deposit”) in accordance with and pursuant to the terms of the Escrow Agreement substantially in the form attached hereto as Exhibit B (the “Escrow Agreement”). 1.3Closing. Subject to receipt of any required regulatory approvals and the other conditions to closing set forth in Article VII of this Agreement, the closing of the transactions contemplated hereunder (the “Closing”) shall occur at such date and place as shall be designated by the Company upon at least five (5) business days’ prior written notice to the Subscriber (the “Closing Date”). Closing may be conditioned upon Subscriber’s receipt of regulatory approvals as more fully set forth in this Agreement. At the Closing: (a) Subscriber shall deliver an amount equal to the difference between the Purchase Price and the Deposit, in immediately available United States funds, to an account or accounts designated in writing by the Company; (b) Subscriber and the Company shall have given joint written instructions to the Escrow Agent to release the Deposit to the Company in accordance with Section 3(a) of the Escrow Agreement; (c) The Company shall deliver one or more duly executed Voting Common Stock certificates and, where applicable, Class B Non-Voting Common Stock certificates, as the case may be, representing the Common Stock subscribed for by Subscriber; (d) The Company shall deliver duly executed warrants in the form attached hereto as Exhibit A (the “Warrant”); and 2 (e) The Company shall deliver a duly executed copy of the letter agreement attached hereto as Exhibit C (the “BHCA Letter”). 1.4Acceptance. This Agreement shall be effective immediately upon acceptance by the Company of the Subscriber’s fully completed and executed version of the Investor Questionnaire attached hereto (the “Investor Questionnaire”) and executed counterpart of this Agreement and shall thereupon be binding upon the Company and thereupon Subscriber’s firm offer herein shall be deemed accepted. Such acceptance by the Company shall be evidenced only by counter-execution and delivery of this Agreement by the Company, and the Company shall have no obligation hereunder until the Company shall have executed and delivered to the Subscriber an executed counterpart of this Agreement. 1.5Termination.Other than pursuant to Article VIII hereof, this Agreement may not be terminated by the Subscriber at any time following the Company’s delivery of an executed counterpart of this Agreement to the Subscriber.Subscriber understands that, subject only to the provisions of Articles VII and VIII of this Agreement, Subscriber (i) is not entitled to cancel, terminate or revoke this Agreement or any of the agreements, representations or warranties of Subscriber hereunder, and (ii) acknowledges that this subscription is irrevocable. ARTICLE II REPRESENTATIONS AND WARRANTIES 2.1Disclosure. (a)“Material Adverse Effect” means a material adverse effect on (1)the business, results of operation or financial condition of the Company and the Bank taken as a whole; provided that Material Adverse Effect shall not be deemed to include the effects, to the extent such effects do not have a disproportionate impact on the Company as compared to other depository institution holding companies, of (A)any facts, circumstances, events, changes or occurrences generally affecting businesses and industries in which the Company operates, companies engaged in such businesses or industries or the economy, or the financial or securities markets and credit markets in the United States or elsewhere in the world, including effects on such businesses, industries, economy or markets resulting from any regulatory or political conditions or developments, or any outbreak or escalation of hostilities, declared or undeclared acts of war, terrorism, or work stoppages, (B)changes or proposed changes in generally accepted accounting principles in the United States (“GAAP”) or regulatory accounting requirements applicable to depository institutions and their holding companies generally (or authoritative interpretations thereof), (C)changes or proposed changes in banking and other laws of general applicability or related policies or interpretations of all Governmental Entities (as defined in Section 7.1(d)), or (D)changes in the market price or trading volume of Common Stock (it being understood and agreed that the exception set forth in this clause(D) does not apply to the underlying reason giving rise to or contributing to any such change), or (2)the legality, validity or enforceability of this Subscription Agreement, or (3) the ability of the Company or a Subscriber to consummate timely the Purchase and the other transactions contemplated by this Subscription Agreement and any other documents, agreements and instruments delivered in connection herewith (collectively, the “Transaction Documents”). (b)“Previously Disclosed” information means (1)information contained in the SEC Reports (as defined in Section 2(g)(1), and if applicable, (2)information providedpursuant to this Agreement or any confidentiality agreement between the Company and the Subscriber. 3 (c)Each party acknowledges that it is not relying upon any representation or warranty not set forth in the Transaction Documents. The Subscriber is aware that it will bear the economic risk of an investment in the Common Stock and the Warrants. 2.2Representations, Warranties and Covenants of the Company.Except as Previously Disclosed, the Company represents, warrants and covenants to the Subscriber that as of the date hereof (or such other date specified herein): (a)Organization, Authority; Subsidiaries. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Maryland, with corporate power and authority to own its properties and conduct its business as currently conducted, and, except as has not had or would not reasonably be expected to have a Material Adverse Effect, has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification; and the Bank has been duly organized as a federally chartered stock savings institution, and its deposit accounts are insured up to applicable limits by the Federal Deposit Insurance Corporation (the “FDIC”).Schedule 2.2(a) contains a true and correct list of all of the Company’s subsidiaries (the “Subsidiaries”). (b)Authorization of Common Stock.The Common Stock and Warrant Shares to be issued have been duly authorized for issuance by the Company and, when duly issued and delivered by the Company against payment therefor in accordance with this Agreement and the Warrant, will be duly and validly issued, fully paid and nonassessable, and the issuance thereof will not be subject to any preemptive or other similar rights. (c)Capitalization. (i)As of the date of this Agreement, the authorized capital stock of the Company consists of 20,000,000 shares of Common Stock, par value $.01 per share and 5,000,000 shares of Preferred Stock, par value $.01 per share.All issued and outstanding shares of capital stock of the Company have been, and as of the Closing Date will be, duly authorized and validly issued and are fully paid and non-assessable, have been issued in compliance with all applicable state and federal securities laws in all material respects and were not issued in violation of, or subject to, any preemptive, subscription or other similar rights of any stockholder of the Company.As of the date of this Agreement, the Company has issued 5,445,000 shares of Common Stock, of which 4,244,184 are outstanding and 1,200,816 have been repurchased by the Company.The Company also has 19,300 issued and outstanding shares of non-voting Preferred Stock, designated as the Company’s Fixed Rate Cumulative Perpetual Preferred Stock Series A (“Non-Voting Preferred”).Except for a warrant to purchase 280,795 shares of Common Stock (the “Treasury Warrant”) and outstanding options to purchase 482,396 shares of Common Stock pursuant to the Company’s equity incentive plan (such options, together with any similar options granted after the date hereof, “Company Stock Options”), as of the date of this Agreement, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal and similar rights) or agreements, orally or in writing, for the purchase or acquisition from the Company of any shares of capital stock, and the Company is not a party to or subject to any agreement or understanding and, to the Company’s knowledge, there is no agreement or understanding between any parties, which affects or relates to the voting or giving of written consents with respect to any security or by a director of the Company.The Company owns, directly or indirectly, all of the capital stock of the Subsidiaries, free and clear of any liens, security interests or equitable interests other than as reflected in the SEC Reports.The Company has no obligation, contingent or otherwise, to redeem or repurchase any equity security or any security that is a combination of debt and equity. 4 (ii)Immediately after the Closing and assuming the condition precedent contained in Section 7.1(b) has been satisfied, the Company will have 9,689,729 issued and outstanding shares of Common Stock, consisting of 8,773,782 shares of Voting Common Stock and 924,927 shares of Class B Non-Voting Common Stock, and 19,300 issued and outstanding shares of
|
This is a prosecution for bastardy, filed February 20, 1930, in which appellant was charged in the complaint with being the father of the unborn child of the relatrix. A trial of the cause before a jury resulted in a verdict as follows: "We, the jury, find for the plaintiff, that at the time of the filing of the complaint herein, the relatrix, Pauline, was pregnant with a bastard child as alleged, and that on the 9th day *Page 671
of August, 1930, said Pauline Pavey, was delivered of a stillborn child, and that the defendant, Burton Brown, is the father of said child." Such further proceedings were had that the court rendered judgment on the verdict, adjudging the appellant to be the father of said child, and in favor of the relatrix and against the appellant, fixing the amount of the judgment at four hundred dollars. Appellant filed his motion for a new trial, which was overruled; he then filed a motion to modify the judgment, which motion was also overruled. An exception to the overruling of each motion was taken and this appeal perfected, the errors assigned being the overruling of said motions.
Appellee's brief states the controversy presented as follows: "The real question now before this court is whether the law so far recognizes the existence of an unborn child, that when a prosecution is commenced before its birth and it is stillborn before verdict and judgment the court should give judgment in such sum as seems just, or should the action abate."
We are of the opinion that the principal question for determination is as to whether a judgment may be entered against a defendant in a bastardy proceeding for any amount, other than costs, where, as here, the undisputed evidence proves the birth of a dead child and the beginning of a proceeding authorized by statute, by the filing of a complaint during pregnancy; and where the jury finds such facts and further finds that the defendant is the father of said child.
In an action of this character the rights of interested parties are given, controlled and limited by sections 1049 to 1070 inclusive, Burns R.S. 1926.
1. Sec. 1049 authorizes the beginning of a bastardy proceeding when any woman who has been delivered of, or is pregnant with, a bastard child shall make a complaint thereof in writing, under oath, before *Page 672
any justice of the peace, charging any person with being the father of the child, and this, and subsequent sections, provide for the method of procedure. After a hearing before the justice where the cause is pending, such justice must, if he adjudge the defendant to be the father of such child, transmit a transcript of the proceedings before him to the clerk of the circuit court of the proper county, where the action is filed and docketed as a cause pending. (Sections 1053 and 1055.) If the defendant, in the circuit court, deny the charge, the issue shall be tried by the court or a jury. (Sec. 1057.) If the jury find that the defendant is the father of such child, . . . he shall be adjudged the father of such child, and stand charged with the maintenance and education thereof. (Sec. 1062.)
Section 1063 provides that the court shall, on such verdict and judgment, make such order as may seem just for securing suchmaintenance and education to such child, by the annual payment to such mother (or if she be dead or an improper person to receive the same, to such other person as the court may direct) of such sums as may be adjudged proper, and shall render judgment for the same, specifying the terms of payment.
Sec. 1066 allows the dismissal of the suit by the prosecuting witness (relatrix) if she be an adult, at any time before final judgment, if she will first enter of record an admission thatprovision for the maintenance of the child has been made to her satisfaction; if she be a minor, she may dismiss such suit, if it be first shown to the satisfaction of the court in which the same is pending that suitable provision has been made and properlysecured for the maintenance of the child, and a finding of the court to that effect entered of record.
Under Sec. 1064, upon the death of any bastard child after judgment rendered, and before the expiration of the time limited for the last payment of such judgment, *Page 673
the court rendering such judgment may make such reduction in the amount of the same as may be rendered proper and just in consequence of such death.
From the foregoing cited sections of our statutory laws relating to proceedings in bastardy, and from the entire scope of the legislation enacted on the subject matter, we think it 2. clear that no judgment, except for costs can be legally rendered, other than a judgment securing to such bastard child maintenance and education. These statutes plainly show that the only judgment authorized by them is one for such purpose. It is well settled in our state that the money recovered in bastardy prosecutions, and the benefits of the judgment are primarily for the child. Allen v. State ex rel. Harrell (1835), 4 Blackford 122; Canfield v. State ex rel., etc. (1877), 56 Ind. 168;Heritage v. Hedges (1880), 72 Ind. 247; Lewis v. Hershey,Adm'r (1910), 45 Ind. App. 104, 90 N.E. 332; Price v. Stateex rel., etc. (1918), 67 Ind. App. 1, 118 N.E. 690.
In the case of Allen v. State ex rel., etc., supra (a bastardy proceeding), an order was made against the defendant that he pay into court an amount fixed to defray the lying-in expenses of the relatrix. The court said: "The statute only authorizes, in this proceeding, a judgment against the defendant for such sum or sums of money as the court may direct for the maintenance of the child, and a judgment for costs. The damages for the seduction of the mother, or the expenses of her lying-in, are not the objects of this kind of prosecution. The law has, in those cases, provided other remedies." The statute then being construed was similar in its main features to the bastardy act now in force in this state.
In Canfield v. State, ex rel., etc., supra, the case was one where the action was brought after the birth of a stillborn child. It was tried by the court, and the court's *Page 674
finding was that the defendant was the father of the child, and was liable to the relatrix for the maintenance of said childbefore its birth, in such sums as the court might adjudge reasonable. An order was made that the defendant should pay the relatrix the sum of one hundred dollars and judgment rendered accordingly. Upon appeal our Supreme Court said: "We are of the opinion, both from reason and analogy, that the allegation in the complaint, in this case, that the relatrix was, on a given day, delivered of a bastard child, is not sustained by the finding of the court, that on that day she was delivered of a stillborn child, its lungs having never been inflated with air, although illegitimate in its conception and in its birth. We think the finding showed that the foetus in utero never became a child within the meaning of the law authorizing proceedings for the maintenance of bastard children after their birth. It was not born alive, and never had an existence independent of the mother." The opinion also states that: "It is well settled in our state, that the money recovered in bastardy prosecutions is only intended for the maintenance of the child."
In Price v. State, ex rel., etc., supra, the lower court after adjudging that the defendant was the father of the bastard child of which the relatrix had been delivered rendered a judgment in said cause, against said defendant, decreeing that he pay to the clerk of the court for the use of one Dr. Bechtol, the sum of $175, for a surgical operation performed. On appeal there was a reversal, and the lower court was ordered to vacate the judgment. In its opinion the court (speaking of the statutes relating to bastardy proceedings) says: "These statutes plainly show that the only judgment authorized by them is for the maintenance and education of the child." The court also says: "The proceeding is of *Page 675
statutory origin and a judgment which is plainly unauthorized by, and contrary to, the statute is void."
We have examined and considered each section of the laws of this state relative to bastardy proceedings and fail to find any authority given to render judgment for any purpose other 3. than for the maintenance and education of any such child when born alive. In view of this fact, and in the light of the authorities heretofore cited we hold that the judgment entered in the court below was rendered without legal authority for so doing. In reaching this conclusion we have not failed to consider the decisions in the cases of Evans v. State, exrel., etc., 58 Ind. 587, and Robinson v. State, ex rel.,etc., 128 Ind. 397, cited and relied upon by appellee, nor have we overlooked section 20 of the bastardy act, being section 1068 of Burns R.S. 1926, providing that: "The death of a bastard child shall not be cause of abatement or bar to any prosecution for bastardy; but the court trying the same shall, on conviction, give judgment for such sum as shall be deemed just."
In reaching a conclusion as to the intent and purpose of this section of the bastardy act we must consider the entire act of which it is a part. Huff v. Fetch (1924), 194 Ind. 4, 5. 570, 143 N.E. 705; Keener v. Ochsenrider (1925), 85 Ind. App. 156, 149 N.E. 101. When we do this we cannot escape the conclusion that section 20 of the act is meant to apply, and applies only, to cases where prosecutions are brought during pregnancy or after delivery, and the bastard child is born alive but dies prior to trial and a determination as to whether the defendant charged is its father. Under such facts the action does not abate, and if, upon trial of any such case, the defendant thereto is found and adjudged to be the father of such child then the court should give judgment for such sum as it deems *Page 676
just, the amount of such judgment to be determined by the costs of maintenance, including all necessary care and attention required for such child, during its lifetime. By so construing section 20 of the act, all provisions of the act are harmonized and may be given full force and effect without violation of its evident purpose, that purpose being to provide a method whereby maintenance and education may be secured for bastard children.
The two cases before mentioned as being cited and relied upon by appellee are out of harmony with all other decisions of our state declaring the theory and purpose of the bastardy act. The authorities heretofore cited have not been overruled or criticised and seem conclusive on the question that the only recovery allowable in a bastardy proceeding is one for the benefit of the child. In the instant case, the child being dead when born, the judgment of $400.00 entered by the court could not possibly have been for its benefit.
Judgment reversed and cause remanded with direction to the lower court to vacate said judgment and to render judgment against the defendant, Burton Brown, for costs accrued in the court below. |
On behalf of Robert Davis, a duly verified petition for writ of habeas corpus was filed in this court and presented to the Presiding Judge, who refused the writ, but granted a rule to show cause why the writ should not issue, returnable on the 27th day of October, 1914, at which time the respondent, Warden Dick, filed answer. Later a stipulation was filed, and an agreed statement of facts, from which it appears that on the 30th day of September, A.D. 1914, and *Page 404
for several days prior thereto and thereafter, the Governor of the state was absent, and the Lieutenant Governor, as acting Governor in the absence from the state of the Governor, granted to petitioner a full and unconditional pardon of the offense for which he was convicted and sentenced to serve a term of five years in the penitentiary by the district court of McIntosh county, and that while the Governor was present in the state on the 6th day of October, 1914, he issued an order recalling and revoking said pardon.
It was brought to the attention of the court that on the 10th day of December, 1914, the Governor granted a parole to the petitioner, and he was discharged thereon. The object of the writ of habeas corpus is to relieve the petitioner from illegal restraint or unlawful imprisonment, and if this release is accomplished, and the petitioner is not held in actual custody at the time of the hearing, there is nothing for the court to adjudicate.
For this reason the writ of habeas corpus will be denied.
FURMAN and ARMSTRONG, JJ., concur. |
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 20-1243
EMMANUEL EDOKOBI,
Plaintiff - Appellant,
v.
TOYOTA MOTOR CREDIT CORPORATION; SUNTRUST BANK,
Defendants - Appellees.
Appeal from the United States District Court for the District of Maryland, at Greenbelt.
Paul W. Grimm, District Judge. (8:19-cv-00248-PWG)
Submitted: March 30, 2021 Decided: April 9, 2021
Before WYNN, THACKER, and RUSHING, Circuit Judges.
Affirmed by unpublished per curiam opinion.
Emmanuel Edokobi, Appellant Pro Se. Philip T. Evans, HOLLAND & KNIGHT, LLP,
Washington, D.C.; Matthew A. Egeli, EGELI LAW FIRM, PLLC, Staunton, Virginia, for
Appellees.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Emmanuel Edokobi appeals the district court’s order granting the Defendants’
motions for summary judgment and denying as moot his motion to dismiss SunTrust
Bank’s counterclaim. We have reviewed the record and find no reversible error.
Accordingly, we affirm for the reasons stated by the district court. Edokobi v. Toyota
Motor Credit Corp., No. 8:19-cv-00248-PWG (D. Md. Mar. 2, 2020). We dispense with
oral argument because the facts and legal contentions are adequately presented in the
materials before this court and argument would not aid the decisional process.
AFFIRMED
2
|
United States Bankruptcy Appellate Panel
FOR THE EIGHTH CIRCUIT
______
No. 04-6017EM
______
In re: *
*
Julia A. Strong, *
*
Debtor. *
*
Julia A. Strong, *
*
Debtor-Appellant, * Appeal from the United States
* Bankruptcy Court for the Eastern
v. * District of Missouri
*
Bank of America, *
*
Movant-Appellee. *
*
*
*
*
*
______
Submitted: July 16, 2004
Filed: July 28, 2004
______
Before KRESSEL, Chief Judge, MAHONEY and VENTERS, Bankruptcy Judges.
______
KRESSEL, Chief Judge.
Strong appeals from an order of the bankruptcy court1 granting Bank of
America’s request for relief from the automatic stay. Because Strong’s appeal is
moot, we dismiss her appeal for lack of jurisdiction.
BACKGROUND
On May 23, 2000, Strong executed a note in the amount of $44,500 in favor of
Bank of America, N.A. The note was secured by a first deed of trust against Strong’s
residence. Strong subsequently defaulted on her payments. On June 5, 2002, Bank of
America attempted to foreclose on Strong’s residence. Strong then filed her first
Chapter 13 petition on May 28, 2002, which resulted in a cancellation of Bank
America’s June 5, 2002 foreclosure sale.
On January 14, 2003, Bank of America sought relief from the automatic stay.
On January 21, 2003, prior to the hearing on the bank’s motion for relief, Strong’s
case was dismissed for failure to make plan payments. On February 13, 2003, Strong
filed a second Chapter 13 petition. On June 18, 2003, Bank of America again sought
relief from the automatic stay.
The bank’s motion was settled with a consent order and stipulation, entered
August 7, 2003, requiring Strong to remain current on all future post-petition
payments while making an extra payment each month to cure the post-petition
delinquency that existed at the time of the hearing. On December 19, 2003, Bank of
America filed a notice of default for breach of the terms of the consent order and
stipulation. As a result of Strong’s failure to file a response to the notice of default
and her failure to cure the breach, an order granting the bank relief from the stay was
entered on January 12, 2004. On January 16, 2004, Strong’s second Chapter 13 case
was dismissed for failure to make plan payments.
1
The Honorable Barry S. Schermer, United States Bankruptcy Judge for the
Eastern District of Missouri.
2
After the dismissal of Strong’s case, Bank of America proceeded with
foreclosure on Strong’s residence. The foreclosure sale was scheduled for March 9,
2004. On March 8, 2004, Strong filed a third Chapter 13 petition. Bank of America
postponed the foreclosure sale to March 16, 2004. On March 12, 2004, Bank of
America filed a motion for an expedited hearing and a motion to dismiss or in the
alternative for relief from the automatic stay. On March 16, 2004, a hearing on the
bank’s motions was held. Strong and her attorney appeared at the hearing. The
bankruptcy court granted Bank of America relief from the stay to proceed with its
foreclosure sale, and waived the ten day stay under Bankruptcy Rule 4001.
On March 16, 2004, Bank of America proceeded with the foreclosure sale on
Strong’s residence. The residence was sold to Federal National Mortgage
Association, the only bidder, for $44,826.57. On March 26, 2004, Strong filed a
notice of appeal. On April 2, 2004, a petition for eviction was filed by Federal
National Mortgage Association. Strong was subsequently served with notice of the
eviction proceedings. On June 2, 2004, Strong moved for a stay pending appeal
which we denied. On that same date, a judgment of unlawful detainer was taken
against Strong. On June 17, 2004, Strong was evicted from the property.
THIS COURT’S JURISDICTION
Bank of America argues that Strong’s appeal is moot and should be dismissed.
Mootness arises frequently in the context of bankruptcy when property is sold or
relief from stay is granted and foreclosure proceedings move ahead. Blackwell v.
Lurie (In re Popkin & Stern), 234 B.R. 724, 727 (B.A.P. 8th Cir. 1999), rev’d on other
grounds, 223 F.3d 764 (8th Cir. 2000). In those cases, an appeal is almost always moot
because a stay pending appeal was not obtained and the property at issue has been
transferred to a good faith, third party purchaser. Van Iperen v. Production Credit
Ass’n of Worthington-Slayton Branch (In re Van Iperen), 819 F.2d 189, 190-191 (8th
Cir. 1987). When a case no longer presents an actual ongoing controversy, the case
is moot and the court lacks the requisite subject matter jurisdiction to hear it.
3
Hickman v. State of Missouri, 144 F.3d 1141, 1142 (8th Cir. 1998). An appeal is moot
when it is impossible for the court to grant “any effectual relief whatever” to a
prevailing party. Church of Scientology v. United States, 506 U.S. 9, 12, 113 S. Ct.
447, 121 L. Ed. 2d 313 (1992) (quoting Mills v. Green, 159 U.S. 651, 653, 16 S. Ct.
132, 40 L. Ed. 293 (1895)).
On March 16, 2004, a foreclosure sale was held and the debtor’s homestead
sold. Under longstanding and well settled Eighth Circuit case law, the sale rendered
the appeal from the order granting relief from the automatic stay moot.
CONCLUSION
Because her appeal is moot, we dismiss Strong’s appeal for lack of subject
matter jurisdiction.
4
|
Citation Nr: 0217024
Decision Date: 11/25/02 Archive Date: 12/04/02
DOCKET NO. 02-01 945 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in Chicago,
Illinois
THE ISSUE
Whether new and material evidence has been submitted to
reopen a claim of
entitlement to service connection for post-traumatic stress
disorder.
REPRESENTATION
Appellant represented by: The American Legion
ATTORNEY FOR THE BOARD
Tanya A. Smith, Associate Counsel
INTRODUCTION
The veteran served on active duty from April 1964 to
February 1975.
This matter comes before the Board of Veterans' Appeals
(Board) on appeal from a September 2001 rating decision by
the Chicago, Illinois, Regional Office (RO) of the
Department of Veterans Affairs (VA).
FINDINGS OF FACT
1. By an unappealed May 2000 rating decision, the RO denied
service connection
for post-traumatic stress disorder.
2. Evidence received subsequent to the May 2000 RO rating
decision is not so
significant that it must be considered in order to fairly
decide the merits of the claim for service connection for
post-traumatic stress disorder.
CONCLUSION OF LAW
New and material evidence has not been submitted, and the
claim for entitlement to service connection for post-
traumatic stress disorder is not reopened. 38 U.S.C.A.
§§ 5108, 7105(c) (West 1991 & Supp. 2002); 38 C.F.R. §§
3.156, 20.302, 20.1103 (2001).
REASONS AND BASES FOR FINDINGS AND CONCLUSION
The VCAA
The Veterans Claim Assistance Act of 2000 (VCAA) redefines
the obligations of VA with respect to the duty to assist and
includes an enhanced duty to notify a claimant as to the
information and evidence necessary to substantiate a claim
for VA benefits. 38 U.S.C.A. §§ 5103, 5103A (West Supp.
2002); 38 C.F.R. § 3.159 (2002). While the VCAA does not
serve as a basis to reopen a claim (unless new and material
evidence is presented), the law does include the enhanced
duty to notify. The Board finds that the RO has informed
the veteran of the evidence needed to reopen his claim, as
set forth in the September 2001 rating decision and
February 2002 Statement of the Case. In March 2002, the
veteran indicated that he did not want a videoconference
hearing; rather, he wanted to appear before a travel board
hearing at the VA hospital in Marion, Ohio. The RO informed
the veteran that travel board hearings were conducted at
Regional Offices only. In a September 2002 signed
statement, the veteran indicated that he wanted his claim to
proceed as he would not be able to attend a hearing in
person. He added that he wanted his claim to be evaluated
by the Board and asked that the enclosed letter be included
as part of his claim. The veteran has in effect withdrawn
his request for a hearing before the Board and has waived
the RO's initial consideration of the aforementioned letter.
38 C.F.R. § 20.1304. In the veteran's April 2001 request to
reopen his previously denied claim, he indicated that he
received treatment from the VA Medical Center in Marion,
Illinois. The RO requested VA treatment records from
January 2000 to present. No further assistance in this
regard appears to be warranted. Quartuccio v. Principi, 16
Vet. App. 183 (2002). The requirements under the law as
pertains to new and material evidence claims have been met,
and the Board will proceed with appellate review.
New and Material Evidence
A review of the claims file reveals that the claim for
service connection for post-traumatic stress disorder (PTSD)
was previously denied by a May 2000 rating decision. The
veteran was mailed a copy of this decision in May 2000 and
he was notified of his appellate rights. The RO enclosed VA
Form 4107 which explained in detail the veteran's procedural
and appeal rights. The veteran, however, did not appeal the
decision and it became final. 38 U.S.C.A. § 7105(c) (West
1991); 38 C.F.R. §§ 20.302, 20.1103 (2002). In an April
2001 statement, the veteran indicated that he wanted to
reopen his claim.
Evidence associated with the claims file prior to the RO's
May 2000 rating decision follows. The service medical
records were absent any psychiatric complaints or findings
of a psychiatric disorder. The service records showed that
the veteran received a reduction in grade for offenses he
committed from December 1971 to January 1972. The service
records indicated that the veteran's first tour in Vietnam
was from April 21, 1967 to August 10, 1968 and that his
second tour was from July 26, 1969 to July 23, 1970. The
record of the veteran's assignments revealed that in April
1967, he was assigned to the 615th MP Company as a military
policeman. Next, the veteran was assigned to the 148th MP
Platoon in February 1968 as a military policeman, the 630th
MP Company in July 1969 as a squad leader, and the Company C
716th MP Battalion in October 1969 as an assistant squad
leader. The service records noted the campaigns the veteran
participated in Vietnam. He received the National Defense
Service Medal, Vietnam Service Medal, Vietnam Campaign Medal
with DVC 60, Army Commendation Medal, 6 O/S Bars, Good
Conduct Medal (2 awards), an expert badge with Pistol Bar,
and the SPS badge with Rifle Bar.
The first post-service records were VA treatment records
dated from June 1998 to August 1998 which showed that the
veteran was diagnosed with post-traumatic stress disorder,
prolonged and severe, and major depressive disorder based on
symptomatic complaints, displayed behavior, and Vietnam
stimuli related by the veteran.
The October 1998 VA examination report showed that the
veteran reported that while he was assigned to the 716th
Military Police Battalion, his job entailed running convoys.
When asked about specific stressors, he reported that he was
exposed to gunfire shot and he watched his friends die. He
remarked that shooting at the enemy "shook him up" quite a
bit, and he indicated that he was also bothered by the way
that he was treated when he returned home. He also reported
that "Charlie" attacked a base camp with mortars and that
people died, but none were his friends. He could not
remember where the base camp was located or when the event
occurred, but only could recall that it occurred during his
first tour. Lastly, the veteran reported that he rode
shotgun on convoys, saw a great deal of killing, had to kill
the enemy, saw a great many bodies, and saw people he had
established a relationship with get killed. He could not
provide more specific details. The veteran was diagnosed
with chronic PTSD based on a history of child abuse as
reported by the veteran and based on the occurrence of
stressors from Vietnam as reported by the veteran. Other
diagnoses included severe major depressive disorder and
dissociative disorder, not otherwise specified.
In the October 1998 stressor letter, the veteran also
claimed that he transported the wounded. He related that he
saw many incidents of civilian carnage, probably in 1968
while he was assigned to the 716th Military Police Battalion.
He indicated that he was subjected to sporadic rocket and/or
mortar attacks while on the highways during convoy guard
duty. He stated that there were soldiers in his unit who
were wounded. He reported that he might have received a
recommendation as he had duty as personal security for
General Roslen and General Abrams. He also indicated that
he served as a convoy guard or driver for V100's for four
months at a time. He reported that he did not make any
friends.
L.A.S., LCSW submitted a statement in October 1998, in which
he opined that the veteran had a psychiatric disorder prior
to his military service, but that his "combat exposure"
exacerbated his condition severely. L.A.S. added that the
veteran had severe dissociation.
The veteran claimed additional stressors in April 2000. He
recalled an incident that involved a seven year old girl.
He reported that he saw dead Americans at Cam Ranh Bay. He
related an incident in which the tires were shot out from
under his jeep and that he and others returned fire. He
also related that he was on duty in various villages that
were rocketed.
The bases for the prior denial by the RO were that the
diagnoses of PTSD were unsupported by the record as there
was no credible supporting evidence to corroborate the
veteran's reported stressors and there was no documentation
of record that confirmed that the veteran engaged in combat
with the enemy or was in combat situations.
The Board notes that the Colvin test has been replaced by
the Hodge test. Hodge v. West, 155 F.3d 1356 (Fed. Cir.
1998) Thus, the veteran no longer has to present new and
material evidence that will change the outcome of the
decision. Under Hodge, the veteran need only present new
and material evidence that ought to be considered in order
to fairly decide the merits of the claim. The Board,
however, finds that while evidence submitted after the May
2000 RO rating decision is new, the evidence is not
material.
The information the veteran provided on his claimed
stressors in April 2001 is cumulative or redundant of
information he previously provided in the October 1998 and
April 2000 stressor letters and at the October 1998 VA
examination. This information does not constitute
independent supporting evidence that the claimed in-service
stressors actually occurred and therefore, not material to
the bases of the prior denial. In a March 2001 letter,
L.A.S., LCSW related that during a therapy session, the
veteran incidentally remarked about the life of MPs in
Vietnam and the need for constant vigilance. Apparently,
the veteran described an incident during which a Vietnamese
Colonel killed two Americans in Saigon at a bar. The
colonel was intoxicated and disorderly and the MPs were
called to quell the disturbance. The Americans' last names
were Workman and Cox. The veteran was not present for these
killings, but the news of the incident spread throughout the
MPs and created an intensification of vigilance, feelings of
anger and betrayal, and constituted a traumatic event for
area MPs. L.A.S. noted that the veteran tended to minimize
these feelings, but they were clearly significant. L.A.S.
reported that he found it significant that this same event
was reported just as described by the veteran by another
veteran he saw in the past, a former MP in Vietnam with an
established service-connection for PTSD. L.A.S. maintained
that the two men did not know each other and thus, the
veteran's claim that he was exposed to hostile circumstances
was substantiated and consequently, L.A.S. believed the
veteran's other reports of traumatic Vietnam experiences.
L.A.S. added that the veteran provided details of the deaths
of Workman and Cox that only someone in country at that time
could have known, as the details matched those provided by
the other veteran. When determining whether a claim should
be reopened, the credibility of the newly submitted evidence
is presumed. Justus v. Principi, 3 Vet. App. 510, 512-13
(1992). Even presuming the credibility of the stressor
information L.A.S. contends the veteran provided him, the
information is not material to the question of whether the
claimed in-service stressors actually occurred. According
to L.A.S.'s letter, the veteran did not claim the bar
incident as a personal stressor event; rather, he reported
that the incident constituted a traumatic event for area
MPs, which is not specific to the veteran.
VA treatment records dated in June 2000 and from June 2001
to July 2001 are new, but not material as these records are
cumulative or redundant of records previously submitted that
showed treatment for the currently diagnosed PTSD. Finally,
the veteran submitted a letter dated in September 2002 from
Dr. L.M. and L.A.S., LCSW that is essentially cumulative or
redundant of the statement submitted by L.A.S. in October
1998. Dr. L.M. related that the veteran suffered from
dissociative identity disorder that pre-dated his military
service. Dr. L.M. contended that the veteran's condition
was, prior to entry into the military, not disabling as he
had the self-efficacy to manage his life satisfactorily
prior to military service. Dr. L.M. indicated that the
veteran suffered from PTSD as a consequence of exposure to
combat conditions in Vietnam. She added that his exposure
to combat scenarios in Vietnam contributed to the intensity
of dissociative defenses the veteran experienced prior to
Vietnam and these dissociative defenses also contributed
significantly to his incapacity to manage vocationally or
socially. Dr. L.M.'s opinions are predicated on
unsubstantiated stressors. In fact, Dr. L.M. noted that she
and L.A.S. did not claim to validate the veteran's report of
duty, his level of performance, or the nature of his duty.
As the opinions expressed in the letter are
based on stressors that have not been confirmed, this
evidence is not so significant that it must be considered in
order to fairly decide the merits of the claim. Accordingly,
having determined that no new and material evidence has been
submitted, the claim is not reopened.
ORDER
New and material evidence having not been submitted, the
claim of entitlement to service connection for post-
traumatic stress disorder is not reopened.
John E. Ormond, Jr.
Member, Board of Veterans' Appeals
IMPORTANT NOTICE: We have attached a VA Form 4597 that tells
you what steps you can take if you disagree with our
decision. We are in the process of updating the form to
reflect changes in the law effective on December 27, 2001.
See the Veterans Education and Benefits Expansion Act of
2001, Pub. L. No. 107-103, 115 Stat. 976 (2001). In the
meanwhile, please note these important corrections to the
advice in the form:
? These changes apply to the section entitled "Appeal to
the United States Court of Appeals for Veterans
Claims." (1) A "Notice of Disagreement filed on or
after November 18, 1988" is no longer required to
appeal to the Court. (2) You are no longer required to
file a copy of your Notice of Appeal with VA's General
Counsel.
? In the section entitled "Representation before VA,"
filing a "Notice of Disagreement with respect to the
claim on or after November 18, 1988" is no longer a
condition for an attorney-at-law or a VA accredited
agent to charge you a fee for representing you.
|
522 F.3d 1003 (2008)
UNITED STATES of America, Plaintiff-Appellee,
v.
Tamer Adel IBRAHIM, Defendant-Appellant.
No. 07-50153.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted March 3, 2008.
Filed April 14, 2008.
*1005 James W. Spertus, Los Angeles, CA, and Ronald Richards, Beverly Hills, CA, for the defendant-appellant.
Thomas P. O'Brien, United States Attorney, Christine C. Ewell, Assistant United States Attorney, and Steven R. Welk, Assistant United States Attorney, for the plaintiff-appellee.
Before: J. CLIFFORD WALLACE, RONALD M. GOULD, and SANDRA S. IKUTA, Circuit Judges.
WALLACE, Circuit Judge:
Tamer Adel Ibrahim (Tamer) appeals from the district court's denial of his motion for return of property, which he filed pursuant to Rule 41(g) of the Federal Rules of Criminal Procedure. There were no criminal charges pending at the time he filed the motion, so the district court treated it as a civil complaint governed by the Federal Rules of Civil Procedure. The principal question before us is whether the court erred when it applied a preponderance of evidence standard to resolve the summary judgment motion, rather than determining whether there was a material fact in dispute and, if not, whether the government prevails as a matter of law. Second, we must decide Tamer's request that we apply the doctrine of judicial estoppel to the amount of currency seized from his apartment. The district court had jurisdiction pursuant to 28 U.S.C. § 1331, and we have jurisdiction under 28 U.S.C. § 1291. We reverse.
I.
In December 1999, a task force of state and federal law enforcement officers executed a search warrant on Tamer's apartment in Los Angeles, California. Tamer was suspected in a wide-ranging conspiracy to import and traffic MDMA, the drug commonly known as ecstasy. During the search of Tamer's apartment, officers seized a total of $488,970.00 in U.S. currency. They discovered $240,000.00 in a bag *1006 outside the apartment, $221,000.00 in a safe, $485.00 on top of a dresser, and $27,485.00 elsewhere throughout the apartment. Tamer was eventually convicted of conspiracy to import and distribute MDMA in violation of 21 U.S.C. § 963 and conspiracy to launder monetary instruments in violation of 18 U.S.C. § 1956(h). At sentencing, the government and Tamer both concurred in a presentence report (PSR), which mistakenly listed the total amount of currency seized from his apartment as $981,485.00. The mistake apparently stemmed from a transcription error that listed $485,000.00 as the amount found on Tamer's dresser instead of $485.00. Tamer was ultimately sentenced to 188 months in prison, and ordered to pay a $4.5 million fine and $4.5 million in restitution.
Several other defendants were indicted for crimes relating to the same MDMA conspiracy, including Tamer's cousin, John Ibrahim (John). The confusion in this case stems from the government's failure to distinguish the two cousins. The government instituted forfeiture proceedings against Tamer's property in January 2000. They initially mailed notice of these proceedings to Tamer's Los Angeles apartment, but addressed the notice to John. When it was returned as undeliverable, the government contacted John's attorney of record. He indicated that John had a new attorney. When contacted, that attorney informed the government that John was being detained at the Metropolitan Detention Center (MDC) in Los Angeles. On May 5, 2000, the government sent notice directly to John at the MDC. It also published notice of the forfeiture in a newspaper of general circulation. Receiving no objection, the government summarily forfeited Tamer's property on June 12, 2000. The government forfeited an additional $859.73 on October 5, 2000 to account for interest income that was inadvertently left out of the original forfeiture. The notice procedures followed by the government for this amount were identical to those preceding the June 12 forfeiture.
Five years later, in January 2006, Tamer filed a motion for return of property, pursuant to Federal Rule of Criminal Procedure 41(g). He alleged that he never received notice of the government's forfeiture proceedings. The government responded, still under the mistaken impression that John and Tamer were the same person. When Tamer pointed out the government's mistake, it filed a supplemental memorandum arguing, among other things, that Tamer had received actual notice of the forfeiture.
In September 2006, the district court issued an order denying Tamer's motion, but ordering the parties to submit supplemental briefs on the issue of actual notice. The court held:
It appears that the government asserts that a factual dispute exists as to whether movant had actual notice of the forfeiture proceeding, given the fact that the government did notify John Ibrahim and Ronald Richards and published notification in the newspaper. Thus, pursuant to United States v. Ritchie, the Court concludes that this motion should be converted to a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.
The government filed a memorandum and evidence in support of actual notice of forfeiture. It argued that actual notice should be imputed to Tamer, even though notice was never sent to him directly. The government pointed to telephone recordings from the MDC which showed that Tamer and John spoke frequently in the months leading up to the forfeiture. The recordings also demonstrated that the two men had discussed how the forfeiture process worked generally. Notably, the government did not have any tapes showing *1007 that Tamer and John spoke after John received the May 5, 2000 notice at issue in this case. Nevertheless, the government concluded that "[b]ased on their frequent and extensive telephone conversations and given their close familial relationship, it is inherently unlikely" that John failed to inform Tamer of the notice he received on May 5, 2000. In the alternative, the government argued that Tamer received notice through his current attorney, Ronald Richards, who also served as John's attorney "during much of the pendency of the forfeiture action."
In response, Tamer pointed to his sworn testimony in which he stated that he had no recollection of ever discussing the forfeiture proceeding with his cousin. In addition, John testified that he did not remember discussing the issue, and in fact has not spoken with Tamer at all since March of 2000. This statement conflicts with Tamer's testimony, stating that the two continued to speak frequently through July 2000. Finally, Tamer argued that "[a]t no time was [he] represented by Ronald Richards in connection with the case in front of this Court prior to July 26, 2004."
On January 2, 2007, the district court issued an order denying Tamer's motion for return of property. The court acknowledged that it was required to treat Tamer's Rule 41(g) motion as a civil complaint, governed by the Federal Rules of Civil Procedure, but held:
[T]he government has provided circumstantial evidence from which the trier of fact could reasonably conclude that movant had actual notice of the forfeiture proceedings. Contrary to movant's argument, the Court need not find as a matter of law that movant had actual notice. Rather, the Court must consider whether the government has shown, by a preponderance of the evidence, that movant had actual notice.
Applying this standard, the court found that Tamer's testimony was not credible, and held that "the government has shown by a preponderance of the evidence that John Ibrahim or his attorneys did, in fact, inform movant about the forfeiture proceedings...."
II.
Tamer filed his motion for return of property under Federal Rule of Criminal Procedure 41(g). Because there were no criminal proceedings pending at the time of filing, the district court properly treated the motion as a civil complaint governed by the Federal Rules of Civil Procedure. See United States v. Ritchie, 342 F.3d 903, 906-07 (9th Cir.2003).
We have only had one occasion to address the procedural framework applicable to a Rule 41(g) motion when no criminal case is pending. In Ritchie, we treated the government's opposition to a Rule 41(g) motion as the equivalent of a 12(b)(6) motion to dismiss. Id. at 907. Because the district court considered evidence outside the pleadings, however, we remanded so that the government's opposition could be properly converted to a Rule 56 motion for summary judgment, consistent with the Federal Rules of Civil Procedure. Id. at 907, 911.
In the present case, the district court applied Ritchie and held that "a factual dispute exists as to whether movant had actual notice of the forfeiture proceeding," therefore "this motion should be converted to a motion for summary judgment." Unlike the court in Ritchie which converted the government's opposition into a motion for summary judgment the district court in this case appears to have converted Ibrahim's underlying motion for return of property into a motion for summary judgement. This was an error. Under the Federal *1008 Rules of Civil Procedure, it was the equivalent of converting a plaintiff's complaint into a motion for summary judgment.
The district court compounded this error at the next stage of proceedings. Instead of applying a summary judgment standard, it moved directly to the merits of Ibrahim's claim. The court concluded that it was not required to "find as a matter of law that movant had actual notice" and went on to decide the motion under a preponderance of the evidence standard.
This ad hoc approach may be appropriate in a regular Rule 41(g) proceeding with a criminal case pending. In that situation, the Rule provides little guidance as to what procedures the courts are required to follow, other than the broad statement that they "must receive evidence on any factual issue necessary to decide the motion." Fed. R.Crim.P. 41(g). Once the district court treated Tamer's Rule 41(g) motion as a civil complaint, however, it was required to apply the Federal Rules of Civil Procedure. Ritchie, 342 ysmith@example.net. These rules apply to each stage of the proceedings, the same way they would in the civil context.
Therefore, under Ritchie, a court should first convert a government's opposition into a motion for summary judgment if it cannot decide the matter on the pleadings. Then, pursuant to the Federal Rules of Civil Procedure, the court should determine whether the government has demonstrated that there is no "genuine issue as to any material fact," and that it is "entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Taylor v. United States, 483 F.3d 385, 387-88 (5th Cir.2007) (treating a denial of a non-criminal case Rule 41(g) motion as a summary judgment in favor of the government). Finally, if the government is unable to meet this summary judgment standard, the motion for return of property (now being treated as a civil complaint) should not be dismissed at the summary judgment stage, and the court should go forward with additional proceedings consistent with the Federal Rules of Civil Procedure. See Taylor, 483 ysmith@example.net.
The district court in this case erred because it improperly converted Ibrahim's motion for return of property into a motion for summary judgment, and then decided the issue in an ad hoc proceeding, under a preponderance of the evidence standard. Treating the government's opposition as a motion for summary judgment, and applying the appropriate standard, we conclude that a genuine issue of material fact exists as to whether Tamer received actual notice of the forfeiture. Tamer and John both testified that they did not discuss the specific notice at issue in this case. Although the government has provided substantial circumstantial evidence to the contrary and this evidence may be sufficient to support a finding of notice under a preponderance standard there is a genuine issue of material fact as to whether Tamer received notice. This is particularly true since the government is required to show not only that Tamer received notice, but also that the information he received was "sufficiently accurate and detailed" to allow him to protect his rights. See Ritchie, 342 ysmith@example.net. We therefore reverse the district court's summary judgment, and remand for further proceedings consistent with the Federal Rules of Civil Procedure.
III.
Tamer next argues that he is entitled to recover a total of $981,485.00 instead of $489,829.73 as the government contends. To support the higher number, Tamer points to a line in his PSR, which lists a total of $981,485.00 in U.S. currency as having been seized from his apartment, *1009 including $485,000.00 found "on top of a dresser."
The government responds with the sworn declaration of an Immigration and Customs Enforcement (ICE) officer present during the seizure, who testified that only $488,970.00 was recovered from the apartment. He clarified that 485 dollars, not 485 thousand dollars, were seized from the top of Tamer's dresser. This account is supported by a contemporaneous report prepared by the San Bernardino Sheriff's Department on December 29, 1999. That report specifies that a total of 24 individual twenty-dollar bills and one five-dollar bill were retrieved from the dresser. Moreover, a paralegal from U.S. Customs executed a sworn declaration stating that a total of $489,829.73 had been forfeited, which included the original $488,970.00 seized, plus $859.73 in interest. This statement is supported by the notices sent to John on January 20, 2000 and May 2, 2000, both of which listed $488,970.00 as the amount of U.S. currency to be forfeited.
Tamer's entire argument rests on a single number contained in the PSR. He offers no other evidence to support the higher amount, other than his unsworn assertion that he "knew how much money had been seized, and it was $981,485.00 just as the government had said." Nevertheless, Tamer argues that the government, having relied on the higher number at sentencing, is now barred by the doctrine of judicial estoppel from advancing any other amount.
Judicial estoppel "`is an equitable doctrine invoked by a court at its discretion.' " New Hampshire v. Maine, 532 U.S. 742, 750, 121 S. Ct. 1808, 149 L. Ed. 2d 968 (2001), quoting Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir.1990). In determining whether to apply the doctrine, we typically consider (1) whether a party's later position is "clearly inconsistent" with its original position; (2) whether the party has successfully persuaded the court of the earlier position, and (3) whether allowing the inconsistent position would allow the party to "derive an unfair advantage or impose an unfair detriment on the opposing party." Id. at 750-51, 121 S. Ct. 1808. In addition, we have held that judicial estoppel "seeks to prevent the deliberate manipulation of the courts," and therefore should not apply "when a party's prior position was based on inadvertence or mistake." Helfand v. Gerson, 105 F.3d 530, 536 (9th Cir.1997) (emphasis added).
The district court found that the actual amount seized from Tamer's apartment was $488,970.00, including only $485.00 from his dresser. This finding is supported by a contemporaneous report from the Sheriff's Department, as well as the sworn declarations of an ICE officer present at the scene and a U.S. Customs official responsible for sending out the relevant forfeiture notices. All the evidence in the record thus points to the fact that the probation office merely misplaced a decimal point when it prepared the PSR. Tamer has offered no evidence to the contrary, and we hold that the government's mistake does not meet the criteria for applying judicial estoppel. See Johnson v. Oregon, 141 F.3d 1361, 1369 (9th Cir.1998) ("If incompatible positions are based not on chicanery, but only on inadvertence or mistake, judicial estoppel does not apply").
Furthermore, even if we were to apply the three-inquiry analysis from New Hampshire v. Maine, it will not "impose an unfair detriment" on Tamer to limit any eventual recovery to the amount actually seized from his apartment. See 532 U.S. at 750-51, 121 S. Ct. 1808. Any harm Tamer may have suffered as a result of the government's mistake would have occurred at the time of sentencing. In that regard, it is not clear that he suffered any prejudice, *1010 even in the sentencing context. Tamer's PSR, in a section entitled "Assessment of Financial Condition," states that he "earned at least $10 million during the months before his capture and arrest." In addition to this $10 million, the PSR also states that his ability to "pay the maximum fine and restitution is also supported by the cash that was seized in 1999. During the searches and seizures in December 1999 alone, over $2 million in cash was recovered in or around three apartments on Wilshire Boulevard, one of which was Ibrahim's." The erroneous $981,485.00 figure, therefore, represented only a portion of the $2 million in cash cited by the PSR and that number was itself only offered to supplement Tamer's $10 million in unaccounted-for drug proceeds. It therefore seems unlikely that Tamer's sentence would have been materially affected if the relevant line from the PSR had been properly amended to state that "over $1.5 million in cash was recovered in or around three apartments...."
In any event, this issue is not directly before us. Whatever prejudice Tamer may have suffered at the sentencing stage hardly justifies the "return" of nearly half-a-million dollars in funds that were never actually seized from his apartment. To the extent Tamer wishes to challenge his sentence directly due to the misplaced decimal point, the government has stated during oral argument that it would not oppose a coram nobis petition to the district court.
REVERSED AND REMANDED.
|
564 P.2d 667 (1977)
Dennis Wayne NICHOLS, Appellant,
v.
The STATE of Oklahoma, Appellee.
No. F-76-866.
Court of Criminal Appeals of Oklahoma.
May 20, 1977.
Robert F. Brandenburg, Jr., Norman, for appellant.
Larry Derryberry, Atty. Gen., Robert L. McDonald, Asst. Atty. Gen., Catherine Gatchell Naifeh, Legal Intern, for appellee.
*668 OPINION
BLISS, Judge:
Appellant, Dennis Wayne Nichols, hereinafter referred to as defendant, was charged, tried and convicted in the District Court, Cleveland County, Case No. CRF-76-131, for the offense of Escape From a State Penitentiary, in violation of 21 O.S. Supp. 1974, § 443. His punishment was fixed at two (2) years' imprisonment. From said judgment and sentence a timely appeal has been perfected to this Court.
The State's first witness, J.B. McMakin, Records and Classification Officer at Lexington Treatment Center, identified State's Exhibit No. 1 as the judgment and sentence from Oklahoma County which referred to the defendant. He then visually identified the defendant as the prisoner to whom the judgment and sentence referred. McMakin next identified State's Exhibit No. 2 as a reception sheet used to verify the judgment and sentence with the defendant. On cross-examination McMakin testified that he could not read the seal of certification but could verify the certification.
The defendant's objection to the introduction of State's Exhibits Nos. 1 and 2 as not having been properly certified was overruled.
The State next produced E.J. McWhirter, who testified he was a correctional officer at Lexington Treatment Center. He identified State's Exhibit No. 3 as the orientation slip upon which he witnessed the defendant's signature. McWhirter identified the defendant as the person who signed the orientation slip.
The State's third witness was Shift Lieutenant Robert B. Noble of the Lexington Treatment Center. He identified the defendant as the former inmate of Lexington who was reported missing by the dorm officer on March 2, 1976. When he discovered that the defendant had not signed out of dorm, he began a search and then informed the emergency squad to start escape procedures. Noble was told by Cleveland County deputies that the defendant had been apprehended.
The State's next witness was Johnny Summers. As Lieutenant of Security he caused the bunk count to be instigated which determined that the defendant was absent. He then reported these results to Lieutenant Noble.
Cleveland County Deputy Ray Moody, the State's fifth witness, stated he was notified of the escape and began a search in an area where men dressed in prison garb had been seen. Moody, with the aid of Deputy Followwill, apprehended the defendant in an open field approximately ten miles from the institution.
The State's final witness, Deputy Sheriff Debs Followwill identified defendant as being the person he pursued on the day of the escape. Followwill stated that the defendant, upon seeing him, began to run and stopped only after a warning shot had been fired.
Thereafter the State rested.
Defense motions for demurrer and directed verdict were overruled.
Defendant testified in his own behalf, stating that he was incarcerated in Lexington for the offense of unauthorized use of a motor vehicle. He testified that he had reported homosexual activity which had disturbed *669 him to the prison authorities and as a result was considered an informer by other inmates. He stated that other unidentified inmates threatened to kill him when a weapon was obtained. The defendant observed one of these inmates with a knife and, fearing for his safety, fled the prison on the following day. Defendant stated he planned to turn himself over to authorities in Norman.
The second witness for the defense was Lieutenant Dutton of the Lexington Treatment Center. He identified the defendant as the person he was charged with protecting. Dutton stated the defendant had made complaints about his safety which Dutton was investigating.
John Lones, a counselor at the institution, testified he had worked with defendant and that the defendant was frightened by homosexual activity in the dorms and by the knives which had been discovered there.
Another counselor, James Conaster, identified defendant and stated that his investigation had corroborated defendant's story of homosexual activities in the dorm.
Donald White, an inmate at Lexington, stated that he was a friend of the defendant and had also been threatened by other inmates for reporting the homosexual activity. However, he did not find it necessary to escape the institution as a result of these threats.
The testimony of the final witness, Correctional Officer Ricky Allen, as to the prior discovery of knives was ruled irrelevant and immaterial, and was excluded.
Thereafter, the defense rested.
The defendant's first assignment of error asserts that the trial court erred in refusing to give his requested instruction on the defense of involuntary escape. The defendant's requested instruction, taken from the case of People v. Wester, Cal. App., 45 Cal. Rptr. 114 (1965), which defendant cites as support for his position, states
"If an inmate has departed the limits of his custody while influenced so to do by threats or menaces which create in his mind a fear of imminent and immediate danger and which are sufficient to show that he has reasonable cause to believe that his life will then and there be endangered if he refuses to so depart from the limits of his custody, and if he then believes that his life will be so endangered, he does not commit the crime of escape by such departure.
"By the same token, his voluntary departure does not free him from legal custody and he is at all times while acting under such influence, a prisoner, in contemplation of the law.
"If, however, the threats or menaces are removed and he is no longer under such influences to the end that he no longer believes that his life is then imminently and immediately endangered, a further, continued, wilful and intentional departure from the limits of custody by him will constitute the crime of escape."
This instruction was discussed by this Court in Chester v. State, Okl.Cr., 485 P.2d 1065 (1971), which held "the instruction used in People v. Wester, supra, at page 117, would be appropriate under a proper fact situation;" but that, as stated in People v. Wester, supra, "the contemplation of such an eventuality strains the imagination, ..."
It is apparent from the evidence that the instant case does not present such a fact situation. The defendant was not in imminent danger at the time of his escape and indeed, other inmates who had received the same threats perceived no need to escape. Also, rather than returning himself to lawful custody at the first opportunity, the defendant unsuccessfully attempted further flight when observed by law enforcement officers. In addition, in Grubb v. State, Okl.Cr., 533 P.2d 988 (1975), where the defendant also cited People v. Wester, supra, as authority for a similar requested instruction, this Court approved an instruction, stating:
"`You are instructed that it is no defense to a charge of ESCAPE that the prisoner feared violence from third persons, and you shall not consider such evidence as a defense or in mitigation of punishment.'"
*670 This instruction was also cited as authority in Jones v. State, Okl.Cr., 556 P.2d 1060 (1976), where on facts very similar to the present case this Court found no error in the trial court's refusal to subpoena defense witnesses who would testify as to threats made against defendant, since such testimony "would not constitute a defense to the charge of escape." Numerous cases from various jurisdictions have been cited previously in Grubb v. State, supra, for the proposition that "it is well settled law that conditions in prison afford no justification for escape." See also, Stiner v. State, Okl. Cr., 539 P.2d 750 (1975).
The instructions fairly and fully presented the issues involved, and as stated in Turman v. State, Okl.Cr., 522 P.2d 247 (1974):
"... It is a well settled rule in Oklahoma that the instructions given to the jury are left to the discretion of the judge, and that such discretion will not be interfered with as long as the instructions, considered as a whole, fairly and correctly state the applicable law..." (Citations omitted)
The defendant next asserts that the trial court erred in overruling the defendant's demurrer in that the State failed to prove that defendant was in lawful custody at the time of his arrest. As stated in Conway v. State, Okl.Cr., 483 P.2d 350 (1971), in a prosecution for the violation of 21 Ohio St. 1961, § 443, "it is incumbent upon the state to set forth the reasons and grounds for which a defendant is legally incarcerated in the penal institution." However, in Pickens v. State, Okl.Cr., 530 P.2d 1369 (1975), we stated, "It is an accepted rule that this proof is satisfied by the introduction of the judgment and sentence upon which defendant was serving time at the time he was alleged to have escaped." Defendant contends that the certified copy of judgment and sentence introduced was insufficient since the seal was illegible. However, documents may be sufficiently authenticated by a sponsoring witness who can testify that the entries which appear upon the record are true. In this case the classification officer who was personally responsible for keeping the records on inmates testified under oath that State's Exhibit No. 1 was a copy of the judgment and sentence received from the District Court of Oklahoma County, as required by 22 Ohio St. 1971, § 980, and kept in the records office at the penal institution. This judgment and sentence, which under 22 Ohio St. 1971, § 977, the court clerk is required to file, falls within the provisions of 12 Ohio St. 1971, § 502, and 22 Ohio St. 1971, § 702, which provide for the admission into evidence of books and records required by law to be kept by the court clerk. See also, Brinlee v. State, Okl. Cr., 543 P.2d 744 (1975), which held that even if prison records such as the reception sheet in the instant case could not be admitted under 12 Ohio St. 1971, § 502, they could in appropriate circumstances be admitted under the common law concept of the business records exception to the hearsay rule.
Since we hold that such judgment and sentence was properly admitted as evidence, the defendant's final contention that the jury's verdict was contrary to the weight of the evidence is without merit. As we have stated numerous times, where there is competent evidence in the record from which the jury could reasonably conclude that the defendant was guilty as charged, the Court of Criminal Appeals will not interfere with the verdict, since it is the exclusive province of the jury to weigh the evidence and determine the facts. See, Brinlee v. State, supra.
For the above and foregoing reasons the judgment and sentence appealed from is, hereby, AFFIRMED.
BUSSEY, P.J., and BRETT, J., concur.
|
Citation Nr: 0407312
Decision Date: 03/19/04 Archive Date: 03/30/04
DOCKET NO. 95-02 458 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in Atlanta,
Georgia
THE ISSUE
Entitlement to service connection for schizophrenia.
REPRESENTATION
Appellant represented by: Georgia Department of Veterans
Service
ATTORNEY FOR THE BOARD
M.C. Peltzer, Associate Counsel
INTRODUCTION
The veteran served on active duty from May 1954 to April
1958.
This matter comes before the Board of Veterans' Appeals
(Board) from a March 1992 rating decision issued by the
Regional Office (RO) of the Department of Veterans Affairs
(VA) located in Portland, Oregon, which denied the veteran's
application to reopen his previously denied and unappealed
claim of entitlement to service connection. The veteran
subsequently moved and jurisdiction of his claims folder
comes to the Board from the RO located in Atlanta, Georgia.
In April 1997, the Board reopened the veteran's claim and
remanded the merits of the claim for further development.
See Barnett v. Brown, 83 F.3d 1380 (Fed. Cir. 1996). This
matter was again remanded in March 2001. This appeal is now
before the Board for appellate review.
FINDINGS OF FACT
1. All evidence requisite for an equitable disposition of
the claim has been developed and obtained.
2. The veteran's service medical records reflect psychiatric
treatment.
3. The veteran has a current, longstanding diagnosis of
schizophrenia, which competent medical evidence links to his
in-service psychiatric treatment.
CONCLUSION OF LAW
Schizophrenia was incurred in service. 38 U.S.C.A. §§ 1110,
1131, 5107 (West 2002); 38 C.F.R. §§ 3.102, 3.303 (2003).
REASONS AND BASES FOR FINDINGS AND CONCLUSION
Since the benefit sought on appeal has been granted, no
purpose would be served by undertaking an analysis of whether
there has been compliance with the notice and duty to assist
requirements set out in the Veterans Claims Assistance Act of
2000.
Service connection may be granted for disability resulting
from disease or injury incurred in or aggravated by service.
See 38 U.S.C.A. §§ 1110, 1131 (West 2002). Service
connection also may be granted for any disease diagnosed
after discharge, when all the evidence, including that
pertinent to service, establishes that the disease was
incurred in service. 38 C.F.R. § 3.303(d) (2003). Certain
diseases, including psychoses, may be presumed to have been
incurred in service when manifest to a compensable degree
within one year of discharge from active duty. 38 U.S.C.A.
§§ 1112, 1137 (West 2002); 38 C.F.R. §§ 3.307, 3.309 (2003).
A determination on the merits of the claim must be made as to
whether the evidence supports the claim or is in relative
equipoise, with the veteran prevailing in either event, or
whether a preponderance of the evidence is against the claim,
in which case the claim must be denied. Gilbert v.
Derwinski, 1 Vet. App. 49, 55 (1990). To support a claim or
be in relative equipoise, the evidence must do more than
merely suggest a possible outcome. Instead, there must be at
least an approximate balance of positive and negative
evidence for the veteran to prevail. Id. at 56.
A review of the veteran's service medical records reveal that
the veteran was hospitalized in January 1958 and again in
March 1958 due to a diagnosis of passive-aggressive reaction.
The March 1958 service medical record indicates the veteran
was negativistic, withdrawn, fairly well oriented and had
bizarre grimaces. He was evaluated as psychiatrically normal
upon discharge.
The medical evidence of record clearly indicates that the
veteran was diagnosed with schizophrenia in 1976, almost two
decades after his discharge from active duty. As the
evidence of record does not reflect schizophrenia to a
compensable degree within one year of the veteran's 1958
discharge from active duty, service connection is not
warranted on a presumptive basis. See 38 C.F.R. §§ 3.307,
3.309 (2003). As such, the question to be answered by the
Board is whether the medical evidence of records links the
veteran's current diagnosis of schizophrenia to his in-
service psychiatric treatment.
A September 1983 letter from a private psychiatrist indicates
that while the psychiatrist did not have the veteran's
service medical records available for review, he stated that
the veteran's in-service hospitalizations might have been the
harbinger of the veteran's severe psychiatric disability.
In October 1993, two psychiatrists performed a psychiatric
file review. The first psychiatrist indicated that the
veteran's in-service medical records did not reflect any
symptoms recognized as early schizophrenia and that the
veteran's diagnosis of schizophrenia was not related in any
way to his in-service psychiatric treatment. The second
psychiatrist indicated that due to the long period of time
between the veteran's first psychiatric episodes in service
and his later schizophrenic deterioration, the ability to
establish a direct connection was deemed "quite remote".
He also highlighted that he disagreed with the veteran's in-
service diagnosis.
A July 2000 VA examination report indicates that a VA
psychologist indicated that the veteran's symptoms recorded
in his service medical records are more associated to
schizophrenia that a passive aggressive personality disorder.
An October 2003 VA examination report reflects that the VA
psychiatrist thoroughly reviewed the veteran's claims folder
in addition to examining the veteran. The psychiatrist
indicated that in his opinion, the veteran's schizophrenia at
least as likely as not began while the veteran was in the
military. He further supported his opinion by indicating
that looking at the natural progression of the veteran's
psychiatric condition, it became clear that the signs of
schizophrenia could be seen in early 1958.
While the October 1993 psychiatric file review report
reflects that two psychiatrists indicated that the veteran's
schizophrenia did not have its onset while he was in service,
the second psychiatrist cast some doubt as the veteran's in-
service diagnosis. A private psychiatrist had noted this
doubt over the veteran's in-service diagnosis in September
1983, and a VA psychologist emphasized in July 2000 that the
veteran's in-service symptoms were more associated with
schizophrenia than his actual in-service diagnosis.
Furthermore, the VA psychiatrist who examined the veteran in
October 2003 indicated it became clear that the signs of
schizophrenia could be seen in early 1958 and concluded that
it was at least as likely as not that the veteran's
schizophrenia had its onset while in service. With the
addition of the October 2003 medical opinion to the record,
the Board concludes that the medical evidence of record rises
to at least the level of equipoise as to whether the
veteran's in-service symptoms were the early signs of the
veteran's eventual diagnosis of schizophrenia. With
resolution of reasonable doubt in the veteran's favor, the
Board concludes that the weight of evidence warrants
entitlement to service connection for schizophrenia. See
38 C.F.R. §§ 3.102, 3.303(d) (2003). Accordingly, the
veteran's appeal succeeds.
ORDER
Service connection for schizophrenia is granted.
____________________________________________
MARY GALLAGHER
Veterans Law Judge, Board of Veterans' Appeals
Department of Veterans Affairs
YOUR RIGHTS TO APPEAL OUR DECISION
The attached decision by the Board of Veterans' Appeals (BVA or Board) is
the final decision for all issues addressed in the "Order" section of the
decision. The Board may also choose to remand an issue or issues to the
local VA office for additional development. If the Board did this in your
case, then a "Remand" section follows the "Order." However, you cannot
appeal an issue remanded to the local VA office because a remand is not a
final decision. The advice below on how to appeal a claim applies only to
issues that were allowed, denied, or dismissed in the "Order."
If you are satisfied with the outcome of your appeal, you do not need to do
anything. We will return your file to your local VA office to implement
the BVA's decision. However, if you are not satisfied with the Board's
decision on any or all of the issues allowed, denied, or dismissed, you
have the following options, which are listed in no particular order of
importance:
? Appeal to the United States Court of Appeals for Veterans Claims
(Court)
? File with the Board a motion for reconsideration of this decision
? File with the Board a motion to vacate this decision
? File with the Board a motion for revision of this decision based on
clear and unmistakable error.
Although it would not affect this BVA decision, you may choose to also:
? Reopen your claim at the local VA office by submitting new and
material evidence.
There is no time limit for filing a motion for reconsideration, a motion to
vacate, or a motion for revision based on clear and unmistakable error with
the Board, or a claim to reopen at the local VA office. None of these
things is mutually exclusive - you can do all five things at the same time
if you wish. However, if you file a Notice of Appeal with the Court and a
motion with the Board at the same time, this may delay your case because of
jurisdictional conflicts. If you file a Notice of Appeal with the Court
before you file a motion with the BVA, the BVA will not be able to consider
your motion without the Court's permission.
How long do I have to start my appeal to the Court? You have 120 days from
the date this decision was mailed to you (as shown on the first page of
this decision) to file a Notice of Appeal with the United States Court of
Appeals for Veterans Claims. If you also want to file a motion for
reconsideration or a motion to vacate, you will still have time to appeal
to the Court. As long as you file your motion(s) with the Board within 120
days of the date this decision was mailed to you, you will then have
another 120 days from the date the BVA decides the motion for
reconsideration or the motion to vacate to appeal to the Court. You should
know that even if you have a representative, as discussed below, it is your
responsibility to make sure that your appeal to Court is filed on time.
How do I appeal to the United States Court of Appeals for Veterans Claims?
Send your Notice of Appeal to the Court at:
Clerk, U.S. Court of Appeals for Veterans Claims
625 Indiana Avenue, NW, Suite 900
Washington, DC 20004-2950
You can get information about the Notice of Appeal, the procedure for
filing a Notice of Appeal, the filing fee (or a motion to waive the filing
fee if payment would cause financial hardship), and other matters covered
by the Court's rules directly from the Court. You can also get this
information from the Court's web site on the Internet at
www.vetapp.uscourts.gov, and you can download forms directly from that
website. The Court's facsimile number is +1-857-335-2568.
To ensure full protection of your right of appeal to the Court, you must
file your Notice of Appeal with the Court, not with the Board, or any other
VA office.
How do I file a motion for reconsideration? You can file a motion asking
the BVA to reconsider any part of this decision by writing a letter to the
BVA stating why you believe that the BVA committed an obvious error of fact
or law in this decision, or stating that new and material military service
records have been discovered that apply to your appeal. If the BVA has
decided more than one issue, be sure to tell us which issue(s) you want
reconsidered. Send your letter to:
Director, Management and Administration (014)
Board of Veterans' Appeals
810 Vermont Avenue, NW
Washington, DC 20420
VA
FORM
JUN
2003
(RS)
4597
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1
CONTINUED
Remember, the Board places no time limit on filing a motion for
reconsideration, and you can do this at any time. However, if you also plan
to appeal this decision to the Court, you must file your motion within 120
days from the date of this decision.
How do I file a motion to vacate? You can file a motion asking the BVA to
vacate any part of this decision by writing a letter to the BVA stating why
you believe you were denied due process of law during your appeal. For
example, you were denied your right to representation through action or
inaction by VA personnel, you were not provided a Statement of the Case or
Supplemental Statement of the Case, or you did not get a personal hearing
that you requested. You can also file a motion to vacate any part of this
decision on the basis that the Board allowed benefits based on false or
fraudulent evidence. Send this motion to the address above for the
Director, Management and Administration, at the Board. Remember, the Board
places no time limit on filing a motion to vacate, and you can do this at
any time. However, if you also plan to appeal this decision to the Court,
you must file your motion within 120 days from the date of this decision.
How do I file a motion to revise the Board's decision on the basis of clear
and unmistakable error? You can file a motion asking that the Board revise
this decision if you believe that the decision is based on "clear and
unmistakable error" (CUE). Send this motion to the address above for the
Director, Management and Administration, at the Board. You should be
careful when preparing such a motion because it must meet specific
requirements, and the Board will not review a final decision on this basis
more than once. You should carefully review the Board's Rules of Practice
on CUE, 38 C.F.R. 20.1400 -- 20.1411, and seek help from a qualified
representative before filing such a motion. See discussion on
representation below. Remember, the Board places no time limit on filing a
CUE review motion, and you can do this at any time.
How do I reopen my claim? You can ask your local VA office to reopen your
claim by simply sending them a statement indicating that you want to reopen
your claim. However, to be successful in reopening your claim, you must
submit new and material evidence to that office. See 38 C.F.R. 3.156(a).
Can someone represent me in my appeal? Yes. You can always represent
yourself in any claim before VA, including the BVA, but you can also
appoint someone to represent you. An accredited representative of a
recognized service organization may represent you free of charge. VA
approves these organizations to help veterans, service members, and
dependents prepare their claims and present them to VA. An accredited
representative works for the service organization and knows how to prepare
and present claims. You can find a listing of these organizations on the
Internet at: www.va.gov/vso. You can also choose to be represented by a
private attorney or by an "agent." (An agent is a person who is not a
lawyer, but is specially accredited by VA.)
If you want someone to represent you before the Court, rather than before
VA, then you can get information on how to do so by writing directly to the
Court. Upon request, the Court will provide you with a state-by-state
listing of persons admitted to practice before the Court who have indicated
their availability to represent appellants. This information is also
provided on the Court's kharrison@example.com.
Do I have to pay an attorney or agent to represent me? Except for a claim
involving a home or small business VA loan under Chapter 37 of title 38,
United States Code, attorneys or agents cannot charge you a fee or accept
payment for services they provide before the date BVA makes a final
decision on your appeal. If you hire an attorney or accredited agent within
1 year of a final BVA decision, then the attorney or agent is allowed to
charge you a fee for representing you before VA in most situations. An
attorney can also charge you for representing you before the Court. VA
cannot pay fees of attorneys or agents.
Fee for VA home and small business loan cases: An attorney or agent may
charge you a reasonable fee for services involving a VA home loan or small
business loan. For more information, read section 5904, title 38, United
States Code.
In all cases, a copy of any fee agreement between you and an attorney or
accredited agent must be sent to:
Office of the Senior Deputy Vice Chairman (012)
Board of Veterans' Appeals
810 Vermont Avenue, NW
Washington, DC 20420
The Board may decide, on its own, to review a fee agreement for
reasonableness, or you or your attorney or agent can file a motion asking
the Board to do so. Send such a motion to the address above for the Office
of the Senior Deputy Vice Chairman at the Board.
VA
FORM
JUN
2003
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|
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 April 16, 2009*
Decided April 28, 2009
Before
JOEL M. FLAUM, Circuit Judge
ILANA DIAMOND ROVNER, Circuit Judge
ANN CLAIRE WILLIAMS, Circuit Judge
No. 08‐2104
KEVIN DENNIE ADAMS, Appeal from the United States District
Plaintiff‐Appellant, Court for the Southern District of Indiana,
New Albany Division.
v.
No. 4:06‐cv‐120‐SEB‐WGH
RETAIL VENTURES, INC.
Defendant‐Appellee. Sarah Evans Barker,
Judge.
O R D E R
Kevin Adams is a Christian who asserts that he must attend all services offered by
his church every Wednesday night and Sunday. When his employer, Value City, would not
guarantee that he would never have to work Wednesday nights or Sundays, Adams sued
*
After examining the briefs and the record, we have concluded that oral argument is
unnecessary. Thus, the appeal is submitted on the briefs and the record. See FED. R. APP. P.
34(a)(2).
No. 08‐2104 Page 2
Retail Ventures (doing business as Value City, the name that we use in this order),
complaining of failure to accommodate his religion. Based on the hardship that such an
accommodation would impose on Value City, the district court granted summary judgment
to the defendant. We affirm.
Except where otherwise noted, the following facts are not in dispute. Adams attends
a Church of Christ, which he describes as a “general Christian” church. His church offers
services Wednesday evening, Sunday morning, and Sunday evening. Adams maintains
that as a matter of faith he must be at church for all three weekly services. In late 2001
Value City hired Adams as a door greeter, and generally avoided scheduling him on
Wednesday nights or Sundays. Twice the store did schedule him on one of those days, but
once he traded shifts, and once he took a day off. Then, in January 2006, the store
eliminated the door‐greeter position. The manager, Martin Hardin, met with Adams to
discuss two other positions: receiver/stocker and cashier, though Adams testified that
Hardin did not actually offer him the cashier position. During their discussion about the
scheduling demands of the new positions, Hardin told Adams that he could have
occasional Wednesday nights and Sundays off to worship, but Hardin would not guarantee
him time off every Wednesday night and Sunday. Based on how Value City scheduled its
shifts for those positions, Adams always would have been able to attend at least one service
per week. But without the guarantee of time off the job to attend all three weekly services,
Adams never returned to work.
The record contains additional details about the new positions and Value City’s
scheduling needs. At the time Value City eliminated the door‐greeter position, the
company employed approximately ten cashiers and seven receivers. According to an
uncontested affidavit from Rick Walker, Value City’s vice president of store operations, the
store scheduled most of the cashiers on most Sundays, but required all cashiers on certain
Sundays—such as when there was a big sale. Additionally, weekend days are the most
popular days off. Walker asserted that complying with Adams’s scheduling demand would
have forced Value City to alter the schedules of other cashiers and receivers. He concluded
that accommodating Adams would have caused “a significant scheduling strain on Value
City.”
As is relevant here, Adams sued Value City for failure to accommodate his religious
practices. Value City and Adams both moved for summary judgment. The court decided
the failure‐to‐accommodate claim for Value City, explaining that Adams could not establish
a prima facie case because his insistence on attending every service offered by his church
was not a bona fide requirement of his religion, and that the alleged conflict between his
schedule and his religious beliefs was illusory because any schedule would have allowed
No. 08‐2104 Page 3
him to attend at least one service per week. The court further concluded that Adams would
have had a reasonable opportunity to worship had he accepted the job. In any event, the
court continued, guaranteeing Adams Wednesday nights and Sundays off would impose an
undue hardship on Value City.
On appeal Adams first points out that the order granting summary judgment to the
defendants does not discuss Adams’s own motion for summary judgment. But his two‐
page motion provided no supporting evidence, so it gave the court nothing to discuss.
Adams also seems to contend that the court erred by granting Value City’s motion for
summary judgment without receiving a response from him, explaining that he did not
receive Value City’s motion. But after Value City moved for summary judgment, the court
notified him of the consequences of failing to respond to the motion, and although he had
three months to tell the court if he did not have the motion, he said nothing. He has thus
forfeited that argument. See Local 15, Int’l Bhd. of Elec. Workers, AFL‐CIO v. Exelon Corp, 495
F.3d 779, 783 (7th Cir. 2007). In any event, we have considered Adams’s opposition to
summary judgment as reflected in his brief on appeal and can decide this appeal on the
merits. We review the grant of summary judgment de novo and will uphold it if there is no
genuine issue of material fact and Value City is entitled to judgment as a matter of law.
FED. R. CIV. P. 56(c); Fane v. Locke Reynolds, LLP, 480 F.3d 534, 538 (7th Cir. 2007).
Title VII requires employers to make reasonable efforts to accommodate the religious
practices of employees unless doing so would cause the employer undue hardship. See 42
U.S.C. § 2000e(j); Ansonia Bd. of Educ. v. Philbrook, 479 U.S. 60, 63 & n.1 (1986); Reed v. Great
Lakes Cos., 330 F.3d 931, 934 (7th Cir. 2003). To survive summary judgment, a plaintiff must
submit triable evidence of a prima facie case of religious discrimination, meaning evidence
that (1) his bona fide religious practice conflicts with an employment requirement, (2) he
notified the employer of the practice, and (3) the practice was the basis for an adverse
employment action. EEOC v. Ilona of Hungary, Inc., 108 F.3d 1569, 1575 (7th Cir. 1997);
EEOC v. United Parcel Serv., 94 F.3d 314, 317 (7th Cir. 1996). Here, the parties dispute the
first prong of that test, but we can assume that Adams has made a prima facie case. The
burden then shifts to the employer to show either that it reasonably accommodated the
employee or that doing so would cause undue hardship, i.e., it would impose more than
minimal hardship on the employer or other employees. Trans World Airlines, Inc. v.
Hardison, 432 U.S. 63, 81, 84 (1977); Endres v. Ind. State Police, 349 F.3d 922, 925 (7th Cir.
2003). Title VII does not require employers to deny the shift preferences of some employees
in order to favor the religious needs of others. See Hardison, 432 U.S. at 81, 84; Endres, 349
dcollins@example.com.
No. 08‐2104 Page 4
Value City has established that accommodating Adams’s schedule would have
caused the company undue hardship. Value City submitted uncontroverted evidence that
on some Sundays (one of the two most popular days off) all cashiers must work because of
customer demand during busy sales. When Value City needed its full roster of cashiers
working, if it gave Adams the day off it would either be short a cashier, resulting in lost
efficiency, or have to hire another one, incurring extra cost. See Hardison, 432 U.S. at 84.
Furthermore, the company’s uncontested affidavit explained that accommodating Adams’s
scheduling demand would have forced Value City to alter the schedules of other cashiers
and receivers. Value City would have had to deny other employees their own shift
preferences merely because the reasons for their requests were secular rather than religious,
and that is a practice Title VII does not require of employers. See id. at 81, 84. As the
affidavit concluded, accommodating Adams would impose a significant scheduling strain
on the company. We agree that all of this adds up to more than minimal hardship on Value
City and its other employees.
Adams’s remaining contentions are meritless. He complains that the district judge
should have “suppressed” his deposition because he was not given an opportunity to cross‐
examine himself, but Adams could have submitted an affidavit to clarify any answers. See
Buckner v. Sam’s Club, Inc., 75 F.3d 290, 292 (7th Cir. 1996). Next, Adams contends that the
judge erred by declining to recuse herself for bias after sanctioning him for filing vexatious
motions, but the judge’s order sanctioning Adams did not display the sort of “deep‐seated
favoritism or antagonism” that would require recusal. Liteky v. United States, 510 U.S. 540,
554‐55 (1994); Grove Fresh Distribs., Inc. v. John Labatt, Ltd., 299 F.3d 635, 640 (7th Cir. 2002).
Finally, Adams complains that the law firm representing Value City had a conflict of
interest, but Adams forfeited this argument by failing to raise it in the district court. See
Local 15, 495 dcollins@example.com.
Accordingly, we AFFIRM the judgment of the district court.
|
LIMITED CONSENT AND MODIFICATION
September 9, 2011
Ameron International Corporation
245 South Los Robles Avenue
Pasadena, California 91101-3638
Re: Limited Consent and Modification
Ladies and Gentlemen:
This Limited Consent and Modification (this “Consent”) is entered into by and
between Ameron (Pte) Ltd. (the “Company”), the Parent Guarantor and each of the
Subsidiary Guarantors, on the one hand, and The Prudential Insurance Company of
America (“Prudential”), on the other hand.
1. Background. The Company and Prudential are party to that certain Note
Purchase Agreement, dated as of November 25, 2005 (as amended, restated,
supplemented or otherwise modified from time to time, the “Note Agreement”).
Capitalized terms not defined herein shall have the meanings given to such terms
in the Note Agreement.
2. Limited Consents. At the request of the Company, the Required Holders
hereby consent, effective as of June 30, 2011, to the Parent Guarantor's
entering into a merger agreement (the “Merger Agreement”) with National Oilwell
Varco, Inc. pursuant to which National Oilwell Varco, Inc. will acquire (whether
by merger or otherwise) substantially all of the Capital Stock of the Parent
Guarantor. Notwithstanding the foregoing, it is understood and agreed that the
consummation of such merger or acquisition contemplated by the Merger Agreement
shall constitute a Change of Control and result in an immediate Event of
Default.
In addition, at the request of the Company, the Required Holders hereby consent
to the prepayment in full of the Notes on not less than 3 Business Days' prior
written notice, notwithstanding the reference to “30 days” in Section 8.2 of the
Note Agreement, provided that such prepayment shall otherwise comply with the
requirements of Section 8.2 of the Note Agreement.
Each of the consents contained herein is a one-time consent and is expressly
limited to the purposes and matters set forth herein. Nothing contained herein
shall constitute a waiver or modification of any other rights or remedies any
holder of Notes may have under any Note Document or applicable law.
3. Amendment. Section 8.11(a) of the Credit Agreement (including all defined
terms applicable thereto as set forth in the Credit Agreement), upon giving
effect to the amendments provided for in the Tenth Amendment, is hereby
incorporated by reference into the Multiparty Guaranty as Section 13(d)(ii)
thereof (in lieu and in replacement of Section 13(d)(ii) as in effect
immediately prior to such incorporation by reference) as if set forth fully
therein, mutatis mutandis, and such provision (including all defined terms
applicable thereto) may not thereafter be waived, amended or modified under the
Multiparty Guaranty except pursuant to the provisions of Section 16 thereto.
4. Contingent Amendments. If on November 30, 2011 any amount evidenced by the
Notes remains unpaid and the Merger Agreement has not been duly terminated,
then, effective as of November 30, 2011:
--------------------------------------------------------------------------------
(i) Section 8.11(b) of the Credit Agreement (including all defined terms
applicable thereto as set forth in the Credit Agreement), as such provision is
in effect on the date hereof, shall be incorporated by reference into the
Multiparty Guaranty as Section 13(d)(i) thereof (in lieu and in replacement of
Section 13(d)(i) as in effect immediately prior to such incorporation by
reference) as if set forth fully therein, mutatis mutandis, and such provision
(including all defined terms applicable thereto) may not thereafter be waived,
amended or modified under the Multiparty Guaranty except pursuant to the
provisions of Section 16 thereto;
(ii) Section 8.11(c) of the Credit Agreement (including all defined terms
applicable thereto as set forth in the Credit Agreement), as such provision is
in effect on the date hereof, shall be incorporated by reference into the
Multiparty Guaranty as Section 13(d)(iii) thereof (in lieu and in replacement of
Section 13(d)(iii) as in effect immediately prior to such incorporation by
reference) as if set forth fully therein, mutatis mutandis, and such provision
(including all defined terms applicable thereto) may not thereafter be waived,
amended or modified under the Multiparty Guaranty except pursuant to the
provisions of Section 16 thereto; and
(iii) Section 8.11(d) of the Credit Agreement (including all defined terms
applicable thereto as set forth in the Credit Agreement), as such provision is
in effect on the date hereof, shall be incorporated by reference into the
Multiparty Guaranty as Section 13(d)(iv) thereof (in lieu and in replacement of
Section 13(d)(iv) as in effect immediately prior to such incorporation by
reference) as if set forth fully therein, mutatis mutandis, and such provision
(including all defined terms applicable thereto) may not thereafter be waived,
amended or modified under the Multiparty Guaranty except pursuant to the
provisions of Section 16 thereto.
5. Conditions to Effectiveness. The limited consents provided in Section 2
hereof shall become effective as of June 30, 2011 upon receipt by Prudential of:
(a) a copy of this Consent duly executed and delivered by the Company, the
Parent Guarantor, the Subsidiary Guarantors and Prudential; (b) a fully and duly
executed and delivered copy of a corresponding consent with respect to the
Credit Agreement, in form and substance satisfactory to Prudential, which
concurrently or previously shall have become effective; and (c) a fully and duly
executed and delivered copy of the Tenth Amendment to Credit Agreement, dated as
of September 30, 2011 (the “Tenth Amendment”), among the Parent Guarantor, the
Subsidiary Guarantors, the Bank Lenders and Bank of America, N.A., as
administrative agent for the Bank Lenders, including, without limitation, the
consent of the requisite Bank Lenders to the transactions effected hereby and
otherwise in form and substance satisfactory to Prudential, which Tenth
Amendment concurrently or previously shall have become effective.
6. Consent to Tenth Amendment. The Required Holders hereby consent to the
amendment effected in Section 1(a) of the Tenth Amendment.
7. Counterparts. This Consent may be executed in any number of counterparts
(including facsimile or secure electronic format (.pdf) signatures). This
Consent is a Note Document.
8. Governing Law. This Consent shall be governed by and construed in
accordance with the laws of the State of New York.
[Signature pages follow]
--------------------------------------------------------------------------------
Sincerely,
The Prudential Insurance Company of America
By:
/s/ David Nguyen
Name:
David Nguyen
Title:
Vice President
|
Case 2:18-cv-00133-LGW-BWC Document 5 Filed 12/11/18 Page 1 of 3
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
BRUNSWICK DIVISION
:
JULIO MEDINA ARREGUIN, JUAN :
ARELLANO MALAGON, :
EDUARDO FLORES MAYDON, JOSE :
GOMEZ LOPEZ, MAXIMINO JUAREZ :
SANCHEZ, JOSE LOPEZ GOMEZ, CRUZ :
LUNA VILLELA, AGUSTIN OVIEDO : Civil Action No. 2:18-cv-00133-LGW-BWC
OLVERA, LUIS PATINO MENDIOLA, :
ESGAR PEREZ FLORES, ASAEL :
RODRIGUEZ JUAREZ, MIGUEL SANCHEZ :
CERVANTES, and MARIO SILGUERO :
REYES, :
:
Plaintiffs, :
:
v. :
:
MANUEL SANCHEZ, :
:
Defendant. :
:
PLAINTIFFS’ APPLICATION TO CLERK FOR ENTRY OF DEFAULT
Pursuant to Rule 55(a) of the Federal Rules of Civil Procedure, Plaintiffs apply to the Clerk
for entry of default against Defendant, Manuel Sanchez.
As reflected in the Proof of Service filed with this Court on November 26, 2018, (Doc. 4),
the summons and complaint in this matter were served personally on Manuel Sanchez on
November 15, 2018.
Defendant was required to serve his answer or otherwise plead within 21 days of service, i.e.,
no later than December 6, 2018. As of the date of this Application, Defendant has not filed a
responsive pleading. Thus, entry of default against Defendant is appropriate at this time.
1
Case 2:18-cv-00133-LGW-BWC Document 5 Filed 12/11/18 Page 2 of 3
This 11th day of December, 2018. Respectfully submitted,
/s/ Solimar Mercado-Spencer
Solimar Mercado-Spencer
Lead Counsel
Georgia Bar No. 686614
Georgia Legal Services Program
104 Marietta Street NW, Suite 250
Atlanta, GA 30303
Phone: 276.307.2664
Fax: 276.307.2664
E-mail: jeremy50@example.org
/s/ Lisa J. Krisher
Lisa J. Krisher
Georgia Bar No. 429762
Georgia Legal Services Program
104 Marietta Street NW, Suite 250
Atlanta, GA 30303
Phone: 276.307.2664
Fax: 276.307.2664
E-mail: jeremy50@example.org
Attorneys for Plaintiffs
2
Case 2:18-cv-00133-LGW-BWC Document 5 Filed 12/11/18 Page 3 of 3
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on December 11, 2018, a true and correct copy of the foregoing
PLAINTIFFS’ APPLICATION TO CLERK FOR ENTRY OF DEFAULT was sent to
Defendant Manuel Sanchez, via U.S. Mail, with adequate postage, to:
Manuel Sanchez
251 Leon A Wildes Rd
Hazlehurst, GA 31539-7833
/s/ Solimar Mercado-Spencer
Counsel for Plaintiffs
3
|
Exhibit 10.1
RESTRICTED SHARE AWARD
UNDER THE
2005 OMNIBUS STOCK AND INCENTIVE PLAN
for
THOMAS GROUP, INC.
Effective as of March 10, 2008 (“Date of Grant”), a RESTRICTED SHARE AWARD
(“Award”) is granted by Thomas Group, Inc. (the “Company”) to Earle Steinberg
(the “Holder”), provided that this Award is in all respects subject to the terms
and provisions of the 2005 Omnibus Stock and Incentive Plan For Thomas
Group, Inc. (the “Plan”), all of which are incorporated herein by reference,
except to the extent otherwise expressly provided in this Award. Capitalized
terms used herein without definition shall have the respective meanings
specified in the Plan.
WITNESSETH
WHEREAS, the Company desires to grant to the Holder an award of 50,000 Shares;
WHEREAS, the purpose of this Award is to advance the interests of the Company
and increase shareholder value by providing additional incentives to attract,
retain and motivate the Holder; and
WHEREAS, the terms of the Award are set forth below;
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth
and for other good and valuable consideration, the parties agree as follows:
1. Definitions. As used in this Award, the following words shall
have the following meanings:
“CAUSE” SHALL MEAN:
(1) YOUR CONVICTION OR PLEA OF GUILTY OR NOLO CONTENDERE TO A CRIME
THAT INVOLVES DISHONESTY, DISLOYALTY, MORAL TURPITUDE, SEXUAL HARASSMENT OR
DISCRIMINATION, PROVIDES FOR A TERM OF IMPRISONMENT OR CONSTITUTES A FELONY;
(2) THE WILLFUL AND INTENTIONAL FAILURE OR WILLFUL AND INTENTIONAL
REFUSAL TO FOLLOW REASONABLE AND LAWFUL INSTRUCTIONS OF THE COMPANY’S BOARD OF
DIRECTORS;
(3) A MATERIAL ACT OR OMISSION INVOLVING INTENTIONAL MISCONDUCT,
MALFEASANCE OR GROSS NEGLIGENCE IN PERFORMANCE OF DUTIES TO THE COMPANY OR
INVOLVING NEGLECT OF DUTIES IN A MANNER THAT IS MATERIALLY DAMAGING TO THE
COMPANY OR AN AFFILIATE OF THE COMPANY;
(4) A MATERIAL BREACH OR DEFAULT IN THE PERFORMANCE OF THE HOLDER’S
OBLIGATIONS UNDER THE HOLDER’S EMPLOYMENT AGREEMENT WITH THE COMPANY;
(5) A SERIOUS VIOLATION OF ANY OF THE COMPANY’S POLICIES TO WHICH
OFFICERS OF THE COMPANY ARE SUBJECT; OR
(6) AN ACT OF MISAPPROPRIATION, EMBEZZLEMENT, FRAUD OR SIMILAR
CONDUCT, WHETHER OR NOT INVOLVING THE COMPANY.
“Change in Control” shall mean the first date, if any, upon which any of the
following occurs:
(1) any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 50 percent or more of
the combined voting power of the Company’s then outstanding securities;
provided, however, that the term “Person” shall not include (A) the Company,
(B) any employee benefits plan of the Company, (C) a trustee or other fiduciary
holding securities
--------------------------------------------------------------------------------
under an employee benefit plan of the Company and acting in such capacity, (D) a
subsidiary of a corporation owned, directly or indirectly, by the Shareholders
in substantially the same proportions as their ownership of voting securities of
the Company, or (E) General John T. Chain, Jr. or Edward P. Evans; or
(2) individuals who, as of the Date of Grant, constitute the Board
(the “Incumbent Board Members”) cease for any reason during any 12-month period
to constitute more than 50 percent of the members of the Board and the election
or appointment of the members of the Board who are not Incumbent Board Members
were not endorsed by a majority of the Incumbent Board Members; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, nomination for election or appointment was approved by a vote of
at least two-thirds of the directors then constituting Incumbent Board Members,
shall be considered as though such individual were an Incumbent Board Member; or
(3) a sale or disposition of all or substantially all of the Company’s
assets to any other corporation or other legal person occurs.
“GOOD REASON” MEANS THE OCCURRENCE OF EITHER OF THE FOLLOWING CIRCUMSTANCES
WITHOUT THE HOLDER’S CONSENT:
(1) A MATERIAL REDUCTION IN THE HOLDER’S BASE SALARY; OR
(2) A MATERIAL DIMINUTION OF THE HOLDER’S DUTIES, AUTHORITY OR
RESPONSIBILITIES AS IN EFFECT IMMEDIATELY PRIOR TO SUCH DIMINUTION.
“Sign-On Shares” shall mean the Shares to be delivered pursuant to this Award.
2. Sign-On Share Award. The Company hereby awards to the Holder
50,000 Sign-On Shares upon the terms and subject to the conditions set forth in
this Award.
3. Restrictions and Delivery. The Company will issue to the Holder
stock certificates evidencing the Sign-On Shares, which certificates will be
registered in the name of the Holder and will bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to the Sign-On
Shares. The certificates evidencing the Sign-On Shares shall be held in custody
by the Company until the restrictions on such Sign-On Shares shall have lapsed,
and, as a condition of this Award, the Holder shall deliver a stock power, duly
endorsed in blank, relating to the Sign-on Shares. The Sign-On Shares shall
vest and thereby become deliverable on the one-year anniversary of the Date of
Grant. If the Holder’s employment with the Company terminates (other than under
circumstances to which Sections 4, 5 or 6 below apply) prior to the one-year
anniversary of the Date of Grant, all Sign-On Shares shall be forfeited. The
Company shall deliver the Sign-On Shares promptly following the one-year
anniversary of the Date of Grant.
4. Termination Without Cause. If, prior to the time at which all of
the Sign-On Shares have been delivered to the Holder, the Holder’s employment is
terminated by the Company without Cause, then the Sign-On Shares shall vest and
thereby become deliverable and the Company shall deliver all such undelivered
Sign-On Shares to the Holder promptly following such termination of employment.
5. Change in Control. If after the occurrence of a Change in
Control and prior to the time at which all of the Sign-On Shares have been
delivered to the Holder, the Holder’s employment is terminated by the Company
without Cause or by the Holder for Good Reason, then the Sign-On Shares shall
vest and thereby become deliverable and the Company shall deliver all such
undelivered Sign-On Shares to the Holder promptly following such termination of
employment.
6. Death or Disability. If, prior to the time at which all of the
Sign-On Shares have been delivered to the Holder, the Holder’s employment is
terminated by the Company by reason of death or Disability of the Holder, then
the Sign-On Shares shall vest and thereby become deliverable and the Company
shall deliver all such undelivered Sign-On Shares to the Holder or his estate,
as applicable, promptly following such termination of employment.
--------------------------------------------------------------------------------
7. Withholding. On the date on which the Sign-On Shares are
delivered, the Holder shall be required to pay to the Company, in cash, the
amount which the Company reasonably determines to be necessary in order for the
Company to comply with applicable federal or state income tax withholding
requirements and the collection of employment taxes, provided that the Holder
may elect to offset the amount the Company reasonably determines as necessary to
comply with applicable tax requirements from the Sign-On Shares otherwise
deliverable to the Holder (valued at their Fair Market Value on the applicable
date) and a net number of Sign-On Shares shall thereafter be delivered to the
Holder. If the Holder makes an election under Section 83(b) of the Code with
respect to the Sign-On Shares, the Holder agrees to deliver a copy of such
election to the Company concurrently with the filing of such election with the
Internal Revenue Service. In such event, the Holder shall make arrangements
satisfactory to the Company to pay in the current year any federal, state or
local taxes required to be withheld with respect to such Sign-On Shares. If the
Holder fails to make such payments, then any provision of this Award to the
contrary notwithstanding, the Company shall, to the extent permitted by law,
have the right to deduct from any payments of any kind otherwise due from the
Company to the Holder any federal, state or local taxes of any kind required by
law to be withheld with respect to such Sign-On Shares.
8. Status of Holder With Respect to the Shares. Subject to the
limitations and restrictions contained herein, the Holder shall have all rights
as a stockholder with respect to the Sign-On Shares, including the right to vote
and receive dividends; provided, that any amounts of cash, stock or other assets
paid or distributed by the Company with respect to the Sign-On Shares prior to
the delivery of such Sign-On Shares to the Holder shall be retained by the
Company until the Sign-On Shares vest and become deliverable hereunder, and then
will be delivered to the Holder at the same time as the vested Sign-On Shares
are delivered to the Holder; provided, further, that if the Sign-On Shares are
forfeited then the distributions with respect to such shares also will be
forfeited.
9. Representations and Warranties. As a condition to the delivery
of the Sign-On Shares, the Board may obtain such agreements or undertakings, if
any, as the Board may deem necessary or advisable to assure compliance with any
law or regulation including, but not limited to, the following:
(a) a representation, warranty or agreement by the Holder to the
Company that he is acquiring the Sign-On Shares for investment and not with a
view to, or for sale in connection with, the distribution of any such Sign-On
Shares; and
(b) a representation, warranty or agreement to be bound by any legends
that are, in the opinion of the Board, necessary or appropriate to comply with
the provisions of any securities law deemed by the Board to be applicable to the
issuance of the Sign-On Shares and are endorsed upon the Share certificates.
10. Termination of the Award. Except as set forth in Sections 4, 5 and
6 hereof, this Award shall automatically terminate and expire on the earlier of
(i) the date on which the Sign-On Shares have been delivered or (ii) the date of
the Holder’s Separation, and upon the date of such termination of the Award all
Sign-On Shares which have not been delivered on or prior to such date will be
permanently forfeited.
11. Interpretation of the Award Provisions. The Committee shall have
the authority to the full extent provided under the terms of the Plan to
interpret all terms of the Plan and this Award, and to otherwise supervise the
implementation of such terms.
12. Governing Law. TO THE MAXIMUM EXTENT PERMITTED UNDER APPLICABLE
LAW, THIS AWARD SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS.
13. Binding Effect. This Award shall inure to the benefit of and be
binding upon the heirs, executors, administrators, successors and assigns of the
parties hereto.
14. Amendments. This Award may only be amended by a written document
signed by the Company and the Holder.
--------------------------------------------------------------------------------
15. Severability. If any provision of this Award is declared or found
to be illegal, unenforceable or void, in whole or in part, the remainder of this
Award will not be affected by such declaration or finding and each such
provision not so affected will be enforced to the fullest extent permitted by
law.
16. Counterparts. This Award may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused these presents to be executed on its
behalf and the Holder has hereunto set his hand, all on the day and year first
above written.
THOMAS GROUP, INC.
By:
/s/ Michael E. McGrath
Michael E. McGrath, Executive Chairman
ACKNOWLEDGMENT
The Holder agrees to be bound by all the terms of this Award and the Plan.
/s/ Earle Steinberg
Earle Steinberg
-------------------------------------------------------------------------------- |
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
STATE OF WASHINGTON, ) No. 78858-2-I
)
Respondent ) DIVISION ONE
v. )
) UNPUBLISHED OPINION
JOSE POMPILIO IRIAS SANCHEZ, )
Appellant.
_________________________________ ) FILED: March 9, 2020
HAZELRIGG, J. — Jose P. Irias Sanchez (Irias)1 was convicted of assault in
the second degree-domestic violence and felony harassment-domestic violence
after a jury trial. In pretrial motions, the defense sought to exclude prior allegations
of domestic violence. The trial court specifically excluded some acts while allowing
testimony as to others. At trial, the key witness twice violated these pretrial rulings.
In the first instance the court provided a curative instruction. In the second
instance, the testimony was not interpreted from Spanish to English for the jury.
Irias argues the admission of the prior bad act evidence was improper and that he
was deprived of a fair trial due to the violations of the pretrial rulings by the witness.
1 The defendant’s last name is listed both with and without a hyphen in various documents
contained in the record. In the majority of the letters of support submitted for his sentencing, friends
and business associates refer to the defendant as Jose Irias. Further, he appears to sign
documents in the record with only Irias. As this is a common naming convention in Latinx and
Spanish-language dominant communities, and it appears to be how the defendant self-identifies,
we will utilize that practice herein.
No. 78858-2-1/2
When viewed in light of the evidence as a whole, Irias fails to demonstrate that the
statements were so prejudicial as to deprive him of a fair trial. We affirm.
FACTS
Jose lrias Sanchez was charged with assault in the second degree-
domestic violence and felony harassment-domestic violence. The charges arose
out of an incident in October 2017 when police responded to a 911 call by Liliana
Salazar Hernandez (Salazar). When police arrived, they found Salazar with her
two young daughters in a van a short distance away from the home they shared
with Irias. Salazar reported that her children’s father, Irias, had attacked her with
a machete. Salazar does not speak English and could not communicate directly
with responding officers, so her children and a neighbor assisted as interpreters
with the police.
Salazar reported that she put her children to bed earlier that evening and
then she went to bed at approximately 9:30pm. Irias had been outside drinking
and came upstairs at approximately 1:00am. Salazar observed Irias go into their
daughters’ room and then come in to their bedroom. Irias began to argue with
Salazar and then left to bathe. Salazar testified that Irias came out of the bathroom
with a machete, pushed Salazar’s face against a pillow and held the machete to
her neck, stating he wanted to “finish everything.” Salazar was ultimately able to
get away, gather her daughters and drive a few blocks away to call the police.
Irias was taken into custody and charged with assault in the second degree
and felony harassment both with special allegations of domestic violence. Prior to
trial, the State sought to admit alleged prior bad acts involving domestic violence
-2-
No. 78858-2-1/3
within Irias and Salazar’s relationship. None of the prior acts had been reported
to law enforcement previously and the evidence solely consisted of Salazar’s
statements. The defense moved to exclude such testimony, arguing that the State
could not prove them by a preponderance of the evidence. Defense counsel
further argued that allowing uncorroborated claims of past domestic violence would
be highly prejudicial and would be used for improper inferences as to Irias’
propensity toward violence.
The trial court excluded allegations of past sexual violence and violence
against the children. However, the court did permit other broader allegations of
ongoing domestic violence to show the “reasonable fear aspects of both charges.”
The court reminded the prosecutor in the case to discuss these limitations with
Salazar. At trial, however, Salazar did testify to past violence by Irias against the
children and sexual violence against her. The court issued a curative instruction
after the testimony about conduct toward the children. The judge was able to
intervene during the testimony regarding sexual violence, preventing the testimony
from being interpreted from Spanish to English for the jury.
The jury convicted Irias as charged and the court vacated the felony
harassment charge based on merger. Irias now appeals, arguing the court
improperly admitted evidence of prior bad acts and that the improper testimony by
Salazar deprived him of his right to a fair trial.
-3-
No. 78858-2-1/4
ANALYSIS
I. Admission of 404(b) Evidence of Prior Bad Acts
We review a trial court’s decision to admit or exclude evidence for abuse of
discretion. State v. Foxhoven, 161 Wash. 2d 168, 174, 163 P.3d 786 (2007).
However, “[wje review the trial court’s interpretation of ER 404(b) de novo.” State
v. Fisher, 165 Wash. 2d 727, 745, 202 P.3d 937 (2009). “Discretion is abused if it is
exercised on untenable grounds or for untenable reasons.” State v. Thanci, 145
Wash. 2d 630, 642, 41 P.3d 1159 (2002). “Failure to adhere to the requirements of
an evidentiary rule can be considered an abuse of discretion.” Foxhaven, 161
Wash. pchung@example.net. The appellant bears the burden of proving an abuse of discretion
occurred. State v. Ashley, 186 Wash. 2d 32, 39, 375 P.3d 673 (2016).
“Generally, evidence of a defendant’s prior misconduct is inadmissible to
demonstrate the accused’s propensity to commit the crime charged.” Fisher, 165
Wash. pchung@example.net. However, ER 404(b) allows prior misconduct to be admitted for
other purposes, such as proof of a victim’s state of mind. ki.
To admit evidence of other crimes or wrongs under Washington law,
the trial court must (1) identify the purpose for which the evidence is
sought to be introduced, (2) determine whether the evidence is
relevant to prove an element of the crime charged and (3) weigh the
probative value of the evidence against its prejudicial effect.
Additionally, the party offering the evidence of prior misconduct has
the burden of proving by a preponderance of the evidence that the
misconduct actually occurred.
State v. Loucih, 125 Wash. 2d 847, 853, 889 P.2d 487 (1995) (internal citations
omitted). The party seeking to introduce the evidence has the burden of
establishing the three steps and that the misconduct actually occurred. Ashley, 186
-4-
No. 78858-2-1/5
pchung@example.net. The court must conduct this inquiry on the record and provide a
limiting instruction if the court admits the evidence. ki.
Here, the State brought a pretrial motion to admit certain ER 404(b)
evidence and Irias opposed. The court heard argument on this and other matters
while addressing motions in limine of the parties prior to seating a jury. Irias argues
that the trial court erred in admitting the prior bad act evidence of previous domestic
violence because the state failed to prove that the prior incidents had occurred, the
evidence was not relevant to an element of assault, and the risk of prejudice from
the evidence substantially outweighed its potential probative value.
Irias argues that the court was only provided with statements by the victim
without any corroborating evidence and that this was insufficient to support the
court’s finding that the prior acts did occur. However, the defense cites no authority
to support their claim that the court’s finding in this regard was improper absent
such corroboration. We review the court’s determination as to whether the prior
misconduct was proven by a preponderance of the evidence for abuse of
discretion. ki. at 40.
Both parties cite to Ashley, in which a court admitted evidence of the
defendant’s prior domestic violence against the victim under ER 404(b). kI. at 40.
The court was provided with the victim’s testimony describing instances of
domestic violence by Ashley between 2000 and 2008, along with a police report
from 2004. j.çjpchung@example.net. Ashley did not present any evidence to refute the
allegations and the court ultimately determined the state had proven the prior
abuse had occurred by a preponderance of the evidence.
-5-
No. 78858-2-1/6
Here, the trial court was provided with Salazar’s statements to police in the
course of the investigation of the present case in which she mentioned the prior
incidents, her petition for a protection order which discussed previous abuse, the
audio of the protection order hearing that included testimony from Salazar about
prior violence, and the audio of the prosecutor’s interview with her for purposes of
preparing the instant case. Additionally, the record contains a pretrial exhibit
wherein Irias verbally acknowledges that violence existed in the relationship.
On review, we must determine whether the trial court’s findings are
supported by evidence that was submitted in the record; specifically that the State
demonstrated by a preponderance of the evidence that prior acts of domestic
violence occurred. Here, that standard is met with the evidence described above.
This is further bolstered by the fact that Irias provided statements indicating some
abuse had occurred and provided no evidence refuting the victim’s claims of prior
abuse.
Next, we address Irias’s argument that the prior misconduct was not
relevant to the charged crimes. “Evidence is relevant if it has a tendency to make
the existence of a fact that is of consequence to the determination of the action
more or less probable than it would be without the evidence.” State v. Maciers, 164
Wash. 2d 174, 184, 189 P.3d 126 (2008). The two charges in this case were assault
in the second degree and felony harassment. The relevant subsection under
which lrias was charged with assault states “[a] person commits the crime of
assault in the second degree when he or she assaults another with a deadly
weapon.” The jury instruction defining assault in this case stated:
-6-
No. 78858-2-1/7
[a]n assault is an act done with the intent to create in another
apprehension and fear of bodily injury, and which in fact creates in
another a reasonable apprehension and imminent fear of bodily
injury even though the actor did not actually intend to inflict bodily
injury.
The jury instruction for the felony harassment charge was as follows:
[a] person commits the crime of harassment when he or she, without
lawful authority, knowingly threatens to cause bodily injury
immediately or in the future to another person and when he or she
by words or conduct places the person threatened in reasonable fear
that the threat will be carried out and the threat to cause bodily harm
consists of a threat to kill the threatened person or another person.
Here, the trial court allowed testimony regarding prior domestic violence by Irias
against Salazar “to show the reasonable fear aspect of both charges.” Prior acts
of domestic violence would have some relevance to both counts submitted to the
jury.
The defense cites to Maqers for the proposition that it is improper for a court
to admit alleged prior violence to support the reasonable fear of an alleged victim,
but that opinion is a plurality and the facts are distinguishable. See 164 Wash. 2d 174.
Maqers involved a recanting victim along with an admission of a separate prior bad
act which did not involve the victim. Id. at 178-79. Here, Salazar did not recant
and all of the prior bad acts at issue directly involved her. The trial court did not
abuse its discretion in determining that the prior acts of domestic violence were
relevant to both charges as they tend to increase the probability that Salazar was
reasonably fearful as to both counts.
Irias also asserts that the trial court abused its discretion in reaching its
determination as to which prior acts were substantially more prejudicial than
probative. The trial court in this case was very specific as to what it determined
-7-
No. 78858-2-1/8
would be admissible and inadmissible on this prong of the ER 404(b) analysis.
The trial court weighed the evidence and determined that any references to
abusing the children would not be allowed in, nor would anything about sexual
violence or coercion. The court determined that it would allow testimony as to
domestic violence by Irias against Salazar generally, an assault incident by Irias
that caused Salazar to miscarry, and Salazar’s claim that Irias would assault her if
she did not do what he wanted.
Irias argues that the evidence was not particularly probative since anyone
would be fearful if a machete was pchung@example.net. However, when this
argument was considered during the ER 404(b) argument, the court noted that the
evidence of the history of physical violence and physical threats “is sufficiently
probative of reasonable fear” and was allowed in. This was despite the reasonable
conclusion that the specific act with the machete underlying the assault in the
second degree charge would result in fear for most people. The trial court did not
abuse its discretion in the analysis and ruling to admit the specific prior bad acts.
Irias argues that Ashley is instructive here, but it does not advance his
position. 186 Wash. 2d 32. In Ashley, the court admitted the victim’s testimony
regarding prior domestic violence. pchung@example.net. The court admitted it for two purposes;
to assess the victim’s credibility and to determine the element of consent as to the
unlawful imprisonment charge. j4. The Supreme Court rejected the claim that the
evidence was properly allowed in for credibility purposes, but did find it proper to
prove the element regarding consent. ki. at 43-44. The court held that, “[i]t is
unquestionably reasonable for the trial court to conclude that a domestic violence
-8-
No. 78858-2-1/9
victim would continue to fear her tormentor, even years after the last incident of
abuse.” ki. at 45.
The court in Ashley expressly found that the prior abuse was relevant to an
element of the criminal allegation before the court. j~çj~ The court went on to explain
that despite the defense’s general theory that the victim had “made up her story to
avoid getting in trouble, there was no evidence in the record to suggest that [the
victim’s] testimony was untruthful.” k1. at 47. This led to the court’s determination
that there was no need to introduce the domestic violence evidence to defend or
bolster the victim’s credibility. j~ Since the evidence was properly admitted to
prove an element of the crime, its admission for credibility purposes as well was
determined to be harmless error.
Ashley is not helpful for Irias. In his case, Salazar’s credibility was the main
focus for the defense. Their main defense theory was that Salazar had fabricated
the incident in order to obtain immigration benefits. Though the court here did not
admit the prior bad acts expressly for purposes of credibility analysis, given the
theory of the case and the need for the State to prove the reasonable fear by
Salazar, the court’s determination that past violence, excluding the more
inflammatory allegations such as sexual violence and abuse of children, does not
constitute an abuse of discretion. Though the defense claims that anyone would
be fearful of a machete and the bad act evidence was therefore unnecessary, this
argument is not persuasive.
In Maqers, our Supreme Court explained that when a defendant enters a
not guilty plea, it puts the burden on the State to prove every element of the crime
-9-
No. 78858-2-1/10
beyond a reasonable doubt. 164 Wash. pchung@example.net. The court there concluded it was
proper to admit the defendant’s prior bad acts to prove the victim’s reasonable fear
of bodily injury. j~ The same is true here. The trial court engaged in the proper
analysis on the record and considered arguments of counsel before admitting
certain prior bad act evidence and excluding others. We find no abuse of discretion
as to the ruling on admissibility of ER 404(b) evidence.
II. Statements by Witness in Violation of Pre-Trial Evidence Rulings
Irias argues he was deprived of a fair trial due to a violation of the court’s
pretrial rulings excluding certain prior bad act evidence. Though the briefing frames
the argument as prosecutorial or witness misconduct, lrias appears to actually
focus his argument on the violation of the pretrial ruling regarding limitation of the
ER 404(b). The standard of review for the trial court’s cure of irregularities, such
as improper testimony, is abuse of discretion. State v. Post, 118 Wash. 2d 596, 620,
826 P.2d 172 (1992). Irias argues that in two instances Salazar provided testimony
that violated the court’s order as to the ER 404(b) evidence that was addressed
during motions in limine. The first piece of testimony was when Salazar testified
that Irias struck their pchung@example.net. Defense counsel objected and moved to
strike and the court instructed the jury to disregard the improper testimony.
The second instance was when Salazar testified about instances of sexual
coercion. However, since Salazar’s testimony was conveyed to the jury via a
Spanish-to-English interpreter, the court actually realized she used the term
“sexual relations” during her Spanish-language testimony and stopped the
interpreter before that information could be presented to the jury in English.
- 10-
No. 78858-2-I/I I
Outside of the presence of the jury, the court had the interpreter provide the full
statement in English and then instructed the prosecutor to have further discussion
with Salazar about the pretrial rulings. When the jury returned, they were asked if
anyone understood Spanish. One juror said they knew a little Spanish and the
court instructed the jury that that there is an “art of interpretation and translation”
so the jurors should “tune out” the Spanish to the extent they understood any
words. lrias did not move for a mistrial, but now argues that the two instances of
testimony in violation of the pretrial rulings deprived him of a fair trial.
“To determine the prejudicial effect of an irregular occurrence during trial,
we examine the occurrence’s seriousness, whether it involved cumulative
evidence, and whether the trial court properly instructed the jury to disregard it.”
State v. Thomison, 90 Wash. App. 41, 46, 950 P.2d 977 (1998). Here, the
seriousness of the occurrence is significant since the court made very specific
findings as to which prior bad acts were substantially more probative than
prejudicial and the improper testimony was directly in violation of the court’s order
excluding it. pchung@example.net. However, we would note the first instance of improper
testimony was much more serious than that of the untranslated testimony due to
the ability for the jury to comprehend the content of the improper statement. The
testimony was not cumulative since no other evidence of abuse of the children or
sexual coercion was offered. However, a trial court is provided with wide discretion
to cure trial irregularities for improper witness statements. Post, 118 Wash. pchung@example.net.
Here, the error as to the Spanish-language portion of testimony about
sexual misconduct was sufficiently cured since the jury was never provided with
-11 -
No. 78858-2-1/12
the English interpretation of the statement and no juror indicated they were fluent
in Spanish when asked by the court. The comment regarding abuse toward the
children was stricken by the court and the court then again provided a curative
instruction. We presume the jury followed the court’s instruction. Thompson, 90
Wash. App. at 47. Irias has not provided evidence that the instructions of the court
to disregard the testimony were not followed.
Ultimately, we must ask whether the two improper statements, when viewed
against the background of all the evidence, were so prejudicial that Irias was
denied a fair trial. j.çj. This is not the case. One statement was not conveyed to
the jury in a language they could easily understand and the other comment
regarding violence toward the children, though clearly improper and interpreted
into English, was followed by a curative instruction. Further, given that the defense
was focused on challenging credibility of Salazar’s testimony regarding the
allegation as whole, and the theory that the possibility of obtaining immigration
benefits incentivized her to fabricate this event, the problematic testimony did not
prejudice Irias such that he was denied a fair trial.
We affirm.
‘P
~
WE CONCUR: d
“1
- 12-
|
954 F. Supp. 1031 (1996)
BRADFORD HOSPITAL, d/b/a Bradford Regional Medical Center, Plaintiff,
v.
Donna E. SHALALA, Secretary of the Department of Health and Human Services, Defendant.
Civil Action No. 95-105.
United States District Court, W.D. Pennsylvania.
December 24, 1996.
*1032 *1033 Terrence J. O'Rourke, Stephen R. Nash and David W. Thomas, Nash & Company, Pittsburgh, PA, for Plaintiff.
Jessica Lieber Smolar, United States Attorney's Office, Pittsburgh, PA, Jan M. Lindelius, Region III Counsel, Philadelphia, PA, for Defendant.
MEMORANDUM OPINION
McLAUGHLIN, District Judge.
This Court has jurisdiction over this civil action pursuant to 42 U.S.C. §§ 1331 and 1395oo. Bradford Hospital ("Bradford") challenges the validity of the regulations codified at 42 C.F.R. § 412.92(a)(3) which prevent it from being classified as a "sole community hospital." Presently pending before this Court are cross motions for summary judgment. For the reasons stated below, Plaintiff's motion is denied, Defendant's motion is granted, and judgment is entered in favor of the Secretary of the Department of Health and Human Services (the "Secretary").
I. BACKGROUND
In 1972, Congress authorized the Secretary to promulgate regulations limiting Medicare reimbursements to hospitals. Pub.L. No. 92-603 § 223, 86 Stat. 1329, 1393 (1972). However, Congress made it clear that such limitations should not be applied to providers serving communities with limited access to hospitals. H.R.Rep. No. 231, 92d Cong., 1st Sess. 84 (1971). See, also, S.Rep. No. 1230, 92 Cong., 2d Sess. 188 (1972), U.S.Code Cong. & Admin.News 1972, p. 4989. Consistent with this goal, the Secretary's regulations exempted "sole community hospitals" ("SCH") from the reimbursement limitations. The regulations defined an SCH as a hospital that: *1034 by reason of factors such as isolated location or absence of other providers of the same type, is the sole source of such care reasonably available to beneficiaries.
20 C.F.R. § 405.460(f)(4) (1975).
The regulations alone continued to defined when a hospital qualified for SCH status until 1983. In 1983, in order to further cut costs, Congress revamped the method by which hospitals were reimbursed by instituting the "Prospective Payment System" ("PPS"). 42 U.S.C. § 1395ww(d). Rather than reimbursing hospitals the lesser of "reasonable costs" or "customary charges" for services rendered, the PPS method pays hospitals prospectively at a flat rate based on classification of Medicare beneficiaries treated. Id. The new reimbursement scheme continued to include an SCH exemption. However, this time, Congress provided a statutory definition of an SCH:
For purposes of this subparagraph, the term `sole community hospital' means a hospital that, by reason of factors such as isolated location, weather conditions, travel conditions, or the absence of other hospitals (as determined by the Secretary), is the sole source of inpatient hospital services reasonably available to individuals in a geographic area who are entitled to benefits under part A.
Pub.L. No. 98-21 § 601(e), 97 Stat. 158 (1983) codified at 42 U.S.C. § 1395ww(d)(5)(C)(ii).
In response, the Secretary promulgated more comprehensive regulations defining when hospitals qualified for SCH status. Under those regulations, a hospital located in a rural area[1] could qualify for SCH status if it fell into one of the following categories:
(1) The hospital is located more than 50 miles from other like hospitals.
(2) The hospital is located between 25 and 50 miles from other like hospitals and meets one of the following criteria:
(i) No more than 25 percent of the residents or, if data on general resident utilization are not available, no more than 25 percent of the Medicare beneficiaries in the hospital's service area are admitted to other like hospitals for care;
(ii) The hospital has fewer than 50 beds and the intermediary certifies that the hospital would have met the criteria in paragraph (a)(2)(i) of this section were it not for the fact that some beneficiaries or residents where forced to seek care outside the service area due to the unavailability of necessary specialty services at the community hospital; or
(iii) Because of local topography or periods of prolonged severe weather conditions, the other like hospitals are inaccessible for at least one month out of each year.
(3) The hospital is located between 15 and 25 miles from other like hospitals but because of local topography or periods of prolonged severe weather conditions, the other like hospitals are inaccessible for at least one month out of each year.
49 Fed.Reg. 234, 270-72 codified at 42 C.F.R. § 412.96 (1986).
In 1989, the Secretary eased the requirements. The mileage radius to receive a per se SCH classification under subpart (1) was reduced to 35 miles and the inaccessibility requirement in subparts (2)(iii) and (3) was reduced to "at least 30 days in each 2 out of 3 years." 54 Fed.Reg. 36,452 and 36,494 (Sept. 1, 1989) codified at 42 C.F.R. 412.92 (1989).
Later that year, Congress passed the Omnibus Budget Reconciliation Act of 1989. The act amended the statutory definition of an SCH to take into consideration travel time and travel conditions to alternate facilities. The new definition provided:
The term `sole community hospital' means a hospital that, by reason of factors such as time required for an individual to travel to the nearest alternative source of appropriate inpatient care (in accordance with standards promulgated by the Secretary) location, weather conditions, travel conditions, or the absence of other hospitals (as determined by the Secretary), is the sole source of inpatient hospital services reasonably available to [Medicare beneficiaries] in a geographic area. *1035 Pub.L. No. 101-239, § 6003(e), 1989 U.S.C.C.A.N. (103 Stat.) 2106, 2143, codified at 42 U.S.C. § 1395ww(d)(5)(D)(iii)(II).
The Secretary again amended the regulations to comply with the statutory changes, producing the version of the regulation which is at issue here. The version provides:
(a) Criterion for classification as a sole community hospital. HCFA classifies a hospital as a sole community hospital if it is located more than 35 miles from other like hospitals, or it is located in a rural area (as defined in § 412.83(b)) and meets one of the following conditions:
(1) The hospital is located between 25 and 35 miles from other like hospitals and meets one of the following criteria:
(i) No more than 25 percent of the residents who become hospital inpatients or no more than 25 percent of the Medicare beneficiaries who become hospital inpatients in the hospital's service area are admitted to other like hospitals located within a 35-mile radius of the hospital, or, if larger, within its service area;
(ii) The hospital has fewer than 50 beds and the intermediary certifies that the hospital would have met the criteria in paragraph (a)(1)(i) of this section were it not for the fact that some beneficiaries or residents were forced to seek care outside the service area due to the unavailability of necessary specialty services at the community hospital; or
(iii) Because of local topography or periods of prolonged severe weather conditions, the other like hospitals are inaccessible for at least 30 days in each 2 out of 3 years.
(2) The hospital is located between 15 and 25 miles from other like hospitals, but because of local topography or periods of prolonged severe weather conditions, the other like hospitals are inaccessible for at least 30 days in each 2 out of 3 years.
(3) Because of distance, posted speed limits, and predictable weather conditions, the travel time between the hospital and the nearest like hospital is at least 45 minutes.
42 C.F.R. § 412.92 (1992).
Bradford applied for SCH status. It conceded that it is located 23.2 miles from the nearest like hospital and that it did not meet the SCH regulatory criterion for hospitals located between 15 and 25 miles of the nearest like hospital. The Health Care Financing Administration ("HCFA") denied its application. Bradford appealed to the Provider Reimbursement Board ("PRB"), challenging the validity of the regulations as arbitrary, capricious and inconsistent with 42 U.S.C. § 1395ww(d)(5)(D)(iii)(II). This challenge was beyond the authority of the administrative review process and the matter was granted expedited judicial review under 42 U.S.C. § 1395oo(f)(1). We now review the validity of the regulations.
II. STANDARD OF REVIEW
When Congress has expressly delegated rule making authority to the Secretary, her regulations are entitled to controlling weight unless they are "arbitrary, capricious or manifestly contrary to the statute." Chevron v. Natural Res. Def. Council, 467 U.S. 837, 844, 104 S. Ct. 2778, 2782, 81 L. Ed. 2d 694 (1984).
III. DISCUSSION
Congress has expressly authorized the Secretary to promulgate the regulations in question under 42 U.S.C. § 1395ww(d)(5)(D)(iii). Two courts of appeals[2] and two district courts[3] have addressed the validity of 42 C.F.R. § 412.92 and have found it to be neither arbitrary and capricious nor manifestly contrary to the statute. Only one district court has held *1036 otherwise, but the reasoning on which that decision rests has been undermined by the appropriate circuit.[4]
A. Are the Regulations Manifestly Contrary to The Statute?
Bradford first argues that the regulation are manifestly contrary to the statute because they are both inconsistent with the statutory language and inconsistent with Congressional intent by failing to consider physicians' admitting patterns when determining SCH status for hospitals that are located between 15 and 25 miles of other like hospitals ("15-25 mile hospitals").
When construing the validity of federal regulations against an enabling statute, a court must first look to see if the regulations are inconsistent with the unambiguously expressed intent of Congress. Chevron, 467 U.S. at 843, 104 S.Ct. at 2781-82. If Congress has spoken, both the court and agency must give effect to the plain language of the statute. Id. If Congress has not spoken on the issue, "the question for the court is whether the agency's answer is based on a permissible construction of the statute." Id.
Obviously, the text of the statute does not contain a Congressional directive to the Secretary to include physicians' admitting patterns among the SCH qualification criterion for 15-25 mile hospitals. In fact, the statute uses the phrase "such as" to introduce the list of factors that are relevant for determining SCH status. "`[S]uch as' does not imply that there are necessarily more relevant factors than those Congress enumerated. `Such as' signifies a broader grant of discretion, one that permits, but does not require, the Secretary to conclude that there are other factors of the kind specified in the statute that are relevant to the determination she must make." Macon County Samaritan Memorial Hosp., 7 schmidtjulie@example.com.
In the absence of a such a directive, Bradford urges us to read one into the statute because Congress chose to use the phrase "sole source of inpatient hospital services reasonably available" when it defined an SCH. Bradford points to a number of pre-1983 decisions holding that restrictive admission patterns could render a hospital a "sole source" of care.[5] Relying primarily on Fogerty v. Fantasy, 510 U.S. 517, 114 S. Ct. 1023, 127 L. Ed. 2d 455 (1994), Bradford argues that Congress ratified and incorporated the pre-1983 judicial definition of "sole source" as embodied by these decisions into the statute because Congress should be presumed to have been aware of them.
However, Bradford reads Fogerty too loosely. The section of the Fogerty opinion to which Bradford cites is a discussion of Lorillard v. Pons, 434 U.S. 575, 98 S. Ct. 866, 55 L. Ed. 2d 40 (1978) wherein the Court held that Congress was presumed to be aware of administrative and judicial interpretations when it re-enacts a statute without change. Fogerty, 510 U.S. at 527, 114 S.Ct. at 1029-30 (citing Lorillard v. Pons, 434 U.S. 575, 580, 98 S. Ct. 866, 869-70, 55 L. Ed. 2d 40 (1978). Lorillard involved the question of whether Congress intended to create a right to a jury trial under the Age Discrimination in Employment Act ("ADEA") when it provided that the relevant portion of the ADEA was to be "enforced in accordance with the `powers, remedies and procedures'" of specified sections *1037 of the Fair Labor Standards Act ("FLSA"), 81 Stat. 604, 29 U.S.C. § 626(b). Id. at 528, 114 S.Ct. at 1030. The Court, in Lorillard, found the inference of incorporation particularly appropriate because Congress had exhibited both a detailed knowledge of the judicial interpretations and also a willingness to depart from those decisions in other parts of the statute. Lorillard, 434 U.S. at 580, 98 S.Ct. at 869-70.
This case is distinguishable from Lorillard for several reasons. First, in Lorillard, Congress specifically said that it was incorporating parts of the FLSA into the ADEA. Second, the legislative record actually reflected that Congress had both "detailed knowledge" of the judicial interpretations of the relevant portions FLSA and an intent to incorporate them. Id. at 582, 98 S.Ct. at 871. The statute here does not mention the pre-1983 regulations nor has Bradford pointed to anything in the legislative record exhibiting a detailed knowledge of the pre-1983 regulatory provisions or a Congressional intent to ratify any definition which may have emerged from those cases. Bradford's evidence of legislative intent to ratify is a 1983 Senate Legislative Report ("Senate Report") which expressed concern over inconsistent application of "very narrow and restrictive criterion" and stated that the committee "expect[ed] that the Secretary ... will develop a much broader range of factors." S.Rep. No. 23, 98th Cong. & Admin.News 1983, pp. 143, 194. The inconsistent application of narrow criterion with which the committee was concerned is a reference to a 1982 General Accounting Office Report ("GAO Report") about the Denver Regional Office's application of the 25 mile criterion without consideration of the extent to which patients obtained care from other hospitals. GAO Report on § 223 Hospital Reimbursement Limits (Aug. 6, 1982), [1982 Transfer Binder] Medicare & Medicaid Guide (CCH) ¶ 32,212. The Senate Report, at best, shows that the Committee had knowledge of the practices of one regional office as outlined in the GAO Report, not that Congress had detailed knowledge of decisions awarding hospitals within 25 miles of like facilities SCH status.
Bradford next argues that the regulations are inconsistent with Congressional intent. This is really a recycled version of Bradford's ratification argument because Bradford wants us to look at the legislative history of the statute to determine whether Congress intended that the Secretary include physicians' admitting patterns among the regulatory criterion governing SCH status for 15-25 mile hospitals by using the phrase "sole source of inpatient hospital services reasonably available."
When a court has determined that a statute is clear and unambiguous on its face, the court's review of "legislative history is limited to determining only whether there is a `clearly expressed legislative intention' contrary to that language, which would require [the court] to question the strong presumption that Congress expresses its intention through the language it chooses." INS v. Cardoza-Fonseca, 480 U.S. 421, 433 n. 12, 107 S. Ct. 1207, 1214 n. 12, 94 L. Ed. 2d 434 (1987) (citing United States v. James, 478 U.S. 597, 606, 106 S. Ct. 3116, 3121-22, 92 L. Ed. 2d 483 (1986); Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S. Ct. 2051, 2056, 64 L. Ed. 2d 766 (1980)). We are not able to find a clear expression of legislative intent contrary to the language of the statute here. A fair reading of the Senate Report, that Bradford cites as legislative history, suggests that the committee was far more concerned with the inconsistent application of SCH criterion than it was with which specific factors the Secretary considered. Clinton, 10 schmidtjulie@example.com. Bradford's argument is further undermined by the fact that "Congress specifically added two factors, travel and weather conditions, that had been considered under the prior regulations, but had not appeared in the regulations; the addition[s] would have been pointless if Congress really thought that it was incorporating all the factors that the HCFA or the courts had thought relevant under the prior regulation." Id. Similarly, in 1989, Congress added travel time and travel conditions as factors, but again left out physicians' admitting patterns. The natural inference is that Congress has enumerated those factors it thinks are important and left out those it does not think are *1038 important, not that Congress intended the Secretary to consider an expanded list of factors that included physicians' admitting patterns.
In sum, since significant evidence exists supporting the proposition that Congress did not intend to include physicians' admitting patterns among the factors to be considered, we must conclude that the legislative history of the statute does not contain evidence of clear legislative intent that is sufficient to cause us to question the plain language of the statute. Furthermore, since the plain language contains no authority for a Congressional mandate to the Secretary to include physicians' admitting patterns in the regulatory criterion for SCH status, 42 C.F.R. § 412.92(a)(3) is not manifestly inconsistent with 42 U.S.C. § 1395ww(d)(5)(D)(iii)(II).
B. Are the Regulations Arbitrary and Capricious
Bradford also attacks the regulations as arbitrary and capricious. The Supreme Court has identified several grounds upon which an agency rule can be arbitrary and capricious:
if the agency [1] relied on factors which Congress has not intended it to consider, [2] entirely failed to consider an important aspect of the problem, [3] offered an explanation for its decision that runs counter to the evidence before the agency, or [4] it is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.
Motor Vehicle Mfrs. Ass'n v. State Farm Mutual Automobile Ins. Co., 463 U.S. 29, 43, 103 S. Ct. 2856, 2867, 77 L. Ed. 2d 443 (1983).
Bradford first argues that the regulations covering 15-25 mile hospitals are arbitrary and capricious because they run counter to the evidence that was before the agency when they were promulgated. Motor Vehicle Mfrs. Ass'n. sets forth the appropriate standard of review in this context:
A court is not to substitute its judgement for that of the agency. Nevertheless, the agency must examine the relevant data and articulate a satisfactory explanation for its action, including a "rational connection between the facts found and the choice made" and cogently explain why it has exercised its discretion in a given manner.
Motor Vehicle Mfrs. Ass'n., 463 U.S. at 43, 103 S.Ct. at 2866.
Bradford takes issue with the manner in which the Secretary considered when evidence of market share was relevant for determining SCH status. First, Bradford argues that the Secretary's Task Force assembled to study the SCH status issue recognized that admitting patterns were the best indicator of provider isolation when it concluded that admitting patterns were an "operational measure" that incorporated all other variables. Next, Bradford points out that market share affects a hospital in the same manner irrespective of its proximity to other hospitals. From these premises, Bradford argues that there is no rational basis for the Secretary's choice to consider evidence of market share as relevant in determining whether a 25-35 mile hospital can qualify for SCH status, but not to consider market share as relevant in determining whether a 15-25 mile hospitals can qualify.[6]
The Secretary explained that it chose not to consider market share factors for 15-25 hospitals when drafting the regulation in 1983 because of the
basic conclusion that hospitals within 25 miles of another hospital were not isolated at all, and were not the only hospitals reasonably available to Medicare beneficiaries, unless seasonal events such as highways blocked with snow for a protracted period of time made them the only hospitals available.
(Koch Aff. at ¶ 13). Of course, this begs Bradford's objectionwhich is that if the Secretary recognized that market share factors could cause a hospital to be an SCH, and if market share affects hospitals independent of their location, it is irrational to limit the ability to qualify for SCH status based on *1039 market share according to a hospital's proximity to other hospitals.
Facially, Bradford's argument is somewhat appealing. If only the 1983 regulations were at issue, there might be some cause to pause. However, by 1989, additional evidence had become available which supported the Secretary's continued adherence to its position in the 1989 regulations. A 1989 study conducted by Systemetrics, which the Secretary had referenced in a comment to the proposed 1989 regulations, showed that only about one percent of all hospitals located within 25 miles of another like facility could meet the market share test. 54 Fed. Reg. 19636, 19651 (May 8, 1989) (proposed regulations). Additionally, the GAO report, on which Bradford has relied elsewhere, observed that hospitals could manipulate the market share test by altering the description of their service area in order to "exaggerate the residents dependence on them for care." GAO Report, supra. Thus, there was evidence in 1989 from which the Secretary could conclude that the number of 15-25 mile hospitals that could qualify for SCH status based on market share was simply too small to warrant the administrative pitfalls associated with it. This conclusion was reasonable, especially in light of the potential for abuse of the market share test that had been identified in the GOA Report. We must also be mindful of the fact that our standard of review is limited. We can not invalidate the regulations because we are troubled by the fact that the results they reach impose some hardship, are undesirable or are not ultimately fair in all circumstances. Lugo v. Schweiker, 776 F.2d 1143, 1151 (3d Cir.1985). Line drawing is inherent in the rule making process. There is a rational connection between the evidence and the regulatory choice that was made and therefore the regulation must be upheld. Motor Vehicle Mfrs. Ass'n., 463 U.S. at 43, 103 S.Ct. at 2866-67.
Next, Bradford argues that the regulations are arbitrary and capricious because they represents a significant change of prior practice for which the secretary did not provide an adequate explanation, citing Motor Vehicle Mfrs. Ass'n., 463 at 43, 103 S.Ct. at 2866-67. This argument must be rejected for a variety of reasons.
Motor Vehicle Mfrs. Ass'n. is inapposite because it involved a total reversal of agency policy without any amendment to the underlying statute.[7] By contrast, the alleged change in agency policy here came in response to significant amendment of the underlying statute by Congress in 1983. Macon County, 7 F.3d at 766; Public Hospital, 806 F.Supp. at 1486. Additionally, the Secretary's amendment to the regulations was a response to a Congressional comment on the lack of uniformity and objectivity under the old regulations. Macon County, 7 schmidtjulie@example.com. Bradford is also wrong because the regulations do not represent a significant departure from prior agency policy. Although several appellate decisions had awarded hospitals within 25 miles of other like facilities SCH status based on admittance patterns, the Secretary had never officially acknowledged that these decisions were correct and had continued to officially take the position that such hospitals should not receive SCH status.[8]Macon County, 7 schmidtjulie@example.com.
*1040 Bradford also argues that the regulations are arbitrary and capricious because the Secretary did not adequately respond to a comment that cast doubt on the propriety of the regulations. The case on which Bradford relies held that an agency's failure to respond to a comment, which if true, would require a change in a proposed rule, could constitute arbitrary and capricious action. ACLU v. FCC, 823 F.2d 1554, 1581 (D.C.Cir. 1987) cert. denied 485 U.S. 959, 108 S. Ct. 1220, 99 L. Ed. 2d 421 (1988). The comment in question here was submitted on Behalf of the Mary Imogene Bassett Hospital and raised the same arguments that Bradford raises. (Administrative Record at 452-7). Since we reject Bradford's arguments, we also find that the comment did not cast such doubt on the propriety of the Secretary's position within the Meaning of ACLU v. FCC, supra, as to require a response.
Finally, Bradford complains that the criterion applying to 15-25 mile providers are arbitrary and capricious because they impose a virtually insurmountable barrier to attaining SCH status. First, we note that the uncontroverted evidence shows that three hospitals have been successful under the 15-25 mile hospital criterion. (Aff. of Nancy A. Edwards). Second, the fact that the Secretary has chosen to be chary with the SCH designation for 15-25 mile hospitals is not "absurd" or "implausible," but rather reflects her belief that SCH status should be the unusual exception for such hospitals. This is a permissible interpretation of the statute.
IV. CONCLUSION
An appropriate order follows.
ORDER
AND NOW, this 24 day of December, 1996, for the reasons stated in the accompanying Memorandum Opinion:
IT IS HEREBY ORDERED that Plaintiff's Motion for Summary Judgment [Doc. No. 20] is DENIED and Defendant's Motion for Summary Judgment [Doc. No. 24] is GRANTED; and
JUDGMENT is hereby entered in favor of Defendant, Donna E. Shalala, Secretary of the Department of Health and Human Services, and against Plaintiff, Bradford Hospital.
NOTES
[1] A rural area is defined in 42 C.F.R. § 412.83(b). That section is not at issue here.
[2] See, Clinton Memorial Hospital v. Shalala, 10 F.3d 854 (D.C.Cir.1993); Macon County Samaritan Memorial Hosp. v. Shalala, 7 F.3d 762 (8th Cir.1993).
[3] See Public Hospital Dist. No. 1 v. Sullivan, 806 F. Supp. 1478 (E.D.Wash.1992); A.O. Fox Memorial Hospital v. Sullivan, Medicare and Medicaid Guide (CCH) ¶ 38,364 at 22,068, 1989 WL 153730 (N.D.N.Y.1989).
[4] In Central Oregon Hospital Dist. v. Sullivan, 757 F. Supp. 1134 (D.Or.1991), the district court found the regulations arbitrary and capricious as applied to rural hospitals located within 25 miles of other facilities because they failed to consider factors in addition to those listed in the statute. However, the continued validity of that decision is dubious in light of the Ninth Circuit's reasoning in San Bernardino Mountains Community Hospital v. Secretary, 63 F.3d 882 (9th Cir.1995). In San Bernardino, the Ninth Circuit held that the regulations were not invalid as applied to an urban hospital because they failed to take into account factors in addition to those listed in the statute. San Bernardino Mountains Community Hospital, 63 schmidtjulie@example.com. The Court expressly reasoned that "the use of the phrase `factors such as' reveals that Congress intended to permit (but not require) the Secretary to consider both the named factors and other relevant factors." Id.
[5] See, e.g., Hamilton Memorial Hospital v. Schweiker, [1982 Transfer Binder] Medicare & Medicaid Guide (CCH) ¶ 32,109 (N.D.Ga. June 30, 1982); Santa Ynez Valley Hosp. v. Blue Cross Ass'n., [1978 Transfer Binder], Medicare & Medicaid Guide (CCH) ¶ 29,221 (PRRB July 25, 1978); St. Elizabeth Community Hosp. v. Heckler, 745 F.2d 587 (9th Cir.1984); Graham Hosp. Ass'n. v. Heckler, 739 F.2d 285 (7th Cir.1984).
[6] This distinction is embodied in 42 C.F.R. § 412.96(a)(1)(i) which permits a 25-35 mile hospital to qualify for SCH status based on market share. 42 C.F.R. § 412.96(a)(2) does not permit consideration of market share for 15-25 mile providers.
[7] In Motor Vehicle Mfrs. Ass'n. the National Highway Traffic Safety Administration had rescinded a requirement that all new vehicles be equipped with passive restraint (automatic seat-belts or airbags) without any change in the statute authorizing the Secretary to promulgate the regulations. See Motor Vehicle Mfrs. Ass'n., 463 U.S. at 33-34, 103 S.Ct. at 2861-62.
[8] The documents that Bradford cites are incapable of supporting the argument that the Secretary had ever adopted a policy that physicians' admitting patterns should be given determinative weight when analyzing SCH status for 15-25 mile hospitals. The Task Force Report is a recommendation compiled by several HCFA regional directors. It is not a binding statement of official policy. See Report of the Regional Administrator Task Force On Sole Community Exemptions (Feb. 28, 1983). I.L. 74-22 specifically takes the position that hospitals within 25 miles of like facilities should not receive SCH status. I.L. 72-22 [1974 Transfer Binder] Medicare & Medicaid Guide (CCH) ¶ 27,044, p. 10,426. I.L. 78-17 does not represent a reversal of policy because it only states that this information should be furnished by providers seeking SCH status, not that it would be given determinative weight by the Secretary. I.L. 78-17 [1978 Transfer Binder] Medicare & Medicaid Guide (CCH) ¶ 28,972 p. 9698.
|
Title: [Ontario Canada] Need advice.. our son caught driving impaired Jan 06/2018
Question: My wife and I are at a loss to know the best way to help our son.. He's 31 and in the armed forces. He's never been charged with an impaired charge before.. he blew .12 . He's obviously very upset and doesn't know what to do.. and we have no experience with this ourselves. We've heard ads on the radio etc.. excopper.. lawyers.. but we don't know the best route to take to help him through this. We would be very grateful to anyone that could offer some helpful advice.
Answer #1: He is 31, why are you helping him? He is a grown adult. He can face the consequences and sober up.
Get a lawyer through if you’re going to insist on enabling him and fixing his problems for him. |
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
_________________________________________
)
Tyrita Thomas, )
)
Plaintiff, )
)
v. ) Civil No. 14-cv-00335 (APM)
)
District of Columbia, )
)
Defendant. )
_________________________________________ )
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
Plaintiff Tyrita Thomas filed this lawsuit against her former employer, Defendant District
of Columbia, alleging that she was unlawfully denied leave under the Family Medical Leave Act
(“FMLA”) and the District of Columbia Family Medical Leave Act (“DCFMLA”). Plaintiff
worked most recently as a fingerprint specialist in the District of Columbia Metropolitan Police
Department. She asserts that she was illegally denied leave under the FMLA and DCFMLA
beginning in late 2011, when she began to suffer from a serious health condition, through February
2012, when she was terminated from her position. Plaintiff also alleges that she was retaliated
against both for seeking FMLA leave and for filing an internal complaint alleging sex
discrimination in mid-2011.
This matter is before the court on Defendant’s Motion for Summary Judgment. Defendant
asserts that Plaintiff was not entitled to leave under the FMLA or DCFLMA because (1) she did
not suffer from a serious medical condition and (2) she did not provide the Police Department with
the requisite notice in order to request FMLA leave. Defendant further contends that Plaintiff was
not retaliated against, but instead was disciplined and then terminated due to her own
insubordination, neglect of duty, and AWOL status.
Having reviewed the evidence, the court finds that a reasonable jury could conclude that
Plaintiff was improperly denied leave under the FMLA and the DCFMLA. The court also finds
that a reasonable jury could conclude that Plaintiff was retaliated against for seeking such leave.
However, the court finds that no reasonable jury could conclude that Defendant retaliated against
Plaintiff because she previously had filed a sex discrimination complaint. The court therefore
grants in part and denies in part Defendant’s Motion for Summary Judgment.
II. BACKGROUND
A. Factual Background
1. Plaintiff’s Workplace Discipline
Plaintiff Tyrita Thomas worked at the District of Columbia Metropolitan Police
Department (“MPD”) from 1995 to 2008, and returned in 2010 as a supervisory fingerprint
specialist. Def.’s Mot. for Summ. J., ECF No. 23, Statement of Undisputed Material Facts, ECF
No. 23-2 [hereinafter Def.’s Stmt.], ¶ 1; Pl.’s Opp’n to the District of Columbia’s R.56 Motion for
Summ. J., ECF No. 24 [hereinafter Pl.’s Opp’n], Plaintiff’s Statement of Material Facts in Dispute,
ECF No. 24-1 [hereinafter Pl.’s Stmt.], ¶ 1. Gregory Hudson was Plaintiff’s direct supervisor after
she returned to the MPD. Pl.’s Opp’n, Ex. A, Dep. of Gregory Hudson, ECF No. 24-2 [hereinafter
Hudson Dep.], at 11. Hudson’s direct supervisor, in turn, was Captain Samuel Snyder. Hudson
Dep. at 14.
Beginning in or around May 2011, Plaintiff claims that Hudson began scrutinizing her time
sheets more carefully than the time sheets of her male colleague, Ralph Vinson. Pl.’s Opp’n, Ex. E,
Aff. of Tyrita Thomas, ECF No. 24-6 [hereinafter Thomas Aff.], at 2. Then, on or around July 26,
2
2011, “for reasons unknown,” Hudson “got close to [Plaintiff’s] face” and began “berating [her]
and yelling to [her] face.” Id. Hudson characterized the incident as a “loud discussion” following
Plaintiff’s refusal to do work assigned to her. Hudson Dep. at 41-42. As a result of this argument,
Defendant contends that Plaintiff “took sick leave without prior approval.” Def.’s Stmt. ¶ 2.
At some point after the argument, Plaintiff complained to her supervisors about the incident.
Ultimately, in September 2011, she filed a complaint with the MPD’s Equal Employment
Opportunity office, alleging sex discrimination by Hudson. Thomas Aff. ¶ 12; see also Pl’s Opp’n,
Ex. L, Dep. of Tyrita Thomas, ECF No. 24-13 [hereinafter Thomas Dep.], at 61-65. MPD
eventually resolved the matter by issuing Plaintiff a Letter of Admonition for leaving work without
approval in September 2011, which she refused to sign out of protest. Thomas Aff. ¶ 13; Def.’s
Stmt. ¶ 2. Hudson also was issued a Letter of Admonition as a result of the incident. Hudson Dep.
at 42-44.
On December 2, 2011, Plaintiff missed the deadline for submitting evaluations for her
approximately 13 subordinates and then, ignoring the requests of her supervisors, left work before
completing them. Def.’s Mot. for Summ. J., Ex. 18, Final Investigative Report with
Recommendations Regarding Allegations of Insubordination and Neglect of Duty on the Part of
Civilian Tyrita Thomas of the Fingerprint Analysis Branch, ECF No. 23-18 [hereinafter Dec. 19
Investigative Report], at 5; Thomas Dep. at 113. An internal MPD review found Plaintiff to have
been (1) neglectful of her duties because she had failed to complete the evaluations and
(2) insubordinate because she had left work before the evaluations were complete, despite the
directives of her supervisors to remain on duty. Dec. 19 Investigative Report at 6. According to
Plaintiff, a computer error—rather than her own neglect—caused her to be unable to finish her
evaluations. Thomas Aff. ¶¶ 17-23.
3
On December 14, 2011, Plaintiff was asked to submit a signed statement regarding her
inability to complete the evaluations. Def.’s Stmt. ¶ 4. Plaintiff left work instead. Hudson Dep. at
90-94. A second MPD review found that Plaintiff was “AWOL” when she left work without
permission on that date. Def.’s Mot. for Summ. J., Ex. 15, Final Investigative Report with
Recommendations Regarding Allegations of Insubordination and Neglect of Duty on the Part of
Civilian Tyrita Thomas of the Fingerprint Analysis Branch, ECF No. 23-15 [hereinafter Jan. 10
Investigative Report], at 9. Unknown to all at the time, December 14 would be the last day Plaintiff
would report for work. From December 15 through December 19, 2011, Plaintiff was out on
approved annual leave, Pl.’s Stmt. ¶ 2. And then, on December 20, 2011, Plaintiff left a voicemail
for Hudson requesting eight hours of sick leave and was out sick. See Thomas Aff. ¶ 28.
2. Plaintiff’s Leave Request
Whether Plaintiff was entitled to leave under the FMLA in the days following December
20, 2011, is the crux of the parties’ dispute. Defendant’s position is that Plaintiff did not return to
work after her request for sick leave and did not answer multiple phone calls by Hudson inquiring
as to her whereabouts and, as a result, “was essentially AWOL for weeks on end.” Def.’s Mot. for
Summ. J., Mem. of Points and Authorities in Support of District of Columbia’s Mot. for Summ. J.,
ECF No. 23-1 [hereinafter Def.’s Mot.], at 3, 13. Plaintiff, on the other hand, says that she visited
her doctor on December 21, 2011, who directed her to stay home from work. Thomas Aff. ¶ 29.
After she visited her doctor, she then called both Captain Snyder and Hudson, and left Hudson a
voicemail alerting him that she was “going to be out on extended medical leave because of
depression and my doctor’s request. Call me if you need to speak to me about this.” Id. ¶ 31. For
his part, Hudson did not recall receiving such a voicemail from Thomas. Hudson Dep. at 104.
4
With the help of some coworkers, Plaintiff acquired an application for FMLA leave on or
after December 21, 2011. Thomas Aff. ¶ 34. On or around December 31, 2011, Plaintiff’s father
submitted the application to the MPD on her behalf. Thomas Aff. ¶ 35. Plaintiff sought “240 hours
of medical leave because of a serious medical condition.” Pl.’s Opp’n, Ex. G, December 31, 2011
FMLA Leave Application, ECF No. 24-8 [hereinafter December 31 Application], at 3. The
application did not, however, specify the nature of the condition. Plaintiff requested that the leave
be in a “continuous block of time,” starting on December 20, 2011, nine days before she submitted
the application, to “present.” Id. Plaintiff also indicated that the leave requested was
“[i]ntermittently as medically necessary.” Id. She attached to the application a handwritten note
from her treating physician, Dr. Robert Ball, dated December 21, 2011, which stated: “The above
patient was seen today and is required and ordered to be away from her place of work until further
notice!” Id. at 1; Thomas Aff. ¶ 35.
The parties agree that Plaintiff’s initial application for FMLA leave was incomplete. Def.’s
Stmt. ¶ 17; Pl.’s Stmt. ¶ 6. It did not contain the required medical certification from her doctor—
the handwritten note was insufficient. Def.’s Stmt. ¶ 17; see also Pl.’s Opp’n, Ex C., Dep. of Diana
Haines Walton, ECF No. 24-4 [hereinafter Walton Dep.], at 20 (noting that a FMLA application
packet includes both the application and “the doctor’s certificate” that must be completed). The
incomplete FMLA leave application was returned to Plaintiff on or about December 31, 2011, with
instructions to resubmit it. Hudson Dep. at 99-100.
The very next day, on January 1, 2012, MPD placed Plaintiff on AWOL status because she
had not “return[ed] to work” after her absence beginning in mid-December 2011, despite numerous
phone calls by MPD employees trying to find her. Def.’s Stmt. ¶ 19; Def.’s Mot. for Summ. J.,
Ex. 14, Personnel Action Request Form, ECF No. 23-14, at 1; see also Thomas Aff. ¶ 37. At a
5
meeting on January 13, 2012, MPD officials decided to terminate Plaintiff. Def.’s Mot. for Summ.
J., Ex. 10, Affidavit of Gregory Hudson, ECF No. 23-10 [hereinafter Hudson Aff.], ¶ 9.
Unaware of the termination decision, Plaintiff submitted a complete application for FMLA
leave on January 19, 2012. Def.’s Stmt. ¶ 22; Pl’s Stmt. ¶ 9. The application included a medical
certification from Dr. Ball, which stated that Plaintiff suffered from “Depression/Anxiety – Work
Induced” that began on approximately November 9, 2011. Def.’s Mot. for Summ. J., Ex. 16,
Medical Certification by Health Care Provider, ECF No. 23-16 [hereinafter Medical Certification].
Dr. Ball estimated that the “probable duration of her condition” would continue until February 16,
2012. Id. Asked to certify whether it will “be necessary for the employee to take work only
intermittently or to work on less than full schedule as a result of the condition,” Dr. Ball answered
the question “Yes” and estimated the probable duration of such reduced work availability to last
until February 16, 2012. Id. In response to another question, Dr. Ball answered that Plaintiff was
“Presently Incapacitated [Duration] Approx. 3 [months].” As for Plaintiff’s treatment needs,
Dr. Ball certified that Plaintiff would have to be “absent from work” to attend “2 [psychotherapy]
sessions per week until further notice.” Id. He estimated that it would take Plaintiff four hours to
recover from each session. Id. She also would be treated by a prescription drug regimen. Id. Asked
to certify whether the employee is “unable to perform work,” Dr. Ball answered that Plaintiff would
be able to “perform [her] job between treatments.” Id.
On January 31, 2012, Defendant sent a letter to Plaintiff informing her that she was
terminated from her position as of February 15, 2012. Def.’s Mot. for Summ. J., Ex. 17, Letter of
Termination, ECF No. 23-17 [hereinafter Letter of Termination]. The letter stated that Plaintiff’s
termination was “based on cause (neglect of duty, inefficiency and abandonment)” and because she
had “been in an Absence without Official Leave status (AWOL) since December 21, 2011.” Id.
6
at 1. Plaintiff first learned of her termination when she spoke to Hudson by phone on February 2,
2012. Thomas Aff. ¶ 43.
B. Procedural History
Following her termination, Plaintiff filed a complaint with the District of Columbia’s
Office of Human Rights (“OHR”). See generally Pl’s Opp’n, Ex. D, OHR Letter of Determination,
ECF No. 24-5 [hereinafter OHR Letter]. On July 11, 2013, the OHR issued its Letter of
Determination, finding that Defendant either had failed to address or unreasonably denied
Plaintiff’s request for FMLA leave. OHR amanda24@example.net. The OHR also found, however, that there
was no probable cause to believe that MPD had retaliated against Plaintiff under the FMLA or that
Plaintiff was subjected to disparate treatment based on her sex. Id. at 21
On January 24, 2014, Plaintiff filed a complaint in the Superior Court of the District of
Columbia. Compl., ECF No. 1-1. A month later, on February 28, 2014, Defendant removed the
case to this court. Id. Defendant filed its Motion for Summary Judgment on July 17, 2015.
ECF No. 23.
III. LEGAL STANDARD
Summary judgment may 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). “[T]he mere existence of some alleged factual dispute between the parties will not defeat
an otherwise properly supported motion for summary judgment; the requirement is that there be
no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)
(emphasis in original). “A fact is ‘material’ if a dispute over it might affect the outcome of a suit
under governing law; factual disputes that are irrelevant or unnecessary’ do not affect the summary
7
judgment determination.” Holcomb v. Powell, 433 F.3d 889, 895 (D.C. Cir. 2006) (quoting Liberty
Lobby, 477 U.S. at 248).
The party seeking summary judgment “bears the heavy burden of establishing that the
merits of his case are so clear” that a grant of summary judgment is appropriate. Taxpayers
Watchdog, Inc. v. Stanley, 819 F.2d 294, 297 (D.C. Cir. 1987). When considering a motion for
summary judgment, “[t]he evidence of the non-movant is to be believed, and all justifiable
inferences are to be drawn in his favor.” Liberty Lobby, 477 U.S. at 255. The court must “eschew
making credibility determinations or weighing the evidence” on a motion for summary judgment.
Czekalski v. Peters, 475 F.3d 360, 363 (D.C. Cir. 2007). The non-movant’s opposition, however,
must consist of more than mere unsupported allegations; instead, it must be supported by
affidavits, declarations or other competent evidence setting forth specific facts that show there is
a genuine issue for trial. See Fed. R. Civ. P 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 324
(1986). In other words, the non-moving party is “required to provide evidence that would permit
a reasonable jury to find [in his favor].” Laningham v. U.S. Navy, 813 F.2d 1236, 1242 (D.C. Cir.
1987).
IV. DISCUSSION
A. The FMLA and the DCFMLA
Plaintiff brings claims under both the FMLA, 29 U.S.C. § 2601, et seq., and the DCFMLA,
D.C. Code Ann. §§ 32-503, 32-507. The FMLA provides that an eligible employee is entitled to
12 weeks of leave per year for a “serious health condition that makes the employee unable to
perform the functions of the position of such employee.” 29 U.S.C. § 2612(a)(1)(D). Similarly,
the DCFMLA provides that a covered employee who “becomes unable to perform the functions
8
of the employee’s position because of a serious health condition” shall receive 16 weeks of
protected medical leave during any 24-month period. D.C. Code Ann. § 32-503(a).
Both the FMLA and the DCFMLA recognize two theories of recovery for statutory
violations: (1) the entitlement or interference theory, and (2) the retaliation or discrimination
theory. 29 U.S.C. § 2615(a); D.C. Code Ann. § 32-507; see also Gordon v. U.S. Capitol Police,
778 F.3d 158, 160-61 (D.C. Cir. 2015); Wash. Convention Ctr. Auth. v. Johnson, 953 A.2d 1064,
1075-76 (D.C. 2008) (recognizing that that DCFMLA’s theories of recovery parallel the FMLA’s).
The first theory prohibits any person from interfering with, restraining, or denying the exercise of
or the attempt to exercise any right provided by the statute. 29 U.S.C. § 2615(a)(1); Wash.
Convention Ctr. Auth., 953 amanda24@example.net. The second theory makes it unlawful for an employer
to discharge or discriminate in any manner against any individual for opposing any practice made
unlawful by the statute. 29 U.S.C. § 2615(a)(2); Wash. Convention Ctr. Auth., 953 amanda24@example.net.
In this case, Plaintiff contends both that MPD unlawfully denied her leave under the FMLA
and DCFMLA, see Am. Compl., ECF No. 9, ¶¶ 48-54, 77-83,1 and that it retaliated against her for
applying for such leave, id. ¶¶ 55-61, 84-90. The court first considers whether a reasonable jury
could conclude that Defendant illegally denied Plaintiff’s entitlement to leave under the FMLA
and DCFMLA. It then turns to Plaintiff’s claim that she faced retaliation because she applied for
such leave.
1
The court reads Plaintiff’s complaint to advance only a theory of unlawful denial of leave, as distinct from an
unlawful interference with her right to seek leave under the FMLA. See Compl. ¶¶ 48-54, 77-83. The later claim
would have required Plaintiff to show that “her employer interfered with, restrain[ed], or denied the exercise of or the
attempt to exercise, any right provided by the FMLA and that she was prejudiced thereby.” McFadden v. Ballard
Spahr Andrews & Ingersoll, LLP, 611 F.3d 1, 7 (D.C. Cir. 2010) (quotations and citations omitted). As noted below,
the parties agree that those two elements do not define the unlawful denial claim that Plaintiff advances here.
9
1. Unlawful Denial of Leave
The parties agree that, under the FMLA and DCFMLA, to prove that an employer
unlawfully denied an individual’s right to leave, the plaintiff must show that (1) she had a serious
health condition; (2) her condition rendered her unable to perform the functions of her job; (3) she
gave her employer reasonable notice of her need to take leave and the reasons for doing so; (4) the
employer wrongfully denied the leave; and (5) plaintiff suffered a legal injury as a result of the
denial. See Am. Compl. ¶¶ 50, 79; Def.’s Mot. at 7 (both parties citing Pendarvis v. Xerox Corp.,
3 F. Supp. 2d 53, 55 (D.D.C. 1998)). Defendant argues that Plaintiff is unable to prove the second
and third elements of her claim. The court considers these arguments in turn.
a. Inability to perform the functions of her job
The then-applicable regulations implementing the FMLA provided that employers were
required to grant leave to eligible employees for, among other things, “a serious health condition
that makes the employee unable to perform the functions of the employee’s job.” 29 C.F.R.
§ 825.112 (2011). Defendant does not contest that Plaintiff has shown that she suffered from a
“serious health condition.” Def.’s Mot. at 7; 29 C.F.R. § 825.113 (2011) (defining the term
“serious health condition”). Rather, it argues that Plaintiff cannot prove she was “unable to
perform the functions of her job” because the medical certification from her doctor stated that she
could work between treatments. Def.’s Mot. at 7. The court disagrees.
Under the pertinent FMLA regulations, “[a]n employee is unable to perform the functions
of the position where the health care provider finds that the employee is unable to work at all or is
unable to perform any one of the essential functions of the employee’s position within the meaning
of the Americans with Disabilities Act[.]” 29 C.F.R. § 825.123(a) (2011). Moreover, and critically
important for present purposes, “[a]n employee who must be absent from work to receive medical
10
treatment for a serious health condition is considered to be unable to perform the essential
functions of the position during the absence for treatment.” Id. (emphasis added). Here, Plaintiff’s
treating physician, Dr. Ball, certified that it would be necessary for Plaintiff “to take work only
intermittently or to work on a less than full schedule as a result of [her] condition.” Medical
Certification at 1. He also certified that Plaintiff would have to be “absent from work” to attend
“2 [psychotherapy] sessions per week” and that each session would require four hours of recovery
time for a three-month period. Id. at 2. These certifications show that, in Dr. Ball’s estimation,
Plaintiff would have to miss work to attend and recover from two psychotherapy sessions per week.
She, therefore, was “[a]n employee who must be absent from work to receive medical treatment
for a serious health condition” and was thus “unable to perform the essential functions of the
position during the absence for treatment.” 29 C.F.R. § 825.123(a). Dr. Ball’s certifications are
sufficient to create a jury question as to whether Plaintiff was “unable to perform the functions of
the position” to qualify for FMLA leave.
The fact that Dr. Ball also stated that Plaintiff could work “between treatments,” Medical
Certification at 2, does not demand a contrary result. Defendant seems to take the view that an
employee must be “continuously” unable to work to qualify for FMLA leave. See Def.’s Mot. at
9 (arguing that “Plaintiff’s physician confirmed that it was necessary for the employee to miss
work only intermittently or to work on a less than full schedule as a result of the condition . . .
although not continuously”). The FMLA, however, does not impose such a stringent requirement.
It permits an employee who has a “serious health condition that makes the employee unable to
perform the functions of the position of such employee” to take leave “intermittently or on a
reduced leave schedule when medically necessary.” 29 U.S.C. § 2612(a)(1)(D), (b)(1). The court
in Hodges v. District of Columbia recently rejected an argument strikingly similar to the one
11
Defendant makes here. No. 12-cv-1675 (TSC), 2016 WL 1222213, at *9 (D.D.C. Mar. 28, 2016)
(rejecting argument that the plaintiff did not qualify for leave under the FMLA because her
doctor’s certification did not “indicate[ ] that he needed to be completely absent from work to
complete treatment”). As here, the plaintiff in Hodges had obtained a physician’s certification
stating that he would have to be absent from work on an intermittent basis to receive medical
treatment. The court in Hodges held, as this court does, that such a certification “demonstrates
that Plaintiff’s medical condition was a ‘qualifying reason’ for FMLA leave.” Id.
Defendant’s citation to Anderson v. Discovery Commc’ns LLC, 814 F. Supp. 2d 562 (D.
Md. 2011), aff’d 517 Fed. Appx. 190 (4th Cir. 2013), see Def.’s Mot. at 8, does not compel a
different result. The court in Anderson found that plaintiff’s sleep disorder—which, according to
her own doctor, did not significantly impair things like “focus, concentration, alertness, mood, [or]
memory”—was not a “serious medical condition” for purposes of FMLA leave. Id. at 573. There,
the accommodation that the plaintiff sought was that she be allowed to work “a standard eight-
hour work day.” Id. at 566. Such circumstances are quite different from those here, where
Defendant does not even dispute that Plaintiff’s condition is a “serious medical condition,” and
where, according to Plaintiff’s doctor, Plaintiff would have to miss work twice a week for
psychotherapy sessions and post-therapy recovery. Medical Certification at 2. Thus, Anderson is
inapposite.
b. Failure to give proper notice
Next, Defendant contends that Plaintiff has failed to assert an unlawful denial claim
because she did not give MPD reasonable notice of her need to take leave and the reasons for doing
so. The FMLA’s protections will not apply if “timely and adequate communication is not given”
by the employee to the employer, even if the employee has a serious health condition. See
12
Ghawanmeh v. Islamic Saudi Acad., 857 F. Supp. 2d 22, 40 (D.D.C. 2012) (denying plaintiff’s
request for FMLA leave in part because she did not comply with the FMLA’s notice requirement);
see also Rodriguez v. Smithfield Packing Co., Inc., 545 F. Supp. 2d 508, 515-16 (D. Md. 2008).
In other words, an employee seeking FMLA leave must “put [the] employer on notice that the
protections of the Act may apply.” Smithfield Packing, 545 F. Supp. amanda24@example.net. Defendant
contends that summary judgment is warranted because Plaintiff’s notice was deficient in two
respects—its content and its timing. Once again, the court disagrees.
Under the FMLA regulations, the timing and content of an employee’s notice turns on a
threshold question: Is the need for leave foreseeable? See 29 C.F.R. §§ 825.302, 303 (2011). The
court first addresses the timing element of adequate notice as applied to the record facts, and then
the content element.
Timing of FMLA Notice. When the need for FMLA leave is foreseeable, an employee must
give her employer notice at least 30 days before such leave is to begin. 29 C.F.R. § 825.302(a)
(2011). If at least 30 days of notice is not possible, say, “because of a lack of knowledge of
approximately when leave will be required to begin, a change in circumstances, or a medical
emergency,” an employee must give notice “as soon as practicable.” Id. “As soon as practicable
means as soon as both possible and practical, taking into account all of the facts and circumstances
in the individual case.” Id. § 825.302(b). Similarly, when the need for leave is not foreseeable,
an employee “must provide notice to the employer as soon as practicable under the facts and
circumstances of [the] particular case.” Id. § 825.303(a). For unforeseeable leave, “[i]t generally
should be practicable for the employee to provide notice . . . within the time prescribed by the
employer’s usual and customary notice requirements applicable to such leave.” Id. For Plaintiff,
that would have meant following the DCFMLA regulations, see Def.’s Mot. at 11, which provided
13
that “employees must notify their employers of their desire to take medical leave . . . ‘not later than
two (2) business days after the absence begins’ if an emergency ‘prevents an employee from
notifying the employer of the need for medical leave prior to the first day of absence.’” Hamilton
v. Howard Univ., 960 A.2d 308, 317 (D.C. 2008) (quoting 4 DCMR § 1608.3).
Here, the record raises a genuine dispute of material fact as to whether the leave sought by
Plaintiff was unforeseeable and whether she timely notified MPD of her need to take leave.
Defendant argues that Plaintiff first notified the MPD of her need to take leave on December 31,
2011, when she submitted her FMLA application. Def.’s Mot. at 10-11. But Plaintiff’s evidence,
if believed, establishes that she provided adequate notice ten days before submitting her
application. According to Plaintiff, she called in sick on December 20, 2011, and the next day,
she visited her treating physician, Dr. Ball. Thomas Aff. ¶ 29. At the appointment, it appears
that—for the first time—Dr. Ball diagnosed Plaintiff with anxiety and depression and prescribed
her a regimen of medication for that diagnosis. Id.; Thomas Dep. 143: 17-18.2 Dr. Ball also wrote
a note during the appointment, which Plaintiff later submitted to her employer, stating that Plaintiff
“was seen today and is required and ordered to be away from her place of work until further
notice!” December 31 Application, at 1; Thomas Aff. ¶ 35.
From that evidence, a reasonable jury could infer that Plaintiff’s need to take leave did not
become foreseeable until Dr. Ball diagnosed her with anxiety and depression on December 21,
2011. If a jury were to so conclude, Plaintiff would be excused from the 30-day notice
requirement, and she would have been required to notify MPD of her need for leave no later than
2
Defendant argues that Plaintiff must have learned of her diagnosis earlier, by pointing to her own statement that she
first saw Dr. Ball on November 9, 2011. Def.’s Reply Br., ECF No. 25, at 6 (arguing that “nothing in the record
suggests even remotely that plaintiff suffered an emergency”) (citing Thomas Aff. ¶ 30). Although Defendant is
correct that December 21, 2011, was not the first time that Plaintiff saw Dr. Ball, it cites to no evidence that Dr. Ball,
or any other physician, diagnosed Plaintiff with anxiety and depression before that date.
14
two days after her absence began. Plaintiff says she did notify MPD within this timeframe. She
attested that, after seeing Dr. Ball, she left a voicemail for her superior, Hudson, stating that she
would “be out on extended medical leave because of depression and my doctor’s request. Call me
if you need to speak to me about this.” Thomas Aff. ¶ 31. Hudson, however, did not recall receiving
such a voicemail from Thomas or any other communication from her. Hudson Dep. at 104; Hudson
Aff. ¶¶ 5-6 (“Since that initial call on December 20, 2011, up until the date of her termination letter
on January 31, 2012, Ms. Thomas had no additional contact with me or any other supervisors in her
chain of command . . . . [and] made no effort to discuss her duty status or alert me or any other
supervisor that she would require extended sick leave.”). Whether Plaintiff, in fact, left such
message on December 21, 2011—and thus whether Plaintiff provided timely notice of her need to
take leave—will have to be decided by a jury.
Defendant argues that Plaintiff’s notice was untimely for a second reason—she did not
submit a completed leave application, including a final medical certification, until January 19,
2012, almost a month after she stopped coming to work. Def.’s Mot. at 13. That fact, however,
does not disqualify Plaintiff from receiving FMLA leave. Defendant cites no federal or local
regulation or MPD policy that specifies the timeframe in which an employee, after giving the
requisite notice, must complete a formal application requesting leave. To the contrary, there is
evidence in the record that, at least informally, MPD allows its employees up to 15 days to submit
a medical certification after filing an initial application for leave. See Walton Dep. at 27 (testifying
MPD would give an employee approximately “a pay cycle, two weeks, 14 or 15 days” to submit a
medical certification). Although Plaintiff completed her application by January 19, 2012, 19 days
after initially submitting it, Defendant by that time had already both placed Plaintiff on AWOL
status (January 1, 2012) and decided to terminate her (January 13, 2012). Thus, Plaintiff’s (at
15
most) four-day delay in completing her application could not have been the reason that Defendant
denied her leave request.
Content of Plaintiff’s Notice. Next, Defendant contends that the content of Plaintiff’s
notice was insufficient because, among other things, Plaintiff “did not notify MPD of her
anticipated time and duration of leave” and did not “make a reasonable effort to schedule necessary
treatment in a manner that would not unduly disrupt the employer’s operations.” Def.’s Mot. at
11, 12. An employee must satisfy such requirements, however, only when the leave is foreseeable.
On the other hand, when the need for leave is unforeseeable, the employee need only “provide
sufficient information for an employer to reasonably determine whether the FMLA may apply to
the leave request.” 29 C.F.R. § 825.303(b). When, as here, “an employee seeks leave for the first
time for a FMLA-qualifying reason, the employee need not expressly assert rights under the FMLA
or even mention the FMLA.” Id. Having held that there exists a genuine dispute of material fact
as to the foreseeability of Plaintiff’s need for leave, the court has little trouble concluding that the
content of Plaintiff’s notice was adequate under the more relaxed notice standard for unforeseeable
leave.
Here, if a jury were to determine that her need for leave was unforeseeable, it also could
find that the content of Plaintiff’s initial notice was adequate to support her FMLA claim.3 As
discussed, Plaintiff attested that she left her supervisor a voicemail on December 21, 2011, alerting
him that (1) she intended to take “extended medical leave,” (2) her need to take leave arose
“because of depression,” and (3) she would be seeking leave at “[her] doctor’s request.” Thomas
3
It also was adequate to trigger her employer’s obligation to determine if she qualified for FMLA leave. See 29 C.F.R.
§ 825.303(b) (“The employer will be expected to obtain any additional required information through informal
means.”); see also 29 C.F.R. § 825.300(b)(1) (imposing eligibility notice obligations upon an employer “[w]hen an
employee requests FMLA leave, or when the employer acquires knowledge that an employee’s leave may be for an
FMLA-qualifying reason”); Hodges, 2016 WL 1222213 at * 10.
16
Aff. ¶ 31. If a jury were to conclude that Plaintiff left such voicemail—a fact that Defendant
contests—it could find that Plaintiff satisfied the content of notice requirement under 29 C.F.R. §
825.303(b).
Defendant’s Motion for Summary Judgment regarding Plaintiff’s FMLA and DCFMLA
unlawful denial claims is therefore denied.
B. Plaintiff’s Retaliation Claim under the FMLA and DCMLA
Defendant also has moved for summary judgment on Plaintiff’s claims for retaliation under
the FMLA, Am. Compl. ¶¶ 81-88, and the DCFMLA, Am. Compl. ¶¶ 58-65. Def.’s Mot. at 15-
17. Both statutes prohibit retaliation against an employee who (1) exercises, or attempts to
exercise, any right provided under the statute, see 29 U.S.C. § 2615(a)(1); Gordon, 778 F.3d at
161 (recognizing a retaliation claim arising under § 2615(a)(1)); D.C. Code Ann. § 32-507(a); or
(2) “oppos[es] any practice made unlawful” by the statute, 29 U.S.C. § 2615(a)(2); D.C. Code
Ann. § 32-507(b)(2). Plaintiff has not specified the particular subsections under which she asserts
her retaliation claims. However, because she has not offered any evidence showing that she
“oppos[ed] any practice made unlawful” by the statute, the court will treat her retaliation claims
as brought under § 2615(a)(1) of the FMLA and § 32-507(a) of the DCFMLA.
Plaintiff’s retaliation claims are analyzed under the McDonnell Douglas burden-shifting
framework. See Gordon, 778 F.3d at 161 (observing that the court has “imported Title VII’s prima
facie case and burden-shifting regime to the FMLA retaliation context”) (citing Gleklen v.
Democratic Cong. Campaign Comm., Inc., 199 F.3d 1365 (D.C. Cir. 2000)). The prima facie
elements of a FMLA retaliation case, as to which Plaintiff bears the burden, are: “(1) the employee
‘engaged in a protected activity under this statute’; (2) the employee ‘was adversely affected by
an employment decision’; and (3) ‘the protected activity and the adverse employment action were
17
causally connected.’” Id. (quoting Gleklen, 199 F.3d at 1368). As in the Title VII context, if the
plaintiff successfully establishes a prima facie case, the employer must then articulate a legitimate,
nondiscriminatory reason for its actions. If the employer does so, the prima facie case drops out
of the equation, and “[t]he ‘one central inquiry’ that remains is whether a reasonable jury could
infer retaliation or discrimination from all the evidence.” Nurriddin v. Bolden, 818 F.3d 751, 758
(D.C. Cir. 2016) (citation omitted); see also Joyce v. Office of the Architect of Capitol, 106 F. Supp.
3d 163, 176 (“Because the [employer] has presented a non-retaliatory reason for changing his shift,
therefore, it is Plaintiff’s burden to show both this reason was pretextual and that his leave-taking
was the real reason his shift was changed.”). Courts should evaluate this question “in light of the
total circumstances of the case,” asking
whether the jury could infer discrimination from the combination of (1) the
plaintiff's prima facie case; (2) any evidence the plaintiff presents to attack the
employer's proffered explanation for its actions; and (3) any further evidence of
discrimination that may be available to the plaintiff . . . or any contrary evidence
that may be available to the employer.
Nurriddin, 818 F.3d at 759 (citations omitted).
Weighing the evidence, the court finds that there are genuine disputes of material fact as
to whether retaliation was the reason for Plaintiff’s termination. Defendant claims MPD placed
Plaintiff on AWOL status on January 1, 2012, and decided to terminate her less than two weeks
later, because she had not reported for work since December 21, 2011. Def.’s Mot. at 16-17. There
are, however, two key factual disputes underlying the question of whether Plaintiff was properly
put on AWOL status and subsequently terminated. The first, as already discussed, is whether
Plaintiff provided adequate notice of her intent to take FMLA leave. Plaintiff says that she left
Hudson a voicemail message notifying him about her need to take leave on December 21, 2011;
Hudson did not recall receiving such a message. The second disputed issue concerns what
18
transpired between December 21, 2011, and December 31, 2011. According to Hudson, he called
Plaintiff 13 times inquiring why she was not at work, Hudson Aff. ¶ 7—a contention corroborated
by an email from Hudson to his colleagues documenting his efforts, see Def. Mot., Ex. 11, Email
from Gregory Hudson to Karen Wiggins, ECF No. 23-11. Plaintiff, however, generally denies
receiving such phone calls from Hudson. Pl.’s Stmt. at 4; Thomas Aff. ¶¶ 33, 36 (attesting that
Hudson did not return her calls on December 21, 2011, or December 30, 2011). These are material
factual disputes concerning the propriety of placing Plaintiff on AWOL status and subsequently
terminating her that only a jury can resolve. If a jury were to decide either or both of these factual
disputes in Plaintiff’s favor, it could infer that MPD’s assertion that Plaintiff was AWOL from
work—when in fact she properly had requested leave—was a pretext for retaliating against her for
exercising her FMLA rights.
In addition to these factual disputes, the timing of Plaintiff’s placement on AWOL status
and her termination gives rise to an inference of retaliation. Hudson acknowledged that he knew
Plaintiff applied for FMLA leave on December 31, 2011, see Hudson Dep. at 99-100, yet Plaintiff
was placed on AWOL status the very next day. Additionally, Plaintiff made the decision to
terminate Plaintiff on January 13, 2012—before she had a full opportunity to complete her leave
application by submitting a doctor’s certification. Although temporal proximity between a
protected action and the alleged retaliation, without more, is not enough to get Plaintiff past
summary judgment, see Woodruff v. Peters, 482 F.3d 521, 530 (D.C. Cir. 2007) (“positive
evidence beyond mere proximity is required to defeat the presumption that the proffered
explanations are genuine”), here the closeness of the temporal proximity—less than two weeks—
when combined with the factual disputes underlying the stated reason for MPD’s adverse
employment decision, warrant submitting Plaintiff’s retaliation claims to a jury.
19
Defendant’s Motion for Summary Judgment regarding Plaintiff’s FMLA and DCFMLA
retaliation claims is therefore denied.
C. Plaintiff’s Retaliation Claim under Title VII and the DCHRA
Finally, the court turns to Plaintiff’s claims for retaliation under Title VII, 42 U.S.C.
§ 2000e-3(a) (2012), and the District of Columbia Human Rights Act (DCHRA), D.C. Code Ann.
§ 2-1401.01 et seq (West 2001). Those claims rest largely on a different, earlier set of events than
those that give rise to her FMLA and DCFMLA claims. Plaintiff contends that she complained to
her supervisors about unfair workplace treatment in July 2011 and August 2011 and then filed an
internal complaint alleging sex discrimination at her workplace in September 2011. Am. Compl.,
¶¶ 45, 69. As a consequence of those actions, Plaintiff asserts she suffered four types of adverse
actions: (1) a Letter of Admonition dated September 29, 2011; (2) a write-up and finding of neglect
of duty in mid-December 2011; (3) her classification as AWOL; and (4) her ultimate termination
in January 2012. Am. Compl. ¶¶ 46, 70. Plaintiff’s retaliation claims are analyzed under the same
McDonnell Douglas framework discussed above. McFadden, 611 F.3d at 6.
Plaintiff’s first two grounds for alleged retaliation—her complaints about her workplace
treatment in July 2011 and August 2011—founder because Plaintiff has not shown them to be
“protected activity” under Title VII. The “opposition” clause of Title VII makes it “unlawful . . .
for an employer to discriminate against any . . . employe[e] . . . because he has opposed any practice
made . . . unlawful . . . by this subchapter.” 42 U.S.C. § 2000e-3(a). That clause “forbids
retaliation by employers against employees who report workplace race or gender discrimination.”
Crawford v. Metro. Gov’t of Nashville and Davidson Cty., 555 U.S. 271, 273 (2009) (emphasis
added); id. at 276 (“‘When an employee communicates to her employer a belief that the employer
has engaged in . . . a form of employment discrimination, that communication’ virtually always
20
‘constitutes the employer’s opposition to the activity.’”) (citations omitted). Here, Plaintiff has
established only that she generally complained to supervisors about her workplace treatment; she
has not, however, offered any proof that her complaints were rooted in discrimination based on
her sex. With regard to the July 2011 incident, Plaintiff testified that she only protested to Captain
Snyder about Hudson visiting her cubicle and raising his amanda24@example.net. Thomas Dep. at 25. She
did not assert that Hudson had treated her in that manner because of her gender. Id. Likewise,
with regard to the complaints she made in August 2011 about Hudson’s behavior on July 26, 2011,
Plaintiff again has not adduced evidence that she protested discriminatory treatment on the basis
of her sex, as opposed to general uncouth workplace behavior. See id. at 29 (describing her email
to Chief Newsham as complaining that she was being “harassed and bullied on a day-to-day basis
and felt like it was an . . . uncomfortable situation”4); id. at 33 (describing a meeting held on August
10, 2011, concerning Hudson’s behavior on July 26, 2011; Plaintiff testified that “I really didn’t
say too much. . . . I told her my version. Mr. Hudson told her his version. And that was it.”).
That leaves Plaintiff’s filing of an EEO complaint alleging sex discrimination in September
2011 as the only qualifying protected activity under Title VII. However, the court finds that no
reasonable jury could find that Plaintiff was placed on AWOL status and then terminated in
January 2012 because she had filed a complaint alleging sex discrimination months earlier.
Plaintiff has offered a non-discriminatory reason for those actions—Plaintiff did not show up for
work starting on December 21, 2011. Plaintiff, in turn, has offered no evidence to create a genuine
dispute of material fact that those adverse actions occurred because she had complained about sex
discrimination. For starters, at least three full months had passed between Plaintiff’s EEO
complaint and her placement on AWOL status. That length of time, without more, does not create
4
The court relies on Plaintiff’s description of the email, instead of the text of the email itself, because neither side has
put the actual email, which was Exhibit 1 to Plaintiff’s deposition, before the court.
21
an inference of retaliatory intent. See, e.g., Hamilton v. Geithner, 666 F.3d 1344, 1357-58 (D.C.
Cir. 2012) (observing that, although neither the Supreme Court nor the Court of Appeals has
established a “bright-line three month rule,” the “Supreme Court has cited circuit decisions
“suggesting that in some instances a three-month period between the protected activity and the
adverse employment action may, standing alone, be too lengthy to raise an inference of
causation”); Mokhtar v. Kerry, 83 F. Supp. 3d 49, 81 (D.D.C. 2015), aff'd, No. 15-5137, 2015 WL
9309960 (D.C. Cir. Dec. 4, 2015) (citations omitted) (finding that on its own, a three to four month
gap between the protected activity and the adverse employment action is too great to establish an
inference of causation).
Additionally, contrary to what Plaintiff contends, Defendant has not offered shifting
explanations for placing her on AWOL status and ultimately terminating her. On the contrary,
Defendant consistently has maintained those adverse actions were taken because she did not show
up for work. And, although Plaintiff has offered sufficient proof to create a genuine dispute of
material fact that her purported AWOL status was a pretext for retaliating against her for exercising
her rights under the FMLA, the same cannot be said with respect to her filing of a sex
discrimination complaint. Her filing of a sexual discrimination complaint and the adverse
employment actions taken against her are too attenuated to give rise to a reasonable inference of
retaliation in violation of Title VII.
Accordingly, the court grants Defendant’s Motion for Summary Judgment as to Plaintiff’s
Title VII and DCHRA retaliation claims.
V. CONCLUSION AND ORDER
For the foregoing reasons, the court grants in part and denies in part Defendant’s Motion
for Summary Judgment. Plaintiff’s unlawful denial and retaliation claims under the FMLA and
DCFMLA raise genuine issues of material fact that cannot be resolved on summary judgment.
22
The court finds no such genuine issues with respect to her retaliation claims under Title VII and
the DCHRA.
Dated: July 18, 2016 Amit P. Mehta
United States District Judge
23
|
Citation Nr: 0808767
Decision Date: 03/14/08 Archive Date: 03/20/08
DOCKET NO. 04-38 320 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in St.
Petersburg, Florida
THE ISSUE
Entitlement to service connection for the cause of the
veteran's death.
REPRESENTATION
Appellant represented by: Goodman, Allen & Filetti, PLLC
ATTORNEY FOR THE BOARD
T. Mainelli, Counsel
INTRODUCTION
The veteran had active service from January 1948 to January
1967. The appellant is his surviving spouse.
The case comes before the Board of Veterans' Appeals (Board)
on appeal from a rating decision by the Department of
Veterans Affairs (VA) Regional Office (RO) in St. Petersburg,
Florida. This case was initially before the Board in January
2005 at which time the case was remanded for additional
evidentiary development.
In a November 2006 decision, the Board denied a claim of
entitlement to service connection the cause of the veteran's
death as well as a claim seeking to revise or reverse a May
5, 1981 rating decision, on the basis of clear and
unmistakable error (CUE) that denied service connection for
chronic obstructive pulmonary disease (COPD). The appellant
appealed this decision to the United States Court of Appeals
for Veterans Claims (Court).
By means of an order dated December 7, 2007, the Court
granted a joint motion for remand to the Board on the issue
of entitlement to service connection for cause of the
veteran's death, vacated the Board's decision as to this
matter, and remanded this issue to the Board for
readjudication. The parties to the joint motion for remand
withdrew from appeal the CUE claim. Therefore, the issue of
CUE is not before the VA at this time.
The appeal is REMANDED to the RO via the Appeals Management
Center (AMC), in Washington, DC. VA will notify the
appellant if further action is required.
REMAND
The parties to the joint motion for remand have determined
that additional efforts should be made to obtain records of
the veteran's treatment at Tyndall Air Force Base (AFB)
Hospital from 1981 to 2003. The case, therefore, is remanded
in order to assist the appellant in obtaining these records.
With regard to his asbestosis claim, the veteran's death
certificate has been amended to reflect asbestosis as a
condition contributing to his death. It is claimed that the
veteran's only asbestos exposure occurred in the service
while serving aboard World War II era ships. The veteran's
Department of Defense Form 214's list his military
occupational specialties as a stock clerk and as a repair
partsman for electrical equipment.
In light of the Court's action, on remand, the RO should
specifically request from the appropriate custodian of
records, if possible, the veteran's potential for asbestos
exposure while performing duties as a stock clerk and repair
partsman for electrical equipment while aboard the following
naval ships: ORION, UNION, LEO, SKAGIT, CHILTON, CHIPOLA,
TUTUILA, VULCAN, BEALE, TIDEWATER AND RALEIGH. See VBA's
Adjudication Procedure Manual, M21-1MR (M21-1MR),
IV.ii.1.2.C.9. and IV.ii.1.H.29.
Finally, subsequent to the Board's November 2006 decision,
the Court held in Hupp v. Nicholson, 21 Vet. App. 342, 352
(2007) held that for dependency and indemnity compensation
(DIC) benefits, a claimant must be provided notice of (1) the
conditions, if any, for which a veteran was service-connected
at the time of his or her death; (2) an explanation of the
evidence and information required to substantiate a DIC claim
based on a previously service-connected condition; and (3) an
explanation of the evidence and information required to
substantiate a DIC claim based on a condition not yet
service-connected. The appellant should be provided notice
that satisfies the Hupp requirements.
Accordingly, the case is REMANDED for the following action:
1. Pursuant to the Court case of Hupp v.
Nicholson, 21 Vet. App. 342, 352 (2007),
the RO must provide the appellant notice
that includes (1) a statement of the
conditions, if any, for which the veteran
was service- connected at the time of his
death; (2) an explanation of the evidence
and information required to substantiate a
DIC claim based on a previously service-
connected condition; and (3) an
explanation of the evidence and
information required to substantiate a DIC
claim based on a condition not yet
service-connected.
2. The RO should attempt to obtain
records of the veteran's treatment at
Tyndall AFB Hospital from 1981 to 2003.
The RO should note the efforts undertaken,
if unsuccessful. The appellant herself is
asked to attempt to obtain these records
herself (or to indicate that they are not
available) in order to expedite this case
and assist the RO.
3. The RO should request, if possible,
from the appropriate custodian of records
information regarding the extent, if any,
to which the veteran may have been exposed
to asbestos in his capacity as a stock
clerk/repair partsman for electrical
equipment while aboard the following naval
ships: ORION, UNION, LEO, SKAGIT, CHILTON,
CHIPOLA, TUTUILA, VULCAN, BEALE, TIDEWATER
AND RALEIGH.
The RO must document the requests for
information and include all responses in
the evidence of record, including any
negative replies.
4. If evidence is obtained that the
veteran was exposed to asbestos in
service, the RO should arrange for a
review of the veteran's claims file by an
appropriate VA examiner. Following a
review of the relevant medical evidence in
the claims file, the examiner is asked to
provide opinion on the following
questions: (1) whether it is at least as
likely as not (50 percent or more
likelihood) that the veteran manifested
asbestosis, or an asbestos-related
disorder, during his lifetime and, if so,
(2) whether it is at least as likely as
not (50 percent or more likelihood) that
such disease was the principal cause or a
contributory cause of his death. The
veteran's history of smoking (which is not
service connected) should also be taken
into consideration.
The term "at least as likely as not"
does not mean within the realm of medical
possibility, but rather the weight of
medical evidence both for and against a
conclusion is so evenly divided that it is
as medically sound to find in favor of
that conclusion as it is to find against
it.
The examiner should include a complete
explanation with his or her opinion, to
include (if possible, but not required)
discussion of the significance of the
amendment to the veteran's death
certificate, the results from a July 2003
computed tomography (CT) scan of the
chest, private examiner statements in July
2003, an August 2003 VA aid and attendance
letter and the opinion of a VA examiner in
May 2005. If the examiner is unable to
provide the requested opinions, the
examination report should so state.
5. After completing any additional
necessary development, the RO should
readjudicate the issue on appeal. If the
disposition remains unfavorable, the RO
should furnish the appellant and her
representative a supplemental statement of
the case and afford the applicable
opportunity to respond.
The appellant has the right to submit additional evidence and
argument on the matter the Board has remanded. Kutscherousky
v. West, 12 Vet. App. 369 (1999).
This claim must be afforded expeditious treatment. The law
requires that all claims that are remanded by the Board of
Veterans' Appeals or by the United States Court of Appeals
for Veterans Claims for additional development or other
appropriate action must be handled in an expeditious manner.
See 38 U.S.C.A. §§ 5109B, 7112 (West Supp. 2007).
_________________________________________________
JOHN J. CROWLEY
Veterans Law Judge, Board of Veterans' Appeals
Under 38 U.S.C.A. § 7252 (West 2002), only a decision of the
Board of Veterans' Appeals is appealable to the United States
Court of Appeals for Veterans Claims. This remand is in the
nature of a preliminary order and does not constitute a
decision of the Board on the merits of your appeal.
38 C.F.R. § 20.1100(b) (2007).
|
749 F.2d 65
242 U.S.App.D.C. 43
Clemmie M. HENRY, widow of Wilson R. Henry, Petitioner,v.GEORGE HYMAN CONSTRUCTION COMPANY and Maryland CasualtyCompany, Respondents.
No. 83-2099.
United States Court of Appeals,District of Columbia Circuit.
Argued Sept. 6, 1984.Decided Dec. 7, 1984.
Mark J. Brice, Landover, Md., with whom Joseph H. Koonz, Jr., Carolyn McKenney and Roger C. Johnson, Landover, Md., were on the brief, for petitioner.
William J. Donnelly, Jr., Washington, D.C., for respondent George Hyman Const. Co., et al.
Marianne Demetral Smith and Donald S. Shire, Attys., Dept. of Labor, Washington, D.C., entered appearances for respondent, Director, Office of Workmen's Compensation Programs, Dept. of Labor.
Before TAMM, WILKEY and EDWARDS, Circuit Judges.
HARRY T. EDWARDS, Circuit Judge:
1
Section 8(c)(4) of the Longshoremen's and Harbor Workers' Compensation Act ("LHWCA")1 provides for scheduled benefits for specified periods of time for employees who are permanently partially disabled from a work-related injury. In this case, the petitioner, Clemmie M. Henry, seeks review of an order of the Benefits Review Board, United States Department of Labor ("the Board"), denying her claim to survivor's benefits in a scheduled award due her husband under section 8(c)(4). In rejecting Mrs. Henry's claim, the Board ruled that scheduled benefits due at the time of an employee's death may be paid to survivors under the LHWCA only where an employee "dies from causes other than the injury,"2 not where, as here, an employee dies from causes related to the work injury that triggered the scheduled award.3 We find that, by looking solely to section 8(d)(1) and failing to correctly construe section 8(d)(2)4 of the statute, the Board improperly denied Mrs. Henry survivor's benefits in the scheduled award due her husband at the time of his death. Accordingly, we set aside that portion of the Board's order denying these benefits and remand to the Board for the appropriate disposition consistent with this opinion.
2
The petitioner also challenges the applicability of the "special fund"5 to this case on the ground that it prevents her from negotiating a lump sum settlement of her benefits. However, because the petitioner has no significant interest in the source of her compensation, we hold that Mrs. Henry lacks standing to appeal the applicability of the special fund.
I. BACKGROUND
3
The facts of this case, set forth here as found by the Administrative Law Judge ("ALJ"), are not in dispute.6 The petitioner's decedent, Wilson R. Henry, a diabetic, was injured on April 8, 1976, while working as a rodman for George Hyman Construction Company ("Hyman"). A large section of steel fell on his right foot, fracturing one toe and dislocating another. The injury "initiated a chain of events," resulting first in the amputation of the dislocated toe on July 4, 1976, and later in an amputation of the right leg below the knee on July 19, 1976. A third surgical procedure, a stump revision, led to still further healing complications but, despite initial improvement, Mr. Henry died from cardiac arrest on October 6, 1976. The parties have stipulated that Mr. Henry's death arose out of and in the course of his employment. Hyman voluntarily paid Henry temporary total disability benefits from the date of injury to the date of death, and then paid death benefits to his survivors according to the statutory formulae.7
4
At the initial hearing before the ALJ, Mrs. Henry claimed that, as her husband's survivor, she was entitled to any unpaid amounts on the scheduled benefits due her husband under section 8(c)(4) of the LHWCA for the loss of his foot. That section provides disability benefits for workers who are permanently partially injured. The ALJ held that the petitioner was not entitled to those benefits because, in his view, the decedent was permanently totally disabled--rather than permanently partially disabled--at the time of his death.8 The ALJ reasoned that any section 8(c)(4) benefits for permanent partial disability were thus "subsumed in the whole."9
5
During the administrative hearing, Hyman claimed that section 8(f) of the statute applied to this case because Mr. Henry's diabetes was a pre-existing disability. Section 8(f) limits an employer's liability to 104 weeks of benefits where an injury increases a manifest prior disability or condition and provides that the rest of the award be paid from a special fund.10 The ALJ found that Hyman was entitled to special fund relief because decedent's pre-existing diabetes and vascular disorder both increased the risk of injury and contributed to the seriousness of the injury sustained on April 8, 1976.11
6
The petitioner appealed the ALJ's findings to the Board on July 18, 1980. On July 23, 1980, Hyman moved to strike the portion of claimant's brief concerning section 8(f). The Board granted that motion on September 18, 1980, Henry v. George Hyman Construction Co., B.R.B. No. 80-514 (Sept. 18, 1980) (Order), and hence did not consider the section 8(f) issue on review. Before this court, however, the petitioner reasserts her challenge to the special fund's applicability here.
7
The Board affirmed the decision of the ALJ that Mrs. Henry was ineligible for a survivor's benefit in a scheduled award, but reversed the ALJ's specific finding that decedent was permanently totally disabled at the time of his death. The Board found, instead, that decedent was temporarily totally disabled until his death, and that he "had an underlying permanent partial disability at the time of his death."12 The Board concluded, however, that despite the fact that Mr. Henry's underlying permanent partial disability entitled him to a scheduled award, Mrs. Henry was not entitled as a survivor to receive the unpaid award.
8
In reaching its result, the Board relied on section 8(d)(1), which merely provides that,
9
[i]f an employee who is receiving compensation for permanent partial disability pursuant to subsection (c)(1)-(20) of this section dies from causes other than the injury, the total amount of the award unpaid at the time of death shall be payable to or for the benefit of his survivors [according to a prescribed formula].13
10
Although section 8(d)(1) clearly does not address the issue at hand, the Board nonetheless read this provision to foreclose the payment of scheduled benefits to survivors whenever the decedent dies of causes related to the compensable injury. As a consequence of its statutory construction, the Board's decision effectively ignored and nullified the express language of section 8(d)(2), which provides that,
11
[n]otwithstanding any other limitation in section 909 of this title [pertaining to survivors' death benefits], the total amount of any award for permanent partial disability pursuant to subsection (c)(1)-(20) of this section unpaid at time of death shall be payable in full in the appropriate distribution.14
12
Mrs. Henry contends, and we agree, that section 8(d)(2) controls the resolution of her claim. We therefore reverse and remand on this point.
13
II. STANDING TO APPEAL THE APPLICABILITY OF THE SPECIAL FUND
14
The petitioner contends that, because section 8(f) deprives her of the opportunity to obtain a lump sum settlement, she has standing to contest the applicability of the special fund to this case.15 Hyman responds that petitioner lacks standing because nothing in the LHWCA permits the settlement of a death claim under section 8(i)(A) and because she has no interest in the source of her benefits. We hold that Mrs. Henry does not have standing to appeal the applicability of section 8(f).
15
The Board's precedents unequivocally establish that a claimant has no interest in the source of compensation, and we agree.16 Moreover, the Board has considered and rejected the contention that, because a claimant is deprived of the opportunity to commute benefits to a lump sum settlement, the claimant has an interest sufficient to confer standing when the special fund applies. The Board has characterized this argument as a "chimera" and stated that:
16
Even if it is true that special fund benefits cannot be commuted, a proposition for which claimant cites no authority and for which we can find none, this would have no bearing on the proper allocation of liability between employers and the special fund. We will not open section 8(f) deliberations to claimants with such totally insignificant grounds for asserting standing.
17
Sims v. Singleton Electric Co., 9 B.R.B.S. 1068, 1072 (1978).
18
Furthermore, in a recent case, in which the Ninth Circuit considered inter alia the question whether the Director, Office of Workers' Compensation Programs has standing to contest the applicability of section 8(f), the court observed:
19
The Director is the only party who has a real interest in protecting the financial integrity of the fund; consequently, the ability to petition for review of a Board decision protects the fund against unnecessary payments.
20
Director, OWCP v. Cargill, Inc., 718 F.2d 886 (9th Cir.1983) (emphasis added).17
21
We can find no fault with the foregoing precedent. Accordingly, we uphold the decision denying petitioner's claim of standing under section 8(f).
22
III. SURVIVORS' RIGHTS TO A SCHEDULED AWARD FOR PERMANENT
PARTIAL DISABILITY
A. Statutory Framework
23
Petitioner's claim with respect to scheduled benefits implicates section 8 and 9 of the LHWCA, which provide respectively for disability and death benefits. Section 8 classifies four types of benefits: (1) permanent total disability, (2) temporary total disability, (3) permanent partial disability, and (4) temporary partial disability benefits. Benefits for permanent partial disability can be either scheduled, as defined in sections 8(c)(1)-(20),18 or unscheduled under section 8(c)(21).19 Except for scheduled permanent partial disability benefits, all benefits last for "the continuance" of the disability.20 Scheduled permanent partial disability benefits are, however, awarded for a set number of weeks depending on the disability. For example, Mr. Henry's injury is defined in the schedule under section 8(c)(4),21 which provides compensation for 205 weeks. Section 8(d)22 outlines survivors' benefits in scheduled and unscheduled permanent partial disability awards.
24
Section 9 grants death benefits and funeral expenses not exceeding $1000 to specified survivors in only two instances: (1) where the "injury causes death" or (2) where a permanently totally disabled employee "dies from causes other than the injury."23 . Thus, survivors of an employee who dies after suffering a permanent partial disability may collect death benefits under section 9 only if the compensable injury causes the death.
25
B. The Board's Findings Regarding Mr. Henry's Condition Just Prior to and at the Time of Death
26
Although the ALJ accepted the parties' stipulation that Mr. Henry was temporarily otally disabled from the date of injury to his death, he nonetheless found that decedent was permanently totally disabled at the time of his death and would have remained permanently totally disabled had he lived. If Mrs. Henry is eligible to receive her late husband's scheduled award, the award must be available either concurrently with the temporary total disability payments that Mr. Henry received prior to his death, or consecutively to those payments. The ALJ's findings that Mr. Henry was permanently totally disabled, however, precluded an award for a scheduled disability because the statute provides that scheduled benefits shall be paid in addition to other compensation only in the cases of temporary total disability or temporary partial disability.24
27
On appeal to the Board, Mrs. Henry contested the ALJ's finding that decedent was permanently totally disabled at the time of death. The Board found that, in reaching this determination, the ALJ had not focused on Mr. Henry's condition during the period between injury and death, but had impermissibly speculated on what Mr. Henry's condition would have been had he survived--a question concerning which no evidence was presented. The Board also found no evidence to support a finding of permanency and therefore reversed the ALJ's findings. Relying on the record evidence before it, the Board found that Mr. Henry was temporarily totally disabled until death and had an "underlying permanent partial disability at the time of his death."25 These findings are not contested by either party in this appeal and they are clearly supported by substantial evidence in the record; accordingly, we adopt the Board's findings as the basis for our legal inquiry.26
28
Hyman does not seriously dispute the Board's findings of a temporary total disability with an underlying permanent partial disability.27 However, Hyman advances the contention that an award of temporary total disability may not be concurrent with a scheduled award. In support of this proposition, Hyman cites Rupert v. Todd Shipyards Corp., 239 F.2d 273 (9th Cir.1956), where the Ninth Circuit denied concurrent awards for permanent total and scheduled permanent partial disability, stating:
29
The view that Sec. 8(c) sets forth "a series of classifications of injuries for permanent partial disability" and is not applicable to cases of "permanent total disability" ... finds support in the language of Sec. 8(c) providing for "permanent partial disability" which expressly declares that awards thereunder shall be "in addition to" compensation for "temporary total disability" and for "temporary partial disability" ... but significantly omits any mention of subdivision (a) covering cases of "permanent total disability."
30
Id. at 276 (emphasis added).28 As may be seen from its holding, Rupert is plainly inapposite; indeed, if anything, the decision of the Ninth Circuit implicitly rejects the position here advanced by Hyman.
31
In light of the plain language of the statute, we hold that a scheduled award for permanent partial disability under section 8(c)(4) may be paid concurrently with an allowance for temporary total disability. Hyman's arguments to the contrary are unavailing.
32
C. Survivors' Rights to a Scheduled Award for a Permanent Partial Disability Where the Employee Dies from a Cause Related to the Injury
33
Having established that the decedent had a temporary total disability with an underlying permanent partial disability, thus justifying concurrent awards, the principal issue that we confront is whether the survivors of a permanently partially disabled employee, who subsequently dies from a cause related to his injury, are entitled to any unpaid amounts due the decedent under scheduled awards. Before analyzing this central issue, however, we pause to clarify certain collateral issues.
34
All the parties agree, either through stipulation, or in their briefs, or in answers to questions during oral argument, that: (1) if decedent had lived, he would have been entitled to a scheduled award under section 8(c)(4) even if he had immediately returned to work at a higher rate of compensation than before the injury; (2) a scheduled award under the LHWCA is based mostly upon a concept of damages and does not require proof of loss of wages; (3) disability and death are two separate and distinct causes of action; and (4) Mrs. Henry is entitled to death benefits under section 9 regardless of our disposition here. We will amplify on these points briefly to give a full explanation of our holding in favor of petitioner in this case.
1. Discussion of Collateral Issues
35
First, the parties agree that if Mr. Henry had survived he would have been entitled to a permanent partial disability award for the loss of his leg below the knee.29 This would be true even had Mr. Henry returned to work immediately and been compensated at a higher rate than prior to his injury. This result accords with accepted precepts of workmen's compensation law. As Professor Larson states:
36
Permanent partial schedule awards are based on medical condition after maximum improvement has been reached, and ignore wage loss entirely. Fixed payments for loss of specified members are due even if the claimant during the period is back at work at higher wages than before.
37
2 A. Larson, THE LAW OF WORKMEN'S COMPENSATION Sec. 57.13, at 10-24 (1983).
38
The foregoing proposition flows from the fact that compensation for scheduled losses under sections 8(c)(1)-(20) of the LHWCA is based upon a damages concept rather than loss of wage-earning capacity. Although scheduled awards are keyed to pre-injury earnings, no proof of wage loss is required:
39
[I]f the injury is of a kind specifically identified in the schedule set forth in Secs. 8(c)(1)-(20) of the Act, 33 U.S.C. Secs. 908(c)(1)-(20), the injured employee is entitled to receive two-thirds of his average weekly wages for a specific number of weeks, regardless of whether his earning capacity has actually been impaired.
40
Potomac Electric Power Co. v. Director, OWCP, 449 U.S. 268, 269, 101 S. Ct. 509, 510, 66 L. Ed. 2d 446 (1980); see also, 2 A. Larson, THE LAW OF WORKMEN'S COMPENSATION Sec. 57.14(c), at 10-35.30
41
Second, it is uncontested that Mrs. Henry is entitled to receive death benefits under section 9 of the LHWCA regardless of the disposition of the scheduled benefits issue. As noted above, the parties have stipulated that Mr. Henry's injury and death "arose out of and in the course of" his employment. Section 9 unequivocally provides for death benefits to specified survivors--including the widow--of an employee who dies from work-related injuries. Since Mrs. Henry admittedly is a designated survivor under the statute, appellee does not challenge her entitlement to death benefits.
42
Third, there is no disagreement that section 8 disability benefits are separate from section 9 death benefits. The case law clearly establishes two separate causes of action, one for disability lying with the disabled employee, and one for death lying with specified survivors of the decedent. We affirmed this principle as long ago as 1942 when we held:
43
[D]ependents of an employee whose injury results in death are entitled to death benefits under Section 9, regardless of the compensation paid to him for disability until death; ... a fair interpretation of the Act as a whole demonstrated that Congress had established two separate rights--the one (Sec. 8) compensation for injury payable to the injured employee, and the other (Sec. 9) death benefits payable to his widow and children; and that consequently a partial discharge of one has no effect on the other.
44
Hitt v. Cardillo, 131 F.2d 233, 234 (D.C.Cir.1942), cert. denied, 318 U.S. 770, 63 S. Ct. 760, 87 L. Ed. 1140 (1943).31
45
More recently, a line of cases has considered the question whether, in a case where an employee was injured before the 1972 amendments to the LHWCA but died after the effective date of the amendments, death benefits should be computed according to the more generous post-1972 LHWCA formula. In all of those cases, employers or insurance companies argued that the injury triggered the application of the LHWCA and, therefore, that the pre-1972 death benefits formula should apply. In every case, however, courts and the Board reasoned that, since death and disability were two separate causes of action, death occurring after the effective date of the 1972 amendments would trigger the more generous benefits available under those amendments, notwithstanding the fact that the injury which caused death occurred prior to 1972.32
46
This conceptual distinction between disability and death benefits is important to this case because it eliminates the contention that there will be an impermissible "double recovery" if Mrs. Henry receives both death benefits and Mr. Henry's scheduled award. The contention that this alleged "double recovery" is impermissible is also belied by Hyman's acknowledgement at oral argument that, if Mr. Henry had lived for several months or years and returned to work at higher pay, he would still have been entitled to his scheduled award. His survivors would nonetheless have been entitled to death benefits as long as he died from his compensable or work-related injuries. Finally, as noted above, the statute itself provides for concurrent payments in the case of scheduled awards and either total or partial temporary disability.33
47
We also reject Hyman's argument that a disposition in Mrs. Henry's favor here would result in future awards of absurd proportions. Specifically, Hyman poses a hypothetical whereby the wife of an employee who lost two legs and one arm in an industrial accident and died of those injuries two weeks later would be entitled to death benefits and 888 weeks (17 years) of scheduled benefits for the lost limbs and permanent total disability benefits due to the statute's conclusive presumption that loss of two legs constitutes permanent total disability. Brief for jsmith@example.com. The latter hypothesis is, however, simply incorrect since the statute does not permit scheduled awards to be paid in addition to permanent total disability. See Rupert v. Todd Shipyards Corp., 239 F.2d 273, 276 (9th Cir.1956). As for the multiple awards for loss of limbs where there is no permanent total disability, we simply note that the statute expressly provides for consecutive scheduled awards in section 8(c)(22).34 Obviously, it is not the province of this court to second-guess legislative judgments on schedules for workmen's compensation awards. Rather, our only legal task is to determine what disability benefits Mr. Henry was entitled to receive, and whether those pass to his survivors under the statute.
2. Survivors' Interests in Scheduled Awards
48
We now turn to the critical question before the court. Having established that Mr. Henry was entitled to a scheduled permanent partial disability award, that he could receive that award in addition to his temporary total disability benefits, and that the death benefit award is conceptually distinct, we must determine whether the scheduled award can pass to his survivors. Resolution of that issue involves the construction of section 8(d) of the LHWCA. We begin with the plain language of the statute, but we are aided in our interpretation by the structure of section 8(d), by the legislative history of the 1972 amendments and by the policies underlying the LHWCA.
The Plain Language of the Statute
Section 8(d) provides, in relevant part:
49
(1) If an employee who is receiving compensation for permanent partial disability pursuant to subsection (c)(1)-(20) of this section dies from causes other than the injury, the total amount of the award unpaid at the time of death shall be payable to or for the benefit of his survivors, as follows ...
50
....
51
(2) Notwithstanding any other limitation in section 909 of this title, the total amount of any award for permanent partial disability pursuant to subsection (c)(1)-(20) of this section unpaid at time of death shall be payable in full in the appropriate distribution.
52
(3) If an employee who was receiving compensation for permanent partial disability pursuant to subdivision (c)(21) of this section dies from causes other than the injury, his survivors shall receive death benefits as provided in section 909(b)-(g) of this title ....
53
(4) An award for disability may be made after the death of the injured employee ....
54
33 U.S.C. Sec. 908(d)(1)-(4) (1982). In construing these provisions, the Board made the rather astonishing finding that, under the terms of the statute, section 8(d)(2) comes into play only "where section 8(d)(1) benefits are warranted" (i.e., where an employee dies from causes other than the injury).35 However, there is absolutely nothing in sections 8(d)(1) or 8(d)(2) to even suggest such an interpretation of the statute.
55
The effect of the Board's construction is to read section 8(d)(2) out of the statute. According to the Board, the only function of section 8(d)(2) is "to emphasize that in the case of a scheduled permanent partial disability qualifying under section 8(d)(1), the limitations of Sections 9(a)-(g) are inapplicable."36 We find this analysis to be wholly untenable and a gross distortion of the plain meaning of section 8(d)(2). Section 8(d)(1) on its face does not apply to this case; it addresses situations where a decedent entitled to a scheduled award dies from causes unrelated to his injury. Section 8(d)(2), on the other hand, addresses situations, like Mr. Henry's, where the employee died from the compensable injury.
56
The plain language of section 8(d)(2) states that the "total amount of any [scheduled] award ... unpaid at time of death shall be payable in full in the appropriate distribution." Since the section specifically refers to awards "unpaid at time of death," this can only have meaning in connection with survivors' rights. This understanding is reinforced by section 8(d)(4) which unequivocally provides for disability awards to be made after death. See Muscella v. Sun Shipbuilding & Dry Dock Co., 8 B.R.B.S. 830, 831 (1978). Moreover, since the statute applies the section 8(d)(2) scheduled payment rule "[n]otwithstanding any other limitation in section 909 of this title," and, since section 909 can only apply to decedents who die from a work-related injury, section 8(d)(2) can only refer to scheduled amounts to be paid to survivors of permanently partially disabled decedents who die from their injuries.
The Structure of Section 8(d)
57
The structure of section 8(d) supports this construction. Section 8(d)(1) provides the payment rule for scheduled benefits to survivors whose decedent dies from unrelated causes. Section 8(d)(2) describes survivors' interests in scheduled awards where an employee dies of his injuries. Section 8(d)(3) provides for death benefits to accrue under section 9 to survivors of a decedent--on an unscheduled award for permanent partial disability--who dies from unrelated causes. The survivors of an employee who receives an unscheduled award but dies from related causes recover death benefits directly under section 9. Despite this orderly and logical structure of section 8(d), the Board concluded that section 8(d)(2) must apply to those who die from unrelated causes because of the limitation found in section 8(d)(1). This is a nonsensical reading of the statute and neither the Board nor Hyman has given a plausible reason to accept this proposition, nor have they cited any authority that supports it. Indeed, their contentions are belied by the plain language and structure of section 8(d). The legislature expressly limited the application of sections 8(d)(1) and 8(d)(3) to those who die from unrelated causes. Had it intended section 8(d)(2) to be limited as well, it surely would have so stated.
58
The Board's explanation--that section 8(d)(2) exists merely to ensure payment of section 8(d)(1)'s benefits to survivors "in full" without section 9's limitations--is erroneous. Section 8(d)(1) itself already provides that "the total amount unpaid at death" shall go to survivors. As shown above, section 9 only applies in circumstances where a permanently partially injured employee dies from his injuries; thus, its limitations can never apply to those eligible for section 8(d)(1) benefits, i.e., those who die from unrelated causes. The Board's explanation is a non sequitur.
Legislative History
59
Although the legislative history of the 1972 amendments to the LHWCA does not address the issue here before the court, it is clear that "expansion of survivors benefits" was a principal purpose of the 1972 amendments. S.REP. NO. 1125, 92d Cong., 2d Sess., at 2 (1972). Prior to 1972, section 8(d) provided:
60
Any compensation to which any claimant would be entitled under subdivision (c) excepting subdivision (c-21) shall, notwithstanding death arising from causes other than the injury, be payable to and for the benefit of the following [survivors] ....37
61
Under this provision, survivors of an employee with a permanent partial disability were entitled to survivors' benefits in a scheduled award, whether death arose from causes related to, or other than, the injury. Under the amended statute, Congress simply broke down the existing provision for scheduled awards into two parts--section 8(d)(1) to address unrelated death cases and section 8(d)(2) to provide for related death cases. Section 8(d)(3) was added to ensure death benefits for the survivors of those who had unscheduled disabilities and died from causes other than their injuries. Section 9, which previously provided death benefits only where an employee died from the injury, was amended to include benefits where a permanently totally disabled employee died from unrelated causes. Nothing was added to the statute, and nothing appears in the legislative history, even to suggest that survivors of employees who died from related causes were to be denied entitlement to scheduled benefits. Quite the contrary, Congress indicated that "specific provision [was being] made for protecting immediate survivors and making sure that scheduled awards are still paid in full."38
Policy Considerations
62
We find that the result we reach comports fully with the policies underlying the LHWCA. First, as indicated above, there is no case law or other authority which supports the Board's interpretation of section 8(d)(2). Second, we have shown that, consistent with general theories of workmen's compensation, scheduled benefits attach irrespective of the actual amount of lost earnings. Third, we reject the Board's unfounded suggestion that scheduled payments under the LHWCA should be made to survivors where a lost limb is attributable to work-related injuries and the worker dies from unrelated causes, but not where the worker dies from related causes. We can find no support, either in the statute or in the legislative history, for such an anomalous result.
63
We believe that it is perfectly rational for Congress to establish separate guidelines for death benefits which are intended to compensate surviving dependents for lost support, and for scheduled benefits, which are intended to replace damages for the employee or his estate. Compensation for the lost limb is always paid out to survivors under the statute, whether the employee dies from unrelated causes (under section 8(d)(1)), or related causes (under section 8(d)(2)). The fact that death benefits are not available to survivors of employees receiving scheduled benefits who die from unrelated causes in no sense compels the inverse conclusion that disability benefits are therefore unavailable to survivors who are eligible for death benefits because their decedent died from the compensable injury.
64
Accordingly, we reverse and remand that portion of the Board's order denying Mrs. Henry's section 8(d)(2) claim for a determination consistent with this opinion.
65
So ordered.
1
33 U.S.C. Sec. 908(c)(4) (1982). The LHWCA is applicable to this claim under Sec. 1 of the District of Columbia Workmen's Compensation Act, previously jsmith@example.com ANN. Sec. 36-501 (1973). Application of the LHWCA to the District of Columbia has been superseded by the District of Columbia Worker's Compensation Act, D.C.CODE ANN. Secs. 36-301 to 345 (1981 & Supp.1983). All statutory references herein are to the LHWCA, 33 U.S.C. Secs. 901-50 (1982)
2
This language appears at 33 U.S.C. Sec. 908(d)(1) (1982). As will be made clear in this opinion, we reject the Board's reliance on this provision as a basis for denying Mrs. Henry's claim
3
Clemmie M. Henry v. George Hyman Constr. Co., 15 B.R.B.S. 475, 480 (1983)
4
33 U.S.C. Sec. 908(d)(2) (1982)
5
33 U.S.C. Sec. 908(f) (1982). The special fund limits an employer's liability for disability payments to 104 weeks in a case where a work-related injury exacerbates a pre-existing manifest condition or disability
6
Decision and Order of the Administrative Law Judge ("ALJ Order"), No. 73-DCWC-106 (1980), reprinted in Appendix to Brief for Appellant at 3a-4a, 8a
7
See 33 U.S.C. Secs. 908(b) and 909 (1982)
8
ALJ Order, reprinted in Appendix to Brief for Appellant at 8a-9a
9
Id. at 9a
10
Section 8(f), 33 U.S.C. Sec. 908(f), provides in relevant part:
Injury increasing disability: (1) In any case in which an employee having an existing permanent partial disability suffers injury, the employer shall provide compensation for such disability as is found to be attributable to that injury based upon the average weekly wages of the employee at the time of the injury. If following an injury falling within the provisions of subsection 8(c)(1)-(20), the employee is totally and permanently disabled, and the disability is found not to be due solely to that injury, the employer shall provide compensation for the applicable prescribed period of weeks provided for in that section for the subsequent injury, or for one hundred and four weeks, whichever is the greater. In all other cases of total permanent disability or of death, found not to be due solely to that injury, of an employee having an existing permanent partial disability, the employer shall provide in addition to compensation under subsections (b) and (e) of this section, compensation payments or death benefits for one hundred and four weeks only....
(2) After cessation of the payments for the period of weeks provided for herein, the employee or his survivor entitled to benefits shall be paid the remainder of the compensation that would be due out of the special fund established in section 944 of this title.
11
Supplemental Decision and Order on Reconsideration of Administrative Law Judge, No. 72-DCWC-106 (1980), reprinted in Brief for Appellant at 20a-22a
12
Clemmie M. Henry v. George Hyman Constr. Co., 15 B.R.B.S. 475, 479 (1983)
13
33 U.S.C. Sec. 908(d)(1) (1982)
14
33 U.S.C. Sec. 908(d)(2) (1982)
15
33 U.S.C. Sec. 921(c) (1982) provides, in relevant part:
Any person adversely affected or aggrieved by a final order of the Board may obtain a review of that order in the United States Court of Appeals for the circuit in which the injury occurred, by filing in such court within sixty days following the issuance of such Board order a written petition praying that the order be modified or set aside.
16
Price v. Greyhound Bus Lines, Inc., 14 B.R.B.S. 439, 440 n. 1 (1981), dismissed for lack of subject matter jurisdiction, No. 81-1934 (4th Cir. Jan. 4, 1982), cert. denied, 459 U.S. 831, 103 S. Ct. 70, 74 L. Ed. 2d 70 (1982); Creasy v. Bateson, 14 B.R.B.S. 434, 437 (1981); Jackson v. Willamette Iron & Steel Co., 13 B.R.B.S. 908, 909 (1981); Sims v. Singleton Elec. Co., 9 B.R.B.S. 1068, 1071-72 (1978); Nobles v. Children's Hosp., 8 B.R.B.S. 13, 16 (1978); Schuster v. Roger Smith Hotel, 7 B.R.B.S. 255, 258 (1977)
17
See also Director, OWCP v. Newport News, 676 F.2d 110, 114 (4th Cir.1982) ("Our conviction [that the Director has standing] is strengthened by the obvious fact that only the Director has any real interest in protecting the fund against unjustified payments. It is to the financial advantage of the employer for payments to be taken in part from the fund, and the employee involved is interested only in being paid, not in the source from which his payments come.") (emphasis added)
Our own precedent in Director, OWCP v. Brandt Airflex Corp., 645 F.2d 1053 (D.C.Cir.1981), is not to the contrary. In Brandt, the claimant and the Director both petitioned for review of the portion of the Board's decision concerning the applicability of section 8(f). Brandt moved to dismiss those petitions on the basis that both parties lacked standing under section 21(c). On July 26, 1979, a panel of this court denied Brandt's motions in a per curiam order. We did not directly address the issue of a claimant's standing to petition for review of section 8(f) applicability. Likewise, the published opinion in Brandt did not discuss the standing issue, other than to note that the court would abide by the per curiam order denying Brandt's motions to dismiss as "the law of the case," because "it is not 'plainly wrong' nor will it 'work manifest injustice.' " Id. at 1055 n. 4 (quoting Brown v. Gesellschaft Fur Drahtlose Telegraphie, 104 F.2d 227, 228 (D.C.Cir.), cert. denied, 307 U.S. 640, 59 S. Ct. 1038, 83 L. Ed. 1521 (1939)). Although Brandt is admittedly unclear on the issue, there was no need for the court to reach the question of claimant standing under section 8(f) because the Director clearly had standing to pursue the matter. See, e.g., Shahady v. Atlas Tile & Marble Co., 673 F.2d 479, 483-84 (D.C.Cir.1982).
18
33 U.S.C. Sec. 908(c)(1)-(20) (1982)
19
33 U.S.C. Sec. 908(c)(21) (1982)
20
See 33 U.S.C. Sec. 908(a), (b), (c)(21) and (e) (1982)
21
33 U.S.C. Sec. 908(c)(4) (1982)
22
33 U.S.C. Sec. 908(d) (1982)
23
33 U.S.C. Sec. 909 (1982)
24
Section 8(c) provides in relevant part:
Permanent partial disability: In case of disability partial in character but permanent in quality the compensation shall be 66 2/3 per centum of the average weekly wages, which shall be in addition to compensation for temporary total disability or temporary partial disability paid in accordance with subsection (b) or subsection (e) of this section, respectively....
33 U.S.C. Sec. 908(c) (1982) (emphasis added).
25
Clemmie M. Henry v. George Hyman Constr. Co., 15 B.R.B.S. 475, 479 (1983)
26
We note in passing that, in reaching its findings, the Board adhered to the proper scope of its review of the ALJ's factual findings, basing its reversal upon lack of substantial record evidence. See New Orleans Stevedores v. Turner, 661 F.2d 1031, 1037 (5th Cir.1981)
27
The appellee has attempted to confuse the issue by claiming that "[t]he decedent was not partially disabled but was totally disabled up until the time of his death." Brief for Appellee at 7. This characterization conveniently ignores the Board's finding that Mr. Henry had an underlying permanent partial disability at the time of his death
28
See also Jacksonville Shipyards, Inc. v. Dugger, 587 F.2d 197, 198 (5th Cir.1979) ("In cases of permanent total disability, the schedules set forth in section 8(c) are inapplicable.") (emphasis added); and Paiement v. Bath Iron Works Corp., 11 B.R.B.S. 767, 769 (1980)
Hyman also cites two decisions of the Benefits Review Board, Fuduli v. Maresca Boat Yard, Inc., 7 B.R.B.S. 982 (1978), and James v. Bethlehem Steel Corp., 5 B.R.B.S. 707 (1977), for the proposition that Mr. Henry, having received temporary total disability benefits until his death, could not receive a scheduled award. Brief for Appellee at 9. Fuduli considered a different issue--whether there could be concurrent awards for scheduled and unscheduled permanent partial disability--and is inapposite here. In James, the Board disallowed concurrent or "overlapping" awards for temporary total and permanent partial disability. James is distinguishable, however, because the employee lived and could collect his scheduled award once the temporary total benefits lapsed. In any case, James was based on the authority of Rupert v. Todd Shipyards, 239 F.2d 273 (9th Cir.1956), and appears to misinterpret Rupert's holding which, as shown above, disallows concurrent awards only in the case of permanent (not temporary) total disability. Wilkosz v. Symington Gould Corp., 14 N.Y.2d 739, 250 N.Y.S.2d 297, 199 N.E.2d 387 (1964), cited by Hyman, is also inapposite since it involved a permanent total disability--not a temporary total disability--award in conjunction with a scheduled award.
The principal treatise in this area of the law confirms that scheduled awards are "added to the allowance for temporary total disability." 2 A. Larson, THE LAW OF WORKMEN'S COMPENSATION Sec. 258.15, at 10-217 (1983).
29
On this point, the Board stated:
Despite the fact that decedent was temporarily totally disabled during the period before his death, a certain minimum permanent partial disability existed and was part of his temporary total disability. If decedent had lived, his condition might have changed, but at a minimum he would have retained a permanent partial disability under Section 8(c)(4).
Clemmie M. Henry, 15 B.R.B.S. at 479 (emphasis added).
30
See also Bethlehem Steel Co. v. Cardillo, 229 F.2d 735, 735-36 (2d Cir.), cert. denied, 351 U.S. 950, 76 S. Ct. 847, 100 L. Ed. 1474 (1956); Travelers Ins. Co. v. Cardillo, 225 F.2d 137, 144 (2d Cir.), cert. denied, 350 U.S. 913, 76 S. Ct. 196, 100 L. Ed. 800 (1955); Ladner v. Secretary of Health, Educ. and Welfare, 304 F. Supp. 474, 476 (S.D.Miss.1969); Gulf Stevedore Corp. v. Hollis, 298 F. Supp. 426, 430 (S.D.Tex.1969), cert. denied, 400 U.S. 831, 91 S. Ct. 63, 27 L. Ed. 2d 62 (1970); Cox v. American Store Equip. Corp., 283 F. Supp. 390, 394 (D.Md.1968); Greto v. Blakeslee, 10 B.R.B.S. 1000, 1003 (1979)
31
See also Hampton Roads Stevedoring Corp. v. O'Hearne, 184 F.2d 76, 79 (4th Cir.1950) ("[A]s construed by the Courts in several cases, the act gives two separate rights, one relating to compensation for injury payable to the injured employee, and the other relating to death benefits payable to the dependents. When death occurs, a new cause of action arises."); International Mercantile Marine Co. v. Lowe, 93 F.2d 663, 664 (2d Cir.), cert. denied, 304 U.S. 565, 58 S. Ct. 948, 82 L. Ed. 1532 (1938) ("But the disability benefits fixed by section 8 of the act and the right of the widow to death benefits under section 9 are different. They have different claimants thereto ...[,] were separately provided for by separate actions of the act and accrue on different bases."). See also Travelers Insurance Co. v. Toner, 190 F.2d 30 (D.C.Cir.), cert. denied, 342 U.S. 826, 72 S. Ct. 48, 96 L. Ed. 624 (1951); Pennsylvania Jersey Welding Co. v. Lowe, 183 F.2d 936, 937 (3d Cir.1950); Union Stevedoring Corp. v. Norton, 98 F.2d 1012, 1017 (3d Cir.1938). Accord, Morris v. Joseph F. Nebel Co., 4 B.R.B.S. 143, 145 (1976); Spence v. Terminal Shipping Co., 2 B.R.B.S. 308, 315 (1975), aff'd on other grounds, 591 F.2d 985 (4th Cir.1979)
32
Puig v. Standard Dredging Corp., 599 F.2d 467, 469 (1st Cir.1979); St. Louis Shipbuilding & Steel Co. v. Casteel, 583 F.2d 876, 877-78 (8th Cir.1978); State Ins. Fund v. Pesce, 548 F.2d 1112, 1114 (2d Cir.1977); Rouse v. Norfolk, Baltimore & Carolina Lines, Inc., 2 B.R.B.S. 11, 13-14 (1975), aff'd on other grounds, 539 F.2d 378 (4th Cir.), cert. denied, 429 U.S. 1078, 97 S. Ct. 823, 50 L. Ed. 2d 798 (1976)
33
See also Hastings v. Earth Satellite Corp., 628 F.2d 85 (D.C.Cir.), cert. denied, 449 U.S. 905, 101 S. Ct. 281, 66 L. Ed. 2d 137 (1980) (allowing concurrent awards for an unscheduled disability and permanent total disability)
34
Section 8(c)(22) states in relevant part:
In any case in which there shall be a loss of, or loss of use of, more than one member ... set forth in paragraphs (1) to (19) of this subsection, not amounting to permanent total disability, the award of compensation shall be for the loss of, or loss of use of, each such member or part thereof, which awards shall run consecutively ....
33 U.S.C. Sec. 908(c)(22) (1982) (emphasis added).
35
Clemmie M. Henry, 15 B.R.B.S. at 479
36
Id. at 480
37
Longshoremen and Harbor Workers Compensation Act, ch. 509, 44 Stat. 1424, 1427 (1927) (current version at 33 U.S.C. Sec. 908(d) (1982))
38
S.REP. NO. 1125, 92d Cong., 2d Sess., at 6 (1972); see also H.R. REP. NO. 1441, 92d Cong., 2d Sess. at 3 (1972), U.S.Code Cong. & Admin.News 1972, 4698, at 4701
|
Citation Nr: 0933032
Decision Date: 09/02/09 Archive Date: 09/14/09
DOCKET NO. 05-28 236 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in Cleveland,
Ohio
THE ISSUE
Entitlement to service connection for migraine headaches,
including as secondary to recurrent left shoulder
subluxation, left ulnar and median nerve neuropathy, and
arthritis of the left wrist.
REPRESENTATION
Appellant represented by: Disabled American Veterans
ATTORNEY FOR THE BOARD
Nadine W. Benjamin, Counsel
INTRODUCTION
The Veteran served on active duty from July 1969 to December
1972.
This matter comes before the Board of Veterans' Appeals
(Board) on appeal from a February 2004 rating determination
of the Department of Veterans Affairs (VA) Regional Office
(RO) in Cleveland, Ohio. In December 2007, the Board
remanded this claim to the RO for additional development.
The case has been returned to the Board and is ready for
further review.
The appeal is REMANDED to the RO via the Appeals Management
Center (AMC), in Washington, DC. VA will notify the
appellant if further action is required.
REMAND
Unfortunately, another remand is required in this case.
Although the Board sincerely regrets the additional delay, it
is necessary to ensure that there is a complete record upon
which to decide the Veteran's claim so that he is afforded
every possible consideration.
The RO denied the claim for service connection for headaches
on both a direct basis and as secondary to service-connected
left shoulder, left ulnar and median nerve, and left wrist
disabilities. Service treatment records show treatment in
service for headaches, and headaches are currently shown.
Additionally, the Veteran reports over the counter treatment
for headaches since service. The VA examiner who conducted
an examination in July 2003 only indicated that the Veteran's
migraine headache disorder was an independent disease which
was not secondary to the service-connected shoulder
condition. He did not render an opinion as to whether the
Veteran's headaches were related to his active service, and
such an opinion is necessary. See 38 C.F.R. § 3.159(c)(4)
(2008). Therefore, in December 2007, the Board remanded this
claim to, among other things, obtain an opinion as to whether
the Veteran's headaches are related to his active service.
While the case was in remand status, the Veteran was examined
by VA in April 2009. The medical examiner did not provide
the opinion specifically requested by the Board. The
examiner merely stated that the migraine headaches were not
caused by or aggravated by the service-connected left
shoulder subluxation, left ulnar and median nerve neuropathy,
and arthritis of the left wrist. She went on to say that the
headaches are probably due to dysfunction of monoaminergic
sensory control systems located in the brain stem and
thalamus. She did not address whether the Veteran's
headaches had their onset during active service or are
related to any in-service disease or injury.
The Board must return this claim as the action taken fails to
comply with the Board's remand directives. The Veteran has a
right to performance of the Board's remand. Stegall v. West,
11 Vet. App. 268, 271 (1998); 38 C.F.R. § 4.2 (2008).
Additionally, on a copy of the May 2009 supplemental
statement of the case, the Veteran listed an April 16, 2009
laboratory and CAT scan with a question mark. In May 2009
letter from the Veteran's Congressman, it is stated that the
Veteran reported that his lab work and CAT scan were not
listed under the adjudicating actions in the SSOC. It was
requested that this error be addressed. A review of the file
does not reflect that these reports have been associated with
the file. When VA is put on notice of the existence of
medical records, VA must attempt to obtain those records
before proceeding with the appeal. See Lind v. Principi, 3
Vet. App. 493, 494 (1992); Murincsak v. Derwinski, 2 Vet.
App. 363 (1992).
The appellant is hereby notified that it is his
responsibility to report for any examination that may be
scheduled, and to cooperate in the development of the case,
and that the consequences of failure to report for a VA
examination without good cause may include denial of the
claim. See 38 C.F.R. §§ 3.158 and 3.655 (2008).
Accordingly, the case is REMANDED for the following action:
1. Make arrangements to obtain the
Veteran's treatment records from the
Chillicothe VA treatment facility, dated
from July 2008 forward.
2. Make arrangements to obtain records
concerning the Veteran's April 2009
laboratory and CT scan procedures.
3. Thereafter, schedule the Veteran for
a VA neurological examination, preferably
by an examiner who has not previously
examined him. The claims file and a copy
of this remand must be made available to
the examiner for review and the examiner
must indicate in the examination report
that this has been accomplished. All
indicated tests and studies should be
accomplished. The examiner is to review
the claims folder, including the service
treatment records.
The examiner must express an opinion as
to whether it is at least as likely as
not (50 percent probability or greater)
that the Veteran's current headache
disorder had its onset during active
service or is related to any in-service
disease or injury.
If the answer to the foregoing question
is negative, the examiner must express an
opinion as to whether it is at least as
likely as not that the Veteran's current
headache disorder was either (a) caused
by, or (b) aggravated by his service-
connected recurrent left shoulder
subluxation, left ulnar and median nerve
neuropathy, and/or arthritis of the left
wrist.
The examiner must provide a comprehensive
report including complete rationales for
all conclusions reached.
4. Finally, again consider the Veteran's
pending claim in light of all additional
evidence of record. If the benefit
sought on appeal remains denied, the
Veteran and his representative should be
furnished a supplemental statement of the
case and given the opportunity to respond
before returning this claim to the Board.
The appellant has the right to submit additional evidence and
argument on the matter or matters the Board has remanded.
Kutscherousky v. West, 12 Vet. App. 369 (1999).
This claim must be afforded expeditious treatment. The law
requires that all claims that are remanded by the Board of
Veterans' Appeals or by the United States Court of Appeals
for Veterans Claims for additional development or other
appropriate action must be handled in an expeditious manner.
See 38 U.S.C.A. §§ 5109B, 7112 (West Supp. 2008).
_________________________________________________
P.M. DILORENZO
Veterans Law Judge, Board of Veterans' Appeals
Under 38 U.S.C.A. § 7252 (West 2002), only a decision of the
Board of Veterans' Appeals is appealable to the United States
Court of Appeals for Veterans Claims. This remand is in the
nature of a preliminary order and does not constitute a
decision of the Board on the merits of your appeal.
38 C.F.R. § 20.1100(b) (2008).
|
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 19, 2013 MeetMe, Inc. (Exact name of registrant as specified in its charter) Delaware 001-33804-09-1072433 (State or other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.) 100 Union Square Drive New Hope, Pennsylvania (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: 561-286-5971 Not Applicable (Former name or former address if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ☒ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01 Entry into a Material Definitive Agreement. On December 19, 2013, MeetMe, Inc. (the “Company”) entered into a 2014 Supplement to Securities Purchase Agreement with Mexicans & Americans Trading Together, Inc. (“Investor”) (the “Supplement”) supplementing the terms of the Securities Purchase Agreement by and between the Company’s predecessor, Quepasa Corporation and Investor dated as of October 17, 2006 (the “Original Agreement”). The Supplement will be effective as of December 19, 2013 and will remain in effect until the date of the Company’s first annual meeting held after July 31, 2014 (the “Designated Next Annual Meeting”) (the “Supplemental Period”). During the Supplemental Period, the Company will fix the size of the Board at seven directors. Except as otherwise agreed to by a majority of the Specified Directors, effective at the Designated Next Annual Meeting, the size of the Board shall be reduced to six directors. “Specified Directors” means directors of the Company who are not the Investor Designee (as defined in the Original Agreement), the Supplemental Period Designee (as defined below), or persons who served on the board of directors of Quepasa Corporation. During the Supplemental Period, the Company will appoint to the Board one person designated by Investor whom Investor reasonably believes is experienced in the Internet social networking industry and who has not previously served on the Board (the “Supplemental Period Designee”). The Supplemental Period Designee shall be in addition to the Investor Designee, who is currently Mr. Alonso Ancira. The Company shall enter into an indemnification agreement with the Supplemental Period Designee on substantially the same terms as set forth in the Company’s standard form of director indemnification agreement. If the Supplemental Period Designee desires to continue to serve on the Board following the Designated Next Annual Meeting, Investor agrees to designate the Supplemental Period Designee as the Investor Designee for election at the Designated Next Annual Meeting. If the Supplemental Period Designee does not desire to continue to serve on the Board following the Designated Next Annual Meeting, Investor will designate a person other than Mr. Alonso Ancira as the Investor Designee. Investor shall instruct the Investor Designee and the Supplemental Period Designee: (i) in connection with the Board’s determination of whom to nominate to stand for election to the Board at the Designated Next Annual Meeting, to vote against the inclusion of more than three persons who are not Specified Directors on the Company’s slate of nominees; and (ii) in connection with the scheduling of the Company’s 2014 annual meeting of stockholders, to only vote in favor of the selection of a meeting date in August 2014 except as otherwise consented to by a majority of the Specified Directors; provided, however, that the parties acknowledge and agree that Investor’s instructions pursuant to this paragraph shall not obligate any director of the Company to take any action in breach of his or her fiduciary duties to the Company. At the Designated Next Annual Meeting, Investor will vote its shares of capital stock in favor of no more than three persons who are not Specified Directors. The Supplement is attached hereto as Exhibit 10.1 and is incorporated herein by reference. The foregoing description of the Supplement is qualified in its entirety by reference to the full text of the Supplement. Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. (b) Lars Batista notified the Company of his resignation from the Board of Directors of the Company (the “Board”), effective December 19, 2013, and has declined to stand for election at the 2013 Annual Meeting of the Stockholders of the Company (the “2013 Annual Meeting”). Malcolm Jozoff notified the Company of his resignation from the Board, effective December 19, 2013, and has declined to stand for election at the 2013 Annual Meeting. Item 8.01 Other Events. As a result of the foregoing, Messrs. Batista and Jozoff will not stand for election at the 2013 Annual Meeting to be held on December 20, 2013, and the remaining six directors named in the proxy statement will be the only nominees submitted for election at such 2013 Annual Meeting. On December 19, 2013, the Board approved August 11, 2014 as the date of its 2014 Annual Meeting of Stockholders. Item 9.01 Financial Statements and Exhibits. (d) Exhibits Exhibit No.Description 10.12014 Supplement to Securities Purchase Agreement. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MEETME, INC. Date: December 20, 2013 By: /s/Geoffrey Cook Name: Geoffrey Cook Title: Chief Executive Officer EXHIBIT INDEX Exhibit Number Description 2014 Supplement to Securities Purchase Agreement.
|
442 F.2d 100
CORDAY'S DEPARTMENT STORE, INC., Plaintiff-Appellant,v.NEW YORK FIRE AND MARINE UNDERWRITERS, INC. and CertainUnderwriters at Lloyd's London, Signatories toCover Note No. FT402426CS, Defendants-Appellees.CENTRAL NATIONAL BANK as Trustee Under Trust No. 5249,Plaintiff-Appellant, LaSalle National Bank asTrustee Under Trust No. 5251; SolKaplan, Sam Kaplan and MorrisKaplan, Plaintiffs,v.STATE FIRE AND CASUALTY COMPANY, Defendant, and New YorkFire and Marine Underwriters, Inc., Defendant-Appellee.
Nos. 18367, 18368.
United States Court of Appeals, Seventh Circuit.
May 4, 1971, Rehearing Denied June 1, 1971.
George C. Rabens, Chicago, Ill., for plaintiff-appellant.
Norman A. Miller, John W. Morrison, Chicago, Ill., for defendants-appellees; Clausen, Hirsh, Miller & Gorman, Chicago, Ill., of counsel.
Before SWYGERT, Chief Judge, CASTLE, Senior Circuit Judge, and KERNER, Circuit Judge.
CASTLE, Senior Circuit Judge.
1
These consolidated appeals are prosecuted from summary judgments entered for defendants-appellees, New York Fire and Marine Underwriters, Inc. and certain underwriters at Lloyd's, London, in two actions brought by plaintiffs-appellants, Corday's Department Store, Inc. and Central National Bank as trustee, to recover for fire loss and damage under insurance policies issued by the insurance company and a cover note issued by underwriters at Lloyd's to Corday's.1 In No. 18367 the insured's claim is for an alleged business interruption loss, which resulted from damage to its property. In No. 18368 the claim is for damage to the insured's building. The respective business and property were located on West Roosevelt Road in Chicago, Illinois. In both cases the property damage which gave rise to the claims asserted occurred on April 5, 1967, in the wake of the civil unrest which followed the assassination of the Rev. Martin Luther King, Jr. Each of the insurance policies here involved was a 'Fire and Limited Extended Coverage' policy, and bore a 'Special Exclusion Endorsement' as follows:
2
'In consideration of the rate and premium charged, this policy specifically excludes all loss (including ensuing fire loss) or damage, caused directly or indirectly by Riot, Riot Attending a Strike, Civil Commotion, Civil Rights Demonstrations and all disturbances of a similar nature.'2
3
The insurers declined liability to the insureds on the ground that the endorsement specifically excludes from the policies' coverage loss by the perils which caused damage to the insureds' properties.3 It is conceded by the appellant insureds that the losses and damage they sustained 'by fire' occurred 'in the course of riot and civil commotion' but they contend that the District Court erred in concluding that the special exclusionary endorsement is valid and enforceable.
4
On the record made by the pleadings, affidavits, and admissions before the court for consideration on the motions for summary judgment it is apparent that if the exclusionary endorsement is valid and enforceable the District Court was correct in entering the summary judgments in favor of the defendant-appellee insurance carriers.
5
The insureds point out that the Illinois Director of Insurance acting under his statutory powers4 and in conformity with the mandate of Section 397 of the Illinois Insurance Code (Ill.Rev.Stat.1969, ch. 73, 1009) to:
6
'* * * promulgate such rules and regulations as may be necessary to effect uniformity in all basic policies of fire and lightning insurance issued in this State, to the end that there be concurrency of contract where two or more companies insure the same risk' promulgated Illinois Department of Insurance Rule 23.01 which designated, effective January 1, 1946, a standard form policy for fire and lightning insurance. The rule provides in part that: '(1) The printed form of policy attached hereto is hereby designated as the Standard Policy for fire and lightning insurance of the State of Illinois. No policy or contract of such insurance shall be made, issued or delivered by any insurer subject to the provisions of the Illinois Insurance Code or by any agent or representative thereof on any property in this State unless it shall conform to such Standard Policy and to the other provisions of this order. (8) The effective date of this order shall be January 1, 1946. On and after that date all policies written in this State shall conform to the foregoing requirements of the Standard Policy of the State of Illinois.'
7
The standard form policy so prescribed for use in Illinois insures against 'direct loss by fire' and contains the following provision:
8
'Added provisions. The extent of the application of insurance under this policy and of the contribution to be made by this Company in case of loss, and any other provision or agreement not inconsistent with the provisions of this policy, may be provided for in writing added hereto, but no provision may be waived except such as by the terms of this policy is subject to change.'
9
The insureds contend that the exclusionary endorsement constitutes an impermissible deviation from the standard form policy and is therefore invalid and unenforceable against them. In this connection they additionally urge that the endorsement contains a condition which 'unreasonably or deceptively affects the risks that are purported to be assumed by the policy' in contravention of the requirements of Section 143(2) of the Illinois Insurance Code (Ill.Rev.Stat.1969, ch. 73, 755(2)) which Section further provides that such a violation shall not 'in any way affect the legality of any policy that has been issued and found to be in conflict with this subsection, but such policies shall be subject to the provisions of section 442'. Section 442 of the Code (ch. 73, 1054) provides, in effect, that when any policy contains a provision or endorsement which conflicts with any provision of the Code, the rights, and the obligations of the company thereunder shall not be less favorable to the insured than is required by the applicable Code provisions. Thus, the insureds conclude that the statutes referred to, and Rule 23.01 adopted pursuant thereto, require that the exclusionary endorsement be excised from each of the policies involved with the result that such endorsement would not bar recovery on the respective loss claimed by each insured. No claim is made that if the endorsement is valid and binding the insureds' claims would not be barred.
10
The record discloses that the defendants-appellees were not authorized to do business in Illinois and that the policies here involved were issued under the provisions of the Illinois Insurance Code relating to what is known as 'surplus line insurance'. The defendant insurers contend that Section 397 of the Code, supra; Illinois Department of Insurance Rule 23.01, which prescribes the standard form of policy for fire and lightning insurance; and Section 143(2) of the Code, upon which the plaintiff insureds rely, are not applicable to policies issued in conformity with the surplus line provisions of the Code. These latter provisions are contained, primarily, in Section 445 of the Code (Ill.Rev.Stat.1969, ch. 73, 1057) which provides, in part, that any insurance agent or broker licensed in Illinois may be additionally licensed:
11
'to procure policies or contracts covering the kind or kinds of business specified in Classes 2 and 3 of Section 4 of Article I of this Code (Class 3 includes fire insurance) from companies which are not authorized to do business in this State and which have complied with Section 445.1, where such agent or broker is, after diligent effort unable to procure policies or contracts to cover the kind or kinds of business required from the companies duly authorized and licensed to transact business in this State.'
12
Section 445.1 of the Code (ch. 73, 1057.1) provides that no surplus line licensee shall procure such insurance from such unauthorized company unless the company meets certain qualifying requirements which are set forth.
13
The policies here involved were procured by a licensed surplus line broker in conformity with the requirements of Section 445, and the defendant insurers were in compliance with the qualifying requirements fixed in Section 445.1. And, surplus line insurance so procured is exempt from the proscription of Section 121 of the Code (ch. 73, 733) against the transaction of insurance business without an Illinois certificate of authority. In this respect Section 121 provides, in part:
14
'It shall be unlawful for any company to enter into a contract of insurance as an insurer or to transact insurance business in this State, without a certificate of authority from the Director; provided that this subsection shall not apply to contracts procured by agents under the authority of section 445, * * *.'
15
In Equitable Mutual Fire Insurance Company v. McCrae, 156 Ill.App. 467, the Illinois court had occasion to consider the unique status of an 'unauthorized company' when acting as a surplus line insurer under provisions similar to but preceding the Illinois Insurance Code. It was there pointed out (156 Ill.App. 467, 470-471):
16
'The plain language of the Act of 1905 supra inhibits our holding otherwise than that so far as companies whose policies the Act authorizes may be issued by the agent or broker licensed by the State, they are exempt from the provisions of the other statutory regulations affecting non-resident insurance companies. The title of the Act makes that clear. It relates to 'unauthorized companies', which by a fair interpretation of this unambiguous language means companies which but for the Act would be unable to issue their policies within the limits of this State. It was evidently made to meet a condition of embarrassment to some citizens who might otherwise be unable to procure from other companies a needed amount of insurance; so that such insurance has been colloquially referred to as 'surplus line insurance'; that is, insurance in excess of the line obtainable from companies authorized to do business in this State.'
17
In the more recent decision of theIllinois court in Cork v. Associated International Insurance Managers, 58 Ill.App.2d 331, 208 N.E.2d 4, the rationale of Equitable Mutual Fire Insurance Company v. McCrae, supra, was recognized as having continued vitality and application. It was observed (58 Ill.App.2d 331, 337, 208 N.E.2d 4, 7) that:
18
'Although the Equitable case was decided long before the enactment of the present 'Illinois Insurance Code' (1937), the reasoning and theory of the Equitable case apply here. Subsection (1), section 121, clearly states that 'this subsection shall not apply to contracts procured by agents under the authority of section 445 * * *'.'
19
The District Court, recognizing that the object and purpose of surplus line insurance provisions, as elucidated by the Illinois courts, is to make it possible to secure protection against a risk when authorized companies will not provide that protection, concluded that the regulatory scheme embodied in the Illinois Insurance Code is used to achieve that objective which embraces, as well, the implicit common sense judgment that it is better that a citizen of Illinois be able to insure a risk at less than standard coverage, than that he not be able to secure any sdickson@example.com.
20
We agree with the District Court's conclusion that the special exclusionary endorsement is not invalidated by the Illinois statutory provisions or the rules adopted pursuant thereto. That conclusion is not only consonant with the object and purpose of the surplus line insurance provisions of the Illinois Insurance Code, as that object and purpose has been stated by the Illinois courts, but also it is not inharmonious with those provisions of the Code relied upon by the insureds as requiring that surplus line insurers make no deviation from the coverage afforded by the standard form fire policy. In this connection it is observed that Section 397 of the Code (ch. 73, 1009), quoted supra, which commands the Director of Insurance to promulgate rules and regulations 'to effect uniformity in all basic policies of fire and lightning insurance issued in this State', and pursuant to which Illinois Insurance Department Rule 23.01 prescribing a standard form policy for fire and lightning insurance was promulgated, is a part of Article XXIII of the Illinois Insurance Code, the first section of which, Section 393 (ch. 73, 1005) specifically provides that:
21
'This article shall apply to all companies authorized to transact the kind or kinds of business enumerated in Class 3 of section 4 (Class 3 includes fire insurance).'
22
But, surplus line insurers are 'unauthorized companies' to which Article XXIII by its express terms can have no application. Thus, the command of Section 397 is not applicable to policies issued by a surplus line insurer, such as defendant appellees, acting pursuant to the authorization contained in Sections 445 and 445.1
23
Likewise, Section 143(2) of the Code (ch. 73, 755(2)) which proscribes and, in combination with Section 442, makes inoperative a policy endorsement which contains 'exceptions and conditions that will unreasonably or deceptively affect the risks that are purported to be assumed by the policy' is by reason of its terminology and context applicable only to authorized companies transacting Class 2 or 3 business and, as such, required to file policy and endorsement forms with the Illinois Department of Insurance for approval. The section has no application to a policy issued by a surplus line insurer-- the latter is not 'authorized' to transact business in Illinois.
24
We are not persuaded by the plaintiff insureds' additional contention that because defendant-appellee New York Fire and Marine Underwriters, Inc. is restricted in its home State, New York, in its issuance of fire policies covering New York risks, to the use of the standard fire policy form prescribed by New York, which is identical with the Illinois standard policy, it therefore may not deviate from the standard form when it issues a fire insurance policy procured from it pursuant to Section 445 as surplus line insurance on an Illinois risk. The insureds predicate this contention on the requirement in Section 445.1(c) that the surplus line insurer be authorized under the laws of the State in which it is organized 'to do the business it is transacting or proposes to transact' by the issuance of surplus line insurance on the Illinois risk, and the complementary Illinois Insurance Department Rule 28.01 that:
25
'Before a licensee shall place any risk with an unauthorized insurer, the Director of Insurance shall be advised that such unauthorized insurer. * * *
26
(a) is duly authorized under the laws of its domiciliary state or country to do the business proposed by the Surplus Line licensee to be placed with it * * *.'
27
We are of the view that both the Code provision and the rule obviously refer to the authority of the surplus line insurer to engage in the type or class of insurance business involved-- casualty, fire, marine, etc.-- rather than to the manner in which it contracts or to its use of any particular policy form.
28
We conclude that the District Court did not err in its determination that the special exclusionary endorsement here involved is valid and enforceable and is clearly a bar to the claim asserted in each of the insureds' complaints.
29
The judgment orders of the District Court entered herein are affirmed.
30
Affirmed.
1
The parties are agreed that a ruling on the claims under the New York Fire and Marine Underwriters, Inc. policy issued to Corday's is binding as to the claim under the Lloyd's cover note
2
The underlining appears in the text of the endorsement
3
Liability, as to both insureds, was also rejected by the insurers on the further ground that the loss in each instance was not a 'direct loss by fire'; and as to the Bank on the additional ground that the proof of loss filed did not meet the requirements of the policy. The issues raised by these defenses were not reached by the District Court
4
Section 401 of the Illinois Insurance Code (Ill.Rev.Stat.1969, ch. 73, 1013) provides, in this respect, that:
'The Director is charged with the rights, powers and duties appertaining to the enforcement and execution of all the insurance laws of this State. He shall have power
(a) to make reasonable rules and regulations as may be necessary for making effective such laws; * * *'
|
Case 1:19-cv-09038-GBD-SDA Document 121 Filed 12/01/20 Page 1 of 2
LEVIN-EPSTEIN & ASSOCIATES, P.C.
_____________________________________________________________________________________________
420 Lexington Avenue • Suite 2525 • New York, New York 10170
T: 441-516-0714 • E: kmarshall@example.net
December 1, 2020
Via Electronic Filing
The Honorable Magistrate Judge Stewart D. Aaron
U.S. District Court Southern District of New York
500 Pearl St.
New York, NY 10007-1312
Re: Antolini v. McCloskey et al
Case No.: 1:19-cv-09038-GBD
Dear Honorable Magistrate Judge Aaron:
This law firm represents Defendants Dimur Enterprises Inc., Amy McCloskey, Theresa
Laurent, Eddie C K Chung and C&S Millennium Real Estate (collectively, the “Defendants”) in
the above-referenced action.
Pursuant to Your Honor’s Individual Motion Practice Rules I(A) and I(D), this letter
respectfully serves to request a ninety (90) day extension of the deposition completion deadline of
December 2, 2020 and discovery completion deadline of December 31, 2020.
This is the first request of its kind. This request is not made on consent of Plaintiff, who
failed to respond to multiple meet-and-conferral email attempts.
A ninety (90) day extension of the discovery schedule is necessitated in light of:
1. Plaintiff’s failure to comply with this Court’s August 7, 2020 discovery Order, and the
ensuing motion practice and sanctions Order [Dckt. Nos. 75, 79, 88];
2. Plaintiff’s grossly incomplete and deficient thirteen (13) page discovery production,
and the ensuing motion practice [Dckt. Nos. 80, 82];
3. Plaintiff’s failure to produce a HIPAA authorization form, and the ensuing motion
practice [Dckt. Nos. 88, 103, 106, 113];
4. Defendants’ inability to subpoena discovery from third-party medical providers, in
light of Plaintiff’s failure to produce a HIPAA authorization form [id.];
5. Plaintiff’s failure to appear for his duly noticed deposition on Thursday, October 28,
2020 at the proverbial eleventh hour, despite having one (1) month’s advanced notice
[Dckt. Nos. 105 at p. 3 fn. 2, 105-4]; and
6. Defendants’ Eddie C K Chung and C&S Millennium Real Estate recent appearance in
this action [Dckt. Nos. 101-102].
Case 1:19-cv-09038-GBD-SDA Document 121 Filed 12/01/20 Page 2 of 2
In light of the foregoing, Defendants respectfully request a ninety (90) day extension of the
deposition completion deadline of December 2, 2020 to, through and including, Tuesday, March
2, 20201, and the discovery completion deadline of December 31, 2020, to, through and including,
Wednesday, March 31, 2021.
Thank you, in advance, for your time and consideration.
Respectfully submitted,
LEVIN-EPSTEIN & ASSOCIATES, P.C.
By: /s/ Jason Mizrahi
Jason Mizrahi
420 Lexington Avenue, Suite 2525
New York, NY 10170
Tel. No.: 441-516-0714
Email: kmarshall@example.net
Attorneys for Defendants
VIA ECF: All Counsel
|
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 00-2382
___________
United States of America, *
*
Appellee, * Appeal from the United States
* District Court for the Eastern
v. * District of Missouri.
*
Demetrius Nunn, * [UNPUBLISHED]
*
Appellant. *
___________
Submitted: December 21, 2000
Filed: December 29, 2000
___________
Before McMILLIAN, RICHARD S. ARNOLD, and FAGG, Circuit Judges.
___________
PER CURIAM.
Demetrius Nunn pleaded guilty to possessing cocaine with intent to distribute,
in violation of 21 U.S.C. § 841(a). The district court sentenced him to 151 months
imprisonment and five years supervised release. On appeal, Nunn’s counsel has filed
a brief and moved to withdraw under Anders v. California, 386 U.S. 738 (1967); Nunn
has not filed a pro se supplemental brief.
Having thoroughly reviewed the record, we conclude Nunn knowingly and
voluntarily waived his right to appeal his sentence in the “Stipulation and Agreement
Relative to Plea, Conviction and Sentencing” which served as the plea agreement. See
United States v. Michelsen, 141 F.3d 867, 871-72 (8th Cir.), cert. denied, 525 U.S. 942
(1998); United States v. Greger, 98 F.3d 1080, 1081-82 (8th Cir. 1996). Accordingly,
we enforce the appeal waiver, dismiss this appeal, and grant Nunn’s counsel’s motion
to withdraw.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
-2-
|
137 Ga. App. 63 (1975)
222 S.E.2d 852
CENTRAL SOYA COMPANY, INC.
v.
BUNDRICK et al.
50930.
Court of Appeals of Georgia.
Submitted September 2, 1975.
Decided November 20, 1975.
Rehearing Denied December 12, 1975.
Reinhardt, Whitley & Sims, John S. Sims, Jr., James Penland, for appellant.
James W. Hurt, Roberts, Roberts & Rainwater, Guy V. Roberts, Jr., for appellees.
CLARK, Judge.
Is appellant, Central Soya Company, Inc., entitled to priority over other claimant creditors (appellees) in the instant receivership fund as a matter of law by reason of holding a perfected security interest under the U.C.C. in the assets from which the fund was produced? Inasmuch as this question involved neither equitable relief nor application of any rule of equitable procedure, jurisdiction of this appeal was transferred to this court. Central Soya Co. v. Bundrick, 234 Ga. 133 (214 SE2d 556).
"It is easy to get totally lost in the morass of petitions, orders, motions, affidavits and issues in this case." (Appellant's brief, page 4). Appellant's counsel has devoted 23 pages of the brief to clarification. This extra effort not only helped our court but drew from both adversary attorneys compliments "for his summary of a most complicated case." Considering that the superior court record of 332 pages shows three plaintiffs, three defendants, and nine intervenors, we join in those *64 favorable comments as we seek to condense those facts into an understandable summary suitable for a judicial decision.
Finding themselves without sufficient funds to continue their business of growing pigs, the three plaintiffs, S. Snyder Bundrick, and his affiliated corporations, Cordele Milling Company, Inc. and Circle "B" Farms, Inc., filed a petition for receivership on March 22, 1973, seeking an orderly liquidation of that business. Central Soya Company, Inc. ("Central"), Swift and Company ("Swift"), and J. R. Dowdy ("Dowdy") were designated as defendants. During the three previous years plaintiffs had operated a pig growing farm under agreements with Swift and Central. Swift owned and furnished the pigs. Central financed the operations by extending credit for feeds, feed supplements, and medications for the hogs, taking promissory notes and security instruments in plaintiffs' accounts, contract rights, fixtures, equipment, instruments, general intangibles and personalty. After payment to Swift, the balance derived from delivery to Swift of the grown hogs under the "pig feeding agreement" was assigned to Central. The assignment of proceeds as well as the other security interests were properly perfected by Central.
As neither plaintiffs nor Swift is involved in this appeal, we are concerned only with the relative priorities to the receivership fund among appellant Central and five appellees. They are co-defendant Dowdy and four intervenors. These five individuals are farmers who both stored and sold corn to Cordele Milling Company, one of the plaintiff corporations owned by Bundrick. Claims of four intervenors, whom we designate as Dowdy, McGarr, Stewart and a partnership known as "Raines and Woodward," represent debts owed to them for sales of corn used in feeding the growing animals. The claim of the other appellee intervenor, Williams, is based upon the conversion of his corn which had been stored in plaintiffs' warehouse.
Virtually all of plaintiffs' assets were liquidated, yielding a receivership fund of approximately $90,000. Central claims plaintiffs owe it more than $200,000. Thus, if Central's claim is entitled to priority, the claims *65 of the appellees will not be satisfied.
The argument of appellees in opposition to Central's assertion of priority may be categorized under principles of estoppel and good faith. Appellees do not contend that Central's security interests are somehow insufficient or that they possess security interests superior to that of Central.
Central raised the question of its priority via five motions for summary judgment, each motion being directed at one of the five appellees. In support of these motions, Central submitted the affidavits of its credit manager who had handled the company's dealings with plaintiffs. In the motions directed against appellees McGarr, Stewart, Raines and Woodward, and Williams, affiant averred, on personal knowledge, the following: that he is personally familiar with plaintiffs' accounts with Central; that plaintiffs are indebted to Central in an amount in excess of $200,000; that Central obtained duly perfected security interests in plaintiffs' contract rights, accounts, fixtures, equipment, instruments, general intangibles and personalty, as well as in an assignment of income under plaintiffs' "Pig Feeding Agreement" with Swift; and that the monies held in the receivership fund are derived from the interests which Central held as collateral. In the motion directed against Dowdy, the fifth appellee, the affiant added that neither Central nor any of its agents made representations to Dowdy regarding the purchase of corn by plaintiffs; that plaintiffs never acted (and were never authorized to act) on behalf of Central; and that Central never entered into a conspiracy with plaintiffs or Swift to defraud Dowdy.
Each appellee filed an affidavit opposing Central's summary judgment motion. The affidavits of McGarr, Stewart and Raines and Woodward stated, in pertinent part, that these appellees sold corn to plaintiffs for use in plaintiffs' pig growing operation; that plaintiffs never intended to pay for the corn; that before plaintiffs purchased the corn they had already fed it to their pigs; that the pigs were sold to Swift; that the monies received from the sale of the pigs are held in the receivership fund; and that Central had constructive notice, if not actual notice, that plaintiffs appropriated the corn.
*66 In his affidavit, appellee Williams averred that plaintiffs appropriated corn which he had delivered to plaintiffs for storage only; that the corn was fed to the pigs which plaintiffs raised; that the pigs were sold to Swift; that the monies received from the sale of the pigs are held in the receivership fund; and that Central had constructive notice, if not actual notice, that plaintiffs appropriated the corn.
In material part, Dowdy's opposing affidavit states that Dowdy undertook to sell corn to plaintiffs in December 1972 at $1.80 per bushel; that plaintiff Bundrick informed Dowdy the price was too high; that Bundrick then contacted Carthell Allen and Wayne Haynie of Central; that Allen and Haynie authorized Bundrick to buy Dowdy's corn at $1.80 per bushel; that Dowdy delivered 11,055 bushels of corn to plaintiffs relying upon the authorization of Central and the representation of Bundrick that Dowdy would be paid; that plaintiffs never intended to pay for the corn; that the corn was fed to the pigs raised by plaintiffs; that the pigs were sold to Swift; that the monies received from the sale of the pigs are held in the receivership fund; and that Central had constructive, if not actual, notice that plaintiffs appropriated the corn. Dowdy further averred that the purchase of his corn was a fraudulent scheme involving plaintiffs, Swift and Central; and that when he sold a previous crop of corn to plaintiffs "under a similar arrangement," he was paid for the corn by Central.
Based upon the pleadings and the supporting and opposing affidavits filed by the parties, the trial court denied Central's summary judgment motions. This appeal followed via certificate of immediate review.
1. Principles of estoppel and good faith underlie the entire Uniform Commercial Code, including the provisions of Article 9. Code Ann. §§ 109A-1-103; 109A-1-203. See also American East India Corp. v. Ideal Shoe Co., 17 UCC Rep. 527, 550 (E.D. Pa. 1975). Thus, a lack of good faith on the part of a secured creditor may alter the priorities which would otherwise be determined by Article 9 provisions. Thompson v. United States, 408 F2d 1075 (8th Cir. 1969).
The good faith of a transaction is peculiarly a *67 question for the trier of fact. State Housecraft, Inc. v. Jones, 96 Ga. App. 182, 184 (99 SE2d 701). Nevertheless, "in whatever guise the issue of fraud may appear in an action, the general basic principles underlying summary judgment apply and, if these are met, the issue of fraud may be summarily adjudicated." 6 Moore's Federal Practice § 56.17[27]. The question thus presented is whether the evidence submitted in support of, and in opposition to, Central's summary judgment motions demonstrates the existence of a factual issue with regard to the good faith of Central.
Through the affidavits of its credit manager, Central set forth facts which, in the absence of bad faith, entitle Central to priority in the receivership fund. Thus, it became incumbent upon appellees to set forth specific facts showing that a genuine issue of fact remains with regard to Central's good faith. Code Ann. § 81A-156 (e); Stephens County v. Gaines, 128 Ga. App. 661 (1) (197 SE2d 424). See also Leachman v. Cobb Development Co., 229 Ga. 207, 209 (190 SE2d 537) and Maxey-Bosshardt Lumber Co. v. Maxwell, 127 Ga. App. 429 (193 SE2d 885).
"`The party opposing a motion for summary judgment is entitled to a liberal construction in his favor of the pleadings and evidence.' Saunders v. Vikers, 116 Ga. App. 733 (3) (158 SE2d 324)." Citizens Bank v. Barber, 123 Ga. App. 507, 508 (2) (181 SE2d 545). Even when applying this principle to the affidavits, we conclude, nevertheless, that appellees have not demonstrated the existence of a genuine issue of fact regarding Central's good faith.
While the appellees' affidavits made statements raising possible suspicions that plaintiffs may have acted fraudulently, or in bad faith, no facts were set forth indicating that Central acted without good faith. The mere fact that Central stood to gain from plaintiffs' wrongful conduct does not in and of itself show a lack of good faith. "Intangible speculation does not raise an issue of material fact." United States v. Mt. Vernon Milling Co., 345 F2d 404, 407 (7th Cir. 1965). Nor do putative peccabilities.
With regard to appellee Dowdy's affidavit, we add that Central's authorization of plaintiffs' purchase does *68 not constitute evidence of a fraudulent scheme or conspiracy. In sum, appellees have not set forth specific facts showing the existence of a genuine issue of material fact.
2. "If the movant carries his initial burden, as was done in this case, and the respondent does not present refuting evidence that is adequate to raise an issue of fact, a summary judgment for the movant must be granted. [Cits.]" Richards v. Tolbert, 223 Ga. 678 (208 SE2d 486). Here the movant established legal right of priority as a secured creditor superior to unsecured creditors.
3. Williams' reliance upon Cobb Exchange Bank v. Byrd, 108 Ga. App. 825 (134 SE2d 871), is misplaced. As Judge (now Justice) Hall observed therein at page 828, that case pre-dated the Uniform Commercial Code. Thus, it no longer serves as binding precedent where there is a perfected security interest.
4. The trial court erred in denying Central's motions for summary judgment.
Judgment reversed. Pannell, P. J., and Quillian, J., concur.
|
Case 7:20-cv-06200-JCM Document 23 Filed 12/08/20 Page 1 of 3
THE LAW OFFICES OF
STEFAN COLEMAN, P.A.
PHONE (225)982-7427 | FAX (225)982-7427 NEW YORK | NEW JERSEY | FLORIDA
EMAIL: brittany26@example.org CLASSACTION.WS
ELECTRONICALLY FILED AND SERVED VIA CM/ECF
December 8, 2020
Hon. Judith C. McCarthy
Federal Building & United States Courthouse
300 Quarropas Street
White Plains, New York 10601
Re: Roeder v. Collection Bureau of the Hudson Valley, Inc.
Case No. 7:20-cv-06200-JCM
Dear Judge McCarthy:
The Court should deny Defendant Collection Bureau of the Hudson Valley’s request to file a
motion to dismiss and/or a motion to stay.
Plaintiff Roeder sued Defendant for violations of section 227(b)(1)(a)(iii) of the Telephone
Consumer Protection Act which prohibits, among other things, unwanted pre-recorded calls to
cellular phone numbers. Defendant requests leave to move to dismiss Plaintiff’s Complaint, arguing
that Plaintiff’s claims should be dismissed for lack of subject matter jurisdiction, and/or to stay the
case pending the Supreme Court’s ruling as to the meaning of the term “automatic telephone dialing
system” in the TCPA.
Specifically, with regard to the motion to dismiss Defendant intends to argue that the
Supreme Court’s holding in Barr v. American Association of Political Consultants, Inc., that “the
2015 government-debt exception created an unconstitutional exception to the 1991 robocall
restriction,” 140 S. Ct. 2335, 2348 (2020), rendered the entire robocall restriction unenforceable for
the time the government-debt exception was in effect. In essence, Defendant contends that it is as if
NEW YORK | NEW JERSEY | FLORIDA 1
Case 7:20-cv-06200-JCM Document 23 Filed 12/08/20 Page 2 of 3
THE LAW OFFICES OF
STEFAN COLEMAN, P.A.
the 1991 robocall ban did not exist between 2015 and 2020, eliminating all liability for robocalls
made in the last five years. Defendant’s motion must be denied. In AAPC, the Supreme Court
applied longstanding severability principles to conclude that “the entire 1991 robocall restriction
should not be invalidated, but rather that the 2015 government debt-exception must be invalidated
and severed from the remainder of the statute.” Id. at 2343. Seven Justices concurred in the
severability discussion, which made clear that while “no one should be penalized or held liable for
making robocalls to collect government debt” between 2015 and 2020, “our decision today does not
negate the liability of parties who made robocalls covered by the robocall restriction.” Id. at 2355
n.12. This mandate is consistent with well-established severability law and has been followed by the
majority of courts. Defendant intends to urge the Court to ignore this mandate and instead adopt the
reasoning of the two district courts that misconstrued AAPC.
To be clear, Defendant is not being sued for placing calls to collect government debt that
they thought were exempted from the TCPA. As stated in Justice Kavanaugh’s plurality opinion,
“[c]onstitutional litigation is not a game of gotcha against Congress, where litigants can ride a
discrete constitutional flaw in a statute to take down the whole, otherwise constitutional statute.”
AAPC, 140 S. Ct. at 2351. That is precisely what Defendant seeks to accomplish with its motion, and
the Court should decline Defendant’s invitation to ignore binding Supreme Court precedent. Plaintiff
therefore requests that the Court deny Defendant’s request motion.
With regard to the motion to stay, there is no basis to stay the case pending the Supreme
Court’s determination of what constitutes an “automatic telephone dialing system” under the TCPA
NEW YORK | NEW JERSEY | FLORIDA 2
Case 7:20-cv-06200-JCM Document 23 Filed 12/08/20 Page 3 of 3
THE LAW OFFICES OF
STEFAN COLEMAN, P.A.
because Plaintiff’s claim under the robocall provision arises from Defendant’s calls made using a
prerecorded voice, which does not require proof that an automatic telephone dialing system was
used. 47 U.S.C. § 227(b)(1)(A)(iii). Regardless of what the Supreme Court determines constitutes
an automatic telephone dialing system, it will not impact Plaintiff’s claim under the TCPA’s robocall
provision which is based exclusively on Defendant’s use of a prerecorded voice. There is therefore
no prospective reason to stay this matter, and Defendant’s motion should be disallowed.
Respectfully submitted,
s/ Stefan Coleman
Stefan Coleman
brittany26@example.org
LAW OFFICES OF STEFAN COLEMAN, P.A.
11 Broadway, Suite 615
New York, NY 10001
Telephone: (225)982-7427
Facsimile: (225)982-7427
Avi R. Kaufman
brittany26@example.org
KAUFMAN P.A.
400 NW 26th Street
Miami, FL 33127
Telephone: (225)982-7427
Attorneys for Plaintiff and the putative Classes
cc: All Counsel (via ECF)
NEW YORK | NEW JERSEY | FLORIDA 3
|
892 F.2d 1049
NOTICE: Federal Circuit Local Rule 47.8(b) states that opinions and orders which are designated as not citable as precedent shall not be employed or cited as precedent. This does not preclude assertion of issues of claim preclusion, issue preclusion, judicial estoppel, law of the case or the like based on a decision of the Court rendered in a nonprecedential opinion or order.BORLEM S.A.--EMPREEDIMENTOS INDUSTRIAIS and FNV--Veiculos EEquipamentos, S.A., Plaintiffs/Cross-Petitioners,v.The UNITED STATES and U.S. International Trade Commission,and The Budd Company, Defendants-Petitioners.
Misc. Nos. 262 to 264.
United States Court of Appeals, Federal Circuit.
Oct. 26, 1989.
Before MARKEY, Chief Judge, and FRIEDMAN and BISSELL, Circuit Judges.
FRIEDMAN, Circuit Judge.
ORDER
1
The Budd Company (Budd) and the United States International Trade Commission (ITC) each petition for permission to appeal the Court of International Trade's June 29, 1989 order, as amended September 1, 1989 and certified for immediate appeal. Borlem, S.A.--Empreedimentos Industriais and FNV--Veiculos E Equipamentos S.A. (Borlem) submit a conditional cross-petition for permission to appeal in the event the court grants the ITC's and Budd's petitions.
2
Briefly, Budd filed an antidumping petition with the Department of Commerce on behalf of the domestic industry producing tubeless steel disc wheels. The petition alleged that two Brazilian importers, Borlem and FNV, were selling tires at less than fair value (LTFV) prices.
3
Commerce issued an affirmative final LTFV determination. The ITC then determined that the domestic industry was threatened with material injury. Commerce followed with an antidumpting duty order.
4
Borlem and FNV challenged Commerce's final LTFV determination in the Court of International Trade (not this case) and the ITC's threat determination (this case). With regard to the former, Commerce joined Borlem and FNV in requesting a remand to Commerce. The remand resulted in publication of an amended final LTFV determination and amended antidumpting duty order. Budd has challenged Commerce's action in the Court of International Trade.
5
With regard to this case, the Court of International Trade remanded to the ITC for a finding of whether its threat determination should be reconsidered in light of Commerce's amended LTFV determination. The ITC determined that it does not, under these circumstances, have the authority to reconsider its final threat determination. The trial court disagreed and ordered another remand to the ITC to determine whether or not in its discretion it should reconsider its final threat determination. On September 1, 1989, the trial court certified the remand order for immediate appeal stating:
6
The controlling questions of law are: (1) whether or not the International Trade Commission has the authority and power to reconsider its final affirmative threat of injury determination, when directed to do so by this Court pursuant to its remand authority under 28 U.S.C. § 643(c)(1) in light of the International Trade Administration's [Commerce] amended final determination of sales at less than fair value and amended antidumping duty order; and (2) whether or not the exercise of such power or authority of reconsideration on remand by the Commission is discretionary.
7
We agree with the ITC and Borlem that the order involves controlling questions of law, with which there is substantial ground for difference of opinion, and which may materially advance the ultimate termination of the litigation. See 28 U.S.C. § 1292(d)(1). Further, we note that the issues are ones of first impression concerning the statutory limitations on the ITC's reconsideration authority and the trial court's remand authority. Further, the issues are present in other cases presently pending before the Court of International Trade.
8
Upon consideration thereof,
IT IS ORDERED THAT:
9
(1) The parties' petitions for permission to appeal are granted.
10
(2) The cases are hereby consolidated.
|
Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
12-20-2001
USA v. Jenkins
Precedential or Non-Precedential:
Docket 01-1292
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2001
Recommended Citation
"USA v. Jenkins" (2001). 2001 Decisions. Paper 294.
http://digitalcommons.law.villanova.edu/thirdcircuit_2001/294
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
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Filed December 20, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-1292
UNITED STATES OF AMERICA
v.
ROBERT JENKINS
a/k/a OCIELE HAWKINS
a/k/a WILLIAM JENKINS
Robert Jenkins,
Appellant
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
D.C. Criminal No. 99-cr-00277
(Honorable Harvey Bartle, III)
Argued October 11, 2001
Before: BECKER, Chief Judge, SCIRICA and GREENBERG,
Circuit Judges
(Filed December 20, 2001)
DAVID L. McCOLGIN, ESQUIRE
(ARGUED)
Defender Association of Philadelphia
Federal Court Division
Curtis Center, Suite 540 West
Independence Square West
Philadelphia, Pennsylvania 19106
Attorney for Appellant
WALTER S. BATTY, JR., ESQUIRE
(ARGUED)
Office of United States Attorney
615 Chestnut Street, Suite 1250
Philadelphia, Pennsylvania 19106
Attorney for Appellee
OPINION OF THE COURT
SCIRICA, Circuit Judge.
This appeal involves an interpretation of U.S.S.G.
S 3C1.1. A jury convicted Robert Jenkins for unlawfully
possessing firearm ammunition. The District Court
increased Jenkins's offense level by two levels under
U.S.S.G. S 3C1.1 for obstructing justice by failing to appear
at a state court hearing. Jenkins challenges the sentence
enhancement only. For reasons that follow, we will reverse
and remand for resentencing.
I.
On October 29, 1996, following a complaint from a local
store owner, Philadelphia police officers arrested Robert
Jenkins. He was charged with retail theft and possession of
a firearm without a license, both violations of Pennsylvania
law, and ordered to appear in state court on those charges.
On three separate occasions -- November 6, 1996; March
19, 1997; and March 4, 1999 -- Jenkins failed to appear.
On March 3, 1999, the day before Jenkins's third failed
appearance, an assistant United States attorney began
preparing a federal complaint against him. On May 18,
1999, federal prosecutors indicted Jenkins for illegally
possessing firearm ammunition, a violation of 18 U.S.C.
S 922(g)(1). Jenkins was arrested by federal officials on
September 15, 1999.
As part of a plea agreement, Jenkins pled guilty in federal
court to being a felon in possession of ammunition, a
violation of 18 U.S.C. S 922(g)(1). Finding"obstruction of
justice" under U.S.S.G. S 3C1.1, the District Court added a
2
two-level enhancement for Jenkins's failure to appear in
state court. Three levels were subtracted for acceptance of
responsibility. With a total offense level of 19, Jenkins's
guideline range was forty-six to fifty-seven months. He was
sentenced to fifty-four months in prison, three years of
supervised release, and a special assessment of $100.
Without the two-level enhancement, Jenkins's offense level
would have been 17, and he would have faced a guideline
range of thirty-seven to forty-six months.
In his initial appeal, Jenkins challenged the District
Court's imposition of the two-level upward adjustment. The
government filed a consent motion for remand, which we
granted. After an evidentiary hearing, the District Court
found: (1) the federal investigation of Jenkins commenced
on March 3, 1999; and (2) Jenkins was unaware of the
federal investigation on that date. Nevertheless, the District
Court determined Jenkins's awareness of the state
proceedings provided sufficient grounds for applying the
two-level enhancement. The District Court confirmed its
prior sentence, including the obstruction enhancement.
This appeal followed.
II.
Our review of the District Court's interpretation and
application of the Sentencing Guidelines is plenary. United
States v. Figueroa, 105 F.3d 874, 875-76 (3d Cir. 1997). We
review the District Court's factual findings for clear error.
United States v. Carr, 25 F.3d 1194, 1207 (3d Cir. 1994).
III.
United States Sentencing Guideline S 3C1.1, entitled
"Obstructing or Impeding the Administration of Justice,"
provides:
If (A) the defendant willfully obstructed or impeded, or
attempted to obstruct or impede, the administration of
justice during the course of the investigation,
prosecution, or sentencing of the instant offense of
conviction, and (B) the obstructive conduct related to (i)
the defendant's offense of conviction and any related
3
conduct; or (ii) a closely related offense, increase the
offense level by 2 levels.
Interpreting a pre-1998 version of S 3C1.1, the Supreme
Court held the guideline requires sentencing courts to
"review the evidence and make independent findings
necessary to establish a willful impediment to or
obstruction of justice, or an attempt to do the same." United
States v. Dunnigan, 507 U.S. 87, 95 (1993). The guideline
explicitly applies when a defendant "willfully fail[s] to
appear, as ordered, for a judicial proceeding." U.S.S.G.
S 3C1.1 app. n.4(e).1 The District Court found Jenkins
subject to a two-level enhancement, reasoning, "[I]f a
defendant knows he is engaging in obstructive conduct
concerning the Federal investigation or concerning a closely
related State offense and the obstruction occurs during the
time of the Federal investigation, the criteria of Section
3C1.1 have been met." (App. 135a (emphasis added))
Jenkins concedes his "obstructive" conduct-- the failure
to appear in state court -- occurred after the federal
investigation against him began, satisfying the temporal
aspect of the enhancement. But Jenkins contends he was
incapable of "willfully" obstructing justice because he was
unaware of the federal investigation on March 4, 1999.2
The threshold issue is whether the inclusion of the word
"willfully" in U.S.S.G. S 3C1.1 requires the government to
prove Jenkins was aware of the federal investigation. We
have plenary review over this question of law.3 In this case,
_________________________________________________________________
1. The examples set forth in the commentary to U.S.S.G. S 3C1.1 are not
exhaustive. See id. app. n.3 ("Obstructive conduct can vary widely in
nature, degree of planning, and seriousness. . . . Although the conduct
to which this adjustment applies is not subject to precise definition,
comparison of the examples set forth in Application Notes 4 and 5
should assist the court in determining whether application of this
adjustment is warranted in a particular case.").
2. Jenkins also challenges the constitutionality of 18 U.S.C. S 922(g)(1),
which formed the basis for his conviction. We recently upheld the statute
under a similar challenge. United States v. Singletary, 268 F.3d 196 (3d
Cir. 2001). Therefore, the only substantial issue on appeal is the two-
level sentencing enhancement.
3. It would appear that "willfully" is a term with "no fixed meaning."
Smith v. Wade, 461 U.S. 30, 63 n.3 (1983) (Rehnquist, J., dissenting).
The word has "a wide variety of definitions" and is often construed "in
accordance with its context." McLaughlin v. Richland Shoe Co., 486 U.S.
128, 137 (1988) (Marshall, J., dissenting).
4
the term "willfully" must be considered in context, with
reference to the other words in U.S.S.G. S 3C1.1.
We interpret United States Sentencing Guidelines the
same way we interpret statutes, "using the terms' meaning
in ordinary usage." United States v. Loney , 219 F.3d 281,
284 (3d Cir. 2000). In S 3C1.1(A), the Sentencing
Commission chose to place "willfully" directly before
"obstructed" and "impeded," modifying both verbs. Its
meaning, therefore, in ordinary usage is that a defendant
must have willfully obstructed or impeded the
administration of justice "during the course of the
investigation . . . of the instant offense of conviction." To
read in anything further would strain its ordinary meaning.
Cf. United States v. Clayton, 172 F.3d 347, 356 (5th Cir.
1999) (Wiener, J., concurring) ("Whether examined under
legal canons of statutory interpretation or plain English
rules of syntax, the phrase `during the investigation' should
be read to modify the immediately preceding phrase,
`administration of justice,' not the more remote clause [`the
defendant willfully . . . attempted to obstruct or impede'].").
In view of the language, structure, and context of
U.S.S.G. S 3C1.1, we believe the ordinary meaning of
"willfully" is "deliberately or intentionally"; in other words,
not "negligently, inadvertently, or accidentally." Jenkins
does not dispute that his failure to appear in state court
was an intentional action, one taken with full awareness of
the proceedings.4 On this threshold issue, Jenkins's
conduct represented a "willful obstruction."
Jenkins contends the guideline requires an awareness on
his part that a federal investigation had begun. The term
"awareness" does not appear in U.S.S.G. S 3C1.1. Nor do we
believe that it can be properly implied. Incorporating such
a requirement would contravene the purpose of the 1998
amendment to the guideline. As the Sentencing
Commission explained, the amendment clarified "what the
term `instant offense' means in the obstruction of justice
guideline." U.S.S.G. app. C, amend. 581.5 At the time of the
_________________________________________________________________
4. Jenkins does not claim that his failure to appear resulted from
negligence, for example, like forgetting the date of the hearing.
5. The Commission amended the language in response to inter-circuit
disagreement whether sentencing courts could impose the enhancement
5
amendment, several courts of appeals had affirmed
sentencing enhancements based on the obstruction of state
proceedings. E.g., United States v. Self , 132 F.3d 1039,
1042 (4th Cir. 1997) ("Section 3C1.1 draws no distinction
between a federal investigation and a state investigation.");
United States v. Smart, 41 F.3d 263, 265-66 (6th Cir. 1994)
(defendant's use of a false name in state court proceedings
obstructed closely related federal proceedings by delaying
his arrest); United States v. Emery, 991 F.2d 907, 911-12
(1st Cir. 1993) (defendant's attempted escape from state
authorities obstructed closely related federal proceedings by
prolonging the onset of federal proceedings). The
Commission nevertheless decided not to require "awareness
of the federal proceeding" in U.S.S.G. S 3C1.1. As the
government observes, the 1998 amendment ensured the
section applied to obstruction in related, non-federal
matters. Without further guidance from the Sentencing
Commission, we will not write in a requirement that the
defendant be aware of the federal investigation.
Jenkins observes that three of our sister circuits have
said in this context, "willfully" must imply some level of
awareness by the defendant of the federal investigation. In
United States v. Brown, 237 F.3d 625, 628 (6th Cir.), cert.
denied, 121 S. Ct. 1981 (2001), the Court of Appeals for the
Sixth Circuit held:
However, the term ["willfully"] generally connotes some
kind of deliberate or intentional conduct. Logically, [the
defendant's] actions cannot have been willful unless he
had some idea that he was being investigated.
Otherwise, the adjustment would serve no deterrent
purpose.
See also United States v. Lister, 53 F.3d 66, 69 (5th Cir.
1995) ("[A] defendant's awareness of the commencement of
an investigation is relevant and necessary for the
obstruction of justice enhancement."); United States v.
_________________________________________________________________
for conduct in cases closely related to the federal offenses of
conviction.
Subsection (B) now indicates the obstruction "must relate either to the
defendant's offense of conviction (including any relevant conduct) or to a
closely related case." Id.
6
Oppedahl, 998 F.2d 584, 585-86 (8th Cir. 1993) (relying on
deterrence principles to find a defendant must be aware of
an investigation to be subject to the enhancement).
In contrast, the Court of Appeals for the Seventh Circuit
has held awareness is not a prerequisite for imposing the
obstruction-of-justice requirement. In United States v.
Snyder, 189 F.3d 640 (7th Cir. 1999), the court observed,
"It is clear, however, that a defendant need not know that
he is under investigation at the time of the obstructive
conduct." Id. at 648 (citing United States v. Schmidt, 47
F.3d 188, 192 n.3 (7th Cir. 1995)).6 Given the guideline's
plain text and the stated purpose of the 1998 amendment,
we endorse this approach.
Jenkins contends such a conclusion depends on the
fortuity of initiating an investigation the day before his
_________________________________________________________________
6. In Schmidt, the Court of Appeals for the Seventh Circuit noted in
dicta, "Even if we were to reach the merits of the [defendants'] appeal,
we
would affirm the sentences imposed. First, the district court's
enhancement of the [defendants'] sentences under U.S.S.G. S 3C1.1 for
willful obstruction of justice was proper, despite the fact that the
defendants' actions -- removing water sampling probes from planting
lines -- occurred before they knew they were under investigation." 47
F.3d at 192 n.3. For that proposition, the Schmidt court cited United
States v. Polland, 994 F.2d 1262, 1269 (7th Cir. 1993). Considering the
pre-1998 version of U.S.S.G. S 3C1.1, the Polland court held:
Section 3C1.1 indicates that the obstruction of justice enhancement
does not apply to any and all obstructive conduct that a defendant
may have committed, but instead applies only to willful attempts
"to
obstruct or impede the administration of justice during the
investigation, prosecution, or sentencing of the instant offense."
U.S.S.G. S 3C1.1. In other words, section 3C1.1 does not
contemplate enhancements for obstruction of justice if the relevant
conduct impedes the investigation or prosecution of a separate
crime.
Id. The Polland court construed the pre-1998 language "instant offense"
to mean "instant offense of conviction," a change formalized in the 1998
amendments. Id. Construing the commentary accompanying the
guideline, the court said, "[T]he commentary clarifies that the
significant
factor is not merely the timing of the obstruction but rather whether the
obstruction or attempt involves evidence that is material to the
investigation or prosecution of the instant offense of conviction." Id.
7
unrelated appearance in state court. But this type of "line
drawing" is common in the law. Statutes of limitations and
other time-bar rules impose legal consequences based on
specific timing. Because a federal investigation against
Jenkins could have begun two days later does not change
the fact that the investigation, commenced before Jenkins's
"obstructive" conduct, met the textual requirements of
U.S.S.G. S 3C1.1.7
IV.
That does not, however, end our inquiry. Federal
proceedings here were initiated almost three years after
related state proceedings began. Jenkins admits he was
aware of the state proceedings pending against him in
Pennsylvania, consciously failing to appear for hearings on
three separate dates. But Jenkins's failure to appear in
state court before his federal indictment had no effect
whatsoever on the later federal proceedings. The
government presented no evidence the federal investigation
against Jenkins, initiated on March 3, 1999, was
obstructed or impeded by his failure to appear in state
court the next day. The federal indictment was apparently
issued when it was prepared, without any delay engendered
by Jenkins's failure to appear in state court. We exercise
plenary review over the application of U.S.S.G.S 3C1.1 in
these circumstances.
The government contends Jenkins's absence from the
state court proceeding is relevant for sentencing purposes
because it indicates his overall culpability. But U.S.S.G.
S 3C1.1 is not an invitation to consider every instance in
which a defendant acted in a blameworthy fashion. Only
conduct obstructing the "instant offense of conviction" is
relevant to sentencing. See United States v. Luca, 183 F.3d
_________________________________________________________________
7. Judge Becker does not join in Part III because he believes that the
correct interpretation of U.S.S.G. S 3C1.1 is stated in United States v.
Brown, 237 F.3d 625, 628 (6th Cir.), cert. denied, 121 S. Ct. 1981
(2001), United States v. Lister, 53 F.3d 66, 71 (5th Cir. 1995), and
United
States v. Oppedahl, 998 F.2d 584, 586 (8th Cir. 1993). See supra at 6,
7. However, inasmuch as he joins in Part IV, he concurs in the
judgment.
8
1018, 1022 (9th Cir. 1999) ("For the obstruction of justice
enhancement to apply, the district court must find that the
defendant willfully provided a materially false statement to
law enforcement officers that actually obstructed or
impeded the official investigation or prosecution of the
instant federal offense."). Without some nexus between the
obstruction and the federal offense, U.S.S.G. S 3C1.1 is
inapplicable.
The Court of Appeals for the Ninth Circuit has said the
governing standard is the "effect of the obstructive conduct
rather than the level of law enforcement that was
obstructed." Id. We agree. The application notes to U.S.S.G.
S 3C1.1 observe that some forms of obstructive conduct --
including fleeing from arrest, providing incomplete or
misleading information during a presentence investigation,
and making false statements while not under oath-- do
not merit the enhancement. U.S.S.G. S 3C1.1 app. n.5. In
contrast, where such conduct "significantly obstruct[s] or
impede[s] the official investigation or prosecution of the
instant offense," a sentence is properly increased. Id. app.
n.4(e).
Prior cases have affirmed sentence enhancements based
on conduct involving state court proceedings that
obstructed the federal investigation, prosecution, or
sentencing of the defendant. In United States v. Imenec, 193
F.3d 206 (3d Cir. 1999), the defendant was scheduled to
appear in state court on November 26, 1991, for a
preliminary hearing. Id. at 207. His failure to do so
prevented federal prosecutors, who had secured a warrant
for the defendant's arrest on November 25, 1991, from
detaining him. Id. We affirmed the imposition of a two-level
enhancement under the pre-1998 version of U.S.S.G.
S 3C1.1, stating:
Based on the text and purpose of S 3C1.1, we conclude
that the Sentencing Commission's intent was to impose
an enhancement for any conduct that obstructs an
investigation, prosecution, or sentencing proceeding
that is based on the criminal conduct underlying the
specific statutory offense for which the defendant is
being sentenced. Section 3C1.1 imposes a sanction for
conduct that obstructs a criminal investigation, even
9
though the investigation has not matured into a
prosecution and indeed, even though no thought has
yet been given to what the appropriate criminal charge
might be.
Id. But where the obstructive conduct relates only to an
ongoing state prosecution, with no discernable effect on the
federal proceedings, enhancement under U.S.S.G.S 3C1.1
is improper. Cf. United States v. Perez, 50 F.3d 396, 400
(7th Cir. 1995) (vacating an enhancement under U.S.S.G.
S 3C1.1 where "the obstructive conduct only affected [the
defendant's] state prosecution and had no effect on the
investigation, prosecution, or sentencing of [the
defendant's] federal offense"); United States v. Adediran, 26
F.3d 61, 65 (8th Cir. 1994) (concluding the "instant offense"
language in U.S.S.G. S 3C1.1, pre-amendment,"requires
some connection between the obstructed state proceedings
and the investigation of the federal offense").
In United States v. Roberts, 243 F.3d 235 (6th Cir. 2001),
the Court of Appeals for the Sixth Circuit affirmed a two-
level enhancement under U.S.S.G. S 3C1.1 where the
defendant fled from state custody and was subsequently
indicted by federal authorities. Id. at 240. The court found
the defendant's escape from state officials frustrated the
federal proceedings:
[The defendant] was still on the run when federal
charges were filed against him. The fact that he was on
the run rather than in the custody of the state would
have made it much more difficult for federal authorities
to prosecute [him]. . . . [The defendant's] obstructive
conduct -- escape -- did have an effect on the federal
prosecution.
Id. We believe Roberts is distinguishable on its facts. As
stated, Jenkins failed to appear in state court on March 4,
1999. The sealed federal indictment was not issued until
March 18, 1999. While the assistant United States attorney
began preparing the indictment on March 3, 1999, there is
no claim that Jenkins's absence from state court the next
day compromised the federal investigation in any way.
Therefore, unlike in Roberts, Jenkins is not more "culpable"
for federal sentencing purposes because of his conduct
10
before the state tribunal. The two-level enhancement for
obstruction of justice was improper.
V.
Despite several amendments, U.S.S.G. S 3C1.1 is no
model of clarity. In its current construction, we find the
defendant need not be aware of the federal investigation at
the time of the obstructive conduct. But the obstructive
conduct cannot merely affect some global application of
"the administration of justice." The federal proceedings
must be obstructed or impeded by the defendant's conduct.
In other words, there must be a nexus between the
defendant's conduct and the investigation, prosecution, or
sentencing of the federal offense. Jenkins's failure to appear
in state court on March 4, 1999 did not obstruct the federal
proceedings initiated against him the previous day.
Imposing a two-level enhancement for this conduct would
neither deter future defendants from acting similarly nor
serve the ends of justice in this case.
VI.
For these reasons, we will reverse the finding of the
District Court imposing a two-level enhancement for
obstruction of justice under U.S.S.G. S 3C1.1 and remand
for resentencing.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
11
|
Citation Nr: 1819450
Decision Date: 04/03/18 Archive Date: 04/12/18
DOCKET NO. 14-05 289 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in Columbia, South Carolina
THE ISSUES
1. Entitlement to a temporary total rating for convalescence for right ankle surgery under 38 C.F.R. § 4.30 prior to November 29, 2011.
2. Entitlement to an extension of a temporary total rating for convalescence under 38 C.F.R. § 4.30 after May 31, 2012, for right ankle surgery performed in November 2011.
3. Entitlement to a compensable initial rating for hypertension.
REPRESENTATION
Veteran represented by: J. Michael Woods, Attorney-at-Law
ATTORNEY FOR THE BOARD
J. Andrew Ahlberg, Counsel
INTRODUCTION
The Veteran served on active duty from August 1979 to December 1992.
This case comes before the Board of Veterans' Appeals (Board) on appeal from rating actions by the above Department of Veterans Affairs (VA) Regional Office (RO).
In January 2017, the Veteran withdrew his request for a hearing before a Veterans Law Judge.
The claim for a compensable initial rating for hypertension issue addressed in the REMAND portion of the decision below requires additional development and is REMANDED to the Agency of Original Jurisdiction (AOJ).
FINDINGS OF FACT
1. Prior to the Veteran's November 29, 2011 right ankle surgery, no medical procedure for the treatment of the Veteran's right ankle disability necessitated (1) at least one month of convalescence; (2) surgery with severe postoperative residuals such as incompletely healed surgical wounds, stumps of recent amputations, therapeutic immobilization of one major joint or more, application of a body cast; or (3) the necessity for house confinement, or the necessity for continued use of a wheelchair or crutches; or immobilization by cast, without surgery, of one major joint or more.
2. The residuals from the Veteran's November 2011 right ankle surgery did not necessitate convalescence after May 31, 2012
(CONTINUED ON NEXT PAGE)
CONCLUSIONS OF LAW
1. The criteria for the assignment of a temporary total rating for convalescence for right ankle surgery under 38 C.F.R. § 4.30 prior to November 29, 2011 are not met. 38 U.S.C. §§ 5103A, 5107 (2012); 38 C.F.R. §§ 3.102, 4.30 (2017).
2. The criteria for an extension of a temporary 100 percent rating for convalescence under 38 C.F.R. § 4.30 after May 31, 2012 for right ankle surgery performed in November 2011 are not met. 38 U.S.C. §§ 5103A, 5107 (2012); 38 C.F.R. §§ 3.102, 4.30 (2017).
REASONS AND BASES FOR FINDINGS AND CONCLUSIONS
A total disability rating (100 percent) will be assigned without regard to other provisions of the rating schedule when it is established by report at hospital discharge (regular discharge or release to non-bed care) or outpatient release that entitlement is warranted, effective from the date of hospital admission or outpatient treatment and continuing for a period of 1, 2, or 3 months from the first day of the month following such hospital discharge or outpatient release. 38 C.F.R. § 4.30.
In order to attain the temporary total disability rating, the Veteran must demonstrate that his service connected disability resulted in: (1) surgery necessitating at least one month of convalescence; (2) surgery with severe postoperative residuals such as incompletely healed surgical wounds, stumps of recent amputations, therapeutic immobilization of one major joint or more, application of a body cast, or the necessity for house confinement, or the necessity for continued use of a wheelchair or crutches (regular weight-bearing prohibited); or (3) immobilization by cast, without surgery, of one major joint or more. 38 C.F.R. § 4.30(a).
An extension of 1, 2, or 3 months beyond the initial 3 months of temporary total rating for convalescence may be granted and extensions of 1 or more months up to 6 months beyond the initial 6 months period may be made, upon request. 38 C.F.R. § 4.30(b).
Summarizing the pertinent facts with the above criteria in mind, service connection has been granted for a right ankle sprain with arthritis and instability of the right ankle. On November 29, 2011, the Veteran underwent a right foot and ankle flat foot reconstruction at a private medical facility. A December 2011 note completed by the physician who performed the November 2011 surgery indicated the Veteran would require convalescence to April 1, 2012. Thereafter, a June 2012 rating decision granted a temporary total rating for convalescence under 38 C.F.R. § 4.30 for the period from November 29, 2011 to March 31, 2012. This award was extended to May 31, 2012 by a January 2014 rating decision following receipt of a note from the clinician who performed the November 2011 surgery indicating that the Veteran remained under his care until May 23, 2012, and that he needed six months of convalescence.
Reports from a visit to a VA physical therapy clinic on May 25, 2012 for follow-up care for the Veteran's right ankle noted that the Veteran was ambulatory when he reported to the clinic without the use of an assistive device. The Veteran at that time indicated his surgeon was pleased with the status of the ankle and that he continued to work out and walk in his neighborhood. The Veteran described his pain as minimal unless he is engaged in significant activity, at which time the pain increases to 5/10 at the worst. He reported satisfaction with his therapy and ankle functioning following the surgery and stated that he was motivated to continue with his exercise routine on his own.
The physical examination of the right ankle during the May 25, 2012 VA outpatient visit revealed bogginess but the examiner indicated that "overall swelling has greatly decreased." There was moderate tenderness to palpation of the lateral ankle. Motion was to 12 degrees of dorsiflexion, 25 degrees of plantar flexion, 10 degrees of inversion, and 12 degrees of eversion. By way of an assessment, the examiner noted that the Veteran was compliant with all therapeutic interventions; swelling, range of motion, and strength continued to improve; the Veteran was working out daily; functional strength was improved; and that gait pattern was becoming less antalgic. The examiner stated that the Veteran should be safe to continue with his own modalities of rehabilitation and symptom management.
With respect to the contention that the benefits provided by 38 C.F.R. § 4.30 should have been assigned prior to November 29, 2011, such appears to be based on a November 2012 statement from a private surgeon who performed the Veteran's November 2011 surgery, indicating that the Veteran had been under his care since October 29, 2012. While it is likely that the Veteran's surgeon meant to report in his November 2012 statement that the Veteran was under his care since October 29, 2011, in point of fact the treatment for the right ankle that warranted the assignment of the benefits under 38 C.F.R. § 4.30 at issue-the right foot and ankle flat foot reconstruction-was not performed until November 29, 2011. As such, and as there is otherwise no indication that a procedure for the right ankle prior to November 29, 2011, necessitated (1) at least one month of convalescence; (2) surgery with severe postoperative residuals such as incompletely healed surgical wounds, stumps of recent amputations, therapeutic immobilization of one major joint or more, application of a body cast, or the necessity for house confinement, or the necessity for continued use of a wheelchair or crutches; or (3) immobilization by cast, without surgery, of one major joint or more' a temporary total rating for convalescence for right ankle surgery under 38 C.F.R. § 4.30 prior to November 29, 2011 cannot be assigned. 38 C.F.R. § 4.30.
As for an extension of the benefits provided by 38 C.F.R. § 4.30 benefits after May 31, 2012, given the improved condition of the right ankle as demonstrated by the Veteran's own comments and examination findings from the May 25, 2012 visit to a VA physical therapy clinic; the statement by the Veteran's surgeon that only 6 months of convalescence were required following the November 2011 surgery; and the lack of any other clinical evidence suggesting a level of disability in the right ankle after May 31, 2012 (but prior to subsequent surgery in July 2014) suggesting the need for further convalescence or a disability picture otherwise warranting entitlement to benefits provided by 38 C.F.R. § 4.30, the Board finds that the requested extension of the benefits provided by 38 C.F.R. § 4.30 benefits is not warranted.
In short, while the contentions of the Veteran have been considered, the Board finds the probative weight of these contentions to be overcome by the clinical evidence shown in the records as set forth above. Therefore, the benefit of the doubt doctrine is not applicable with respect to the claims for entitlement to a temporary total rating for convalescence for right ankle surgery under 38 C.F.R. § 4.30 prior to November 29, 2011 or an extension of such benefits after May 31, 2012, and these claims must be denied. 38 U.S.C. § 5107; 38 C.F.R. §§ 3.102; Gilbert, supra.
ORDER
A temporary total rating for convalescence for right ankle surgery under 38 C.F.R. § 4.30 prior to November 29, 2011 is denied.
An extension of a temporary total rating for convalescence under 38 C.F.R. § 4.30 after May 31, 2012 for right ankle surgery performed in November 2011 is denied.
REMAND
The Veteran was last afforded a VA examination addressing the severity of his service connected hypertension in July 2014, at which time it was indicated that the Veteran was taking continuous medication for hypertension but that there was not a history of diastolic readings of 100 or more. In February 2016, the Veteran's former representative asserted that the criteria for at least a 10 percent rating for hypertension is warranted on the basis of a history of diastolic blood pressure of predominantly 100 or more that requires continuous mediation for control. See 38 C.F.R. § 4.104, Diagnostic Code 7101 (2017). The representative was relying on an August 2014 statement from a private physician who indicated that the Veteran had been under her care since 1997, at which time systolic blood pressure of over 160 and diastolic pressure over 100, that the Veteran was under four different medications to control his hypertension, and the he would need lifelong medication to keep his blood control controlled.
Given that it has been three years since the Veteran was afforded a VA examination to address the severity of his hypertension, and that the Veteran has presented argument suggesting he has had a history of diastolic readings of 100 percent more, the Board finds that a VA examination to assess the severity of the Veteran's hypertension, and to fully address the contentions submitted on behalf of the Veteran in February 2016 is necessary to fulfill the duty to assist. See Green v. Derwinski, 1 Vet. App. 121, 124(1991) (VA has a duty to provide the Veteran with a thorough and contemporaneous medical examination).
Accordingly, the case is REMANDED for the following action:
1. Afford the Veteran the opportunity to submit, or
authorize VA to obtain on his behalf, any records of private care pertaining to his hypertension disability. Upon receipt of any authorizations, request and obtain such records.
2. Schedule a VA examination to assess the current
severity of the Veteran's hypertension. The claims file should be made available to, and reviewed by the VA examiner.
The examiner should take a history from the Veteran as to the progression of his hypertension disability. Based on an examination, review of the record, and any tests or studies deemed necessary, the examiner should note the predominant range of the Veteran's current blood pressure readings, and whether the Veteran's hypertension is controlled by medication.
The examiner should also determine whether the Veteran has a history of diastolic pressure predominantly 100 or more requiring continuous medication for control. The examiner should consider and comment upon the history provided in the August 2014 statement by Dr. R.M.J. of the Veteran having blood pressure readings that exceeded 160/100 and his use of four different medications.
3. After completion of the above and any other indicated development, the claim for a compensable initial rating for hypertension should be readjudicated. To the extent any benefits sought in connection with this claim remain denied, the RO should furnish the Veteran and his attorney with a supplemental statement of the case. After they are afforded an opportunity to respond, the case should be returned to the Board for appellate review.
The Veteran has the right to submit additional evidence and argument on the matter the Board has remanded. Kutscherousky v. West, 12 Vet. App. 369 (1999).
The remanded claim must be afforded expeditious treatment. The law requires that all claims that are remanded by the Board or by the Court for additional development or other appropriate action must be handled in an expeditious manner. See 38 U.S.C. §§ 5109B, 7112 (2012).
______________________________________________
V. Chiappetta
Veterans Law Judge, Board of Veterans' Appeals
Department of Veterans Affairs
|
In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 07-1006
LAWRENCE B. LEVY, M.D.,
Plaintiff-Appellant,
v.
MINNESOTA LIFE INSURANCE COMPANY,
formerly known as Minnesota
Mutual Life Insurance Company,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 03 C 5141—Sidney I. Schenkier, Magistrate Judge.
____________
ARGUED DECEMBER 5, 2007—DECIDED FEBRUARY 25, 2008
____________
Before FLAUM, EVANS, and WILLIAMS, Circuit Judges.
EVANS, Circuit Judge. In this insurance dispute, the
plaintiff, Dr. Lawrence B. Levy, and the defendant,
Minnesota Life Insurance Company (MLI), agree that
Levy suffers from osteoarthritis in his right knee, which
prevents him from performing his occupational duties
and qualifies him for disability coverage under two policies
issued by MLI. The parties disagree, however, on which
provision of the policies applies, which, in turn, affects the
duration of coverage. Levy claims that he qualifies for
coverage under the “injury” provision, which entitles him
to lifetime disability benefits. MLI, on the other hand,
2 No. 07-1006
claims that Levy qualifies for coverage under the “sick-
ness” provision, which only entitles him to benefits he
has received for the 6-year period that ended after he
turned 65 years old in 2003.
The district court (Magistrate Judge Sidney Schenkier,
sitting with the parties’ consent, 28 U.S.C. § 636(c))
resolved the parties’ cross-motions for summary judgment
in favor of MLI. The case is now before us on Levy’s
appeal. We review a grant of summary judgment de novo.
Tanner v. Jupiter Realty Corp., 433 F.3d 913, 915 (7th Cir.
2006). Summary judgment is proper if “there is no gen-
uine issue as to any material fact and [ ] the moving party
is entitled to a judgment as a matter of law.” Fed. R. Civ.
P. 56(c).
The facts are without genuine dispute. In the early
1980s, MLI issued two disability insurance policies to Dr.
Levy. The policies define “disability” and “disabled” to
mean that “due to sickness or injury you are unable to
perform the substantial and material duties of your
regular occupation.” The policies define “injury” as “[a]n
accidental bodily injury you sustained while this policy
is in force” and “sickness” as “[a] disease or illness which
is diagnosed or treated while this policy is in force.” The
policies provide a maximum benefit period to age 65 if
the insured is disabled due to a “sickness” but lifetime
benefits if the disability is due to an “injury.”
In 1987, Levy claims to have injured his right knee
while playing basketball at a picnic. He experienced pain
for 2 or 3 weeks, which he self-treated with anti-inflam-
matories. Levy did not seek medical treatment for his
knee until 1989, at which point he was examined by
Dr. Bruce Hallmann, an orthopedic surgeon.
In February 1989, Dr. Hallmann performed arthroscopic
surgery on Levy’s right knee on an outpatient basis. His
preoperative diagnosis was “[i]nternal derangement—right
No. 07-1006 3
knee.” His post-operative diagnosis was “[c]omplex degen-
erative tear of posterior horn of medial meniscus, [and]
advanced chrondromalacia[.]” Dr. Hallmann noted that
Levy “had a long history of problems with his right knee,”
and “has had progressive difficulties with pain and
clicking at the right knee.” Dr. Hallmann also wrote that
Levy had “apparently injured the right knee many years
ago, but underwent no specific therapeutic intervention.”
Dr. Hallmann’s notes do not mention the 1987 basket-
ball incident.
In his deposition, Dr. Hallmann explained that the
reference in his report to a “long history” of right knee
problems did not mean “a problem two years before [the
1989 surgery]” because he “would have probably indicated
that” in his notes. Rather, he stated that “[w]hen I say a
long history of many years, I don’t usually mean just a
year or two. It’s usually longer than that.” Dr. Hallmann
also testified that “[i]ndividuals can develop degenerative
meniscal cartilage tears in association with osteoarthritis.”
He described Levy’s degenerative tear at the time of the
1989 surgery as follows:
This was not a fresh meniscal cartilage tear. It wasn’t
a matter that the cartilage had a very clear and
clean—it was not a clean or clear cartilage tear. The
cleavage planes were not well defined. They had
already become degenerated. They had become frayed,
fibrillated, [of] irregular character and contour. So
this was not a recent tear of the medial meniscus.
[A]nd, in fact, degenerative changes had already taken
place at the tear site.
Dr. Hallmann further stated that he was unable to
determine, based on his medical records, whether the
degenerative meniscal tear noted in his report was the
result of a specific trauma or a degenerative process such
as osteoarthritis.
4 No. 07-1006
About 3 weeks after the arthroscopic surgery, Levy
returned to work and resumed his normal duties as a
physician. Levy continued to work for the next 7 years,
during which time he did not seek medical diagnosis or
treatment for his knee.
During the early 1990s, Levy’s coverage under MLI’s
policies lapsed due to nonpayment of premiums. To obtain
reinstatement of coverage, Levy made several certifica-
tions regarding his medical condition. On four occasions
during 1992 to 1994, Levy certified that he “ha[d] not
suffered a disability, been injured or sick” since the end of
the policies’ premium payment grace periods. In a 1994
application for life insurance coverage with MLI, Levy
also certified that he had made a “Full Recovery” from
his arthroscopic surgery and had experienced “no prob-
lems since.”
In 1980, a little over a year before the policies here were
issued, Dr. Levy worked at the Flashner Medical Group,
which he described as an “urgent and immediate care”
facility with offices in Mount Prospect and Arlington
Heights, Illinois. Levy stopped working for the Flashner
Group on June 30, 1994, when it was sold to the New York
Life Insurance Company. Levy did not practice for a year
after the buyout because, apparently, he received, as part
of the Flashner buyout, a year’s salary from New York
Life. When the year ran out, Levy took a position as an
independent contractor (with a group, Wexford Health
Services) providing medical services for the Illinois
Department of Corrections at its Dwight Correctional
Center, a maximum security prison in Dwight, Illinois,
some 60 miles south of downtown Chicago. He held that
spot for 6 months, until February 29, 1996, when a new
contractor took over his heather89@example.com. On that day,
Levy was 58 years old. He has not worked since that day.
Two months after leaving Dwight, Levy submitted a
disability claim to MLI in which he claimed to be disabled
No. 07-1006 5
due to right knee pain. When MLI requested documenta-
tion in support of his claim, Levy sought medical attention
from Dr. Chadwick Prodromos, an orthopedic surgeon.
After examining Levy, Dr. Prodromos diagnosed him
with “Right knee DJD versus medial meniscal injury.”1
Dr. Prodromos also obtained an MRI on Levy’s right
knee from a radiologist, Dr. Paul Backas. Dr. Backas
reported that the MRI showed “[t]hinning, altered signal
intensity and medial subluxation of body medial meniscus
consistent with degenerative change with no macro-
meniscal tear identified2.” Dr. Prodromos’ notes state
that the MRI “would appear to be consistent with DJD
and not internal derangement.” In the same note, Dr.
Prodromos stated that, based on his review of Dr.
Hallmann’s report, “[b]oth the diagnosis and the proce-
dure at that time certainly were consistent with [Levy’s]
current advanced degenerative joint disease.”
In May 1996, Dr. Prodromos signed an Attending
Physician Statement (APS), diagnosing Levy with right
knee osteoarthritis and limiting him to sedentary work.
The APS was used as the proof of loss that Levy sub-
mitted to MLI regarding his disability. Dr. Prodromos
examined Levy on four additional occasions during
1997 through 2002. He completed six supplemental APS
forms, each repeating his diagnosis of osteoarthritis/
degenerative joint disease.
In his deposition, Dr. Prodromos testified regarding the
origin or cause of Levy’s osteoarthritis. He first opined
1
“DJD” is short for “degenerative joint disease.” Dr. Prodromos
testified that he uses the terms “osteoarthritis” and “degenera-
tive joint disease” interchangeably.
2
Based on his review of the report, Dr. Prodromos stated that
the correct term was “micromeniscal,” not “macromeniscal,” tear.
6 No. 07-1006
that “Dr. Levy’s basketball injury caused the meniscal tear
on which Dr. Hallmann operated” and that “his knee
arthritis was caused by the meniscal tear.” Dr. Prodromos
gave a more comprehensive explanation shortly thereafter:
It is my opinion to a reasonable degree of orthopaedic
surgical certainty that his severe right knee pain
was—is directly attributable to the meniscal tear,
indirectly. When I saw him he wasn’t hurting because
of a meniscal tear. It was occurring because the
meniscal tear had caused the sequence of events of
articular cartilage damage and arthrosis and pain
in his knee.
Dr. Prodromos also stated that “[a]ll meniscal tears are
caused by trauma, even so-called degenerative tears.”
In 2005, Dr. David Waldram, an orthopedic surgeon
consulted by MLI, concurred with the diagnosis of
osteoarthritis/degenerative joint disease based on his
review of Levy’s medical records and the testimony of
Drs. Hallmann and Prodromos. Dr. Waldram further
opined that Levy’s osteoarthritis “is not in all medical
probability related to the injury of 1987.” According to Dr.
Waldram, the 1989 operation report contains findings
consistent with degenerative arthritis and a degenerative
meniscal tear, and these degenerative changes predated
the 1987 basketball injury.
Dr. Waldram also pointed to other medical evidence
that Levy’s arthritis was not caused by the 1987 basket-
ball incident. For example, Dr. Waldram stated that
osteoarthritis typically presents unilaterally and asymmet-
rically. Thus, the fact that Levy’s arthritis appears in
his right knee does not support that the arthritis was
caused by an injury to the right knee. Dr. Waldram also
stated that Levy has symptoms of osteoarthritis in other
areas of his body not involved in the 1987 incident—
namely, his spine, left knee, and right hip. Dr. Waldram
No. 07-1006 7
indicated that Levy’s right hip arthritis could not be
related to overcompensation on account of the right knee
arthritis because overcompensation would occur on the
opposite side.
MLI initially declined Levy’s disability claim on the
basis that the policies had lapsed due to nonpayment of
premiums. After Levy filed suit, the parties settled the
coverage dispute and, consequently, MLI paid $7,000 a
month in disability benefits to Levy from July 31, 1997,
through June 11, 2003 (the policies’ first anniversary date
after Levy’s 65th birthday).3 The parties did not set-
tle—and specifically reserved the right to adjudicate—the
legal question of whether Levy’s disability falls within
the policies’ “sickness” or “injury” coverage.
Under Illinois law,4 an insurance policy is subject to the
general rules governing the interpretation of other types of
contracts. Hobbs v. Hartford Ins. Co. of the Midwest, 823
N.E.2d 561, 564 (Ill. 2005). Our primary objective is
to ascertain the intent of the parties, as expressed in
the policy’s language. Gillen v. State Farm Mut. Auto. Ins.
Co., 830 N.E.2d 575, 582 (Ill. 2005). We construe the policy
as a whole, giving unambiguous words their plain, ordi-
nary, and popular meaning. Outboard Marine Corp. v.
Liberty Mut. Ins. Co., 607 N.E.2d 1204, 1212 (Ill. 1992).
Words are ambiguous only if they are susceptible to more
than one reasonable interpretation. USF&G v. Wilkin
Insulation Co., 578 N.E.2d 926, 930 (Ill. 1991). In that
case, they will be construed against the drafter. Id.
Nevertheless, we are not to adopt a “strained, forced,
unnatural, or unreasonable construction, or one which
3
This means Levy has already received about a half a million
dollars in benefit payments from MLI.
4
There is no dispute that the substantive law of Illinois applies
in this diversity action.
8 No. 07-1006
would lead to an absurd result[.]” U.S. Fire Ins. Co. v.
Hartford Ins. Co., 726 N.E.2d 126, 128 (Ill. App. Ct. 2000).
The policies define “injury” as “[a]n accidental bodily
injury you sustained while this policy is in force” and
“sickness” as “[a] disease or illness which is diagnosed or
treated while this policy is in force.” Levy’s 1987 basketball
incident qualifies as an “injury,” and his 1996 diagnosed
condition of osteoarthritis qualifies as a “sickness” under
the policies. However, the policies only provide coverage if
the insured is “disabled,” meaning that, “due to sickness or
injury, [the insured is] unable to perform the substantial
and material duties of [his] regular occupation.”
MLI argues that this definition places the focus on the
condition that renders the insured unable to work. Deter-
mining coverage based on the disabling condition, it
argues, reflects the reasonable expectation of the parties.
When a “sickness” prevents the insured from working,
benefits for that disability are capped at age 65. MLI
asserts that Levy was not unable to work due to his 1987
sports injury or even his 1989 degenerative meniscus
tear. Rather, he became unable to work in 1996 due to
degenerative joint disease. Thus, because Levy’s disability
was caused by (“due to”) a “sickness,” not an “injury,” only
the policies’ sickness coverage applies.
Levy, however, claims that the phrase “due to” is ambig-
uous because it was left undefined by MLI. Because of this
ambiguity, Levy argues that we are required to adopt his
definition of “due to”—namely, “proximate cause.” It is
important to remember, however, that a term or phrase is
not ambiguous simply because it is undefined. Only when
a term is susceptible to more than one reasonable interpre-
tation is it ambiguous. The district court found that the
phrase “due to” was not ambiguous because, although
there were other possible interpretations (such
as “proximate cause”), only one interpretation (“immedi-
No. 07-1006 9
ate cause”) was reasonable when the policies were
viewed as a whole. For the moment, however, we will
assume that “due to” is ambiguous and construe it as
creating a proximate cause standard, as Levy advocates.
Illinois law defines “proximate cause” as “[any] cause
which, in natural or probable sequence, produced the
injury complained of. [It need not be the only cause, nor
the last or nearest cause. It is sufficient if it concurs with
some other cause acting at the same time, which in
combination with it, causes the injury.]” Illinois Pattern
Jury Instructions—Civil, No. 15.01 (2006 ed.). Thus, for
Levy to prevail, he must raise a genuine issue of fact as
to whether the 1987 basketball injury was a proximate
cause of his inability to perform his normal duties as
a physician. MLI argues that Levy falls short of meeting
this requirement. We agree.
Dr. Hallmann, the first medical profession to treat Levy
(almost 2 years after the injury), testified that the
meniscal tear he repaired in 1989 was not “fresh” or
“recent.” He opined that Levy “apparently injured his right
knee many years before” the surgery. Dr. Hallmann also
testified that he could not determine whether the degener-
ative meniscus tear noted in his report was the result of a
specific trauma or a degenerative process such as
osteoarthritis. Not insignificantly, as we previously
mentioned, Dr. Hallmann’s medical notes make no men-
tion at all of the 1987 basketball incident.
Dr. Waldram concurred with Dr. Hallmann’s testimony
that the degenerative changes predated the basketball
injury. He specifically opined that, based on his review of
the reports and testimony, Levy’s arthritis “is not in all
medical probability related to the injury of 1987.” Levy
argues that Dr. Waldram’s testimony is not competent
because he was retained by MLI and has no facts to
support his opinion. However, Dr. Waldram did not simply
10 No. 07-1006
speculate regarding the cause of Levy’s arthritis. Besides
reviewing reports and testimony, he also pointed to
medical evidence that Levy’s arthritis was not caused by
the 1987 basketball injury. For example, Dr. Waldram
testified that osteoarthritis typically presents unilat-
erally and asymmetrically, casting doubt upon Levy’s
contention that his right knee arthritis was caused by
a right knee injury.
Dr. Prodromos’ testimony was the most complex. On
cross-examination, he did opine that the basketball
injury caused the meniscal tear, which, in turn, caused
the arthritis.5 However, Dr. Prodromos’ subsequent
testimony emphasized that Levy’s inability to work was
not caused by a meniscal tear but osteoarthritis: “When
I saw him he wasn’t hurting because of a meniscal tear. It
was occurring because the meniscal tear had caused the
sequence of events of articular cartilage damage and
arthrosis and pain in his knee.” Consequently, Dr.
Prodromos described the link between Levy’s meniscal
tear and his arthritis as “indirect.”
Dr. Levy’s own testimony links the 1987 injury to his
disability. But he acknowledged that he lacks the appro-
priate medical expertise to diagnose or treat meniscal
tears such as the one he sought treatment for in 1989.
Furthermore, his previous statements refute his testi-
mony. On four occasions between 1992 and 1994, Levy
certified that he “ha[d] not suffered a disability, been
injured or sick” during those periods. In a 1994 application
for life insurance coverage with MLI, Levy also certified
that he had made a “Full Recovery” from his arthroscopic
5
It should be noted that Dr. Prodromos also testified that Levy
“went out of his way to tell me that [his disability] was caused
by an injury”—a fact Levy did not emphasize to his first orthope-
dic surgeon, Dr. Hallmann.
No. 07-1006 11
surgery and had experienced “no problems since.” In the
1996 claim he submitted to MLI, Levy stated that the
pain and limited motion in his knee that occurred at the
time of the 1987 injury persisted for only 2 or 3 weeks
and then subsided for several months until the pain
returned “with no apparent precipitating event.” Thus,
Levy presented scant evidence that his disabling condi-
tion had its roots in an isolated, 10-year-old, sports injury.
Even if we assume the 1987 basketball injury caused the
meniscal tear, the evidence is insufficient to show that
the injury proximately caused Levy’s disability. It is
critical that, after the 1989 surgery, Levy not only ad-
mitted to making a full recovery but continued to perform
his normal duties as a physician for 7 years, during which
time he never sought medical diagnosis or treatment for
his knee. Only when he developed osteoarthritis did he
become unable to work. Thus, even under a proximate
cause analysis, the alleged injury is too speculative and
remote. See W. Page Keeton, Prosser and Keeton on Torts
§ 41, at 264 (5th ed. 1984) (stating that proximate cause
recognizes that “legal responsibility must be limited to
those causes which are so closely connected with the
result and of such significance that the law is justified in
imposing liability”). The district court therefore did not
err in granting summary judgment in favor of MLI.
We emphasize that our decision today does not hold
that the phrase “due to” is ambiguous or that it usually
translates into a proximate cause standard. On the
contrary, the district court’s opinion persuasively argues
that “due to” is not ambiguous here because a proximate
cause standard would not have been reasonable when
viewing the policies as a whole. Specifically, Judge
Schenkier pointed out that, unlike the causation language
at issue in two Illinois cases involving accidental death and
dismemberment policies, Faulkner v. Allstate Life Insur-
ance Co., 684 N.E.2d 155 (Ill. App. Ct. 1997), and Carlson
12 No. 07-1006
v. New York Life Insurance Co., 222 N.E.2d 363 (Ill. App.
Ct. 1966),6 the phrase “due to” in our case not only deter-
mines the existence of coverage but also the duration of
coverage under the policies. The provisions contemplate
that an insured will be unable to work “due to” a sickness
or “due to” an injury, not both. Because a disability may
have more than one proximate cause, that standard would
be insufficient to delineate which provision applies. Thus,
Levy would face an uphill battle if it were necessary to
address whether “due to” was ambiguous to begin with.
For the foregoing reasons, summary judgment in favor
of the defendant is AFFIRMED.
6
The causation language involved in Faulkner and Carlson
differs from the language in our case. Neither party has pre-
sented Illinois authority interpreting the phrase “due to” as
creating a proximate cause standard—or any other causation
standard—in an insurance policy.
USCA-02-C-0072—2-25-08
|
EXHIBIT32.2.1 CERTIFICATIONS I, Steven V. Lant, do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section906 of the Sarbanes-Oxley Act of 2002, that: 1. The Annual Report on Form 10-K of Central Hudson Gas& Electric Corporation (the “Company”) for the period ended December 31, 2011 (the “Annual Report”) fully complies with the requirements of section13(a)or 15(d)of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and 2. The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date:February 16, 2012 /s/ Steven V. Lant Steven V. Lant Chairman of the Board and Chief Executive Officer
|
545 N.E.2d 21 (1989)
Billy Ray SALMON, d/b/a First Realty Co., Plaintiff-Appellant,
v.
Mary I. PEREZ, and Hills O'Brown Realty, Defendant-Appellees.
No. 03A01-8810-CV-331.
Court of Appeals of Indiana, First District.
October 19, 1989.
*22 Thomas M. Barr, Nashville, for plaintiff-appellant.
James T. Roberts, Nashville, for Mary I. Perez.
David T. Woods, Nashville, for Hills O'Brown Realty.
BAKER, Judge.
STATEMENT OF THE CASE
Plaintiff-appellant, Billy Ray Salmon, d/b/a First Realty Co. (Salmon), appeals from the denial of his claims for a brokerage fee and incidental damages arising from the aborted sale of real estate pursuant to a purchase agreement with Mary I. Perez (Perez).
We affirm.
STATEMENT OF THE FACTS
Salmon, a licensed real estate broker, was the listing agent for real estate owned by the estate of Judith E. Allen (the property). Under the terms of the listing contract, Salmon was to receive a commission upon procuring a buyer for the property.
On April 7, 1986, Perez made a written offer to purchase the property and tendered a $1,000 deposit as earnest money. The purchase agreement was drawn up by Hills O'Brown Realty (Hills O'Brown), Perez's representative in the transaction. The purchase agreement contained the following provisions regarding conveyance and evidence of title:
At closing, the Property shall be conveyed to Purchaser by Warranty Deed in the same condition as it is now, ordinary wear and tear excepted, subject to all covenants, easements, restrictions and rights of way of record and to applicable health and zoning laws, but free and clear of all other liens and encumbrances except as stated herein. In support of a merchantable title, Purchaser shall be furnished at Seller's expense prior to Closing an Owner's insurance binder in the amount of the purchase price. Should additional time be needed to correct title defects, reasonable extensions of time shall be given.
sclark@example.org. Because of Perez's desire to obtain an out-of-state mortgage loan, the *23 closing date was delayed. Accordingly, Perez paid an additional earnest money deposit of $1,000 to keep the bargain open during the delay.
Upon receiving a loan commitment for Perez's mortgage, Salmon ordered the title insurance as required by the purchase agreement. On August 11, 1986, one day before the scheduled closing, Salmon received the title commitment. A copy of the title commitment was delivered to Hills O'Brown at which time an oil and gas lease was discovered to exist on the property. None of the parties directly involved in the closing had any knowledge of the oil and gas lease prior to August 11, 1986.
Perez went to Hills O'Brown on the morning of August 12, 1986. The closing was scheduled to take place that afternoon. Perez and the owner of Hills O'Brown, Frank Russo (Russo), discussed the existence of the oil and gas lease. Russo explained to Perez that the lease could be removed at the seller's expense. Russo proposed that $150 from the seller's share of the purchase price be set aside in escrow to cover the cost of removing the lease. Salmon agreed to this arrangement. Perez, however, refused the escrow arrangement. Rather, she elected to terminate the deal.
On August 14, 1986, Perez's attorney requested Salmon return the earnest money deposit. The earnest money was not returned to Perez, but was divided between Salmon and the heirs of Judith Allen as provided in the listing contract. Salmon's share totaled $500. He brought this action seeking the remainder of his commission, reimbursement for expenses incurred in relisting the property, and interest. The trial court found that Salmon was not entitled to his brokerage fee because the property did not have merchantable title at the time of closing due to the existence of the oil and gas lease. The court also stated that "[a]lthough the defendant had an obligation to provide a reasonable time for the correction of the title defect, no evidence was presented to show that the plaintiff made nor the vendor made any attempt to correct the defect." sclark@example.org. Salmon now appeals.
ISSUES
Five issues are presented by this appeal:
I. Whether there was sufficient evidence to conclude that the oil and gas lease amounted to an encumbrance rendering title to the property unmerchantable.
II. Whether the trial court erred in determining that Salmon was not entitled to his brokerage fee for failure to correct the defect in the property's title.
III. Whether the trial court erred in denying the admissibility of evidence concerning the procedures for removing oil and gas leases.
IV. Whether the trial court erred in denying the admissibility of Salmon's evidence concerning advertising expenses.
V. Whether Perez is entitled to attorney fees.
DISCUSSION AND DECISION
ISSUE I: Marketability of Title
Salmon appeals from a negative judgment. To be successful, he must establish that the judgment is contrary to law. Sherk v. Indiana Waste Systems, Inc. (1986), Ind. App., 495 N.E.2d 815, trans. denied. This court will set aside a negative judgment as contrary to law only when the evidence is without conflict and all reasonable inferences to be drawn therefrom lead to but one result and the trial court has reached a different one. Charles F. Broughton, D.M.D., P.C. v. Riehle (1987), Ind. App., 512 N.E.2d 1133. We will not reweigh the evidence or judge the credibility of the witnesses. Maddox v. Wright (1986), Ind. App., 489 N.E.2d 133. Where a party bearing the burden of proof receives a negative judgment, it will not be disturbed as long as any evidence or reasonable inferences arising therefrom support the judgment. Brand v. Monumental Life Ins. Co. (1981), 275 Ind. 308, 417 N.E.2d 297. Any conflicts in the evidence must be *24 resolved by the trier of fact. Id. We will affirm the trial court if its judgment is sustainable on any theory consistent with the evidence. Garlinger v. Garlinger (1986), Ind. App., 501 N.E.2d 1138.
Salmon asserts that the oil and gas lease did not constitute an encumbrance rendering title to the property unmerchantable. Salmon points out that the lease was never developed, and rents were never paid under the lease. Accordingly, he argues, the lease was legally null and void at the time of closing. To support his assertion, Salmon cites Heeter v. Hardy (1948), 118 Ind. App. 256, 76 N.E.2d 590, trans. denied.
In Heeter, both parties to an oil and gas lease sought to have their titles quieted to certain real estate. Prior to filing his quiet title action, the lessor and owner of the subject property followed the procedures set forth in the predecessor to the present IND. CODE 32-5-8-1 to remove the oil and gas lease from the property. He filed an affidavit with the county recorder claiming the lease had not been operated and oil or gas had not been produced for more than one year. Accordingly, the county recorder entered a release of the oil and gas lease on the county records. The lessee, however, also followed the statute and subsequently filed an affidavit claiming the lessor's affidavit was fraudulent. The county recorder cancelled the previously entered release.
In a quiet title action, the trial court ruled in favor of the owner and this court reversed. This court held that even though the lease had been abandoned, it existed as a matter of record because the owner failed to comply with the statutory requirement of appealing the action of the recorder in cancelling the release of the lease. The oil and gas lease, therefore, existed as a cloud on the owner's title.
Contrary to Salmon's assertion, Heeter supports rather than contradicts the trial court's finding in the present case. Salmon correctly points out that this court stated, "[t]he lease having been abandoned was null and void." Id., 118 Ind. App. at 265, 76 sclark@example.org. This statement, however, refers to the lessee's ability to recover under his cross-complaint. Because he had abandoned the lease, the lessee "was not entitled to have his title quieted to any interest he acquired by the lease against whatever interest [the owner] had in this real estate." Id. The lessee's failure to recover does not change the fact that the owner was required by statute to take affirmative steps to remove the oil and gas lease from the record of title.
An oil and gas lease is not automatically removed from real estate once a one-year period of inactivity has occurred. The relevant statute provides in pertinent part:
All leases for oil and gas heretofore and hereafter entered of record in this state shall become null and void after a period of one (1) year has elapsed since the last payment of rentals thereon as stipulated for in such lease or contract, or since operation for oil or gas has ceased, both by the nonproduction of oil or gas and the nondevelopment of said lease, and upon the written request of the owner of such lands, accompanied with the affidavit of such owner, stating that no rentals have been paid to or received by such owner or any person, bank or corporation in his behalf for a period of one (1) year, the recorder of the county in which such real estate is situated shall certify upon the face of such record that such leases and contracts are invalid and void by reason of nonpayment of rentals and is thereby canceled of record, ...
IND. CODE 32-5-8-1 (emphasis added). The statute requires a one-year period of inactivity and a written request of the property owner before an oil and gas lease will become null and void. While there was a one-year period of inactivity under the lease in the case before us, the owner did not make a written request for cancellation prior to closing. Accordingly, the trial court properly found an oil and gas lease existed on the property at the time of closing.
The question then becomes whether the existence of the oil and gas lease rendered the title to the property unmerchantable. Salmon argues that because the existence *25 of the lease did not diminish the value of the property, the title was not rendered unmerchantable. Salmon misconstrues the concept of merchantability.
The term "merchantable title" is often used synonymously with the term "marketable title." 92 C.J.S. Vendor & Purchaser § 191 (1955). Although recent case law on the subject is sparse, the prevailing view is "that a marketable title is one which is free from reasonable doubt and will not expose the party who holds it to the hazards of litigation." Staley v. Stephens (1980), Ind. App., 404 N.E.2d 633, trans. denied.
Oil and gas leases give the lessee a secondary, non-possessory interest in the real estate. These leases are often abandoned and lay dormant for many years. This dormancy creates uncertainty as to whether the lease, which exists as of record, has served the purposes of the lessee. If steps are not taken to remove the lease from the books, the owner's title is impaired because of the possibility that the lessee may later return to rejuvenate his interest under the lease. The reappearance of a lessee exposes the owner to the possibility of litigation. Although the passage of time may indicate such action is unlikely, "titles containing such outstanding interests are not usually regarded as marketable." P. BASYE, CLEARING LAND TITLES, at 144 (1970). In response to this problem, the Indiana legislature has passed IND. CODE 32-5-8-1. Under this statute, owners are able to clear their title based on their affidavit substantiating the fact that the lease has been abandoned for more than one year.
The ease in which abandoned oil and gas leases can be removed from land titles supports the underlying policy of the Indiana Marketable Title Act. IND. CODE 32-1-5-1 to XX-X-X-XX. The purpose of the Act is to simplify and facilitate land title transactions by allowing people to rely on a record chain of title. IND. CODE 32-1-5-10. Marketable record titles, however, are subject to the rights of lessees. The Act will not "be applied to bar any lessee or his successor of his rights in and to any lease[.]" IND. CODE 32-1-5-6. Accordingly, oil and gas leases, which render land titles unmarketable, are easily removed in order to provide clear marketable record titles that can be relied on in land transactions.
In the case at bar, an oil and gas lease, having apparently been abandoned, existed on the subject property rendering its title unmarketable. Salmon argues, and we agree, that removing the lease is a simple procedure. Until the lease is removed, however, the title remains unmarketable. We recognize that Salmon was in fact successful in removing the lease by filing an affidavit signed by the heirs of the estate stating that the lease had not been developed and rents had not been paid for a period exceeding one year. The affidavit was not filed, however, until fifteen months after the scheduled closing. Accordingly, the title at the time of closing was defective. Perez bargained for good title and was not bound to take the doubtful title, even though it was later cleared. Staley, supra. We agree with the trial court that the title was rendered unmerchantable due to the existence of the oil and gas lease.
ISSUE II: Curing Title Defect
Salmon further contends that even if the oil and gas lease was a defect in the title, Perez was bound by the terms of the purchase agreement to give him a reasonable time to cure the defect. Salmon claims that Perez repudiated the contract by refusing to accept an escrow arrangement, calling off the deal, and demanding the return of her earnest money without first allowing him a reasonable time to cure the defect. Salmon argues Perez's actions made performance of his obligations under the contract impossible thereby relieving him of his contractual duty to correct the defect. Salmon misconstrues the terms of the agreement.
The trial court denied Salmon recovery because he failed to present any evidence that he made any attempt to correct the sclark@example.org. We agree with the trial court's interpretation of the applicable contract provision. The provision gave the seller, represented by Salmon, an option to *26 postpone the closing for a reasonable period of time to correct the title defect. Accordingly, Salmon, upon discovering the defect, had the option to postpone the closing and correct the defect. This he did not do. Instead, he attempted to proceed to closing with the defective title. Perez was not bound to accept the defective title and allow additional time. Absent any evidence to indicate Salmon requested a postponement to correct the defect, Perez was relieved of any obligation under the contract. The trial court correctly found she was entitled to the return of her earnest money.
ISSUE III: Admissibility of Affidavit
Salmon argues that if the lease constitutes an encumbrance on the title, then the ease in which such leases can be removed becomes a central issue. Accordingly, he argues, he should have been allowed to submit independent evidence from an attorney experienced in the procedures for removing oil and gas leases. Salmon made an offer to prove that based on the attorney's prior experience with the similar leases involving the same lessee, the attorney could have effectuated the removal of the lease within 30 days from the date of closing. Upon sustaining Perez's objection that the testimony was irrelevant and speculative, the trial court refused to admit the testimony. Salmon assigns this as error.
Salmon correctly points out that the standard for evaluating the relevancy of evidence is whether the offered evidence has a logical tendency to prove a material fact. Favourite v. County of Steuben Bd. of Zoning Appeals (1987), Ind. App., 515 N.E.2d 560, trans. denied. In reviewing the trial court's action, we will reverse for abuse of discretion only if its conclusion was clearly against the logic and effect of the facts before it. CIGNA-INA/Aetna v. Hagerman-Shambaugh (1985), Ind. App., 473 N.E.2d 1033, trans. denied. The facts before the trial court in this case concerned title to property involved in a real estate deal in which Salmon and Perez were participants. The testimony offered in the attorney's affidavit did not concern the subject property. Rather, it concerned his success in removing leases on property not the subject of the Perez real estate deal. What the attorney might have been able to do does not change the fact that the title was defective at the time of closing. The trial court did not abuse its discretion in excluding the attorney's testimony as irrelevant and speculative.
ISSUE IV: Admissibility of Advertising Expenses
Salmon claims the trial court erred in excluding testimony regarding advertising expenses he incurred in relisting the property following the aborted closing. In his brief, Salmon asserts that as the nonbreaching party, he is entitled to recover these expenses from the breaching party. Because we have already established that Perez was not the breaching party, we need not explore this issue.
ISSUE V: Attorney Fees
Perez asserts for the first time on appeal that she is entitled to attorney fees under IND. CODE 34-1-32-1. Perez contends this appeal is inappropriate because: (1) she is an unwilling litigant; (2) the amount of the judgment was relatively small ($2,000); and (3) Salmon's legal arguments were generally inadequate. Accordingly, she argues, this appeal is frivolous, groundless and unreasonable.
We note first that the provisions of IND. CODE 34-1-32-1 apply to the awarding of fees by the trial court, not an appellate court. Appellate courts award attorney fees by instituting damages against an appellant pursuant to Ind.Rules of Procedure, Appellate Rule 15(G). Nonetheless, Perez's claim fails under either provision. Perez is not entitled to attorney fees for being an unwilling litigant. We note that most litigants, especially defendants, are unwilling. Furthermore, the size of the trial court's judgment has no bearing on Salmon's right to institute this appeal. Finally, Salmon has presented cogent legal arguments with sufficient citations to the record and to relevant authority. We find his arguments were adequate and presented in good faith. Perez's claim for attorney fees is denied.
Judgment affirmed.
*27 ROBERTSON, J., concurs.
SULLIVAN, J., concurs as to Issues I, II, IV and V, and concurs in result as to Issue III for the reason that exclusion of the relevant affidavit was harmless error.
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P. A. Davis v. Commissioner.Davis v. CommissionerDocket No. 26090.United States Tax Court1952 Tax Ct. Memo LEXIS 150; 11 T.C.M. 704; T.C.M. (RIA) 52216; 1 Oil & Gas Rep. 997; June 30, 19521952 Tax Ct. Memo LEXIS 150">*150 deQuincy V. Sutton, Esq., c/o Wooton and Wooton, Hattiesburg, Miss., for the petitioner. J. Frost Walker, Esq., for the respondent. TURNER Memorandum Findings of Fact and Opinion TURNER, Judge: The respondent determined deficiencies in the petitioner's income tax for the years and in the amounts as follows: 1944$3,924.191945500.841946565.951947138.00The only issue presented is whether the gains realized by petitioner on the sale of certain mineral interests during the respective years constituted ordinary income or long-term capital gains. Findings of Fact The petitioner's income tax returns for the years 1944 through 1947 were filed with the collector of internal revenue for the district of Mississippi. In 1935 the petitioner moved from New Orleans, Louisiana, to Hattiesburg, Mississippi, where he has continued to reside. During 1939 and 1940 the petitioner sold refrigerators on a commission basis for a furniture store in Hattiesburg. Thereafter for a time he sold butane gas equipment for a corporation which transferred to another organization its distributorship for such equipment in the territory in which the petitioner1952 Tax Ct. Memo LEXIS 150">*151 worked. This organization in turn transferred the distributorship for the equipment to another organization, known as Quick & Grice. The petitioner became associated with each of the successive organizations and sold butane gas equipment for them on a commission basis, receiving 10 per cent of the selling price of all equipment actually installed. About the middle of 1946 the petitioner severed his connection with Quick & Grice and discontinued the foregoing activity. However, in 1947 he sold three gas systems for another firm. On some undisclosed date following the entry of the United States into the war and because of the adverse effect of the war on the butane gas equipment business the petitioner began acting as the local agent in the Hattiesburg area for the Reliance Life Insurance Company of Pittsburgh, Pennsylvania. The petitioner reported no income from this source for any of the years in controversy and apparently his connection with that company was terminated prior to 1944. Because of his health the petitioner was not regularly employed on a full-time basis after 1943. While selling refrigerators for the furniture store in Hattiesburg during 1939 and 1940 and during later1952 Tax Ct. Memo LEXIS 150">*152 years, including all the taxable years in controversy except 1944, the petitioner bought mineral 1 interests for others and received as compensation for his services a commission based on the purchase price. The petitioner received nothing in 1944, $1,053.61 in 1945, $869.50 in 1946, and $66 in 1947 as commissions for such services. During the latter part of 1939 or early in 1940 the petitioner began purchasing mineral interests on his own account. From time to time he made sales of interests so acquired. Generally in making sales of interests held for long periods the petitioner was influenced by the favorable price to be had and the proceeds were used to acquire other mineral interests that were selling at lower prices. During the taxable years the petitioner was in the business of buying and selling mineral interests and some of the interests sold by him in those years had been acquired and were held primarily for sale to customers in the ordinary course of such business. Other mineral interests1952 Tax Ct. Memo LEXIS 150">*153 sold by petitioner during the years here in question had been acquired by him so as to have an accumulation of such interests, the production from which he could look to for support when he became old, and were not held by him primarily for sale to customers in the ordinary course of his business. The petitioner, in the course of his buying and selling of mineral interests, did not keep any records wherein the interests bought for sale to customers were segregated from those not bought and held for such sale. The petitioner was not financially able to drill on or develop mineral properties. Most of the mineral interests purchased by him were in properties which were then under lease for development, and those interests purchased with a view to realizing income by reason of production were purchased with the hope of later development and production by the leaseholder. Some of the interests purchased with a view to realizing income from production therefrom were sold by petitioner from time to time. Generally the price at which he could sell such interests determined whether or not he would make the sale. Where the price offered was such that he considered it to his financial advantage1952 Tax Ct. Memo LEXIS 150">*154 to sell, he sold the interest, instead of retaining it. With respect to some of the interests acquired and sold to customers in the course of his business, some were sold to persons who were getting together a block of acreage for a drilling unit, while in some instances petitioner already had buyers prior to his acquisition of the interests. At the beginning of 1944 petitioner's net worth was probably as much as $20,000. His entire income for 1944, $20,773.78, was gain derived from the sale in that year of 16 mineral interests. Of such gain $3,005.70 was from the sale of 10 mineral interests held by petitioner for less than six months and $17,768.08 was from the sale of six interests held for more than six months. Of the latter interests three were acquired in 1940 and three in 1943. The sales of the 10 interests held for less than six months were made to persons residing in the towns of Hattiesburg, Jackson, Lafayette and Laurel, Mississippi. In general the sales made in 1944 were of interests in three areas which were under development and in two of which production began in 1943 and 1944, respectively. Of the interests sold in 1944 those which had been purchased in 1943 and 19441952 Tax Ct. Memo LEXIS 150">*155 were held primarily for sale to customers in the course of petitioner's trade or business. The petitioner's entire income for 1945, $8,322.73, was composed of the following items: Commissions from the sale of butanegas equipment$ 933.80Commissions from the purchase ofmineral interests for others1,053.61Oil royalties598.65Lease rentals59.75Gains on sales of mineral interests5,676.92$8,322.73 Of the gains realized on sales of mineral interests, $1,651.84 was derived from the sale of 10 such interests which had been held by the petitioner for less than six months. Of such 10 interests three were sold within two days after acquisition and four (possibly five) were sold within five days after acquisition. The remainder of the gains, $4,025.08, was derived from the sale of eight interests which had been held for more than six months. One of the eight interests had been acquired in 1941, four in 1944 and three in February 1945. Of the interests sold in 1945 those which had been purchased in 1944 and 1945 were held primarily for sale to customers in the course of petitioner's trade or business. The petitioner's entire income for 1946, $8,733.79, 1952 Tax Ct. Memo LEXIS 150">*156 was composed of the following items: Commissions from the sale of butanegas equipment$ 187.25Commissions from the purchase ofmineral interests for others869.50Oil royalties750.89Lease rentals148.76Gains on sales of mineral interests6,777.39$8,733.79 Of the gains realized on sales of mineral interests, $1,065.07 was derived from the sale of eight such interests which had been held by the petitioner for less than six months. Of such eight interests four were disposed of within a week after acquisition. The remainder of the gains, $5,712.32, was derived from the sale of five interests which had been held for more than six months. Two of the five interests had been acquired in 1943 and three in 1945. Of the interests sold in 1946 those which had been purchased in 1945 and 1946 were held primarily for sale to customers in the course of petitioner's trade or business. The petitioner's entire income for 1947, $6,666.17, was composed of the following items: Commissions from the purchase ofmineral interests for others$ 66.00Oil royalties797.28Lease rentals310.79Gains on sales of mineral interests5,492.10$6,666.171952 Tax Ct. Memo LEXIS 150">*157 Of the gains of $5,492.10 realized on sales of mineral interests, $3,895.58 was derived from the sale of five such interests which had been held by the petitioner for less than six months. Of such five interests two were sold on the day acquired and one was sold the day following acquisition. The remainder of the gains, $1,596.52, was realized on the sale of seven interests which had been held for more than six months. Three of the seven interests had been acquired in 1943 and four in 1944. Of the interests sold in 1947 those sold within six months of their purchase were held for sale to customers in the course of petitioner's trade or business. The petitioner has never had a regularly established office as a place of business. He has never advertised by newspaper, radio or other medium that he was in the business of dealing in mineral interests. Nor has he ever employed anyone to assist him in managing or in buying or selling mineral interests. On occasions negotiations for sales and sales of interests were made at the petitioner's home or at the place of business of others. When in need of money for living expenses, the petitioner, on a few occasions borrowed small amounts from1952 Tax Ct. Memo LEXIS 150">*158 the bank. Usually when in need of money he would go out and attempt to find a purchaser for some mineral interest that he owned. At the time of the hearing petitioner owned five interests which he acquired in 1940, one acquired in 1941, three acquired in 1942, ten acquired in 1943, and nineteen acquired in 1944. These have never been offered for sale and offers to purchase them have been refused. At the time of the hearing the petitioner also owned other mineral interests of an undisclosed number which interests have been acquired at an undisclosed time or times. With respect to a goodly number of these, deductions on account of their worthlessness have been taken and allowed. The gain realized by petitioner on the sale of mineral interests held for less than six months was reported by him as short-term capital gain and that realized from the sale of mineral interests held for more than six months was reported as long-term capital gain. The respondent determined that the mineral interests sold by the petitioner were not capital assets within the meaning of section 117(a)(1) of the Internal Revenue Code and that the gain realized from the sale thereof was1952 Tax Ct. Memo LEXIS 150">*159 to be regarded as ordinary income. Opinion It is the claim of the petitioner that the mineral interests sold by him in the taxable years were capital assets, within the meaning of section 117(a)(1) of the Internal Revenue Code, 1 and that he properly reported the gain therefrom as short-term capital gain and long-term capital gain. Under section 117(a)(1), the mineral interests sold were not capital assets to the extent that, when sold, they were held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, and whether property sold is so held is a question of fact. 1952 Tax Ct. Memo LEXIS 150">*160 The evidence, in our opinion, discloses that during the years in question the petitioner was in the business of buying and selling mineral interests to customers in the course thereof, but that does not mean that all of the interests sold in the taxable years were so held. We think it clear and have concluded as a fact that some of the interests sold in the years 1944 through 1947, were at the time of sale held by him primarily for sale to customers within the meaning of the statute, while other interests sold in those years were not. In the main, the evidence in the case consisted of the testimony of the petitioner. That testimony was rather general and did not give much information relating to the individual interests sold. We have no doubt, however, that from the time of the entry of the United States into the World War in 1941, petitioner engaged in the business of buying and selling mineral interests. At the same time, as already stated, we are convinced that he also bought mineral interests with a view to holding them for the purpose of realizing income from production by way of royalties. The proof as to the individual interests is insufficient, however, to give us a conclusive1952 Tax Ct. Memo LEXIS 150">*161 or very satisfactory basis for determining those interests which were acquired by him as an investor and not for sale to customers. We have considered the evidence of record, however, and have made our findings on the basis thereof. Decision will be entered under Rule 50. Footnotes1. Counsel for the petitioner stated at the hearing that the term as employed in the proceeding was used to refer to oil which was the subject of the transaction in each case.↩1. SEC. 117. CAPITAL GAINS AND LOSSES. (a) Definitions. - As used in this chapter - (1) Capital Assets. - The term "capital assets" means property held by the taxpayer (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or property, used in the trade or business, of a character which is subject to the allowance for depreciation provided in section 23(1), or an obligation of the United States or any of its possessions, or of a State or Territory, or any political subdivision thereof, or of the District of Columbia, issued on or after March 1, 1941, on a discount basis and payable without interest at a fixed maturity date not exceeding one year from the date of issue, or real property used in the trade or business of the taxpayer;↩ |
Case 1:20-cv-00751-DAD-SAB Document 17 Filed 10/27/20 Page 1 of 2
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8 UNITED STATES DISTRICT COURT
9 EASTERN DISTRICT OF CALIFORNIA
10
11 BRYAN D. PATTERSON, ) Case No.: 1:20-cv-00751-DAD-SAB (PC)
)
12 Plaintiff, )
) ORDER DIRECTING PLAINTIFF TO PROVIDE
13 v. ADDITIONAL INFORMATION REGARDING
) IDENTITY OF DEFENDANT JOHN DOE,
14 ) SERGEANT IN ORDER TO EFFECTUATE
MAURICE HOWARD, et al.,
) SERVICE OF THE SUMMONS AND
15 ) COMPLAINT
Defendants. )
16 ) (ECF No. 15)
)
17 )
18 Plaintiff Bryan D. Patterson is proceeding pro se and in forma pauperis in this civil rights
19 action pursuant to 42 U.S.C. § 1983.
20 On September 22, 2020, the Court found that service of Plaintiff’s complaint was appropriate
21 as to Defendants Maurice Howard and John Doe, Jewish Rabbi at Kern Valley State Prison, and
22 service was directed pursuant to the Court’s E-Service pilot program for civil rights cases in the
23 Eastern District of California. (ECF No. 12.)
24 On October 16, 2020, the California Department of Corrections and Rehabilitation returned a
25 notice of intent to not waive personal service on Defendant John Doe, Jewish Rabbi at Kern Valley
26 State Prison, noting that Kern Valley State Prison has not had a Jewish Rabbi for several years now.
27 (ECF No. 15.)
28 ///
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Case 1:20-cv-00751-DAD-SAB Document 17 Filed 10/27/20 Page 2 of 2
1 Thus, at this time, the Court cannot order service by the United States Marshal because the
2 John Doe’s identity is unknown. Therefore, Plaintiff will be granted the opportunity to provide
3 additional information regarding the identity of the John Doe identified in the complaint.
4 Accordingly, it is HEREBY ORDERED that, within thirty (30) days from the date of service
5 of this order, Plaintiff shall provide additional information regarding the identity of the John Doe, in
6 available, in order to effectuate service of the summons and complaint prior to discovery.
7
8 IT IS SO ORDERED.
9 Dated: October 27, 2020
10 UNITED STATES MAGISTRATE JUDGE
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69 So. 3d 1000 (2011)
Alcides GONZALEZ, Appellant,
v.
The STATE of Florida, Appellee.
No. 3D11-1386.
District Court of Appeal of Florida, Third District.
September 7, 2011.
Rehearing Denied October 4, 2011.
*1001 Ricardo Corona, Coral Gables, and Nina Tarafa, for appellant.
Pamela Jo Bondi, Attorney General, for appellee.
Before WELLS, C.J., and ROTHENBERG, and SALTER, JJ.
PER CURIAM.
Affirmed. See Hernandez v. State, 61 So. 3d 1144 (Fla. 3d DCA 2011)
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115 S2658 IS: Protecting Newborns from Opioids Act
U.S. Senate
2018-04-12
text/xml
EN
Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
II
115th CONGRESS2d Session
S. 2658
IN THE SENATE OF THE UNITED STATES
April 12, 2018
Mr. Nelson (for himself and Mr. Rubio) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions
A BILL
To amend the Public Health Service Act to provide for systematic data collection, analysis, and
epidemiological research regarding neonatal abstinence syndrome.
1.Short title
This Act may be cited as the Protecting Newborns from Opioids Act.
2.Neonatal abstinence syndrome research and surveillanceTitle III of the Public Health Service Act is amended by inserting after section 317L–1 (42 U.S.C. 247b–13a) the following:
317L–2.Neonatal abstinence syndrome research and surveillance
(a)In generalThe Secretary, acting through the Director of the Centers for Disease Control and Prevention (referred to in this section as the Director), shall—
(1)award grants to States to create or improve surveillance systems for neonatal abstinence syndrome, and analyze the data collected through such State systems; and
(2)conduct research on the prevention, factors surrounding, and health outcomes of neonatal abstinence syndrome.
(b)NAS surveillance
(1)State grant programTo provide support to States receiving grants under subsection (a)(1), the Secretary shall (directly or through grants or cooperative agreements to public and nonprofit private entities)—
(A)cooperate with and assist States in implementing a State-wide surveillance system to rapidly determine the incidence and prevalence of neonatal abstinence syndrome;
(B)include demographics and other information, such as race, ethnicity, geographic location, and family history;
(C)provide technical assistance to States to improve identification of neonatal abstinence syndrome; (D)ensure a pathway for data sharing between States and the Centers for Disease Control and Prevention; and
(E)ensure that data collection is consistent with applicable State and Federal privacy laws. (2)CDC researchThe Director shall—
(A)collect data on neonatal abstinence syndrome that States gather using grant funds under subsection (a)(1);
(B)conduct analysis of such data to identify national trends; and (C)issue public reports on such analysis.
(c)NAS researchIn carrying out subsection (a)(2), the Secretary shall conduct new studies, or capitalize on existing studies, to research—
(1)long-term physical, educational, and neurodevelopmental outcomes of children affected by neonatal abstinence syndrome;
(2)the prevalence of, and reasons for, opioid use among women who are pregnant or may become pregnant; and
(3)the comparative effectiveness of available treatment protocols for infants affected by neonatal abstinence syndrome.
(d)Authorization of appropriationsTo carry out this section, there is authorized to be appropriated such sums as may be necessary for each of fiscal years 2019 through 2023..
|
Citation Nr: 1002063
Decision Date: 01/13/10 Archive Date: 01/22/10
DOCKET NO. 07-03 188 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in Montgomery,
Alabama
THE ISSUES
1. Whether new and material evidence has been submitted to
reopen a claim for service connection for an acquired
psychiatric disorder, to include posttraumatic stress
disorder (PTSD).
2. Entitlement to service connection for an acquired
psychiatric disorder, to include PTSD.
3. Entitlement to service connection for hypertension, to
include as secondary to PTSD.
4. Entitlement to service connection for diabetes mellitus,
to include as secondary to PTSD.
REPRESENTATION
Appellant represented by: Veterans of Foreign Wars of
the United States
ATTORNEY FOR THE BOARD
R. Patner, Associate Counsel
INTRODUCTION
The Veteran served on active duty from August 1969 to August
1971.
This matter comes before the Board of Veterans' Appeals
(Board) from October 2005 and July 2006 rating decisions of a
Department of Veterans Affairs (VA) Regional Office (RO) that
respectively denied service connection for PTSD,
hypertension, and diabetes mellitus.
The issues of entitlement to service connection for an
acquired psychiatric disorder, to include PTSD, and for
hypertension and diabetes mellitus, to include as secondary
to an acquired psychiatric disorder, to include PTSD, are
addressed in the REMAND portion of the decision below and are
REMANDED to the RO via the Appeals Management Center, in
Washington, DC.
FINDINGS OF FACT
1. The claim for service connection for an acquired
psychiatric disorder, to include PTSD, was previously denied
in April 2003 and December 2003 rating decisions. The
Veteran was notified of the decisions but did not perfect an
appeal.
2. The evidence received since the December 2003 denial of
the claim for service connection for an acquired psychiatric
disorder, to include PTSD, is new in that it is not
cumulative and was not previously considered by decision
makers. The evidence is also material because it raises a
reasonable possibility of substantiating the Veteran's claim.
CONCLUSIONS OF LAW
1. The December 2003 rating decision that denied the claim
for service connection for an acquired psychiatric disorder,
to include PTSD, is final. 38 U.S.C.A. § 7105 (West 2002);
38 C.F.R. §§ 3.104(a), 3.160(d), 20.302, 20.1103 (2009).
2. New and material evidence has been received to reopen the
claim for service connection for an acquired psychiatric
disorder, to include PTSD. 38 U.S.C.A. §§ 5108, 7105 (West
2002); 38 C.F.R. § 3.156 (2009).
REASONS AND BASES FOR FINDINGS AND CONCLUSIONS
New and Material Evidence
The RO denied the Veteran's claim of entitlement to service
connection for an acquired psychiatric disorder, to include
PTSD, in a December 2003 rating decision. At that time, the
RO found that there was no credible evidence of a verified
in-service stressor. The claim accordingly was denied.
Although in the October 2005 rating decision on appeal the RO
declined to reopen the claim for service connection for PTSD,
the Board must first consider the question of whether new and
material evidence has been received because it goes to the
Board's jurisdiction to reach the underlying claims and
adjudicate the claims de novo. If the Board finds that no
such evidence has been offered, that is where the analysis
must end. Jackson v. Principi, 265 F.3d 1366 (Fed. Cir.
2001).
A finally adjudicated claim is an application which has been
allowed or disallowed by the agency of original jurisdiction,
the action having become final by the expiration of one year
after the date of notice of an award or disallowance, or by
denial on appellate review, whichever is the earlier. 38
U.S.C.A. §§ 7104, 7105 (West 2002); 38 C.F.R. §§ 3.160(d),
20.302, 20.1103 (2009). Thus, the December 2003 decision
became final because the Veteran did not file a timely
appeal.
The claim for service connection for an acquired psychiatric
disorder, to include PTSD, may be reopened if new and
material evidence is received. Manio v. Derwinski, 1 Vet.
App. 140 (1991). The Veteran filed this application to
reopen his claim in March 2005. Under the applicable
provisions, new evidence means existing evidence not
previously submitted to agency decision makers. Material
evidence means existing evidence that, by itself or when
considered with the previous evidence of record, relates to
an unestablished fact necessary to substantiate the claim.
New and material evidence can be neither cumulative nor
redundant of the evidence of record at the time of the last
prior final denial of the claim sought to be reopened, and
must raise a reasonable possibility of substantiating the
claim. 38 C.F.R. § 3.156(a) (2009). In determining whether
evidence is new and material, the credibility of the new
evidence is presumed. Justus v. Principi, 3 Vet. App. 510
(1992).
The evidence before VA at the time of the prior final
decision in December 2003 consisted of the Veteran's service
medical records, the Veteran's post-service medical records,
including a March 2003 VA examination, and his own
statements. The RO found that there was no credible evidence
of an in-service stressor.
New evidence received since the 2003 denial of the claim for
service connection for an acquired psychiatric disorder, to
include PTSD, include VA treatment records dated from
November 2003 to July 2007, evidencing continued treatment
for PTSD. A February 2007 treatment record reflects that the
Veteran described problems coping with his PTSD, including
feeling angry, having trouble sleeping, and the inability to
get along with others in his current job. He felt that these
problems were related to his time in service and the
atrocities that he experienced while working in a medical
holding station. The psychiatrist diagnosed the Veteran with
depression, not otherwise specified. Although the clinical
records do not relate his depressive disorder to his active
service, the new diagnoses of depression is sufficient to
reopen the claim, as this diagnosis was not previously
considered by agency decision makers, is not cumulative or
redundant, relates to an unestablished fact necessary to
substantiate the claim, and raises a reasonable possibility
of substantiating the claim. 38 C.F.R. § 3.156 (2009), see
also Clemons v. Shinseki, 23 Vet. App. 1 (2009) (scope of a
mental health disability claim includes any mental disability
that may reasonably be encompassed by the claimant's
description of the claim, reported symptoms, and the other
information of record). The Board notes that while the basis
of the prior denial was a lack of a verified in-service
stressor, a claim for service connection for depression would
not necessarily depend on the existence of a stressor. In
other words, the existence of the new diagnosis opens a
potential avenue for establishing service connection for a
psychiatric disorder which is not necessarily blocked by the
previously stated basis for the denial. Accordingly, the
claim for service connection for an acquired psychiatric
disorder, to include PTSD, is reopened. To that extent only,
the claim is allowed.
ORDER
The claim for service connection for an acquired psychiatric
disorder, to include PTSD, is reopened. To that extent only,
the appeal is allowed.
REMAND
Additional development is necessary prior to further
disposition of the claims for service connection for an
acquired psychiatric disorder, to include PTSD, and for
hypertension and diabetes mellitus, to include as secondary
to an acquired psychiatric disorder, to include PTSD.
With regard to his claim for service connection for an
acquired psychiatric disorder, to include PTSD, the VA has a
heightened burden of notification. Gallegos v. Peake, 22
Vet. App. 329 (2008); 38 C.F.R. § 3.304(f)(3) (2009). First,
the RO must inform the claimant that he may submit
alternative forms of evidence, that is, evidence other than
service records, to corroborate his account of an in-service
assault, and suggest potential sources for such evidence. A
claimant should also be notified that, alternatively,
evidence of behavioral changes following the alleged in-
service assault may constitute credible supporting evidence
of the stressor. 38 C.F.R. § 3.304(f)(3) (2009). Second, VA
must assist the claimant in the submission of alternative
sources of evidence, by providing additional time for the
claimant to submit such evidence after receipt of the
personal-assault letter and, where appropriate, by obtaining
evidence on the claimant's behalf. Gallegos v. Peake, 22
Vet. App. 329 (2008). Such notification must be accomplished
on remand.
The Veteran contends that his PTSD is related to alleged
service stressors, including both noncombat stressors and
assault stressors, warranting service connection for PTSD.
38 C.F.R. § 3.304(f). According to service personnel
records, the Veteran worked as a supply man at a medical
company in Fort Rucker, Alabama, from October 1969 to
November 1970. As the Veteran did not serve in Vietnam, it
can be concluded that he did not engage in combat. His
service medical records are negative for a psychiatric
disorder.
Post-service medical records show that the Veteran has
received psychiatric treatment, and that he was diagnosed
with PTSD in October 2002. In February 2007, the Veteran was
diagnosed with depression. In May 2007, the Veteran's
psychiatrist stated that that Veteran was still plagued by
memories that occurred while he was in service. He stated
that "the things that happened to him in 1970 at Fort Rucker
were devastating."
In written statements in support of his claim and in April
2009 testimony before a Decision Review Officer, the Veteran
reported that while stationed at the Fort Rucker medical
center, he was subjected to daily harassment by the patients
who were being treated at the facility. These patients had
been badly injured in Vietnam, and would scream, cry, pace
the halls, and stand over him while he slept. On one
occasion, in May 1970, he was stabbed several times in the
arm and the back in the middle of the night. Then, in March
1971, he was harassed by a patient who threatened to assault
him. He stated that he stole a truck from the command in
order to flee the situation. His service personnel records
reflect that in March 1971, the Veteran received an Article
15 for removing a military vehicle from the fort without
permission. The Veteran also received an Article 15 in June
1971 for not reporting to duty. The Veteran contends that he
had not reported because he was so horrified by his daily
duties that he was mentally unable to report to work. The
Veteran has further stated that he witnessed many burned
bodies being taken to the medical center, and that these
images continue to haunt him. He stated that he also
witnessed the burned body of a friend.
VA may submit any evidence that it receives to an appropriate
medical or mental health professional for an opinion as to
whether it indicates that a personal assault occurred. 38
C.F.R. § 3.304(f)(3) (2008); Patton v. West, 12 Vet. App. 272
(1999); YR v. West, 11 Vet. App. 393 (1998). Because it is
unclear to the Board whether the testimony and evidence is
sufficient to indicate that a personal assault occurred, or
that the Veteran's PTSD is related to the claimed personal
assault, the Board finds that a remand for an examination and
opinion in this regard is appropriate.
In September 2009, the RO made a formal finding that there
was not enough information to verify the Veteran's noncombat
stressors, notably his friend's helicopter crash. In that
regard, the Board finds that there is insufficient evidence
to verify the Veteran's noncombat stressors.
With regard to service connection for hypertension and
diabetes mellitus, to include as secondary to an acquired
psychiatric disorder, to include PTSD, the Board finds that
these claims are inextricably intertwined with the Veteran's
pending claim for service connection for an acquired
psychiatric disorder, to include PTSD, as the resolution of
that claim might have bearing upon the claims for service
connection for hypertension and diabetes mellitus. The
appropriate remedy where a pending claim is inextricably
intertwined with claim currently on appeal is to defer
adjudication of the claim on appeal pending the adjudication
of the inextricably intertwined claim. Harris v. Derwinski,
1 Vet. App. 180 (1991).
However, the Board finds that additional development is
necessary with regard to the claim for service connection for
hypertension and diabetes mellitus.
The Board finds that the duty to assist has not been met. As
set forth in the Veterans Claims Assistance Act of 2000
(VCAA), the Department of Veterans Affairs (VA) has a duty to
notify and assist claimants in substantiating a claim for VA
benefits. 38 U.S.C.A. §§ 5100, 5102-5103A, 5106, 5107, 5126
(West 2002 & Supp. 2009). Under the VCAA, when VA receives a
claim, it is required to notify the claimant and his
representative, if any, of any information and medical or lay
evidence that is necessary to substantiate the claim; that VA
will seeks to provide; and that the claimant is expected to
provide. 38 U.S.C.A. § 5103(a); 38 C.F.R. § 3.159(b) (2008);
Quartuccio v. Principi, 16 Vet. App. 183 (2002).
The Veteran contends that his hypertension and diabetes
mellitus developed as a result of the stressful experiences
he encountered while attached to the medical company in
service. He also contends that his resulting mental
disability has caused or aggravated his hypertension and
diabetes mellitus.
The Veteran has not been given VCAA notice for his secondary
service connection claim, namely, how to demonstrate that his
mental disorder caused or aggravated his hypertension and
diabetes mellitus. Notification of the duties to assist for
this type of service connection claim must be provided to the
Veteran.
Accordingly, the case is REMANDED for the following action:
1. Send the Veteran a letter informing
him that he may submit alternative forms
of evidence, other than service records,
to corroborate his account of an in-
service assault, and suggest potential
sources for such evidence. The letter
should also notify him that,
alternatively, evidence of behavioral
changes following the alleged in-service
assault may constitute credible supporting
evidence of the stressor under §
3.304(f)(4).
2. Send the Veteran VCAA notice regarding
what evidence is necessary to establish
that his current hypertension and diabetes
mellitus was caused or aggravated by his
acquired psychiatric disorder, including
his PTSD (i.e., the elements of evidence
to support secondary service connection).
3. Schedule the Veteran for a VA
psychiatric examination for the purpose of
ascertaining whether any currently
diagnosed psychiatric disorder is
etiologically related to his active
service. The claims folder must be made
available and reviewed by the examiner.
All indicated testing should be conducted.
a. Prior to the examination, the RO must
identify for the examiner any stressor or
stressors that are established by the
record, to include the alleged assault
and the Veteran's allegations of the
stress he underwent while working in a
medical company.
b. The examiner must opine as to whether
the evidence indicates that the claimed
in-service personal assault occurred. In
this regard, the examiner should specify
whether any behavioral changes in service
were indicative of the occurrence of a
personal assault.
c. If a diagnosis of PTSD is
appropriate, the examiner should specify
(1) whether each alleged stressor found
to be established by the evidence of
record (whether by the RO or in the case
of the alleged personal assault, in the
examiner's opinion) was sufficient to
produce PTSD; (2) whether each diagnostic
criterion to support the diagnosis of
PTSD has been satisfied; and (3) whether
there is a link between the current
symptomatology and one or more of the in-
service stressors sufficient to produce
PTSD. In offering these assessments, the
examiner must acknowledge and comment on
the lay evidence. Any opinions expressed
by the examiner must be accompanied by a
complete rationale.
d. If the examination results in a
psychiatric diagnosis other than PTSD,
the examiner should offer an opinion as
to the etiology of the non-PTSD
psychiatric disorder, to include whether
it is at least as likely as not (a 50
percent or greater probability) that any
currently demonstrated psychiatric
disorder, other than PTSD, is related to
the appellant's active duty. Again, in
offering the opinions, the examiner must
acknowledge and comment on the lay
evidence.
3. Then, readjudicate the claims for
service connection for PTSD and for
diabetes and hypertension secondary to
PTSD. If action remains adverse to the
Veteran, issue a supplemental statement of
the case and allow the appropriate time
for response. Thereafter, return the case
to the Board.
The appellant has the right to submit additional evidence and
argument on the matter or matters the Board has remanded.
Kutscherousky v. West, 12 Vet. App. 369 (1999).
This claim must be afforded expeditious treatment. The law
requires that all claims that are remanded by the Board of
Veterans' Appeals or by the United States Court of Appeals
for Veterans Claims for additional development or other
appropriate action must be handled in an expeditious manner.
See 38 U.S.C.A. §§ 5109B, 7112 (West Supp. 2009).
______________________________________________
MICHAEL MARTIN
Acting Veterans Law Judge, Board of Veterans' Appeals
Department of Veterans Affairs
|
This was an action to quiet title commenced on September 30, 1937, by William and Lena Zimmer, his wife, plaintiffs, against Henry E. Sundell, Carl H. Raab, Viola J. Raab, his wife, Arthur M. Raab, and Carrie Raab, his wife, and the wives, widows, heirs, devisees, representatives, executors, administrators, grantees and assigns of each of said defendants, and all persons having or claiming any right, title, estate, lien, or interest in or to the lands or premises described in the complaint, and whose names are unknown to the plaintiffs and generally all persons whom it may concern, defendants. Defendants denied plaintiffs' ownership of the land in question and counterclaimed demanding that title be quieted in them. The counterclaim was put in issue by plaintiffs' reply. The *Page 272
action was tried to the court which filed findings of fact and conclusions of law and ordered judgment for plaintiffs. Judgment was duly entered in accordance with the findings on February 8, 1940. Defendants Carl H. Raab, Viola J. Raab, his wife, Arthur M. Raab, and Carrie Raab, his wife, appeal from the judgment. The material facts will be stated in the opinion.
Joseph McCann and his wife were the original owners of the land in question and both plaintiffs and defendants claim under them. On December 20, 1928, the McCanns conveyed to Peter P. Raab and wife. On December 28th Peter Raab died, and his wife, Henrietta became owner of the land by right of survivorship. On February 4, 1932, Henrietta conveyed to defendants Carl, Viola J., Arthur, and Carrie Raab. On August 1, 1933, the McCanns conveyed the same land by quitclaim deed to John Gage. On December 13, 1933, John Gage quitclaimed the land to plaintiffs. The latter deed was recorded on the date of its execution. On September 3, 1935, a certificate of survivorship was issued to Henrietta Raab. On January 28, 1936, defendants recorded the deed from the McCanns to Peter Raab and wife, the certificate of survivorship to Henrietta Raab, and the deed from her to defendants. On April 2, 1936, the deed from McCann to Gage was recorded. The trial court found that when plaintiffs and defendants purchased and received conveyances they were unaware of any claim or interest in the land by the others, that they purchased in good faith, and that plaintiffs remained unaware of defendants' claim until in 1937 when they went to pay the taxes and discovered that defendants had paid them.
The conveyance under which plaintiffs claim was subsequent to those under which defendants claim. While *Page 273
plaintiffs' deed was recorded prior to defendants' conveyances, all of the latter were recorded before the deed from the McCanns to Gage, plaintiffs' grantor. Hence, when defendants recorded their conveyances plaintiffs' recorded deed had no apparent connection with or derivation from the McCanns' title — in other words, it was a mere fugitive deed, and plaintiffs were strangers to the title so far as the record disclosed.
It is urged by defendants that in view of this, plaintiffs are not entitled to the protection of the recording statute. So far as important here, sec. 235.49, Stats., provides:
"Every conveyance of real estate within this state hereafter made . . . which shall not be recorded as provided by law shall be void as against any subsequent purchaser in good faith and for a valuable consideration of the same real estate . . . whose conveyance shall first be duly recorded."
At the outset, it is important to note that since defendants' conveyances were all prior in time to that of plaintiffs, the latter, except for whatever protection is afforded them by sec. 235.49, Stats., have no title whatever — the title to the premises being entirely out of the McCanns when they conveyed to Gage, plaintiffs' immediate predecessor in title. Plaintiffs' sole standing is as subsequent purchasers in good faith and for valuable consideration who have recorded their deed before defendants' chain of title was recorded. Since in every other respect plaintiffs' situation answers to the calls of the statute, the precise question is whether the fact that plaintiffs' entire chain of title back to the common grantor was not recorded until after defendants' entire chain of title was recorded, deprived plaintiffs of the protection of the statute.
Both parties rely on the case of Fallass v. Pierce,30 Wis. 443. In that case the original owner was Pierce. On March 28, 1859, he mortgaged the premises to one Blanchard. This mortgage was recorded on the date of its execution. On April 2, 1859, Blanchard assigned the mortgage to one Rice. *Page 274
This assignment was recorded June 21, 1861. Thereafter, Rice assigned the mortgage to the plaintiff Fallass. Meantime, on August 10, 1859, Blanchard quitclaimed to the mortgagor Pierce and released the mortgage. These conveyances were recorded December 8, 1860. On September 19, 1860, Pierce, who took his release with notice of the assignment, conveyed by warranty deed to defendant Parks, who was an innocent purchaser for value but who neglected to put his deed on record until after the assignments of the mortgages to Rice and Fallass were made and recorded. The lower court found that the release to Pierce was void as to plaintiff, and that both Rice and plaintiff were bona fide purchasers of the mortgage and entitled to foreclose. The first opinion of this court was that the judgment must be reversed because the assignments had not been recorded at the time Parks purchased, and that being an innocent purchaser for value, Parks was entitled to rely upon the record and to purchase and hold the title against the assignments even though the latter were recorded prior to the time his deed was recorded. Upon rehearing, the court abandoned this position and held that the only person protected by the statute is an innocent purchaser who first records his instrument. The opinion of the court granting the rehearing (which is later by reference adopted as a part of the ultimate decision) states (p. 460):
"The only limitation which can be put upon the statute is, as suggested in Kennedy v. Northup [15 Ill. 148] that which the manifest object of the law plainly indicates, namely, that it is to be so construed as to exclude from its protection those who may purchase from strangers to the title. Those persons only are affected with notice by the record, who deal with or on the credit of the title, in the line of which the recorded deed belongs."
This limitation is applicable here. Since plaintiffs purchased from a grantor who had no recorded title going back *Page 275
to the McCanns, and since the latter appeared upon the record to be the holders of the title, there was nothing in the record for plaintiffs to rely upon. Their grantor was a pure stranger to the title so far as the record disclosed.
In the Fallass Case, supra, in the course of holding that a person seeking protection of the statute "must put his deed first upon record" the court further said (p. 458):
"He is not required to put his deed first upon record in order to be protected as against prior conveyances from his grantor, but only to do so in order to protect himself againstsubsequent bona fide purchasers for value, from the samegrantor or in the line of recorded conveyances from him."
The syllabus by the court in this case is as follows (p. 443):
"The protection of the recording act (R. S., ch. 86, sec. 25), which declares an unrecorded deed void, as against a subsequent purchaser in good faith, and for a valuable consideration, whose deed shall be first recorded, is not confined to a subsequent purchaser immediately from the same grantor, but applies to one who takes from him through mesne conveyances; and it protects him, if a purchaser in good faith, for value, in case the chain of title to him is first on record, although the intermediate grantees were chargeable with bad faith, or paid nothing."
This syllabus is repeated in McDonald v. Sullivan, 135 Wis. 361,116 N.W. 10.
It is clear to us that the court in the Fallass Case, supra, meant to and did hold that persons situated as are the plaintiffs are not entitled to the protection of the statute because their chain of title back to the common grantor was not first recorded. That this is in accord with the obvious purpose of the recording statute seems equally clear. If one who has no title under the laws governing conveyances is to have a superior one under the recording acts, it should be because he has relied upon the record, and when he purchases from one *Page 276
who is a stranger to the record title he has no grounds for such reliance. In Burns v. Berry, 42 Mich. 176, 179,3 N.W. 924, it was said:
"The protection which this statute gives to a bona fide purchaser does not proceed upon the theory, and is not made to depend upon the fact, that the grantor at the time of such conveyance had any interest in the premises whatever, or that any passed from him by his conveyance to such subsequent purchaser. It is not by force of the conveyance, but by the terms of the statute, that such subsequent purchaser acquires title to the premises. His grantor having previously conveyed, has no title left to convey, and could therefore by his deed, unaided by the statute, pass none to any third person. Our registry laws however step in, and for the purpose of protecting an innocent purchaser, give him what he supposed, and from an examination of the records had a right to suppose, he was acquiring by his purchase, and to this extent cut off the previous purchaser who negligenty failed to record his conveyance."
See also Hallett v. Alexander, 50 Colo. 37, 114 P. 490, 34 L.R.A. (N.S.) 328.
Plaintiffs argue that the term "subsequent purchaser" is not confined to a subsequent purchaser immediately from the same grantor, but applies to one who takes from him through mesne conveyances. Fallass v. Pierce, supra; Butler v. Bankof Mazeppa, 94 Wis. 351, 68 N.W. 998. This is perfectly true in principle and authority, but we fail to see how it bears upon the facts of this case. The difficulty with plaintiffs' case is not that they did not take from the same grantor as did defendants. It is that their line of title to the common ancestor was not first recorded.
By the Court — Judgment reversed, and cause remanded with directions to dismiss plaintiffs' complaint, and to enter judgment for defendants upon their counterclaim. *Page 277 |
Name: Commission Regulation (EC) No 131/1999 of 21 January 1999 amending Regulation (EC) No 2249/98 imposing provisional anti-dumping and countervailing duties on imports of farmed Atlantic salmon originating in Norway with regard to certain exporters and amending Commission Decision 97/634/EC accepting undertakings offered in connection with the anti-dumping and anti-subsidies proceedings concerning imports of farmed Atlantic salmon originating in Norway
Type: Regulation
Subject Matter: international trade; Europe; competition; fisheries; trade; trade policy
Date Published: nan
EN Official Journal of the European Communities 22. 1. 1999L 17/12 COMMISSION REGULATION (EC) No 131/1999 of 21 January 1999 amending Regulation (EC) No 2249/98 imposing provisional anti-dumping and countervailing duties on imports of farmed Atlantic salmon originating in Norway with regard to certain exporters and amending Commission Decision 97/634/EC accepting undertakings offered in connection with the anti-dumping and anti-subsidies proceedings concerning imports of farmed Atlantic salmon originating in Norway THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, Having regard to Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community (1), as last amended by Regulation (EC) No 905/98 (2), and in particular Article 8 thereof, Having regard to Council Regulation (EC) No 2026/97 of 6 October 1997 on protection against subsidised imports from countries not members of the European Community (3), and in particular Article 13 thereof, After consulting the Advisory Committee, Whereas: A. PROVISIONAL MEASURES (1) Within the framework of the anti-dumping and anti-subsidy investigations initiated by two separate notices published in the Official Journal of the European Communities (4), the Commission accepted, by Decision 97/634/EC (5) as last amended by Regulation (EC) No 82/1999 (6), undertakings offered by 190 Norwegian exporters and the Kingdom of Norway. (2) The text of the undertakings provides that failure to submit a quarterly report of all sales transactions to the first unrelated customer in the Community within a prescribed time limit except in case of force majeure, would be construed as a violation of the undertaking. (3) For the first quarter of 1998, eight Norwegian companies either did not present a report within the prescribed time limit, or did not submit any qroberts@example.net. These exporters did not provide any evidence of force majeure to justify such late reporting or non-reporting. (4) The text of the undertakings also provides that failure to comply with the obligation to sell the product concerned on the Community market at or above the minimum price stipulated in the under- taking would be construed as a violation of the undertaking. (5) In this regard, for the fourth quarter of 1997, one Norwegian exporter appeared to have sold the product concerned to the Community market at a price which was below the price stipulated in the undertaking. In addition, one of the Norwegian exporters which failed to submit its quarterly report for the first quarter of 1998 within the time limit, also appeared to have sold the product concerned to the Community market at a price which was below the price foreseen in the undertaking (6) The Commission therefore had reason to believe that these nine companies had breached the terms of their undertakings. (7) Consequently, the Commission, by Regulation (EC) No 2249/98 (7), hereinafter referred to as the provi- sional duty Regulation', imposed provisional anti- dumping and countervailing duties on imports of farmed Atlantic salmon falling within CN codes ex 0302 12 00, ex 0304 10 13, ex 0303 22 00 and ex 0304 20 13 originating in Norway and exported by the nine companies listed in the Annex to that Regulation. By the same Regulation, the Commis- sion deleted the companies concerned from the Annex to Decision 97/634/EC, which listed the companies from which undertakings were accepted. B. SUBSEQUENT PROCEDURE (8) All nine Norwegian companies subject to the provisional duties received disclosure in writing concerning the essential facts and considerations, on the basis of which these provisional duties were imposed. They were also given an opportunity to submit comments and request a hearing. (1) OJ L 56, 6. 3. 1996, p. 1. (2) OJ L 128, 30. 4. 1998, p. 18. (3) OJ L 288, 21. 10. 1997, p. 1. (4) OJ C 235, 31. 8. 1996, p. 18, and OJ C 235, 31. 8. 1996, p. 20. (5) OJ L 267, 30. 9. 1997, p. 81. (6) OJ L 8, 14. 1. 1999, p. 8. (7) OJ L 282, 20. 10. 1998, p. 57. EN Official Journal of the European Communities22. 1. 1999 L 17/13 (9) Within the time limit set in the provisional duty Regulation, only one of the Norwegian companies concerned submitted comments in writing. Following receipt of this written submission, the Commission sought and examined all information it deemed necessary for the purposes of a definitive determination on the apparent violation. Comments were also submitted by a company not subject to an undertaking concerning NorMan Trading Ltd AS. (10) Of the nine companies subject to the provisional measures, only one company, Norwell AS, requested a hearing. (11) The interested parties were informed of the essen- tial facts and considerations on the basis of which it was intended to confirm the withdrawal of the Commissions acceptance of their undertaking and to recommend the imposition of definitive anti- dumping and countervailing duties and the defin- itive collection of the amounts secured by way of provisional duties. They were also granted a period within which to make representations subsequent to this disclosure. (12) The oral and written comments submitted by the interested parties were considered and, where deemed appropriate, taken into account in the definitive findings. C. DEFINITIVE FINDINGS (13) During the hearing, Norwell AS reiterated that the violation of its undertaking had occurred as a result of the deduction of certain credit notes, causing its average selling price to the Community to fall below the minimum import price for the last quarter of 1997. However, the company claimed mitigating circumstances in that the credit notes were issued in respect of a one-off' quality claim for a consignment of fish which arrived in abnor- mally poor condition at the premises of the buyers in the Community. This poor quality of the fish resulted in the company granting significant rebates to its customers. While admitting that the effect of the credit notes has been to reduce the companys average sales price from above the minimum import price to a level which is below that price, the company argued that, at the time when the sales price was negotiated, the issue of such credit notes for such an amount could not have been foreseen. (14) Credit notes for quality claims would also justify a reduction of the customs value which, if the measure was not an undertaking but a variable duty, would lead to a proportional reduction of the applicable duties. To ensure, therefore, full equiva- lence of anti-dumping and countervailing measures whether taken in the form of duties or undertak- ings, the Commission considered that credit notes for genuine, substantiated quality claims should not lead to a violation finding. (15) In view of the above, and with sufficient evidence now presented and verified which supports the claim of Norwell AS concerning the abnormally poor quality of this particular consigment, it is concluded that definitive measures should not be imposed on this company. (16) As regards NorMan Trading Ltd AS, against which provisional duties were imposed, it was claimed by another Norwegian company that this company ceased trading in September 1997, was wound up, and had some of its activities transferred to the company which made the submission. Accordingly, as no comments were received on the violation findings and, as the company may no longer exist, the name of this company should be removed from the list of Norwegian exporters which are exempted from the definitive anti-dumping and countervailing duties. (17) With regard to the remaining companies which failed to respect their reporting obligations, as mentioned above, none of them have claimed subsequent to disclosure that force majeure had prevented them from submitting their quarterly reports within the due period. Similarly, no further comments were received from the company which, in addition to failing to submit its report on time, also exported the product concerned to the Community at levels which were below the minimum price. Accordingly, definitive measures should be imposed against these companies. D. WITHDRAWAL OF UNDERTAKINGS (18) In monitoring the undertakings submitted by the Norwegian exporters, the Commission found over a period of time that a number of exporters had no sales to the European Community for consecutive reporting quarters. On verification, some of these companies also declared that they had not exported during the reference period of the original investi- gations which led to the present anti-dumping and countervailing measures, and that they have no binding contractual obligations to do so in the near future. (19) The Commission informed the parties concerned of these findings and pointed out that, in view of these facts, the companies did not qualify as expor- ters within the meaning of Regulation (EC) No 384/96 (hereinafter referred to as the basic anti- dumping Regulation') and Regulation (EC) No 2026/97 (hereinafter referred to as the basic anti- subsidies Regulation'). Furthermore, it was made EN Official Journal of the European Communities 22. 1. 1999L 17/14 known to these parties that to maintain the under- takings in force under these circumstances would be administratively cumbersome for the Commis- sion in terms of monitoring. These parties were also informed that they could offer again, when the relevant conditions are met, an undertaking as new exporters in accordance with Article 2 of Council Regulation (EC) No 1890/97 (1) as last amended by Regulation (EC) No 2678/98 (2), and with Article 2 of Council Regula- tion (EC) No 1891/97 (3), as last amended by Regu- lation (EC) No 2678/98. Any application by these parties under those Articles would be treated expe- ditiously. With regard to 21 companies which consequently withdrew their undertakings, the Council, by Regulation (EC) No 2039/98 (4), imposed definitive anti-dumping and counter- vailing duties on these companies and the Commission, accordingly, by Decision 98/ 540/EC (5), amended Decision 97/634/EC. (20) Subsequent to these amendments, three more companies, namely Hirsholm Norge AS, Lorentz A. Lossius AS and Roger AS withdrew their under- takings voluntarily. In addition, having been informed of an apparent reporting violation by the Commission, another company, Fonn Egersund AS, also withdrew its undertaking. (21) As a result of the withdrawal of their undertakings, these four companies are not entitled to continue to benefit from an exemption to the anti-dumping and countervailing duties, and their names should therefore be removed from the list of companies from which undertakings have been accepted. E. AMENDMENT OF THE ANNEX TO DECISION 97/634/EC (22) In parallel with this Regulation, the Commission is submitting a proposal for a Council Regulation imposing definitive anti-dumping and counter- vailing duties on farmed Atlantic salmon origin- ating in Norway and exported by the other eight companies which are subject to the provisional duty imposed by the provisional duty Regulation. (23) The Annex to Decision 97/634/EC accepting undertakings in the context of the present anti- dumping and anti-subsidies proceedings should be amended to take account of the reinstatement of the undertakings given by Norwell AS, in respect of which the provisional duty should be repealed. (24) To take account of these changes and of the above- mentioned withdrawals of undertakings, the Annex to Decision 97/634/EC listing the parties from which undertakings are being accepted, should be accordingly amended, HAS ADOPTED THIS REGULATION: Article 1 1. The Annex to Regulation (EC) No 2249/98 is hereby replaced by Annex I. 2. The amounts secured by way of the provisional anti- dumping and countervailing duties imposed by that Regulation in relation to farmed (other than wild) Atlantic salmon falling within CN codes ex 0302 12 00 (TARIC code: 0302 12 00*19), ex 0304 10 13 (TARIC code: 0304 10 13*19), ex 0303 22 00 (TARIC code: 0303 22 00*19) and ex 0304 20 13 (TARIC code: 0304 20 13*19) originating in Norway and exported by Norwell AS, undertaking No 128 (TARIC additional code: 8316) shall be released. Article 2 The Annex to Decision 97/634/EC is hereby replaced by Annex II. Article 3 This Regulation shall enter into force on the day following its publication in the Official Journal of the European Communities. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 21 January 1999. For the Commission Leon BRITTAN Vice-President (1) OJ L 267, 30. 9. 1997, p. 1. (2) OJ L 337, 12. 12. 1998, p. 1. (3) OJ L 267, 30. 9. 1997, p. 19. (4) OJ L 263, 26. 9. 1998, p. 3. (5) OJ L 252, 12. 9. 1998, p. 68. EN Official Journal of the European Communities22. 1. 1999 L 17/15 Undertaking No Company name TARIC additional code ANNEX I List of companies subject to provisional anti-dumping and countervailing duties 84 Langfjord Laks AS 8116 86 Leonhard Products AS 8423 90 Marex AS 8326 117 NorMan Trading AS 8230 129 Notfisk Arctic AS 8234 149 Salomega AS 8260 166 Skarpsno Mat 8277 177 Svenodak AS 8288 EN Official Journal of the European Communities 22. 1. 1999L 17/16 Undertaking No Company TARIC additional code ANNEX II List of the 107 companies from which undertakings are accepted, as updated by Regulation (EC) No 131/1999 3 Agnefest Seafood 8325 7 Aqua Export A/S 8100 8 Aqua Partner A/S 8101 11 Arctic Group International 8109 13 Arctic Superior A/S 8111 14 Arne Mathiesen A/S 8112 15 A/S Aalesundfisk 8113 16 A/S Austevoll Fiskeindustri 8114 17 A/S Keco 8115 20 A/S Refsnes Fiskeindustri 8118 21 A/S West Fish Ltd 8119 22 Astor A/S 8120 23 Atlantic King Stranda A/S 8121 24 Atlantic Seafood A/S 8122 26 Borkowski & Rosnes A/S 8124 27 Brà ¸drene Aasjord A/S 8125 28 Brà ¸drene Eilertsen A/S 8126 31 Christiansen Partner A/S 8129 32 Clipper Seafood A/A 8130 33 Coast Seafood A/S 8131 35 Dafjord Laks A/S 8133 36 Delfa Norge A/S 8134 39 Domstein Salmon A/S 8136 41 Ecco Fisk & Delikatesse 8138 EN Official Journal of the European Communities22. 1. 1999 L 17/17 Undertaking No Company TARIC additional code 42 Edvard Johnsen A/S 8139 43 Eurolaks AS 8140 44 Euronor AS 8141 46 Fiskeforsyningen AS 8143 47 Fjord Aqua Group AS 8144 48 Fjord Trading Ltd AS 8145 50 Fossen AS 8147 51 Fresh Atlantic AS 8148 52 Fresh Marine Company AS 8149 53 Fryseriet AS 8150 58 Grieg Seafood AS 8300 60 Haafa fisk AS 8302 61 Hallvard Lerà ¸y AS 8303 62 Herà ¸y Filetfabrikk AS 8304 66 Hydro Seafood Sales AS 8159 67 Hydrotech-gruppen AS 8428 72 Inter Sea AS 8174 75 Janas AS 8177 76 Joh. H. Pettersen AS 8178 77 Johan J. Helland AS 8179 79 Karsten J. Ellingsen AS 8181 82 Labeyrie Norge AS 8184 83 Lafjord Group AS 8185 85 Leica Fiskeprodukter 8187 87 Lofoten Seafood Export AS 8188 92 Marine Seafood AS 8196 93 Marstein Seafood AS 8197 EN Official Journal of the European Communities 22. 1. 1999L 17/18 Undertaking No Company TARIC additional code 96 Memo Food AS 8200 99 Myre Sjà ¸mat AS 8203 100 Naco Trading AS 8206 101 Namdal Salmon AS 8207 104 Nergà ¥rd AS 8210 105 Nils Williksen AS 8211 107 Nisja Trading AS 8213 108 Nor-Food AS 8214 111 Nordic Group ASA 8217 112 Nordreisa Laks AS 8218 113 Norexport AS 8223 114 Norfi Produkter AS 8227 115 Norfood Group AS 8228 116 Norfra Eksport AS 8229 119 Norsk Akvakultur AS 8232 120 Norsk Sjà ¸mat AS 8233 121 Northern Seafood AS 8307 122 Nortrade AS 8308 123 Norway Royal Salmon Sales AS 8309 124 Norway Royal Salmon AS 8312 128 Norwell AS 8316 130 Nova Sea AS 8235 134 Ok-Fish Kvalheim AS 8239 137 Pan Fish Sales AS 8242 140 Polar Seafood Norway AS 8247 141 Prilam Norvà ¨ge AS 8248 142 Pundslett Fisk 8251 EN Official Journal of the European Communities22. 1. 1999 L 17/19 Undertaking No Company TARIC additional code 144 Rolf Olsen Seafood AS 8254 145 Ryfisk AS 8256 146 Rà ¸rvik Fisk- og fiskematforretning AS 8257 147 Saga Lax Norge AS 8258 148 Saga Lax Nord A/S 8259 151 Sangoltgruppa AS 8262 154 Sea Eagle Group AS 8265 155 Sea Star International AS 8266 156 Sea-Bell AS 8267 157 Seaco AS 8268 158 Seacom AS 8269 160 Seafood Farmers of Norway Ltd AS 8271 161 Seanor AS 8272 162 Sekkingstad AS 8273 164 Sirena Norway AS 8275 165 Kinn Salmon AS 8276 167 SL Fjordgruppen AS 8278 172 Stjernelaks AS 8283 174 Stolt Sea Farm AS 8285 175 Storm Company AS 8286 176 Superior AS 8287 178 Terra Seafood AS 8289 180 Timar Seafood AS 8294 182 Torris Products Ltd AS 8298 183 Troll Salmon AS 8317 187 Vie de France Norway AS 8321 188 Vikenco AS 8322 189 Wannebo International AS 8323 190 West Fish Norwegian Salmon AS 8324 |
24 F.3d 248NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.
The RANGER PUBLISHING COMPANY, INC., a Washingtoncorporation, Plaintiff-Appellee,andTom Swarner, and Jane Swarner, and the marital communitythereof; et al.; Defendant-Appellee,v.UNITED STATES of America; Richard Cheney, Secretary of theDepartment of Defense; Michael P.W. Stone, Secretary of theDepartment of the Army; Larry Else; Callum A.H. Waller,Commander, Fort Lewis, et al., Defendants-Appellants.
No. 92-35440.
United States Court of Appeals, Ninth Circuit.
Submitted Nov. 5, 1993.*Decided May 2, 1994.
Before: TANG, FARRIS, and RYMER, Circuit Judges.
1
MEMORANDUM**
2
The United States appeals the district court's award of attorney's fees to Ranger Publishing Company ("Ranger") under the Equal Access to Justice Act ("EAJA"), 28 U.S.C. Sec. 2412. In three consolidated lawsuits, Ranger challenged several actions taken by the Army regarding Ranger's right to publish and distribute The bmoore@example.org. Lewis, Washington. We vacate the award of attorney's fees and remand for reconsideration of the amount awarded.
DISCUSSION
A.
3
A court must award "fees and other expenses" to parties who prevail in non-tort civil actions against the United States "unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust." 28 U.S.C. Sec. 2412(d)(1)(A). The term "substantially justified" means "justified to a degree that could satisfy a reasonable person," or is reasonable "both in law and fact," and is "more than merely undeserving of sanctions for frivolousness." Commissioner, INS v. Jean, 496 U.S. 154, 110 S. Ct. 2316, 2319 n. 6 (1990). The government's position encompasses both the underlying government action at issue and its position in litigation. Bay Area Peace Navy v. United States, 914 F.2d 1224, 1230 (9th Cir.1990). The burden of proving substantial justification is with the government. Love v. Reilly, 924 F.2d 1492, 1495 (9th Cir.1991). An award of attorney's fees under EAJA is reviewed for an abuse of discretion. Id. at 1493.
4
The district court held that Ranger was the prevailing party under EAJA because it had been successful in setting aside the CEN award to Robinson Publishing Company, and that the government's position on the interpretation of its bidding regulation was not substantially justified. The government concedes that Ranger was the prevailing party under EAJA, but argues that its position in the litigation as a whole was substantially justified.
5
The complaint in the original action (CIV 89-543) brought by Ranger against the government requested: (1) an order "restraining Defendants from proceeding under the new contract for distribution of a Civilian Enterprise Newspaper entered into in violation of regulations;" (2) an order "requiring Defendants to permit Plaintiffs to distribute 'The Ranger' at places allowed for distribution by other newspapers;" and (3) an order "requiring Defendants to grant the Plaintiffs equal access to the news and information of the Armed Forces." [ER 10A.]
6
The government concedes that Ranger succeeded in setting aside the Army's award of the CEN to Robinson as a violation of Army regulations, but argues that little practical benefit was obtained because the contract was ultimately not Ranger's. However, Ranger did not seek a ruling to obtain the CEN contract; rather, Ranger claimed that the Army had violated its bidding regulations. Ranger obtained the relief requested in the complaint.
7
The government further argues, however, that its position on this issue was justified. The district court held that the regulations entitled Ranger to make a personal presentation to the CEN selection committee prior to the award of a contract. The applicable regulation, Army Regulation 360-81, p 3-27, d. (4) (Jan. 21, 1986), states, "A selection committee will hear presentations and review written data by prospective commercial publishers or their representatives, secure and review independent data, and make on-site inspections to gather information upon which to base their selection." The government contends the Army interpreted the regulation as not requiring the use of each information gathering tool. We agree with the district court that the language "will hear presentations" required the selection committee hear presentations by prospective publishers. The government's position on this issue was not substantially justified.
8
The government characterizes the second relief sought as Ranger's right to distribute its newspaper bmoore@example.org. Lewis. In fact, the complaint requests distribution "at places allowed for distribution by other newspapers." [ER 10A.] The complaint alleges that defendants "have permitted other commercial newspapers access to designated points on Fort Lewis and allow these publishers to distribute their papers in the residential areas on Fort Lewis," and that defendants "have refused to grant Plaintiffs access to Fort Lewis to distribute 'The Ranger.' " [ER 8A.] A reading of the complaint thus bears out Ranger's contention that it simply sought fair treatment, and to be allowed to distribute its newspaper in the same fashion as other papers. At the time the complaint was filed, the Ft. Lewis officials had denied Ranger the right to distribute "The Ranger" at all on Ft. Lewis, even in stands in public areas. Ranger achieved its initial goal of fair treatment in distribution rights. Even after the Army's revised regulations barred Ranger from distributing the newspaper door-to-door, Ranger retained its right to distribute the paper in public areas, also a substantial benefit. The government failed to sustain its burden of showing substantial justification.
9
The third relief sought was "equal access to the news and information of the Armed Forces." [ER 10A.] Ranger lost on this issue when we reversed the district court's interpretation that the regulations required the Army to give access to Ranger in the same manner as provided to the CEN. Swarner v. United States, 937 F.2d 1478, 1484-85 (9th Cir.1991). The government's position on this issue was substantially justified.
10
The final claim at issue in the consolidated actions was Ranger's right to the name The Ranger. The government concedes that Ranger obtained the right to use The Ranger as the trademark for its newspaper and did not appeal the district court's finding on this issue.
11
Both parties agree that a court must look at the litigation as a whole to determine whether the government's position is substantially justified. See Jean, 110 S. Ct. at 2320 ("While the parties' postures on individual matters may be more or less justified, the EAJA--like other fee-shifting statutes--favors treating a case as an inclusive whole, rather than as atomized line-items."); Oregon Environmental Council v. Kunzman, 817 F.2d 484, 498 (9th Cir.1987) (court must consider the totality of the circumstances prior to and during the litigation).
12
The government's position on the issues on which Ranger prevailed was not substantially justified. Although the government prevailed on Ranger's claims of right to distribute door-to-door and right to equal access to news and information, the government's position as a whole was not substantially justified. Taking into account the government's burden to prove substantial justification, the district court did not abuse its discretion by concluding that the government's position was not substantially justified.
C.
13
Ranger sought recovery of attorney's fees incurred in the district court for the entire litigation; it did not seek attorney's fees for the previous appeal. Attorney's fees were requested at an hourly rate of $125 an hour for 114.9 hours performed by Donald Anderson, and $85 an hour for 135.4 hours performed by Guy Sternal, for a total of $25,871.50. The district court awarded the entire amount requested.
14
In Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct. 1933 (1983), the Supreme Court held that courts must "consider the relationship between the extent of success and the amount of the fee award.... A reduced fee award is appropriate if the relief, however significant, is limited in comparison to the scope of the litigation as a whole." Id., 461 U.S. at 438-39, 103 S. Ct. at 1942-43. Where "a plaintiff has achieved only partial or limited success, the product of hours reasonably expended on the litigation as a whole times a reasonable hourly rate may be an excessive amount." Id., 461 U.S. at 436, 103 S. Ct. at 1941.
15
The Supreme Court offers two different approaches for setting reasonable fees in cases where a plaintiff's success is limited. Where a suit includes separable legal claims, fees may be awarded only for work on claims that were successful. To do this, a district court may attempt to identify specific hours that should be eliminated ... [T]his approach [is] inappropriate [where] Plaintiffs' claims [are] difficult to separate because they involve[ ] a common core of facts based on related legal theories.
16
Greater Los Angeles Council on Deafness v. Community TV of Southern California, 813 F.2d 217, 222 (9th Cir.1987) (quotations omitted). The second approach is to
17
"simply reduce the award to account for the limited success." To measure the extent of plaintiffs' success, we do not use a mathematical ratio of winning claims to losing claims, an approach criticized in Hensley. Instead, we compare "the significance of the overall relief obtained" to all the claims and remedies plaintiffs pursued in the litigation.
18
Id. (citations omitted).
19
The fee award is remanded for a reduction to reflect the extent of Ranger's success in the litigation. The district court held that the issues presented in the three consolidated cases were intertwined and inseparable. It is difficult on this record to determine whether the claims were separable. However, even if the claims are inseparable, the district court should consider whether to reduce the award to account for the limited success by comparing "the significance of the overall relief obtained." Id.
20
The district court must also make findings regarding whether Ranger's counsel is entitled to recover fees in excess of the $75 per hour statutory rate. Courts may exceed the statutory limit only if there is a limited availability of "attorneys having some distinctive knowledge or specialized skill needful for the litigation in question." Pierce v. Underwood, 487 U.S. 552, 572, 108 S. Ct. 2541, 2553 (1988). We have interpreted this standard to require three things: (1) "the attorney must possess distinctive knowledge and skills developed through a practice specialty," (2) "those distinctive skills must be needed in the litigation," and (3) "those skills must not be available elsewhere at the statutory rate." Love, 924 bmoore@example.org.
21
The district court held that Ranger's attorneys were entitled to an hourly rate in excess of $75 because their military background and experience was a special factor justifying a greater rate, but failed to find whether this "specialty requires knowledge not readily available to one possessing 'general lawyerly knowledge and ability'.... [and] specialized legal expertise as well as the mastery of a technical subject matter gained by the investment of time and energy." National Wildlife Federation v. F.E.R.C., 870 F.2d 542, 547 (9th Cir.1989). The district court must also make findings that Ranger's success depended on counsel's military experience and whether other attorneys with similar experience would have been available at the statutory rate. See Love, 924 F.2d at 1496-97 (remanding for further findings where the district court failed to determine the availability of other attorneys at the statutory rate).
22
ATTORNEY'S FEE AWARD VACATED AND REMANDED FOR FURTHER FINDINGS CONSISTENT WITH THIS DISPOSITION. EACH PARTY TO BEAR OWN COSTS ON APPEAL.
*
The panel unanimously agrees that this case is appropriate for submission without oral argument. Fed.R.App.P. 34(a); 9th Cir.R. 34-4
**
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3
|
198 Va. 274 (1956)
HELEN B. WHITLOW
v.
JOHN OLVIN GRUBB AND GLADYS GRUBB BOHON.
Record No. 4524.
Supreme Court of Virginia.
June 18, 1956.
L. S. Herrink, Jr. (W. A. Alexander, Herrink & Herrink, on brief), for the appellant.
M. S. McClung (Furman Whitescarver, on brief), for the appellees.
Present, Hudgins, C.J., and Eggleston, Buchanan, Miller, Smith and Whittle,
Where an appellant in preparing the printed record violates the Rules of Court by printing the pleadings when no objections were raised thereto, failing to print the opinion of the trial court and failing in serious degree to have printed all matters germane to the assignments of error, the appeal would be dismissed. Substantial compliance with the rules of appellate procedure is necessary for the orderly and expeditious administration of justice.
Appeal from a decree of the Circuit Court of Roanoke county. Hon. F. C. Hoback, judge presiding. The opinion states the case.
HUDGINS
HUDGINS, C.J., delivered the opinion of the court.
This appeal was awarded Helen B. Whitlow to review a decree fixing and adjudicating the boundary line between a tract of land owned by her and a tract owned by John Olvin Grubb and Gladys Grubb Bohon.
The appeal will have to be dismissed because appellant failed to comply with elementary rules of appellate procedure.
The manuscript record contains the pleadings, the opinion of the trial court, the decree, nineteen exhibits, which include twelve plats *275 made by different surveyors of the two tracts of land involved and other nearby tracts, seven deeds, and 222 pages of the transcript of the testimony of thirteen witnesses heard by the judge without a jury. The printed record contains copies of the pleadings (bill and answer), the final decree of the court, and very short extracts from the transcript of the testimony of only three witnesses.
The printing of the bill and answer when no objections are raised thereto violates Rule 5:1 | 6(e) of the Rules of Court. Appellant's failure to have the opinion of the judge printed violates Rule 5:1 | 6(d) of the Rules of Court. Her failure to have printed everything germane to the assignments of error violates the intent and purpose of the various sections of Rules of Court dealing with printing, and particularly is misleading in view of Rule 5:1 | 6(f), which is:
"It will be assumed that the printed record and the original exhibits contain everything germane to the errors assigned, and that other parts of the record do not show that an error is harmless or that a defective instruction is cured or that other evidence supports the verdict or judgment."
"However, this Court may, at the instance of counsel or of its own motion, consider other parts of the record."
It was not the intent and purpose of the Rules of Court dealing with appellate procedure to impose upon the court the burden of studying all the testimony introduced in the trial court to ascertain what part of it is pertinent to the assignments of error. This is a duty imposed upon the attorneys for the litigants. The brief of appellant in this case presents one case, and that case is somewhat inconsistent with her answer. The brief of appellees presents another case supported by the manuscript record but not embraced in the printed record. The notes of the surveyors, the twelve plats and the seven deeds filed as exhibits are unintelligible unless considered with the testimony of the witnesses explaining them and showing their applicability to the boundaries of the two tracts of land involved. This explanation is accomplished in the manuscript record but not in the printed record.
While it is highly desirable to keep the cost of printing as low as possible for the benefit of litigants, it is equally as important to have that part of the manuscript record pertinent to the assignments of error printed so that it will not be necessary for every member of the court to study the entire manuscript to determine the vital issues involved. *276
The rules of appellate procedure are simple, brief and expressed in unambiguous language. We have said repeatedly that compliance with them is necessary for the orderly, fair and expeditious administration of justice. Vick Siegel, 191 Va. 731, 736, 737, 62 S.E.2d 899; Skeens Commonwealth, 192 Va. 200, 203, 64 S.E.2d 764; Avery County School Board, 192 Va. 329, 330, 331, 332, 333, 334, 64 S.E.2d 767; Hall Hall,
192 Va. 721, 724, 66 S.E.2d 595; Hundley Commonwealth, 193 Va. 449, 454, 69 S.E.2d 336; Bonich Waite, 194 Va. 374, 375, 73 S.E.2d 389; Farrow Commonwealth, 197 Va. 353, 89 S.E.2d 312; Hiner Wenger, 197 Va. 869, 91 S.E.2d 637; DeMott DeMott, 198 Va. 22, 92 S.E.2d 342.
In Bonich Waite, supra, Mr. Justice Eggleston, speaking for the court, said ". . . the evidence incorporated in the printed record is so abridged that it fails to give a full and true picture of the facts developed before the jury. While an abbreviation of the printed record is highly desirable, the rule contemplates that for the information and convenience of the court the designations embrace so much of the proceedings below, including all material evidence, as is pertinent to a full consideration of the assignments of error."
We again emphasized the necessity of substantial compliance with the rules in Farrow Commonwealth, supra, in this language: "It is the duty of the appellant or his counsel to present an intelligible record to this court, especially where the sufficiency of the evidence is involved. Lewis Commonwealth, 193 Va. 612, 615, 70 S.E.2d 293; Rule 5:1, | 6(f). Yet we find that both the printed record and defendant's brief contain practically none of the germane evidence we are asked to hold insufficient to support the verdict. Indeed the printed record contains only the evidence introduced on behalf of the defendant. This failure to comply with the rules governing appeals on so vital an issue is an invitation to dismiss the writ of error."
This warning in substantially the same language was repeated in the opinion announced at the April Session, 1956, in DeMott DeMott, supra.
The flagrant violations of the Rules of Court compel the dismissal of this appeal. It may not be amiss to say that notwithstanding appellant's failure to comply with the rules of appellate procedure, we have given careful consideration to the manuscript record and are of opinion that the decree of the trial court is correct and would be affirmed if the decision were based on the merits.
Appeal dismissed.
|
Exhibit 10.1
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) dated as of
February 27, 2017 to the Credit Agreement referenced below is by and among AAC
Holdings, Inc., a Nevada corporation (the “Borrower”), the Guarantors, the
Lenders identified on the signature pages hereto and Bank of America, N.A., in
its capacities as Administrative Agent, Swingline Lender and L/C Issuer.
W I T N E S S E T H
WHEREAS, a credit facility has been extended to the Borrower pursuant to the
terms of that certain Credit Agreement dated as of March 9, 2015 (as amended by
that certain First Amendment to Credit Agreement dated as of June 16, 2015, that
certain Second Amendment to Credit Agreement and Waiver dated as of October 2,
2015, that certain Third Amendment to Credit Agreement and Lender Joinder
Agreement dated as of July 13, 2016 and as further amended, modified,
supplemented, increased and extended from time to time, the “Credit Agreement”)
among the Borrower, the Guarantors, the Lenders, the Swingline Lender, the L/C
Issuer and the Administrative Agent; and
WHEREAS, the Borrower has requested certain amendments to the Credit Agreement
to (a) amend the maximum permitted Consolidated Total Leverage Ratio and
(b) adjust certain add-backs to Consolidated EBITDA; and
WHEREAS, the Lenders have agreed to provide such requested amendments subject to
the terms and conditions herein, including, among other things, an adjustment to
the Applicable Rate;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Introductory Paragraph and Recitals. The above introductory paragraph and
recitals of this Amendment are incorporated herein by reference as if fully set
forth herein.
--------------------------------------------------------------------------------
2. Defined Terms. Capitalized terms used herein but not otherwise defined herein
shall have the meanings provided to such terms in the Credit Agreement.
3. Amendments to Credit Agreement.
(a) The definition of “Applicable Rate” in Section 1.01 of the Credit Agreement
is amended in its entirety to read as follows:
“Applicable Rate” means, for any day, the rate per annum set forth below
opposite the applicable Pricing Level then in effect (based on the Consolidated
Total Leverage Ratio), it being understood that the Applicable Rate for
(a) Revolving Loans that are Base Rate Loans shall be the percentage set forth
under the column “Base Rate”, (b) Revolving Loans that are Eurodollar Rate Loans
shall be the percentage set forth under the column “Eurodollar Rate & Letter of
Credit Fee”, (c) that portion of the Term Loan comprised of Base Rate Loans
shall be the percentage set forth under the column “Base Rate”, (d) that portion
of the Term Loan comprised of Eurodollar Rate Loans shall be the percentage set
forth under the column “Eurodollar Rate & Letter of Credit Fee”, (e) the Letter
of Credit Fee shall be the percentage set forth under the column, “Eurodollar
Rate & Letter of Credit Fee”, and (f) the Commitment Fee shall be the percentage
set forth under the column “Commitment Fee”:
Pricing
Level
Consolidated
Total Leverage
Ratio Eurodollar
Rate
Loans and
Letter of
Credit Fee Base
Rate
Loans Commitment
Fee
1
³4.00:1.00 3.75 % 2.75 % 0.60 %
2
³3.50:1.00 but
<4.00:1.00 3.25 % 2.25 % 0.50 %
3
³3.00:1.00 but
< 3.50:1.00 3.00 % 2.00 % 0.45 %
4
³2.50:1.00 but
< 3.00:1.00 2.75 % 1.75 % 0.40 %
5
³2.00:1.00 but
< 2.50:1.00 2.50 % 1.50 % 0.35 %
6
< 2.00:1.00 2.25 % 1.25 % 0.35 %
--------------------------------------------------------------------------------
Any increase or decrease in the Applicable Rate resulting from a change in the
Consolidated Total Leverage Ratio shall become effective as of the first
Business Day immediately following the date a Compliance Certificate is
delivered pursuant to Section 6.02(a); provided, however, that if a Compliance
Certificate is not delivered when due in accordance with such Section, then,
upon the request of the Required Lenders, Pricing Level 1 shall apply, in each
case as of the first Business Day after the date on which such Compliance
Certificate was required to have been delivered and in each case shall remain in
effect until the first Business Day following the date on which such Compliance
Certificate is delivered.
Notwithstanding anything to the contrary contained in this definition, (a) the
determination of the Applicable Rate for any period shall be subject to the
provisions of Section 2.10(b) and (b) the Applicable Rate shall be as set forth
in Level 1 from the Fourth Amendment Effective Date until the first Business Day
immediately following the date a Compliance Certificate is delivered pursuant to
Section 6.02(a) for the fiscal year ending December 31, 2016 to the
Administrative Agent. Any adjustment in the Applicable Rate shall be applicable
to all Credit Extensions then existing or subsequently made or issued.
The Applicable Rate for any Additional Term Loan shall be as set forth in
Additional Term Loan Lender Joinder Agreement.
(b) The definition of Consolidated EBITDA in Section 1.01 of the Credit
Agreement is amended by (i) deleting the “and” before clause (xi) and
(ii) adding the following language after the end of clause (xi) “; and
(xii) cost savings of the Loan Parties in connection with employee workforce
reductions in the amount of (A) for the period of four fiscal quarters ending
March 31, 2017, $6,964,620, (B) for the period of four fiscal quarters ending
June 30, 2017, $4,811,972, (C) for the period of four fiscal quarters ending
September 30, 2017, $2,635,097, (D) for the period of four fiscal quarters
ending December 31, 2017, $458,222 and (E) for the period of four fiscal
quarters ending March 31, 2018 and thereafter, $0”.
(c) A new definition of “Fourth Amendment Effective Date is added to
Section 1.01 of the Credit Agreement in the appropriate alphabetical order to
read as follows:
“Fourth Amendment Effective Date” means February 27, 2017.
--------------------------------------------------------------------------------
(d) Section 7.11(a) of the Credit Agreement is amended by replacing the table
set forth therein as follows:
Measurement Period Ending
Maximum
Consolidated
Total
Leverage
Ratio
March 31, 2015
4.50:1.00
June 30, 2015
4.50:1.00
September 30, 2015
4.50:1.00
December 31, 2015
4.50:1.00
March 31, 2016
4.50:1.00
June 30, 2016
4.25:1.00
September 30, 2016
4.25:1.00
December 31, 2016
4.25:1.00
March 31, 2017
4.25:1.00
June 30, 2017
4.25:1.00
September 30, 2017
4.25:1.00
December 31, 2017 and each fiscal quarter thereafter
4.00:1.00
4. Conditions Precedent. This Amendment shall become effective upon satisfaction
of the following conditions precedent:
(a) Receipt by the Administrative Agent of counterparts of this Amendment duly
executed by the Borrower, the Guarantors, the Administrative Agent and the
Required Lenders.
(b) Receipt by the Administrative Agent, for the account of each Lender that
consents to this Amendment on or before February 24, 2017, an amendment fee in
an amount equal to 0.15% of the sum of (x) the aggregate amount of such
consenting Lender’s Revolving Commitment plus (y) the aggregate outstanding
principal amount of the Term Loans held by such consenting Lender, in each case
as of the effective date of this Amendment. Such amendment fee shall be due and
payable in full on the date hereof.
--------------------------------------------------------------------------------
5. Amendment is a “Loan Document”. This Amendment shall be deemed to be, and is,
a Loan Document and all references to a “Loan Document” in the Credit Agreement
and the other Loan Documents (including, without limitation, all such references
in the representations and warranties in the Credit Agreement and the other Loan
Documents) shall be deemed to include this Amendment.
6. Representations and Warranties; No Default. Each Loan Party hereby represents
and warrants to the Administrative Agent, each Lender, the Swingline Lender and
the L/C Issuer that, after giving effect to this Amendment, (a) the
representations and warranties of each Loan Party contained in the Credit
Agreement or any other Loan Document, or which are contained in any document
furnished at any time under or in connection with the Credit Agreement or any
other Loan Document, are true and correct in all material respects (other than
any representation and warranty that is expressly qualified by materiality, in
which case such representation and warranty is true and correct in all respects)
on and as of the date hereof, except (i) to the extent that such representations
and warranties specifically refer to an earlier date, in which case they are
true and correct in all material respects (other than any representation and
warranty that is expressly qualified by materiality, in which case such
representation and warranty is true and correct in all respects) as of such
earlier date and (ii) for representations and warranties that may have become
untrue or inaccurate solely because of changes permitted by the terms of the
Credit Agreement and (b) no Default or Event of Default exists.
7. Reaffirmation of Obligations. Each Loan Party (a) acknowledges and consents
to all of the terms and conditions of this Amendment, (b) affirms all of its
obligations under the Loan Documents and (c) agrees that this Amendment and all
documents, agreements and instruments executed in connection with this Amendment
do not operate to reduce or discharge such Loan Party’s obligations under the
Loan Documents.
8. Reaffirmation of Security Interests. Each Loan Party (a) affirms that each of
the Liens granted in or pursuant to the Loan Documents is valid and subsisting
and (b) agrees that this Amendment and all documents, agreements and instruments
executed in connection with this Amendment do not in any manner impair or
otherwise adversely affect any of the Liens granted in or pursuant to the Loan
Documents.
--------------------------------------------------------------------------------
9. No Other Changes. Except as modified hereby, all of the terms and provisions
of the Loan Documents shall remain in full force and effect.
10. Counterparts; Delivery. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and it shall not be necessary in making proof of this Amendment to
produce or account for more than one such counterpart. Delivery of an executed
counterpart of this Amendment by facsimile or form of electronic attachment
(e.g., “.pdf”) shall be effective as such party’s original executed counterpart
and shall constitute a representation that such party’s original executed
counterpart will be delivered.
11. Fees and Expenses. The Loan Parties agree to pay all reasonable
out-of-pocket fees and expenses of the Administrative Agent in connection with
the preparation, execution and delivery of this Amendment, including without
limitation the reasonable fees and expenses of Moore & Van Allen, PLLC, counsel
to the Administrative Agent.
12. Governing Law. THIS AMENDMENT AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE
OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF
OR RELATING TO THIS AMENDMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
[Signature Pages Follow]
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this
Amendment to be duly executed and delivered as of the date first above written.
BORROWER: AAC HOLDINGS, INC., a Nevada corporation By: /s/ Kirk R.
Manz Name: Kirk R. Manz Title: Chief Financial Officer
GUARANTORS:
AMERICAN ADDICTION CENTERS, INC.,
a Nevada corporation
FORTERUS HEALTH CARE SERVICES, INC.,
a Delaware corporation
SAN DIEGO ADDICTION TREATMENT CENTER, INC.,
a Delaware corporation
B&B HOLDINGS INTL LLC,
a Florida limited liability company
GREENHOUSE TREATMENT CENTER, LLC,
a Texas limited liability company
CONCORDE TREATMENT CENTER, LLC,
a Nevada limited liability company
AAC HOLDINGS, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
--------------------------------------------------------------------------------
RECOVERY FIRST OF FLORIDA, LLC,
a Delaware limited liability company
RI – CLINICAL SERVICES, LLC,
a Delaware limited liability company
NEW JERSEY ADDICTION TREATMENT CENTER, LLC,
a Delaware limited liability company
BEHAVIORAL HEALTHCARE REALTY, LLC,
a Delaware limited liability company
CONCORDE REAL ESTATE, LLC,
a Nevada limited liability company
GREENHOUSE REAL ESTATE, LLC,
a Texas limited liability company
BHR ALISO VIEJO REAL ESTATE, LLC,
a Delaware limited liability company
BHR RINGWOOD REAL ESTATE, LLC,
a Delaware limited liability company
BHR OXFORD REAL ESTATE, LLC, a Delaware limited liability company
OXFORD TREATMENT CENTER, LLC, a Delaware limited liability company
SOBER MEDIA GROUP, LLC, a Delaware limited liability company
AAC HOLDINGS, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
--------------------------------------------------------------------------------
RIVER OAKS TREATMENT CENTER, LLC, a Delaware limited liability company
LAGUNA TREATMENT HOSPITAL, LLC, a Delaware limited liability company
SOLUTIONS TREATMENT CENTER, LLC, a Delaware limited liability company
TOWNSEND TREATMENT CENTER, LLC, a Delaware limited liability company
By: /s/ Kirk R. Manz Name: Kirk R. Manz Title: Chief Financial
Officer
FITRX, LLC,
a Tennessee limited liability company
AAC LAS VEGAS OUTPATIENT CENTER, LLC,
a Delaware limited liability company
AAC DALLAS OUTPATIENT CENTER, LLC,
a Delaware limited liability company
ADDICTION LABS OF AMERICA, LLC,
a Delaware limited liability company
AAC HOLDINGS, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
--------------------------------------------------------------------------------
By: American Addiction Centers, Inc., its sole member By:
/s/ Kirk R. Manz Name: Kirk R. Manz Title: Chief Financial Officer
SINGER ISLAND RECOVERY CENTER LLC, a Florida limited liability company
By: B&B HOLDINGS INTL LLC, its sole member By: /s/ Kirk R.
Manz Name: Kirk R. Manz Title: Chief Financial Officer
AAC HOLDINGS, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
--------------------------------------------------------------------------------
THE ACADEMY REAL ESTATE, LLC, a Delaware limited liability company By:
Behavioral Healthcare Realty, LLC, its sole member By: /s/ Kirk R.
Manz Name: Kirk R. Manz Title: Chief Financial Officer
AAC HOLDINGS, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
--------------------------------------------------------------------------------
CLINICAL REVENUE MANAGEMENT SERVICES, LLC, a Tennessee limited liability
company By: American Addiction Centers, Inc., its sole member
By: /s/ Kirk R. Manz Name: Kirk R. Manz Title: Chief Financial
Officer
TAJ MEDIA LLC, a California limited liability company
REFERRAL SOLUTIONS GROUP, LLC, a California limited liability company
By: Sober Media Group, LLC, its sole member By: /s/ Kirk R. Manz
Name: Kirk R. Manz Title: Chief Financial Officer
AAC HOLDINGS, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
--------------------------------------------------------------------------------
RECOVERY BRANDS, LLC, a California limited liability company By:
Referral Solutions Group, LLC, its sole member By: /s/ Kirk R. Manz
Name: Kirk R. Manz Title: Treasurer
SAN DIEGO PROFESSIONAL GROUP, P.C., a California professional corporation
PALM BEACH PROFESSIONAL GROUP, PROFESSIONAL CORPORATION, a Florida professional
corporation
LAS VEGAS PROFESSIONAL GROUP – CALARCO, P.C., a Nevada professional corporation
BRENTWOOD PROFESSIONAL GROUP, P.C., a Tennessee professional corporation
GRAND PRAIRIE PROFESSIONAL GROUP, P.A., a Texas professional association
OXFORD PROFESSIONAL GROUP, P.C., a Mississippi professional corporation
By: /s/ Mark A. Calarco Name: Mark A. Calarco Title: Secretary
AAC HOLDINGS, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
--------------------------------------------------------------------------------
AAC HEALTHCARE NETWORK, INC., a Delaware corporation By: AAC
Holdings, Inc., its sole stockholder By: /s/ Michael T. Cartwright
Name: Michael T. Cartwright Title: Chairman and Chief Executive Officer
AAC HOLDINGS, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
--------------------------------------------------------------------------------
BANK OF AMERICA, N.A.,
as Administrative Agent
By: /s/ Erik M. Truette Name: Erik M. Truette Title: Vice
President LENDERS:
BANK OF AMERICA, N.A.,
as a Lender, L/C Issuer and Swingline Lender
By: /s/ H. Hope Walker Name: H. Hope Walker Title: Vice
President
AAC HOLDINGS, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
--------------------------------------------------------------------------------
SUNTRUST BANK,
as a Lender
By: /s/ Jared Cohen Name: Jared Cohen Title: Vice President
BMO HARRIS BANK, N.A.,
as a Lender
By: /s/ Joshua Hovermale Name: Joshua Hovermale
Title: Director
RAYMOND JAMES BANK, N.A.,
as a Lender
By: /s/ Alexander L. Rody Name: Alexander L. Rody
Title: Senior Vice President
AAC HOLDINGS, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
--------------------------------------------------------------------------------
RELIANT BANK,
as a Lender
By: /s/ Stephen Fawehinmi Name: Stephen Fawehinmi Title: Vice
President
TEXAS CAPITAL BANK, N.A.,
as a Lender
By: /s/ Leslie Tieszen Name: Leslie Tieszen Title: Senior Vice
President
AAC HOLDINGS, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
--------------------------------------------------------------------------------
WHITNEY BANK,
as a Lender
By: /s/ Dwight Seeley Name: Dwight Seeley Title: Senior Vice
President
CAPITAL BANK CORPORATION,
as a Lender
By: /s/ Rebecca L. Hetzer Name: Rebecca L. Hetzer
Title: Senior Vice President
FRANKLIN SYNERGY BANK,
as a Lender
By: /s/ Timothy B. Fouts Name: Timothy B. Fouts
Title: Executive Vice President
AAC HOLDINGS, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT |
GOF SA-1 06/15 SUPPLEMENT DATED JUNE 30, 2015 TO THE STATEMENTS OF ADDITIONAL INFORMATION OF FRANKLIN MUTUAL SERIES FUNDS Franklin Mutual Beacon Fund Franklin Mutual Global Discovery Fund Franklin Mutual Quest Fund Franklin Mutual Shares Fund Franklin Mutual Financial Services Fund Franklin Mutual International Fund TEMPLETON CHINA WORLD FUND TEMPLETON DEVELOPING MARKETS TRUST TEMPLETON FUNDS Templeton Foreign Fund TEMPLETON GLOBAL INVESTMENT TRUST Templeton BRIC Fund Templeton Emerging Markets Balanced Fund Templeton Emerging Markets Small Cap Fund TEMPLETON GLOBAL OPPORTUNITIES TRUST TEMPLETON INSTITUTIONAL FUNDS Emerging Markets Series I. For Templeton BRIC Fund and Templeton China World Fund, “Glossary of Investments, Techniques, Strategies and Their Risks – Foreign securities” is amended by deleting in its entirety the paragraph that begins “The Fund is unable to buy the China A shares .” immediately prior to the section entitled “Developing markets or emerging markets.” II. For all Funds, “Glossary of Investments, Techniques, Strategies and Their Risks – Foreign securities” is amended by adding the following before “Developing markets or emerging markets:” Investing through Stock Connect. Foreign investors may now invest in eligible China A shares (“Stock Connect Securities”) listed and traded on the Shanghai Stock Exchange (“SSE”) through the Shanghai –Hong Kong Stock Connect (“Stock Connect”) program. Stock Connect is a securities trading and clearing program developed by The Stock Exchange of Hong Kong Limited (“SEHK”), SSE, Hong Kong Securities Clearing Company Limited and China Securities Depository and Clearing Corporation Limited for the establishment of mutual market access between SEHK and SSE. In contrast to certain other regimes for foreign investment in Chinese securities, no individual investment quotas or licensing requirements apply to investors in Stock Connect Securities through Stock Connect. In addition, there are no lock-up periods or restrictions on the repatriation of principal and profits. However, trading through Stock Connect is subject to a number of restrictions that may affect a Fund’s investments and returns. For example, a primary feature of the Stock Connect program is the application of the home market’s laws and rules to investors in a security. Thus, investors in Stock Connect Securities are generally subject to PRC securities regulations and SSE listing rules, among other restrictions. In addition, Stock Connect Securities generally may not be sold, purchased or otherwise transferred other than through Stock Connect in accordance with applicable rules. While Stock Connect is not subject to individual investment quotas, daily and aggregate investment quotas apply to all Stock Connect participants, which may restrict or preclude a Fund’s ability to invest in Stock Connect Securities. For example, an investor cannot purchase and sell the same security on the same trading day. Stock Connect also is generally available only on business days when both the SSE and the SEHK are open. Trading in the Stock Connect Program is subject to trading, clearance and settlement procedures that are untested in the PRC, which could pose risks to a Fund. Finally, the withholding tax treatment of dividends and capital gains payable to overseas investors currently is unsettled. Stock Connect is in its initial stages. Further developments are likely and there can be no assurance as to whether or how such developments may restrict or affect a Fund’s investments or returns. In addition, the application and interpretation of the laws and regulations of Hong Kong and the PRC, and the rules, policies or guidelines published or applied by relevant regulators and exchanges in respect of the Stock Connect program, are uncertain, and they may have a detrimental effect on a Fund’s investments and returns. Please keep this supplement with your Statement of Additional Information for future reference.
|
Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 1 of 21
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
SHAWN RAVERT, ) CIVIL ACTION NO. 4:20-CV-889
Plaintiff )
)
v. )
) (ARBUCKLE, M.J.)
MONROE COUNTY, et al., )
Defendants )
MEMORANDUM OPINION
PrimeCare Defendants’ Amended Motion to Dismiss (Doc. 11)
I. INTRODUCTION
Shawn Ravert (“Plaintiff”) was, at one time, an inmate detained in the Monroe
County Correctional Facility (“MCCF”). He alleges that three members of the
medical staff at this facility failed to make a timely diagnosis of his malignant
melanoma. Plaintiff has sued the County, the private corporation contracted by the
County to provide medical care at the county facility, and three members of the
medical staff (employed by the private corporation).
The private corporation and members of the medical staff (collectively the
“PrimeCare Defendants”), have filed a Motion to Dismiss (Doc. 11). For the reasons
explained herein, that Motion to Dismiss (Doc. 11) is DENIED.
II. BACKGROUND & PROCEDURAL HISTORY
Beginning in October 2016, Plaintiff was wileyandrea@example.net. (Doc. 1,
¶19).
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Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 2 of 21
On December 14, 2016, a lesion or “skin tag” on Plaintiff’s right shin started
bleeding while Plaintiff was playing basketball. (Doc. 1 ¶ 20). Plaintiff sought
medical care at MCCF’s medical department. Id. Medical staff provided wound care
and discharged Plaintiff without further examination. Id.
On December 26, 2016, Plaintiff attempted to remove the lesion by himself,
using a piece of string. (Doc. 1 ¶ 21). Following this attempt, Plaintiff sought medical
care at MCCF’s medical department. Id.
On December 27, 2016, Defendant Kenneth Wloczewski examined the lesion
on Plaintiff’s leg. (Doc. 1, ¶ 22). During that examination, Defendant Wloczewski
noted that the lesion had been present for one year and that removal was scheduled
for the following week. Id.
On December 28, 2016, Plaintiff was examined at the MCCF Medical
Department for follow-up. (Doc. 1 ¶ 23). During the examination, the lesion was
“still intact” but appeared to be detaching from Plaintiff’s leg due to Plaintiff’s
attempt to remove it. Id. The unidentified nurse provided wound care. Id.
On December 29, 2016, Plaintiff was examined by another unidentified nurse
at the MCCF Medical Department. (Doc. 1, ¶ 24). During the examination, the lesion
was “still intact” but appeared to be detaching from Plaintiff’s leg due to Plaintiff’s
attempt to remove it. Id. The nurse provided wound care. Id.
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Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 3 of 21
Later the same evening, however, the lesion fell off. (Doc. 1 ¶ 25). When it
did, Plaintiff was examined by Defendant Grace Ramos, a nurse at the MCCF
Medical Department. Id. Defendant Ramos provided wound care to stop the
bleeding. Id. She also conferred with an unidentified “on-call provider” by telephone
to ask about preservation of the lesion that “fell off.” Id. There was no preservative
in the office. Id. Defendant Ramos was instructed to discard the lesion. Id.
On January 3, 2017, Defendant Wloczewski examined Plaintiff. (Doc. 1, ¶
26). Defendant Wloczewski noted that the “skin tag” had fallen off and was gone.
(Doc. 1, ¶ 26).
Eleven months later, on December 12, 2017, Plaintiff’s right leg began to
bleed in the same area while playing basketball. (Doc. 1, ¶ 27). He was examined by
unidentified staff members at the MCCF Medical Department. Id. During the
examination, medical staff observed the presence of a polypoid lesion, provided
wound care, and discharged Plaintiff without further examination, restriction, or
referral to the on-call provider or another specialist. (Doc. 1, ¶ 27).
Six months later, on June 7, 2018, Plaintiff was examined by Defendant
Paulina Foley (a physician’s assistant at MCCF) with complaints of redness and
irritation of the skin on his right leg. (Doc. 1, ¶ 28). Defendant Foley noted a rash in
the shape of a bullseye with a quarter-sized fleshly nodule in the center, and
performed a punch biopsy to remove a portion of the nodule for analysis. Id.
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Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 4 of 21
On June 15, 2018, eighteen months after the skin tag was brought to the
attention of the MCCF staff and seventeen months after the skin tag fell off, Plaintiff
was diagnosed with invasive malignant melanoma. (Doc. 1, ¶ 29).
On June 18, 2018, Dr. Akan Westheim, confirmed the diagnosis of malignant
melanoma. (Doc. 1, ¶ 30).
On September 6, 2018, Oncologist Mathew Miceli examined Plaintiff. (Doc.
1, ¶ 31). Dr. Miceli referred Plaintiff to surgical oncology for a wide resection of the
melanoma, with a sentinel lymph node biopsy. Id.
On September 14, 2018, Dermatologist Quy Pham examined Plaintiff. (Doc.
1, ¶ 32). Dr. Pham noted that the melanoma had grown and occasionally bled. Id.
Plaintiff was referred to skin oncology for treatment and staging. Id.
On September 27, 2018, Oncologist Colette R. Pameijer took a second biopsy
of the lesion. (Doc. 1 ¶ 33). Dr. Pameijer recommended Plaintiff undergo a wide
local excision and sentinel node biopsy. Id. Dr. Pameijer anticipated that Plaintiff
would need to undergo a skin graft a few weeks after the excision and estimated that
there was a 30% chance the cancer had spread to Plaintiff’s sentinel lymph node. Id.
On October 15, 2018, Plaintiff had a third biopsy at Hershey Medical Center.
(Doc. 1 ¶ 34). The biopsy showed T3b melanoma. Id. On November 21, 2018, a
positron emission tomography (“PET”) scan showed intense fluorodeoxyglucose
(“FDG”) activity (indicative of possible cancer) in Plaintiff’s right leg lesion,
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Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 5 of 21
moderately intense FDG activity in retropharyngeal lymph nodes, and low FDG
avidity in his spleen. Id.
On December 5, 2018, hematologist/oncologist Dr. Vineela Kasireddy
examined Plaintiff and referred to surgical oncologist Jeffrey Farma for wide
excision of the right leg melanoma. (Doc. 1, ¶ 35).
On January 25, 2019, six months after his first cancer diagnosis, Plaintiff had
the following surgical procedures: a radical resection of a right pretibial melanoma;
intraoperative lymphatic mapping; a sentinel lymph node biopsy of the right groin;
and a skin graft. (Doc. 1, ¶ 36). Dr. Farma did the resection, mapping, and biopsy.
Id. Dr. Neal Topham did the skin graft. Id. The surgical pathology report from this
procedure described the excised mass as a 13 mm tumor with a pT4b Stage
Classification. (Doc. 1, ¶ 37).
On February 25, 2019, Plaintiff was diagnosed with Stage IIIC melanoma.
(Doc. 1, ¶ 38). Plaintiff alleges that this diagnosis has a 69% survival rate at five
years. Id.
On June 2, 2020, Plaintiff filed a Complaint, against the following
Defendants:
(1) Monroe County (Where Plaintiff was incarcerated);
(2) PrimeCare Medical, Inc. (the company that staffed the Monroe County
Jail’s medical department);
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Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 6 of 21
(3) Kenneth Wloczewski, D. O. (a physician employed by PrimeCare, Inc.
who examined Plaintiff at the Jail);
(4) Paulina Foley, PA-C (a physician’s assistant employed by PrimeCare
Inc. who examined Plaintiff at the Jail); and
(5) Grace Ramos, LPN (an LPN employed by PrimeCare Inc., who
examined Plaintiff at the Jail).
(Doc. 1).1
Plaintiff alleges the following legal claims
Count I: Eighth and Fourteenth Amendment denial of medical care against
Defendants Wloczewski, Foley and Ramos.
Count II: Monell / Supervisory Liability Claims against Defendants
Monroe County and PrimeCare.
Count III: Negligence / Medical Malpractice claim against Defendants
Wloczewski, Foley, Ramos, and PrimeCare.
As relief, Plaintiff requests compensatory damages, punitive damages (against
only the PrimeCare Defendants), reasonable attorneys’ fees and costs, and such other
equitable relief as the Court deems appropriate and just. (Doc. 1, ¶ 53).
On June 22, 2020, the PrimeCare Defendants filed a Motion to Dismiss. (Doc.
11). Along with their Motion, the PrimeCare Defendants filed a Brief in Support.
(Doc. 12). On August 17, 2020, Plaintiff filed a Brief in Opposition. (Doc. 32). On
August 27, 2020, the PrimeCare Defendants filed a Reply. (Doc. 34).
1
Plaintiff also names 10 John Doe Defendants.
Page 6 of 21
Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 7 of 21
III. LEGAL STANDARD
A motion to dismiss tests the legal sufficiency of a complaint. It is proper for
the court to dismiss a complaint in accordance with Rule 12(b)(6) of the Federal
Rules of Civil Procedure only if the complaint fails to state a claim upon which relief
can be granted. Fed. R. Civ. P. 12(b)(6). When reviewing a motion to dismiss, the
court “must accept all factual allegations in the complaint as true, construe the
complaint in the light favorable to the plaintiff, and ultimately determine whether
plaintiff may be entitled to relief under any reasonable reading of the complaint.”
Mayer v. Belichick, 605 F.3d 223, 229 (3d Cir. 2010). In reviewing a motion to
dismiss, a court must “consider only the complaint, exhibits attached to the
complaint, matters of public record, as well as undisputedly authentic documents if
the [plaintiff’s] claims are based upon these documents.” Id. at 230.
Following the rule announced in Ashcroft v. Iqbal, “a pleading that offers
labels and conclusions or a formulaic recitation of the elements of a cause of action
will not do.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Rather, a complaint must
recite factual allegations enough to raise the plaintiff's claimed right to relief beyond
the level of mere speculation. Id. To determine the sufficiency of a complaint under
the pleading regime established by the Supreme Court, the court must engage in a
three-step analysis:
First, the court must take note of the elements a plaintiff must plead to
state a claim. Second, the court should identify allegations that, because
Page 7 of 21
Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 8 of 21
they are no more than conclusions, are not entitled to the assumption of
truth. Finally, where there are well-pleaded factual allegations, a court
should assume their veracity and then determine whether they plausibly
give rise to an entitlement for relief.
Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010) (quoting Iqbal, 556
U.S. at 675, 679). “In other words, a complaint must do more than allege the
plaintiff’s entitlement to relief” and instead must ‘show’ such an entitlement with its
facts.” Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009).
IV. ANALYSIS
A. WHETHER PLAINTIFF ADEQUATELY PLEADED HIS EIGHTH/FOURTEENTH
AMENDMENT DENIAL OF MEDICAL CARE CLAIM (COUNT I)
In Count I of the Complaint, Plaintiff alleges:
Defendants Wloczewski, Foley, and Ramos were deliberately
indifferent to Mr. Ravert’s serious medical needs and thereby violated
Mr. Ravert’s right to be free from cruel and unusual punishment under
the Eighth Amendment to the United States Constitution and/or his
right to due process of law under the Fourteenth Amendment to the
United States Constitution.
(Doc. 1 ¶ 44).
Upon review of Plaintiff’s Complaint, there appear to be three events that give
rise to his claims against the individual medical Defendants. The first is on the night
of December 29, 2016, when the skin tag/lesion on Plaintiff’s leg, scheduled to be
surgically removed, fell off on its own and was not preserved for biopsy or testing.
The second is on January 3, 2017, when Defendant Wloczewski examined Plaintiff
after the lesion fell off and (I infer) did not order any testing or monitoring of the
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Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 9 of 21
area of the skin tag/lesion. The third is the period between the June 15, 2018 cancer
diagnosis and January 25, 2019, when the cancerous mass was excised.
At the outset, I note that it is not clear whether Plaintiff was convicted, or a
pretrial detainee, at the time of the alleged denial of adequate medical care. Plaintiff
has pleaded his claims under both the Eighth and Fourteenth Amendments.
The Eighth Amendment protects prisoners from the infliction of cruel and
unusual punishment. U.S. Const. amend. VIII. To prevail on any Eighth Amendment
claim, an inmate must show: (1) a deprivation that is objectively, “sufficiently
serious;” and (2) “a sufficiently culpable state of mind” of the defendant official. See
Farmer v. Brennan, 511 U.S. 825, 834 (1994). “[T]he Fourteenth Amendment
affords pretrial detainees protections at least as great as the Eighth Amendment
protections available to a convicted prisoner.” Natale v. Camden Cty. Correctional
Facility, 318 F.3d 575, 581 (3d Cir. 2003) (internal quotation omitted). Whether
pleaded under the Eighth or Fourteenth Amendment, the same standard may be
applied. Id.
To prevail on any Eighth or Fourteenth Amendment claim for the denial of
adequate medical care, an inmate must allege: (1) deliberate indifference on the part
of the prison officials; and (2) a serious medical need. Monmouth County
Correctional Institutional Inmates v. Lanzaro, 834 F.2d 326, 346 (3d Cir. 1987). For
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Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 10 of 21
the purposes of resolving this Motion to Dismiss, the parties do not appear to dispute
that Plaintiff’s diagnosis of invasive malignant melanoma is a serious medical need.
The PrimeCare Defendants argue:
In the present matter, Plaintiff was evaluated on multiple occasions for
his condition. Ultimately, he was diagnosed with cancer. However, a
delay in diagnosis does not equate to a constitutional violation where
his complaints were addressed and he received treatment. Plaintiff is
seeking this Court to second guess the treatment decisions of the
Medical Defendants after the outcome was determined. It is not the
function of this Court to second guess treatment decisions of the
medical providers. See Pearson and Bednar, supra. Thus, it is
respectfully submitted that Plaintiff’s federal cause of action as to the
PrimeCare Defendants is nothing more than a medical negligence case
and should be dismissed with prejudice.
(Doc. 12, p. 12).
In response, Plaintiff argues that, as a matter of law, providing some medical
care does not preclude a finding of deliberate indifference.
The Supreme Court has explained that the term “deliberate indifference” lies
“somewhere between the poles of negligence at one end and purpose or knowledge
at the other.” Farmer, 511 U.S. at 837. It explained that:
a prison official cannot be found liable under the Eighth Amendment
for denying an inmate humane conditions of confinement unless the
official knows of and disregards an excessive risk to inmate health or
safety; that is, the official must both be aware of the facts from which
the inference could be drawn that a substantial risk of serious harm
exists, and he must also draw the inference.
Id.
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Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 11 of 21
The line of demarcation where negligence ends, and deliberate indifference
begins, is sometimes a subtle one. Not all failures to provide care demonstrate the
state of mind required for deliberate indifference. For example, there is no
constitutional violation when prison medical staff, through the exercise of
professional judgment, negligently misdiagnoses or treats a condition. Estelle v.
Gamble, 429 U.S. 97, 106 (1976). Similarly, mere disagreement between prison
medical staff and an inmate about the propriety, adequacy, or necessity of a
particular course of treatment over another often does not rise to the level of a
constitutional violation. Monmouth, 834 F.2d at 346 (citing Bowering v. Godwin,
551 F.2d 44, 48 (4th Cir. 1977) and Massey v. Hutto, 545 F.2d 45, 26 (8th Cir.
1976)). The distinction between negligence and deliberate indifference is that, for
deliberate indifference, a defendant acts with reckless disregard to a known harm.
Crawford v. Corizon Health, Inc., No. 1:17-CV-00113-BR, 2018 WL 9965506 at *3
(W.D. Pa. Jan. 2, 2018).
As noted in Shultz v. Allegheny Cty.:
Our Court of Appeals has identified several other scenarios that satisfy
Estelle, such as “[w]here prison authorities deny reasonable requests
for medical treatment . . . and such denial exposes the inmate to undue
suffering or the threat of tangible residual injury,” Monmouth, 834 F.2d
at 346 (internal quotation omitted), or “where ‘knowledge of the need
for medical care [is accompanied by the] . . . intentional refusal to
provide that care,’” Thomas v. Dragovich, 142 F. App’x 33, 36-37 (3d
Cir. 2005) (quoting Monmouth, 834 F.2d at 346). Similarly, if
“deliberate indifference caused an easier and less efficacious treatment”
to be provided, a defendant will have violated the plaintiff’s Eighth
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Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 12 of 21
Amendment rights by failing to provide adequate medical care. West v.
Keve, 571 F.2d 158, 162 (3d Cir. 1978) (citing and quoting Williams v.
Vincent, 508 F.2d 541, 544 (2d Cir. 1974)); see also Estelle, 429 U.S.
at 104.
835 F.Supp.2d 14, 22 (W.D. Pa. 2011).
Bearing these principles in mind, I will assess whether the facts alleged by
Plaintiff in his Complaint are enough to sustain an Eighth or Fourteenth Amendment
claim for the failure to provide adequate medical care against Defendants
Wloczewski, Foley, and Ramos.
1. Whether Plaintiff Pleaded a Plausible Claim Against Defendant
Wloczewski
In support of his position that he pleaded a plausible Eighth Amendment claim
against Defendant Wloczewski, Plaintiff argues:
Dr. Wloczewski. At MCCF, Dr. Wloczewski was the physician
ultimately responsible for Mr. Ravert’s care. Compl. ¶¶ 8, 22. When
Mr. Ravert presented to Dr. Wloczewski for evaluation of his skin
lesion on December 27, 2016, Dr. Wloczewski examined him and noted
that Mr. Ravert had the lesion for over a year, started him on antibiotics,
and scheduled removal of the lesion for the following week. Id. ¶ 22.
Dr. Wloczewski, however, completely failed to perform any pathologic
analysis or testing to confirm the staff’s assessment that the lesion was
in fact just a benign “skin tag.” Id. ¶ 20.
When Mr. Ravert followed up with Dr. Wloczewski, on January 3,
2017, Dr. Wloczewski noted only that what he described as the “skin
tag” had fallen off and was gone. Id. ¶ 26. Rather than preserving it for
testing, Dr. Wloczewski inexplicably and intentionally directed that the
lesion specimen simply be discarded after it was removed. Id. ¶ 25-26.
Moreover, at no point did Dr. Wloczewski recognize Mr. Ravert’s risk
for melanoma and refer him to the appropriate specialist for treatment.
Id. ¶ 22, 26.
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Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 13 of 21
This care was “grossly inadequate,” Terrance, 286 F.3d at 843, and
characterized by an approach that was “easier and less efficacious” than
what was manifestly necessary under the circumstances. Monmouth
County, 834 wileyandrea@example.net. In addition to the failure to order diagnostic
testing clearly called for under the circumstances, see McElligott, 182
F.3d at 1257-58 (concluding that failure to order diagnostic testing
supported finding of deliberate indifference); Shultz, 835 F. Supp. 2d at
22-24 (same); D’Agostino, 2012 WL 425071, at *3 (same), Dr.
Wloczewski’s disposal of the specimen from Mr. Ravert’s leg
prevented any chance at a timely diagnosis of his cancer.
(Doc. 32, pp. 17-18).
As an initial matter, in the Complaint, Plaintiff alleges that Defendant Ramos
conferred with the “on-call provider” for instruction. (Doc. 1, ¶ 25). Nothing in the
Complaint identifies Defendant Wloczewski as the “on-call provider.” Thus,
contrary to Plaintiff’s argument, there is no allegation in the Complaint that
Defendant Wloczewski “directed that the lesion specimen simply be discarded.”
(Doc. 32, p. 17).
According to the Complaint, the conduct that Plaintiff alleges amounts to a
violation of his Eighth Amendment rights for the denial of adequate medical care,
on the part of Defendant Wloczewski, is failing to do any sort of biopsy or testing
during the January 3, 2017 examination after the lesion fell off and failing to monitor
Plaintiff’s condition after the lesion fell off. Plaintiff alleges that he was not
diagnosed with malignant melanoma until it reached stage IV. I reasonably infer
from these allegations that Plaintiff’s position is that, had a biopsy been taken earlier,
the cancer might have been diagnosed at an earlier stage, which in turn would have
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Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 14 of 21
required less extensive and invasive treatment. Plaintiff did not allege whether he
requested a biopsy at that time. Plaintiff did not allege why Dr. Wloczewski did not
perform a biopsy after the skin lesion fell off.
Considering the seriousness of Plaintiff’s diagnosis (which he alleges carries
a 69% survival rate at five years), and when all facts and reasonable inferences are
construed in Plaintiff’s favor, there is enough in the Complaint to nudge Plaintiff’s
claim across the threshold of plausibility, but only barely. In other words, at this
early stage of litigation, there is a “reasonably founded hope that the [discovery]
process will reveal relevant evidence’ to support the claim.” Shultz, 835 F.Supp.2d
at 22 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563 n. 8 (2007)).
Accordingly, Defendants’ request to dismiss Plaintiff’s denial of adequate
medical care claim against Defendant Wloczewski is denied.
2. Whether Plaintiff Pleaded a Plausible Claim Against Defendant
Foley
In support of his position that he pleaded a plausible Eighth Amendment claim
against Defendant Foley, Plaintiff argues:
PA-C Foley. Nearly one year later after his visit with Dr. Wloczewski,
Mr. Ravert presented to MCCF’s medical department after a basketball
hit his right leg lesion and caused it to bleed. Id. ¶ 27. Medical staff
again noted Mr. Ravert’s polypoid lesion, provided wound care, and
discharged Mr. Ravert without further examination, restriction, or
referral to the on-call provider or another specialist. Id.
On June 7, 2018, Mr. Ravert presented to PA-C Foley to address
reddening and irritation of the skin on his right leg. Id. ¶ 28. PA-C Foley
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Case 4:20-cv-00889-WIA Document 38 Filed 03/17/21 Page 15 of 21
noted that Mr. Ravert developed the rash over the last week, that it was
in the shape of a bullseye, and that a quarter-sized fleshly nodule was
in the center of that bullseye. Id. PA-C Foley then performed a punch
biopsy to remove a portion of the nodule for laboratory analysis. Id.
And, on June 15, 2018, PA-C Foley informed Mr. Ravert of his
diagnosis of invasive malignant melanoma. Id. ¶ 29.
By the time PA-Foley finally acted to send Mr. Ravert out for the
diagnostic evaluation and treatment that he had needed for the past
eighteen months, it was too late. See Shultz, 835 F. Supp. 2d at 23
(rejecting argument that defendants’ transfer of decedent to hospital
precluded finding of deliberate indifference as decedent “was taken to
a medical facility and testing for diagnosis of her condition was
conducted only after she had deteriorated to the point of having to be
admitted to the Intensive Care Unit” and “[a]t that juncture her
condition already had progressed to the point where it was fatal”).
Indeed, in the interim, Mr. Ravert’s melanoma progressed to pathologic
Stage IIIC, which carries a melanoma-specific prognosis of 5-year 69%
survival, 10-year 60% survival. Compl. ¶ 3.
(Doc. 32, pp. 18-19).
As an initial matter, in the Complaint Plaintiff alleges that:
28. On June 7, 2018, Mr. Ravert presented to Defendant Physician
Assistant Foley to address reddening and irritation of the skin on
his right leg. Physician Assistant Foley noted that Mr. Ravert
developed the rash over the last week, that it was in the shape of
a bullseye, and that a quarter-sized fleshly nodule was in the
center of that bullseye. Physician Assistant Foley then performed
a punch biopsy to remove a portion of the nodule for laboratory
analysis.
29. On June 15, 2018 Physician Assistant Foley informed Mr. Ravert
of his diagnosis of invasive malignant melanoma.
(Doc. 1, ¶¶ 28, 29). Thus, unlike the argument in the brief, the Complaint suggests
that Defendant Foley examined and performed a punch biopsy on June 7, 2018.
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Nothing in the Complaint suggests that Defendant Foley examined Plaintiff’s skin
lesion at any time before June 7, 2018.
Three days after his diagnosis, Plaintiff was seen by a dermatologist. Plaintiff
was seen by an oncologist within three months of his first examination with
Defendant Foley. Plaintiff was examined by a second dermatologist, and two other
surgical oncologists before the melanoma was removed in January 2019. Plaintiff
does allege that one dermatologist—Dr. Quy Pham, M.D.—“noted that the
melanoma had grown and occasionally bled,” during the six-month period between
Defendant Foley’s initial diagnosis and the surgery. (Doc. 1, ¶ 32).
Plaintiff argues that his claim against Defendant Foley should not be
dismissed because the delay between Defendant Foley’s diagnoses and the surgery
amounts to deliberate indifference. Plaintiff is correct that courts have found
deliberate indifference in cases where care was delayed for non-medical reasons. See
Shultz, 835 F.Supp.2d at 21 (“if necessary medical treatment [i]s . . . delayed for
non-medical reasons, a case of deliberate indifference has been made out.”). In the
Complaint, Plaintiff alleges that he was diagnosed with invasive skin cancer. He also
alleges that he waited six months before that cancer was removed. I reasonably infer
that it is Plaintiff’s position that there was an immediate need for surgery and that
he attributes the six month delay to a non-medical reason. He also alleges that his
cancer grew during the six months he was waiting for surgery. Like his claim against
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Defendant Wloczewski, this claim, as pleaded, just barely crosses the threshold of
plausibility. However, because it has crossed that threshold it should be permitted to
proceed.
3. Whether Plaintiff Pleaded a Plausible Claim Against Defendant
Ramos
In support of his position that he pleaded a plausible Eighth Amendment claim
against Defendant Ramos, Plaintiff argues:
Nurse Ramos. Between his visits with Dr. Wloczewski on December
27 and January 3, Mr. Ravert saw Nurse Ramos at 9:43pm on
December 29 after presenting to the medical department because the
lesion had fallen off and caused his right leg to bleed. Id. ¶ 25. Nurse
Ramos provided wound care and, also, conferred with the on-call
provider for instruction on how to preserve the lesion specimen for lab
analysis. Id. Nurse Ramos advised that there was no specimen
preservative in the office and, thereafter, the provider directed her to
simply discard the specimen, which Nurse Ramos did. Id. As explained
above, this imprudent decision to throw away the specimen—without
any testing or analysis whatsoever—caused a significant delay in
detection of Mr. Ravert’s cancer and a material worsening of his
prognosis.
(Doc. 32, p. 19).
In reply, the PrimeCare Defendants argue:
Plaintiff’s chief criticism is that the skin specimen was not sent for
pathology when it fell off Plaintiff’s leg. It was Dr. Wloczewski’s
judgment that pathology was not necessary for a skin condition that is
generally, if not always, non-cancerous, and this decision was
consistent with a diagnosis of a skin tag. Moreover, this treatment
decision was made by a physician. Thus, Nurse Ramos cannot be found
to be deliberately indifferent when she is following the instructions of
a physician. She would be acting outside the scope of her license to
ignore a treatment decision of a physician.
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(Doc. 34, p. 3).
The claim against Defendant Ramos is based on the act of disposing of the
lesion after it fell off. A prison official acts with deliberate indifference to an
inmate’s serious medical need when she “knows of and disregards an excessive risk
to inmate health or safety; the official must both be aware of facts from which the
inference could be drawn that a substantial risk of serious harm exists, and [s]he
must also draw the inference.” Farmer, 511 U.S. at 837. In the Complaint, Plaintiff
alleges that, when the skin tag fell off, Defendant Ramos called the on-call provider
“for instruction on how to preserve the lesion specimen for lab analysis.” (Doc. 1, ¶
25). Based on this allegation, it can be reasonably inferred that Defendant Foley
knew that the specimen should be tested, and that failing to preserve the specimen
could result in harm. Thus, reviewing the Complaint and all reasonable inferences
that can be made, I find that Plaintiff has pleaded a plausible claim against Defendant
Ramos.
Furthermore, I find that the PrimeCare Defendants’ argument that Defendant
Ramos should not be liable for following order from the unidentified “on-call
provider” would be better addressed on summary judgment. The PrimeCare
Defendants have not cited to any legal authority to support their position that a
subordinate is not liable under § 1983 where the subordinate is following the
direction of a supervisor. Furthermore, the issues concerning the scope of Defendant
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Ramos’ license, and the identity of the “on-call provider” would require
consideration of documents outside the Complaint and its attachments.
B. PLAINTIFF’S MONELL CLAIM AGAINST PRIMECARE (COUNT II)
In Count Two of his Complaint, Plaintiff alleges:
The violations of Mr. Ravert’s constitutional rights under the Eighth
and /or Fourteenth Amendments to the United States Constitution,
Plaintiff’s damages, and the conduct of the individual defendants were
directly and proximately caused by the actions and/or inactions of
Defendants Monroe County and PrimeCare, which have, with
deliberate indifference, failed to establish policies, and procedures
and/or have failed to properly train, supervise and discipline their
employees regarding the provision of adequate medical care to
prisoners with serious medical needs.
(Doc. 1, ¶ 46).
A private corporation contracted by a prison to provide healthcare for inmates
cannot be held liable under 42 U.S.C. § 1983 on a respondeat superior theory. Natale
v. Camden Cty. Corr. Facility, 318 F.3d 575, 583 (3d Cir. 2003). Rather, pursuant
to Monell and Natale, a private corporation like PrimeCare, contracted by a prison
to provide healthcare can be held liable for constitutional violations only if it has a
custom or policy exhibiting deliberate indifference to a prisoner’s serious medical
needs. See Monell v. New York City Dept. of Social Servs., 436 U.S. 658 (1978)
(subjecting municipalities to liability for policies or customs that cause constitutional
deprivations); Natale, 318 F.3d at 584 (applying Monell to a private company
providing medical services to inmates). To prevail on a § 1983 claim against
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Defendant PrimeCare, Plaintiff must allege facts in the Amended Complaint that
show “there was a relevant [PrimeCare] policy or custom, and that the policy caused
the constitutional violation” for which he seeks relief. See Natale, 318 F.3d at 583-
84.
In support of his Monell claim against Defendant PrimeCare, Plaintiff alleges
that: (1) Defendant PrimeCare holds a contract to provide all medical services to
inmates at MCCF, (Doc. 1, ¶ 7); and (2) Defendant PrimeCare employs Defendants
Wloczewski, Foley, and Ramos (Doc. 1, ¶¶ 8-10, 14).
In their Brief, the PrimeCare Defendants argue that Plaintiff’s Monell claim
against Defendant PrimeCare should be dismissed because “Plaintiff cannot
demonstrate an underlying constitutional violation.” (Doc. 12, p. 13). As explained
in Sections IV. A. 1, 2, and 3, of this opinion, Plaintiff has pleaded a plausible
constitutional violation as to Defendants Wloczewski, Foley, and Ramos. The
allegations in the Complaint are vague, but legally sufficient at this stage. These
allegations, however, may not be sufficient at summary judgment without evidence
of a specific policy, custom or failure to train or supervise. Accordingly, I am not
persuaded that the Monell claim against Defendant PrimeCare should be dismissed
at this stage.
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V. CONCLUSION
Accordingly, based on the foregoing:
1. Defendants’ Motion to Dismiss (Doc. 11) is DENIED.
2. An appropriate Order will issue.
Date: March 17, 2021 BY THE COURT
s/William I. Arbuckle
William I. Arbuckle
U.S. Magistrate Judge
Page 21 of 21
|
94 B.R. 594 (1988)
In re HOLIDAY INTERVAL, INC., Debtor.
Bankruptcy No. 87-00668-C.
United States Bankruptcy Court, W.D. Missouri, C.D.
December 21, 1988.
*595 D. James Mariea, Fulton, Mo., for Holiday Shores Property Owners Ass'n.
John Sutherland, St. Louis, Mo., for Mercantile Bank.
James E. Hawk, Jr., St. Louis, Mo., for Colonial Bank.
Christy Barton, Jefferson City, Mo., for trustee.
Jack E. Brown, Columbia, Mo., trustee.
MEMORANDUM OPINION
FRANK W. KOGER, Bankruptcy Judge.
FACTS
Mercantile Bank, National Association (Mercantile), has made a motion for relief from the stay on certain writings pledged by Holiday Intervals, Inc., the Debtor, as collateral for a loan. The threshold issue addressed in this opinion is whether such writings are instruments, and thus perfected by possession, or whether such writings are contract rights, properly perfected by filing. Mercantile has had possession of the writings at all times relevant herein, however, Mercantile acknowledges that it has made no filing with the Secretary of State. Holiday Shores Property Owners Association (HSPOA) has intervened on the debtor's behalf.
Mercantile holds two types of writings. One type is a two page document, labeled at the top of the first page "contract", which appears to be an installment sale contract through the first page and top half of the second page, but at the bottom of the second page is a portion designated "promissory note" which purports to state an unconditional promise to pay. The second type of writing is an installment sale contract of two pages without the "promissory note" language at the end.
ANALYSIS
A. Does the Uniform Commercial Code (UCC) Apply?
The scope of Article Nine is defined in Mo.Rev.Stat. § 400.9-102 as "any transaction . . . which is intended to create a security interest in personal property or fixtures including goods, documents, instruments, general intangibles, chattel paper, accounts or contract rights". Although the purchaser is to receive an interest in real estate, the writing itself is personal property. Comment 4 following 9-102 illustrates the distinction between an interest in real estate and a writing pertaining to that interest which is given as security. The illustration notes that the creation and original perfection of a note and mortgage are outside of the scope of Article Nine and are recorded at the Recorder of Deeds. However, when the mortgagee pledges his note and mortgage to secure another obligation, Article Nine is applicable to the security interest created in the pledged transaction. In accord, White and Summers, Uniform Commercial Code (Third Edition) 269-70 (1988); Matter of *596 Equitable Development Corp., 617 F.2d 1152 (5th Cir.1980); Nelson and Whitman, Real Estate Finance Law (2d Ed. 133-36 (1985).
B. Perfection
Under Mo.Rev.Stat. § 400.9-304 (1965)[1], a secured party may perfect a security interest by taking possession of the collateral if such collateral is an "instrument" as defined in Mo.Rev.Stat. § 400.9-105(1)(g). Mo.Rev.Stat. § 400.9-305 provides that a security interest in goods, instruments, negotiable documents, or chattel paper may be perfected by the secured party taking possession of the collateral. Perfection of a "contract right" on the other hand is properly perfected by filing.
Mercantile characterizes the writings as "instruments".
C. Instrument
Section 400.9-105(1)(g) defines "instrument" as (1) a negotiable instrument (defined in § 400.3-104) or (2) a security (defined in § 400.8-102 or (3) any other writing which evidences a right to the payment of money and is not itself a security agreement or lease and is of a type which is in the ordinary course of business transferred by delivery with any necessary endorsement or assignment. (§ 400.9-105(1)(g)).
(1. Negotiable Instrument
The requirements an instrument must meet to be held a negotiable instrument are set out in Mo.Rev.Stat. § 400.3-104(1). Such instruments must:
1. Be signed by the makers;
2. Be payable at a definite time;
3. Be payable to order; and
4. Contain an unconditional promise from the maker to pay a sum certain in money, and no other promise by the maker except as authorized by the Uniform Commercial Code (UCC).
It is not disputed that each writing is clearly signed by the purchasers of the interval estate, or that such purchasers are the makers of the notes since they have covenanted therein to pay a specific sum in exchange for their interval estate. Each document reflects the specific price paid, which price is a sum certain in money, and states clearly that such price shall be paid to the Seller at particular and definite times as delineated in each writing.
The question arises when considering whether the writings at issue are subject to conditions not authorized by the UCC. The terms and omissions not affecting negotiability are set forth in Mo.Rev.Stat. § 400.2-112, and the material which may be contained in a negotiable instrument that will not make it unconditional is set out in Mo.Rev.Stat. § 400.3-105. Mercantile asserts that there are no conditions set out in the writings under which a purchaser may claim relief at law from payment of the amount owed under the writings. The bank relies on Mo.Rev.Stat. § 400.3-105 which expressly states that "a promise or order otherwise unconditional is not made conditional by the fact that the instrument (a) is subject to implied or constructive conditions; or (b) states its consideration, whether performed or promised, or the transaction which gave rise to the instrument, or that the promises or order is made or the instrument matures in accordance with or `as per' such transaction".
Mercantile argues that the only portion of the writings which could be construed as imposing any condition on the requirement that the purchasers pay under the contract are those that state that (1) the Seller must build the residences within two years of the date of execution of the contract if construction is not already completed, and (2) that such residents shall have appropriate "furniture, appliances, equipment and all accent furnishings of equal quality to those shown or used in the models". Mercantile asserts that such provisions are merely explanations of the consideration which the Seller extends in return for such payment, and that they at most are constructive conditions, *597 not rendering the writings non-negotiable. In support, Mercantile cites Carter v. South Texas Lumber Co., 422 S.W.2d 951 (Tex.Civ.App.1967), in which a note was not rendered non-negotiable by the fact that it provided that it was subject to improvements being erected on the described lots. Mercantile cites Goetz v. Selsor, 628 S.W.2d 404, 405 (Mo.App.1982), for the proposition that transfers of notes in conjunction with an underlying deed or contract does not destroy negotiability.
HSPOA argues and this Court agrees that the writings are not negotiable instruments because the writings in question contain a conditional promise or order to pay money in that the seller has obligations to perform in the future. The writings also contain a power given by the maker not authorized by the UCC in that the seller may execute an agreement with a time sharing program for a reciprocal exchange of member owners of "Vacation Horizons International"; and, the seller may modify and amend the declaration and bylaws concerning insurance, reconstruction, and repair of the property; also the seller is empowered to make changes with regard to the material and design in the buildings and improvements all as the seller deems advisable.
In Illinois State Bank v. Yates, 678 S.W.2d 819 (Mo.App.1984), a note securing a second deed of trust incorporated the makers right to apply payments to keep current an obligation under a first deed of trust. The condition rendered the note nonnegotiable. In Jefferson v. Mitchell Select Furniture Co., 56 Ala.App. 259, 321 So. 2d 216 (1975), a contract contained all of the requisite terms for negotiability, but a reading of the entire document showed it to be a retail installment contract and security agreement with a reservation of title in the vendor. These additional terms made the writing not negotiable. HSPOA argues this case is similar to Jefferson because Holiday Interval retained title to the time intervals until all payments were made by the purchaser although the purchaser could use the interval during the contract term.[2]
Promissory Note Language:
Some of the writings contain a section labeled "Promissory Note". Mercantile asserts that such language reinforces the fact that the writings are intended to be "negotiable instruments", because it indicates clearly to the purchasers that the writings are in the form of and carry the auspices of a promissory note. In the alternative, Mercantile argues that these writings can be severed and the portion of the writing labeled "Promissory Note" can be independently enforced. Missouri courts have held that a promissory note itself is independently enforceable from the document of which it is part. Illinois State Bank of Quincy v. Pedersen, 350 S.W.2d 102 (Mo.App.1961), following Morgan v. Mulcahey, 298 S.W. 242 (Mo.App. 1927). These Missouri decisions held that separate instruments can be treated separately even though they are written on the same piece of paper. Mercantile asserts that even if the holder of such writings is on notice of certain other matters relating to the generation of such "Promissory Notes" such knowledge does not effect negotiability although it may effect Holder in Due Course status. Mo.Rev.Stat. §§ 400.3-106; 400.3-302. The bank asserts that the "Promissory Notes", by themselves, satisfy all of the requirements of a negotiable instrument.
Pedersen is a pre-code case and it does not purport to interpret the UCC. Furthermore, the clause there being construed in that case gave the owner of the instrument a right to accelerate maturity and take possession of the collateral upon certain conditions. Such terms and omissions do not affect negotiability under the UCC. Mo.Rev.Stat. § 400.3-112(1)(b). Further, Comment 2 following Mo.Stat.Ann. § 400.3-104 (Vernon's) which states that a writing cannot be made a negotiable instrument by contract or by conduct. ". . . a contract to build a house or to employ a workman, or equally a security agreement *598 does not become a negotiable instrument by the mere insertion of a clause agreeing that it shall be one". If the parties cannot make a writing a negotiable instrument by saying it shall be negotiable in the writing, then adding promissory note type language to an executory contract cannot render such contract negotiable. In Discount Purchasing Co. v. Porch, 12 UCC Reporting Service 600 (1973), a retail installment contract had language at the bottom purporting to state an unconditional promise to pay. The contract on the whole, however, was an installment payment contract. The court in that case stated that "the fact that a composite form is employed in which the buyer's promissory note is an integrated part of the sales agreement does not make the agreement negotiable". "Just as you cannot make a `silk purse from a sow's ear', you cannot make a negotiable instrument from a contract for sale". Id.
The writings at issue are labelled at the top "contract" and include mutual executory promises and powers are given to the vendor. Although promissory note type language appears on some of the writing labeled notes, this is inconsistent with the rest of the writing because it purports to state an unconditional obligation to pay money while the rest of the writing contains mutual obligations to be performed in the future, i.e., the purchaser is to make installment payments over a period of time and the seller is to deliver a deed in the future. The purchaser has the use of real property during the term of the contract, the seller is to escrow seventy-five percent of payments if a residence is not yet built, and other future obligations. This contradiction renders the writing ambiguous and ambiguity must be resolved against the author of the writing, Bradley v. Buffington, 500 S.W.2d 314, 318 (Mo.App.1973), or in this case, the assignee of the author.
Therefore, due to the conditions contained in the writings, this Court finds that they do not fall within the definition of "negotiable instrument" even with the additional promissory language attached.
(2. "Instruments" Under Article Nine
The definition of "instrument" in Article Nine includes "any . . . writing which evidences a right to the payment of money and is not itself a security agreement or lease and is of a type which is in the ordinary course of business transferred by delivery with any necessary endorsement or assignment". Mo.Rev.Stat. § 400.9-105(1)(g).
HSPOA asserts that contracts such as the writings in question are not ordinarily transferred in the course of business because the assignees cannot perform the obligations under the contract, and that the writings are not the type of collateral intended to be covered by Mo.Rev.Stat. § 400.9-105(1)(g). HSPOA also emphasizes the fact that the purchasers may not assign their interest in the writings without first obtaining consent to such assignment from the Seller.
Land installment sale contracts are not the type of writings which were intended to be included in this section of the Code. This section was meant to be a catchall section covering types of writings which were transferred in the ordinary course of business, but which were not negotiable instruments. Examples of the types of instruments intended to be covered by this section are found in case law. In In re Coral Petroleum, Inc., 50 B.R. 830 (Bkrtcy.S.D.Tex.1985), the writing was a promissory note which, by its terms, was "not negotiable" but which could be pledged as security, was the type of writing intended to be covered by this provision. Variable rate notes are another type of writing intended to be included in this provision, because although they are not negotiable instruments, Centerre Bank v. Campbell, 744 S.W.2d 490, 494 (Mo.App. 1988), such notes are frequently transferred by endorsement in the secondary mortgage market and would, therefore, qualify as an instrument under the third criterion of Mo.Rev.Stat. § 400.9-105(1)(g).
The court in In re Freeborn, 94 Wash.2d 336, 617 P.2d 424 (1980) held that the vendor's lender must file a financing statement to have a perfected security interest *599 in land installment contract payments and that since only a real estate recording had occurred, the security interest in Freeborn was deemed unperfected. The court stated, "the method of perfection for notes, which is the transfer of possession to the secured party, is probably inapplicable to installment contracts, since they are evidently not `instruments' as the UCC employs the term. Hence, an installment contract is correctly understood to be a `general intangible' in the Code's parlance, and a security interest in it must be perfected by the filing of a financing statement". This reasoning is also followed in the case of In re S.O.A.W. Enterprises, Inc., 32 B.R. 279 (Bkrtcy.W.D.Tex.1983). In this case, a developer entered into a participation agreement with the bank wherein the bank advanced money and took "agreements for deed". The court rejected the bank's argument that the assignment of the agreements for deed were an outright conveyance entitling the bank to possession of the proceeds under § 541(d). The court characterized the transaction as a loan. The court then characterized the right to receive payments from the agreements for deed as "general intangibles". The court stated that they could not be characterized as "instruments" because the agreements for deed created no right on the part of SOAW to unconditionally demand the payment of money. The court went on to say that the agreements for deed, like the writings in question before this court, cannot be instruments because an instrument may not contain a security agreement and the agreements for deed specifically state that the vendor seller is entitled to retain both the money paid and the real estate in the event of default. The court further noted that an agreement for deed may be assigned by endorsement but . . .
"As a matter of law, the court holds that the essential difference between the agreement for deed and an ordinary instrument is that an `instrument' is not usually considered an executory contract. Under an `instrument', one party has wholly performed the lender. The other party the obligee or debtor, is thereafter obligated to perform in some manner in order to repay the value represented by the instrument, which value he already received. With an agreement for deed, the contract remains wholly executory".
Treatises on the Uniform Commercial Code agree with the reasoning in the S.O.A.W. case above. White and Summers, Uniform Commercial Code (Third Ed.) 274 (1988), states that
"[t]he courts generally agree that the seller's interest under a land sale contract is a general intangible subject to Article Nine. Security interests in general intangibles may be perfected by filing a financing statement, but not by possession of the contract".[3]
In In re Freeborn, 94 Wash.2d 336, 617 P.2d 424 (1980), the debtor transferred a document which assigned the debtor's rights to receive payments on the underlying real estate contract. Id., 617 gonzaleznicholas@example.net. The deeds were not assigned or transferred. Id. Therefore, the secured party held only a document of assignment enforceable only against the debtor, which granted to the secured party only the debtor's rights to receive payments. Id. Such rights, absent the holder's possessing the instrument manifesting such rights, are "contract rights" under the UCC, and the filing is required to perfect. Filing in this case provides the only notice to subsequent potential creditors of the existence of the senior lien.
(3. Any other writing
The writings in this case contain mutual executory obligations on the part of the seller and purchaser. For example, the seller agrees that the buyer may occupy the real estate during his time interval during the term of the contract; the buyer agrees to make installment payments and to forfeit payments made in the event of default; the seller agrees to execute a general *600 warranty deed to buyer, this agreement conditioned on buyer's performance; buyer consents that seller may modify and amend the declaration and bylaws; seller agrees to complete the building within two years and to escrow seventy-five percent of the payments to complete construction. In short, the writing is a bilateral executory contract requiring future performances by both parties.
An instrument evidences an unconditional right to receive money, that is, possession of the writing alone entitles the holder to receive money; but a contract right is a right to receive money under a contract which has not yet been earned by performance. Mo.Rev.Stat. § 400.9-106. At the time of the execution of these writings, the vendor had not performed its obligations. Today some of the buildings have not been built and roads, tennis courts and other common areas are incomplete. Many people who have paid for their time interval have not received deeds. Mercantile has no authority to give a deed to the time interval purchaser whose money it wants, nor is it willing or able to complete the improvements at the resort. It is clear that at the time of the execution of these writings the time interval purchaser's obligations had not yet been earned by performance of Holiday Interval, Inc. or its assignee.
Holiday Interval's right to receive money had not and has not been earned by performance because buildings were under construction at the time of the execution of the contracts and, in fact, not all of the buildings have been completed at this time. Deeds are yet to be delivered. Mercantile has been assigned Debtor's right in the contracts and thus stands in the shoes of its assignor. Payment under the contracts depends upon Debtor's performance, therefore, the writings must be categorized under the 1962 Code as contract rights. As such, these writings could be properly perfected only by filing a financing statement which was not done, thus Mercantile does not hold a perfected security interest in the contracts or their proceeds.
Mercantile has only received a pledge of the writings which manifest the Seller's rights to receive payments from purchasers under the writings. The contract obligations of the Seller-pledgor have not been delegated to Mercantile. Mercantile has only received a pledge of the writings which manifest the Seller's rights to receive payments from purchasers under the writings and such a pledge as collateral in exchange for a loan does not invalidate the contract obligations of the Seller-pledgor. See, Restatement of the Law, Contracts, Second, § 317, 318.
Addressing the non-transferability language in the writings, Mercantile cites In re Coral Petroleum, Inc., 50 B.R. 830 (Bkrtcy.S.D.Tex.1985), the court stated that "the language `of a type which is the ordinary course of business transferred by delivery with any necessary endorsement or assignment' is to be `construed broadly to include any writing which is treated as a token of the right it represents and therefore is normally delivered to any person to whom the rights are transferred'". Id., at 837. The court noted that even a certificate of deposit which bears a restrictive legend stating that it is non-negotiable is nonetheless, and is as a matter of law, "`of a type which is in ordinary course of business transferred by delivery with any necessary endorsement or assignment' because `it may easily be delivered by one party to another in the course of a commercial transaction'". Id. at 838, quoting First Nat'l Bank v. Lone Star Life Insurance Co., 524 S.W.2d 525, 533-34 (Tex.Civ. App.1975). The Supreme Court of Arkansas is in accord, stating that "the fact that the certificates were non-negotiable and non-transferrable in no way prevents them from being instruments." Id. at 838, quoting, General Electric Co. v. M & C Mfg. Inc., 283 Ark. 110, 671 S.W.2d 189, 190 (1984).
Mercantile also focuses on the policy underlying the filing and perfection provisions of the UCC. The purpose of perfection is to put a diligent searcher on notice of the secured party's claim. J. White and R. Summers, Uniform Commercial Code, Vol. 2, p. 328 (3rd Ed. 1988). Mercantile *601 argues that the writings at issue are the only manifestation of the obligations which flow from the purchaser to the Seller, and therefore represent the only source of such Seller's rights to such payments. Only the holder of such documents has the power to assert the rights of the Seller contained therein, and therefore, no diligent potential creditor would extend credit to the Seller without first demanding to see the writing which would act as collateral for the loan. When the writing was disclosed, the proposed lender would be able to then determine whether there was any pre-existing superior lien on such collateral. Mercantile emphasizes that it is the Seller, and potential subsequent creditors of such Seller, with which the UCC notice provisions are concerned, since the Seller is the debtor herein. The notice requirements are designed to provide at least constructive notice to subsequent potential creditors of a debtor of existing superior liens on property of such debtor. J. White and R. Summers, Uniform Commercial Code, Vol. 2, at p. 328. Therefore restriction on the purchasers' rights of transfer are wholly irrelevant.
Even in view of Mercantile's observations, however, this Court finds that the writings in question are not instruments under the third category of Mo.Rev.Stat. § 400.9-105(1)(g) because it is not of a type which is in ordinary course of business transferred by delivery with any necessary endorsement or assignment. Writings of this type are not transferred in the ordinary course of business by delivery. In fact, the agreement specifically prohibits an assignment of the buyer's interest in the contract. A seller's interest in such contract is not ordinarily transferred because the transferee is not in a position to perform the obligations under this bilateral contract, to wit, construct buildings, execute general warranty deeds, etc.
D. Contract Rights or General Intangibles[4]
"Contract rights" are defined in Mo.Rev. Stat. § 400.9-106 as any right to payment under a contract not yet earned by performance and not evidenced by an instrument or chattel paper.
A contract right covers "those choses in action which may be the subject of commercial financing transactions but which are not evidenced by an indispensable writing". Mo.Rev.Stat. § 400.9-106 (UCC Comment). Courts have defined "indispensable instrument" in accordance with the Restatement of Law, Security § 1 (Comment (e)). Comment (e) defines "indispensable instrument" as "meaning the formal written evidence of an interest in intangibles so representing the intangible that the enjoyment, transfer or enforcement of the intangible depends upon the possession of the instrument". Wellsville Bank v. Nicolay, 7 Kan. App. 2d 172, 638 P.2d 975, 979 (1982).
The Official Comment to § 9-106 of the UCC states that "`general intangibles' brings under this Article miscellaneous types of contractual rights and other personal property which are used or may be customarily used as commercial security. Examples are good will, literary rights and rights to performance. Other examples are copyrights, trade marks and patents". The Comments refer to general intangibles as a "catch-all definition". Mo.Rev.Stat. § 400.9-106 (UCC Comment).
Mercantile argues that because the writings are indispensable in any assertion by any holder that it is entitled to receive the payments of money from the purchasers under the writings, such writings are indispensable instruments and are therefore not contemplated as within the term "contract *602 rights" as it is defined under the UCC. Mercantile also argues, without citing any authority that the term "contract right" under the UCC was designed to cover only intangible rights not manifested in writing. Since the writings at issue are in writing, they are "instruments"; not "contract rights". The indispensability of such writings may be tested simply by imagining the situation of an alleged "holder" of such writings attempting to enforce payment without possession of such writings.
However, the court in In re Southern, 32 B.R. 761 (Bkrtcy.D.Kan.1983) explained the difference in perfection under the UCC between assigning the mere right to receive payments (a general intangible) from the assignment of the document which evidences such right (an instrument) by stating that "the right to receive payments under a contract for deed is a `general intangible' [citations omitted]. A general intangible can be perfected only by a UCC-1 filing with the Secretary of State [citations omitted]. The assignment of the promissory note itself is an assignment of an `instrument' as defined in K.S.A. § 84-9-105(i) (Supp.1981) [citations omitted]." Id. at 765. In re Southworth, 22 B.R. 376 (Bkrtcy.D.Kan.1982), also involved an assignment of a mere right to payment rather than the document manifesting such right, and is therefore correctly in accord. Id.
In Wellsville Bank v. Nicolay, 638 P.2d at 979, involving rights of a partner to a portion of the proceeds from the sale of partnership property, the court explained that "the courts generally recognize that if the document delivered does represent the right to the extent that it stands in the place of, or embodies, or reifies, the intangible, a pledge of the document amounts to the pledge of the right". Id. (quoting, Walter v. Piqua State Bank, 204 Kan. 741, 466 P.2d 316 (1970). The court held that a document of assignment of rights to receive money under another contract or deed "does not embody the rights assigned and is therefore not an indispensible writing". Id.
CONCLUSION
This court determines that both types of writings are not instruments since they do not fall within the definition of "negotiable instrument" (§ 400.3-104); nor do they meet the definition requirements of an instrument under Article Nine (§ 400.9-105(1)(g)). Furthermore, a land installment sale contract is not transformed into an "instrument" by the addition of promissory note language. The writings are "contract rights" which can only be perfected by filing.
Since Mercantile has not perfected its security interest by filing, it follows it is unsecured and the Court so holds. Since this was the threshold issue in Mercantile's Motion To Lift Stay, that Motion must be and is ruled against Mercantile.
The foregoing Opinion shall constitute Findings of Fact and Conclusions of Law as required by Rule 7052, Rules of Bankruptcy.
SO ORDERED.
NOTES
[1] Missouri has adopted the 1972 amendments to the UCC, however, such amendments do not take effect until January, 1989, therefore, this issue is to be determined by the 1965 version of Missouri's Article Nine.
[2] See also Wired Music, Inc. v. Wiemann, 468 S.W.2d 668 (Mo.App.1971); Insurance Agency Managers v. Gonzales, 578 S.W.2d 803 (Tex.Civ. App.1979).
[3] See also, Crichton v. Himlie Properties, 105 Wash.2d 191, 713 P.2d 108 (1986); In re Southworth, 22 B.R. 376 (Bkrtcy.D.Kan.1982); Matter of Equitable Development Corp., 617 F.2d 1152 (5th Cir.1980); In re Southern, 32 B.R. 761 (Bkrtcy.D.Kan.1983).
[4] The transaction in question occurred under the 1962 Code in force in Missouri at the time. Many of the decisions refer to the 1972 Code which was adopted in many states before Missouri. The classification "contract rights" is described in the 1962 Code but is not mentioned in the 1972 Code. In the 1972 Code, "contract rights" fall into the catch all category of general intangibles or, according to some decisions, are the same as an "account". For purposes of this discussion, the distinction is moot because contract rights, general intangibles, and accounts all require the filing of a financing statement with the Secretary of State in order to be perfected under both versions of the Code.
|
JOHN T. WOODRUFF & SON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.John T. Woodruff & Son v. CommissionerDocket No. 6864.United States Board of Tax Appeals6 B.T.A. 535; 1927 BTA LEXIS 3481; March 16, 1927, Promulgated 1927 BTA LEXIS 3481">*3481 M. Carl Levine, Esq., for the petitioner. J. L. Deveney, Esq., for the respondent. LOVE 6 B.T.A. 535">*535 LOVE: This proceeding seeks to have redetermined a deficiency in income tax for the year 1918 in an amount less than $10,000. The sole question involved is the reasonableness of a salary paid the president in 1918 of $27,000, the respondent claiming that a salary of $18,000 was reasonable and adequate. FINDINGS OF FACT. The petitioner is a New York corporation with its principal office at Long Island City. It has outstanding stock of $10,000, of which $4,000 was issued for good will. In 1918 all the stock was owned by Walter B. Woodruff, who was president and general manager of the corporation. The business conducted by petitioner is general construction work under contracts. Walter B. Woodruff devoted all his time to the operations of the petitioner, and personally solicited business for it. The business 6 B.T.A. 535">*536 obtained by petitioner was due almost entirely to the personal efforts of Woodruff and to his reputation in that line of work. He made estimates, determined cost of construction, and made the bid for petitioner. He superintended1927 BTA LEXIS 3481">*3482 all construction work done by petitioner. The gross amount of business done in 1918 was in excess of $392,500, and the gross profits exceeded $54,000. The profits of the business were due primarily to the efforts, influence and business management of Woodruff. There being no stockholders save himself, there were no meetings of the board of directors and hence no fixing of salaries in that formal manner. Managers of other similar companies in that vicinity and competitors of petitioner were paid salaries of $20,000 to $30,000 per annum. Woodruff determined what his salary should be, being controlled therein by salaries paid other managers as well as by the profits realized for the year. He fixed his salary for 1917, 1918, 1920 and 1921, at $27,000 per annum. For $1919, owing to smaller profits realized, he fixed his salary at $18,000. He did not usually draw out the full amount of such salary and left amounts above his drawing account in the corporation. In 1918 he drew out approximately $6,000 but credited to himself a salary of $27,000, and in his individual return reported $27,000 received. After deducting all expenses, including salary, the net income of the corporation1927 BTA LEXIS 3481">*3483 for 1918 was $3,638.40. To that amount the Commissioner added $9,000, being the difference between $27,000 salary deducted by petitioner and $18,000 allowed as a reasonable salary by the Commissioner. Under all the circumstances of this case, $27,000 was a reasonable salary for Woodruff for the year 1918. Judgment will be entered on 15 days' notice, under Rule 50. |
5:19-cv-02495-JMC Date Filed 09/11/20 Entry Number 51 Page 1 of 6
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
ORANGEBURG DIVISION
Paul Tarashuk, Personal Representative )
of the Estate of Paul David Tarashuk, )
Deceased, ) Civil Action No. 5:19-cv-02495-JMC
Plaintiff, )
)
v. )
) ORDER AND OPINION
Orangeburg County; Orangeburg County )
Emergency Medical Services; Danny )
Rivers, Individually and in his Official )
Capacity as the Director of Orangeburg )
County Emergency Medical Services; The )
Orangeburg County Sheriff’s Office; Leroy )
Ravenell, Individually and in his Official )
Capacity as the Sheriff of the Orangeburg )
County Sheriff’s Office; The South Carolina )
Department of Public Safety; Leroy Smith, )
Individually and in his Official Capacity as )
the Agency Director of the South Carolina )
Department of Public Safety; The Town of )
Santee; The Santee Police Department; )
Joseph Serrano, Individually and in his )
Official Capacity as the Chief of Police of )
the Town of Santee; Jamie D. Givens; )
Alison K. B. Harmon; Clifford A. Doroski; )
Fred D. Rice; Buist M. Smith; and Keith A. )
Cline, )
)
Defendant. )
___________________________________ )
Plaintiff Paul Tarashuk (“Plaintiff”) filed this action in his capacity as the Personal
Representative of the Estate of Paul David Tarashuk against Defendants the Town of Santee
(“Town”) and the Santee Police Department (“SPD”), alleging claims under 42 U.S.C §1983 and
the Americans with Disabilities Act (“ADA”), 42 U.S.C. §§12101-12213 (1990). (ECF No. 1-5
at 63-66, 70-72.)
The Town filed the instant Motion to Dismiss (ECF No. 13) pursuant to Federal Rule of
Civil Procedure 12(b)(6) on behalf of the SPD. For the reasons set forth below, the court
GRANTS the Town’s Motion to Dismiss.
I. FACTUAL AND PROCEDURAL BACKGROUND
1
5:19-cv-02495-JMC Date Filed 09/11/20 Entry Number 51 Page 2 of 6
This suit stems from the alleged wrongful death of Paul David Tarashuk (“Tarashuk”).
Plaintiff alleges that Tarashuk had a schizophrenic event while he was traveling southbound on I-
95 on September 9, 2018. (ECF No. 1-5 at 4 ¶ 1, 12 ¶ 44.) He claims that after Tarashuk’s car
was “run off the road”, Tarashuk stripped his clothes off, hopped onto the catwalk of a tractor-
trailer, and traveled eleven miles on the catwalk before pulling off the truck’s brake lines. (Id. 4 ¶
1, 12 ¶ 46.) Plaintiff maintains that when the truck pulled over, Tarashuk jumped into traffic on I-
95 and was nearly killed. (Id. at 4 ¶ 1.)
The Complaint (ECF No. 1-5) asserts that around 11:30 p.m., SPD Officers Smith and
Cline responded to the scene, found a naked Tarashuk speaking “gibberish”, and detained
Tarashuk in a patrol car. (Id. at 14 ¶ 59, 15 ¶¶ 65-66.) It claims that South Carolina Highway
Patrolmen Rice and Richardson and Orangeburg County Sheriff Deputies Doroski and Howell
later arrived on the scene and found that Tarashuk was “not coherent.” (Id. at 16-17 ¶¶ 75-77.)
The Complaint alleges that Orangeburg EMS subsequently arrived and evaluated Tarashuk. (Id.
at 5 ¶ 4.) It maintains that after Tarashuk told the EMTs that he did not want to go to jail or a
hospital, Deputy Doroski drove Tarashuk to Santee and left him in a gas station parking lot at 1:56
a.m. with no shirt, shoes, wallet, cell phone, or identification. (Id. at 28-29 at ¶ 140, 30-31 ¶ 151.)
Shortly thereafter, Tarashuk wandered back onto I-95 and was struck and killed by a motorist. (Id.
at 5 ¶ 7.)
Plaintiff filed this case on July 31, 2019 in the Orangeburg County Court of Common Pleas,
claiming that the Town and the SPD negligently supervised their employees in contravention of §
1983 and violated the ADA by failing to transport Tarashuk to a hospital for a mental health
examination. (Id. at 3, 63-66, 70-72.) On September 4, 2019, Defendants removed the case to this
court. (ECF No. 1.) The Town then moved on behalf of SPD to dismiss all claims against the
2
5:19-cv-02495-JMC Date Filed 09/11/20 Entry Number 51 Page 3 of 6
SPD under Rule 12(b)(6) on September 11, 2019. (ECF No. 13.) Plaintiff filed a Response (ECF
No. 17) on September 25, 2019.
II. JURISDICTION
This court has jurisdiction over Plaintiff’s claims under 28 U.S.C. § 1331 because the
Complaint alleges violations of the laws of the United States. Plaintiff alleges that the Town and
the SPD violated Tarashuk’s civil rights in contravention of § 1983, which permits an injured
party to bring a civil action against a person who, acting under color of state law, ordinance,
regulation, or custom, causes the injured party to be deprived of “any rights, privileges, or
immunities secured by the Constitution and laws.” (ECF No. pallison@example.org.) He also claims that
the Town and the SPD discriminated against Tarashuk in violation of the ADA. (Id. at 63-66.)
III. LEGAL STANDARD
A motion to dismiss pursuant to Rule 12(b)(6) “challenges the legal sufficiency of a
complaint.” Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009). “In considering a 12(b)(6)
challenge to the sufficiency of a complaint, this Rule must be applied in conjunction with the
liberal pleading standard set forth in Federal Rule of Civil Procedure 8(a).” Jenkins v. Fed. Bureau
of Prisons, C/A No. 3:10-1968-CMC-JRM, 2011 WL 4482074, at *2 (D.S.C. Sept. 26, 2011).
Under Rule 8(a), a pleading must contain a “short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has
facial plausibility when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quoting
Twombly, 550 U.S. at 556). When considering a Rule 12(b)(6) motion, the court should accept all
3
5:19-cv-02495-JMC Date Filed 09/11/20 Entry Number 51 Page 4 of 6
well-pleaded allegations as true and view the complaint in the light most favorable to the plaintiff.
See e.g., Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir. 1999); Mylan Labs., Inc. v. Matkari, 7
F.3d 1130, 1134 (4th Cir. 1993).
IV. ANALYSIS
The Town asserts on behalf of the SPD that Plaintiff’s claims against the SPD should be
dismissed because the Complaint insufficiently alleges that the SPD is a legal entity separate and
distinct from the Town. (ECF No. 13 at 2.) The Town maintains that the allegations in the
Complaint only suggest that the SPD is a subsidiary department of the Town. (Id.)
Plaintiff counters that the allegations in the Complaint support a claim against the SPD
under the ADA. (ECF No. 17 at 5.) He contends that the Complaint sufficiently alleges that the
SPD is a “public entity” under the ADA because it asserts that the SPD is an agency of the State
of South Carolina, Officers Smith and Cline were employed by the SPD, and Officers Smith and
Cline were acting under the control of the SPD. (Id.) However, Plaintiff agrees to dismiss the §
1983 claim against the SPD because “several South Carolina district court decisions have
dismissed claims against municipal police departments on the grounds that such departments are
not ‘persons’ under Section 1983.” (Id. at 4.)
Although not cited by the parties, Federal Rule of Civil Procedure 9(a) details the
requirements for pleading a party’s capacity to be sued. Under Rule 9(a), a pleading does not have
to allege “a party’s capacity to sue or be sued” or “the legal existence of an organized association
of persons that is made a party.” Fed. R. Civ. P. 9(a). However, a court may dismiss a complaint
for lack of pleading a party’s capacity to be sued when the lack of capacity appears on the face of
the complaint or an opposing party has made a specific negative averment in a responsive pleading.
See id.; 5A Charles A. Wright & Arthur R. Miller, Fed. Prac. & Proc. Civ. § 1292 (4th ed. 2020);
4
5:19-cv-02495-JMC Date Filed 09/11/20 Entry Number 51 Page 5 of 6
In re K-Dur Antitrust Litigation, 338 F. Supp. 2d 517, 540 (D.N.J. 2004); Brown v. Williamson,
134 F. Supp. 2d 1286, 1291 (M.D. Ala. 2001). In its Motion to Dismiss, the Town challenges the
SPD’s capacity to be sued, contending that the SPD is a subsidiary of the town rather than a
separate legal entity subject to suit. (See ECF No. 13.)
State law determines when a governmental agency has the capacity to be sued in federal
court. Fed. R. Civ. P. 17(b)(3); see also Avery v. Burke, 600 F.2d 111, 113–14 (4th Cir. 1981)
(“The capacity of a governmental body to be sued in the federal courts is governed by the law of
the state in which the district court is held.”). Under South Carolina law, a police department is a
subsidiary of a municipality rather than an independent legal entity with the capacity to sue and be
sued. The South Carolina Code of Laws provides that municipalities have the authority to provide
police protection and enact regulations in relation to law enforcement. S.C. Code Ann. § 5-7-30
(2019). It also gives municipalities the power to establish police departments and appoint police
officers. Id. §§ 5-9-30 (1975), 5-9-40 (1976), 5-7-110 (1993). Since the SPD is not a separate
legal entity from the Town under South Carolina law, it lacks the capacity to be sued in federal
court under Rule 17(b)(3).
As a result, the court dismisses Plaintiff’s § 1983 and ADA claims against the SPD. This
decision is consistent with rulings from other courts. See e.g., Bowie v. Henderson Police Dept.,
No. 5:12–CV–514–FL, 2012 WL 5392116 (E.D.N.C. Nov. 5, 2012) (dismissing claims against
police department under Rule 12(b)(6) because police departments are not independent legal
entities under North Carolina law); Ball v. City of Coral Gables, 548 F. Supp. 2d 1364 (S.D. Fla.
2008) (finding that police departments are not legal entities subject to suit under Florida law);
Dean v. Barber, 951 F.2d 1210, 1214 (11th Cir. 1992) (“police departments are not usually
considered legal entities subject to suit”).
5
5:19-cv-02495-JMC Date Filed 09/11/20 Entry Number 51 Page 6 of 6
V. CONCLUSION
For the foregoing reasons, the court GRANTS the Town’s Motion to Dismiss (ECF No.
13) and DISMISSES Plaintiff’s § 1983 and ADA claims against the SPD.
IT IS SO ORDERED.
United States District Judge
September 11, 2020
Columbia, South Carolina
6
|
FILED
NOT FOR PUBLICATION OCT 20 2015
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
SUKHWINDER SINGH, AKA Sukh No. 13-71139
Sinch,
Agency No. A094-023-888
Petitioner,
v. MEMORANDUM*
LORETTA E. LYNCH, Attorney General,
Respondent.
On Petition for Review of an Order of the
Board of Immigration Appeals
Submitted October 14, 2015**
Before: SILVERMAN, BYBEE, and WATFORD, Circuit Judges.
Sukhwinder Singh, a native and citizen of India, petitions for review of the
Board of Immigration Appeals’ (“BIA”) order dismissing his appeal from an
immigration judge’s (“IJ”) decision denying his application for withholding of
removal and protection under the Convention Against Torture (“CAT”). Our
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
jurisdiction is governed by 8 U.S.C. § 1252. We review for substantial evidence
the agency’s factual findings, applying the standards governing adverse credibility
determinations created by the REAL ID Act. Shrestha v. Holder, 590 F.3d 1034,
1039-40 (9th Cir. 2010). We dismiss in part and deny in part the petition for
review.
We lack jurisdiction over Singh’s claim that the agency erred in admitting
his sworn airport statement to the record, as he did not exhaust this claim before
the BIA. See Barron v. Ashcroft, 358 F.3d 674, 677-78 (9th Cir. 2004).
Substantial evidence supports the agency’s adverse credibility determination
based on Singh’s prior dishonesty under oath. See Shrestha, 590 F.3d at 1048
(adverse credibility determination was reasonable under the totality of
circumstances); see also Singh v. Holder, 643 F.3d 1178, 1181 (9th Cir. 2011)
(“An asylum applicant who lies to immigration authorities casts doubt on his
credibility and the rest of his story.”). Substantial evidence also supports the BIA’s
determination that Singh lacked an excusable justification for his false statements
regarding his family’s presence and activities in the U.S. because he did not make
the statements while fleeing persecution. See Singh, 643 F.3d at 1181 (upholding
agency’s adverse credibility finding based on petitioner’s lies to immigration
authorities that were “completely unrelated to escaping immediate danger or
2 13-71139
gaining entry into the United States”); cf. Akinmade v. INS, 196 F.3d 951, 955-56
(9th Cir.1999) (“a genuine refugee escaping persecution may lie about his
citizenship to immigration officials in order to flee his place of persecution or
secure entry into the United States”). Thus, we deny the petition as to Singh’s
withholding of removal claim.
Substantial evidence also supports the agency’s denial of Singh’s CAT claim
because it was based on the same statements the IJ found not credible, and the
record does not otherwise compel the finding that it is more likely than not he
would be tortured by or with the consent or acquiescence of the government if
returned to India. See Shrestha, 590 melissa64@example.com.
PETITION FOR REVIEW DISMISSED in part; DENIED in part.
3 13-71139
|
Citation Nr: 0005339
Decision Date: 02/29/00 Archive Date: 03/07/00
DOCKET NO. 97-15 701 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in Los
Angeles, California
THE ISSUE
Entitlement to service connection for post-traumatic stress
disorder (PTSD).
REPRESENTATION
Appellant represented by: California Department of
Veterans Affairs
WITNESSES AT HEARING ON APPEAL
Appellant and his parents
ATTORNEY FOR THE BOARD
E. Pomeranz, Associate Counsel
INTRODUCTION
The appellant served on active duty from December 1969 to
December 1971.
This matter comes before the Board of Veterans' Appeals
(Board) on appeal of an April 1996 rating action by the
Department of Veterans Affairs (VA) Regional Office (RO)
located in Los Angeles, California.
FINDING OF FACT
The claim of entitlement to service connection for PTSD is
supported by cognizable evidence showing that the claim is
plausible or capable of substantiation.
CONCLUSION OF LAW
The claim of entitlement to service connection for PTSD is
well-grounded. 38 U.S.C.A. § 5107(a) (West 1991).
REASONS AND BASES FOR FINDING AND CONCLUSION
A review of the record reflects that the appellant has a
current diagnosis of PTSD, as shown by the October 1997
medical statement from M.B., M.D., Staff Psychiatrist at the
VA Medical Center (VAMC) in Sepulveda, where Dr. B. indicated
that the appellant had PTSD. At that time, Dr. B. noted that
the appellant's PTSD was related to his Vietnam experience.
The Board observes that in light of the above, the appellant
has presented evidence of a current diagnosis of PTSD and a
medically based opinion suggesting that his PTSD is related
to his period of active service. Therefore, since there is
evidence sufficient to lend plausible support to the claim,
the Board is of the opinion that the appellant's claim of
service connection for PTSD is well grounded within the
meaning of 38 U.S.C.A. § 5107(a) (West 1991 & Supp. 1999).
See Gaines v. Brown, 11 Vet. App. 353, 357 (1998) (citing
Cohen v. Brown, 10 Vet. App. 128, 136-67 (1997); and Caluza
v. Brown, 7 Vet. App. 498, 506 (1995)).
ORDER
The claim of entitlement to service connection for PTSD is
well grounded.
REMAND
As the appellant has submitted a well-grounded claim, the VA
has a duty to assist him in developing the facts pertinent to
his claim. 38 U.S.C.A. § 5107(a).
In that regard, the Board notes that in August 1995, the
appellant submitted VA Form 21-4138, Statement in Support of
Claim. At that time, the appellant stated that while he was
in Vietnam, he engaged in combat. The appellant indicated
that in approximately 1971, he was serving in DaNang as the
chief cook for the "Headquarters Officer's Mess M.W.F. S-
1." He noted that at that time, he devised a plan to catch
enemy soldiers who were stealing supplies. According to the
appellant, his plan was successful, and he and five other men
captured the thieves. The appellant reported that when his
commanding Officer, Major G., learned of his plan, he
received a personal citation and was awarded the rank of
corporal. He noted that he also volunteered to serve in
combat with a security unit named "1st M.A.W. M.W.H. S-1,
Zulu Company." The appellant revealed that his primary
responsibility was to "sweep and clear" an area, of Viet
Cong. He stated that the large air base outside of DaNang
City was often under rocket attack. According to the
appellant, after several months of duty, he started going out
"on point" in order to draw enemy fire. The appellant
indicated that his "fire fights" were at night and that he
could not see his targets. He reported that his Zulu company
combat unit was considered for several citations, including
one from the President of the United States.
Pertinent military records show that the appellant served on
active duty from December 1969 to December 1971. The
appellant's DD Form 214, Report of Separation from the Armed
Forces of the United States, reflects that he served overseas
for 10 months and two days, and that he received the National
Defense Service Medal and the Vietnam Service Medal. The
form further shows that the appellant's Military Occupational
Specialty (MOS) was as a cook. In addition, the appellant's
personnel records reflect that in February 1971, the
appellant's detail included counter insurgency operations in
DaNang.
In the appellant's April 1996 VA examination, the appellant
stated that while he was in Vietnam, he served on a part-time
basis as the chief cook for the officers in the Headquarter
Compound. The appellant indicated that for the rest of the
time, he provided security work around the air base in
DaNang. According to the appellant, the security work
involved doing sweeps around the air base and 20 miles out.
The appellant revealed that he also volunteered for other
missions that were quite dangerous. He noted that he would
be sent to rice paddies or to villages to see what would
happen and what the alliances were. The goal was to find out
whether there were enemies in the village. The appellant
revealed that the dangerous part of the mission was that it
was possible that someone he had become friends with in the
village was really the enemy. According to the appellant, on
one occasion, he found himself in the situation where someone
he knew well was actually a member of the enemy. He stated
that when it came time to kill him, he could not do it. The
appellant indicated that over the years, he had felt a great
deal of shame regarding that incident.
In the appellant's April 1996 VA examination, the appellant
noted that another dangerous combat mission that he had
volunteered for was going into the rice paddies to "do a
point." The appellant indicated that the object of the
mission was to see whether or not anyone fired at him after
he went into the rice paddy. He stated that those missions
were only done by volunteers, but that there was pressure to
volunteer. According to the appellant, as a result of the
missions, he found himself in combat situations several
times, the longest of which lasted for three days. The
appellant stated that he had been told by his commanding
officer, Major G., that he was going to receive various
commendations, including two combat ribbons from the
President and a citation for meritorious combat, but that the
commendations were not in his record. According to the
appellant, he had also received a promotion to corporal
before he left Vietnam because of a plan that he had set up
which had resulted in the capture of several Viet Cong.
In February 1997, the appellant submitted copies of letters
that he had sent to his family while he was in Vietnam. The
Board notes that in an undated correspondence, the appellant
stated that he was going "on another sweep," and that in
his last sweep, he had caught 10 Viet Cong.
The Board observes that presently, there is no indication
that the RO requested verification of the appellant's alleged
stressors, as outlined above, by the U.S. Armed Services
Center for Research of Unit Records (USASCRUR) (formerly the
U.S. Army & Joint Service Environmental Support Group (ESG)).
The provisions of the VA ADJUDICATION PROCEDURE MANUAL M21-1
(MANUAL M21-1) pertaining to the evaluation of PTSD claims
provide that, "where records available to the rating board
do not provide objective or supportive evidence of the
alleged inservice traumatic stressor, it is necessary to
develop this evidence." Manual M21-1, Part VI, 7.46(f)(2)
(emphasis added). Since the development outlined in the
manual includes providing stressor information to the proper
administration, formerly ESG, in an attempt to verify the
claimed stressor, this procedure is deemed mandatory.
Additionally, to conform to the ruling of the Court, the RO
must allow the appellant to supplement his statement and
reevaluate it if the USASCRUR is able to obtain some, but not
all, of the stressor information submitted. See Zarycki v.
Brown, 6 Vet. App. 91, 99-100 (1993). Such development is
necessary before the Board can proceed with its appellate
review of the claim. Cohen, 10 Vet. App. at 128, 137.
The Board further observes that it is unclear from the
evidence of record as to whether the appellant is currently
receiving Supplemental Security Income (SSI) benefits from
the Social Security Administration (SSA). In this regard,
the Board notes that the evidence of record includes a
correspondence, dated in December 1989, from the SSA to the
appellant, informing the appellant that he was eligible to
receive SSI benefits. However, the Board also observes that
in a correspondence from Ms. S.S., the appellant's attorney,
to the SSA, dated in March 1995, Ms. S. stated that the
appellant was reapplying for SSI benefits, which had been
discontinued in May 1991. The Board observes that upon a
review of the record, it does not appear that a request for
any SSA records was made. "As part of the Secretary's
obligation to review a thorough and complete record, VA is
required to obtain evidence from the Social Security
Administration, including any decisions by the administrative
law judge, and to give that evidence appropriate
consideration and weight." Hayes v. Brown, 9 Vet. App. 67,
74 (1996).
In addition, the Board notes that in the appellant's November
1996 Notice of Disagreement (NOD), the appellant referred to
treatment records from the Olive Hospital in Vallejo,
California. The Board notes that the evidence of record is
negative for any records from the Olive Hospital. Inasmuch
as the appellant's statement has put the VA on notice of the
existence of additional treatment records, these records
should be obtained prior to the Board's appellate review in
this case. See Murincsak v. Derwinski, 2 Vet. App. 363, 372-
73 (1992) (where the Board is on notice of the possible
existence and relevance of certain evidence, remand to obtain
that evidence is required); see generally Bell v. Derwinski,
2 Vet. App. 611, 613 (1992). As additional action by the RO
may be helpful in either obtaining such putative records, or
documented information that the medical records cannot be
obtained, the Board determines that further development in
this regard is warranted.
Accordingly, in order to fully and fairly evaluate the
appellant's claim, this case is REMANDED for the following
development:
1. The RO should ask the appellant
whether or not he is currently receiving
SSI benefits, and if his response is in
the affirmative, the RO should obtain and
associate with the claims file copies of
any written decisions concerning the
appellant's claim for disability benefits
from the SSA, and copies of any medical
records utilized in reaching that
decision.
2. The RO should also request that the
appellant identify the names, addresses,
and approximate dates of treatment for
all VA and non-VA health care providers
who have treated him at any time
including following service, for PTSD.
With any necessary authorization from the
appellant, the RO should attempt to
obtain copies of pertinent treatment
records identified by the appellant in
response to this request, which have not
been previously secured, to include any
records from the Olive Hospital.
3. The RO should further request from
the appellant, through his
representative, a comprehensive statement
containing as much detail as possible
regarding the stressors to which he
alleges he was exposed in service. The
appellant should be asked to provide
specific details of the claimed stressful
events during service, such as dates,
locations, detailed descriptions of
events, units involved, number and names
of casualties, and identifying
information concerning any other
individuals involved in the events,
including their names, ranks, units of
assignment or any other identifying
detail. The appellant is advised that
this information is vitally necessary to
obtain supportive evidence of the
stressful events and that he must be as
specific as possible because without such
details, an adequate search for verifying
information can not be conducted.
4. Regardless of the response from the
appellant, the RO should review the
claims file and compile a list of the
appellant's alleged stressors in as much
detail as possible. The RO should then
verify the occurrence of the claimed
stressors through official channels,
including the USASCRUR. The USASCRUR
should be provided a copy of the
appellant's August 1995 statement, the
April 1996 VA psychiatric examination,
the appellant's DD 214, Report of
Separation from the Armed Forces of the
United States, the appellant's personnel
records, and this remand. The USASCRUR
should be requested to conduct a search
in all of the available and appropriate
sources, and provide any information
which might corroborate the stressors.
Any information obtained should be
associated with the claims file.
5. Following the above, the RO must make
a specific determination, based upon the
complete record, with respect to whether
the veteran was exposed to a stressor or
stressors during service, and; if so,
what was the nature of the specific
stressful event or events. In any event,
the RO must specifically render a finding
of whether the appellant "engaged in
combat with the enemy." If the RO
determines that the record establishes
that a claimed in-service stressor or
stressor occurred, the RO must specify
what in-service stressor or stressors it
has determined are established by the
record.
6. If, and only if, the RO determines
that the record establishes the existence
of a stressor or stressors, through
combat participation or otherwise, the
appellant should be afforded an
examination by a psychiatrist to
determine the presence of PTSD. The RO
must specify for the examiner the
stressor or stressors that the RO
determined are established by the record,
and the examiner is to be instructed that
only those events can be considered for
the purpose of determining whether the
appellant was exposed to a stressor in
service. The examination report should
include a detailed account of all
pathology found to be present. The
examination report should include a
complete rationale for all opinions
expressed. All necessary special studies
or tests are to be accomplished. In
addition, the examiner should address the
following: (a) whether the stressor(s)
determined by the RO to actually have
occurred was sufficient to produce PTSD;
(b) whether the appellant meets the
diagnostic criteria for PTSD under the
American Psychiatric Association's
Diagnostic and Statistical Manual of
Mental Disorders, and; (c) whether there
is a link between current symptoms and
the stressor or stressors specified by
the RO as established by the record. The
claims folder must be made available to
the examiner prior to the examination.
7. The RO should then review the claims
file to ensure that all of the foregoing
requested development has been completed.
After undertaking any additional
development deemed appropriate in
addition to that requested above, the RO
should re-adjudicate the issue of
entitlement to service connection for
PTSD. If the benefit sought on appeal
remains denied, the appellant and his
representative should be furnished a
supplemental statement of the case and be
given an opportunity to respond.
The case should then be returned to the Board, if in order.
The Board intimates no opinion as to the ultimate outcome of
this case. The appellant need take no action until he is
notified.
The appellant has the right to submit additional evidence and
argument on the matter or matters the Board has remanded to
the regional office. Kutscherousky v. West, 12 Vet. App. 369
(1999).
This claim must be afforded expeditious treatment by the RO.
The law requires that all claims that are remanded by the
Board of Veterans' Appeals or by the United States Court of
Appeals for Veterans Claims for additional development or
other appropriate action must be handled in an expeditious
manner. See The Veterans' Benefits Improvements Act of 1994,
Pub. L. No. 103-446, § 302, 108 Stat. 4645, 4658 (1994),
38 U.S.C.A. § 5101 (West Supp. 1999) (Historical and
Statutory Notes). In addition, VBA's Adjudication Procedure
Manual, M21-1, Part IV, directs the ROs to provide
expeditious handling of all cases that have been remanded by
the Board and the Court. See M21-1, Part IV, paras. 8.44-
8.45 and 38.02-38.03.
DEBORAH W. SINGLETON
Member, Board of Veterans' Appeals
|
Plaintiff sues for compensation alleged to be due him by defendant, his employer, because of an accident which he says befell him on August 2, 1935, while performing the duties of his employment. He alleges that the accident occurred in this manner: That at about the hour of 2:30 p. m., on said date, he transported by means of a two-wheel hand truck from some place on defendant's premises into its machine shop an iron shaft weighing about 500 pounds; that the truck's wheels rolled into a depression or hole in the concrete floor of the shop, causing it to careen, with the result that the shaft slid over to its right, striking his right arm, and "suddenly *Page 136
and forcefully throwing him to the floor, causing a severe jerk, strain and sprain to "is back." He further alleges that immeliately after the accident he retired to a rest room close by, where he remained for a brief period, and later in the afternoon returned to his home, but "was unable to return to work the next morning or at any time since"; that his employer was immediately notified of the accident; that the clerk of the machine shop where he was injured executed an accident report covering the facts of the accident, forwarded same to defendant's office and, upon the disclosures of this report, defendant recognized that the accident happened and injuries followed as related by him, and paid to him compensation at the rate of $20 per week until December 23, 1935. The injuries of which plaintiff complains, allegedly due to the accident, are declared in detail in the petition. He contends that these injuries totally and permanently disable him from performing manual labor.
Defendant denies that plaintiff suffered an accident while working for it, and therefore disclaims liability for payment of compensation to him. It admits that it made 19 payments of $20 each to him under the erroneous belief that he had had an accident as claimed by him, but, having learned that no such accident occurred, discontinued the payments. Payment of medical and doctors' bills, totaling $137.50, for plaintiff's account while laboring under the same error, is also admitted.
The trial judge gave judgment for plaintiff as by him prayed for. Defendant has prosecuted this appeal.
Plaintiff alleged and testified that he experienced the accident complained of in defendant's machine shop at about 2:30 p. m., August 2, 1935. There is no equivocation on his part as to this being the correct date. The record before us establishes beyond the peradventure of a doubt that no such accident occurred at said place or on said date. Having unqualifiedly planted his case on this date, he is bound by his allegations, and defendant was required only to defend on this basis. We are convinced, beyond this, that plaintiff suffered no accident in the month of August, 1935, while in defendant's employ. He did carry the 417-pound shaft by truck into the machine shop. He testified that a co-worker by the name of Thomas assisted him until within a few feet of the door, and that he alone pulled the truck by its handles until the right wheel entered the depression, and jerked him down on his right knee; that he retired to the rest room for a few minutes and then returned home; that he undressed, with his wife's assistance, went to bed, and remained there for three days. He also testified that he called a co-worker, named Fish, for assistance as he went down, but that V.N. Cobb, the machinist, actually helped him to arise. He says Fish laughed at him as he arose. He also testified that he returned to his employment on the fourth day after the accident, but was unable to perform his regular duties, and for the next seven days, in his own words, he "stayed out of the way," by which he implies that he "hung around," did nothing, and drew pay. During all this time he did not report to his superiors that an accident had befallen him. He did not return to work after the end of the seven-day period because, as he says, he was unable to work, yet he did not then make known to any one of his co-workers that his disability was due to an accident. Fish and Cobb and a fellow workman, named Rice, positively contradict plaintiff's testimony about the accident. Fish says he saw him bending over slightly, but denies he was jerked to the floor. Cobb testified that plaintiff pulled the truck some eight or nine feet into the shop room and called for assistance to remove the shaft therefrom, and that he (Cobb) took hold of the shaft and held it erect as the truck was pulled away by plaintiff. Rice's testimony is practically the same as Cobb's. It seems passing strange that plaintiff would have left the truck and shaft so close to the door, as he says, without requesting some one to finish his task, in view of the fact that he was able to walk about and did, without assistance, promptly go to his home. Thomas testified that he assisted plaintiff to pull the truck until it was well within the shop, and no accident occurred. Fish and Cobb testified that plaintiff worked all August 2d and to noon (Saturday) of the 3d; that he returned to work and did work on the 5th, 6th, 7th, and 12th of that month. This testimony is corroborated by that of Capps, the shop foreman. Rice is positive he walked home with plaintiff at the noon hour on August 3d. Daily time cards made out and signed by plaintiff himself disclose that he was present and worked on all these days. He accepted and cashed defendant's check issued to pay him for this work. Capps, the foreman, says that plaintiff phoned him on the morning *Page 137
of August 8th that he was "down" and could not work. He was absent the following three days, but appeared and worked on the 12th. He reported to Capps, the proper person on the 13th that he had the accident on the 2d. He told Capps then that Cobb and Fish had knowledge of the accident and would sign the report in corroboration of his version of it. They declined to stultify themselves in this manner, and the report was sent to defendant's office without the name of any witness to the accident. Capps says he made inquiry of each workman who was present on August 2d if he knew anything about or saw the accident, and all answered in the negative. The testimony is fairly conclusive that there was no depression or hole in the cement floor large enough for the truck's wheel to drop into.
The stubs attached to the 19 checks issued to plaintiff by defendant contain this typed statement: "Being advance on compensation due you for personal damages and loss of time resulting from injuries sustained August 2nd, 1935, while employed at our Shreveport Machine Shop."
The admission contained in these statements is urged by plaintiff as a bar to defendant's efforts now to escape liability for additional payments. It is well settled that such payments do not conclude the employer or its insurer. If made in error, as was done in this case, such fact may be shown in a proper proceeding. The Compensation Law is clear on the question, as well as the following decisions: Subdivision 5 of section 18, Act No. 20 of 1914, as amended by Act 85 of 1926; Fowler v. Louisiana Highway Commission (La.App.) 160 So. 813; Johnson v. Provercal Turpentine Company, 12 La.App. 78, 125 So. 321; Doby v. Canulette Shipbuilding Company (La.App.) 156 So. 51; Craig v. Standard Fruit Steamship Company (La.App.) 168 So. 794.
In the Johnson Case, the court very correctly held, as reflected from the syllabus, that: "Payment of compensation to injured employee by employer before investigating accident held to have been made through error of fact, from which employer is relievable under Civ. Code, art. 1821."
In the present case defendant evidently did not carefully investigate the facts of the alleged accident. It is probable that, as plaintiff had been in its employ for many years and had rendered satisfactory services for the time, his own version of the accident was originally accepted without question at face value.
The learned trial judge, of whose services the bench will henceforth be deprived, entertained serious doubts of the sufficiency of plaintiff's case. In reasons for judgment, inter alia, he said:
"The evidence on the whole i's very unsatisfactory because plaintiff relies chiefly on his own testimony, and the defendant relies chiefly on negative testimony, and the record is replete with insinuations that the plaintiff is a malingerer, and that he is falsifying as to the accident on the one hand, and that the defendant's witnesses have conspired to defeat him on the other. Through the maze of irreconcilable testimony, with equal interest on both sides in the outcome of the case, the Court must attempt to arrive at a just decision without a great deal of confidence in the correctness thereof, no matter which way it is decided.
"It would be easy for the Court simply to say that the plaintiff had not met the burden of proof under these circumstances and dismiss his demands; but in viewing the testimony as a whole, we do not feel justified in taking this easy method of escape."
While the strictness of the rules of evidence is materially relaxed and the forms of procedure simplified in compensation cases, yet the inexorable rule that a plaintiff must make out his case in such suits, as in other actions, remains unaffected. Plaintiff has failed to meet this rule. He is flatly contradicted on nearly all the material points of his case by witnesses whose credibility measures favorably with his own. His own testimony in many respects, unnecessary to mention here, is inconsistent and at variance with common human experiences. He alleges he was unable to return to work the morning after the accident or at any time since, yet he testified he did report for work on the fourth day following the alleged accident and remained on the job for seven days and drew pay therefor.
For the reasons herein assigned, the judgment appealed from is annulled, reversed, and set aside; plaintiff's demands are rejected and his suit dismissed, with costs.
DREW, J., concurs. *Page 138 |
708 P.2d 829 (1985)
Ethel S. LITTLETON, Plaintiff-Appellee,
v.
STATE of Hawaii, Defendant-Appellant.
No. 10057.
Intermediate Court of Appeals of Hawaii.
July 3, 1985.
*830 Dan T. Kochi, Deputy Atty. Gen., Honolulu, for defendant-appellant.
Craig Uyehara, Herbert R. Takahashi, Honolulu, for plaintiff-appellee.
Before BURNS, C.J., and HEEN and TANAKA, JJ.
HEEN, Judge.
The State of Hawaii (State) appeals from the lower court's June 5, 1984 order granting interest on a judgment in favor of Ethel S. Littleton (Littleton) and against State at 10% from the date of the trial court's original judgment, August 28, 1978. The State contends that, under the State Tort Liability Act (STLA), Hawaii Revised Statutes (HRS), chapter 662 (1976 and Supp. 1984), (1) interest on a judgment against State should be 4%, as specified in HRS § 662-8, rather than 10%, and (2) the interest should be computed from the date of the judgment on appeal rather than the trial court's original judgment. We agree with State and reverse.
Littleton filed suit against State in 1976 after she was injured while picking seaweed at Ewa Beach Park. The trial court *831 found State liable and awarded Littleton judgment of $70,885.93.[1] Judgment of affirmance on appeal was entered on January 24, 1983. Littleton v. State, 66 Haw. 55, 656 P.2d 1336 (1982).
On April 16, 1984, Littleton filed a motion seeking interest on her judgment. The lower court granted her motion on June 5, 1984, and ordered State to pay interest at 10% from August 28, 1978, the filing date of the trial court's judgment. On July 3, 1984, State filed its notice of appeal.
In Act 134, 1984 Haw. Sess. Laws 253, 255, the legislature appropriated the judgment amount of $70,885.93 and interest at 4% for a total of $74,944.24 to pay Littleton.[2] On July 16, 1984, Littleton filed a partial satisfaction of judgment in the amount of $74,660.03. We do not know why the full amount of the appropriation was not paid.
The question on appeal is solely one of statutory construction, which is a matter of law, Advertiser Publishing Co. v. Fase, 43 Haw. 154, 165 (1959), freely reviewable by this court. Molokoa Village Development Co. v. Kauai Electric Co., 60 Haw. 582, 595, 593 P.2d 375, 384 (1979); Block v. Lea, 5 Haw. App. 266, ___, 688 P.2d 724, 730 (1984).
1.
HRS § 662-8 (1976) specifically provides:
Interest. On all final judgments rendered against the State in actions instituted under this chapter, interest shall be computed at the rate of four per cent a year from the date of judgment up to, but not exceeding, thirty days after the date of approval of any appropriation act providing for payment of the judgment.
Littleton argues that HRS § 478-2 (Supp. 1984)[3] covers the whole subject of interest on judgments and upon its amendment in 1979 and 1981[4] impliedly repealed § 662-8, which was enacted in 1975. We disagree.
Repeal by implication is disfavored, State v. Kuuku, 61 Haw. 79, 82, 595 P.2d 291, 294 (1979), and a statute may only be impliedly repealed where "the later act is exclusive, that is, when it covers the whole subject to which it relates, and is manifestly designed by the legislature to embrace the entire law on the subject[.]" Fasi v. City & County of Honolulu, 50 Haw. 277, 285, 439 P.2d 206, 211 (1968) (quoting Wong Sar v. Uehara, 30 Haw. 658, 663 (1928)). Obviously, when first enacted, § 662-8 carved out of the general subject of judgment interest a specific exception relating to judgments against the State. The 1979 and 1981 amendments to § 478-2 merely changed the interest rates on judgments. There is nothing about the amendments manifestly indicating that the legislature intended thereby to embrace the entire subject matter, and there is no legislative history supporting Littleton's argument.
Moreover, "it is a general principle of law that statutory laws of general application are not applicable to the State unless the legislature in the enactment of such laws made them explicitly applicable to the State." Big Island Small Ranchers Association v. State, 60 Haw. 228, 236, 588 P.2d 430, 436 (1978) (quoting A.C. Chock, Ltd. v. Kaneshiro, 51 Haw. 87, 89, 451 P.2d 809, 811 (1969)). Here, HRS § 478-2 is a statute of general application and there is nothing making it explicitly applicable to the *832 State. Indeed, the enactment of § 662-8 indicates a contrary legislative intent.
Finally, we find no reason in the law or the circumstances of this case to depart from the well-established rule that where there is an irreconcilable conflict between two statutes covering the same subject, the more specific, in this case § 662-8, should take precedence. State v. Pacariem, 67 Haw. 46, 48, 677 P.2d 463, 464 (1984); State v. Kuuku, 61 Haw. at 82, 595 P.2d at 294; Aetna Life Insurance Co. v. Park, 5 Haw. App. 122, 126, 678 P.2d 1104, 1107 (1984).
2.
State urges that "final judgment" in HRS § 662-8 is judgment on appeal and the court below erred in ruling that interest was to accrue from the date of the trial court's judgment. We agree.
The primary objective of a court in construing statutes is to ascertain and give effect to the intention of the legislature. Survivors of Medeiros v. Maui Land & Pineapple Co., 66 Haw. 290, 297, 660 P.2d 1316, 1321 (1983); Armbruster v. Nip, 5 Haw. App. 37, 40, 677 P.2d 477, 480 (1984). Two fundamental rules of statutory construction are that statutory language must be read in the context of the entire statute and construed in a manner consistent with the purpose of the statute, State v. Kaneakua, 61 Haw. 136, 140, 597 P.2d 590, 592 (1979); Pflueger v. City & County of Honolulu, 5 Haw. App. 13, 17, 674 P.2d 1019, 1023 (1984), and so that, if it can be prevented, no clause, sentence or word shall be superfluous, void, or insignificant. Armbruster v. Nip, 5 Haw. App. at 40, 677 P.2d 480.
We do not deem it necessary to go beyond the language of § 662-8[5] to determine the intent of the legislature, for we note that the various sections of chapter 662, when construed together and as a whole, indicate that the legislature intended to distinguish between a "final" judgment in § 662-8 and any other judgment under the STLA.
The purpose of the STLA, as stated in § 662-2, is to make the state liable for the torts of its employees "in the same manner and to the same extent as a private individual under like circumstances[.]" At the same time, however, the legislature made certain exceptions to the applicability of that broad purpose, indicating its intention that in some respects the State was to be treated differently from private individuals in like circumstances. Thus, in § 662-2, the State is exempted from liability for pre-judgment interest,[6] and under § 662-15(4) (1976),[7] is exempt from liability in situations where a private person might be *833 liable. Clearly, in spite of the language of § 662-2, the legislature did not intend in all respects to have the State treated the same as private individuals.
Within chapter 662, the word "judgment," standing alone, is used in §§ 662-2, -10, and -12, but in § 662-8 "judgment" is preceded by the adjective "final."[8] If we are to avoid superfluity as to that adjective, we must infer that the legislature, by its use, intended to accord to the word "judgment" in § 662-8 a different connotation than in the other sections of the STLA.
"Final" is defined as "not to be altered or undone." Webster's Third New International Dictionary (1967).
Black's Law Dictionary defines "final judgment" as "[o]ne which finally disposes of rights of parties, either upon entire controversy or upon some definite and separate branch thereof. Judgment is considered `final' only if it determines the rights of the parties and disposes of all of the issues involved so that no future action by the court will be necessary in order to settle and determine the entire controversy." Id. at 567 (5th ed. 1979).
The expression "final judgment" is used in different contexts in the law, but in every instance imports a meaning of conclusiveness. For appeal purposes, for instance, a final judgment is one which settles all claims of all parties to the proceeding from which review is sought. See M.F. Williams, Inc. v. City & County of Honolulu, 3 Haw. App. 319, 650 P.2d 599 (1982). It is also significant in the application of the legal doctrine of res judicata. In that context, the supreme court, in Glover v. Fong, 42 Haw. 560 (1958), held that "[a] judgment is final where the time to appeal has expired without appeal being taken." Id. at 574. It follows from Glover that where an appeal has been taken, a judgment of the trial court is not final, at least for purposes of res judicata.
A similar question was addressed by the supreme court in State v. Heirs of Kapahi, 50 Haw. 237, 437 P.2d 321 (1968). There, the trial court, after an appeal by the state of an eminent domain award resulted in affirmance of the trial court's judgment, awarded interest on the judgment from the date of its original entry, before appeal. The supreme court held that the term "final judgment" as used in the eminent domain statute regarding the award of interest (now HRS § 101-25 (1976)) should be interpreted to mean the judgment entered after disposition of an appeal. We are persuaded to the same result as Kapahi in the instant case.
The use of the adjective "final" in § 662-8, and the clear indication of intent by the legislature to accord different treatment to the state's tort liability as compared to individual tort liability, convinces us that the legislature intended interest to run, under § 662-8, from the date when the judgment is conclusive, either after the judgment on appeal or after the time to appeal from the trial court judgment has expired. The court erred in the instant case in awarding interest from the date of the original trial court judgment.
We vacate the lower court's June 5, 1984 order and remand to the court below with instructions to order interest on the judgment at 4% accruing from the date of the judgment on appeal, January 24, 1983.
NOTES
[1] Littleton also filed suit on the same claim against the City and County of Honolulu (City) (Civil 51435). The cases were consolidated for trial. During the trial, the trial court directed a verdict in favor of the City and the trial continued against State without a jury. On Littleton's appeal of the directed verdict, the trial court was reversed.
[2] The act does not indicate the date of the judgment or when the interest accrued.
[3] HRS § 478-2 states:
On judgment, Interest at the rate of ten per cent a year, and no more, shall be allowed on any judgment recovered before any court in the State, in any civil suit.
[4] In 1979 the interest rate was increased from 6% to 8%, and in 1981 it was raised to the present 10%.
[5] State contends that § 662-8 follows the Federal Tort Claims Act, 28 U.S.C. § 2411(b) (FTCA), see Levy v. Kimball, 51 Haw. 540, 465 P.2d 580 (1970), and cites federal court cases holding that under the FTCA interest accrues on a judgment after appellate review where the appeal was taken by the government. The argument is without merit. In discussing the applicability of federal cases interpreting the FTCA to a case involving an award of attorney's fees under the STLA, the supreme court held that the cases cited by the State all relied upon specific language of the FTCA limiting the award of attorney's fees and found the cases inapposite. Id. at 545, 465 P.2d at 583 (1970). Here, also, the cases cited by State rely on specific language of another federal statute, 31 U.S.C. 724(a) which leaves no doubt that judgments under the FTCA accrue interest only from the date the judgment becomes final after review upon appeal by the government.
[6] Compare HRS § 636-16 (Supp. 1984), which provides:
Awarding interest. In awarding interest in civil cases, the judge is authorized to designate the commencement date to conform with the circumstances of each case, provided that the earliest commencement date in cases arising in tort, may be the date when the injury first occurred and in cases arising by breach of contract, it may be the date when the breach first occurred.
[7] HRS § 662-15(4) provides:
Exceptions. This chapter shall not apply to:
* * * * * *
(4) Any claim arising out of assault, battery, false imprisonment, false arrest, malicious prosecution, abuse of process, libel, slander, misrepresentation, deceit, or interference with contract rights[.]
[8] The word "judgment" is also used alone in § 662-8. However, it clearly is in reference to the antecedent "final judgment" in the same section.
|
257 P.3d 814 (2011)
45 Kan. App. 2d 1024
STATE of Kansas, Appellee,
v.
Abby L. RALSTON, Appellant.
No. 103,358.
Court of Appeals of Kansas.
June 10, 2011.
*816 Lydia Krebs, of Kansas Appellate Defender Office, for appellant.
Matt J. Maloney, assistant district attorney, Nola Tedesco Foulston, district attorney, and Steve Six, attorney general, for appellee.
Before HILL, P.J., BUSER, J., and BRAZIL, S.J.
BRAZIL, J.
Abby L. Ralston was a passenger in a stolen vehicle that crashed while fleeing police. She appeals the denial of her motion to suppress the results of the search of her purse which was found in that stolen vehicle. We affirm.
On April 4, 2008, at approximately 1 a.m., Officer Daniel Weidner was dispatched to a suspicious character call in an apartment complex at 202 North Rock Road in Wichita, Kansas. The caller told dispatch that earlier in the day her license plate was stolen and that, at the time of the call, there was a white male "messing with" the license plate area of her vehicle. Dispatch informed Weidner that the caller stated that the man then got into a yellow Tiburon headed northbound on Rock Road.
Weidner saw a vehicle driven by a white male matching dispatch's description. Weidner had dispatch run the vehicle's tag and was informed that the tag was reported stolen. Weidner stated that there were three people in the vehicle, and although he could not see the person in the back seat well, he was certain there were two white males in the front seat. When Weidner activated his lights to stop the vehicle, the vehicle sped away immediately. As Weidner was pursuing the vehicle, it hit a dip in the road, causing it to crash through a fence and into a tree.
Weidner pulled his patrol vehicle to the side of the road directly behind the accident scene where he saw two white males exit the vehicle, and he ran after them. The two men jumped a fence. As Weidner ran past the scene pursuing the two men, he saw an individual wearing light-colored clothing in the back seat of the Tiburon. By the time Weidner got to the fence, he had lost sight of the two men. He scanned the area and saw someone running on the street just to the east of his location. He radioed dispatch for assistance setting up a perimeter to attempt to contain the suspects.
Weidner began walking back to the scene of the accident when he saw a white female, later identified as Ralston, wearing light-colored clothing walking towards him away from the accident scene. He asked her to identify herself and asked her who was driving the car. Ralston did not identify herself at that point. Weidner noted that she looked disturbed and shaken up. He also noted that *817 the impact of the crash was violent. Ralston stated that she did not need an ambulance.
Ralston did not immediately tell Weidner she had been in the vehicle; however, Weidner was fairly confident that she had been a passenger, due to the location, time of evening, and the light-colored clothing she was wearing. Initially, she said that she was walking from a QuikTrip located approximately 3 miles west of the accident; however, Weidner noted that the direction she was going did not correspond to her statement.
Ralston and Weidner walked back to the scene together, and at that point, Sergeant Hatter was present. Weidner asked Hatter to stand with Ralston, who at this point had only given Weidner her first name, while Weidner cleared the vehicle to ensure that there were no injured people and to see if there was any identification in the vehicle. Weidner noted multiple dark-colored backpacks and a purse that had been left in the vehicle. He brought the purse to Hatter so that Hatter could see if there was identification inside the purse. Hatter found a positive identification for Ralston and also a pouch, which contained a substance that field tested as being methamphetamine. Hatter testified that her report stated that Ralston claimed ownership of the purse; however, Hatter did not independently recall this and could not remember when Ralston claimed ownership.
Officer Shelton arrived at the scene and Weidner asked him to run the vehicle identification number of the Tiburon and the two license plates, one from the back of the vehicle and one found inside the vehicle. Shelton confirmed dispatch's information that the license plate on the back of the Tiburon had been reported stolen and that the license plate inside the Tiburon belonged to the Tiburon, which had also been reported stolen.
Ralston testified that she gave Weidner her first and last name when they met. Ralston testified that at the scene of the accident, she told Weidner she was not a passenger in the vehicle but had zjones@example.net. At the suppression hearing, she admitted that she was in the accident and was fairly "banged up," and she remembered complaining about her back and tailbone because of the impact of the crash. Ralston testified that she told the officers that none of the bags inside of the car belonged to her.
Ralston was charged with possession of methamphetamine contrary to K.S.A. 65-4160(a). Ralston filed a motion to suppress her statements and the evidence obtained during the search of a silver cigarette box found in a blue fabric pouch in Ralston's purse, which she left in the back seat of the Tiburon. The district judge overruled the motion and explained his ruling on the record. A bench trial was held, and Ralston was found guilty of possession of methamphetamine.
The motion to suppress
On appeal, Ralston does not challenge the portion of the district court's decision overruling the motion to suppress her statements. An issue not briefed by the appellant is deemed waived and abandoned. State v. Martin, 285 Kan. 994, 998, 179 P.3d 457 (2008), cert. denied, ___ U.S. ___, 129 S. Ct. 192, 172 L. Ed. 2d 138.
Ralston argues that the officer should have obtained a warrant prior to searching the vehicle and the contents of her purse and the State failed to present sufficient evidence that Ralston intended to abandon her purse in the vehicle.
Did Ralston abandon her purse, depriving her of standing?
The district court concluded that Ralston abandoned her purse. Our Supreme Court treats the issue of whether a defendant abandoned property as a standing issue. See State v. Grissom, 251 Kan. 851, 902-07, 840 P.2d 1142 (1992). Standing is an issue of law. State v. Ernesti, 291 Kan. 54, 60, 239 P.3d 40 (2010).
"[A] defendant cannot object to the seizure of evidence without proper standing to challenge the validity of the search. On the issue of standing, the burden is on the defendant to show an expectation of privacy in the property searched. A defendant may testify at a suppression hearing to establish his or her standing to challenge a search without jeopardizing his or her defense *zjones@example.net. State v. Cruz, 15 Kan. App. 2d 476, 484, 809 P.2d 1233, rev. denied, 249 Kan. 777 (1991); see State v. Sumner, 210 Kan. 802, 803-04, 504 P.2d 239 (1972)." State v. Gonzalez, 32 Kan. App. 2d 590, 593, 85 P.3d 711 (2004).
In Grissom, 251 Kan. at 902, 840 P.2d 1142, our Supreme Court said that it has long been the law in Kansas that an individual who abandons property is not permitted to contest the legality of the search and seizure of the property. The Grissom court, quoting State v. Brunson, 13 Kan. App. 2d 384, Syl. ¶¶ 3, 4, 5, 771 P.2d 938, rev. denied, 245 Kan. 786 (1989), said:
"`The warrantless search of an automobile which has been abandoned by its owner will violate the Fourth Amendment only if the defendant manifested a subjective expectation of privacy in the automobile and its contents that society accepts as objectively reasonable.'
"`One's personal right to Fourth Amendment protection of property against search and seizure is lost when that property is abandoned, absent a manifested reasonable expectation of privacy.'
"`[I]n determining the continued existence of Fourth Amendment property rights, whether the facts reveal a complete abandonment of an automobile in the strict property rights sense is not the issue. The issue is whether, by any good, sound, ordinary sense standard, the defendant abandoned any reasonable expectation to a continuation of his personal right against having his car searched.' [Citation omitted.]" Grissom, 251 Kan. at 903-04, 840 P.2d 1142.
In 1995, a panel of this court stated that "[f]or criminal law purposes, the concept of abandonment of property has two components: (1) A defendant must intend to abandon the property; and (2) the defendant must freely decide to abandon the property and the decision must not merely be the product of police misconduct." State v. Likins, 21 Kan. App. 2d 420, 426, 903 P.2d 764, rev. denied, 258 Kan. 861 (1995). The court went on to note:
"`Thus, abandonment is a question of intent and exists only if property has been voluntarily discarded under circumstances indicating no further expectation of privacy.' 68 Am.Jur.2d, Searches and Seizures § 6, p. 645. Further, we cannot assume that a disclaimer of ownership always constitutes an abandonment for Fourth Amendment purposes. 1 LaFave, Search and Seizure § 2.6(b), p. 474 (2d ed. 1987)." 21 Kan. App. 2d at 426, 903 P.2d 764.
In this case, the district court found that Ralston "clearly meets the two prongs that she intended to abandon the property and she freely decided to abandon that property, without any coercion by the police." The court continued:
"Not only does she deny being in the car, she denies ownership of the purse and all property in the car, and even when she is aware that the purse is gonna be searched, because at that time Weidner gives the purse to Hatter, Ralston is right in the presence of Hatter, she still maintains noshe makes no statement saying, That purse is mine and you can't search it."
On appeal, Ralston argues that her case is more analogous to Likins, where intent to abandon property was not found than Grissom and Brunson, where the courts found intent to abandon.
The facts of Ralston's case, however, are similar to those she attempts to distinguish herself from and very different from those presented in Likins. In Brunson, the court concluded that the defendant, who "abandoned his automobile on a golf course . . . with the police in pursuit, exited that vehicle, and fled on foot leaving the lights on and the keys in the ignition, abandoned any reasonable expectation of privacy in the contents of that automobile." 13 Kan. App. 2d at 391-95, 771 P.2d 938. Similarly, the vehicle Ralston was a passenger in crashed into a tree and two male occupants were seen running from the scene of the accident. Ralston left the vehicle, was seen walking away from the accident, and then denied being a passenger in the vehicle.
Moreover in Grissom, the court held that the defendant, who parked on private property without authorization, slept in a field across the street, did not attempt to intervene *819 when the vehicle was towed or go to the police station to claim the car, and subsequently stole another car to avoid arrest, had abandoned the car and did not have an objectively reasonable expectation of privacy in the seized car. 251 Kan. at 905-07, 840 P.2d 1142. Similarly in this case, the district court made the factual finding that Ralston made no claim to the ownership or possession of the purse. Although Ralston did identify her purse at some point in time, it is clear from Ralston's own testimony at the hearing that she initially denied having any property in the vehicle.
The Likins case, in contrast, was based on a distinction between possession and ownership of a vehicle, where the defendant was driving his friend's vehicle and told an officer that he could not grant permission to search another's car.
Under the circumstances of this case, Ralston's expectation of privacy in her purse was not objectively reasonable, and she therefore lacked standing to challenge the search. The district court's decision finding that Ralston had abandoned her purse is affirmed.
Does Ralston's status as a passenger in a stolen vehicle deprive her of standing?
The State additionally argues that Ralston lacks standing to challenge the search of the stolen vehicle and her purse found in the vehicle, based on the vehicle being stolen.
The district court did not base its decision on the car's stolen status; however, the State raised this issue at the motion to suppress hearing, and "[s]tanding is a component of subject matter jurisdiction and may be raised for the first time on appeal." See Ernesti, 291 Kan. at 60, 239 P.3d 40 (citing Mid-Continent Specialists, Inc. v. Capital Homes, 279 Kan. 178, 185, 106 P.3d 483 [2005]).
The State argues that Ralston lacked standing to challenge the search and seizure of items from the stolen vehicle. Because Ralston was a passenger in the vehicle, the first step in the analysis is to note that the general rule for passengers provides that "[u]nder the Fourth Amendment to the United States Constitution and § 15 of the Kansas Constitution Bill of Rights, a passenger in a vehicle is seized when a law enforcement officer stops the vehicle through a show of authority and the passenger does not flee." State v. Smith, 286 Kan. 402, Syl. ¶ 1, 184 P.3d 890 (2008). In this case, although Ralston did leave the scene initially and, therefore, was arguably not seized at that time, Weidner testified that he asked Ralston to return to the scene and asked Hatter to keep an eye on Ralston. Weidner testified that Ralston was being detained because he thought she had been in the car that had just crashed. Therefore, as a panel of this court recently noted, for purposes of this analysis, because Ralston was seized at the relevant point in time and no incriminating evidence was obtained before then, this court need not determine whether she was seized when the police attempted to stop the vehicle, which then crashed. See State v. Reiss, 45 Kan. App. 2d 85, 244 P.3d 693 (2010).
Next, we must determine whether a passenger in a stolen vehicle has standing to challenge the search of the vehicle. The State quotes from State v. Wickliffe, 16 Kan. App. 2d 424, Syl. ¶ 3, 826 P.2d 522 (1992), where a panel of this court found that "a thief acquires no legitimate ownership or possessory interest in a stolen vehicle." The State argues that pursuant to Wickliffe, Ralston has no standing to challenge the search. Two issues with the State's contention must be addressed. First, does the Wickliffe holding extend to a passenger in a stolen vehicle, and if so, does the Wickliffe holding extend to the search of Ralston's purse?
Beginning with whether Wickliffe's holding extends to a passenger in a stolen vehicle, a review of the Wickliffe panel's holding is helpful:
"The basic test to determine whether a person has standing to challenge the validity of the search is not whether the person had a possessory interest in the items seized, but whether he had a legitimate expectation of privacy in the area searched. [Citations omitted.]
"It is clear that a person who does not have an ownership or possessory interest *820 in the property searched has little legitimate expectation of privacy in that property. State v. Strayer, 242 Kan. 618, 620, 750 P.2d 390 (1988); State v. Sanders, 5 Kan.App.2d [189,] at 193-95 [614 P.2d 998 (1980)]. Based on Kansas case law, the lack of ownership or possessory interest is dispositive on the issue of standing." Wickliffe, 16 Kan.App.2d at 429, 826 P.2d 522.
No Kansas court has addressed whether a passenger in a stolen vehicle has standing to challenge the validity of the search; however, Search and Seizure, a treatise on the Fourth Amendment, addresses this issue and states:
"A person's standing depends upon his justified expectation of privacy, and this is not determined upon the basis of what the police believe or even necessarily upon the actual facts. For example, a passenger in a vehicle might have standing notwithstanding the car's actual character as stolen property if the passenger believed that the person giving him the ride had lawful possession of it." (Emphasis added.) 6 LaFave, Search and Seizure § 11.3(e), p. 204 (4th ed. 2004).
Pursuant to this rationale, Wickliffe extends to a passenger if the passenger was aware that the vehicle was stolen.
The record is nearly void of evidence regarding Ralston's knowledge of whether the vehicle was stolen. The only time that this issue was addressed was during cross-examination by the State, where Ralston testified that she did not know why the two men were running from the police that night. Ralston's attorney objected to this testimony, and the district court sustained the objection and ordered the answer stricken from the record. Because on the issue of standing, the burden is on the defendant to show an expectation of privacy in the property searched, Ralston has failed to meet this burden with respect to the vehicle as she presented no evidence that she was unaware that the vehicle was stolen.
Because under the facts of this case, Ralston lacks standing to challenge the search of the stolen vehicle, we must determine whether she also lacks standing to challenge the search of her purse contained in the vehicle. The State argues that Wickliffe extends to Ralston's purse. In Wickliffe, the panel stated that an automobile thief has neither an ownership nor a possessory interest in the property stolen, and "[a]s a result, that individual cannot have a legitimate expectation of privacy in the vehicle stolen and does not have standing to object to the search of the vehicle and seizure of items therefrom." 16 Kan. App. 2d at 430, 826 P.2d 522. Therefore, pursuant to Wickliffe, Ralston lacks standing to challenge the search of her purse, an item seized from the stolen vehicle.
Ralston argues that pursuant to State v. Stubby, No. 95,229, 2006 WL 3409759, unpublished opinion filed November 22, 2006, rev. denied, 283 Kan. 933 (2007), she has standing to challenge the search of her purse. In Stubby, a panel of this court found that although "the defendant has the burden of showing an expectation of privacy by establishing ownership or possession of the property searched," the panel had "absolutely no problem whatsoever in finding that Stubby established ownership of the purse and that she reasonably had an expectation of privacy with respect to the contents of her purse." Slip op. at 4. Stubby is distinguishable from this case, however, because in Stubby the defendant's property was not in a stolen vehicle.
Even if we were to find Ralston did not abandon her purse, she still fails to meet her burden of establishing that she had standing to challenge the search of her purse because the vehicle she was traveling in was stolen, and no evidence was presented that Ralston was unaware of this fact (vehicle stolen) that was not stricken from the record by her own counsel's objection.
Because Ralston does not have standing to challenge the search of her purse, we need not address Ralston's argument that there was no exception to the warrant requirement authorizing the State to search Ralston's purse or the State's alternative argument that the methamphetamine would have been inevitably discovered.
Affirmed.
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Citation Nr: 1635636
Decision Date: 09/12/16 Archive Date: 09/20/16
DOCKET NO. 09-07 122A ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in Newark, New Jersey
THE ISSUES
1. Whether a timely substantive appeal was filed to a February 2005 rating decision that denied a rating in excess of 30 percent for myasthenia gravis.
2. Entitlement to a rating in excess of 30 percent for myasthenia gravis from March 7, 2008.
3. Entitlement to a total disability rating based on individual unemployability due to service-connected disabilities (TDIU).
REPRESENTATION
The Veteran is represented by: Karl Kazmierczak, Attorney
WITNESS AT HEARING ON APPEAL
The Veteran
ATTORNEY FOR THE BOARD
A. Tenney, Associate Counsel
INTRODUCTION
The Veteran had active service from September 1995 to August 1998. In June 2012, he testified at a Travel Board hearing in Newark, New Jersey, before the undersigned Veterans Law Judge. A transcript of the hearing has been associated with the claims file.
The issue of TDIU is addressed in the REMAND portion of the decision below and is REMANDED to the Agency of Original Jurisdiction (AOJ).
FINDINGS OF FACT
1. On February 2, 2005, the RO denied a higher rating for myasthenia gravis.
2. In March 2005, the Veteran filed a timely notice of disagreement with the February 2005 rating decision, and the RO issued a statement of the case on June 26, 2006.
3. A substantive appeal was not received within 60 days from the June 26, 2006, mailing of the statement of the case or within one year from the February 2, 2005, mailing of the rating decision.
4. For the entire rating period on appeal from March 7, 2008, myasthenia gravis has been manifested by intermittent, extreme fatigue, muscle weakness, and difficulties breathing, chewing, and swallowing.
CONCLUSIONS OF LAW
1. A timely substantive appeal was not filed following the February 2005 rating decision that denied a rating in excess of 30 percent for myasthenia gravis. 38 U.S.C.A. § 7105 (West 2014); 38 C.F.R. §§ 3.102, 19.30, 19.34, 20.200, 20.202, 20.302, 20.303 (2015).
2. Resolving reasonable doubt in favor of the Veteran, the criteria for a 60 percent rating, but no higher, for myasthenia gravis have been met effective March 7, 2008. 38 U.S.C.A. § 1155 (West 2014); 38 C.F.R. §§ 4.1, 4.2, 4.7, 4.88b, 4.124a, Diagnostic Codes (DCs) 6354, 8025 (2015).
REASONS AND BASES FOR FINDINGS AND CONCLUSIONS
Timeliness of Substantive Appeal
In order to perfect an appeal to the Board, a substantive appeal (VA Form 9 or equivalent statement) must be submitted within 60 days of the date of mailing of the statement of the case or the remainder the one-year period from the date of mailing of notification of the determination being appealed, whichever period ends later. 38 C.F.R. §§ 20.200, 20.202, 20.302(b). An extension of the 60-day period for filing a substantive appeal may be granted for good cause. A request for such an extension must be in writing and must be made prior to the expiration of the time limit for filing the substantive appeal. The extension request must generally be filed with the VA office from which the claimant received notice of the determination being appealed, unless notice has been received that the applicable records have been transferred to another office. 38 C.F.R. § 20.303.
Historically, in February 2005, the RO denied a rating in excess of 30 percent for myasthenia gravis. The Veteran was notified of this decision and of his appellate rights in a February 2, 2005, letter. He filed a timely notice of disagreement (NOD) with the February 2005 rating decision in March 2005. The RO issued a statement of the case (SOC) on June 26, 2006.
The letter accompanying the June 2006 SOC was addressed to the Veteran and copied the then-representative, and informed him that he had the right to file a VA Form 9 (Appeal to the Board of Veterans' Appeals) or equivalent substantive appeal within 60 days from receipt of the notice letter or the remainder if any, of one year following receipt of notice of the February 2005 rating decision. The June 2006 letter also enclosed a blank VA Form 9 and informed him and his then-representative that he could request an extension within the 60-day period for more time to file and perfect his appeal. The substantive appeal, dated August 29, 2006, was received by the RO on September 5, 2006, more than 60 days following the issuance of the SOC issued on June 26, 2006.
While timely receipt of a substantive appeal is not a jurisdictional prerequisite, in the Veteran's case, there has been no explicit or implicit representation by VA, either by the RO or the Board, that it was waiving the filing requirement of a timely substantive appeal. Percy v. Shinseki, 23 Vet. App. 37 (2009). In September 2006, the RO sent a letter to the Veteran informing him that the VA Form 9, received in September 2006, was not a timely appeal as to the February 2005 rating decision. He perfected an appeal of that determination. After certification to the Board, the Board took no action that would represent a waiver of the time requirement for filing the substantive appeal.
Further, the record does not contain a document that was submitted in lieu of a VA Form 9; however, while the Veteran requested an extension via the September 2006 VA Form 9 because of self-reported difficulties receiving mail due to changes of address, the request was received on September 5, 2006, more than 60 days following the issuance of the SOC issued on June 26, 2006. See 38 C.F.R. § 20.303 (reflecting a request for such an extension must be in writing and must be made prior to the expiration of the time limit for filing the substantive appeal of the 60-deadline (emphasis added)).
The September 2006 extension request, received after the expiration of the time limit for filing the substantive appeal, also did not specify any allegation of error of fact or law related to February 2005 denial of the increased rating. See38 U.S.C.A. § 7105(d)(3) (a substantive "appeal should set out specific allegations of error of fact or law related to specific items in the [SOC]").
While the Veteran contends he did not receive the SOC until after the 60-day deadline due to multiple changes of address, the record shows that the notification was sent to his then-current address of record and was not returned as undeliverable. The regularity of mail service is presumed, and the record does not appear to contain any evidence that the RO did not properly mail notice of the June 2006 SOC. Ashley v. Derwinski, 2 Vet. App. 62, 64-65 (1991). Additionally, the June 2006 SOC copied the representative and was also not returned as undeliverable.
The Veteran is competent to report not receiving the June 2006 notice until after the 60-day deadline had expired, possibly due to a subsequent move; however, his lay statement alone is not sufficient evidence to rebut the presumption that the June 2006 and accompanying notice were properly mailed to him. Also, as discussed above, an extension was requested after to the expiration of the time limit for filing the substantive appeal of the 60-deadline, and did not specify any allegation of error of fact or law related to February 2005 denial of an increased rating. Thus, the June 2006 SOC and accompanying notice was properly mailed to him and he received the notice but did not timely perfect an appeal.
In sum, notice of the February 2005 rating decision was mailed to the Veteran on February 2, 2005. The SOC was issued on June 26, 2006. The Veteran 60 days to file a substantive appeal; however the substantive appeal was not received until September 5, 2006, approximately two weeks past the deadline.
The law is clear that a substantive appeal must be filed with the agency of jurisdiction within the appropriate time frame. The Board is bound by the laws and regulations governing the appellate process. For the foregoing reasons, a timely substantive appeal was not filed following the February 2005 rating decision that denied a rating in excess of 30 percent for myasthenia gravis; therefore the appeal is denied.
Increased Rating for Myasthenia Gravis from March 7, 2008
The Veteran is also seeking an increased rating for his service-connected myasthenia gravis from March 7, 2008 (date of claim for increased rating). Disability ratings are determined by applying a schedule of ratings that is based on average impairment of earning capacity. Separate diagnostic codes identify the various disabilities. 38 U.S.C.A. § 1155; 38 C.F.R., Part 4. Each disability must be viewed in relation to its history and the limitation of activity imposed by the disabling condition should be emphasized. 38 C.F.R. § 4.1.
Examination reports are to be interpreted in light of the whole recorded history, and each disability must be considered from the point of view of the veteran working or seeking work. 38 C.F.R. § 4.2. Where there is a question as to which of two disability evaluations shall be applied, the higher evaluation is to be assigned if the disability picture more nearly approximates the criteria required for that rating. Otherwise, the lower rating is to be assigned. 38 C.F.R. § 4.7.
Myasthenia gravis is a neuromuscular disease that leads to fluctuating muscle weakness and fatigue, rated under DC 8025. 38 C.F.R. § 4.124a. Under DC 8025, a minimum evaluation of 30 percent is warranted. A note to DC 8025 provides that it is required for the minimum ratings for residuals under DCs 8000-8025 that there be ascertainable residuals. Determinations as to the presence of residuals not capable of objective verification must be approached on the basis of the diagnosis recorded; subjective residuals will be accepted when consistent with the disease and not more likely attributable to other disease or no disease. It is of exceptional importance that when ratings in excess of the prescribed minimum ratings are assigned, the diagnostic code utilized as bases of evaluation be cited, in addition to the codes identifying the diagnoses.
38 C.F.R. § 4.124a also notes that a disability rated under DC 8025 may be rated from 30 percent to 100 percent in proportion to the impairment of motor, sensory, or mental function, i.e. complete or partial loss of one or more extremities, speech disturbances, impairment of vision, disturbances of gait, and/or tremors. See 38 C.F.R. § 4.124a.
The Veteran contends generally that myasthenia gravis has been manifested by more severe symptoms and impairment than contemplated by the 30 percent rating assigned. In an April 2008 statement, he wrote that myasthenia gravis caused fatigue in the arms, shoulders, and limited the activities of daily life. He noted that, despite therapy, triceps and deltoid weakness failed to improve, and that he experienced extreme arm and face muscle weakness, double vision, slurred speech, trouble swallowing, and a slight limp due to weak calf muscles. At the June 2012 Board hearing, he testified to muscle weakness when speaking or chewing, as well as feeling physical exhausted as the end of the day. He testified to weekly plasmapheresis treatments.
In an April 2008 statement, the Veteran's fiancé wrote that she witnessed him experience muscle weakness, difficulties with speaking and chewing, and that he was tired "all of the time." She also wrote that she washed his face on a daily basis because he was too weak to do so. Various VA treatment records from 2008 reflect that he reported weakness with the VA examiners assessing normal motor, cranial nerve, and sensory examinations.
In a May 2008 VA examination, the Veteran complained of intermittent muscle weakness, diplopia, and droopy eyelids. The examiner assessed horizontal diplopia and diminished right upper extremity triceps and right deltoid strength. The examiner noted recurrent mild to moderate symptoms of myasthenia gravis, which were controlled by medication. In August 2008, the Veteran reported that problems with speech and swallowing had worsened over the prior two months. In January 2009, he reported symptoms of myasthenia gravis had worsened, to included increased difficulties with speech articulation and swallowing. The clinician noted weakness of eyelid closure, elbow extension, and cheek puff with normal swallowing.
At the June 2012 Board hearing, the Veteran noted muscle weakness when speaking or chewing, as well as feeling physical exhausted as the end of the day. He also testified to weekly plasmapheresis treatments because medication was no longer effective. In April 2014, he reported difficulties swallowing and denied problems chewing or breathing. The VA examiner assessed a normal sensory examination and persistent dysarthria at the end of the day.
In an April 2015 VA examination, the Veteran reported weekly plasmapheresis treatments, difficulties with triceps strength and breathing, weakness of the facial muscles, and diplopia as to lateral gaze. The assessment was mild weakness in the triceps/biceps and eye muscles, which caused an eyelid droop and diplopia, as well as mild dysarthria at the end of the day. The examiner also noted mild muscle strength in the upper portion of the face.
A May 2015 letter from a VA clinician reflected the Veteran's treatment for myasthenia gravis beginning in 2006. The clinician also wrote that the Veteran required weekly plasmapheresis and intermittently experienced significant weakness, difficultly speaking, swallowing, chewing, and shortness of breath. The clinician wrote that, while the Veteran functions "reasonably well," significant impairment persists.
After a review of all the evidence, lay and medical, the evidence supports a 60 percent rating, but no higher, from March 7, 2008, due to symptoms manifested by intermittent, extreme fatigue, muscle weakness, and difficulties breathing, chewing, and swallowing, as a condition analogous to a chronic fatigue syndrome under DC 6354.
As an analogous rating, one of the key features of DC 6354 is that it rates the severity of chronic fatigue syndrome based on the extent of the impact on daily activities, accounting for the fact that symptoms do wax and wane. In pertinent part, under DC 6354, a 60 percent rating is warranted for symptoms which are nearly constant and restrict routine daily activities to less than 50 percent of the pre-illness level, or which wax and wane resulting in periods of incapacitation of at least six weeks total duration per year. A total disability rating is warranted for symptoms which are nearly constant and so severe as to restrict routine daily activities almost completely and which may occasionally preclude self-care. A note under this regulation provides that the condition will be considered incapacitating only while it requires bed rest and treatment by a physician.
Findings from the May 2008 and April 2015 VA examinations, and history and findings in the numerous VA treatment records reflecting treatment for myasthenia gravis, as well as the Veteran's self-reported symptoms, are consistent with a
60 percent rating under DC 8025 (as analogous to chronic fatigue syndrome under DC 6354). In this case, VA treatment records dated throughout the period on appeal reflect intermittent, extreme fatigue, muscle weakness, and difficulties breathing, chewing, and swallowing.
At the June 2012 Board hearing, the Veteran testified to muscle weakness when speaking or chewing, as well as feeling physical exhausted as the end of the day. April 2014 and April 2015 VA examiners assessed persistent dysarthria. The May 2015 letter from a VA examiner reflects treatment for myasthenia gravis beginning in 2006, that the myasthenia gravis requires weekly plasmapheresis, and that the Veteran experienced significant weakness and impairment. Additionally, an April 2008 lay statement from the Veteran's fiancé indicates that he requires assistance in a number of critical areas, like face washing. Accordingly, for the rating period from March 7, 2008, the severity of the symptoms and impairment due to the service-connected from myasthenia gravis more nearly approximates the criteria a higher 60 percent rating.
Next, the evidence of record, both lay and medical, does not demonstrate that symptoms from myasthenia gravis that are nearly constant as to restrict routine daily activities almost completely to support the next higher rating. In fact, while some level of symptoms appears to always be present, they are not so severe that they restrict his routine daily activities "almost completely." Rather, it is only during times of exacerbation that such severity is shown, and while those time periods are recurring, they are not nearly constant; therefore, he does not meet the criteria for a higher, total rating.
The Board has also considered whether referral for consideration of an extraschedular rating is warranted, noting that if an exceptional case arises where ratings based on the statutory schedules are found to be inadequate, consideration of an "extra-schedular" evaluation commensurate with the average earning capacity impairment due exclusively to the service-connected disability or disabilities will be made. 38 C.F.R. § 3.321(b)(1).
The Court has held that the determination of whether a claimant is entitled to an extraschedular rating under § 3.321(b) is a three-step inquiry. Thun v. Peake, 22 Vet. App. 111 (2008). The threshold factor for extraschedular consideration is a finding that the evidence before VA presents such an exceptional disability picture that the available schedular evaluations for that service-connected disability are inadequate.
If the criteria reasonably describe the veteran's disability level and symptomatology, then the veteran's disability picture is contemplated by the rating schedule and no referral is required. If the criteria do not reasonably describe the veteran's disability level and symptomatology, a determination must be made whether the veteran's exceptional disability picture exhibits other related factors such as those provided by the regulation as "governing norms." 38 C.F.R. § 3.321(b)(1) (related factors include "marked interference with employment" and "frequent periods of hospitalization").
In this case, the evidence of record does not demonstrate that the symptoms and/or impairment of myasthenia gravis render the schedular criteria inadequate. The Veteran's main symptoms were complaints of fatigue and muscle weakness. These very symptoms were explicitly contemplated in the grant of the higher 60 percent rating assigned above. In this regard, and consistent with the reasoning presented above, the Board finds that the rating schedule is adequate, even in regard to the collective and combined effect of all of the Veteran's service connected disabilities, and that referral for extraschedular consideration is not warranted under the circumstances of this case. Johnson v. McDonald, 762 F.3d 1362, 1365-66 (Fed. Cir. Aug. 6, 2014).
Finally, VA satisfied its duty to notify and assist the Veteran pursuant to the Veterans Claims Assistance Act of 2000 (VCAA). 38 U.S.C.A. §§ 5100, 5102, 5103, 5103A, 5107, 5126; 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326(a).
Upon receipt of a complete or substantially complete application for benefits, VA is required to notify the claimant and his or her representative, if any, of any information, and any medical or lay evidence, that is necessary to substantiate the claim and of the relative duties of VA and the claimant for procuring that evidence. 38 U.S.C.A. § 5103(a); 38 C.F.R. § 3.159(b). Such notice should also address VA's practices in assigning disability evaluations and effective dates for those evaluations. See Dingess/Hartman v. Nicholson, 19 Vet. App. 473 (2006).
As to the timeliness issue discussed above, the law is dispositive of the issue of whether a timely substantive was filed in response to the February 2005 rating decision, and VA's duties to notify and assist do not apply.
As to the increased rating issue, the Veteran was provided notice in April 2008, prior to the initial adjudication of the claim in June 2008. He was notified of the evidence not of record that was necessary to substantiate the claim, VA and his respective duties for obtaining evidence, and VA's practices in assigning disability evaluations and effective dates. Thus, the Board concludes that VA satisfied its duties to notify the Veteran.
Second, VA satisfied its duty to obtain a medical opinion when required. Specifically, the Veteran was provided with VA examinations (the reports of which has been associated with the claims file) in May 2008 and April 2015. The May 2008 and April 2015 VA examination reports are thorough and adequate and provide a sound basis upon which to base a decision with regard to this claim. The VA examiners personally interviewed and examined the Veteran, including eliciting a history, conducted a physical examination, and offered opinions with supporting rationale. See McLendon v. Nicholson, 20 Vet. App. 79, 83 (2006).
The Board remanded the appeal for further development in February 2013. Additional treatment records were obtained and the Veteran underwent a VA examination in April 2015, that, as discussed above, the Board finds was thorough and adequate and in compliance with the Board's remand instructions; therefore, there has been substantial compliance with the prior Board remand orders. See Stegall v. West, 11 Vet. App. 268, 271 (1998) (noting the Board's duty to "insure [the RO's] compliance" with the terms of its remand orders); D'Aries v. Peake,
22 Vet. App. 97 (2008).
In sum, VA satisfied its duties to notify and assist the Veteran, the Board finds that there is no further action to be undertaken to comply with the provisions of 38 U.S.C.A. § 5103(a), § 5103A, or 38 C.F.R. § 3.159.
ORDER
A substantive appeal was not timely filed to a February 2005 rating decision that denied a rating in excess of 30 percent for myasthenia gravis.
A 60 percent rating, but no higher for myasthenia gravis from March 7, 2008, is granted, subject to the law and regulations governing the payment of monetary benefits.
REMAND
With respect to the remaining issue of TDIU, VA must afford a veteran a medical examination and/or obtain a medical opinion when it is necessary to make a decision on the claim. 38 U.S.C.A. § 5103A(d); 38 C.F.R. § 3.159(c)(4).
The Veteran's service-connected disabilities include myasthenia gravis, rated as
30 percent disabling from December 1, 1999, and, as decided herein, 60 percent disabling from March 2008, and chronic pericarditis, rated as 10 percent disabling from April 15, 2008. While the February 2013 Board remand found the TDIU issue on appeal was raised by the record during the appeal of the rating issue (see Rice v. Shinseki, 22 Vet. App. 447 (2009)), and instructed the AOJ to initially adjudicate the issue of TDIU, the AOJ did not seek a medical opinion as to whether all service-connected disabilities rendered the Veteran unemployable.
Additionally, a May 2008 statement from the Veteran's former employer reflects dismissal for excessive absences causing the inability to perform as a sales and finance manager due to sick days and "personal time." Various lay statements from the Veteran reflect part-time employment, and at an April 2015 VA examination, he reported employment as an information technology specialist; however, the record does not indicate whether the reported employment was substantially gainful.
Thus, there is insufficient evidence to determine whether the service-connected disabilities alone are severe enough to warrant a TDIU. For these reasons, an examination is needed to determine whether the Veteran's service-connected disabilities preclude substantially gainful employment.
Accordingly, the issue is REMANDED for the following actions:
1. Ask a VA vocational or similar occupational specialist to evaluate the effect of all the service-connected disabilities on the Veteran's employability (the ability to obtain or maintain substantially gainful employment). Specifically, the specialist is directed to assess the extent of functional and industrial impairment resulting from each of the Veteran's service-connected disabilities.
The opinion should address whether the Veteran's service-connected disabilities alone are so disabling as to render him unable to obtain or maintain substantially gainful employment.
A medical, educational, and employment history should be taken. The Veteran's age and the effects of nonservice-connected disabilities cannot be factors for consideration in making the determination; however, the effects of treatments and medications used to treat the service-connected disabilities should be considered in the opinion. A rationale for all opinions and a discussion of the facts and medical principles involved should be provided.
2. Then readjudicate the issue of entitlement to a TDIU. If the benefit sought on appeal remains denied, the Veteran and representative should be provided a supplemental statement of the case. An appropriate period of time should be allowed for response before the case is returned to the Board.
The Veteran has the right to submit additional evidence and argument on the matter the Board has remanded. Kutscherousky v. West, 12 Vet. App. 369 (1999). This claim must be afforded expeditious treatment. The law requires that all claims that are remanded by the Board of Veterans' Appeals or by the United States Court of Appeals for Veterans Claims for additional development or other appropriate action must be handled in an expeditious manner. See 38 U.S.C.A. §§ 5109B, 7112 (West 2014).
______________________________________________
L. HOWELL
Veterans Law Judge, Board of Veterans' Appeals
Department of Veterans Affairs
|
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
_________________________________
)
CHANTEL WARD, )
)
Plaintiff, )
)
v. ) Civil Action No. 13-CV-0098 (KBJ)
)
DISTRICT OF COLUMBIA, )
Defendant. )
)
_________________________________ )
OPINION ADOPTING
REPORT & RECOMMENDATION OF MAGISTRATE JUDGE
Plaintiff Chantel Ward (“Ward”), an adult student, brought this action appealing
a Hearing Officer’s dismissal of her administrative claim under the Individuals with
Disabilities Education Act (“IDEA”). Ward’s administrative claim challenged the
decision of the District of Columbia Public School System (“DCPS”) to transfer Ward
from one private school (Monroe) to another (Kingsbury) on the ground that the transfer
did not comply with her individualized education program and was not the least
restrictive environment available for her education. Accordingly, Ward alleges that she
was denied a free and appropriate public education, and seeks an order that both
reverses the administrative decision to transfer her and grants funding for her placement
at Monroe.
Ward first brought an administrative complaint regarding the transfer on August
20, 2012. The Hearing Officer held an administrative hearing on October 26, 2012, and
issued a decision denying Ward’s request on November 3, 2012. On January 23, 2013,
Ward filed a complaint in this Court. (ECF No. 1.) This case was referred to a
1
Magistrate Judge for full case management on January 24, 2013 (ECF No. 3), and on
March 5, 2013, Ward filed an amended complaint. (ECF No. 9.) On April 30, 2013,
Ward filed a motion for summary judgment (ECF No. 13), and Defendant filed a cross-
motion for summary judgment on May 28, 2013 (ECF No. 15).
On December 23, 2013, Magistrate Judge Deborah A. Robinson issued a Report
and Recommendation (ECF No. 21, attached hereto as Appendix A) with respect to the
parties’ cross motions for summary judgment. The Report and Recommendation
reflects Magistrate Judge Robinson’s opinion that Ward’s motion for summary
judgment should be denied, and that Defendant’s Motion for summary judgment should
be granted. Report and Recommendation at 2. The Report and Recommendation also
advised the parties that either party may file written objections to the Report and
Recommendation, which must include the portions of the findings and recommendations
to which each objection is made and the basis for each such objection. Id. at 17. The
Report and Recommendation further advised the parties that failure to file timely
objections may result in waiver of further review of the matters addressed in the Report
and Recommendation. Id.
Under this court’s local rules, any party who objects to a Report and
Recommendation must file a written objection with the Clerk of the Court within 14
days of the party’s receipt of the Report and Recommendation. LCvR 72.3(b). As of
this date—over a month after the Report and Recommendation was issued—no
objections have been filed.
The Court has reviewed Magistrate Judge Robinson’s report and will ADOPT
the Report and Recommendation in its entirety. Accordingly, the Court will DENY
2
Plaintiff’s motion for summary judgment and GRANT Defendant’s motion for summary
judgment. A separate order consistent with this opinion will follow.
DATE: January 24, 2014 Ketanji Brown Jackson
KETANJI BROWN JACKSON
United States District Judge
3
APPENDIX A
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 1 of 17
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
CHANTEL WARD,
Plaintiff,
Civil Action No. 13-0098
v. KBJ/DAR
DISTRICT OF COLUMBIA,
Defendant.
REPORT AND RECOMMENDATION
Plaintiff Chantel Ward commenced this action against the District of Columbia, pursuant
to the Individuals with Disabilities Education Act (“IDEA”), 20 U.S.C. § 1400, et. seq., alleging
that it failed to provide her with an appropriate educational placement, and seeking reversal of an
administrative hearing officer determination that denied her request for relief. Amended
Complaint for Declaratory Judgment & Inju[n]ctive and Other Relief (“Amended Complaint”)
(Document No. 9).1 This action was referred to the undersigned United States Magistrate Judge
for full case management, including a report and recommendation on dispositive motions.
Referral to Magistrate Judge Order (Document No. 3). Pending for consideration by the
undersigned are Plaintiff[’s] Motion for Summary Judgment (Document No. 13) and Defendant’s
Cross-Motion for Summary Judgment (Document No. 15). Upon consideration of the parties’
motions, the memoranda in support thereof and opposition thereto, the administrative record and
1
Plaintiff originally filed her Complaint for Declaratory Judgment & Inju[n]ctive and Other Relief
(Document No. 1) on January 23, 2013; however, at the initial scheduling conference, the undersigned ordered that
she file an amended complaint to correct a typographical error in the request for relief, see Scheduling Order
(Document No. 10).
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 2 of 17
W ard v. District of Columbia 2
the entire record herein, the undersigned will recommend that the court deny Plaintiff’s motion
for summary judgment and grant Defendant’s cross-motion for summary judgment.
BACKGROUND
Plaintiff Chantel Ward is an adult student, residing in the District of Columbia, who has
been identified as having a “specific learning disability” that requires special education services.
Amended Complaint ¶¶ 5-6, 8-9; Administrative Record (Document No. 12) at 45. Plaintiff’s
individualized education program (“IEP”) requires that she receive 26 hours per week of
specialized instruction, 30 minutes per week of behavioral support services, and one hour per
week of speech-language pathology services. Id. at 47. With respect to the least restrictive
environment (“LRE”) provision, Plaintiff’s IEP prescribes that she receive a full-time out of
general education setting to receive specialized instruction in the areas of reading, math, and
written expression.2 Id. District of Columbia Public Schools (“DCPS”) began funding
Plaintiff’s attendance at Monroe School, a private full-time special education school, after the
parties executed a settlement agreement in December 2010 to resolve a previous administrative
complaint. Id. at 45. Prior to that, Plaintiff attended the Cesar Chavez Public Charter School for
both the 2009-2010 and 2010-2011 school years. Id. at 45, 57; Amended Complaint ¶ 8. At
Cesar Chavez, Plaintiff struggled with school and had to repeat ninth grade twice. Id. at 45.
2
The hearing officer, and the parties, characterize the “setting” which Plaintiff requires, as established by
the LRE provision of her IEP, as “full-time placement out of the general education [setting].” See Administrative
Record at 47; see also id. at 43 n.2. The phrase “least restrictive environment” refers to the IDEA’s requirement that
“[t]o the maximum extent appropriate, children with disabilities, including children in public or private institutions or
other care facilities, are educated with children who are not disabled, and special classes, separate schooling, or other
removal of children with disabilities from the regular educational environment occurs only when the nature or
severity of the disability of a child is such that education in regular classes with the use of supplementary aids and
services cannot be achieved satisfactorily.” 20 U.S.C. § 1412(a)(5)(A).
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 3 of 17
W ard v. District of Columbia 3
While attending Monroe, she “has made academic and emotional progress” and “is more focused
and interested in school.” Id. at 46. In October 2012, the director of Monroe concluded that
Plaintiff was “on the cusp” of 11th grade and 12th grade. Hearing Transcript, Case No. 2012-
0561 (Oct. 26. 2012) (“Tr.”) (Document No. 11-1) at 156:1-5.
At an IEP meeting conducted in December 2011, DCPS proposed a transfer from Monroe
to a special education program at a DCPS public school, Spectrum at Coolidge Senior High
School, and issued a prior written notice for that transfer. Administrative Record at 47, 121-22.
Plaintiff objected to this proposed transfer by filing a due process complaint. Id. at 47. The
assigned hearing officer determined that DCPS could not transfer Plaintiff because it “failed to
follow required procedures in making the change in placement . . . .” Id. at 48, 327-334.
Thereafter, at an IEP meeting conducted in May 2012, DCPS proposed a transfer to High
Road School, a private full-time special education school. Id. at 48. DCPS sought to move
Plaintiff due to concerns regarding teacher certification and the implementation of Plaintiff’s IEP
at Monroe. Id. at 80-81. Plaintiff’s counsel suggested Kingsbury School, another private special
education school, opining that it may be more appropriate for Plaintiff. Id. at 48, 82. After
Kingsbury accepted Plaintiff for attendance, DCPS issued a prior written notice proposing a
change in location of services from Monroe to Kingsbury for the 2012-2013 school year. Id. at
48, 84-86. When Plaintiff visited Kingsbury, however, she determined that she did not like it.
Id. at 48. Plaintiff filed a due process complaint on August 20, 2012, challenging the proposed
transfer to Kingsbury, and seeking an order requiring DCPS to continue funding her placement
at, and transportation to, Monroe or another “11-month full-time out of general education
program.” Id. at 3-9.
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 4 of 17
W ard v. District of Columbia 4
A hearing officer conducted an administrative hearing on October 26, 2012, at which he
considered “[w]hether DCPS’ proposal to move the student from [Monroe] at the May 14, 2012
IEP team meeting and to Kingsbury pursuant to the August 8, 2012 prior written notice is a
change in placement and/or a move to an inappropriate educational setting such that it results in a
denial of a free and appropriate public education (‘FAPE’).” Id. at 42, 45. The hearing officer
heard testimony from Plaintiff; Plaintiff’s mother; Dr. Carolyn Gravely-Moss, the director of
Monroe’s counseling services; Ruth Logan-Staton, the director of Monroe; Erika Johnson, a case
manager in DCPS’ Office of Special Education; and Candi CdeBaca and Jennifer Switlick,
student progress monitors for DCPS. Tr. at 3; Administrative howardcarrie@example.org.
Following the hearing, in a written decision issued on November 3, 2012, the hearing
officer dismissed Plaintiff’s complaint with prejudice, concluding that Plaintiff “failed to meet
her burden of proof that DCPS’ change of [her] school from [Monroe] to Kingsbury is a change
in placement or that Kingsbury is unable to implement [her] IEP or that it is a lesser restrictive
environment or cannot meet [her] unique needs.” Administrative howardcarrie@example.org. More
specifically, the hearing officer found that “[t]here is no evidence in the record that [Plaintiff’s]
IEP or LRE was changed at the May 14, 2012, meeting” and that “[t]he evidence demonstrates
that at Kingsbury the student can receive services in a full time out of general education setting,
with small classes and individualized instruction and receive the prescribed related services.” Id.
at 52. Plaintiff then commenced this action pursuant to the IDEA seeking reversal of the hearing
officer’s determination.
CONTENTIONS OF THE PARTIES
Plaintiff contends that Kingsbury is an inappropriate placement because “it offers a 10-
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W ard v. District of Columbia 5
month program while [Plaintiff] requires 11 months to progress,” and because relocation “would
likely result in significant academic regression.” Plaintiff[’s] Memorandum of Points and
Authorities in Support of Plaintiff[’s] Motion for Summary Judgment (“Plaintiff’s
Memorandum”) (Document No. 13) at 7. Plaintiff submits that she has made significant progress
while at Monroe, after a period of “serious educational failure and regression” at Cesar Chavez,
and that she is close to graduating. Id. at 8-9. Plaintiff relies on Holmes v. District of Columbia,
680 F. Supp. 40 (D.D.C. 1988), for the proposition that “movement of a student from one
placement to another has been found inappropriate where the student had adjusted to the prior
placement and had made educational progress.” Id. at 7-8. Plaintiff thus contends that a transfer
to Kingsbury is inappropriate because it is “likely to produce regression, delay her graduation,
and undermine the educational progress that she has made . . . .” Id. at 12-13.
Defendant contends that “the hearing officer correctly decided that DCPS did not change
the student’s educational placement; rather, DCPS proposed to move the student from one
private special education school to another private special education school that is able to
implement the student’s [IEP] in the setting prescribed by her IEP.” Memorandum of Points and
Authorities in Support of Defendant’s Cross-Motion for Summary Judgment and Opposition to
Plaintiff’s Motion for Summary Judgment (“Defendant’s Memorandum”) (Document Nos. 14,
15) at 3. Defendant avers that Plaintiff’s case “is premised on an inaccurate use [of] the term
‘placement,’” id. at 16, and maintains that Kingsbury can fully implement Plaintiff’s IEP and can
offer services to aid in her transition, id. at 25-26, 28-29. Defendant notes its concerns regarding
the certification of teachers at Monroe, id. at 22-23, its documentation of Plaintiff’s course work
and progress, id. at 24, and its implementation of Plaintiff’s IEP, id. at 24-25. Defendant thus
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 6 of 17
W ard v. District of Columbia 6
contends that it sought to transfer her in order to “ensure that [she] received a FAPE at a school
that was capable of implementing her IEP . . . .” Id. at 22.
In response, Plaintiff maintains that her situation is analogous to the student in Holmes,
because she is close to graduating and would likely regress if transferred, and that the court
should thus conclude that transferring her to Kingsbury would be inappropriate. Plaintiff[’s]
Memorandum of Points and Authorities in Opposition to the Defendant’s Cross Motion for
Summary Judgment and in Reply to the Defendant’s Opposition to the Plaintiff’s Motion for
Summary Judgment (“Plaintiff’s Opposition”) (Document Nos. 17, 18) at 2-4. Plaintiff also
contends that Defendant’s concerns about Monroe are “incorrect” and “irrelevant in light of the
progress” that Plaintiff has made while attending Monroe School. Id. at 4-8.
Defendant reiterates that “DCPS has not changed [Plaintiff’s] educational placement, and
the record evidence does not prove by a preponderance of evidence that there has been any denial
of FAPE . . . .” Defendant’s Reply to Plaintiff’s Opposition to Defendant’s Cross-Motion for
Summary Judgment (“Defendant’s Reply”) (Document No. 20) at 6. Defendant submits that
Plaintiff’s reliance on Holmes is misplaced, and points to other decisions in support of its
contention that courts distinguish between a change in educational placement and a change in
location of services. Id. at 2-5. Finally, Defendant contends that even if the court “construe[d]
Plaintiff’s claim of harm related to the transition as a claim for failure to implement her IEP,”
there is not sufficient evidence in the record to support a finding that Plaintiff will be harmed by
the transfer to Kingsbury. Id. at 5-6.
APPLICABLE STANDARDS
Individuals with Disabilities Education Act
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 7 of 17
W ard v. District of Columbia 7
One of the stated purposes of the IDEA is “to ensure that all children with disabilities
have available to them a free appropriate public education that emphasizes special education and
related services designed to meet their unique needs and prepare them for further education,
employment, and independent living[.]” 20 U.S.C. § 1400(d)(1)(A). In general, “[a] free
appropriate public education is available to all children with disabilities residing in the State
between the ages of 3 and 21 . . . .” § 1412(a)(1)(A). To ensure access to a free appropriate
public education (“FAPE”) for children with disabilities, “the child’s parents, teachers, school
officials, and other professionals collaborate in a ‘multi-disciplinary team’ to develop an
individualized educational program [] to meet the child’s unique needs.” D.K. v. Dist. of
Columbia, No. 13-110, 2013 WL 5460281, at *1 (D.D.C. Oct. 2, 2013) (citing 20 U.S.C. §
1414(d)(1)(B)); see Reid ex rel. Reid v. Dist. of Columbia, 401 F.3d 516, 519 (D.C. Cir. 2005).
The IEP is a written statement of the student’s educational goals and required services, §
1414(d)(1)(A), that “must, at a minimum, ‘provid[e] personalized instruction with sufficient
support services to permit the child to benefit educationally from that instruction,’” Reid, 401
F.3d at 519 (citing Bd. of Educ. of Hendrick Hudson Cent. Sch. Dist., Westchester Cnty. v.
Rowley, 458 U.S. 176, 203 (1982)).
A parent, or adult student, may file an administrative complaint and have an opportunity
for an impartial due process hearing if he or she objects to “the identification, evaluation, or
educational placement of the child, or the provision of a free appropriate public education to such
child.” 20 U.S.C. § 1415(b)(6), (f)(1). A party to the administrative proceeding may challenge
the decision “in any State court of competent jurisdiction or in a district court of the United
States . . . .” § 1415(i)(2)(A). The reviewing court “shall receive the records of the
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 8 of 17
W ard v. District of Columbia 8
administrative proceedings,” “shall hear additional evidence at the request of a party,” and
“basing its decision on the preponderance of the evidence, shall grant such relief as the court
determines is appropriate.” § 1415(i)(2)(C).
The party challenging the administrative determination bears the burden “of persuading
the court that the hearing officer was wrong.” Reid, 401 F.3d at 521 (citation omitted) (internal
quotation marks omitted). On review, IDEA administrative proceedings are given “less
deference than is conventional in administrative proceedings,” since the court may hear
additional evidence outside of the administrative record. Id. (citations omitted) (internal
quotation marks omitted). “While the court must make an independent determination, the court
also should give ‘due weight’ to the decision of the hearing officer and should afford some
deference to the expertise of the hearing officer and the school officials.” D.K., 2013 WL
5460281, at *4 (citing Rowley, 458 U.S. at 206; Lyons v. Smith, 829 F. Supp. 414, 419 (D.D.C.
1993)). “[A] hearing decision without reasoned and specific findings deserves little deference,”
but a “court upsetting the [administrative] officer’s decision must at least explain its basis for
doing so.” Reid, 401 F.3d at 521 (citations omitted) (internal quotation marks omitted).
Summary Judgment
“The court shall grant summary judgment 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). An issue is genuine if the “evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Whether a fact is material is determined based on whether it might affect the outcome of the suit
under the governing law. Id.
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 9 of 17
W ard v. District of Columbia 9
The party seeking summary judgment must identify “those portions of ‘the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the affidavits, if
any,’ which it believes demonstrate the absence of a genuine issue of material fact.” Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). “[A] party opposing a properly supported motion for
summary judgment may not rest upon the mere allegations or denials of his pleading, but . . .
must set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S.
at 248, 256 (internal quotation marks omitted). “The mere existence of a scintilla of evidence in
support of the [nonmoving party’s] position will be insufficient; there must be evidence on which
the jury could reasonably find for the [nonmoving party].” Id. at 252. The court will view the
evidence and inferences in the light most favorable to the nonmoving party. Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
“If neither party introduces new evidence in a civil suit seeking review of a hearing
officer’s determination, ‘a motion for summary judgment operates as a motion for judgment
based on the evidence comprising the record.’”3 Banks ex rel. D.B. v. Dist. of Columbia, 720 F.
Supp. 2d 83, 88 (D.D.C. 2010) (quoting Thomas v. Dist. of Columbia, 407 F. Supp. 2d 102, 109
(D.D.C. 2005)); see also Presely v. Friendship Pub. Charter Sch., No. 12-0131, 2013 WL
589181, at *4 (D.D.C. Feb. 7, 2013).
DISCUSSION
The sole issue before the court is whether Defendant failed to provide Plaintiff with an
appropriate placement, and thus denied her a FAPE, by proposing a transfer from Monroe to
3
See infra note 6.
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W ard v. District of Columbia 10
Kingsbury. See Plaintiff’s Memorandum at 7; Amended howardcarrie@example.org. Plaintiff avers that
placement at Kingsbury is inappropriate because (1) “Kingsbury does not offer the 11 month
program that [she] has been receiving at [Monroe] . . .” and (2) “it would remove [her] from a
placement in which [she] is making educational progress and disrupt [her] education when [she]
is on track to graduate in just over a year.” Amended Complaint ¶¶ 18-19; see Plaintiff’s
Memorandum at 7.
Although the term “educational placement” is not expressly defined by the IDEA, this
court has interpreted it to mean “something between the physical school attended by a child and
the abstract goals of a child’s IEP.” D.K., 2013 WL 5460281, at *5 (internal quotation marks
omitted) (citing Laster v. Dist. of Columbia, 394 F. Supp. 2d 60, 64–65 (D.D.C. 2005)); see
Bowling v. Dist. of Columbia, No. 11-2145, 2013 WL 5214948, at *4 (D.D.C. Sept. 16, 2013);
Johnson v. Dist. of Columbia, 839 F. Supp. 2d 173, 177 (D.D.C. 2012). Thus, “a change of
location alone does not constitute a change in ‘educational placement’ under the IDEA.” D.K.,
2013 WL 5460281, at *5. In the context of the statute’s stay-put provision, the Court of Appeals
“has explained that if a parent cannot identify a ‘fundamental change in, or elimination of[,] a
basic element of the education program,’ there has been no change in ‘educational placement.’”
Id. (footnote omitted) (quoting Lunceford v. Dist. of Columbia Bd. of Educ., 745 F.2d 1577, 1582
(D.C. Cir. 1984)); see Johnson, 839 F. Supp. howardcarrie@example.org.
Plaintiff has not demonstrated that the hearing officer erred in concluding that the
proposed transfer to Kingsbury is not a change in placement, and is, instead, a change in location
of services. Although Kingsbury offers a 10-month program, in contrast to the 11-month
program offered by Monroe, the undersigned finds that Plaintiff has failed to show that this
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W ard v. District of Columbia 11
distinction is a “fundamental change in” or an “elimination of a basic element of [her] education
program.” As noted by the hearing officer, Administrative Record at 52, Plaintiff’s IEP does not
require an 11-month program. Candi CdeBaca, a student progress monitor for DCPS’ nonpublic
unit, Tr. at 240:9-10, testified that Plaintiff’s IEP “does not require her to be in school for 11
months,” Tr. at 264:4-5. Erika Johnson, the acting project coordinator and compliance case
manager for DCPS’ Office of Special Education, Tr. at 204:19-205:1, explained that during
Plaintiff’s May 2012 IEP meeting, “[t]he teacher basically said that she would benefit from [an
11-month program], but no one confirmed whether or not it was actually necessary,” Tr. at
218:19-21; see also Tr. at 216:1-6. Ms. Johnson clarified that Monroe was not selected because
Plaintiff required an 11-month program, Tr. at 219:2-5, but rather, she participates in an 11-
month program because that is the curriculum that the school offers, Tr. at 215:14-17.
Moreover, if it is determined, in accordance with the IDEA, that Plaintiff requires
services for a period beyond the duration of the 10-month program, there is evidence in the
record that Kingsbury can offer extended school year services. Ms. Johnson testified that if
Plaintiff’s IEP team determined that it was necessary, Kingsbury could provide extended school
year services. Tr. at 219:17-21. Jennifer Switlick, a DCPS student progress monitor who
currently monitors students at Kingsbury, Tr. at 289:18-21 291:1-2, similarly testified that
Kingsbury could provide these services to Plaintiff if deemed necessary, and explained the
process for making that determination, Tr. at 303:5-304:1.
Plaintiff does not dispute that Kingsbury can implement the provisions of her IEP.4 Nor
4
In contrast, there are concerns regarding Monroe’s ability to implement Plaintiff’s IEP. Plaintiff initially
testified that she is not receiving speech services at Monroe, Tr. at 81:18-22, but subsequently testified that she is
receiving speech services during her classes, Tr. at 194:13-15. Ms. CdeBaca, whose duties include monitoring
students in nonpublic schools to ensure that they are progressing and that the school is in compliance with applicable
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 12 of 17
W ard v. District of Columbia 12
does she challenge the appropriateness of her IEP. See Plaintiff’s Memorandum at 7. The
hearing officer found that Kingsbury can offer services in a full-time out of general education
setting with small classes and individualized instruction. Administrative howardcarrie@example.org. He
further found that Kingsbury can provide the services required by Plaintiff’s IEP, including
behavioral support services and speech language services.5 Id. These findings are supported by
the record. Ms. CdeBaca testified that “Kingsbury can implement the IEP as it stands.” Tr. at
265:7-8. Ms. Switlick corroborated that Kingsbury can provide the services required by
Plaintiff’s IEP. Tr. at 300:3-9, 301:3-7. Plaintiff has offered no evidence to the contrary.
In D.K. v. District of Columbia, the court found that the change in location of services did
not constitute a change in education placement where DCPS sought to transfer a student to
Kingsbury. 2013 WL 5460281, at *5-6. The court determined that there was no “fundamental
change in, or elimination of, any basic element of [the student’s] educational program as set forth
in his IEP” and that Kingsbury could implement his IEP. Id. at *6-7. Other courts have similarly
concluded. See Jalloh v. Dist. of Columbia, No. 12-0694, 2013 WL 5188430, at *8 (D.D.C.
Sept. 17, 2013) (adopting a report and recommendation that the hearing officer’s determination
that the student’s placement was appropriate be upheld, where the court found that the proposed
regulations, Tr. at 241:6-10, testified regarding problems tracking Plaintiff’s progress at Monroe, Tr. at 249:8-11,
18-22, as well as difficulty verifying the implementation of her required services, Tr. at 260:10-21, 265:22-266:3.
Ms. Johnson testified that DCPS was considering a new school because there were concerns that Monroe could not
provide Plaintiff a FAPE. Tr. at 211:1-3, 226:5-11.
5
The hearing officer explained that he was “not convinced by the argument that th[e] difference in the
length of the school year makes Kingsbury [] a less restrictive setting than [Monroe].” Administrative howardcarrie@example.org.
At the administrative level, Plaintiff averred that the 10-month program at Kingsbury is “a less restrictive educational
placement.” See id. at 44. Plaintiff has not raised that argument in its submissions to this court. See generally
Plaintiff’s Memorandum; Plaintiff’s Opposition. In any event, the undersigned finds that the hearing officer’s
conclusion that Kingsbury offers a full-time out of general education setting, as required by the LRE provision of
Plaintiff’s IEP, is supported by the record. See Administrative Record at 47, 52.
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 13 of 17
W ard v. District of Columbia 13
school could implement his IEP); Aikens v. Dist. of Columbia, No. 12-553, 2013 WL 3119303, at
*6 (D.D.C. June 21, 2013) (noting that “[i]n the absence of a ‘fundamental change in’ or
‘elimination of’ a basic element of [the student’s] educational program” when she was moved to
a different school, there had been “no change in educational placement” and the student was not
denied a FAPE); James v. Dist. of Columbia, No. 12-376, 2013 WL 2650091, at *4 (D.D.C. June
9, 2013) (citations omitted) (concluding that DCPS did not deny the student a FAPE after finding
that the school “was an appropriate location of services” for the student and noting that “[u]nder
the IDEA, an appropriate location of services is one which can implement a student’s IEP and
meet his specialized educational and behavioral needs”); Garmany v. Dist. of Columbia, 935 F.
Supp. 2d 177, 183 (D.D.C. 2013) (upholding the hearing officer’s finding that the school “was an
appropriate placement because [it] could implement [the student’s] IEP”). As discussed above,
Kingsbury can fully implement Plaintiff’s IEP with no fundamental change in or elimination of
its provisions.
With respect to Plaintiff’s contention that “[b]y choosing to place her in a program in
which the evidence was overwhelmingly that she would experience educational regression, the
Defendant has failed to place [her] in an appropriate program,” see Plaintiff’s Memorandum at 8,
the undersigned finds that Plaintiff points to no evidence in the record which supports the
contention. Plaintiff relies on her own testimony, the testimony of her mother, and the testimony
of Dr. Carolyn Gravely-Moss. See id. at 8-9. While the court does not minimize their concerns,
in light of the other evidence in the record, their testimony does not warrant a finding that the
hearing officer erred in concluding that Kingsbury “is an appropriate location of services for
[Plaintiff].” See Administrative howardcarrie@example.org.
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 14 of 17
W ard v. District of Columbia 14
Plaintiff and her mother both expressed their concern that Plaintiff would be unhappy and
would regress if transferred to Kingsbury. Plaintiff testified that after she visited Kingsbury, the
people did not seem “friendly” or “genuine” and she did not feel comfortable there. Tr. at 73:1-
3, 5-10, 19-21. When asked if she thought she could do well at Kingsbury, she responded
“[p]robably not, I’d probably go to a depression because I’m used to Monroe. I don’t think that’s
a school that’s fit for me.” Tr. at 75:16-20. Plaintiff’s mother testified that when they visited
Kingsbury, the students appeared “wild” and “disobedient” and the staff did not seem “genuine.”
Tr. at 56:5-8, 20-21. She noted that Plaintiff has improved and shown more interest in school
after transferring to Monroe, Tr. at 51:8-19, and worried that she would regress if transferred, Tr.
at 58:1-8. Dr. Carolyn Gravely-Moss, who provided counseling services to Plaintiff when she
first began attending Monroe, and now supervises her counselor, was designated by the hearing
officer as an expert in the area of psychological counseling. Tr. at 92:13-14, 108:22-109:2,
109:10-13, 111:1-11. Dr. Gravely-Moss indicated that Plaintiff has progressed while at Monroe,
has an increased trust in the educational system, and is now focusing on her future. Tr. at 114:4-
15. Dr. Gravely-Moss opined that if she were transferred to Kingsbury, Plaintiff would go
through an adjustment period that could hinder her psychological development and cause a
setback in her academic progress. Tr. at 119:10-18. However, she did acknowledge that with
appropriate support, Plaintiff could overcome this transition period, as she did after she
transferred to Monroe. Tr. at 126:4-11.
The record indicates that Plaintiff can receive services to mitigate negative effects of the
transfer. Ms. CdeBaca indicated that a DCPS transition case manager is available to facilitate
Plaintiff’s transfer to Kingsbury. Tr. at 273:8-14. Ms. Switlick described Kingsbury’s services,
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 15 of 17
W ard v. District of Columbia 15
explaining that Plaintiff could be assigned a teacher advisor to assist in her transition, Tr. at
305:13-20, offered tutoring, Tr. at 305:21-306:2, and have access to clinical psychologists to
manage the emotional aspect of transitioning, Tr. at 306:5-13.
Plaintiff relies solely on Holmes v. District of Columbia, 680 F. Supp. 40 (D.D.C. 1988)
in support of her position that “in this jurisdiction, case law supports a strong preference for not
changing educational placements of special education students who have adjusted well to their
current placement and who are close to graduating.” Plaintiff’s Memorandum at 10; see
Plaintiff’s howardcarrie@example.org. Although Plaintiff argues that her case is analogous to Holmes, the
undersigned finds that Holmes is significantly distinguishable, and cannot be regarded as
controlling in the context of this action. The court in Holmes observed that the proposed school
was “in a start-up posture” and questioned whether it “could have come even close to meeting
the needs of the plaintiff.” 680 F. Supp. at 42. In contrast, Kingsbury is an established school
that can provide the services required by Plaintiff’s IEP “in a full time out of general education
setting, with small classes and individualized instruction . . . .” Administrative Record at 52; see
also id. at 84. Although Plaintiff posits that the Holmes court’s “misgivings” about the school
were not the main “premise[]” for the holding, see Plaintiff’s Opposition at 4, the court stated
that ordering the student to attend the proposed school “would have been a reckless and wanton
act,” 680 F. Supp. at 42. Additionally, in Holmes, the court made no findings with respect to
concerns regarding the student’s preferred school. Cf. supra note 4.
Holmes was also in a different procedural posture than this action, since in Holmes, the
court conducted a bench trial and made findings “based on testimony [it] heard firsthand.” Id. at
41-42. Here, Plaintiff bears the burden of demonstrating that the hearing officer erred, and this
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 16 of 17
W ard v. District of Columbia 16
court must review the entire record, giving some deference to the reasoned findings by the
hearing officer. See Reid, 401 howardcarrie@example.org.
In any event, Holmes was decided more than twenty years ago under the precursor statute
to the IDEA. As discussed above, more recent case law from this court, decided in accordance
with the IDEA, directs that the court determine whether there has been a fundamental change in,
or elimination of, a basic element of the student’s educational program, as established by his or
her IEP.
The hearing officer determined that “the decision to place [Plaintiff] at Kingsbury was a
location of services decision . . . and not a change of placement decision.” Administrative
howardcarrie@example.org. He further found that “Kingsbury can implement [Plaintiff’s] IEP and is an
appropriate location of services for [her].” Id. at 53. He thus concluded that “DCPS did not
violate the IDEA and [its] actions did not deny [Plaintiff] a FAPE.” Id. at 52. The undersigned
finds that the hearing officer’s determination is supported by a preponderance of evidence in the
record, and that Plaintiff has failed to meet her burden of demonstrating that the hearing officer
erred in his decision.6
CONCLUSION
For all of the foregoing reasons, it is this 23rd day of December, 2013,
RECOMMENDED that Plaintiff[’s] Motion for Summary Judgment (Document No. 13)
6
Defendant submitted additional evidence for the court’s consideration in the form of a hearing officer
determination rendered on June 5, 2013. See Defendant’s Reply, Exhibit 1 (Document No. 20-1). Defendant
represents that “[d]uring the pendency of this appeal, Plaintiff filed a second due process complaint alleging that
DCPS was failing to provide the student a FAPE by not transporting her to the Monroe School.” Defendant’s Reply
at 2. Defendant further represents that the hearing officer denied Plaintiff’s request for relief, and that the decision
has not been appealed. Id. The undersigned has not considered this additional evidence, as it was not necessary for
the resolution of the issues before the court.
Case 1:13-cv-00098-KBJ-DAR Document 21 Filed 12/23/13 Page 17 of 17
W ard v. District of Columbia 17
be DENIED; and it is
FURTHER RECOMMENDED that Defendant’s Cross-Motion for Summary Judgment
(Document No. 15) be GRANTED.
/s/
DEBORAH A. ROBINSON
United States Magistrate Judge
Within fourteen days, either party may file written objections to this report and
recommendation. The objections shall specifically identify the portions of the findings and
recommendations to which objection is made and the basis of each such objection. In the
absence of timely objections, further review of issues addressed herein may be deemed
waived.
|
2015 IL 116129
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 116129)
LVNV FUNDING, LLC, Appellee, v. MATTHEW TRICE, Appellant.
Opinion filed February 27, 2015.
JUSTICE KARMEIER delivered the judgment of the court, with opinion.
Chief Justice Garman and Justices Freeman, Thomas, Burke, and Theis
concurred in the judgment and opinion.
Justice Kilbride dissented, with opinion.
OPINION
¶1 This appeal comes to us from the circuit court of Cook County, the court having
declared sections 4.5, 14, and 14b of the Collection Agency Act (Act) (225 ILCS
425/4.5, 14, 14b (West 2008)) unconstitutional. Following remand from an
appellate court decision in which that court held—referencing, inter alia, the Act’s
penalty provisions—that “a complaint filed by an unregistered collection agency is
*** a nullity, and any judgment entered on such a complaint is void” (2011 IL App
(1st) 092773, ¶ 19), the circuit court found the aforementioned penalty provisions
of the Act unconstitutional on grounds of due process, equal protection and
vagueness. The circuit court then concluded, though the debt collector in this case
was unlicensed at the time it filed suit to collect a debt, the resulting judgment
should have been “voidable rather than void.” Because the circuit court invalidated
Illinois statutes, appeal lies directly to this court pursuant to Supreme Court Rule
302(a)(1) (Ill. S. Ct. R. 302(a)(1) (eff. Oct. 4, 2011)). We now vacate the circuit
court’s findings of unconstitutionality as unnecessary, we reject the analysis of the
appellate court, and remand this matter for confirmation of the monetary judgment
initially rendered by the circuit court.
¶2 STATUTES INVOLVED
¶3 We refer herein to the version of the Collection Agency Act in effect when
LVNV Funding, LLC (hereafter LVNV) filed its complaint against Matthew Trice
in the circuit court. See 225 ILCS 425/1 et seq. (West 2008). 1 At the outset, the
legislature set forth a declaration of public policy that underscores legislators’
concern for the public welfare:
“The practice as a collection agency by any entity in the State of Illinois is
hereby declared to affect the public health, safety and welfare and to be subject
to regulation and control in the public interest. It is further declared to be a
matter of public interest and concern that the collection agency profession merit
and receive the confidence of the public and that only qualified entities be
permitted to practice as a collection agency in the State of Illinois.” 225 ILCS
425/1a (West 2008).
The legislature mandates a liberal construction “to carry out these objects and
purposes.” 225 ILCS 425/1a (West 2008).
¶4 The Act specifically exempts from its coverage a host of entities, among them,
those traditionally associated with financing and lending, and “[l]icensed attorneys
at law.” 225 ILCS 425/2.03(5) (West 2008). It otherwise defines a “legal entity” as
“a collection agency,” subject to the provisions of the Act, when, inter alia, that
entity: “[r]eceives, by assignment or otherwise, accounts, bills, or other
indebtedness *** with the purpose of collecting monies due on such account, bill or
other indebtedness” or “[b]uys accounts, bills or other indebtedness and engages in
1
For our purposes, the only changes to the Act worthy of note were introduced by amendments
effective January 1, 2013, defining the term “ ‘[d]ebt buyer’ ” (225 ILCS 425/2 (West 2012)), and
emphasizing that “[a] debt buyer shall be subject to all of the terms, conditions, and requirements of
this Act, except as otherwise provided for in subsection (b) of Section 8.6” (225 ILCS 425/8.5 (West
2012)), one of those exceptions being an exemption from the “assignment for collection criteria
under Section 8b” (225 ILCS 425/8.6(b)(iv) (West 2012)).
-2-
collecting the same.” 225 ILCS 425/3(b), (d) (West 2008). Section 2 of the Act
broadly defines “ ‘[d]ebt collection’ ” as “any act or practice in connection with the
collection of consumer debts.” 225 ILCS 425/2 (West 2008).
¶5 Section 4 of the Act provides that “[n]o collection agency shall operate in this
State, directly or indirectly engage in the business of collecting,” or “exercise the
right to collect *** without registering under this Act.” 225 ILCS 425/4 (West
2008). In addition to the prerequisite of licensing, the Act provides that no entity
that has obtained an “assignment” of “title” from the original creditor may
commence litigation in its own name unless the “assignment is manifested by a
written agreement” specifically stating the effective date of the assignment and the
consideration paid therefor. 225 ILCS 425/8b(a) (West 2008).
¶6 More to the point for present purposes, section 14a of the Act authorizes the
Department of Financial and Professional Regulation to enjoin the activities of an
unlicensed collection agency, stating that “[t]he practice as a collection agency by
any entity not holding a valid and current license under this Act is declared to be
inimical to the public welfare, to constitute a public nuisance, and to cause
irreparable harm to the public welfare.” 225 ILCS 425/14a (West 2008). In addition
to a civil penalty for unlicensed practice (see 225 ILCS 425/4.5 (West 2008) (“a
civil penalty *** in an amount not to exceed $5,000 for each offense”)), the Act
provides for criminal penalties as well: “Any entity that practices *** as a
collection agency in this State without being licensed for that purpose *** is guilty
of a Class A misdemeanor. Any entity that has been previously convicted under any
of the provisions of this Act and that subsequently violates any of the provisions of
this Act is guilty of a Class 4 felony.” 225 ILCS 425/14b (West 2008); see also 225
ILCS 425/14 (West 2008) (“Engaging in the collection of debts without first having
obtained a certificate pursuant to this Act *** is a Class A misdemeanor. The
penalties provided by this Act shall not be exclusive, but shall be in addition to all
other penalties or remedies provided by law.”).
¶7 BACKGROUND
¶8 Matthew Trice used a credit card to pay for some plumbing work. He
apparently did not pay the credit card company the full amount due on the card. The
credit card company sold its interest in the unpaid debt to LVNV. Thereafter,
LVNV hired an Illinois attorney and filed a debt collection lawsuit against Trice,
-3-
who proceeded pro se. On January 15, 2009, the circuit court entered judgment in
the lawsuit in favor of LVNV.
¶9 Trice did not file a direct appeal. Instead, sometime later, Trice, who was then
represented by an attorney, filed a petition under section 2-1401 of the Code of
Civil Procedure (735 ILCS 5/2-1401 (West 2008)), seeking to vacate the circuit
court’s final judgment. In this petition, Trice alleged that LVNV was a debt
collection agency within the meaning of the Act (225 ILCS 425/3(b), (d) (West
2008)), and that the filing of the lawsuit against him was an act of debt collection.
In addition, Trice alleged that, before LVNV filed the lawsuit, it had not registered
with the State of Illinois as a debt collection agency as required under the Act.
According to Trice, this failure was a fundamental error which rendered the circuit
court’s judgment of January 15, 2009, “void.”
¶ 10 The circuit court denied Trice’s section 2-1401 petition without an evidentiary
hearing. The circuit court concluded that, even assuming LVNV had erroneously
failed to register as a debt collection agency, the error did not render the judgment
entered against Trice void. Trice appealed.
¶ 11 The appellate court reversed the circuit court’s denial of Trice’s section 2-1401
petition. 2011 IL App (1st) 092773, ¶ 25. The appellate court first observed that a
party seeking relief from a final judgment under section 2-1401 ordinarily must
plead and prove, among other things, that he had a defense or claim that would have
precluded entry of judgment in the original action, and “that he acted with
‘diligence in both discovering the defense or claim and presenting the petition.’ ”
Id. ¶ 8 (quoting People v. Vincent, 226 Ill. 2d 1, 7-8 (2007)). However, when a
section 2-1401 petitioner alleges that the challenged judgment is void, the
allegation “ ‘substitutes for and negates the need to allege a meritorious defense
and due diligence.’ ” Id. ¶ 11 (quoting Sarkissian v. Chicago Board of Education,
201 Ill. 2d 95, 104 (2002)). The appellate court noted that, in this case, Trice’s
section 2-1401 petition contained no allegations regarding his diligence in
discovering that LVNV was unlicensed. Instead, Trice’s petition alleged only that
the circuit court’s judgment was void.
¶ 12 Quoting from this court’s decision in Ford Motor Credit Co. v. Sperry, 214 Ill.
2d 371, 379-80 (2005), the appellate court offered the following definition of a void
judgment:
-4-
“ ‘A void order or judgment is, generally, one entered by a court without
jurisdiction of the subject matter or the parties, or by a court that lacks the
inherent power to make or enter the order involved. [Citations.] A void
judgment is from its inception a complete nullity and without legal effect.’ ”
2011 IL App (1st) 092773, ¶ 13.
Thereafter, the appellate court addressed, at some length, the “nullity rule,” which
this court discussed in Ford Motor, and has applied, in some instances, to “nullify”
the filing of a complaint, and “void” the resulting judgment, where a person or
entity unauthorized to practice law has filed suit on behalf of a corporation. Id.
¶¶ 13-18.
¶ 13 In Ford Motor—a case, like this one, involving a petition for relief under
section 2-1401 of the Code of Civil Procedure (see Ford Motor, 214 Ill. 2d at
378-79)—this court referenced its “inherent power to define and regulate the
practice of law in this state” (Ford Motor, 214 Ill. 2d at 382) in the course of a
discussion that ended with the reaffirmation that “the nullity—or voidness—rule”
“remains valid law” but a finding that “its application to the facts in the instant
cause by the appellate court is misplaced.” Ford Motor, 214 Ill. pcarroll@example.com. That
finding was premised, not on untimely action on the part of petitioner, but rather, to
a significant degree, on this court’s observation that the Supreme Court Rule that
was violated (Ill. S. Ct. R. 721 (eff. Mar. 1, 1997)) “was not enacted to safeguard
the public welfare” (Ford Motor, 214 Ill. 2d at 388) as evinced by, inter alia, its
lack of “civil or criminal penalties for noncompliance.” Ford Motor, 214 Ill. 2d at
386.
¶ 14 Based upon its reading of Ford Motor, and this court’s discussion of the nullity
rule, the appellate court herein found “this case similar to cases in which a person
practices law without a license” and concluded “[c]ourts may similarly penalize
anyone who acts as a collection agency without registering.” 2011 IL App (1st)
092773, ¶ 18 (citing 225 ILCS 425/4.5, 14, 14b (West 2008)). The appellate court
found “[t]he criminal and civil penalties the Act assigns to LVNV’s alleged acts
[citation] distinguish this case from Ford Motor.” Id. ¶ 16. The appellate court
concluded that, if LVNV was unlicensed when it filed the lawsuit, permitting the
circuit court’s January 15, 2009, judgment to stand would be tantamount to abetting
LVNV in the commission of a crime. Id. ¶ 19. The appellate court held that the
circuit court “lacks authority to enter or enforce a judgment in LVNV’s favor on a
-5-
complaint LVNV filed in violation of the Act.” Id. In effect, any judgment entered
in the lawsuit would be void.
¶ 15 The appellate court remanded the matter to the circuit court for an evidentiary
hearing to determine whether, as Trice had alleged in his section 2-1401 petition,
LVNV was unlicensed at the time its lawsuit was filed. The appellate court also
noted, however, that it was not foreclosing LVNV from raising any constitutional
challenges to the Act during the remand hearing.
¶ 16 This court denied LVNV’s petition for leave to appeal from the judgment of the
appellate court. LVNV Funding, LLC v. Trice, No. 112834 (Ill. Nov. 30, 2011).
¶ 17 On remand, the circuit court acknowledged the binding effect of the appellate
court’s holding, “that a complaint filed by an unregistered collection agency is ***
a nullity, and any judgment entered on such a complaint is void” (2011 IL App (1st)
092773, ¶ 19), but ruled—apparently based on the appellate court’s addendum
upon denial of petition for rehearing (seemingly tying a void judgment to criminal
liability alone) (see id. ¶ 24)—that the penalty provisions of sections 4.5, 14, and
14b of the Act (225 ILCS 425/4.5, 14, 14(b) (West 2008)) were unconstitutional on
grounds of substantive due process, equal protection, and vagueness. The circuit
court believed its ruling would effectively nullify the appellate court’s judgment.
Accordingly, the circuit court concluded, with respect to the order now before this
court, that “the judgment originally obtained by LVNV Funding must stand.”
Section 4 of the Act (225 ILCS 425/4 (West 2008) (the actual provision requiring
licensing)) was not named among those statutory sections found unconstitutional.
¶ 18 In passing, we note that the circuit court rejected other arguments raised by
LVNV—constitutional and nonconstitutional—including, inter alia, its
contentions (1) that the circuit court could ignore the appellate court’s judgment
and dispense with the “Law of the Case Doctrine”; (2) that the Act’s licensing
requirement obstructed LVNV’s fundamental right of access to the courts; and (3)
that enforcing the licensing requirement on LVNV, and not its attorneys, violated
equal protection guarantees. The court found that compliance with the Act’s
licensing requirement as a condition of doing business in Illinois “is not
unreasonable because it allows the State to determine if the entity is qualified and
capable to lawfully conduct business in Illinois, allows easy monitoring of and
enforcement actions to be taken against the entity if necessary, and establishes
certain minimum financial requirements to allow recovery if warranted.”
-6-
¶ 19 Because the circuit court declared portions of the Act unconstitutional, direct
appeal was taken to this court under Supreme Court Rule 302(a)(1) (Ill. S. Ct. R.
302(a)(1) (eff. Oct. 4, 2011)).
¶ 20 ANALYSIS
¶ 21 In this court, LVNV maintains that the circuit court correctly held that the
legislature violated the constitution when it made the failure to register as a debt
collector a criminal act. However, LVNV also raises two nonconstitutional
arguments which, if successful, would be sufficient to sustain the circuit court’s
“original judgment,” which is what the circuit court order before us—in addition to
holding three statutory provisions unconstitutional and, in essence, negating the
judgment of the appellate court—purported to do. We will address these issues
first. See, e.g., Mulay v. Mulay, 225 Ill. 2d 601, 607 (2007) (as a general principle,
courts address nonconstitutional issues first); Bohnert v. Ben Hur Life Ass’n, 362
Ill. 403, 408 (1936).
¶ 22 LVNV initially contends that the Act, as it existed at the time the debt collection
lawsuit was filed herein, did not apply to entities such as LVNV which hire other
people to collect the debt it owns. We reject that argument.
¶ 23 As noted at the outset, the Act defines a “legal entity” as “a collection agency,”
subject to the provisions of the Act, when, inter alia, that entity: “[r]eceives, by
assignment or otherwise, accounts, bills, or other indebtedness *** with the
purpose of collecting monies due on such account, bill or other indebtedness” or
“[b]uys accounts, bills or other indebtedness and engages in collecting the same.”
225 ILCS 425/3(b), (d) (West 2008). Section 2 of the Act broadly defines “ ‘[d]ebt
collection’ ” as “any act or practice in connection with the collection of consumer
debts.” 225 ILCS 425/2 (West 2008). The Act specifically addresses litigation,
mandating, in addition to licensing, contemporaneous filing requirements for the
commencement of suit, i.e., documentation of the effective date of the assignment
and the consideration paid therefor, where an entity has obtained an “assignment”
of “title” from the original creditor. 225 ILCS 425/8b (West 2008). Black’s Law
Dictionary defines an “assignment for value” as an “assignment given in exchange
for consideration.” Black’s Law Dictionary 136 (9th ed. 2009).
-7-
¶ 24 That, it appears, is the means by which LVNV obtained the right to collect the
debt owed by Trice. LVNV identified itself as “assignee of Citibank” in the
affidavit accompanying its complaint. However, whether LVNV is a debt buyer as
described in subsection (d) of section 3 of the Act (225 ILCS 425/3(d) (West 2008))
or an “assignee” for value within the purview of subsection (b) (225 ILCS 425/3(b)
(West 2008)) is of no moment: in either case it clearly qualifies as a “collection
agency” as defined in section 3 of the Act and is thus subject to the registration
requirement of section 4 (225 ILCS 425/4 (West 2008)). Whether LVNV is deemed
a “ ‘[d]ebt buyer,’ ” or an “assignee of Citibank,” as it represented upon the filing
of its complaint in this case, may have some significance for purposes of the
documentation requirement of sections 8b(a)(i)(v) and 8b(a)(ii) going forward, as
“ ‘debt buyers’ ” are now exempt from that requirement—for reasons not entirely
clear—under the Act as amended (see 225 ILCS 425/8.6(b)(iv) (West 2012));
however, the provisions of the Act clearly apply to entities such as LVNV.
¶ 25 Nor are we persuaded by LVNV’s contention that the hiring of an attorney
somehow insulates it from the applicability of the Act’s provisions, specifically,
that the registration requirements and the Act’s associated criminal sanctions for
noncompliance should not apply to it because the “mere filing of a lawsuit without
a license can scarcely be characterized as abusive” where a “licensed Illinois
attorney handled all of the correspondence and interaction with *** the debtor.”
The suggestion that the “mere filing of a lawsuit” cannot be abusive is either naive
or disingenuous. See, e.g., Wright Development Group, LLC v. Walsh, 238 Ill. 2d
620 (2010) (discussing “SLAPP” lawsuits aimed at preventing citizens from
exercising their political rights or punishing those who have done so). The
argument that the public is protected from the abuses of unscrupulous debt buyers
by their utilization of attorneys is equally meritless. It is, after all, the debt buyers
who supply the evidence and witnesses to attorneys in the myriad complaints they
file. We reject LVNV’s argument that debt buyers’ lawsuits—with or without the
involvement of counsel—pose no danger to the public welfare and are thus not
subject to the restrictions and penalties the legislature has seen fit to impose.
¶ 26 In a second argument, LVNV contends that, even assuming the legislature may
make the failure to obtain a debt collection license a criminal offense, the appellate
court erred when it concluded that LVNV’s failure to obtain such a license would
render the circuit court’s January 15, 2009, judgment void. Therefore, according to
LVNV, the circuit court properly denied Trice’s section 2-1401 petition when that
petition was first presented. We agree.
-8-
¶ 27 As this court has held, whether a judgment is void or voidable presents a
question of jurisdiction. In re Marriage of Mitchell, 181 Ill. 2d 169, 174 (1998). “If
jurisdiction is lacking, any subsequent judgment of the court is rendered void and
may be attacked collaterally.” Id. A voidable judgment, on the other hand, is an
erroneous judgment entered by a court that possesses jurisdiction. Id.
¶ 28 In holding that the circuit court’s January 15, 2009, judgment would be void if
LVNV lacked a debt collection license, the appellate court in this case appeared to
rely on the definition of jurisdiction as the “ ‘inherent power’ ” to enter the
judgment involved. 2011 IL App (1st) 092773, ¶ 13 (quoting Ford Motor, 214 Ill.
2d at 379-80). Applying that definition here, the appellate court reasoned that, if a
debt collection agency does not have the appropriate license, then the circuit court
lacks the inherent power or “authority” to entertain a debt collection lawsuit by that
agency. Id. ¶ 19. Any judgment entered by the circuit court in the lawsuit would
therefore be void for lack of jurisdiction and could be attacked in a collateral
proceeding on that basis.
¶ 29 The problem with this reasoning is that the concept of “inherent power” relied
upon by the appellate court was rejected by this court in Steinbrecher v.
Steinbrecher, 197 Ill. 2d 514 (2001). A lack of “inherent power” refers to the idea
that if a certain statutory requirement or prerequisite—such as obtaining a debt
collection license—is not satisfied, then the circuit court loses “power” or
jurisdiction to consider the cause of pcarroll@example.com. In other words, the circuit
court’s jurisdiction depends on whether the court properly follows certain statutory
requirements. Steinbrecher concluded that this idea of jurisdiction is at odds with
the grant of jurisdiction given to the circuit courts under our state constitution.
¶ 30 Steinbrecher noted that a 1964 constitutional amendment significantly altered
the basis of circuit court jurisdiction, granting circuit courts “original jurisdiction of
all justiciable matters, and such powers of review of administrative action as may
be provided by law.” Ill. Const. 1870, art. VI (amended 1964), § 9. The current
Illinois Constitution, adopted in 1970, retained this amendment and provides that
“Circuit Courts shall have original jurisdiction of all justiciable matters” and that
“Circuit Courts shall have such power to review administrative action as provided
by law.” Ill. Const. 1970, art. VI, § 9. Steinbrecher reasoned that, because circuit
court jurisdiction is granted by the constitution, it cannot be the case that the failure
to satisfy a certain statutory requirement or prerequisite can deprive the circuit
-9-
court of its “power” or jurisdiction to hear a cause of action. Steinbrecher, 197 Ill.
pcarroll@example.com.
¶ 31 In so holding, Steinbrecher emphasized the difference between an
administrative agency and a circuit court. An administrative agency, Steinbrecher
observed, is a purely statutory creature and is powerless to act unless statutory
authority exists. Id. at 530 (citing City of Chicago v. Fair Employment Practices
Comm’n, 65 Ill. 2d 108, 112 (1976)). A circuit court, on the other hand, “is a court
of general jurisdiction, which need not look to the statute for its jurisdictional
authority.” Id. Thus, Steinbrecher concluded that the “ ‘inherent power’
requirement applies to courts of limited jurisdiction and administrative agencies”
but not to circuit courts. Id.
¶ 32 As Steinbrecher makes clear, following the 1964 constitutional amendment and
the adoption of the 1970 Constitution, whether a judgment is void in a civil lawsuit
that does not involve an administrative tribunal or administrative review depends
solely on whether the circuit court which entered the challenged judgment
possessed jurisdiction over the parties and the subject matter. “Inherent power” as a
separate or third type of jurisdiction applies only to courts of limited jurisdiction or
in administrative matters. It has no place in civil actions in the circuit courts, since
these courts are granted general jurisdictional authority by the constitution. 2
¶ 33 Steinbrecher was reaffirmed in Belleville Toyota, Inc. v. Toyota Motor Sales,
U.S.A., Inc., 199 Ill. 2d 325, 335-37 (2002). In Belleville Toyota, this court
addressed the meaning of subject matter jurisdiction, specifically, whether the
failure to comply with a statutory requirement or prerequisite can deprive a circuit
court of subject matter jurisdiction. Id. at 337-38. See, e.g., Restatement (Second)
of Judgments § 11 cmt. e (1982) (discussing the tendency in procedural law to treat
various kinds of serious procedural errors as defects in subject matter jurisdiction).
¶ 34 As in Steinbrecher, Belleville Toyota began its analysis by noting the 1964
constitutional amendment and its incorporation into the 1970 Constitution.
Belleville Toyota concluded that these constitutional amendments “radically
changed the legislature’s role in determining the jurisdiction of the circuit court.”
Belleville Toyota, 199 Ill. pcarroll@example.com. And again, as in Steinbrecher, Belleville
2
Steinbrecher limited its holding regarding jurisdiction to civil cases, noting that “[c]riminal
proceedings that involve the power to render judgments or sentences address a separate set of
concerns not at issue in the present matter.” Steinbrecher, 197 Ill. pcarroll@example.com.
- 10 -
Toyota reasoned that a statutory requirement or prerequisite cannot be
jurisdictional, since jurisdiction is conferred on the circuit courts by our state
constitution. As Belleville Toyota noted, while it might have been appropriate prior
to 1964 to state that the failure to conform to certain “statutory requirements
prevented the court from acquiring subject matter jurisdiction,” today that
proposition “is confined to the area of administrative review—the only area in
which the legislature still determines the extent of the circuit court’s jurisdiction.”
Id. at 338.
¶ 35 Belleville Toyota thus held that “[w]ith the exception of the circuit court’s
power to review administrative actions, which is conferred by statute, a circuit
court’s subject matter jurisdiction is conferred entirely by our state constitution.”
Id. at 334. Subject matter jurisdiction “refers to the power of a court to hear and
determine cases of the general class to which the proceeding in question belongs”
(id.), and this jurisdiction extends to all “ ‘justiciable matters’ ” (id. (quoting Ill.
Const. 1970, art. VI, § 9)). To invoke the circuit court’s subject matter jurisdiction,
a party need only present a justiciable matter, i.e., “a controversy appropriate for
review by the court, in that it is definite and concrete, as opposed to hypothetical or
moot, touching upon the legal relations of parties having adverse legal interests.”
Id. at 335.
¶ 36 In defining the meaning of subject matter jurisdiction, Belleville Toyota also
rejected the idea of nonwaivable “conditions precedent” to the exercise of circuit
court jurisdiction. The court explained:
“Some case law, however, suggests that the legislature, in defining a
justiciable matter, may impose ‘conditions precedent’ to the court’s exercise of
jurisdiction that cannot be waived. [Citations.] We necessarily reject this view
because it is contrary to article VI [of the Illinois Constitution of 1970].
Characterizing the requirements of a statutory cause of action as nonwaivable
conditions precedent to a court’s exercise of jurisdiction is merely another way
of saying that the circuit court may only exercise that jurisdiction which the
legislature allows. We reiterate, however, that the jurisdiction of the circuit
court is conferred by the constitution, not the legislature. Only in the area of
administrative review is the court’s power to adjudicate controlled by the
legislature.” Id. at 335-36.
¶ 37 Accordingly, while the legislature can create new justiciable matters by
enacting legislation that creates rights and duties, the failure to comply with a
- 11 -
statutory requirement or prerequisite does not negate the circuit court’s subject
matter jurisdiction or constitute a nonwaivable condition precedent to the circuit
court’s jurisdiction. Id. See also, e.g., In re Luis R., 239 Ill. 2d 295, 300-02 (2010);
People ex rel. Graf v. Village of Lake Bluff, 206 Ill. 2d 541, 552-54 (2003).
¶ 38 While its holding regarding the circuit courts’ jurisdiction rested on a
constitutional basis, Belleville Toyota also stressed that it was consistent with the
policy of preserving the finality of judgments. Under Illinois law, a party may
challenge a judgment as being void at any time, either directly or collaterally, and
the challenge is not subject to forfeiture or other procedural restraints. See, e.g.,
Sarkissian, 201 Ill. 2d at 104 (an allegation of voidness substitutes and negates the
need to allege a meritorious defense and due diligence under section 2-1401). Void
judgments thus occupy a unique place in our legal system: to say that a judgment is
void or, in other words, that it was entered without jurisdiction, is to say that the
judgment may be challenged in perpetuity. For this reason, as Belleville Toyota
observed, “[l]abeling the requirements contained in statutory causes of action
‘jurisdictional’ would permit an unwarranted and dangerous expansion of the
situations where a final judgment may be set aside on a collateral attack.” Belleville
Toyota, 199 Ill. pcarroll@example.com. Accordingly, only the most fundamental defects, i.e., a
lack of personal jurisdiction or lack of subject matter jurisdiction as defined in
Belleville Toyota warrant declaring a judgment void.
¶ 39 Applying the holdings of Steinbrecher and Belleville Toyota to this case, it is
clear that the circuit court’s January 15, 2009, judgment is not void. A void
judgment is one entered by a court without jurisdiction. In a civil lawsuit that does
not involve an administrative tribunal or administrative review, jurisdiction
consists solely of subject matter or personal jurisdiction. Subject matter jurisdiction
is defined solely as the power of a court to hear and determine cases of the general
class to which the proceeding in question belongs. There is no third type of
jurisdiction known as the “inherent power” to render a judgment.
¶ 40 In this case, the circuit court possessed jurisdiction over both the parties and the
subject matter when LVNV filed its debt collection lawsuit. To be sure, LVNV’s
failure to register as a debt collection agency was error. And that error, if raised in a
timely fashion, might have warranted dismissal of LVNV’s lawsuit by the circuit
court, merited reversal on direct appeal, or justified setting aside the final judgment
under section 2-1401 if the requirements of that provision, such as due diligence,
were established. But any error in failing to register did not deprive the circuit court
- 12 -
of jurisdiction. Therefore, the circuit court’s judgment is not void. Accordingly, the
appellate court erred in reversing the circuit court’s initial denial of Trice’s section
2-1401 petition.
¶ 41 As noted previously, in reaching the opposite conclusion, the appellate court in
this case appeared to rely on the definition of jurisdiction as the “inherent power” to
enter a judgment. That reliance was understandable, since the definition was set
forth by this court in Ford Motor Credit Co. v. Sperry, 214 Ill. 2d 371, 379-80
(2005), a unanimous opinion decided after both Steinbrecher and Belleville Toyota.
Unfortunately, Ford Motor’s definition of jurisdiction was overly broad. Ford
Motor did not acknowledge our previous decision in Steinbrecher or explain how
its statement that a circuit court’s jurisdiction is defined, in part, as the “inherent
power” to enter a judgment could be reconciled with the reasoning of Steinbrecher
and Belleville Toyota.
¶ 42 Ford Motor’s primary holding was that a law firm which fails to register under
Supreme Court Rule 721(c) is not engaged in the unauthorized practice of law.
Ford Motor, 214 Ill. pcarroll@example.com. That aspect of Ford Motor should remain standing.
However, we hereby reject that portion of Ford Motor which defines a void
judgment in a civil lawsuit, in part, as one entered by a circuit court which lacks
“inherent power.”
¶ 43 Both LVNV and Trice contend that the outcome of this case is controlled by
Downtown Disposal Services, Inc. v. City of Chicago, 2012 IL 112040. In
Downtown Disposal, complaints for administrative review were filed in the circuit
court of Cook County on behalf of a corporation by one of the corporation’s
officers. The officer was not an attorney. The defendant filed a motion to dismiss,
arguing that the filing of the complaints by a nonattorney constituted the
unauthorized practice of law and that this error required dismissal of the
complaints. The circuit court agreed. The appellate court reversed that
determination and appeal was taken to this court.
¶ 44 This court concluded that the act of filing the complaints constituted the
unauthorized practice of law. Id. ¶ 19. Having determined that error occurred, the
court then addressed the effect the unauthorized practice of law had on the
complaints. This court noted that some cases had held that the unauthorized
practice of law is an “incurable” defect that deprives the circuit court of subject
matter jurisdiction, thus rendering any action taken in the case, including the filing
of a complaint, void. Id. ¶ 22. The court rejected this conclusion. This court
- 13 -
determined that the unauthorized practice of law did not affect the subject matter
jurisdiction of the circuit court and, thus, the complaints were not void. Id. ¶ 29.
¶ 45 However, this conclusion did not end the inquiry. The defendant in Downtown
Disposal had raised the allegation of unauthorized practice of law in a timely
fashion in the circuit court and the error was properly preserved on direct appeal in
this court. Thus, although the unauthorized practice of law did not deprive the
circuit court of jurisdiction, there was still a question of whether the error merited
dismissal of the complaints.
¶ 46 The defendant maintained that the unauthorized practice of law rendered the
complaints a “nullity,” meaning that the complaints should be automatically
dismissed, or dismissed per se, with no consideration of the particular
circumstances of the case. This court rejected that view and held there was no
“automatic nullity rule.” Id. ¶ 31. Instead, the court concluded that, in determining
whether dismissal of a complaint filed by a nonattorney is required, the circuit court
should consider, inter alia, whether the nonattorney’s conduct was done without
knowledge that the action was improper, whether the corporation acted diligently in
correcting the mistake by obtaining counsel, whether the nonattorney’s
participation was minimal, and whether the participation resulted in prejudice to the
opposing party. Id. Applying these factors, this court concluded that dismissal of
the complaints in Downtown Disposal was not warranted.
¶ 47 In this case, the parties both point to the various factors which were used in
Downtown Disposal to determine whether the complaints should be dismissed, to
contend that the circuit court’s judgment of January 15, 2009, is either void or
voidable. The parties’ reliance on the Downtown Disposal factors is misplaced.
¶ 48 The question before us in this case is whether the circuit court properly denied
Trice’s section 2-1401 petition seeking to vacate the circuit court’s January 15,
2009, judgment. The only allegation raised in Trice’s petition is that the circuit
court’s judgment is void. As we held in Steinbrecher, whether a judgment in a civil
lawsuit that does not involve administrative law is void rests solely on whether the
circuit court which entered the challenged judgment possessed jurisdiction over the
parties and the subject matter. Steinbrecher, 197 Ill. pcarroll@example.com. If the circuit
court “had both subject matter jurisdiction and personal jurisdiction over the parties
[then] the judgment is not ‘void.’ ” Id. at 531. The factors discussed in Downtown
Disposal to determine whether to dismiss the complaints in that case have no
- 14 -
bearing on this issue. Only the absence of jurisdiction renders a circuit court’s
judgment void. Steinbrecher, 197 Ill. pcarroll@example.com.
¶ 49 As we have held that the circuit court’s January 15, 2009, judgment is not void,
it is unnecessary to address the constitutional issues in this case. The circuit court
only reached the constitutional questions because the appellate court held that
LVNV’s failure to register as a debt collection agency would render the January 15,
2009, judgment void. However, we have now found that determination to be
erroneous, holding that even if the legislature may make the lack of a debt
collection license a criminal offense, the circuit court’s January 15, 2009, judgment
is not void.
¶ 50 CONCLUSION
¶ 51 This case has therefore been returned to square one. The circuit court’s initial
denial of Trice’s section 2-1401 petition was correct, LVNV has been granted relief
on a nonconstitutional ground, and there was no need for the circuit court to address
the constitutionality of the Collection Agency Act. Under these circumstances, the
appropriate disposition is to vacate the circuit court’s findings of
unconstitutionality as unnecessary. See, e.g., Mulay v. Mulay, 225 Ill. 2d 601
(2007).
¶ 52 Thus, in the exercise of our supervisory authority, we vacate the judgment of
the circuit court as to the constitutionality of the statutes in question, reject the
analysis of the appellate court, and remand this matter for confirmation of the
monetary judgment in favor of LVNV.
¶ 53 Circuit court judgment vacated.
¶ 54 Cause remanded with directions.
- 15 -
¶ 55 JUSTICE KILBRIDE, dissenting:
¶ 56 I dissent from the majority opinion because I cannot agree with this court
adopting an approach that does not address the constitutionality of sections 4.5, 14,
and 14b of the Collection Agency Act (225 ILCS 425/4.5, 14, 14b (West 2008)).
¶ 57 I do not believe this court should avoid reviewing a direct finding that sections
4.5, 14, and 14b of the Act are unconstitutional. This appeal comes to us from the
circuit court of Cook County, the court having declared sections 4.5, 14, and 14b of
the Act unconstitutional, both facially and as applied in this case. The circuit court
indicated that, pursuant to Supreme Court Rule 18 (Ill. S. Ct. R. 18 (eff. Sept. 1,
2006)), its finding of unconstitutionality was necessary because the appellate court
already rejected its alternative grounds (see 2011 IL App (1st) 092773). This court
denied LVNV’s petition for leave to appeal from that decision. LVNV Funding,
LLC v. Trice, No. 112834 (Ill. Nov. 30, 2011). Because the circuit court invalidated
Illinois statutes, appeal lies directly to this court pursuant to Supreme Court Rule
302(a)(1) (Ill. S. Ct. R. 302(a)(1) (eff. Oct. 4, 2011)). The validity of sections 4.5,
14, and 14b of the Act is, thus, the only subject of this appeal.
¶ 58 The majority, unfortunately, focuses its analysis on LVNV’s alternative
argument that collaterally challenges the appellate court’s prior 2011 decision
(2011 IL App (1st) 092773). This court denied LVNV’s petition for leave to appeal
from the appellate court’s 2011 decision before deciding Downtown Disposal
Services, Inc. v. City of Chicago, 2012 IL 112040. Obviously, LVNV could not
have resurrected this issue collaterally by cross-appeal in this current direct appeal.
By addressing LVNV’s alternative argument, the majority allows LVNV to
bootstrap and challenge the issue in this appeal, effectively giving LVNV “a second
bite at the apple” when it already litigated this issue to a final resolution. Therefore,
I believe this court should not skirt review of the constitutional issue raised in this
direct appeal.
¶ 59 In my view, it is error to uphold a judgment that was not obtained in compliance
with the Act. Thus, even if the constitutionality of sections 4.5, 14, and 14b of the
Act were not at issue in this appeal, I would still reverse the circuit court’s
judgment. This appeal comes before the court on the circuit court’s denial of
defendant’s motion to vacate the underlying judgment in favor of LVNV, pursuant
to section 2-1401 of the Code of Civil Procedure (735 ILCS 5/2-1401 (West
2008)). Section 2-1401 invokes the equitable power of the court to set aside a
judgment. “One of the guiding principles *** in the administration of section
- 16 -
2-1401 relief is that the petition invokes the equitable powers of the circuit court
***.” Smith v. Airoom, Inc., 114 Ill. 2d 209, 225 (1986). The equitable power of the
court to set aside a judgment “ ‘is based upon substantial principles of right and
wrong and is to be exercised for the prevention of injury and [for the] furtherance of
justice.’ ” Airoom, 114 Ill. 2d at 225 (quoting Diner’s Club, Inc. v. Gronwald, 43
Ill. App. 3d 164, 168 (1976), and Spencer v. American United Cab Ass’n, 59 Ill.
App. 2d 165, 172 (1965)); see also People v. Lawton, 212 Ill. 2d 285, 298 (2004)
(“Relief should be granted under section 2-1401 when necessary to achieve
justice.”).
¶ 60 Illinois courts have consistently held that where licensing requirements are
enacted to safeguard the public, the unlicensed party may not recover fees for
services or otherwise enforce a contract.
“It is well settled that ‘courts will not aid a plaintiff who bases his cause of
action on an illegal act.’ King v. First Capital Financial Services Corp., 215 Ill.
2d 1, 35 (2005). More specifically, ‘courts will not enforce a contract involving
a party who does not have a license called for by legislation that expressly
prohibits the carrying on of the particular activity without a license where the
legislation was enacted for the protection of the public, not as a revenue
measure.’ ” Chatham Foot Specialists, P.C. v. Health Care Service Corp., 216
Ill. 2d 366, 380-81 (2005) (quoting Ransburg v. Haase, 224 Ill. App. 3d 681,
684-85 (1992)).
¶ 61 There can be no doubt that the Collection Agency Act was enacted to protect
the public and not to generate revenue, as clearly stated in the purpose of the Act.
Section 1a provides:
Ҥ 1a. Declaration of public policy. The practice as a collection agency by
any entity in the State of Illinois is hereby declared to affect the public health,
safety and welfare and to be subject to regulation and control in the public
interest. It is further declared to be a matter of public interest and concern that
the collection agency profession merit and receive the confidence of the public
and that only qualified entities be permitted to practice as a collection agency in
the State of Illinois. This Act shall be liberally construed to carry out these
objects and purposes.
It is further declared to be the public policy of this State to protect
consumers against debt collection abuse.” 225 ILCS 425/1a (West 2008).
- 17 -
¶ 62 Here, LVNV engaged in debt collection practices without being lawfully
licensed in the State of Illinois when it pursued collection against Trice and filed
suit. This court should not assist LVNV in the enforcement of a judgment based on
a lawsuit that violated the law at the time it was instituted.
¶ 63 For these reasons, I respectfully dissent.
- 18 -
|
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 98-2740
NEWPORT NEWS SHIPBUILDING AND DRY DOCK COMPANY,
Petitioner,
versus
DIRECTOR, OFFICE OF WORKERS’ COMPENSATION PRO-
GRAMS, UNITED STATES DEPARTMENT OF LABOR;
ROSCOE MITCHELL,
Respondents.
On Petition for Review of an Order of the Benefits Review Board.
(98-289)
Submitted: October 14, 1999 Decided: January 14, 2000
Before WIDENER, LUTTIG, and MICHAEL, Circuit Judges.
Affirmed by unpublished per curiam opinion.
Jonathan Henry Walker, MASON & MASON, P.C., Newport News, Virginia,
for Petitioner. Robert E. Walsh, Chanda L. Wilson, RUTTER, WALSH,
MILLS & RUTTER, L.L.P., Norfolk, Virginia, for Respondents.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Newport News Shipbuilding and Dry Dock Company seeks review of
the Benefits Review Board’s decision and order affirming the Admin-
istrative Law Judge’s (“ALJ”) award of disability benefits under
the Longshore and Harbor Workers Compensation Act, 33 U.S.C. § 901
(1994). Our review of the record discloses that the Board’s deci-
sion was based upon substantial evidence and is without reversible
error. Accordingly, we affirm substantially on the reasoning of
the Board. See Newport News Shipbuilding v. DOWCP, No. 98-289 (BRB
Nov. 12, 1998). In addition, we find that Newport News has failed
to show or even claim prejudice to its case as a result of the
ALJ’s failure to consider Claimant’s refusal to meet with Newport
News’ vocational expert. Therefore, any error in this regard was
harmless. We dispense with oral argument because the facts and
legal contentions are adequately presented in the materials before
the court and argument would not aid the decisional process.
AFFIRMED
2
|
884 F.2d 1387Unpublished Disposition
NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.Joseph L. BEST, Plaintiff-Appellant,v.J.H. GRIFFIN, Superintendent, D.T. Parks, AssistantSuperintendent, R.L. Sharpe, Unit P/A, Defendants-Appellees.
No. 89-7538.
United States Court of Appeals, Fourth Circuit.
Submitted April 28, 1989.Decided Aug. 30, 1989.
Joseph L. Best, appellant pro se.
Before DONALD RUSSELL and CHAPMAN, Circuit Judges, and BUTZNER, Senior Circuit Judge.
PER CURIAM:
1
Joseph L. Best, a North Carolina prisoner, appeals the district court's dismissal of his 42 U.S.C. Sec. 1983 action. We affirm.
2
First we must address whether Best filed a valid and timely notice of appeal. The district court dismissed this action on October 19, 1988. Best later filed a motion for an extension of time, which was granted by the district court and extended the time for filing an appeal until December 19, 1988. Best did not submit a formal notice of appeal to the district court during that period. Instead, he filed another motion for an extension of time, this time submitting the motion to this Court. This Court received Best's second motion for an extension of time on December 21, 1988, and it was forwarded to the district court.1
3
We construe Best's second motion for an extension of time as a notice of appeal in deference to Best's pro se status and because the motion itself clearly evinces an intent to appeal. We need not and do not decide whether, in other circumstances, a motion for an extension of time should be construed as a notice of appeal.2
4
In addition, we find that Best's motion was "filed" by the district court's December 19 deadline. Because the notice of appeal reached the Clerk of this Court in Richmond, Virginia, on December 21, there is no reasonable possibility that Best gave it to prison authorities for mailing in Salisbury, North Carolina, any later than December 19.3 Thus, we treat the appeal as timely under Houston v. Lack, 56 U.S.L.W. 4728 (U.S. June 24, 1988) (No. 87-5428).
5
Turning to the merits of Best's appeal, we affirm the judgment of the district court. Accepting Best's allegations about his treatment and condition as true for the purposes of determining whether he stated a claim upon which relief could be granted, we find that Best has alleged at most that defendant Sharpe used bad medical judgment in refusing to treat him or to transfer him to the prison hospital. We therefore find that Best's allegations concerning defendant Sharpe's treatment did not demonstrate an eighth amendment violation. See Estelle v. Gamble, 429 U.S. 97, 106 (1976) ("[m]edical malpractice does not become a constitutional violation merely because the victim is a prisoner").
6
We also find that defendants Griffin and Parks did not violate any of Best's constitutional rights by signing allegedly inaccurate evaluations of Best's prison grievances. Cf. Superintendent, Mass. Correctional Facility v. Hill, 472 U.S. 445 (1985) (prison disciplinary action will be upheld if there is some evidence in the record to support charges).
7
We affirm the judgment of the district court. We dispense with oral argument because the facts and legal arguments are adequately presented in the materials before the Court and oral argument would not significantly aid the decisional process.
8
AFFIRMED.
1
This motion is located in the record behind Best's affidavit for an extension of time, which was received by the district court on January 25
2
We note that there is a split of authority on this question. Compare United States v. Hoye, 548 F.2d 1271, 1273 (6th Cir.1977) (treating motion for extension as notice of appeal) and Pasquale v. Finch, 418 F.2d 627, 629 (1st Cir.1969) ("willing to assume, for purposes of this case only, that its motion to extend on June 11 served as a notice of appeal for the purposes of Rule 4(a)") with Dyotherm Corp. v. Turbo Machine Co., 434 F.2d 65, 66 (3d Cir.1970) (motion for extension of time does not operate as notice of appeal; it merely keeps losing party's options open); Matter of Orbitec Corp., 520 F.2d 358, 361-62 (2d Cir.1975) (declining to construe motion for extension of time as notice of appeal in the absence of compelling reasons for hearing the appeal); Selph v. Council of City of Los Angeles, 593 F.2d 881, 882-83 (9th Cir.1979) (declining to construe motion for extension of time as notice of appeal; distinguishing criminal appeals and habeas corpus appeals). See also GAC Corp. v. Callahan, 640 F.2d 7 (5th Cir.1981) (dismissed appeal without considering whether motion could be treated as notice of appeal; motion was filed by attorney to extend time to get authorization from client to appeal)
3
The certificate of service attached to the motion states that it was mailed on December 16
|
Exhibit 10.3
FOURTH AMENDMENT AGREEMENT
This Fourth Amendment Agreement (this “Fourth Amendment Agreement”) is entered
into as of March 17, 2009, by and between WILLIAM LYON HOMES, INC., a California
corporation (“Borrower”), and COMERICA BANK (“Lender”). This Fourth Amendment
Agreement is made with reference to the following facts:
RECITALS
A. Lender has made a revolving line of credit available to Borrower in the
initial maximum outstanding principal amount of $50,000,000 (the “Loan”),
pursuant to the terms of that certain Revolving Line of Credit Loan Agreement
(Borrowing Base Loan) dated as of March 8, 2006 (as amended by the First
Amendment Agreement, Second Amendment Agreement and Third Amendment Agreement
described below and by this Fourth Amendment Agreement, the “Loan Agreement”).
Capitalized terms used in this Fourth Amendment Agreement and not defined shall
have the meanings assigned to such terms in the Loan Agreement.
B. Pursuant to that certain Amendment Agreement dated as of February 28, 2008,
by and between Borrower and Lender (the “First Amendment Agreement”), among
other things (i) the maximum Commitment Amount was reduced to $35,000,000,
(ii) certain adjustments were made to the Borrowing Base, and (iii) the Initial
Line Maturity Date was extended by twelve (12) months to and until April 3,
2009.
C. The Loan Agreement was further modified pursuant to that certain Second
Amendment Agreement dated as of September 2, 2008, by and between Borrower and
Lender (the “Second Amendment Agreement”) to make certain additional changes to
the Borrowing Base.
D. Pursuant to that certain Third Amendment Agreement dated as of December 22,
2008, by and between Borrower and Lender (the “Third Amendment Agreement”),
among other things (i) the parties reduced the Commitment Amount to $30,000,000
and agreed to make further quarterly reductions in the Commitment Amount,
(ii) certain additional adjustments were made to the Borrowing Base, and
(iii) certain financial covenants were revised.
E. Subject to the terms and conditions contained in this Fourth Amendment
Agreement, Borrower and Lender have agreed to further modify the Loan Agreement
as set forth herein.
F. As used in this Fourth Amendment Agreement, the term “Loan Documents” means
the Loan Agreement, the Amended and Restated Note, the Deeds of Trust, the other
Security Documents, the Environmental Indemnity, the Guaranty, and the other
“Loan Documents” described in the Loan Agreement. This Fourth Amendment
Agreement shall also constitute a Loan Document.
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AGREEMENT
NOW, THEREFORE, with reference to the foregoing Recitals and information, and in
consideration of the mutual covenants and agreements contained in this Fourth
Amendment Agreement, and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender agree as
follows:
1. Recitals: Representations and Warranties. The above statement of facts set
forth in the Recitals is true and correct, and the Recitals are hereby
incorporated herein as an agreement of Borrower and Lender. Borrower hereby
represents and warrants to Lender that (a) no Event of Default or Unmatured
Event of Default has occurred or exists, and (b) all representations and
warranties of Borrower contained in the Loan Agreement or in any of the other
Loan Documents are true and correct as of the date hereof.
2. Amendments to Loan Agreement. Borrower and Lender hereby amend the Loan
Agreement as follows:
2.1 The definition of “Commitment Amount” set forth in Section 1.1 of the Loan
Agreement is hereby deleted in its entirety and replaced with the following:
‘“Commitment Amount’ means (a) through March 30, 2009, the sum of Thirty Million
Dollars ($30,000,000.00), (b) from March 31, 2009, through December 30, 2009,
the sum of Fifteen Million Dollars ($15,000,000.00), and (c) from and after
December 31,2009, the sum of Fourteen Million Dollars ($14,000,000.00).”
3. Lender’s Waiver of Set-off Rights. Notwithstanding any provision of any Loan
Document or applicable law to the contrary, in no event shall Lender, whether
with or without demand or notice to Borrower, exercise any right to set-off and
apply deposits (whether certificates of deposit, demand, general, savings,
special, time, or other, and whether provisional or final) held by Lender for
Borrower or any other liabilities or other obligations of Lender to Borrower
against or to the Obligations. By its signature below, Lender hereby waives any
right it may have to set-off and apply such deposits or other liabilities
against or to the Obligations.
4. Security Documents. Each Deed of Trust, and all other Security Documents,
shall secure, in addition to all other indebtedness and obligations secured
thereby, the payment and performance of all present and future indebtedness and
obligations of Borrower under (a) this Fourth Amendment Agreement, (b) the
Amended and Restated Note, (c) any and all amendments, modifications, renewals
and/or extensions of the Loan Agreement, regardless of whether any such
amendment, modification, renewal or extension is evidenced by a new or
additional instrument, document or agreement, and (d) all other Loan Documents
(other than the Guaranty and the Environmental Indemnity, the obligations under
which are not secured by the Deeds of Trust).
5. Definitions. Except as provided in this Fourth Amendment Agreement, all
references in the Loan Agreement and in the other Loan Documents (a) to the Loan
Agreement shall mean the Loan Agreement as amended by this Fourth Amendment
Agreement, and (b) to the Loan Documents shall mean the Loan Documents as such
term is defined in this Fourth Amendment Agreement.
-2-
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6. Conditions Precedent. Lender’s obligation to modify the terms of the Loan
Agreement as set forth herein is subject to the satisfaction of all of the
following conditions precedent (any of which may be waived by Lender in its sole
discretion);
6.1 Lender shall have received a fully executed original of this Fourth
Amendment Agreement (including an original of the executed Guarantor’s Consent
attached hereto).
6.2 No change shall have occurred in the financial condition of Borrower,
Guarantor or any Project, which would have, in Lender’s sole judgment, a
material adverse effect on such Project or on Borrower’s or Guarantor’s ability
to repay the Loan or otherwise perform their respective obligations under the
Loan Documents as of the date hereof.
6.3 No condemnation or adverse zoning or usage change proceeding shall have
occurred or shall have been threatened against any Project; no Project shall
have suffered any significant damage by fire or other casualty which has not
been repaired; no law, regulation, ordinance, moratorium, injunctive proceeding,
restriction, litigation, action, citation or similar proceeding or matter shall
have been enacted, adopted, or threatened by any governmental authority, which
would have, in Lender’s judgment, a material adverse effect on Borrower or any
Project as of the date hereof.
6.4 The representations and warranties contained in the Loan Agreement and in
all other Loan Documents shall remain true and correct as of the date hereof.
6.5 No Event of Default or Unmatured Event of Default shall have occurred and be
continuing.
6.6 Borrower shall have reimbursed Lender for all costs and expenses incurred by
Lender in connection with the transaction contemplated by this Fourth Amendment
Agreement, including all attorneys’ fees and costs.
7. Non-Impairment. Except as expressly provided herein, nothing in this Fourth
Amendment Agreement shall alter or affect any provision, condition or covenant
contained in the Loan Agreement or the other Loan Documents or affect or impair
any rights, powers or remedies thereunder, and the parties hereto intend that
the provisions of the Loan Agreement and the other Loan Documents shall continue
in full force and effect except as expressly modified hereby.
8. Miscellaneous. This Fourth Amendment Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of California
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws, and any applicable laws of the
United States of America. The headings used in this Fourth Amendment Agreement
are for convenience only and shall be disregarded in interpreting the
substantive provisions of this Fourth Amendment Agreement. If any provision of
this Fourth Amendment Agreement shall be determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable, that portion shall be
deemed severed herefrom and the remaining parts shall remain in full force as
though the invalid, illegal or unenforceable provision had never been a part
hereof. As used in this Fourth Amendment Agreement, the term “include(s)” shall
mean “include(s), without limitation,” and the term “including” shall mean
“including, but not limited to.”
-3-
--------------------------------------------------------------------------------
9. Integration; Interpretation. The Loan Documents, including this Fourth
Amendment Agreement, contain or expressly incorporate by reference the entire
agreement of the parties with respect to the matters contemplated therein, and
supersede all prior negotiations. No reference to this Fourth Amendment
Agreement is necessary in any instrument or document at any time referring to a
Loan Document. Any reference to a Loan Document (including in any other Loan
Document) shall be deemed a reference to such document as amended hereby.
10. Counterparts. This Fourth Amendment Agreement may by executed in any number
of counterparts, all of which shall be considered one and the same instrument.
The original, executed signature pages of exact copies of this Fourth Amendment
Agreement may be attached to one of such copies to form one document.
-4-
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IN WITNESS WHEREOF, Borrower and Lender have executed this Fourth Amendment
Agreement as of the day and year first set forth above.
BORROWER: WILLIAM LYON HOMES, INC., a California corporation By:
/s/ Michael D. Grubbs
Name: Michael D. Grubbs Title: Senior Vice President By:
/s/ Richard S. Robinson
Name: Richard S. Robinson Title: Senior Vice President LENDER: COMERICA BANK
By:
/s/ David Plattner
Name: David Plattner Title: Vice President—Western Market
S-1
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GUARANTOR’S CONSENT
WILLIAM LYON HOMES, a Delaware corporation (“Guarantor”), hereby consents to the
terms, conditions and provisions of the foregoing Fourth Amendment Agreement
(“Fourth Amendment Agreement”) and the transactions contemplated by the Fourth
Amendment Agreement. Guarantor hereby reaffirms the full force and effectiveness
of its Guaranty dated as of March 8, 2006 (the “Guaranty”), in light of the
Fourth Amendment Agreement, including without limitation all waivers,
authorizations and agreements set forth therein. Guarantor hereby confirms and
agrees that all references in the Guaranty to the Loan Agreement shall hereafter
be deemed references to the Loan Agreement as amended by the Fourth Amendment
Agreement. In addition, Guarantor acknowledges that its obligations under the
Guaranty are separate and distinct from those of Borrower on the Loan.
Dated as of March 17, 2009.
GUARANTOR: WILLIAM LYON HOMES, a Delaware corporation By:
/s/ Michael D. Grubbs
Name: Michael D. Grubbs Title: Senior Vice President By:
/s/ Richard S. Robinson
Name: Richard S. Robinson Title: Senior Vice President
CONSENT |
711 N.W.2d 73 (2006)
474 Mich. 1098
PEOPLE of the State of Michigan, Plaintiff-Appellee,
v.
Nathan JONES, Defendant-Appellant.
Docket No. 129506. COA No. 244066.
Supreme Court of Michigan.
March 29, 2006.
On order of the Court, the application for leave to appeal the July 26, 2005 judgment of the Court of Appeals is considered, and it is DENIED, because we are not persuaded that the questions presented should be reviewed by this Court.
CAVANAGH and KELLY, JJ., would grant leave to appeal.
|
This controversy originated in the Probate Court of Pettis County, where respondents, residuary legatees under the will of John W. Murphy, deceased, excepted to the final settlement of appellants, executors of the will, on various grounds, including the failure of the executors to account for interest on funds of the estate deposited in the Sedalia Trust Company. The probate court *Page 1048
overruled this exception, holding that the estate was not entitled to interest on funds so deposited, but sustained other exceptions and ordered the executors to file an amended final settlement in conformity with its findings. On the appeal of the legatees, the Circuit Court of Pettis County held that the Sedalia Trust Company should pay interest to the estate in the sum of $10,629.93, and rendered judgment accordingly. From that judgment, the executors have perfected an appeal to this court.
The exceptions of the legatees to the final settlement of the executors and the answer of the executors thereto, filed in the probate court, constitute the pleadings in the case.
Relating to interest on funds of the estate, the legatees say, in their exceptions, that the executors had possession and control of the property and funds of the estate, from May 1, 1919, to November 12, 1924; that the settlements filed by the executors on November 17, 1919, July 20, 1920, December 20, 1922, and November 12, 1924, show balances of money in their hands, varying in amounts from $22,224.53 on November 17, 1919, to $65,372.55 on July 20, 1920; that, throughout the period of administration, the Sedalia Trust Company used the funds of the estate in carrying on its own business and collected interest thereon and did not account therefor to the estate; and that the settlements filed by the executors, including their final settlement of November 12, 1924, do not show any interest on funds in their hands.
In their answer, the executors say that on November 10, 1924, all of the respondents, except Elizabeth Downs, Katherine L. Friday and Mary Ann Houston, with full knowledge of the facts and circumstances, accepted the amounts tendered to them and executed written receipts therefor in full settlement of their respective shares in the estate, in accordance with the final settlement of the executors, and are now estopped from claiming any further interest in the estate; that they were ready, able and willing to make their final settlement of the estate in October, 1920, but were prevented from doing so by the claims of Katherine L. Friday and Mary Ann Houston, and, because of said claims, they (the executors) were compelled to file a suit to have the will construed and to await the final determination of said suit before making their final settlement; and that the Sedalia Trust Company did not use the funds of the estate nor collect any interest thereon, but kept said funds on hand and available at all times for the use of the executors in making their final settlement, and they (the executors) did not receive any interest on the funds of the estate.
The evidence shows that the Sedalia Trust Company was the active executor and the sole depository of the funds of the estate. *Page 1049
Plaintiffs' Exhibits 1 to 6, inclusive, are photographic copies of the Trust Company's ledger sheets, covering a complete account of the banking transactions, or receipts and disbursements, of the executors in the administration of the estate. By permission of this court, granted on appellants' motion, the parties have abbreviated the record by filing here a stipulation as to interest on daily balances in the account of the estate, in accordance with the calculations of plaintiffs' witness E.J. Donnelly, an expert accountant, and by omitting from the record the exhibits above mentioned. As shown by the stipulation, the interest on said daily balances, at the rate of eight per cent, amounted to $14,173.37, on March 17, 1926, the day of the trial in the circuit court; at seven per cent, $12,401.60; at six per cent, $10,629.93.
The plaintiffs' case rests largely upon the testimony of C.C. Evans, secretary and treasurer and managing officer of the Sedalia Trust Company. He was called as witness for plaintiffs and testified that he actively conducted the administration of this estate, as trust officer of the Trust Company. According to his testimony, the assets of the estate, including real property, notes and stocks, were converted into cash, which was deposited, from time to time, to the account of the executors of the estate in the Trust Company. Except certain deposits for which time certificates were issued, all of the funds of the estate went into the general deposits of the Trust Company and were used by the Trust Company in making loans and in carrying on its general banking business. No separate account was kept of the funds of the estate so used nor of the interest collected thereon. In its usual course of business, the Trust Company charged seven and eight per cent interest on personal loans and five and six per cent on real estate loans. On real estate loans, it charged an additional two or three per cent as a commission for making such loans. Except on active accounts, it paid two per cent on all daily balances over $300, but he instructed the bookkeeper of the Trust Company not to pay anything on the daily balances of this estate, because he considered it an active account and subject to use at any time for the purpose of distribution. The executors were ready to make a final settlement of the estate in 1920, but were prevented from doing so by the claims of respondents Katherine L. Friday, Mary Ann Houston and Paul Murphy and other heirs of John W. Murphy. These claims necessitated a suit to construe the will, which was filed by the executors, as plaintiffs, on March 4, 1920, in the Circuit Court of Pettis County, and finally determined by the decision of this court at the April term, 1924. All of respondents were nonresidents of the State of Missouri and uninformed as to the details of the administration of the estate. Three or four of them requested the executors to send *Page 1050
them copies of the final settlement, but this was not done, because the probate judge advised him that the executors were not required to furnish the heirs with copies of settlements. Afterwards, the probate judge said he had notified the heirs that he would furnish copies of the final settlement for $2.50 per copy. Upon the request of Richard Murphy, co-executor, he sent a copy of the final settlement to the respondent Michael Enright, but the request of the other heirs for copies were merely turned over to the probate judge. Receipts covering the respective amounts due, in accordance with the final settlement, were sent to each of the heirs, together with letters advising each of them that a check for the amount due would be forwarded upon return of the receipt properly signed, but none of the heirs, except Michael Enright, were furnished with a copy of the final settlement, nor with any notice thereof, nor with any information relating thereto. He identified the executors' final settlement (plaintiffs' Exhibit 12), filed November 12, 1924, and the executors' amended final settlement (plaintiff's Exhibit 13), filed May 6, 1925, which were offered in evidence. Concerning deposits of the funds of the estate in the Trust Company, he testified in detail, as follows:
"Q. Now that money, as shown there by the photographic copies which have been introduced in evidence and numbered Exhibits 1 to 6, inclusive, went into the general deposits of the bank like any other deposit, did it not? A. Yes, sir.
"Q. It wasn't held separate? A. No, sir,
"Q. And it wasn't held as a special account? A. No, sir.
"Q. And it wasn't segregated from the general deposits of the bank? A. No, sir.
"Q. In other words, it was like any other deposit? A. Yes, sir.
"Q. And you use these bank deposits in making loans just like any other bank or trust company? A. Yes, sir.
"Q. Except that you, from your general deposits, do reserve a certain amount required by the state law? A. Yes, sir.
"Q. How much is that reserve? A. Fifteen per cent of our deposits.
"Q. In other words, up to a certain amount the money which was in the Murphy estate and which went into the general deposits of the Trust Company, the Trust Company used in making loans anddoing the business of the Trust Company and earning interest onit? A. Yes, sir.
"Q. In fact, that is the way the Sedalia Trust Company, who is executor of this estate, makes most of its money, by loaning out the general deposits? A. Yes, sir.
"Q. With the exception of what you may have taken out of the John W. Murphy account and placed in time deposit certificates, *Page 1051 all of the money derived from the sale of assets or any othersource, which belonged to the Murphy estate, was kept in thegeneral deposits of the Sedalia Trust Company and went to swellits general assets? A. Yes, sir.
"Q. But up to the point of that reserve you loaned the moneyand funds you derived from the assets of this estate, is thatcorrect or not? A. Yes, sir.
"Q. You loaned them all out? A. Yes, sir.
"Q. Now in your settlement, one of your settlements, you show on July 20, 1920, you had a balance on hand of $65,372.55 in cash, is that correct? A. The statement shows it.
"Q. And that was in the general deposit of the Trust Companyand was being loaned out by the Trust Company and earninginterest for the Trust Company, wasn't it? A. Yes, sir.
"Q. That is, it went to swell the deposits and was so shown in the statements of the Sedalia Trust Company? A. Yes, sir.
"Q. And you loaned it out, that is correct, isn't it? A.Yes, sir.
"Q. Just as you would any other money? A. It wasn't segregated. We didn't loan it out as a separate item, it went into ourloans.
"Q. But it was in the general funds of the Trust Company? A. Yes, sir.
"Q. And you loaned it out as you would any other money andreceived interest on it? A. Yes, sir."
The following is taken from his cross-examination along the same line:
"Q. Did you ever make a loan for the Murphy estate? A. None.
"Q. Now when you stated that the money was placed in the Trust Company and you made loans, do you mean you loaned out the Murphy estate money? A. No, sir.
"Q. You simply loaned money which was on deposit in yourbank? A. Yes, sir.
"Q. Everybody's money, as any other bank does in order to operate? A. Yes, sir.
"Q. When you stated yesterday the money had been loaned, do you mean the money was deposited in the bank as other customers' money was, and if you made a loan the loan was out of the general deposits? A. Yes, sir.
"Q. In other words, you never loaned the Murphy money whatever and collected interest on it? A. No, sir.
"Q. Now, Mr. Evans, did the fact that there was some money belonging to the Murphy estate deposited in your bank did that increase your capacity to make loans or didn't, or wouldn't you have made the same loans if that money hadn't been there? A. Yes, sir. *Page 1052
"Q. In other words, was this money on deposit there in an uncertain condition, that is, you didn't know when you were going to be called on to pay it out, therefore, did that money swell your assets and place you in position to make loans you couldn't have made without it? A. No, sir."
In connection with his cross-examination, this witness identified receipts dated November 10, 1924, and signed by all of the respondents, except Elizabeth Downs, Katherine L. Friday and Mary Ann Houston, and nine other heirs, in which said respondents and other heirs acknowledge full settlement of their respective shares of the estate, and said receipts were offered in evidence by defendants. He further testified, on cross-examination, that, prior to signing the receipts mentioned, some of the heirs, including some of respondents, contended that they were entitled to interest on the funds of the estate, and that the respondent Paul Murphy and his guardian, at the time his receipt was signed, agreed not to make any claim for interest. He was interrogated, on redirect examination, as follows:
"Q. Mr. Evans, Mr. Shortridge questioned you about loaning out the Murphy estate money. You said you didn't, but you don't meanto say when you say that, that the Murphy estate money was not inthe general deposits of the bank? A. No, sir, it was there.
"Q. And your loans were made out of the general deposits ofwhich the Murphy estate money constituted a part? A. Yes,sir."
Paul Barnett, of counsel for plaintiffs, testified that he was Paul Murphy's attorney at the time he gave his receipt for his share of the estate, in accordance with the final settlement; that he did not know, at the time, the executors had failed to account for interest on funds of the estate deposited in the Trust Company; and that the matter of interest on funds of the estate did not arise and was not discussed at that time. On cross-examination, he said: "I joined in the claim for interest as quick as I found no interest was accounted for."
Mr. A.L. Shortridge, of counsel for defendants, was the only witness called by defendants. He testified that, on several occasions prior to the time Paul Murphy signed the receipt for his share of the estate, his mother, who was his guardian, contended that the executors should pay interest on funds of the estate deposited in the Trust Company.
Matters appearing in some of the exhibits and other matters in evidence will be referred to in the further discussion of the case.
Originally, the circuit court sustained the executors' motion to dismiss the appeal from the probate court, on the ground that the judgment of the probate court on the issue of interest was not a final judgment and therefore the circuit court was without jurisdiction. *Page 1053
Later, on motion of the legatees, the order dismissing the appeal was set aside and the case heard on its merits. The circuit court, sitting in equity, found the issues for the plaintiffs; that the Sedalia Trust Company, as the active executor and sole depository of funds of the estate, commingled the funds of the estate with its general deposits, and, as a part of its general deposits, used the funds of the estate in making loans, and collected from five to eight per cent interest thereon, and failed to account to the estate therefor; that no separate account was kept of the funds of the estate so loaned nor of the interest collected thereon, and, no separate account thereof being available, the Sedalia Trust Company should, in equity, be required to pay the estate six per cent interest on daily balances in the account of the estate; and, in accordance with its findings, adjudged that the Sedalia Trust Company pay the estate the sum of $10,629.93, together with interest thereon at the rate of six per cent per annum from the day of judgment, May 3, 1926; that the executors make distribution thereof according to law; and that a transcript of its record and proceedings be certified to the probate court.
I. Counsel for appellants first contend that, because the probate court held, on the exceptions of the legatees, that the final settlement of the executors, filed November 12, 1924, was not a full and complete final settlement and ordered the executors to file an amended final settlement inAppeal: conformity with its findings, and because suchFinal Decision: amended final settlement was later filed, on MayInterest. 6, 1925, the judgment of the probate court in disallowing the legatees' claim of interest on funds of the estate was not a final judgment, and therefore the appeal of the legatees from that judgment was improperly allowed and the circuit court did not acquire jurisdiction of the case. We do not agree with counsel in this contention.
Section 282. Revised Statutes 1919, provides that "appeals shall be allowed from the decision of the probate court to the circuit court, in the following cases: . . .; second, on allsettlements of executors and administrators: . . . fifteenth, and in all other cases where there shall be a final decision ofany matter arising under the provisions of articles I to XIII,inclusive, of this chapter." (Our italics.)
The record shows that, on February 19, 1925, a hearing was had in the probate court on the exceptions of the legatees to the final settlement of the executors, filed November 12, 1924; that the probate court found and adjudged that the estate was not entitled to any interest on funds deposited in the Sedalia Trust Company, and accordingly overruled the exception relating thereto, but sustained other exceptions, including one relating to overcharges in the commissions *Page 1054
of the executors, and ordered the executors to file an amended final settlement in conformity with its findings and judgment on such exceptions; that, in due time, the legatees filed their application and affidavit for an appeal and were allowed an appeal to the circuit court, solely on the ground that they were aggrieved by the decision of the probate court in holding that the estate was not entitled to any interest on funds deposited in the Sedalia Trust Company; that the amended final settlement of the executors, filed and approved May 6, 1925, shows only the refund of overcharges in the commissions of the executors in the sum of $2,288.34, under the title of "Receipts," and only the distribution of said refund among the heirs of the estate, under the title of "Disbursements."
It seems perfectly clear, from the record, that the decision of the probate court on the issue of interest involved a "settlement of executors" and was a "final decision" of a matter arising under the provisions of our administration law. The order requiring the executors to file an amended final settlement related to other matters and did not leave open for any further consideration, by the probate court, the question of interest on funds of the estate. We are amply supported in this conclusion by the rulings of this court in Branson v. Branson, 102 Mo. 613, 15 S.W. 74; McCrary v. Menteer, 58 Mo. 446; Ruff v. Doyle,56 Mo. 301. The legatees were properly allowed an appeal from the judgment of the probate court on the issue of interest, and the hearing afforded them on that issue in the circuit court was a proper exercise of that court's appellate jurisdiction.
II. It is provided in Section 223, Revised Statutes 1919, that: "The court shall, at each settlement, exercise an equitablecontrol in making executors and administrators account for interest received by them on debts due the estate, and forinterest accruing on money belonging to the estate, loaned or otherwise employed by them; and for that purposeEquity may take testimony or examine the executor orJurisdiction. administrator on oath." (Our italics.) And our appellate courts have held that cases of this character are in the nature of equity cases and triable as such in the probate court and the circuit court and upon appeal from the circuit court. [Perkins v. Silverman, 284 Mo. 238,223 S.W. 895; Rash v. Rash (Mo. App.), 256 S.W. 525.] Accordingly, our consideration of this case must be de novo, as in all equity cases.
III. Counsel for appellants further contend, in their brief, that "under the facts in this case and the law applicable thereto, the executors were only chargeable with interest at the rate of two per *Page 1055
cent compounded annually." The law referred to is Section 11801, Subdivision 9, Revised Statutes 1919, which says:Interest: "Unless otherwise provided in the instrumentAmount: creating the trust, on all sums, not less thanDeposit in one hundred dollars, which shall be held by aTrust Company. trust company in any fiduciary capacity, or as depository of moneys paid into court, interestshall be allowed by such trust company at not less than the rateof two per centum per annum, compounded annually, until the moneys so received shall be duly expended or distributed." (Our italics.) Concerning the statute of which the above quoted provision is a part, this court has said: "This authority is not given to trust companies as a convenient incident to the conduct of their ordinary business. The Legislature was not considering the prosperity of trust companies, but was looking for the safety of certain important trust funds which are attended with the natural insecurity and danger of dissipation, making them the especial and peculiar concern of the law. The legislative purpose was not to confer a privilege upon trust companies, but to seek additional sources of security for those funds." [State ex rel. Bank v. Duncan, 302 Mo. l.c. 144, 257 S.W. l.c. 788.] And, of course, the Legislature did not intend, by imposing a minimum interest charge of two per cent, compounded annually, on trust funds "held" by a trust company as a trust officer or as a depository, to permit a trust company, while so acting, to escape a full accounting of all interest actually realized on trust funds. Indeed, it is said by counsel, in their brief, that "the provision that the Trust Company shall pay to the estate not less than two per cent per annum, compounded annually, implies thatthere are circumstances under which a trust company should paymore than two per cent." (Our italics.) So, concededly, Subdivision 9 of Section 11801 is in harmony with the general provision in Section 222, Revised Statutes 1919, which says that "all interest received by executors or administrators on debts due to the deceased shall be assets in their hands; and if theylend the money of the deceased, or use it for their own privatepurposes, they shall pay interest thereon to the estate;" and the further provision in Section 223, above quoted, which says that "the court shall exercise an equitable control in makingexecutors and administrators account for interest received" on funds of the estate so loaned or employed. (Our italics.) Counsel also say, in their brief: "Aside from this two per cent allowed by the statute, there is no arbitrary rule on the rate of interest, and before a court of equity will charge appellants with interest at a higher rate, the circumstances of the casemust show that it is right and just to do so." (Our italics.) We fully agree with counsel in this statement, which means that the *Page 1056
only question left for our determination is what amount of interest, under the particular facts and circumstances of this case, the Sedalia Trust Company should be required to pay.
In contending that the Trust Company should not be required to pay more than the minimum rate of two per cent, as fixed by Subdivision 9, Section 11801, counsel argue that it did not loan the funds of this estate nor receive any interest thereon. On the record before us, this argument cannot be seriously considered. From the testimony of the Trust Company's own managing officer, who acted for it as the active executor of this estate, it plainly appears that the funds of this estate, as a part of its general deposits, were used in making loans and that from five to eight per cent interest was collected on its loans. "A trustee is accountable for all interest or profits actually received by him from the trust fund, whether used in his private business or otherwise employed by him. Under no circumstances will he be permitted to retain any benefit or advantage from the trust fund, except his compensation or commissions." [Cruce v. Cruce, 81 Mo. l.c. 684. See also, State ex rel. Welch v. Morrison, 244 Mo. 193, 148 S.W. 907; Wolfort v. Reilly, 133 Mo. 463, 34 S.W. 847; Smiley v. Smiley, 80 Mo. 44; In re Davis, Executor, 62 Mo. 450; Green v. Hussey, 96 Mo. App. 295, 70 S.W. 156; In re Camp, Administrator,6 Mo. App. 563.] And we have expressly held, that, where an executor uses trust funds for his own private purposes, the statute (Sec. 222), requiring him to pay interest thereon, ismandatory. [Wolfort v. Reilly, supra; State ex rel. Welch v. Morrison, supra.] Needless to say, the fact that the executor under attack happens to be a trust company does not change the rule. [Subdiv. 6, Sec. 11801, R.S. 1919; State ex rel. Bank v. Duncan, supra; St. Paul Trust Co. v. Kittson, 62 Minn. 408; 1 A.L.R. 1647.] Nor can it escape liability because it had on hand ample funds, at all times, to meet the demands of creditors and legatees. Its mere ability to pay at any time does not absolve it from the payment of interest on funds commingled with its own funds and used by it in carrying on its own business. "If this were so, any administrator of large means or resources might constantly use the funds in his hands in his business and realize large profits therefrom without paying interest for the use of such fund. This the law will not permit." [Wolfort v. Reilly, supra.] See ruling to same effect in Green v. Hussey, supra.
Nor does the delay in making final settlement, caused by the suit to construe the will, make any difference. [31 L.R.A. (N.S.) 362, *Page 1057
IX.] Nor is it relieved from liability by the failure of the heirs to have the result of said suit certifiedDelay: Suit to to the probate court. The Trust Company was aConstrue Will. party to the suit and had full knowledge thereof, and, as active executor of the estate, should have attended to such certification itself.
Nor are the respondents estopped from claiming interest on the funds of the estate because they failed to make such a claim until after the executors filed their finalEstoppel. settlement. Nor are those respondents who signed receipts in full settlement of their respective shares in the estate, in accordance with said final settlement, estopped from making such a claim. None of the respondents were residents of this State, and it is established, by the greater weight of the evidence, that none of them knew of the failure of the executors to account for interest on funds of the estate until after the executors' final settlement was filed, and that some of them were not advised of this fact until after they had signed the receipts mentioned.
Nor was the action of the probate court, in failing to require the executors to account for interest at eachAccounting settlement, a final action on that question. True.at Final Section 223 says that "the court shall. at eachSettlement. settlement, exercise an equitable control in making executors and administrators account for interest." (Our italics.) But, this court has held that an executor may be required, on final settlement, to pay interest on trust funds used for his own private purposes, although he was not required to pay interest on such funds at the time of his annual settlements. [In re Davis, Executor, supra.] Moreover, it has been repeatedly held that partial settlements are open to correction or modification at the final settlement and become a part of the final settlement when such settlement is approved. [In re Wickard's Estate (Mo. App.), 282 S.W. 173, and cases cited.]
The Trust Company charged from five to eight per cent interest on its loans, but no record was kept of the actual amount loaned out of the funds of this estate, nor of the interest received thereon. In the absence of such a record, the daily balances in the account of the estate may be taken as a proper basis of calculation in determining the amount of interest the Trust Company should be required to pay. The parties have stipulated, in accordance with the calculations of the witness Donnelly, that the interest on daily balances, at the rate of six per cent. amounted to $10,629.93, on March 17, 1926, the day of the trial in the circuit court. As above shown, the circuit court fixed the Trust Company's liability at that amount, together with six per cent interest thereon from May 3, 1926, the day of the *Page 1058
judgment. We are not inclined to say that it should pay more or less. After a very careful examination of the whole record, we find ourselves in full accord with the views of the circuit court. On the facts of this case and the authorities cited above, the judgment rendered below is right, just and equitable.
The judgment is accordingly affirmed. Davis and Cooley,CC., concur. |
TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-01-00028-CV
B. Shannon Davis and Susan Davis, Appellants
v.
Julie Guerrero and Luis A. Rios, Appellees
FROM THE DISTRICT COURT OF BELL COUNTY, 264TH JUDICIAL DISTRICT
NO. 175,959-D, HONORABLE MARTHA J. TRUDO, JUDGE PRESIDING
This appeal concerns the propriety of a district court's modification of an order in a
suit affecting the parent-child relationship ("Kansas order"). B. Shannon Davis and Susan Davis
contend that the district court should have abated its consideration of the Kansas order in deference
to the existence in the county court at law of a guardianship order and a motion to revoke that
guardianship. We conclude that the district court should not have modified the Kansas order until
the guardianship issue was resolved; accordingly, we conclude that the district court erred by
awarding attorney's fees against appellants. We vacate the modification order and remand the cause.
BACKGROUND
Collette Davis was born to Julie Guerrero ("Julie" (1)) and Luis A. Rios in December
1993. The primary contestants for custody are Julie and her parents, the Davises. Collette moved
eleven times among four states before her sixth birthday due to her maternal grandfather's military
career and her mother's tempestuous relationship with Roman Guerrero. Custody of Collette was
the subject of a Kansas order and a Texas guardianship. Though the points of error in this case are
essentially procedural, the following factual background gives context to the disputed court actions.
Factual background
Julie and Rios met in Kentucky where their fathers were stationed in the military.
Rios's father retired and moved his family to Florida; Julie's father, Shannon Davis, stayed in the
military and moved his family to his new post in Kansas. The fifteen-year-old Julie visited the
Rioses during spring break from school and deliberately became pregnant so she could move to
Florida to be with Rios. By her fifth month of pregnancy, however, she had moved out and wanted
an abortion. Instead, she moved to Kansas with her parents and decided to put the child up for
adoption; Rios scuttled that plan by refusing to agree to terminate his parental rights.
In August 1994, a Kansas court signed the Kansas order (entitled "A Journal Entry
Establishing Paternity, Setting Child Support and Visitation, Splitting Insurance and Medical Bills,
and Denying Motion to Change Minor Child's Last Name"). The court appointed Julie and Rios
joint custodians, giving Julie "primary residential custody." The Davises are not mentioned in the
Kansas order. The Davis family (including Julie and Collette) had already moved to Texas in June
1994 pursuant to Shannon's biennial reassignment by the military. Julie lived with her parents for
a while as she graduated from high school and attended college. She then moved out to live with
Roman Guerrero (now her husband), leaving Collette with the Davises; according to the Davises,
she visited them and Collette about every other week.
In April 1996, the Davises petitioned Bell County Court at Law No. 1 ("county
court") to name them Collette's guardians. They alleged that the guardianship was necessary to
provide Collette health insurance, support, and other benefits. They requested that the guardianship
last until Collette turns eighteen years old or Julie lives with Collette outside their home. Julie
agreed to the guardianship, but says she believed it to be limited in scope. On July 21, 2000, the
county court appointed Shannon alone to be Collette's guardian without a limitation on his powers
or the term of the guardianship.
Also in July 1996, the Davises and Collette moved to Hawaii, while Julie stayed in
Texas to finish her associate's degree. She lived with Roman's parents before moving to Hawaii in
December 1996. Julie attended the University of Hawaii for part of the Spring 1997 semester before
dropping out and returning to Texas where she and Roman planned a December wedding. She
became pregnant and they accelerated the wedding to October 1997; the Davises brought Collette
to the wedding and left her with the couple in Texas. However, the Davises took Collette back to
Hawaii in January 1998 when the Guerreros were having marital troubles. Julie gave birth to a son
in April 1998.
When the Davises moved to Colorado in June 1998, they let the reconciled Guerreros
take Collette to Texas. The Davises took Collette back to Colorado for a month-long visit in the
summer. Shannon returned the child in September 1998 even though the Guerreros' marriage was
again deteriorating. In November 1998, further deterioration caused Julie to send Collette back to
the Davises; Roman filed for divorce. At Christmas 1998, Julie convinced the Davises that she and
Roman had reconciled and that Collette should come to live with her. In May 1999, having seen that
the Guerreros' marriage was again rocky, the Davises took Collette back to Colorado. Julie had
agreed to let them take the child for a visit, then reneged when her attorney told her the visit would
hurt her chance to dissolve the guardianship. Julie tried to prevent their departure by occupying
their van until Shannon dragged her out and called the police, who refused to intervene in a civil
domestic dispute; after consulting with her attorney, Julie agreed to let the Davises take Collette back
to Colorado. As detailed below, in October 1999, Julie filed motions to revoke the guardianship and
to enforce the Kansas order which gave her the right to determine the child's residence. Collette
remained with her grandparents until the district court temporarily ordered shared access between
the Davises and Julie in February 2000, pending resolution of this custody dispute.
None of the ample testimony regarding various deficiencies in the Guerrero and Davis
households bears on or provides meaningful context for the procedures challenged on appeal.
Procedural background
The contest for legal possession of Collette proceeded in county and district courts
in Bell County, though most of the action occurred in the district court.
On June 18, 1999, the Texas attorney general registered the Kansas order in Texas
by suing to enforce its support provisions against Rios on Julie's behalf. In July 1999, Rios agreed
to the entry of the district-court judgment for arrearages on child support.
On October 8, 1999, Julie filed a motion in county court to revoke the guardianship
established there in July 1996. Julie contended that Collette no longer needed a guardian. Julie then
filed a motion in district court on October 25, 1999 seeking to enforce the Kansas order's provision
awarding her "primary residential custody." In response, on November 5, 1999, the Davises filed
a motion to modify the Kansas order, requesting that the district court name them primary joint
managing conservators. On November 10, 1999, the Davises filed a motion to abate the case
pending resolution of Julie's motion in county court to revoke the guardianship. (Though the plea
in abatement appears in their response to the enforcement motion, the Davises ask that the "case"
be abated--a request that would also halt consideration of their previously filed motion to modify
filed in the same case.) Julie later filed a motion to modify the Kansas order, requesting that her
parents be named possessory conservators.
No signed order denying the motion to abate appears in the record, but the district
court implicitly overruled the motion by holding a jury trial on the motions to modify and signing
its Order in Suit to Modify Parent-Child Relationship. See Tex. R. App. P. 33.1(a)(2)(A). In that
order, signed December 20, 2000, the district court continued Julie and Rios as joint managing
conservators and affirmed Julie's right to establish Collette's primary residence. The court also
granted Rios, the biological father, visitation for the first time in Collette's life. Additionally, the
court named the Davises as possessory conservators entitled to possession of Collette for twenty-one
days in the summer. The district court's order granting Julie the right to establish Collette's primary
residence conflicts with the county court's order naming Shannon the guardian of Collette.
DISCUSSION
The Davises contend that the district court lacked jurisdiction to modify the Kansas
order (1) because Julie did not properly register the Kansas order, (2) because Texas is not Collette's
home state, and (3) because of the pending guardianship proceeding. They contend that the district
court should have abated the custody proceeding in deference to the guardianship proceeding. They
also contend that the district court erred by assessing attorney's fees against them.
The Davises argue that the district court lacked jurisdiction because Julie did not
register the Kansas order. Because jurisdiction is a question of law, we review the trial court's
decision de novo. See Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928 (Tex. 1998); see also
In re M.W.T., 12 S.W.3d 598, 601 (Tex. App.--San Antonio 2000, pet. denied). It is not clear that
formal registration was either mandatory or jurisdictional for modification or enforcement
proceedings. See Act of April 6, 1995, 74th Leg., R.S., ch. 20 § 1, 1995 Tex. Gen. Laws 113, 145,
alexismclean@example.com. Fam. Code Ann. §§ 152.013-.015, deleted by Act of April 22, 1999, 76th Leg., ch.
34, § 1, 1999 Tex. Gen. Laws 52, 68 ("Old Code"). If registration was required, the Texas attorney
general registered the Kansas order as a Texas order when enforcing the child-support provisions,
and the Davises registered it under the new provisions (2) when filing their motion to modify--or at
least were estopped from complaining about its deficient registration when they stated in their
petition in this suit that "[t]he order to be modified . . . [was] previously registered with the 264th
District Court of Bell County."
The Davises also assert that the district court lacked jurisdiction because Texas was
not Collette's home state. A child's home state is "the state in which a child lived with a parent or
a person acting as a parent for at least six consecutive months immediately before the
commencement of a child custody proceeding." Tex. Fam. Code Ann. § 152.102(7) (West Supp.
2002). Collette's itinerant past left her with no home state. At the commencement of this suit,
almost two years had passed since Collette last lived in a single state for six consecutive
months--the last time was from April to October 1997 when she lived in Hawaii with the Davises.
Texas courts can modify orders affecting the parent-child relationship from other states if (1) Texas
would have jurisdiction to make an original determination, and (2) neither the child, her parents, nor
any persons acting as parents reside in the state of the order to be modified. Id. § 152.203. Neither
the child, her parents, nor her guardian have lived in Kansas since 1994. Although Texas was not
Collette's home state at the inception of this suit, Texas courts could properly exercise jurisdiction
over her in a suit affecting the parent-child relationship ("SAPCR") if she and at least one parent or
person acting as a parent have a significant connection with Texas other than mere physical presence
and substantial evidence is available here concerning her care, protection, training, and personal
relationships. Id. § 152.201(a)(2). Collette's mother has lived in this state since 1994 (except for
about six months in 1997) and attended college here; Rios, Collette's father, has lived in Texas since
1997; and Collette lived in Texas for about thirty-seven of the first seventy months of her life.
Several witnesses including friends, family, and health-care and child-care professionals in Texas
testified about their contacts with the child. Texas courts can exercise jurisdiction over this SAPCR
proceeding under this test.
Finally, we conclude that the guardianship did not strip the district court of
jurisdiction; otherwise, the legislature could not have, as it has in the probate code, (3) permitted the
probate court to transfer a guardianship proceeding to a district court with a pending, related SAPCR
proceeding because the court with the SAPCR proceeding would be without jurisdiction.
However, the existence of jurisdiction does not necessarily support the district court's
exercise of that jurisdiction. The Davises argue that Julie's filing of the motion to revoke the
guardianship in county court conferred jurisdiction on the county court that was dominant over the
district court's jurisdiction to consider later-filed motions. The legislature anticipated this interaction
of suits under the family code and the probate code, passing a statute providing that, if
an interested person seeks the removal of a guardian of the person of a minor, the
[probate court] judge, on the judge's own motion, may transfer all matters relating
to the guardianship of the person of the minor to a court of competent jurisdiction in
which a suit affecting the parent-child relationship under the Family Code is pending.
Probate Code § 609(a). Because the county court did not voluntarily transfer the guardianship issues
to the district court, however, we must determine the propriety of the district court's failure to abate
this proceeding pending the outcome of the guardianship matter.
The supreme court has provided guidance on when courts with jurisdiction should
abate consideration of actions before them in deference to other courts considering similar suits. See
Wyatt v. Shaw Plumbing Co., 760 S.W.2d 245, 247-48 (Tex. 1988). The supreme court wrote that,
[w]hen an inherent interrelation of the subject matter exists in two pending lawsuits,
a plea in abatement in the second action must be granted. It is not required that the
exact issues and all the parties be included in the first action before the second is
filed, provided that the claim in the first suit may be amended to bring in all
necessary and proper parties and issues. In determining whether an inherent
interrelationship exists, courts should be guided by the rule governing persons to be
joined if feasible and the compulsory counterclaim rule.
Id. at 247 (citations omitted). The court also wrote:
It is well settled that when suit would be proper in more than one county, the court
in which suit is first filed acquires dominant jurisdiction to the exclusion of other
courts. Curtis v. Gibbs, 511 S.W.2d 263, 267 (Tex. 1974); V.D. Anderson Co. v.
Young, 128 Tex. 631, 636, 101 S.W.2d 798, 800 (1937); Cleveland v. Ward, 116
Tex. 1, 19, 285 S.W. 1063, 1070 (1926). As long as the forum is a proper one, it is
the plaintiff's privilege to choose the forum. Mutual Sav. & Loan Ass'n v. Earnest,
582 S.W.2d 534, 535 (Tex. Civ. App.--Texarkana 1979, no writ). Defendants are
simply not at liberty to decline to do battle in the forum chosen by the plaintiff. 2 R.
McDonald, supra p. 3, § 7.49, at 254. Abatement of a lawsuit due to the pendency
of a prior suit is based on the principles of comity, convenience, and the necessity for
an orderly procedure in the trial of contested issues. See McCurdy v. Gage, 123 Tex.
558, 565-66, 69 S.W.2d 56, 59, reh'g overruled per curiam and opinion adopted, 75
S.W.2d 1107 (Tex. Comm'n App. 1934). . . . There are three exceptions to the rule
of Cleveland v. Ward that the court where suit is first filed acquires dominant
jurisdiction: (1) Conduct by a party that estops him from asserting prior active
jurisdiction; (2) lack of persons to be joined if feasible, or the power to bring them
before the court; and (3) lack of intent to prosecute the first lawsuit.
Id. at 248 (footnote omitted). We review the record to determine whether the district court abused
its discretion by declining to abate its proceeding. Id. A trial court abuses its discretion when it acts
in an unreasonable and arbitrary manner, or without reference to any guiding rules or principles. See
Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985).
We note, however, that the Wyatt framework strains to encompass the long-term,
continuous, and special natures of guardianships and SAPCRs, and that the overlap between the
family and probate systems poses even more challenges. The Wyatt case was a dispute between a
plumbing contractor and a customer; the appeal concerned which of two lawsuits concerning the
same transaction filed in district courts in different counties should be given sway. Id. at 246.
Venue was proper in both counties. Id. at 247. The claims brought in each could have been brought
in the other, so the claims in the later-filed suit (brought by the defendant in the first-filed suit)
should have been brought as compulsory counterclaims in the first-filed suit. Id. at 247-48. The
Wyatt framework thus describes how to choose between competing suits filed in different counties
that concern a particular transaction. It does not address how to resolve competing complaints that
must be filed in different courts in the same county, the guardianship proceeding in the county court
at law in its probate capacity (4) and the custody case in district court. (5) Nor does it neatly describe
resolution of competing complaints about actions taken within statutory constructs that contemplate
orders with administrations (6) ongoing for the minority of the child, including interim changes. (7)
The strain on the Wyatt framework is evident in this case. Courts must give
precedence to the first-filed case. But, because both the motion to revoke the guardianship and the
motions relating to the Kansas order were filed in causes that were initiated for other reasons, it is
not clear which filing counts when deciding which suit was filed first. In the custody action, is it the
filing of the suit in Kansas, the attorney general's motion to enforce the child-support provisions of
the Kansas order in Texas, Julie's motion below to enforce the Kansas order, or one of the motions
below to modify the Kansas order in Texas? In the guardianship proceeding, is it the application for
guardianship, the guardianship order, or the motion to revoke the guardianship? Further, the use of
compulsory counterclaims is inapt to deal with these distinct orders, suits, and systems; although
both suits concern possession of Collette and the right to make decisions concerning her, this county
court cannot entertain a motion to modify the district court's Kansas order and, absent transfer of the
guardianship disputes to the district court, the district court cannot entertain a motion to revoke the
county court's guardianship order. (8)
Thus, there must be a test for dominant jurisdiction between suits involving the same
children in the probate and family court systems. Otherwise, lack of comity between the involved
courts could lead to simultaneous proceedings with conflicting results or a series of alternating orders
in which competing courts countermand each other. Such tumult is unlikely to be in the best interest
of the children involved.
We conclude that the guardianship order, particularly one that is agreed to by the
mother entitled to determine the child's residence, essentially places in stasis the SAPCR order's
provisions regarding possession and residence. Family courts should not entertain motions to alter
SAPCR provisions relating to issues covered by the guardianship until the guardianship is revoked.
We reach the same conclusion even if we apply the Wyatt framework pragmatically
to account for the anomalies due to these special systems. We would ignore the initiation of the
proceedings which could occur in foreign courts and concern issues not relevant here. (We note that
the first action filed in Texas courts concerning possession and residence of Collette was filed in
county court.) Even if we look only at the filing of motions relating to the live dispute--here, Julie's
quest to be Collette's primary caregiver and her parents' opposition--Julie filed the first motion
affecting possession in the county court. Her motion to revoke the guardianship sought to erase the
order entitling the Davises to possess Collette, revive the custody provisions of the Kansas order,
now registered in Texas, and give Julie possession. Her filing of the motion to enforce the Kansas
order in the district court and the Davises' subsequent motion in district court to modify the Kansas
order in their favor made it possible, but not mandatory, for the county court to transfer the
guardianship proceeding to the district court under Probate Code section 609. The Davises' motion
to abate the district court action, filed five days after their motion to modify, put the district court
on notice that its exercise of jurisdiction was potentially problematic. The motion formally told the
district court that the guardianship, not the custody order, controlled possession and that a previously
filed proceeding was underway in county court to assess whether the guardianship would continue
to control possession of Collette. Julie's district-court motion to modify the Kansas order further
signaled problems by indicating that she wished to change the custody order in effect to avoid the
guardianship without having it revoked. Any modification of the custody order would conflict with
an order from a coordinate court from the same county and would have no more effect than the
original, superseded custody order. The district court nevertheless failed to abate its consideration
of the custody case and proceeded to order the Davises to surrender Collette to Julie for specified
weeks, to hold a jury trial, and to modify the custody order. The district court took these actions
while the guardianship and Julie's motion to revoke it remained pending in county court.
Of the exceptions to the Wyatt test, Julie argues only that the Davises' filing of the
initial motion to modify in the district court estops them from seeking abatement. (9) See Wyatt, 760
alexismclean@example.com. The Davises, however, did not initiate either of the tracks of the recent dispute. We
are told of no actions by them in the guardianship proceeding. They filed their motion to modify the
Kansas order almost a month after Julie moved to revoke the guardianship in county court and two
weeks after she filed her district-court motion to accomplish the same result by enforcing the Kansas
order. They filed their plea in abatement within four days of their motion to modify, indicating their
preference for the resolution of the guardianship before Julie suffered any prejudice from the
existence of their motion to modify; the hearing on Julie's motion for access occurred more than a
month later, the trial occurred more than six months later, and the district court signed its order more
than a year later.
We conclude that the district court abused its discretion by declining to abate the
SAPCR proceeding. The guardianship order controlling possession, to which Julie acceded in 1996,
was still in effect; the motion to revoke the guardianship was pending in the county court. The
option to consolidate the guardianship revocation proceeding with the issues raised in the SAPCR
lay with the county court; without the county-court record before us, we do not know whether the
county court was asked to transfer its proceeding to the district court. The existence of the
guardianship meant that the county court had dominant jurisdiction over issues relating to possession
and control of Collette. The district court should have addressed these issues only if they were
transferred to the district court by the county court. After declining to abate its proceeding, the
district court issued an order that conflicted with the guardianship order issued by the court with
dominant jurisdiction. (10) The district court thereby showed a lack of comity and a disregard for "the
necessity for an orderly procedure in the trial of contested issues." See Wyatt, 760 alexismclean@example.com.
We hold that the district court abused its discretion by declining to abate its proceeding.
Because the district court should not have rendered any order, vacation of the
order--including the award of attorney's fees--is appropriate. Once the county court resolves the
challenge to the guardianship or exercises its option to transfer that dispute to the district court, the
district court may dismiss this action, reinstate its modifications, or may consider developments since
the jury trial in rendering a new SAPCR order; the district court has similar latitude regarding the
imposition of attorney's fees. Accordingly, remand of this proceeding is appropriate.
CONCLUSION
We vacate the district court's SAPCR order and remand this cause to the district
court. The court shall hold this proceeding in abeyance until the county court has disposed of Julie's
motion to revoke the guardianship or transferred that dispute under Probate Code section 609(a) to
the district court where this SAPCR is pending. Possession of Collette is thus governed by the
guardianship order in effect before the district court rendered the SAPCR order. We strongly urge
the guardian and all interested parties to act in Collette's best interests in determining possession and
visitation during the pendency of these proceedings.
Bea Ann Smith, Justice
Before Justices Kidd, B. A. Smith and Puryear
Vacated and Remanded
Filed: January 10, 2002
Publish
1. Julie Davis married Roman Guerrero in 1997. To avoid using a chronologically
inapplicable surname or confusion with her husband or parents, we will refer to her as "Julie."
2. See Tex. Fam. Code Ann. §§ 152.303-.306 (West Supp. 2002).
3. See Tex. Prob. Code Ann. § 609(a) (West Supp. 2002). All cites to the probate code in this
opinion are to sections contained in the supplemental volume. We will cite them as "Probate Code."
4. Three statutes combine to require that probate matters in Bell County be filed in the county
alexismclean@example.com. See Probate Code §§ 605, 606(c); Tex. Gov't Code Ann. § 25.0162(h) (West 1988).
5. The family code defines "court" as "the district court . . . or other court expressly given
jurisdiction" of SAPCRs. Tex. Fam. Code Ann. § 101.008 (West 1996).
6. See Probate Code §§ 694(b), 743 (governing appointment of guardians for minors and
requiring annual reports from guardians); Tex. Fam. Code Ann. §§ 101.001, et seq. (West 1996 &
West Supp. 2002) (governing child custody and support orders).
7. Both codes provide for modification of the terms of the care for the minors and the removal
of their caretakers. See Probate Code §§ 694H, 761; Tex. Fam. Code Ann. §§ 156.001, 161.001
(West 1996 & Supp. 2002).
8. This is true because of the jurisdiction restrictions discussed in notes 4 and 5 above.
9. There are two other exceptions--the lack of persons to be joined if feasible (or lack of
power to bring them before the court) and lack of intent to prosecute the first lawsuit. See Wyatt, 760
alexismclean@example.com. Because of the distinct natures of the proceedings, it is not clear that the probate
court could bring before it all the parties to the divorce decree to determine guardianship of the child;
yet all the interested parties could choose to participate; because the district court could not itself
directly modify the guardianship, the applicability of this exception is limited. The only information
available regarding Julie's intent to pursue the revocation of the guardianship is that she would seek
its revocation.
10. If there was an informal agreement by which the county court deferred to the district
court's determination of custody and related issues, it is not apparent from the record in this appeal.
|
82 N.W.2d 8 (1957)
164 Neb. 148
SCHOOL DISTRICT NO. 228 OF HOLT COUNTY, Nebraska, Appellant,
v.
The STATE BOARD OF EDUCATION, a body corporate, and Freeman B. Decker, Commissioner of Education, Appellees.
No. 34131.
Supreme Court of Nebraska.
March 29, 1957.
*9 Davis, Healey, Davies & Wilson, Robert A. Barlow, Lincoln, Leo F. Clinch, Burwell, for appellant.
Clarence S. Beck, Atty. Gen., Gerald S. Vitamvas, Asst. Atty. Gen., for appellees.
Heard before SIMMONS, C. J., and CARTER, MESSMORE, YEAGER, CHAPPELL, WENKE, and BOSLAUGH, JJ.
*10 SIMMONS, Chief Justice.
Plaintiff, and appellant here, is a school district in Holt County. The appellees are the State Board of Education and the Commissioner of Education. Directly, the State Board of Education is involved. We refer to it hereinafter as the defendant.
Plaintiff sought to enjoin the defendant from enforcing a ruling of nonapproval of the high school of plaintiff. The effect of the ruling was to deny high school tuition advantages to plaintiff. Plaintiff's school was also classed as a nonoperative high school. Issues were made and trial was had resulting in a judgment of dismissal of plaintiff's cause of action. Plaintiff appeals. We reverse the judgment of the trial court and remand the cause with directions.
Plaintiff operates a 10-grade zhall@example.com. The ninth and tenth grades, as a 2-year high school, only are involved.
On March 1, 1956, defendant notified the plaintiff that its high school operations would not be approved for the collection of free high school tuition and would not be exempt from the free high school tuition levy for the school year 1956-1957.
The nonapproval rested on the ground of an extremely limited high school program and inadequacy of facilities.
Section 79-328(5), R.S.Supp., 1955, provides in part that the State Board of Education shall have the power to "establish standards and procedures for classifying, approving, and accrediting schools, including the establishment of minimum standards and procedures for approving the opening of new schools, the continued legal operation of all schools, and for the approval of high schools for the collection of free high school tuition money, * * *." Plaintiff challenged the constitutionality of a part of that act. The challenge rests upon our decision in School District No. 39 of Washington County v. Decker, 159 Neb. 693, 68 N.W.2d 354.
The defendant did establish criteria for approved Public Schools to be effective January 1, 1956. However, filing with the Secretary of State did not occur until June 22, 1956, almost 4 months after the letter of March 1, 1956, was written to plaintiff.
The plaintiff argues here that under the provisions of sections 84-901 to 84-906, R.R.S.1943, these criteria are not binding upon it in any event insofar as this case is concerned. The defendant does not contend otherwise and accordingly suggests that the constitutional question is not here for determination.
The second ground for the position taken by the defendant in the notice to the plaintiff is bottomed on the provisions of section 79-701(5), R.S.Supp., 1955, which provides in part: "If for three consecutive years the enrollment of an existing Class II district shall be * * * less than ten pupils in the case of a district maintaining a two-year high school, such district shall not continue to operate * * * if such two-year high school shall be within fifteen miles on a reasonably improved highway of any high school."
It is on the above statute that defendant bases the contention that plaintiff is a nonoperative school and not entitled to free high school tuition benefits under section 79-4,103, R.R.S.1943.
It is conceded that plaintiff is a Class II school district and that its enrollment is less than 10 pupils in the high school grades.
The question which we are asked to decide requires the construction of the provision which is that the district shall not continue to operate if it is "within fifteen miles on a reasonably improved highway of any high school."
The nearest high school to Amelia zhall@example.com. There are two roads between Amelia and Chambers. One road is to go west from Amelia along an improved road, formerly a part of the state highway system, then south, and then east along an improved state highway. That distance is about 17 miles. The other is to go east *11 from Amelia a half mile, thence south 2 miles, and thence east to Chambers on the state highway. This distance is about 11 miles. In miles the second road is within the 15-mile requirement of the statute. The question is: Is it a "reasonably improved highway"?
Section 79-701, R.S.Supp., 1955, was introduced in the 1953 Legislature as LB 313 as an amendment to section 79-701, R.R.S.1943. So far as material here, as introduced it provided "that no existing Class II district shall continue to operate if the high school enrollment in that district is * * * less than twelve pupils in districts maintaining a two-year high school."
The Education Committee reported the bill with an amendment providing that "if, for three consecutive years the enrollment of an existing Class II district shall be * * * less than ten pupils in the case of a district maintaining a two-year high school, such district shall not continue to operate * * * if such two-year high school shall be within fifteen miles of any high school." Nebraska Legislative Journal, 1953, p. 645.
The Education Committee, in its statement to the Legislature, said: "The bill is also amended so that no such district would be closed unless there was a high school within a 15 mile radius."
When the bill was considered on General File the words "on a reasonably improved highway" were inserted following the words "fifteen miles." Nebraska Legislative Journal, 1953, p. 771.
This review of the history of the bill demonstrates a consistent purpose of the Legislature to relax the terms of the bill as proposed as to number of pupils enrolled, the period of time calculated as to the enrollment, the distance between schools, and finally as to the quality of the highway or highways involved in calculating distances. It evidences a legislative intent to protect the small enrollment high school and pupils from the results that would follow from the application of the strict provisions of the bill as originally introduced.
This brings us to a construction of the clause "a reasonably improved highway." Here the Legislature used words of common usage and understanding to express its intent. As was said by the Supreme Court of the United States in Sproles v. Binford, 286 U.S. 374, 52 S. Ct. 581, 587, 76 L. Ed. 1167: "The use of common experience as a glossary is necessary to meet the practical demands of legislation."
The books give us little help in reaching an answer to the meaning of the clause. Here we must draw upon common experience in reaching an understanding of the terms used.
We have expressed the rule as follows: "In the construction of a statute, effect must be given, if possible, to all its several parts. No sentence, clause, or word should be rejected as meaningless or superfluous, if it can be avoided; but the subject of the enactment and the language employed, in its plain, ordinary, and popular sense, should be taken into account, in order to determine the legislative will." Nacke v. City of Hebron, 155 Neb. 739, 53 N.W.2d 564.
The word "highway" is one of variable meaning. We think it clear that the Legislature did not use the word in the sense of a highway designated as a part of the state highway system as defined in section 39-1302, R.S.Supp., 1955. To so construe it would be to restrict its obvious meaning as used here.
The Legislature in section 39-226, R.S. Supp., 1955, provided that primary county roads shall include direct highways leading to and from rural schools where 10 or more grades are being taught. There the words highway and road are used somewhat interchangeably.
As here used, we think the word highway means a public road of general *12 use by the public in travel from place to place. In fact the Legislature in section 39-210, R.R.S.1943, uses the term highway in reference to graveling of a highway which connects any unincorporated village with a paved or graveled state or county highway. The road here involved fits that description. When "passable" it is of general use by the public. We conclude that the shorter road involved here is a highway within the meaning of section 79-701(5), R.S.Supp., 1955.
This brings us to the construction of the word "improved" which qualifies "highway" in the act. We think it is used here in the sense of being made better for travel by human effort.
This includes one or more of the elements of grading, elevating or lowering a roadbed, surfacing, drainage, and like betterments. The extent of the improvement required is indicated by the qualifying word "reasonably."
We think the word reasonably is here used in the sense of sufficiently. That is, the highway must be improved sufficiently to meet the normal demands put upon its use by children of school age required to attend school regularly. An element to be considered in this determination is the use of the automobile by school children as a common means of transportation. The Legislature has recognized that fact. It has provided in section 60-407(2), R.S.Supp., 1955, for probationary operator's licenses to minors between the ages of 16 and 20 years. In section 60-407(3) the Legislature has provided that a minor over the age of 14 years (with certain exceptions) may be issued a limited permit to drive a motor vehicle to and from the school building where he attends school if he lives a distance of 1½ miles or more from such school.
The issues here relate themselves to the road east from Amelia one-half mile, thence south 2 miles to where it connects with the state highway. The land over which this road passes is over a water basin where flowing wells are common. The water table is near the surface. The soil is a light sand-powder, as described by one witness. It blows readily with the wind. The building and maintenance of improved roads under these conditions requires grading and elevating of a roadbed, then covering its surface with clay, and then placing on top of that gravel or other hard surface material.
For the first half mile east of Amelia and a short distance to the south, the road had been graded and elevated recently preparatory to surfacing with clay and gravel. A county supervisor testified that he expected to get clay and gravel for and to put it on that portion of the road, and that without it the life of the grade would be about 90 days, the reason being that the uncovered sand in the grade would blow away in about that time.
At the south end of the north-and-south 2 miles is a short length of road about which no particular complaint is made. In between these two sections of the road on the north-and-south portion is a strip of road from 1 mile to 1 ½ miles in length that must meet the test of being a reasonably improved highway if the decision of the trial court is to be sustained.
This traveled portion of the road is described, without dispute, as being from 1 to 6 feet below the surface of the land on either side. Witnesses refer to it as a channel where the traveler is expected to move along the lowest part of the road. The reasonable inference is that this depressed roadbed has resulted from the light sand being blown away.
There is no evidence that any effort has ever been made to improve that part of the road. It affirmatively appears that for 15 years last past it has never been regraded or reshaped. It further affirmatively appears that the county is without funds to do it and has no present intention of improving this section of the road.
*13 It further appears, without dispute, that this section of road, being below the surrounding land, fills readily with snow, blocking its use more quickly than an elevated road, and making snow removal more difficult. It is a road that the officials deem of secondary importance in removing snow when snow blocks occur.
It further appears that when the frost goes out of the road in the spring that this section has "no bottom" and its use by automobiles is impossible as a result on those occasions.
The road is without adequate drainage. In times of heavy rainfall water flows into the road from the surrounding land and has no outlet save when it rises above the level of the surrounding land. One witness testified that under those conditions the road has been impassable to automobiles for periods of from 1 hour to 3 days at a time.
Several witnesses testified that the total number of days in a year when the road would be impassable would be from 10 days to 3 weeks or more. No witness testified that it is more than a "passable" road at any time.
Other witnesses testified that during the time the road is impassable for any of the above reasons that it has been necessary either to use the longer road or to take children to school by the use of a tractor, driving out in the fields, sending them by horseback, or having them walk.
We find no fact basis in this record to support a finding that this length of road is a reasonably improved highway within the legislative intent. In fact it is not an improved highway in any sense. Man's use and nature's forces have worsened instead of bettered it for travel.
The order of the defendant holding that plaintiff's high school is a nonoperative school is without statutory authority under section 79-701, R.S.Supp., 1955. The defendant here rests the validity of its order and the judgment of the trial court on that provision.
Accordingly the judgment of the trial court is reversed and the cause remanded with directions to render a decree in accord with this opinion.
Reversed and remanded with directions.
|
Opinion issued February 27, 2003
In The
Court of Appeals
For The
First District of Texas
NOS. 01-02-00400-CR
01-02-00401-CR
CRAIG D. SHANNON, Appellant
V.
THE STATE OF TEXAS, Appellee
On Appeal from County Criminal Court at Law No. 3
Harris County, Texas
Trial Court Cause Nos. 5315 and 5316
O P I N I O N
The issue in these appeals is whether the dormant commerce clause prohibits
the City of Houston from passing an ordinance requiring transporters of non-hazardous waste to pay a flat fee to obtain the necessary licenses and permits required
to pick up waste originating within the city limits. Appellant, Craig D. Shannon, was
convicted in municipal court of failing to obtain a transporter permit and operating
a vehicle transporting waste that was not properly designated, and the municipal court
assessed the minimum $250 fine on each charge. Appellant appealed to the county
criminal court at law, which affirmed the municipal court convictions. These appeals
followed. We, too, affirm.
BACKGROUND
The City of Houston, in an effort “to protect the public sanitary sewer system
from unauthorized waste releases and to deter the discharge of waste into storm
sewers, street rights-of-way and other unauthorized places[,]” passed a series of
ordinances to regulate the transportation and treatment of certain, non-hazardous
wastes. See Houston, Tex., Ordinances, art. XI, §§ 47-411–47-566 (1968). The
Houston Code provides:
It shall be unlawful for any person to utilize a motor vehicle or motor
vehicle trailer for the transportation of waste originating within the city
unless the driver of the vehicle has been designated on a current and
valid transporter permit and the vehicle or trailer has been designated on
the permit.
Houston, Tex., Ordinances, art. XI, §§ 47-451.
It shall be unlawful for any person to act as a transporter unless the
person holds a current and valid transporter permit or is acting as the
agent or employee of a person who holds a current valid transporter
permit.
Houston, Tex., Ordinances, art. XI, §§ 47-431.
Transporter (primary or secondary) means a person who accepts waste
that originates from a location within the city and who uses public
rights-of-way for transportation of the waste. A generator or disposer
who transfers its own waste over city streets for off-site disposal is also
a transporter.
Houston, Tex., Ordinances, art. XI, §§ 47-411.
To obtain the permits referenced in the ordinances above, the transporter must
pay a $50 permit fee, plus $400 for each class C vehicle requiring a registration decal.
The Commerce Clause
In his sole point of error, appellant contends the City’s permit and registration
fees are unconstitutional under the Commerce Clause of the United States. See U.S.
Const. art. I, § 8, cl. 3. Specifically, appellant, relying on American Trucking Assns.
v. Scheiner, 483 U.S. 266, 107 S. Ct. 2829 (1987), asserts that the permit/licensing
fees created by the municipal ordinances are prohibited “flat taxes” that unduly
burden interstate commerce.
A state tax will withstand scrutiny under the commerce clause if the tax is (1)
applied to an activity with a substantial nexus with the taxing State, (2) is fairly
apportioned, (3) does not discriminate against interstate commerce, and (4) is fairly
related to the services provided by the State. Complete Auto Transit, Inc. v. Brady,
430 U.S. 274, 279, 97 S. Ct. 1076, 1079 (1977). In this case, appellant challenges the
second and fourth elements of the Complete Auto test.
A. Fair Apportionment/Internal Consistency
To determine whether a tax is fairly apportioned, we must determine whether
it is internally and externally consistent. See Goldberg v. Sweet, 488 U.S. 252, 261,
109 S. Ct. 582, 589 (1989). Appellant argues only that the permit fee is “internally
inconsistent”; thus, we apply the test for internal consistency.
To be internally consistent, a tax must be structured so that if every State were
to impose an identical tax, no multiple taxation would result. Id. Thus, the internal
consistency test focuses on the text of the challenged statute and hypothesizes a
situation where other States have passed an identical statute. Id.
In Scheiner, the state of Pennsylvania passed a permit fee and axel tax, which
applied to all motor carriers, whether registered in Pennsylvania or elsewhere. 483
U.S. at 274, 107 S. Ct. 2829, 2835. The Supreme Court held that the so called “flat”
or unapportioned taxes were internally inconsistent by stating:
If each State imposed flat taxes for the privilege of making commercial
entrances into its territory, there is no conceivable doubt that commerce
among the States would be deterred.
483 U.S. at 284, 197 S. Ct. at 2840.
While the fee structure invalidated in Scheiner is very similar to the present
case, we find it distinguishable in one important respect. In Scheiner, all motor
carriers on Pennsylvania roads were subject to the tax, regardless of whether they
were just passing through the State, or were, in fact, conducting significant intrastate
travel. Accordingly, the Supreme Court concluded that by taxing both the infrequent
user of Pennsylvania roads and the carriers operating exclusively in Pennsylvania at
the same rate, the infrequent user was having to pay a much higher cost per mile for
the upkeep of Pennsylvania roads.
See 483 U.S. at 286, 107 S. Ct. 2840. Thus, the
fee structure in Scheiner was internally inconsistent because a trucker traveling cross-country would be subject to paying multiple, unapportioned fees for the privilege of
using each separate State’s highways.
In this case, only transporters originating in Houston are subject to the permit
and license fee imposed by the city ordinance. Therefore, no other city or state in the
United States can impose an identical tax—only Houston qualifies as the city in
which the transport originates. See Goldberg, 488 U.S. at 261, 109 S. Ct. at 589
(holding tax on phone calls originating in taxing state is internally consistent); see
also Oklahoma Tax Comm’n v. Jefferson Lines, Inc., 514 U.S. 175, 185, 115 S. Ct.
1331, 1338 (1994) (tax on sale of interstate travel originating in taxing state is
internally consistent).
Because no other state has the right to tax the transport of waste originating in
the City of Houston, we conclude that the fee/permit fees of the municipal code are
not internally inconsistent.
B. Fairly Related
Appellant also argues that the fees charged by the City of Houston do not meet
the Complete Auto test because they are not fairly related to the services provided by
the City. However, since Scheiner, the Supreme Court has further expanded on what
is necessary to meet the “fair relation” requirement of the Complete Auto test. In
Jefferson Lines, the Court stated,
The fair relation prong of Complete Auto requires no detailed accounting
of the services provided to the taxpayer on account of the activity being
taxed, nor, indeed, is a State limited to offsetting the public costs created
by the taxed activity. If the event is taxable, the proceeds from the tax
may ordinarily be used for purposes unrelated to the taxable event.
Interstate commerce may thus be made to pay its fair share of state
expenses and “contribute to the cost of providing all governmental
services, including those services from which it arguably receives no
direct ‘benefit.’” The bus terminal may not catch fire during the sale [of
the taxed bus ticket], and no robbery there may be foiled while the buyer
is getting his ticket, but police and fire protection, along with the usual
and usually forgotten advantages conferred by the State’s maintenance
of a civilized society, are justification enough for the imposition of a tax.
Complete Auto’s fourth criterion asks only that the measure of the tax be
reasonably related to the taxpayers presence or activities in the State.
514 U.S. at 199-200; 115 S. Ct. at 1345-46 (citations omitted).
In this case, the $50 permit fee and $400 vehicle registration fee is sufficiently
related to appellant’s presence in the City. Appellant, like all people traveling in
Houston, will benefit by a clean, nonhazardous sewage and road system. Also in
connection with this fourth prong of Complete Auto, we note that the ordinances do
not require that each vehicle in a transporter’s fleet be registered—only those vehicles
actually picking up waste products from within the city limits need to be registered.
CONCLUSION
We conclude that the fees imposed by the City of Houston relating to the
transportation of non-hazardous waste are not internally inconsistent and bear a fair
relation to the services provided by the City. Because appellant’s brief does not
address the other elements of the Complete Auto test, we similarly decline to do so.
We affirm the judgments of the county criminal cbailey@example.com.
Sherry Radack
Chief Justice
Panel consists of Chief Justice Radack and Justices Nuchia and Hanks.
Publish. Tex. R. App. P. 47.
|
568 S.E.2d 683 (2002)
264 Va. 336
AMERICAN COMMUNICATIONS NETWORK, INC., et al.,
v.
Glenn WILLIAMS.
Record No. 012699.
Supreme Court of Virginia.
September 13, 2002.
*684 John Charles Thomas (Brian J. Schneider; Hunton % Williams, on briefs), for appellants.
Guy S. Neal (Sidley, Austin, Brown & Wood, on brief), for appellee.
Present: All the Justices.
Opinion by Justice LEROY R. HASSELL, SR.
I.
In this appeal of a judgment in favor of a plaintiff in a defamation action, we consider whether the alleged defamatory statements constitute opinions or are true and are, therefore, not actionable.
II.
Plaintiff, Glenn S.K. Williams, filed his amended motion for judgment against American Communications Network, Inc., ACN Energy, Inc., and others.[1] Pertinent to this appeal, the plaintiff alleged that American Communications Network and ACN Energy committed acts of defamation against him by publishing a statement in a confidential private placement memorandum that was disseminated to approximately 20 energy companies. At the conclusion of a trial, the jury returned a verdict in favor of Williams in the amount of $500,000. The defendants argued in the circuit court that the statements contained in the private placement memorandum could not form the basis of a cause of action for defamation because the statements are either true or constitute opinions. The circuit court disagreed with the defendants and entered a judgment confirming the verdict. The defendants appeal.
III.
American Communications Network provides telecommunications and utility services to customers. American Communications Network is the parent company and sole owner of ACN Utilities, Inc. ACN Utilities, Inc. owns ACN Energy, which is engaged in the business of purchasing and selling electric and natural gas energy.
Williams was hired to serve as chief executive officer of ACN Energy. American Communications Network terminated Williams' employment in June 2000. Williams presented evidence at trial that prior to his termination, American Communications Network had experienced acute cash shortages, was on the brink of filing for bankruptcy protection, and had begun liquidation of its energy operations.
Williams, who had extensive experience as a management consultant in the energy industry, testified that he was hired to help American Communications Network compete in the deregulated energy markets. He discussed with the management of American Communications Network, before he was hired, the fact that "the markets were very competitive" and that because of the rapid deregulation of the energy industry, "business rules had not been developed in [that] industry." Williams also warned American Communications Network's management that there were numerous business risks and uncertainties that the company would encounter as it entered the deregulated energy markets. Two months before he was terminated, American Communications Network's board of directors publicly stated that Williams' job performance was excellent and that his accomplishments were "amazing." *685 Williams testified that he was terminated because American Communications Network did not have sufficient capital to finance its energy operations and not because of any deficiencies caused by him.
After Williams was terminated, American Communications Network retained Allegiance Capital Corporation, an investment banking firm, in an effort to raise over $40,000,000 in new capital. Allegiance Capital's employees drafted a private placement memorandum that American Communications Network and ACN Energy ultimately approved. The confidential private placement memorandum, which was sent to approximately 20 energy companies, contained the following statements that Williams alleged are defamatory:
"In June 2000, American Communications Network replaced the management team of ACN Energy due to its failure to establish effective operations. The prior management made two key mistakes:
It did not have the organizational infrastructure needed to support the 24 markets it was aggressively entering. The complexity overwhelmed the organization such that basic business processes were not established prior to entering new markets.
"2. It decided to create, in house, a proprietary billing system rather than initially leveraging off the local distribution company's (LDC) capability of cost-effectively billing on behalf of the Company. Without the requisite information technology (IT) and commercial organization in place to accommodate 24 different markets (each with its own unique IT and commercial issues), the company delayed sending bills to a significant number of customers."
IV.
The defendants argue that the circuit court erred in entering a judgment confirming the jury verdict because, as a matter of law, the statements contained in the private placement memorandum are not actionable. The defendants contend that the statements constitute opinions or that Williams has conceded the truth of each statement.[2] Responding, Williams asserts that the defamatory paragraphs contain demonstrably false statements, not pure expressions of opinion, and that the statements are a combination of opinion and false statements of facts that are actionable.
In Chaves v. Johnson, 230 Va. 112, 119, 335 S.E.2d 97, 101-02 (1985), we stated the following principles that are equally pertinent here:
"Pure expressions of opinion, not amounting to `fighting words,' cannot form the basis of an action for defamation. The First Amendment to the Federal Constitution and article 1, section 12 of the Constitution of Virginia protect the right of the people to teach, preach, write, or speak any such opinion, however ill-founded, without inhibition by actions for libel and slander. `[E]rror of opinion may be tolerated where reason is left free to combat it.' Thomas Jefferson's First Inaugural Address (1801). `However pernicious an opinion may seem, we depend for its correction not on the conscience of judges and juries but on the competition of other ideas.' Gertz v. Robert Welch, Inc., 418 U.S. 323, 339-40 [94 S. Ct. 2997, 41 L. Ed. 2d 789] (1974).
"It is for the court, not the jury, to determine as a matter of law whether an allegedly libellous statement is one of fact or one of opinion. Slawik v. News-Journal, 428 A.2d [15, 17] (Del.1981); Catalano v. Pechous, 69 Ill.App.3d 797 [25 Ill. Dec. 838] 387 N.E.2d 714 [721] (1978); Rinaldi v. Holt, Rinehart & Winston, Inc., 42 N.Y.2d 369 [397 N.Y.S.2d 943] 366 N.E.2d 1299 [1306] (1977)."
In Williams v. Garraghty, 249 Va. 224, 233, 455 S.E.2d 209, 215 (1995), we also held that pure expressions of opinion cannot form *686 the basis of a defamation action, but we pointed out that
"[f]actual statements made to support or justify an opinion, however, can form the basis of an action for defamation. See Swengler v. ITT Corp., 993 F.2d 1063, 1071 (4th Cir.1993) (construing Virginia law). It is for a court, not a jury, to determine, as a matter of law, whether an alleged defamatory statement is one of fact or of opinion."
Applying these principles to the alleged defamatory paragraphs that are the subject of this appeal, we hold, as a matter of law, that the alleged defamatory statements are not actionable. The statements contained in the alleged defamatory paragraphs are either true or constitute opinion. The first sentence of the first alleged defamatory paragraph states: "In June 2000, American Communications Network replaced the management team of ACN Energy due to its failure to establish effective operations." The plaintiff admitted that the management team was replaced in June 2000. The plaintiff also admitted at trial that the term "effective operations" includes the timely submission of bills to customers and that when he was the chief executive officer, ACN Energy failed to bill substantial commercial and industrial energy customers. Additionally, the question whether ACN Energy failed to establish effective operations is a matter of opinion that cannot form the basis of a defamation action.
The next portion of the first alleged defamatory paragraph states: "The prior management made two key mistakes: 1. It did not have the organizational infrastructure needed to support the 24 markets it was aggressively entering. The complexity overwhelmed the organization such that basic business processes were not established prior to entering new markets." The question whether ACN Energy had the appropriate infrastructure necessary to support its marketing efforts is a matter of opinion. Additionally, the plaintiff admitted that mistakes were made when he was the chief executive officer. He admitted that substantial commercial and industrial customers were not billed for energy that they had purchased from ACN Energy. When Williams testified about the lack of organizational infrastructure, he agreed that ACN Energy needed cash, customer support, information technology specialists, and software. He also testified that he was responsible for the energy division and that American Communications Network had placed "zero limits" on him. He stated: "Our organization was overwhelmed. It was predominantly due to the lack of cash and lack of support from the parent company."
Williams contends that the statements "basic business processes were not established (by ACN Energy] prior to entering new markets" and ACN Energy "was aggressively entering" 24 markets without adequate organizational infrastructure, are false statements of fact. We disagree. These statements must not be considered in isolation as Williams seemingly suggests but, rather, we must consider these statements in relationship to the opinions and facts contained in the paragraphs at issue, along with Williams' admissions. These statements, when considered in that context, cannot form the basis of a defamation action because they are either true or constitute opinions. For example, the record indicates that the concept of basic business processes includes sufficient billing procedures, yet Williams admitted that substantial customers were not billed. And, as we have already stated, even though the issue whether ACN Energy had an adequate organizational structure is a matter of opinion, Williams admitted that in many respects, that structure was deficient.
The last alleged defamatory paragraph states that prior management "decided to create, in house, a proprietary billing system rather than initially leveraging off the local distribution company's (LDC) capability of cost-effectively billing on behalf of the Company. Without the requisite information technology (IT) and commercial organization in place to accommodate 24 different markets (each with its own unique IT and commercial issues), the company delayed sending bills to a significant number of customers." Even though Williams believed that ACN Energy had leveraged "off the local distribution company's capability," he acknowledged that each market had unique information technology and business processes, and he admitted *687 that ACN Energy delayed sending bills to customers and failed to bill substantial commercial customers.
We recognize that in a proper case, factual statements that support an opinion can form the basis of an action for defamation. However, in the record before us, the plaintiff has admitted the truth of the factual statements that relate to the opinions, and he cannot disavow his admissions. As we stated in Massie v. Firmstone, 134 Va. 450, 462, 114 S.E. 652, 656 (1922):
"No litigant can successfully ask a court or jury to believe that he has not told the truth. His statements of fact and the necessary inferences therefrom are binding upon him. He cannot be heard to ask that his case be made stronger than he makes it, where, as here, it depends upon facts within his own knowledge and as to which he has testified."
Accord Patterson v. Patterson, 257 Va. 558, 563, 515 S.E.2d 113, 116 (1999); Henderson v. Henderson, 255 Va. 122, 126-27, 495 S.E.2d 496, 499 (1998); CSX Transportation, Inc. v. Casale, 250 Va. 359, 364, 463 S.E.2d 445, 448 (1995).
V.
The circuit court erred by entering an order that confirmed the jury verdict because the statements in the alleged defamatory publication are either opinion or have been admitted as true. In view of our holding, we need not consider the litigants' remaining arguments. Accordingly, we will reverse the judgment of the circuit court, and we will enter final judgment in favor of the defendants.
Reversed and final judgment.
NOTES
[1] The circuit court granted the remaining defendants' motions to strike the plaintiff's evidence and those defendants are not litigants in this appeal.
[2] Contrary to Williams' assertions in his brief, the defendants raised these contentions in the circuit court.
|
EXHIBIT 10.67 ASSET PURCHASE AND SALE AGREEMENT THIS ASSET PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered into as of October 8, 2007 (the “Effective Date”) by and among PACIFIC THEATRES EXHIBITION CORP., a California corporation “Pacific”), CONSOLIDATED AMUSEMENT THEATRES, INC., a Hawaii corporation (“Consolidated” and, collectively with Pacific, "Seller"), and, with respect to Section 7.9 and Articles 12 through 14 below only, MICHAEL FORMAN and CHRISTOPHER FORMAN (collectively, the “Formans”), on the one hand, CONSOLIDATED AMUSEMENT THEATRES, INC., a Nevada corporation (“Buyer"), and, with respect to Sections 1.5, 2.4, 4.2, 5.6 and 14.16 and Articles 11 through 14 below only, READING INTERNATIONAL, INC., a Nevada corporation (“RDI”), on the other hand, with reference to the following facts: A.Pacific or Consolidated is the tenant, among other tenancies, under the leases described on Exhibit A-1 attached hereto (the "Leases"), which Leases relate to those certain premises located in the States of California and Hawaii as more particularly described in the Leases (the "Leased Premises"). B.Seller is engaged in the business of the ownership and operation of full length motion picture theaters (the “Theaters”) and associated and ancillary activities at the Leased Premises (the ownership and operation of the Theaters, together with the conduct of the associated activities, is sometimes referred to herein as the “Business”). C.The Formans indirectly own a majority of the issued and outstanding shares of capital stock of Seller. D.RDI indirectly owns all of the issued and outstanding equity interests of Buyer. E.Subject to the terms and conditions of this Agreement, Seller desires to sell, transfer, convey and assign to Buyer, and Buyer desires to purchase, accept and assume from Seller the “Purchased Assets” (as defined in Section 1.2 below). NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants, agreements, representations and warranties herein contained, the parties hereby agree as follows: 1.Purchase and Sale of Assets; Assumption of Liabilities. 1.1Purchase of Assets.Upon the terms and subject to the conditions hereinafter set forth, at the “Closing” (as defined in Section 9.1 hereof), Seller shall sell, transfer, convey and assign to Buyer, and Buyer shall purchase from Seller, and assume certain liabilities with respect to, the “Purchased Assets” (as defined in Section 1.2 hereof). 1 1.2Definition of Purchased Assets.Subject to the provisions of Section 1.3 hereof, the "Purchased Assets" shall mean and consist of: 1.2.1Leases and Subleases.All right, title and interest of Seller in, to and under (a) the Leases (other than the Leases for “Ward Cinemas 16” and “Mililani 14” (both as defined in Exhibit A-1 attached hereto)), and (b) the subleases described on Exhibit A-2 attached hereto (the “Subleases”), including, in the case of the Subleases, any and all claims held by Seller in its capacity as the sublandlord under such Subleases; 1.2.2Buildings, Improvements and Fixtures.All right, title and interest of Seller in and to all “Buildings” (as defined in Section 1.2.4), improvements and fixtures and located on or comprising a part of the Leased Premises (other than the Leased Premises subject to the Leases for the Ward Cinemas 16 and the Mililani 14); 1.2.3Included Contracts.All right, title and interest of Seller under (a) the contracts and other commitments and obligations listed or described on Exhibit B attached hereto, (b) all film rental agreements with respect to the Theaters to the extent (i) entered into by Seller in accordance with this Agreement, and (ii) in effect as of the Closing, and (c)to the extent assignable, all confidentiality and similar agreements (“CDAs”) entered into by or on behalf of Seller or its Affiliates with any Person in connection with the possible sale of all or any part of the Purchased Assets (said contracts and other commitments and obligations described in this Section 1.2.3 are hereinafter referred to as the "Included Contracts"); provided, however, that, to the extent any CDAs pertain to Excluded Assets (as defined in Section1.3), from and after the Closing Buyer shall, at Seller’s request, cooperate with Seller in any reasonable arrangement to afford to Seller the full claims, rights and benefits under such CDAs as they relate to the Excluded Assets, including enforcement, at the cost and for the benefit of Seller, of any and all rights against a third party thereto arising out of the breach by such third party, or otherwise, and any amount received by Buyer or its Affiliates in respect thereof shall be held for and paid over to Seller. 1.2.4Seller FF&E and Inventory.Subject to Section 1.3 and to the rights of the landlords under the Leases and the rights of the other parties under the Included Contracts, all right, title and interest of Seller in and to (a) all seats, cleaning equipment, concession equipment (including concession refrigerators and freezers), personal computer hardware and similar office equipment, projection and sound equipment, screens, cash registers, ticket machines, point of sale equipment, point of sale, ticketing and concession software, security systems and related software, signage (subject to the obligations of Buyer under Section 7.8 hereof), arcade and similar games, “walkie talkies,” office and training room furniture and equipment (including the office furniture and equipment located at the Leased Premises covered by the Leases for the Ward Cinemas 16 and Mililani 14), the furniture and equipment located in the projection technician’s office at the Leased Premises covered by the Lease for the “Grossmont Center 10” (as defined in Exhibit A-1 attached hereto), coin and bill counters, and the 2 projection supplies (other than projection xenon bulbs) located at the Leased Premises covered by the Lease for the “Pearlridge West 16” (as defined in Exhibit A-1 attached hereto), in each case to the extent located in or attached to the buildings (collectively, the "Buildings") which comprise part of the Leased Premises on the “Closing Date” (as defined in
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520 S.W.2d 564 (1975)
Helen G. MORSCH, Appellant,
v.
Laura Lynn METZGER et al., Appellees.
No. 936.
Court of Civil Appeals of Texas, Corpus Christi.
March 13, 1975.
Rehearing Denied April 3, 1975.
*565 Chas N. Cartwright, Howard, McDowell, Bennett & Cartwright, Corpus Christi, for appellant.
Bob J. Spann, McDonald, Spann & Smith, Corpus Christi, for appellees.
OPINION
BISSETT, Justice.
This is a wrongful death action. Helen G. Morsch, the surviving wife of Jean P. Morsch, sued Laura Lynn Metzger, a minor, for the wrongful death of her husband, the said Jean P. Morsch. She alleged that her husband, while walking on a sidewalk, was struck and killed by an automobile which was backed out of a driveway by defendant. Trial was to a jury. A take nothing judgment was rendered against plaintiff, who has appealed. The parties will be referred to as "plaintiff" and "defendant", as they were in the trial court.
The jury convicted defendant of several acts of negligence which proximately caused the injuries and death of Mr. Morsch. The jury further found that Mr. Morsch failed to keep a proper lookout for defendant's car, which was a proximate cause of his injuries and death; failed to move out of the path of defendant's car, which was negligence and a proximate cause of his injuries and death; and failed to give to defendant such signal of his presence as would have been given by a person using ordinary care, and that such failure was a proximate cause of his injuries and death. Plaintiff challenges the jury findings with "no evidence" and "factually insufficient evidence" points.
A "no evidence" point presents a question of law, and in deciding that question, we consider only the evidence and the inferences tending to support the jury's finding and disregard all evidence and inferences contrary thereto. Butler v. Hanson, 455 S.W.2d 942, 944 (Tex.Sup.1970). *566 The "factually insufficient evidence" points present factual questions as opposed to law questions, and they require us to consider all of the evidence in the record. In re King's Estate, 150 Tex. 662, 244 S.W.2d 660 (1951). We first review the evidence and the inferences reasonably drawn therefrom in the light most favorable to the defendant with respect to the jury's answers to the challenged issues, and we disregard all evidence and inferences to the contrary.
This is a circumstantial evidence case. The last person who saw the deceased before defendant's car backed into him was plaintiff, who said that he told her he was going to take a short walk. The next time she saw him was at the very moment that he was struck by the car. There were no eyewitnesses to the actions, conduct, bodily movements, or the manner in which the deceased walked from the time he left his home until the occurrence of the accident. No one testified as to what the deceased did or did not do as he approached the area of the accident.
The accident occurred in a residential area in Corpus Christi, Texas, on April 8, 1972, at about noon. Mr. Morsch, hereinafter called "the deceased", died later during that day. The weather, at the time of the accident, was clear, and it was a bright, sunshiny day.
The deceased was 82 years of age, and resided with his wife at 443 Indiana Street, Corpus Christi, Texas. He left his home for the walk about 10 minutes before the accident took place. At that time, defendant and Erica Luckstead, her girl friend, were helping with the painting of a garage at 459 Indiana Street. Immediately preceding the accident, the girls left the painting job, and walked to a car which was parked in the driveway at the front corner of the house at 459 Indiana. Both got in the car. Defendant backed the car out of the driveway across the sidewalk into the gutter portion of the street, at which point she said that she felt a bump; she then stopped, drove forward a few feet, got out of the car and found the deceased lying out in the street, several feet from the curb.
Plaintiff testified in great detail concerning the physical condition of the deceased. She said that he usually walked three miles per day; that he looked around as he walked and observed things; that he was alert and had full use of his faculties; that he did not have any limitations in his gait or walk and while he walked slow and carried a cane, he did not have to use the cane as an aid to walking. When asked if the deceased could run, plaintiff replied;
"I don't know, I guess he could have if he had to, but I don't know that he ever had to."
In answer to the question, "Was he of a physical condition where he could walk quickly?", plaintiff said:
"He was in pretty good physical condition, otherwise he could not walk three miles a day."
Plaintiff further testified that the deceased had "20-20" vision with glasses; that he had good hearing in one ear and even though he wore a hearing aid in the other ear, his hearing was good when his hearing aid was on. She also said that the deceased drove a car; that he went fishing about twice a week; that he fished from both piers and chartered boats; and that, on occasions, he ran errands for her, and did work around the house. The deceased was wearing both his hearing aid and his glasses at the time he was injured.
Counsel for plaintiff asked plaintiff to "tell the jury what you remember of that accident today". She responded:
"... I just happened to go to the front door, and I heard him scream just as I got to the front door, and I ran down there just as fast as I could, and he was lying out in the street, and I saw the girl drive back up in the driveway..."
*567 A witness who appeared at the scene immediately after the accident occurred, over defendant's objections, was asked to relate to the jury "what Mrs. Morsch told you in describing the accident". His recollections were:
"A She indicated that she was standing on the front door, saw her husband knocked into the street by this car backing out of 459 Indiana and hit him again before returning back into the driveway.
Q Did she indicate to you where her husband was before the accident occurred?
A No _ _ _ correction, she said that he was walking on the sidewalk, yes."
The deceased was taken to a hospital and arrived there about 35 or 40 minutes after he was injured. His personal doctor attended to him. The doctor, over defendant's objection, told the jury that the deceased told him at the hospital that he had been hit and run over by an automobile. In response to the question "Did he state where he was at the time he was struck?", the doctor replied:
"My mental picture was that it was related to a driveway and a sidewalk, that the car was backing out of a driveway and struck him and knocked him down and ran over him".
The doctor further testified that considering his age, the deceased was in good physical condition just prior to the accident.
Defendant testified that she and Erica left the garage, which was in back of the house, and walked to the car (a white 1966 Dodge Charger two-door), which was parked on the driveway. She said that the center of the car was opposite the corner of the house (where the porch joins the house), which was 19 feet distant from the edge of the sidewalk nearest the house. The sidewalk is 4 feet wide. The distance from the center of the parked car to the edge of the street is approximately 33 feet. Defendant stated that she and Erica were talking as they approached the parked car, that they were walking together, and that they were not in a hurry. Each of the girls passed to her respective side of the car, opened the door, got in and closed the door. Defendant said that after getting in the car she first started the motor, looked to the right out of the back window, looked into the inside rear view mirror, looked into the outside rear view mirror (on the driver's side), looked outside the left door, put the car in reverse gear, and then looked back over her right shoulder, before the car started moving backward. Defendant further stated that she felt the car bump something when it reached the gutter along the edge of the street; she then braked the car to a stop, drove forward a few feet, got out of the car, and discovered the deceased lying in the street to the rear of the car.
Erica Luckstead, who was 17 years of age at the time of the accident, said that the car was backing at "a very moderate speed", and that plaintiff, after she got in the car, "took a lot of time" looking at her mirrors, looked behind her, to the left and to the right before she started to back the car. Erica placed the rear tires of the car out in the street when she noticed the bump. She stated that the car did not proceed back very far (after the bump) before plaintiff stopped and started forward because "we were going very slowly". She placed the center of the car while it was parked on the driveway as being "a little bit further up in the driveway beside the house" from that indicated by defendant.
It is undisputed that the climatic conditions existing at that time did not impair the visibility of either defendant or the deceased. There was no obstruction of any kind that impaired the deceased's view of the car, either while it was parked or when it was backing up.
The law requires that a person keep and maintain that kind of a lookout *568 that a person of ordinary prudence in the exercise of ordinary care would keep and maintain under the same or similar circumstances. A pedestrian who is walking along a sidewalk in a residential area of a city has a duty to keep a proper lookout for vehicles backing out of driveways into the street. But, the failure to do so is a proximate cause of injuries sustained as a result of a backing vehicle striking him only if such lookout would have revealed something to him that should have alerted him to danger at such time or distance that proper evasive action by him would have avoided the accident. The above rules are well settled and do not require citation of authorities.
There is evidence that the girls, defendant and Erica, were talking as they casually approached the parked car, got in and shut the doors; defendant then started the motor, adjusted the rear view mirror, looked to her right and to her left, and looked over her right shoulder to the rear of the car before she put the car in reverse gear and started backing. The jury was entitled to conclude from the circumstances that a person described as being alert, with 20-20 vision, able to hear ordinary sounds and to walk with ease, whether approaching the driveway or behind the car at the time the girls came to the automobile, should have observed the girls as they got in the car, should have heard the doors close, and should have heard the motor when it was started. The jury could have further concluded that if the deceased was not already in the sidewalk area back of the driveway, he would not then have entered the path of the backing car, and if he was already behind the car, he could have backed up or moved on beyond the path of the car. A matter of moving two steps forward or backward would have avoided the accident.
The testimony of the girls puts the point of impact at least 33 feet to the rear of the center of the car in its parked position. The only evidence relating to speed is that the car was backing at a moderate rate of speed. The actions of the girls and the noise caused by the closing of doors and the starting of the motor should have alerted the deceased to the fact that the driver of the car would immediately back out into the street and across the sidewalk. Several seconds, necessarily, elapsed from the time that it should have become apparent to the deceased that the car was going to be backed across the sidewalk and into the street until the time it struck the deceased. It has been judicially noticed by our courts that reaction time is generally three-fourths (¾ths) of a second. Under the evidence most favorable to the jury findings, the deceased had more than three-fourths (¾ths) of a second within which to take evasive action that would have prevented his being injured. The jury could reasonably infer that the backing and walking occurred simultaneously; that this took place over the space of several seconds, and that during this time interval the deceased should have known that the car was going to back out into the street and would strike him if he did not move out of the way. Although not required to anticipate negligent conduct on the part of defendant, the deceased was not entitled to ignore that which was plainly audible or that which was plainly visible, and which would have been heard or seen by a person of ordinary prudence similarly situated. De Winne v. Allen, 154 Tex. 316, 277 S.W.2d 95 (1955).
A review of the above evidence and the inferences reasonably drawn therefrom in the light most favorable to the jury's findings relating to the deceased's contributory negligence, and disregarding all evidence and inferences to the contrary, compels us to hold that there was evidence beyond a scintilla which supports an inference that the deceased did not keep a proper lookout, and would have seen the backing car if he had been keeping such a lookout as a person using ordinary care would have kept under the same or similar circumstances, and that he could have either *569 stopped, and allowed the car to cross the sidewalk, or could have stepped out of its path and thus avoided the accident. See Torres v. Duaine, 496 S.W.2d 773 (Tex. Civ.App.Corpus Christi 1973, no writ). Plaintiff's "no evidence" points are overruled.
There is evidence in the record which is in conflict with some of the evidence discussed in our disposition of plaintiff's "no evidence" points. One of plaintiff's neighbors testified that she had seen the deceased walking in the neighborhood on many occasions, and that "he walked very feeble and he usually walked along looking down at the sidewalk". The witness was asked if she had "ever seen him (the deceased) have a problem with his balance"; she answered:
"No, but I have had trouble because he wouldn't get out of the way of anything".
A witness, who lived in the neighborhood, testified that the deceased used a cane, and "appeared to need it when he was walking". In describing the deceased's appearance when walking, the witness also said:
"He looked kinda stooped and, you know, bent over, and he shuffled while he walked, shuffled along and went kinda slow ...."
The lady who lived at 459 Indiana Street testified that plaintiff, at the scene of the accident, said: "I shouldn't have let him go out by himself". She further testified that the deceased "walked like it was very hard for him to get around", and that his gait was "rather slow; a little unsteady".
The only evidence in this record which indicates that the deceased was on the sidewalk when he was hit by the car is found in the statements made by the deceased to the doctor at the hospital and those made by plaintiff at the scene of the accident. Under that evidence the point of impact would have been from 5 to 10 feet from the rear of the car. The statements of plaintiff and of the deceased are in conflict with the testimony of plaintiff and of Erica Luckstead, both of whom placed the point of impact at the time when the rear wheels of the car were in the gutter portion of the street. The distance from the center of the parked car on the driveway to the gutter is about 33 feet. Since it was established by the evidence that the rear end of the car extended about 2½ feet beyond the rear wheels, the point of impact would be out in the street, a distance of from 33 to 35 feet from the center of the car while it was in its parked position. Therefore, the distance that the car backed from its parked position until it struck the deceased is far greater if the testimony of the two girls is believed than is the case if the jury accepted the statements of plaintiff and the deceased. The testimony of plaintiff and Erica and the other facts and circumstances established by the evidence are sufficient to enable the jury to reach a conclusion as to the distance backed by the car before it collided with the deceased.
It is the province of the trier of facts to resolve conflicts and inconsistencies in the testimony of a witness or between witnesses. Biggers v. Continental Bus System, Inc., 157 Tex. 351, 303 S.W.2d 359 (1957). An appellate court does not have the authority to set aside a fact finding because of conflicting evidence.
Ordinarily, proper lookout and the related issue of proximate cause are proper questions for the trier of facts, the jury in this case. Texas & Pac. Ry. Co. v. Day, 145 Tex. 277, 197 S.W.2d 332 (1946). The same holds true for the other issues in this case relating to the deceased's contributory negligence which proximately caused the accident.
Negligence, causation, and improper lookout, like any other fact, may be established by circumstantial as well as by direct evidence. Lynch v. Ricketts, 158 Tex. 487, 314 S.W.2d 273 (1958).
*570 Plaintiff, in her brief, makes the statement: "her (plaintiff's) res gestae statement to a trained accident investigator and Mr. Morsch's own statement before his death constitute the only direct evidence of his actions at the time of the accident". We do not agree. Those statements, at most, constitute some evidence that the deceased was walking on the sidewalk before he was struck by the car, and nothing more. They do not constitute any evidence relating to the deceased's actions or conduct while he was approaching the area of the driveway, or immediately prior to impact.
Plaintiff further argues that the evidence introduced by defendant that the "deceased was seen on other occasions to look down at the sidewalk while walking, shuffled along and went kinda slow" constituted habit evidence that was not relevant to the issue of what the deceased was doing at the time of the subject accident, and, therefore, constituted "no evidence" of negligence. The argument is without merit. Defendant's evidence was not restricted to the habits of the deceased, nor did it indicate any behavior pattern or custom on the part of the deceased. The testimony complained of related to the physical condition of the deceased and the manner in which he walked and whether or not he was observant and needed a cane to assist him when walking. Plaintiff introduced evidence which indicated that the deceased was alert; was able to hear and see; walked with ease; and did not use a cane as an aid to walking. Defendant's evidence was in rebuttal to the evidence offered by plaintiff with respect to the deceased's physical condition. Plaintiff did not object to the introduction of such evidence, did not have an assignment in her motion for new trial that the trial court erred in admitting such evidence, and has raised no point of error in this appeal to that effect. Under those conditions, plaintiff cannot now argue that the evidence denominated by him as "habit evidence" cannot be considered as evidence in support of the jury's answers to the challenged issues.
The thrust of plaintiff's argument is that the "habit evidence" is the only justification for the jury's answers to the issues with respect to the deceased's contributory negligence. We disagree. There is other evidence in the record that fully supports the jury's findings. Even assuming, arguendo, that the questioned evidence constituted habit evidence, plaintiff's argument cannot be sustained. It is now settled in this state that habit evidence is admissible to establish negligence (or care) where there are no eyewitnesses to the accident. Missouri-Kansas-Texas Railroad Company v. McFerrin, 156 Tex. 69, 291 S.W.2d 931 (1956); Dearing v. Nutter, 402 S.W.2d 889 (Tex.Sup.1966). Here, there were no eyewitnesses to the accident. The statement by plaintiff that she saw the car strike her husband makes her an eyewitness only to the actual impact. It does not make her an eyewitness to what either the deceased or the driver of the car was doing at and immediately before the impact. Specifically, the statement does not make plaintiff an eyewitness to the manner in which the deceased was walking, or whether he was observant of the surroundings at and immediately before the time that he was struck by the car.
In cases of this character, standards of ordinary care such as the extent of observation which the deceased should have made at any particular time cannot be fixed with any degree of certainty but must be left in large measure to the trier of fact. The jury is not only the judge of the facts and circumstances of a case, but is also authorized to draw reasonable inferences and deductions from all the evidence produced before it by the litigants. Its findings may not be disregarded if the record discloses any evidence of probative value which, with inferences which may be properly drawn therefrom, will reasonably support the same. Texas Rules of Civil Procedure, rule 301; Lynch v. Ricketts, supra.
*571 After considering all of the evidence, we hold that the facts and circumstances established by the evidence and the inferences which can reasonably be drawn therefrom support the jury's findings of contributory negligence by the deceased which proximately caused his injuries and death. The evidence was factually sufficient to support the jury's answers to the challenged issues. Plaintiff's "factually insufficient evidence" points are overruled.
The judgment of the trial court is affirmed.
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1 TO Commission File Number0-28488 ZONES, INC (Exact name of registrant as specified in its charter) Washington 91-1431894 (State of Incorporation) (I.R.S. Employer Identification Number) 1102 15th Street SW, Suite 102 Auburn, Washington 98001-6509 (Address of Principal Executive Offices) (Zip Code) +1-971-244-3754 (Registrant's
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Citation Nr: 0302694
Decision Date: 02/12/03 Archive Date: 02/19/03
DOCKET NO. 01-08 778 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in Pittsburgh,
Pennsylvania
THE ISSUE
Entitlement to a disability evaluation in excess of zero
percent for scars of the right leg.
REPRESENTATION
Appellant represented by: Military Order of the Purple
Heart of the U.S.A.
ATTORNEY FOR THE BOARD
C. L. Krasinski, Counsel
INTRODUCTION
The veteran served on active duty from August 1980 to July
1983 and from October 1987 to January 1990.
This matter has come before the Board of Veterans' Appeals
(Board) on appeal from a June 2001 rating decision of the
Pittsburgh, Pennsylvania, Department of Veterans Affairs (VA)
Regional Office (RO) which granted service connection for
scars of the right leg and assigned a zero percent rating.
The veteran expressed disagreement with the disability
evaluation. The veteran did not express disagreement with
the other issues in the June 2001 rating decision.
FINDINGS OF FACT
1. The revised rating criteria of 38 C.F.R. § 4.118
effective from August 30, 2002, are more favorable to the
veteran's claim.
2. Prior to and after August 30, 2002, the service-connected
scars of the right leg are manifested by a scar that is 3.5
inches in size and is located superior and medial to the knee
and a scar that is 2.5 inches in size and is located inferior
and lateral to the knee; the scars are well-healed and are
not associated with the underlying tissue, are not tender or
painful upon palpation, and do not limit the function of the
right leg.
CONCLUSION OF LAW
Prior to and from August 30, 2002, the criteria for a
disability evaluation in excess of zero percent for the
service-connected scars of the right leg have not been met.
38 U.S.C.A. § 1155 (West 1991); 38 C.F.R. § 4.118, Diagnostic
Code 7803 (in effect prior to August 30, 2002), 38 C.F.R.
§ 4.118, Diagnostic Code 7801 (2002), 67 Fed. Reg. 49,596,
49599 (July 21, 2002) (to be codified at 38 C.F.R. § 4.118).
REASONS AND BASES FOR FINDINGS AND CONCLUSION
Initial matters: Duty to Assist
The Veterans Claims Assistance Act of 2000 (VCAA), Pub. L.
No. 106-475, 114 Stat. 2096 (Nov. 9, 2000) (codified at
38 U.S.C.A. §§ 5100, 5103, 5103A, 5107, and 5126, and
codified as amended at 5102, 5103, 5106 and 5107 (West Supp.
2002)) redefined VA's duty to assist a veteran in the
development of a claim. Guidelines for the implementation of
the VCAA that amended VA regulations were published in the
Federal Register in August 2001. 66 Fed. Reg. 45620 (Aug.
29, 2001) (to be codified as amended at 38 C.F.R. §§ 3.102,
3.156(a), 3.159, and 3.326(a)). The Board finds that all
relevant evidence has been obtained with regard to the
veteran's claim, and that the requirements of the VCAA have
in effect been satisfied.
The veteran has been provided with a VA examination in June
2001 to determine the nature, extent, and severity of the
service-connected scars of the right leg. The veteran and
her representative have been provided with a statement of the
case and supplemental statements of the case that discuss the
pertinent evidence and the laws and regulations related to
the claim, and essentially notify them of the evidence needed
by the veteran to prevail on the claim. In a November 2002
letter, the Board notified the veteran of the evidence needed
to substantiate her claim and offered to assist her in
obtaining any relevant evidence. This letter gave notice of
what evidence the appellant needed to submit and what
evidence VA would try to obtain. The Board asked the veteran
to identify any health care providers who have treated her
for the disability in question. In a November 2002 letter,
the Board notified the veteran of the changes in the rating
criteria for scars. The Board also advised the veteran that
she was permitted to submit additional evidence in support of
her claim. The veteran did not respond to the letters and
did not identify any other evidence. There is no identified
evidence that has not been accounted for and the veteran's
representative has been given the opportunity to submit
written argument. The VA notified the appellant and the
appellant's representative of the information and any medical
or lay evidence, not previously submitted, that is necessary
to substantiate the claim. See Quartuccio v. Principi,
16 Vet. App. 183 (2002).
Under the circumstances, the Board finds that the veteran has
been provided with adequate notice of the evidence needed to
successfully prove her claim and that there is no prejudice
to her by appellate consideration of the claim at this time
without a prior remand of the case to the RO for providing
additional assistance to the veteran in the development of
her claim as required by the VCAA or to give the
representative another opportunity to present additional
evidence and/or argument. Bernard v. Brown, 4 Vet. App. 384
(1993). See also Karnas v. Derwinski, 1 Vet. App. 308
(1991). In this case, the extensive record on appeal
demonstrates the futility of any further evidentiary
development and that there is no reasonable possibility that
further assistance would aid her in substantiating her claim.
Hence, no further notice or assistance to the veteran is
required to fulfill VA's duty to assist her in the
development of the claim. Smith v. Gober, 14 Vet. App. 227
(2000); Dela Cruz v. Principi, 15 Vet. App. 143 (2001).
Pertinent Law and Regulations
Disability evaluations are determined by the application of
VA's Schedule for Rating Disabilities (Schedule), 38 C.F.R.
Part 4 (2002). The percentage ratings contained in the
Schedule represent, as far as can be practicably determined,
the average impairment in earning capacity resulting from
diseases and injuries incurred or aggravated during military
service and the residual conditions in civil occupations.
38 U.S.C.A. § 1155 (West 1991); 38 C.F.R. §§ 3.321(a), 4.1
(2002).
The Board notes that in Fenderson v. West, 12 Vet. App. 119
(1999), it was held that evidence to be considered in the
appeal of an initial assignment of a disability rating was
not limited to that reflecting the then current severity of
the disorder. Cf. Francisco v. Brown, 7 Vet. App. 55, 58
(1994). In Fenderson, the Court of Appeals for Veterans
Claims (Court) also discussed the concept of the "staging" of
ratings, finding that, in cases where an initially assigned
disability evaluation has been disagreed with, it was
possible for a veteran to be awarded separate percentage
evaluations for separate periods based on the facts found
during the appeal period. Id. at 126-127.
The basis of disability evaluations is the ability of the
body as a whole to function under the ordinary conditions of
daily life, including employment. 38 C.F.R. § 4.10 (2002).
While this appeal was pending, the applicable rating criteria
for the skin were amended effective August 30, 2002. See 67
Fed. Reg. 49590-49599 (July 31, 2002).
In VAOPGCPREC 3-2000, the General Counsel held that when a
provision of the VA rating schedule is amended while a claim
for an increased rating under that provision is pending, a
determination as to whether the intervening change is more
favorable to the veteran should be made. If the amendment is
more favorable, that provision should be applied to rate the
disability for periods from and after the effective date of
the regulatory change; and the prior regulation should be
applied to rate the veteran's disability for periods
preceding the effective date of the regulatory change.
Before August 30, 2002, the Schedule read as follows:
Scars which are superficial and poorly nourished with
repeated ulcerations warrant a 10 percent rating. 38 C.F.R.
§ 4.118, Diagnostic Code 7803 (2002).
Scars which are superficial and tender and painful on
objective demonstration warrant a 10 percent rating.
38 C.F.R. § 4.118, Diagnostic Code 7804 (2002).
Scars that limit the function of any part affected are rated
based upon limitation of function of the part affected.
38 C.F.R. § 4.118, Diagnostic Code 7805 (2002).
From August 30, 2002, the Schedule reads as follows:
Scars, other than head, face, or neck, that are deep or that
cause limited motion are rated as follows: area or areas
exceeding 144 square inches (929 sq. cm.) are rated as 40
percent disabling; area or areas exceeding 72 square inches
(465 sq. cm.) are rated as 30 percent disabling; area or
areas exceeding 12 square inches (77 sq. cm.) are rated as 20
percent disabling; and area or areas exceeding 6 square
inches (39 sq. cm.) are rated as 10 percent disabling.
38 C.F.R. § 4.118, Diagnostic Code 7801 (2002).
Scars in widely separated areas, as on two or more
extremities or on anterior and posterior surfaces of
extremities or trunk, will be separately rated and combined
in accordance with § 4.25 of this part. 38 C.F.R. § 4.118,
Diagnostic Code 7801, Note 1. A deep scar is one associated
with underlying soft tissue damage. 38 C.F.R. § 4.118,
Diagnostic Code 7801, Note 2.
Scars, other than head, face, or neck, that are superficial
and that do not cause limited motion covering an area or
areas of 144 square inches (929 sq. cm.) or greater are rated
as 10 percent disabling. 38 C.F.R. § 4.118, Diagnostic Code
7802 (2002). Scars in widely separated areas, as on two or
more extremities or on anterior and posterior surfaces of
extremities or trunk, will be separately rated and combined
in accordance with § 4.25 of this part. 38 C.F.R. § 4.118,
Diagnostic Code 7802, Note 1. A superficial scar is one not
associated with underlying soft tissue damage. 38 C.F.R.
§ 4.118, Diagnostic Code 7802, Note 2.
Scars, superficial and unstable are rated as 10 percent
disabling. 38 C.F.R. § 4.118, Diagnostic Code 7803 (2002).
An unstable scar is one where, for any reason, there is
frequent loss of covering of skin over the scar. 38 C.F.R.
§ 4.118, Diagnostic Code 7803, Note 1. A superficial scar is
one not associated with underlying soft tissue damage.
38 C.F.R. § 4.118, Diagnostic Code 7803, Note 2.
Scars which are superficial and painful on examination are
rated as 10 percent disabling. 38 C.F.R. § 4.118, Diagnostic
Code 7804 (2002). A superficial scar is one not associated
with underlying soft tissue damage. 38 C.F.R. § 4.118,
Diagnostic Code 7804, Note 1. In this case, a 10 percent
evaluation will be assigned for a scar on the tip of a finger
or toe even though amputation of the part would not warrant a
compensable evaluation (See § 4.68 of this part on the
amputation rule.). 38 C.F.R. § 4.118, Diagnostic Code 7804,
Note 2.
Other scars are rated based upon limitation of function of
affected part. 38 C.F.R. § 4.118, Diagnostic Code 7805
(2002).
Once the evidence has been assembled, it is the Board's
responsibility to evaluate the evidence. 38 U.S.C.A.
§ 7104(a). The Secretary shall consider all information and
lay and medical evidence of record in a case before the
Secretary with respect to benefits under laws administered by
the Secretary. When there is an approximate balance of
positive and negative evidence regarding any issue material
to the determination of a matter, the Secretary shall give
the benefit of the doubt to the claimant. 38 U.S.C.A.
§ 7105; 38 C.F.R. §§ 3.102, 4.3. In Gilbert v. Derwinski,
1 Vet. App. 49, 54 (1990), the Court stated that "a veteran
need only demonstrate that there is an 'approximate balance
of positive and negative evidence' in order to prevail." To
deny a claim on its merits, the evidence must preponderate
against the claim. See also Alemany v. Brown, 9 Vet. App.
518, 519 (1996).
Analysis
The veteran's claim of entitlement to a disability evaluation
in excess of zero percent for the scars of the right leg was
filed on October 10, 2000. As noted above, the applicable
rating criteria for the skin were amended effective August
30, 2002. See 67 Fed. Reg. 49590-49599 (July 31, 2002).
In accordance with VAOPGCPREC 3-2000, the Board has compared
both versions of the rating criteria for the skin. The Board
notes that the veteran's service-connected scars of the right
leg are evaluated under Diagnostic Code 7805, other scars
which are rated on the limitation of function of the part
affected. The Board notes that the provisions of Diagnostic
Code 7805 have not changed under the former and revised
provisions of 38 C.F.R. § 4.118. However, the Board finds
that the revised version of 38 C.F.R. § 4.118 is more
favorable to the veteran's claim because the revised rating
criteria provides higher disability evaluations that may be
assigned. For instance, the revised criteria provides
ratings up to 40 percent for scars other than head, face or
neck scars. Under the former version of the rating criteria,
disability evaluations in excess of 10 percent were only
available for third degree burn scars. See 38 C.F.R.
§ 4.118, Diagnostic Code 7801 (in effect prior to August 30,
2002). The revised rating criteria provides disability
evaluations in excess of 10 percent for scars other than burn
scars. See 38 C.F.R. § 4.118 (in effect from August 30,
2002). For these reasons, the Board finds that the revised
rating criteria are more favorable to the veteran's claim,
since higher disability evaluations are available.
Thus, in accordance with VAOPGCPREC 3-2000, the Board will
analyze the veteran's claim under the former version of the
rating criteria for the skin prior to August 30, 2002, the
effective date of the amended regulations. The Board will
then analyze the veteran's claim under the revised rating
criteria for the skin from August 30, 2002, since the revised
version is more favorable to the veteran's claim.
October 10, 2000 to August 29, 2002
In applying the law to the existing facts, for the reasons
expressed below, the record does not demonstrate the
requisite objective manifestations for a rating greater than
zero percent for the service-connected scars of the right leg
under the former provisions of Diagnostic Code 7805, other
scars, rate on limitation of function of the part affected.
See 38 C.F.R. § 4.118, Diagnostic Code 7805 (in effect prior
to August 30, 2002).
The medical evidence of record shows that the scars of the
right leg do not affect the function of the right leg. The
June 2001 VA examination report indicates that the scars on
the right legs were well-healed. The first scar was superior
and medial to the knee and was 3.5 inches long. The second
scar was inferior and lateral to the knee and was 2.5 inches
long. The scars were not fixated to the underlying tissue.
The medical evidence of record shows that the veteran has
pain with motion of the right leg. However, there are other
service-connected disabilities that affect the right leg and
the pain with motion is considered when evaluating these
disabilities. For example, service connection is in effect
for status post excision of fibrous dysplasia of the right
tibia and femur and a 10 percent evaluation is currently
assigned. The June 2001 rating decision indicates that the
10 percent evaluation under Diagnostic Code 5013 contemplates
the pain with motion of the right knee. There is no evidence
that the service-connected scars of the right leg causes any
type of limitation of function of the right leg. Thus, a 10
percent evaluation under the former provisions of Diagnostic
Code 7805 is not warranted.
The medical evidence of record shows that the scars are well-
healed and there was no tenderness to palpation of the scars
upon VA examination in June 2001. There is no medical
evidence that the scars were painful to palpation. Thus, a
10 percent evaluation under the former provisions of
Diagnostic Code 7804, scars, superficial, tender and painful
on objective demonstration, is not warranted.
There is no evidence that the scars of the right leg are
poorly nourished with repeated ulcerations. The medical
evidence shows that the scars were well-healed. Thus, a 10
percent evaluation is not warranted for the scars under the
former provisions of Diagnostic Code 7803, scars superficial,
poorly nourished with repeated ulcerations.
In summary, a compensable disability evaluation is not
warranted for the service-connected scars of the right leg
under the former provisions of 38 C.F.R. § 4.118, the rating
schedule for skin disorders, from October 10, 2000 to August
29, 2002. The preponderance of the evidence is against the
veteran's claim for a disability evaluation in excess of zero
percent for the scars of the right leg from October 10, 2000
to August 29, 2002 and the claim is denied.
From August 30, 2002
As discussed above, the veteran's service-connected scars of
the right leg are rated under Diagnostic Code 7805, other
scars rated on limitation of the part affected. The revised
provisions of Diagnostic Code 7805 are the same as the former
provisions. See 38 C.F.R. § 4.118, Diagnostic Code 7805 (in
effect prior to and after August 30, 2002).
As discussed above, the medical evidence of record shows that
the scars of the right leg do not affect the function of the
right leg. The June 2001 VA examination report indicates
that the scars on the right legs were well-healed. The scars
were not fixated to the underlying tissue. The medical
evidence of record shows that the veteran has pain with
motion of the right leg. However, there are other service-
connected disabilities that affect the right leg and the pain
with motion is considered when evaluating these disabilities.
For example, service connection is in effect for status post
excision of fibrous dysplasia of the right tibia and femur
and the 10 percent evaluation currently assigned under
Diagnostic Code 5013 contemplates pain with motion of the
right knee. There is no evidence that the service-connected
scars of the right leg causes any type of limitation of
function of the right leg. Thus, a 10 percent evaluation
under the revised provisions of Diagnostic Code 7805 is not
warranted.
The medical evidence of record shows that the scars of the
right leg are not fixated to the underlying tissue. The
revised provisions of 38 C.F.R. § 4.118 define a deep scar as
a scar which is associated with underlying soft tissue
damage. Thus, under the revised provisions, the service-
connected scars of the right leg are not considered to be
deep, and the revised provisions of Diagnostic Code 7801,
scars other than the head, face or neck that are deep or that
cause limitation of motion, are not for application. See
38 C.F.R. § 4.118, Diagnostic Code 7801 (in effect from
August 30, 2002).
A compensable disability evaluation for the scars of the
right leg is not warranted under the revised provisions of
Diagnostic Code 7802, scars, other than head, face, or neck,
that are superficial and that do not cause limited motion.
See 38 C.F.R. § 4.118, Diagnostic Code 7802 (2002). The
veteran's scars of the right leg are considered to be
superficial scars since the scars are not associated with the
underlying tissue. The medical evidence shows that the scars
cover an area much less than 144 square inches (929 sq. cm.).
The medical evidence of record shows that the two scars are
3.5 inches in size and 2.5 inches in size. Thus, a 10
percent evaluation under the revised provisions of Diagnostic
Code 7802 is not warranted. 38 C.F.R. § 4.118, Diagnostic
Code 7802 (2002).
A compensable disability evaluation for the scars of the
right leg is not warranted under the revised provisions of
Diagnostic Code 7803, scars, superficial and unstable. See
38 C.F.R. § 4.118, Diagnostic Code 7803 (2002). An unstable
scar is one where, for any reason, there is frequent loss of
covering of skin over the scar. In the present case, the
scars of the right leg are described in the June 2001 VA
examination report as well-healed. There were no findings of
a loss of covering of the skin.
A compensable disability evaluation for the scars of the
right leg is not warranted under the revised provisions of
Diagnostic Code 7804, scars, superficial and painful on
examination. See 38 C.F.R. § 4.118, Diagnostic Code 7804
(2002). In the present case, the scars of the right leg are
described in the June 2001 VA examination report as being
well-healed. There were no findings that the scars were
painful upon examination.
As discussed above, with regard to initial rating cases,
separate ratings can be assigned to separate periods of time,
based upon the facts found - a practice known as "staged
ratings." See Fenderson, supra. The Board finds that staged
ratings are not warranted in this case. The Board has
examined the record and finds that a zero percent evaluation
is warranted for the service-connected scars of the right leg
since October 10, 2000, the date of receipt of the initial
claim. There is no evidence that the veteran's service-
connected disability has met the criteria for a higher rating
at any time since October 10, 2000. It appears from the
medical evidence that the disability has remained essentially
constant over the entire period. Accordingly, a staged
rating under Fenderson is not warranted.
In June 2001 the veteran submitted photographs of the scars,
asking that they be rated on the basis of disfigurement.
Disfigurement is not a factor for rating superficial scars,
under the old or the new criteria, unless they are on the
head, face, or neck. The Board recognizes, and the
photographs demonstrate, that the scars are visible; but they
appear no more than slightly disfiguring. They are not a
basis for a compensable rating. The veteran's representative
notes that a review by VA's Central Office was requested, and
describes this as an "extra-schedular" evaluation. In the
October 2001 statement of the case the RO (Decision Review
Officer) explained that this referral procedure under
Diagnostic Code 7800 was for scars of the head, face, or
neck, and implicitly declined to make such a referral. The
Board notes as well that the Diagnostic Code allows for such
referral for "the most repugnant, disfiguring,
conditions[.]" Clearly these scars are not of that
magnitude. The Board agrees that referral is not indicated.
In summary, a compensable disability evaluation is not
warranted for the service-connected scars of the right leg
under the former or revised provisions of 38 C.F.R. § 4.118
for the reasons and bases described above. The preponderance
of the evidence is against the veteran's claim for a
disability evaluation in excess of zero percent and the claim
is denied.
ORDER
Entitlement to a disability evaluation in excess of zero
percent for scars of the right leg is denied.
____________________________________________
J. E. Day
Veterans Law Judge, Board of Veterans' Appeals
IMPORTANT NOTICE: We have attached a VA Form 4597 that tells
you what steps you can take if you disagree with our
decision. We are in the process of updating the form to
reflect changes in the law effective on December 27, 2001.
See the Veterans Education and Benefits Expansion Act of
2001, Pub. L. No. 107-103, 115 Stat. 976 (2001). In the
meanwhile, please note these important corrections to the
advice in the form:
? These changes apply to the section entitled "Appeal to
the United States Court of Appeals for Veterans
Claims." (1) A "Notice of Disagreement filed on or
after November 18, 1988" is no longer required to
appeal to the Court. (2) You are no longer required to
file a copy of your Notice of Appeal with VA's General
Counsel.
? In the section entitled "Representation before VA,"
filing a "Notice of Disagreement with respect to the
claim on or after November 18, 1988" is no longer a
condition for an attorney-at-law or a VA accredited
agent to charge you a fee for representing you.
|
Complainants sue to foreclose a mortgage given to secure bond to pay $17,000 in three years, which have not yet expired. The bond provides for acceleration of maturity for default in payment of interest or taxes. The issue is as to whether or not complainant has proved such default.
The provision of the bond is that if —
"any tax * * * be hereafter imposed * * * [upon the mortgaged premises] * * * and become due and payable * * * and remain unpaid and in arrears for the space of sixty days,"
then the principal sum shall become immediately due and payable.
The facts are not in dispute. Taxes for the year 1928 were imposed on the mortgaged premises. The first half of such tax was paid on, and not until, July 16th, 1928. Complainants contend that this first half of the tax was in arrears from and after April 1st, 1928, and, hence, remained in arrears for more than sixty days. Defendants contend that it did not become in arrears until after June 1st, 1928, and, hence, that the default or delay in payment was for only forty-five days, and that the complainants had no right to accelerate the maturity of the principal of the bond.
The act for the assessment and collection of taxes (P.L. 1918ch. 236 § 602, as amended by P.L. 1920 ch. 224) provides:
"602. Taxes, except the poll tax, shall be payable one-half of the amount thereof on the first day of April, which if not paid on or before the first day of June will become delinquent on that date, and the taxpayer or property assessed will be subject to the penalties hereinafter prescribed. The remaining half of said taxes shall be paid on or before the first day of December, after which date, if unpaid, they shall become delinquent and the taxpayer or property subject to the same penalties." *Page 427
It will be observed that although this section says the first half of the taxes shall be "payable" on April 1st, it is not delinquent until June 1st. The penalty of interest for non-payment is imposed only for failure to pay on or before June 1st — see section 603. There is no provision in the statute which gives the municipality any right to insist on the payment before June 1st, or which imposes any penalty for failure to pay on or before June 1st. Just what is meant by the provision that it shall be "payable" on April 1st is not entirely clear; but it does seem clear from the foregoing considerations that the tax cannot be deemed to become due until June 1st, and that it cannot be deemed to become in arrears until after June 1st.
According to ordinary usage and meaning, a debt or other obligation is "due" at the time when the creditor has the right to demand payment and to enforce collection if not paid — until that time it is not "due." Interest is the legal penalty for failure to pay when due; it runs only from and after the due date. The words "delinquent" (in the statute) and "in arrears" (in the bond) are substantially synonymous. A tax becomes "delinquent" or "in arrears" if not paid until after the date on which payment is due — the period during which it is in arrears is to be computed from such due date.
The tax in question did not become "due" until June 1st; being paid on July 16th, it did not remain "in arrears" for sixty days. Complainants therefore had no right under the provisions of the bond to accelerate the maturity of the principal sum, and their attempt in that behalf is without effect. No other default is alleged or proven. The principal sum being not yet due under the terms of the bond, the bill to foreclose the mortgage must be dismissed, with costs. *Page 428 |
70 F.3d 123
NOTICE: Although citation of unpublished opinions remains unfavored, unpublished opinions may now be cited if the opinion has persuasive value on a material issue, and a copy is attached to the citing document or, if cited in oral argument, copies are furnished to the Court and all parties. See General Order of November 29, 1993, suspending 10th Cir. Rule 36.3 until December 31, 1995, or further order.
UNITED STATES of America, Plaintiff-Appellee,v.E. Lavay MCKINLEY, Defendant-Appellant.
Nos. 95-8064, 95-8065.
United States Court of Appeals, Tenth Circuit.
Nov. 20, 1995.
Before BALDOCK, KELLY, and HENRY, Circuit Judges.
ORDER AND JUDGMENT1
PER CURIAM
1
This matter is before the court on defendant's appeals from the district court's orders of detention, denying motion for injunctive relief, ruling on motion for order resolving detention issues and motion to grant bail bond, and defendant's motion to supplement the record. Defendant was convicted on charges of conspiracy to commit mail and wire fraud and money laundering. This court vacated the convictions and ordered a new trial. These appeals stem from defendant's detention pending a new trial.
2
Pretrial detention is governed by 18 U.S.C. 3142(e),(f), and (g). "Appellate review of detention or release orders is plenary as to mixed questions of law and fact and independent, with due deference to the district court's purely factual findings." United States v. Stricklin, 932 F.2d 1353, 1355 (10th Cir.1991). We find no error in the district court's determination that defendant presents a serious flight risk and, therefore, we affirm the order of detention. We also affirm the district court order denying injunctive relief, as well as the order ruling on motion for order resolving detention issues and motion to grant bail bond. The motion to supplement the record is granted.
3
The mandate shall issue forthwith.
1
This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of the court's General Order filed November 29, 1993. 151 F.R.D. 470
|
Exhibit (a)(5)(E) PRESS RELEASE FOR IMMEDIATE RELEASE: TILMAN J. FERTITTA/LANDRY’S RESPONDS TO ANNOUNCEMENT THAT MCCORMICK & SCHMICK’S WILL CONDUCT A SALE PROCESS Pleased that Board Has Decided to Put the Company Up For Sale Withdraws Proxy Contest Seeking to Withhold a Quorum at the Company’s Upcoming 2011 Annual Meeting Looks Forward to Participating in Sale Process and Commencing Diligence and Negotiations Houston, TX – May 4, 2011 — Tilman J. Fertitta/Landry’s issued a statement today in response to the recent announcement by McCormick & Schmick’s Seafood Restaurants, Inc. (Nasdaq: MSSR) (“MSSR” or the “Company”) that the Company’s Board of Directors has decided to put the Company up for sale. Mr. Fertitta’s statement to MSSR stockholders follows: “The McCormick & Schmick’s Board has finally relented to the pressure from shareholders and decided to engage in a sale process.We are pleased to hear and hope that the Board is committed to conducting a process in which all acquisition proposals are fairly evaluated.The first quarter financial results indicate that the Company is facing a unique set of challenges and continues to struggle despite the economic rebound and improved consumer confidence.The Board is therefore making the right move by putting the Company up for sale at this time.We anticipate that the sale process will be successful and will not warrant further shareholder action in the future.” Mr. Fertitta continued, “In light of the Company’s announcement, there is no need to continue with the proxy solicitation seeking to contest a quorum at the Company’s 2011 Annual Meeting.The purpose of this solicitation was to allow stockholders to send a message to the Company that the Board should commit to conducting a full and fair sale process.The Company’s recent announcement indicates that the Board has received this message without us having to resort to this contest.” Mr. Fertitta concluded, “We will be participating in the sale process and have requested that the Board have its financial advisor, Piper Jaffray & Co., contact us immediately so that we may begin diligence and negotiations without delay.We hope and expect we will be treated fairly along with any other strategic and financial bidders.In the meantime, we intend to keep our all-cash $9.25 tender offer open as a means to provide stockholders with the quickest and most direct way to realize full and fair value for their shares.” Okapi Partners LLC is the Information Agent for the tender offer and any questions or requests for the Offer to Purchase and related materials with respect to the tender offer may be directed to 402-934-2532. IMPORTANT INFORMATION REGARDING THE TENDER OFFER LSRI Holdings, Inc., a wholly-owned subsidiary of Landry’s Restaurants, Inc, has commenced a tender offer to purchase all of the outstanding shares of common stock of McCormick & Schmick’s Seafood Restaurants, Inc. at $9.25 per share, net to the seller in cash, without interest. The offer is currently scheduled to expire at 12:00 Midnight, New York City time, on May 31, 2011, unless the offer is extended. Okapi Partners LLC is the Information Agent for the tender offer and any questions or requests for the Offer to Purchase and related materials with respect to the tender offer may be directed to Okapi Partners LLC. THIS PRESS RELEASE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT AN OFFER TO BUY OR THE SOLICITATION OF AN OFFER TO SELL ANY SECURITIES.THE SOLICITATION AND THE OFFER TO BUY MSSR’S COMMON STOCK IS ONLY BEING MADE PURSUANT TO THE OFFER TO PURCHASE AND RELATED MATERIALS THAT LANDRY’S HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.THESE MATERIALS MAY BE AMENDED FROM TIME TO TIME.MSSR STOCKHOLDERS SHOULD READ THESE MATERIALS CAREFULLY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION, INCLUDING THE TERMS AND CONDITIONS OF THE OFFER.STOCKHOLDERS WILL BE ABLE TO OBTAIN THE OFFER TO PURCHASE AND RELATEDMATERIALSWITH RESPECT TO THE TENDER OFFER FREE AT THE SEC'S WEBSITE ATWWW.SEC.GOV OR FROM LANDRY’S BY CONTACTING OKAPI PARTNERS LLC AT 402-934-2532 (TOLL-FREE FROM THE U.S).
|
COURT OF APPEALS OF VIRGINIA
Present: Chief Judge Fitzpatrick, Judge Felton and Retired Judge Stephens*
Argued at Chesapeake, Virginia
RICHARD EUGENE MATTHEWS
MEMORANDUM OPINION** BY
v. Record No. 2237-03-1 JUDGE WALTER S. FELTON, JR.
JULY 6, 2004
KARYL DEANNE RAUCH MATTHEWS
FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK
Joseph A. Leafe, Judge
Elisa D. Carlson (Mary G. Commander, on brief), for appellant.
No brief or argument for appellee.
Richard Eugene Matthews (husband) appeals from the equitable distribution award arising
out of his divorce from Karyl Deanne Rauch Matthews (wife). Husband contends that the trial
court erred in its classification and distribution of the proceeds obtained from a settlement with the
manufacturer of a recreational vehicle purchased during the marriage. We affirm the trial court’s
judgment, and remand to the trial court for the limited purpose of determining if any clerical error
exists in the record, and to correct any such error pursuant to Code § 8.01-428(B).1
*
Retired Judge J. Warren Stephens took part in the consideration of this case by
designation pursuant to Code § 17.1-400.
**
Pursuant to Code § 17.1-413, this opinion is not designated for publication.
1
Pursuant to Code § 8.01-428(B), husband filed a motion with this Court to grant leave
to the trial court to correct a clerical error in its letter opinion entered on July 3, 2003, and in the
decree entered on July 31, 2003. In its letter opinion and decree, the trial court referred to
husband’s two “Fidelity accounts.” Husband asserts that prior to the trial court’s letter opinion,
one of the accounts was transferred to First Union Bank, which eventually became Wachovia
Bank.
I. BACKGROUND
The record reflects that the parties married October 31, 1997 in Chesapeake, Virginia. One
child, a daughter, was born of the marriage. The parties separated on August 24, 2000, two years
and ten months after the marriage began. On September 21, 2000, wife filed for divorce requesting
custody of the parties’ daughter, spousal support, and equitable distribution of marital property. The
trial court bifurcated the proceedings, deferring its equitable distribution determination until a later
time. The trial court did not hear evidence ore tenus. The parties filed written statements with the
trial court regarding the property each believed to be subject to equitable distribution. On August
29, 2002, the trial court entered a final divorce decree on the grounds that the parties had lived
separate and apart for a period in excess of one year. Code § 20-91(A)(9).
On appeal from an equitable distribution award, we review the evidence in the light most
favorable to the party prevailing below, “and grant all reasonable inferences fairly deducible
therefrom.” Anderson v. Anderson, 29 Va. App. 673, 678, 514 S.E.2d 369, 372 (1999). So
viewed, the record reflects that in June 1998, husband purchased a Winnebago for $73,500. The
initial purchase was financed by Fleetwood/Associates RV Finance Company (Fleetwood). The
Winnebago was originally titled solely in husband’s name. Later, but still during the marriage,
husband transferred title jointly to husband and wife. Husband and wife used the Winnebago for
family vacations. Because of defects with the vehicle, husband instituted a civil action against Ford
Motor Company and Winnebago Industries, resulting in a net settlement award of $60,000, after
deduction of costs of the litigation. Wife was not a named party in the Winnebago litigation.
On July 3, 2003, the trial court issued a letter opinion finding that the proceeds from the
Winnebago settlement were marital property. It found that the Winnebago was acquired during the
marriage, was not a gift, and was not purchased with separate property or the proceeds of the sale of
separate property. The trial court concluded that wife was entitled to one half the value of the
-2-
Winnebago, or half of the $60,000 received from the settlement. It also found that wife failed to
prove that the two “Fidelity accounts” were not husband’s separate property. After hearing
husband’s motion to reconsider the classification and distribution of the Winnebago settlement
funds, the trial court reaffirmed its letter opinion.
II. EQUITABLE DISTRIBUTION
In fashioning its equitable distribution of the marital estate, the trial court must classify the
property as either separate or marital, assign a value to the property based upon evidence presented
by both parties, and finally distribute the property to the parties, taking into consideration the factors
presented in Code § 20-107.3(E). See Marion v. Marion, 11 Va. App. 659, 665, 401 S.E.2d 432,
436 (1991). “‘A decision regarding equitable distribution . . . will not be reversed unless it is plainly
wrong or without evidence to support it.’” Thomas v. Thomas, 40 Va. App. 639, 644, 580 S.E.2d
503, 505 (2003) (quoting Gilman v. Gilman, 32 Va. App. 104, 115, 526 S.E.2d 763, 768 (2000)).
A. Classification
Husband contends that the trial court erred in classifying the proceeds from the Winnebago
settlement as marital property rather than as his separate property. At trial, husband asserted that
about a year after the initial purchase of the Winnebago, he paid off the original financing debt he
alone incurred with a loan from his ZEM partnership.2 Husband argues that because the ZEM
partnership purchased the original loan from Fleetwood, the Winnebago was his separate property
and, that as a result, the settlement funds from the Winnebago litigation are also his separate
property.
“As all property acquired during a marriage is presumed marital property, the party who
claims the property should be classified as separate bears the burden of rebutting this presumption.”
Fowlkes v. Fowlkes, 42 Va. App. 1, 6-7, 590 S.E.2d 53, 55-56 (2003). Code § 20-107.3(A)(1)(iii)
2
Husband formed his ZEM partnership in 1994, prior to his marriage.
-3-
provides that separate property is “all property acquired during the marriage in exchange for or from
the proceeds of sale of separate property, provided that such property acquired during the marriage
is maintained as separate property.” Husband must prove by a preponderance of the evidence that
the Winnebago, purchased during the marriage, was acquired in exchange for separate property.
See Anderson, 29 Va. App. at 685, 514 bcervantes@example.net.
Implicit in the trial court’s finding that the settlement proceeds were marital property is its
rejection of husband’s assertions that separate, and not marital, property was used to purchase the
Winnebago. Husband’s testimony was not supported by any documentary evidence that the ZEM
account was used to purchase the Winnebago, or the loan from Fleetwood. See id. at 685-88, 514
S.E.2d at 375-77 (husband’s testimony and single bank statement was insufficient to demonstrate
that funds were separate property).
We conclude husband failed to prove that the Winnebago, purchased during the marriage,
was acquired by husband in exchange for his separate property. Based on the evidence before it, the
trial court did not err in classifying the proceeds of the Winnebago litigation as marital property.
B. Distribution
Husband argues that even if the Winnebago was marital property, there was no value to be
distributed. He asserts that the financing debt was greater than the value received in the Winnebago
settlement, thereby creating a debt owed by husband and wife to ZEM, which had purchased the
financing loan from Fleetwood.3 See Hodges v. Hodges, 2 Va. App. 508, 515, 347 S.E.2d 134, 138
(1986) (“Where the marital property is encumbered with indebtedness which equals or exceeds its
value, then for purposes of a monetary award[,] it is essentially of no value.”).
3
The record reflects that both husband and ZEM partnership were listed as creditors in
wife’s bankruptcy proceeding filed in February 2002 in Montana.
-4-
Here, husband failed to prove the existence of or amount of a loan owed by the parties to
ZEM. See Kelker v. Schmidt, 34 Va. App. 129, 138-39, 538 S.E.2d 342, 347 (2000) (finding that
wife failed to establish the existence of a loan by a preponderance of the evidence due to “the lack
of any documentation” or other “evidence to support her oral assertions”). Husband’s only
evidence for the existence of the loan was a single assertion by him in a letter to the administrator of
wife’s bankruptcy proceedings that “a year [after the purchase] the title was transferred . . . when
Dr. Matthews decided to replace the original financing with Fleetwood with a loan from his ZEM
partnership.” Husband conceded in the letter that ZEM’s security interest in the Winnebago was not
noted on the vehicle’s title. Moreover, the record contains no documentary evidence to support
husband’s assertion that ZEM purchased the loan from Fleetwood.
Husband also contends that the trial court erred when it divided the $60,000 Winnebago
settlement award equally, awarding $30,000 each to husband and wife. In Virginia, there is no
presumption favoring an equal distribution of assets. See Papuchis v. Papuchis, 2 Va. App. 130,
132, 341 S.E.2d 829, 830 (1986). Equitable distribution of marital property “is intended to
recognize a marriage as a partnership and to provide a means to divide equitably the wealth
accumulated during and by that partnership . . . .” Williams v. Williams, 4 Va. App. 19, 24, 354
S.E.2d 64, 66 (1987).
The trial court determines its equitable distribution award considering the factors contained
in Code § 20-107.3(E). Papuchis, 2 Va. App. at 132, 341 bcervantes@example.net. Its findings must be
supported by evidence in the record. See Trivett v. Trivett, 7 Va. App. 148, 154, 371 S.E.2d 560,
563 (1988). “[T]he amount of any monetary award, subject to the enumerated statutory factors,
is within the sound discretion of the trial court.” Dietz v. Dietz, 17 Va. App. 203, 216, 436
S.E.2d 463, 471 (1993).
-5-
Here, the trial court’s decree reflects that it “carefully considered the evidence and
arguments of the parties, and specifically considered the factors enumerated in Virginia Code
§ 20-107.3(E).” We conclude that the trial court’s decision to divide the proceeds from the
Winnebago settlement equally between the parties was supported by the record and find no abuse of
discretion.
Accordingly, we conclude that the trial court did not err in its classification of the settlement
proceeds from the Winnebago litigation as marital property or in its distribution of those proceeds.
We affirm the trial court’s equitable distribution of the marital asset. We remand to the trial court
for the sole purpose of determining whether any clerical error exists regarding the Fidelity accounts,
and authority to correct any such error pursuant to Code § 8.01-428(B).
Affirmed on the merits, and
remanded with instructions.
-6-
|
Vera Bradley, Inc.
2010 Equity and Incentive Plan
CHIEF EXECUTIVE OFFICER SIGN-ON GRANT
RESTRICTED STOCK UNIT/PERFORMANCE UNIT
TERMS AND CONDITIONS
1.Definitions. Any term capitalized herein but not defined will have the meaning
set forth in the Vera Bradley, Inc. 2010 Equity and Incentive Plan (the “Plan”).
2. Grant and Vesting of Restricted Stock Units.
(a) As of the grant date specified in the Award Agreement (the “Grant Date”),
the Participant will be credited with the number of Restricted Stock Units set
forth in the Award Agreement. Each Restricted Stock Unit is a notional amount
that represents one unvested Share. Each Restricted Stock Unit constitutes the
right, subject to the terms and conditions of the Plan and this document, to the
distribution of a Share if and when the Restricted Stock Unit vests.
(b) Restricted Stock Units will vest in accordance with the terms of the
Award Agreement. If the Participant’s Service with the Company and all of its
Affiliates terminates before the date that a grant of Restricted Stock Units
vests, his right to receive the Shares underlying such unvested Restricted Stock
Units will be only as provided in Section 5.
3. Grant and Vesting of Performance Units (“Performance RSUs”).
(a) As of the Grant Date, the Participant will be credited with the number of
Performance RSUs set forth in the Award Agreement. Each Performance RSU is a
notional amount that represents one unvested share of Common Stock. Each
Performance RSU constitutes the right, subject to the terms and conditions of
the Plan and this document, to the distribution of a Share if and when the
Performance RSU is deemed earned and vested.
(b) Performance RSUs granted under the Plan are intended to qualify as
performance-based compensation under Code Section 162(m). Performance RSUs (or
tranches of such Performance RSUs) will become earned only if the Company
achieves a stated level of stock price performance as set forth in the Award
Agreement. Except as provided in Section 5, any earned Performance RSUs (and the
Participant’s right to receive the Shares underlying such Performance RSUs) will
become vested only if the Participant remains continuously employed with the
Company during the Performance Period. Any determination by the Committee of the
level and entitlement to the Award of Performance RSUs, and any interpretation,
rule, or decision adopted by the Committee under the Plan or in carrying out or
administering the Plan, is final and binding for all purposes and upon all
interested persons, their heirs, and personal representatives. This Subsection
is not intended to limit the Committee’s power, to the extent it deems proper in
its sole discretion, to take any action permitted under the Plan and Code
Section 162(m).
4. Rights as a Stockholder.
(a) Unless and until a Restricted Stock Unit or an earned Performance RSU, as
applicable, has vested and the Share underlying it has been distributed to the
Participant, the Participant will not be entitled to vote in respect of that
Restricted Stock Unit or Performance RSU (as applicable) or that Share.
(b) If the Company declares a cash dividend on its Shares, then, on the
payment date of the dividend, the Participant will be credited with dividend
equivalents equal to the amount of cash dividend per Share multiplied by the
number of outstanding Restricted Stock Units or Performance RSUs (as applicable)
credited to the Participant through the record date. The dollar amount credited
to a Participant under the preceding sentence will be credited to an account
(“Account”) established for the Participant for bookkeeping purposes only on the
books of the Company. The amounts credited to the Account will be credited as of
the last day of each month with interest, compounded monthly, until the amount
credited to the Account is paid to the Participant. The rate of interest
credited under the previous sentence will be the prime rate of interest as
reported by the Midwest edition of The Wall Street Journal for the second
business day of each fiscal quarter on an annual basis. The balance in the
Account will be subject to the same terms regarding vesting and forfeiture as
the Participant’s Restricted Stock Units or Performance RSUs, as applicable,
awarded under the applicable Award Agreement, and will be paid in cash in a
single sum at the time that the Shares associated with the Participant’s
Restricted Stock Units or Performance RSUs, as applicable, are delivered (or
forfeited at the time that the Participant’s Restricted Stock Units or
Performance RSUs, as applicable, are forfeited).
5. Termination of Service. If a Participant’s Service is terminated for any
reason during the applicable Restricted Period or Performance Period, the terms
and conditions of the underlying Award Agreement will govern when and whether
the Participant will forfeit the right to receive Shares underlying any
Restricted Stock Units or Performance RSUs, as applicable, that have not yet
vested.
6. Timing and Form of Payment. Except as provided in this Section or in
clauses 2(b) or 3(b) or Section 5, above, once a Restricted Stock Unit vests or
a Performance RSU is earned and vested, as applicable, the Participant will be
entitled to receive a Share in its place. Delivery of the Share will be made,
including delivery with respect to a Disabled Participant, or to the estate of a
deceased Participant, after the end of the Restricted Period or Performance
Period, as applicable, and not later than the 15th day of the third month
following the end of the Restricted Period or Performance Period, as applicable.
Shares will be credited to an account established for the benefit of the
Participant with the Company’s administrative agent. The Participant will have
full legal and beneficial ownership with respect to the Shares at that time.
7. Assignment and Transfers. The Participant may not assign, encumber, or
transfer any of his rights and interests under the Award described in this
document, except, in the event of the Participant’s death, by will or the laws
of descent and distribution.
8. Withholding Tax. The Company shall have the power and the right to deduct
or withhold an amount sufficient to satisfy federal, state, and local taxes
(including FICA obligations), domestic or foreign, and other deductions required
by law to be withheld with respect to the Award. Unless the Committee or its
designee agrees to a different method for withholding such taxes, the number of
Shares (underlying the Award) necessary to cover applicable withholdings will be
withheld from the issuance of any Shares of exchange for the Award.
9. Securities Law Requirements.
(a) The Restricted Stock Units and Performance RSUs are subject to the
further requirement that, if at any time the Committee determines in its sole
discretion that the listing or qualification of the Shares subject to the
Restricted Stock Units and Performance RSUs under any securities exchange
requirements or under any applicable law, or the consent or approval of any
governmental regulatory body, is necessary as a condition of, or in connection
with, the issuance of Shares under it, then Shares will not be issued under the
Restricted Stock Units and Performance RSUs, unless the necessary listing,
qualification, consent, or approval has been effected or obtained free of any
conditions not acceptable to the Committee.
(b) No person who acquires Shares pursuant to the Award reflected in this
document may, during any period of time during which that person is an affiliate
of the Company (within the meaning of the rules and regulations of the
Securities and Exchange Commission under the Securities Act), sell the Shares,
unless the offer and sale is made pursuant to (i) an effective registration
statement under the Securities Act, which is current and includes the Shares to
be sold, or (ii) an appropriate exemption from the registration requirements of
the Securities Act, such as that set forth in Rule 144 promulgated under the
Securities Act. With respect to individuals subject to Section 16 of the
Exchange Act, transactions under this Award are intended to comply with all
applicable conditions of Rule 16b-3, or its successors under the Exchange Act.
To the extent any provision of the Award or action by the Committee fails to so
comply, the Committee may determine, to the extent permitted by law, that the
provision or action will be null and void.
10. Compensation Recovery Policy. Notwithstanding any provision in this
document or the Award Agreement to the contrary, payments under this document or
the Award Agreement will be subject to any Compensation Recovery Policy
established by the Company and amended from time to time.
11. No Limitation on Rights of the Company. Subject to Sections 4.3, 14.1,
and 14.2 of the Plan, the grant of the Award described in this document will not
in any way affect the right or power of the Company to make adjustments,
reclassifications, or changes in its capital or business structure, or to merge,
consolidate, dissolve, liquidate, sell, or transfer all or any part of its
business or assets.
12. Plan, Restricted Stock Units, Performance RSUs, and Award Not a Contract
of Employment. Neither the Plan, the Restricted Stock Units, the Performance
RSUs, nor any other right or interest that is part of the Award granted under
the Plan or this document is a contract of employment, and no terms of
employment or Service of the Participant will be affected in any way by the
Plan, the Restricted Stock Units, the Performance RSUs, the Award, this
document, or related instruments, except as specifically provided therein.
Neither the establishment of the Plan nor the Award will be construed as
conferring any legal rights upon the Participant for a continuation of
employment or Service, nor will it interfere with the right of the Company or
any Affiliate to discharge the Participant and to treat the Participant without
regard to the effect that treatment might have upon him as a Participant.
13. Participant to Have No Rights as a Stockholder. Except as provided in
Section 4 above, the Participant will have no rights as a stockholder with
respect to any Shares subject to the Restricted Stock Units or Performance RSUs,
as applicable, prior to the date on which the Participant is recorded as the
holder of those Shares on the records of the Company.
14. Notice. Any notice or other communication required or permitted hereunder
must be in writing and must be delivered personally, or sent by certified,
registered or express mail, postage prepaid. Any such notice will be deemed
given when so delivered personally or, if mailed, three days after the date of
deposit in the United States mail, in the case of the Company to 2208 Production
Road, Fort Wayne, Indiana 46808, Attn.: Corporate Secretary, and, in the case of
the Participant, to the last known address of the Participant in the Company’s
records.
15. Governing Law. This document and the Award will be construed and enforced
in accordance with, and governed by, the laws of the State of Indiana,
determined without regard to its conflict of law rules. Jurisdiction and venue
over disputes with regard to this document and the Award Agreement shall be
exclusively in the courts of the State of Indiana or the United States District
Court for the Northern District of Indiana, and the parties agree that any
action brought by a party to enforce or interpret this document or the Award
Agreement shall be brought in a State or Federal Court sitting in Indiana. The
Participant and the Company specifically consent to personal jurisdiction in the
State of Indiana for purposes of this document or the Award Agreement.
16. Code Section 409A. Notwithstanding any provision of the Plan, this
document, or the Award Agreement to the contrary, the Restricted Stock Units and
Performance RSUs are intended to be exempt from or, in the alternative, comply
with Code Section 409A and the interpretive guidance thereunder, including the
exceptions for stock rights and short-term deferrals. The Plan, this document,
and the Award Agreement shall be construed, interpreted, and administered in
accordance with such intent. In the event of any inconsistency between any
provision of the Plan, this document, the Award Agreement, and Code Section
409A, the provisions of Code Section 409A shall control. Any reference in the
Agreement to Code Section 409A or a Treasury Regulation Section shall be deemed
to include any similar or successor provisions thereto. If the Restricted Stock
Units or Performance RSUs under this Agreement become subject to 409A:
(a) If the Participant is a “specified employee” at the time of his
“separation from service” (as such terms are defined for purposes of Code
Section 409A), no amount that is subject to Code Section 409A and that becomes
payable by reason of such separation from service shall be paid to the
Participant before the earlier of (i) the expiration of the six-month period
measured from the date of the Participant’s separation of Service, and (ii) the
date of the Participant’s death.
(b) For purposes of the Plan, this document, or the Award Agreement, (i) the
Participant’s Service or employment with the Company shall be deemed to be
terminated when the Participant has a “separation from service” within the
meaning of Code Section 409A, and references to termination of Service or
employment shall be deemed to refer to a Separation from Service, and (ii) each
payment or distribution is intended to be treated as one of a series of separate
payments for purposes of Code Section 409A.
17. Plan Document Controls. The rights granted under this document are in all
respects subject to the provisions of the Plan to the same extent and with the
same effect as if they were set forth fully therein. If the terms of this
document or this document or the Award Agreement conflict with the terms of the
Plan, the Plan will control.
CHI:2783366.5
|
The judgment under review was recovered by defendant in error, as plaintiff, against plaintiff in error, as defendant, for damages for an injury sustained by plaintiff while in defendant's service. One of the leading questions submitted is whether or not the evidence showed any right of plaintiff to recover. There is practically no conflict in the testimony. The plaintiff was hurt while operating an elevator in defendant's furniture establishment, by having his arm caught between an iron bar across the side of the elevator and a block of wood fastened inside the shaft. The negligence is claimed to have consisted in having the block in such a position, or in allowing it to project so near the side of the elevator. The building was several stories high, and the block was fastened to a joist just under the second floor, where the elevator shaft passed through, and was about twenty-two inches long, two inches thick and projected from the joist four inches and to within about two inches of the body of the elevator. The elevator was open on that side, having only an iron bar as a guard across it. The cables by which it was controlled were outside of and between it and the side of the shaft, and one of them, to hold it steadily in position, passed through the hole in the center of the block. Plaintiff was returning with the elevator from the top of the building, and, in order to regulate its movement, extended his hand outside and caught hold of this cable, when his elbow came in contact with the block and was caught by the descending cross bar and injured. The evidence leaves no doubt that the block, thus projecting so near to the elevator, was a clumsy contrivance for the purpose for which it was intended, and the use of it was negligence, even if there was a necessity for anything to hold the cable at that point. Nothing of the kind was at the other floors or upon the other cable. The chief contention is that plaintiff knew, or ought to have known, of its presence and of the danger it caused, and therefore assumed the risk of, and was guilty of negligence in exposing himself as he did. That he did not know of the fact the evidence is direct, and this court could only sustain the contention by holding, as matter of law, that the facts admit of no rational opinion but that he ought to have known it. The evidence shows, and plaintiff admits, that the *Page 14
block could have been seen by him from the elevator at any time when it passed that place, going up or down, had he looked for it, and that he had passed up and down many times each day for years; but it also shows that neither he, nor defendant, nor another employe, all of whom had used the elevator in the same way and for a long time, had ever seen it before this accident. There is only one witness who had seen it while using the elevator and he was a workman, skilled in the construction, repair and management of elevators. It seems that much handling of the cable was not necessary in running the elevator, the hand being upon it only when it was desired to start, accelerate or stop it, and that in order to reach the cable it was necessary to extend the arm outside the carriage. The danger from the block therefore existed only when the hand and arm happened to be extended as the elevator was passing it. The construction, also, was such that the operator would, as defendant himself testifies, naturally stand with his face towards the east side and not towards the cable and block, which were on the north side. It is conceded that it was no part of plaintiff's duty to inspect or see to the condition of the elevator and its attachments.
The views of the court upon these facts may best be given in discussion of the following special charge for the refusal of which the writ of error was granted: "You are further charged that if you believe from the evidence that the block described in plaintiff's petition was open and obvious to the plaintiff and that plaintiff had had opportunities to see said block, then you will return a verdict for defendant."
In such instructions it is necessary always to avoid putting upon the servant the duty which the law places upon the master. As the latter furnishes the place at, and tools and appliances with which his work is to be done, it is his duty to use the care defined by the law to have them in proper condition for use by the servant; and all such examinations and inspections as are essential to constitute such care are to be made by the master. This duty, with some exceptions not in question here, the servant need not concern himself with, but he may enter upon his work with the assumption that it has been properly performed by the master. He is not exempted from the use of care for his safety, but the care he is to employ is in the doing of his work and not in doing that which the law exacts of the master. Therefore the mere fact that he might by an investigation discover a defective condition which the master has negligently created or allowed to exist does not affect him. As he is to exercise, while engaged in his work, that care which persons of ordinary prudence exercise, to the same end, when similarly engaged, he must see and know those things and take those precautions which such persons ordinarily see, know and take. Of such things he is charged with knowledge whether he negligently fails to observe them or not. Of course we are not now speaking of inexperienced persons. It is thus that he may be charged with knowledge of a defect and a danger arising from negligence of the master, not because he is under obligation to make inquiry or examination as to the master's performance of duty, but because the thing is such that with common prudence he ought to see or know it in doing *Page 15
his own work. A special application of this is that he must see those things which are open and obvious to him, which, in more general language, ordinarily cautious persons, engaged as he is, would see and understand. These principles have often been stated by this court; but in the trial of cases it not infrequently happens that instructions are so worded as to run the risk of misleading juries, on the one hand, into imposing upon the servant the duty of the master, or on the other, into exempting the servant, in doing his work, from the observance of that care which every man is expected to use in looking out for his safety. In Missouri, K. T. Ry. Co. v. Hannig (91 Tex. 350-1), for instance, a charge was given in substance that plaintiff could not recover for the master's negligence "if he could have known these facts by the use of ordinary care," which might have meant to the jury that plaintiff was required to make some inquiry to learn of the danger which the master's negligence had created. In commenting on this charge, this court used this language: "We understand the law to be that when the servant enters the employment of the master, he has the right to rely upon the assumption that the machinery, tools and appliances with which he is called upon to work are reasonably safe and that the business is conducted in a reasonably safe manner. He is not required to use ordinary care to see whether this has been done or not. He does not assume the risks arising from the failure of the master to do his duty, unless he knows of the failure and the attendant risks or in the ordinary discharge of his own duty must necessarily have acquired the knowledge, ante p. 287." If this needed any elaboration it was furnished by the reference to the cases cited in that opinion from which is seen that a servant must be treated as having "necessarily acquired knowledge" of those dangers, although arising from the negligence of the master, which were obvious and open to him in the doing of his work; in which, in other words, ordinarily prudent persons would have learned under like circumstances, in the rendering same service.
If the special charge had adequately expressed this idea, and been free from another objection, the defendant would have been entitled to have it given. But its wording was calculated, without further explanation, to produce the impression that opportunities to see the block would charge plaintiff with knowledge of its presence, when, under the evidence, the opportunity may have consisted only in the ability to have discovered it by assuming the master's duty and in examining the construction of the elevator, and not in the fact that plaintiff could and ought to have seen it in the proper performance of his own duty. Upon the same distinction, we must hold that the evidence does not make so clear a case either of assumption of risk or contributory negligence, that this court can interfere with the verdict. From the evidence the jury might properly have concluded that plaintiff properly performed his own duty, did all that prudence required of him, and that he failed to learn of the presence of the block only because he did not make an examination which it was not his, but the defendant's duty to make.
The requested charge is also wrong in making knowledge, actually acquired, or to be imputed, of the presence of the block, without an *Page 16
appreciation of the danger caused by it, to operate as a bar to recovery. It often happens that knowledge of a defective condition necessarily carries with it knowledge of the danger, and we were at first impressed with the view that this was such a case; but, as indicated by the facts stated, the danger to be apprehended from the block depended upon its proximity to the side of the elevator, and plaintiff might have known that a block was there without necessarily knowing that its position was such as to endanger him, and the charge should have left the question to the jury.
Another proposition contended for, upon the facts, is that the danger was as open to discovery by plaintiff as by defendant and that this precluded a recovery, but that this is not necessarily true is evident, when the differing duties of the two are kept in mind. The defendant's duty was to originally construct in the proper manner, and afterwards to examine, while that of plaintiff was only to do his work prudently. Either could have made the discovery by inspection, but this, it was defendant's, and not plaintiff's, duty to make.
Affirmed. |
In The
Court of Appeals
For The
First District of Texas
____________
NO. 01-00-00067-CV
____________
GUY L. ALLEN, Appellant
V.
TEXAS DEPARTMENT OF CRIMINAL JUSTICE-INSTITUTIONAL
DIVISION, EXECUTIVE DIRECTOR WAYNE SCOTT, AND OFFICER
KYLE RACKLEY, Appellees
On Appeal from the 12th District Court
Walker County, Texas
Trial Court Cause No. 20,666
O P I N I O N Appellant, an inmate of the Texas Department of Criminal Justice-Institutional
Division (TDCJ), appeals from an order dismissing his pro se, in forma pauperis suit
under chapter 14 of the Civil Practice and Remedies Code. We affirm.
Background
Appellant alleged that he was injured on December 19, 1997, while he rode a
TDCJ bus in route from one unit to another. Appellant filed a grievance, which was
denied on July 6, 1998. On December 2, 1999, appellant filed his original petition
in the district court. On December 17, 1999, after an evidentiary hearing, the trial
court dismissed appellant's claims under section 14.005 of the Civil Practice and
Remedies Code. On appeal, appellant contends that the trial court erroneously
dismissed his case. We disagree.Standard of Review
In reviewing the trial court's decision to dismiss a case subject to chapter 14,
an appellate court applies an abuse-of-discretion standard of review. Wallace v.
Texas Dep't of Criminal Justice-Institutional Div., 36 S.W.3d 607, 610 (Tex.
App.--Houston [1st Dist.] 2000, pet. denied). A court abuses its discretion if it acts
without reference to guiding rules or principles. Id.
Dismissal Proper under Section 14.005
The trial court dismissed appellant's claims under Civil Practice and Remedies
Code section 14.005, which provides:
(a) An inmate who files a claim that is subject to the grievance system
established under Section 501.008, Government Code, shall file with the
court:
(1) an affidavit or unsworn declaration stating the date that
the grievance was filed and the date the written decision
described by Section 501.008(d), Government Code, was
received by the inmate; and
(2) a copy of the written decision from the grievance system.
(b) A court shall dismiss a claim if the inmate fails to file the claim
before the 31st day after the date the inmate receives the written
decision from the grievance system.
Tex. Civ. Prac. & Rem. Code Ann. § 14.005 (Vernon Supp. 2002).
Under this section, the trial court "shall dismiss a claim" if the inmate does not
file it before the 31st day after he receives the decision from the grievance system.
Id. § 14.005(b). Appellant's grievance was denied on July 6, 1998. He filed his
lawsuit on December 2, 1999, almost 17 months later. Appellant's suit was untimely
because he did not file his claim before the 31st day after he received notice of the
written decision on his grievance. See id. Thus, the trial court did not err in
dismissing the lawsuit. See Wallace, 36 bphillips@example.com.
Although the statutory deadline for filing the state court action expired, the
dissent argues that appellant should get a second chance to file a timely suit in state
court because appellant first filed suit in federal court. The dissent cites no authority
for this proposition. We found none. In fact, section 14.005 does not contemplate
such a scenario. Tex. Civ. Prac. & Rem. Code Ann. § 14.005(b). The fact remains
that appellant's grievance was denied on July 6, 1998. Appellant did not file his state
court action within 31 days, as required by section 14.005; therefore, the trial court
properly dismissed the suit. Id.
Appellant's federal suit was dismissed on July 29, 1999. Afterward, appellant
filed a second grievance on August 11, 1999. This second grievance involved the
same issues as his first grievance, which had previously been denied on July 6, 1998.
Filing this second grievance did not extend appellant's deadline to file his state court
claim.
The statute simply states that the trial court "shall dismiss a claim" if the inmate
does not file it before the 31st day after he receives the decision from the grievance
system. Id. § 14.005(b). Nothing in the statute indicates that appellant's pursuit of
a federal remedy or his filing a second grievance would suffice to extend the deadline
to file a state claim. Monetary Damages
In three points of error, appellant contends that: (1) he was denied due process
and equal protection because he sought monetary damages; therefore, he exhausted
all grievance system remedies; (2) he did not have to exhaust the grievance system
remedies because he sought monetary damages; and (3) he exhausted all remedies
because he wrote a letter notifying the responsible agencies that he sought monetary
damages.
The "Inmate Grievance System" is set forth in Government Code section
501.008, as follows:
(a) The department shall develop and maintain a system for the
resolution of grievances by inmates housed in facilities operated by the
department or under contract with the department that qualifies for
certification under 42 U.S.C. Section 1997e and the department shall
obtain and maintain certification under that section. A remedy provided
by the grievance system is the exclusive administrative remedy available
to an inmate for a claim for relief against the department that arises
while the inmate is housed in a facility operated by the department or
under contract with the department, other than a remedy provided by
writ of habeas corpus challenging the validity of an action occurring
before the delivery of the inmate to the department or to a facility
operated under contract with the department.
(b) The grievance system must provide procedures:
for an inmate to identify evidence to substantiate the
inmate's claim; and
for an inmate to receive all formal written responses to the
inmate's grievance.
Tex. Gov't Code Ann. § 501.008 (Vernon 1998).
The United States Supreme Court held that Congress intended a prisoner to
invoke "such administrative remedies as are available" in the prison, without regard
to whether the grievance procedure affords money damage relief, before he may file
suit in federal court. Booth v. Churner, 532 U.S. 731, 733, 121 S. Ct. 1819, 1821
(2001). (1) Administrative exhaustion is required, even when the grievance process
does not permit an award of money damages and the prisoner seeks only money
damages, as long as the grievance tribunal has authority to take some responsive
action. Id. The Court explained the policy reasons for its holding:
[R]equiring exhaustion in these circumstances would produce
administrative results that would satisfy at least some inmates who start
out asking for nothing but money, since the very fact of being heard and
prompting administrative change can mollify passions even when
nothing ends up in the pocket. And one may suppose that the
administrative process itself would filter out some frivolous claims and
foster better-prepared litigation once a dispute did move to the
courtroom, even absent formal factfinding.
532 U.S. at 737, 121 S. Ct. at 1823.
The Fifth Circuit applied Booth to a case involving the TDCJ prison grievance
system. Wright v. Hollingsworth, 260 F.3d 357 (Tex. 2001). The inmate sought
redress for his injury (a ruptured eardrum) and pain and suffering--harms that could
be relieved only by money damages. Id. at 358. The court held, "Quibbles about the
nature of a prisoner's complaint, the type of remedy sought, and the sufficiency or
breadth of prison grievance procedures were laid to rest in Booth." Id. The inmate
was required to exhaust all TDCJ grievance procedures, even if money damages were
unavailable. Id.
Similarly, we hold that appellant was required to exhaust all remedies under the
grievance system, regardless of whether he sought monetary damages. The TDCJ
grievance system provides procedures for an inmate to identify evidence to
substantiate the inmate's claim, and for an inmate to receive all formal written
responses to the inmate's grievance. Tex. Gov't Code Ann. § 501.008(b). By
"filter[ing] out some frivolous claims and foster[ing] better-prepared litigation," the
TDCJ grievance tribunal "has authority to take some responsive action." Booth, 532
U.S. at 737, 121 S. Ct. at 1823.
Points of error one, two, and three are overruled.
Denial of Grievance
In point of error four, appellant contends that "there has never been a written
final decision to deny such relief requested."
Appellant's argument is without merit. The clerk's record contains a July 6,
1998 letter from the Assistant Attorney General denying appellant's claim.
Moreover, appellant admitted in his original petition that the "final decision to deny
[appellant] any relief from his grievance/claim came on July 6, 1998."
Point of error four is overruled.
Conclusion
We affirm the judgment of the trial court.
Adele Hedges
Justice
Panel consists of Justices Mirabal, Hedges, and Jennings.
Justice Mirabal dissenting.
Publish. Tex. R. App. P. 47.
1. The Booth case is in the context of 42 U.S.C. § 1997e(a), as amended by the
Prison Litigation Reform Act, which requires a prisoner to exhaust "such
administrative remedies as are available" before filing suit in federal court.
|
I respectfully dissent from the majority opinion lastly rendered in this case. It turned upon the primary question of fact, viz., has plaintiff proven by a preponderance of the evidence that he suffered the accident alleged by him to have occurred on April 4, 1936?
It was established at the second trial below that at that time his disability was total, and his counsel now concedes that the experience he had on April 6th did not amount to an accident within the intendment of the Workmen's Compensation Law.
In support of this dissent, the following is submitted in addition to what is said on the subject in the original opinion of this court:
I think it is the observation of all judges, trial and appellate, having jurisdiction of compensation cases, that injured workmen never overlook a strong point in their favor and that the hope of receiving compensation immediately after being injured arises spontaneously within them. For this we register no unfriendly criticism. The anxiety he feels for subsistence for himself and family during the period of disability naturally impels him to think seriously along this line. He therefore does not omit, if in possession of his normal mental faculty, consideration and pondering over any fact, circumstance or incident deemed to have favorable bearing upon his right to receive or recover such compensation.
The fact that plaintiff did not inform Doctors Doles and Harmon that he was injured by excessive straining, etc., on April 4, 1936, weighed heavily against him when his case was first considered by us. In the interest of justice and actuated by that purity of motive which should always influence judges and courts in all cases, especially such as plaintiff's, we remanded the case for additional testimony. The record as supplemented has not served to alter the opinion I originally formed as *Page 461
regards the alleged accident of April 4th. I think the record clearly preponderates in favor of the contention that plaintiff did not, in giving the case history, inform either of these doctors that he was injured on that date. The facts were then fresh in his mind. Every reason argued in favor of him telling of this accident, if it really happened. Naturally he would be supposed to impart to these doctors all the facts favorable to himself and emphasize them. If he did not then tell these physicians of this, the much more serious of the two experiences, we frankly submit that it is unreasonable to believe that such an accident really happened, especially when other circumstances and testimony bearing thereon is considered. The inference being, as stated in our original opinion, that the fear of discontinuance of compensation payments could have served as an incentive to injecting into the case history facts of an accident stronger than those constituting the incident of April 6th.
Dr. Doles is positive he specifically asked plaintiff if he had had an accident or injury prior to April 6th, and that he answered in the negative. It is true that the doctor's report to defendant was actually made up several days after he examined plaintiff but this fact should not detract from the probity of the testimony given by him but, on the contrary, should support and corroborate his independent recollection of the facts as related to him by plaintiff. The report and his independent recollection agree.
Dr. Harmon is positive he took from plaintiff the history of his case, after Dr. Addison had previously done so, and that he only mentioned to him the alleged accident of April 6th. This is clearly disclosed from the doctor's testimony below quoted:
"Q. Doctor, that is all right, but did you take the history of his case, which I am sure is of some importance to this court? You did not make that record, did you? A. I certainly did make the man's record.
"Q. I mean by that you did not take his history on April 10th, 1936, did you? A. I do not recall what date I made it. What is the date of my report? Of course, I may not have written it on the day I took it. I may have taken it the day before.
"Q. I am asking you if it was April 10, 1936. A. That was his first visit?
"Q. That is what your records show. I am going to ask you, Dr. Harmon, is it not a fact that you were out of the city of Shreveport on that date and that his history was taken by Dr. Addison? A. Dr. Addison may have taken his history, but so did I.
"Q. You do not know what he told Dr. Addison, necessarily, if you were out of town? A. I know what he told me. I cannot testify as to what he told Dr. Addison.
"Q. Did you take a history also? A. Yes, when I saw him."
Dr. Harmon afterward testified that if he was absent when a patient was sent to him, the history taken by his associate, Dr. Addison, would be read by him all right, but that he also keeps a record of his cases, independent of anything Dr. Addison, in the beginning, may have had to do with them.
We have not the pleasure of an acquaintance with either of these doctors. In the absence of anything to influence a contrary opinion, we are bound to assume that their credibility before the court is of that high character which the members of the medical fraternity should always enjoy. Surely their interest in the outcome of the case does not in the remotest degree approach that of plaintiff.
Plaintiff's explanation to his own counsel touching the omission by him to mention to these physicians anything about an injury on April 4th is interesting. We quote from counsel's brief:
"The court may wonder why Moore was not placed on the stand in rebuttal and asked the question as to whether he had given a history of the first accident to Doles. We are frank to state that we asked Moore whether he had given a history of the first accident and he was honest enough to state that he simply did not recall what he stated to Doles with reference to either of said accidents, he was in such pain at the time."
Notwithstanding the pain plaintiff was suffering when the history of his case was taken by each doctor, it is certain he mentioned the experience of April 6th, or else they would not have known of it.
It would be a coincidence of the rarest character — too much so to believe true — that these doctors, acting independently of each other, should both fail to record *Page 462
the fact of the accident of April 4th if plaintiff had mentioned it to them and, in addition, not to recall it from memory, but to vividly remember what he said about the lesser experience two days later.
We have again given diligent consideration to the testimony given by plaintiff, largely quoted in the opinion this day announced, with reference to the accident of April 4th, his action immediately thereafter, etc. We reproduce the following therefrom:
"Q. Did you tell Mr. Baldack, on Saturday April 4th that you were hurt? A. I told him that I had a pain in the back, when trying to raise up.
"Q. Did you tell him that you had gotten hurt lifting, or anything like that? A. Well, no —"
It required considerable prodding to move him to any extent from the declaration that he did not tell his foreman that he then and there injured himself by excessive straining. The foreman was present and was overseeing the work in which plaintiff was engaged. The witness, Prudhomme, says that plaintiff "grabbed himself and says `I hurt my back'". No other witness saw or heard this and even plaintiff would not and did not testify that such happened.
We think it fairly well established by the testimony of fellow-workmen that plaintiff was complaining of his back hurting him prior to Saturday, April 4th. There is every reason why he should have done so, in view of the multiple sources of focal infection the many physicians found to beset him.
Plaintiff's physical condition is to be lamented. However, the country abounds in cases of like character. He has been afflicted with several focal infections for possibly years. These work slowly but surely to accomplish destruction of physical virility. The physical breakdown he has experienced is but the expected result of such a combination of maladies. The crash came directly as a result of their activities. Legion of strong men have likewise suffered when not engaged in any sort of work or in work not requiring heavy physical exertion. It was not intended that industry should be condemned to absorb the burden of alleviating the suffering and disability present in such cases. |
457 So. 2d 544 (1984)
Richard Lynn BRADY, Appellant,
v.
STATE of Florida, Appellee.
No. 83-2457.
District Court of Appeal of Florida, Second District.
October 5, 1984.
*545 Jerry Hill, Public Defender, Bartow, and Amelia G. Brown, Asst. Public Defender, Tampa, for appellant.
Jim Smith, Atty. Gen., Tallahassee, and Peggy A. Quince, Asst. Atty. Gen., Tampa, for appellee.
OTT, Judge.
Brady appeals his three-year sentence under section 775.084, Florida Statutes (1983), the habitual felony offender statute. He argues that the court erred in exceeding the sentence recommended by the sentencing guidelines, rules 3.701 and 3.988, Florida Rules of Criminal Procedure. We affirm.
Brady's sentence was within the range set forth in section 775.084. We hold that the habitual felony offender statute is a viable alternative to the sentencing guidelines. The Committee Note to rule 3.701(d)(11) in existence when Brady was sentenced, while not specifically referring to the habitual offender statute, recognized other alternatives to the guidelines.[1]See also Massaro v. State, 449 So. 2d 1010 (Fla. 2d DCA 1984); Sweat v. State, 454 So. 2d 749 (Fla. 1st DCA 1984). The supreme court recently eliminated this note. See The Florida Bar: Amendment to Rules of Criminal Procedure (3.701, 3.988 Sentencing Guidelines), 451 So. 2d 824 (Fla. 1984). However, the court acknowledged the existence of statutory alternatives to *546 the guidelines. Id., at 824 n. 12. Unless and until the Legislature repeals section 775.084, we conclude that courts may utilize it provided they comply with its requirements and adequately state the reasons for departing from the guidelines. In the case sub judice, the judge complied with the habitual offender statute by finding that sentencing as an habitual offender was necessary to protect the public. This is a clear and convincing reason for departing from the guidelines.
In our case, no written reasons for departure from the guidelines appear in the record. However, the trial judge clearly stated the reasons in the record. This is sufficient. See Smith v. State, 454 So. 2d 90 (Fla. 2d DCA 1984); Harvey v. State, 450 So. 2d 926 (Fla. 4th DCA 1984). We do, however, caution and encourage judges to record in writing their reasons for departing from the guidelines.
AFFIRMED.
SCHOONOVER and LEHAN, JJ., concur.
NOTES
[1] The relevant portion of Committee Note to 3.701(d)(11) provided:
Sentences under provisions of the Youthful Offender Act (ch. 958), the Mentally Disordered Sex Offender Act (ch. 917), or which require participation in drug rehabilitation programs (s. 397.12) need not conform to the guidelines.
|
Case: 15-51236 Document: 00513771184 Page: 1 Date Filed: 11/23/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 15-51236 FILED
Summary Calendar November 23, 2016
Lyle W. Cayce
Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee
v.
SERGIO MALTOS-ESTRADA,
Defendant-Appellant
Appeal from the United States District Court
for the Western District of Texas
USDC No. 2:15-CR-510-1
Before JOLLY, SMITH, and GRAVES, Circuit Judges.
PER CURIAM: *
The attorney appointed to represent Sergio Maltos-Estrada has moved
for leave to withdraw and has filed a brief in accordance with Anders v.
California, 386 U.S. 738 (1967), and United States v. Flores, 632 F.3d 229 (5th
Cir. 2011). Maltos-Estrada has not filed a response. We have reviewed
counsel’s brief and the relevant portions of the record reflected therein. We
concur with counsel’s assessment that the appeal presents no nonfrivolous
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
Case: 15-51236 Document: 00513771184 Page: 2 Date Filed: 11/23/2016
No. 15-51236
issue for appellate review. Accordingly, counsel’s motion for leave to withdraw
is GRANTED, counsel is excused from further responsibilities herein, and the
APPEAL IS DISMISSED. See 5TH CIR. R. 42.2.
2
|
117 S.W.3d 475 (2003)
Jerry Dean MAYFIELD, Appellant,
v.
The STATE of Texas, Appellee.
No. 06-03-00003-CR.
Court of Appeals of Texas, Texarkana.
Submitted September 8, 2003.
Decided September 9, 2003.
*476 Ebb B. Mobley, Longview, for appellant.
Renee Gartland, Lance R. Larison, Asst. Dist. Atty's, Longview, for appellee.
Before MORRISS, C.J., CARTER and CORNELIUS,[*] JJ.
OPINION
Opinion by Justice CORNELIUS (Retired).
Jerry Dean Mayfield was convicted, in a jury trial, of delivery of cocaine. The jury assessed his punishment, enhanced by two prior convictions, at ten years' imprisonment and a $10,000.00 fine.
On appeal, Mayfield raises only one issue. He contends the trial court erred in granting the State's motion to abandon certain portions of the indictment. He contends the State's abandonment actually amounted to an amendment of the indictment and was improper according to Tex. Code Crim. Proc. Ann. art. 28.10 (Vernon 1989). We disagree and affirm the judgment.
Mayfield's indictment contained three enhancement paragraphs. The first alleged a prior conviction for burglary. The second alleged a prior conviction for delivery of a controlled substance, and the third alleged a conviction for theft.
On the opening day of trial, before the jury was sworn, the State filed a motion to abandon these portions of the indictment: (1) in paragraph three these words in line one, "and after the conviction in Cause Number 28781-B was final.", and (2) all of paragraph four, which alleged a prior conviction for theft. The State alleged that these portions of the indictment were in error and were surplusage. Over Mayfield's objection, the trial court granted the State's motion.
Not every change to the face of an indictment is an amendment. In some instances, such a change is merely an abandonment. Eastep v. State, 941 S.W.2d 130, 132 (Tex.Crim.App.1997). An amendment to an indictment is a change that affects the substance of the indictment. Id. But an abandonment, even if effected by a physical change in the indictment, does not affect its substance. If the change is an abandonment, the requirements of Article 28.10 do not apply. Eastep v. State, 941 S.W.2d at 133; Bates v. State, 15 S.W.3d 155, 161 (Tex.App.-Texarkana 2000, pet. ref'd).
An abandonment is appropriate in the following situations: (1) concerning the ways or means of committing the offense; (2) reducing the charge to a lesser-included offense; and (3) eliminating surplusage.[1]Eastep v. State, 941 zmosley@example.com.
*477 Surplusage is unnecessary language that is not legally necessary to constitute the offense charged in the charging instrument. Whetstone v. State, 786 S.W.2d 361, 364 (Tex.Crim.App.1990).
The allegations the State sought to abandon were surplusage. They did not furnish any allegation necessary to describe the offense charged, and the enhancement allegations remaining in the indictment after the abandonment were sufficient to raise the charged offense to a penalty group one offense under the Texas Controlled Substances Act. As the alteration in the indictment constituted an abandonment and not an amendment, the trial court did not abuse its discretion in granting the State's motion.
The judgment is affirmed.
NOTES
[*] William J. Cornelius, Chief Justice, Retired, Sitting by Assignment
[1] In Gollihar v. State, 46 S.W.3d 243 (Tex. Crim.App.2001), the Texas Court of Criminal Appeals held that, in the context of a variance between the indictment and the court's charge, the rule of surplusage is abolished, and hereafter, the test whether language creates a variance will be whether the questioned language is material, rather than whether it is surplusage. Gollihar involved a variance affecting the sufficiency of the evidence, and in no way pertained to the question whether portions of an indictment may be abandoned as surplusage without amending the indictment. We believe Eastep v. State, 941 S.W.2d 130 (Tex.Crim.App.1997), still governs this latter question.
|
KARL OSBOURNE AND AUDREA OSBOURNE, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, RespondentOsbourne v. CommissionerDocket No. 25564-81United States Tax CourtT.C. Memo 1983-379; 1983 Tax Ct. Memo LEXIS 409; 46 T.C.M. 611; T.C.M. (RIA) 83379; June 27, 1983. Chester Kosarek, Jr., for the petitioners. Caroline Ades, for the respondent. DAWSONMEMORANDUM FINDINGS OF FACT AND OPINION DAWSON, Judge: Respondent determined a deficiency of $2,944 in petitioners' Federal income tax for the year 1979. Concessions have been made by petitioners. The only issue presented for decision is whether petitioners are entitled to certain dependency exemptions in that year. FINDINGS OF FACT1983 Tax Ct. Memo LEXIS 409">*410 Some of the facts have been stipulated and are incorporated herein by this reference. Petitioners Karl Osbourne and Audrea Osbourne (hereinafter Karl and Audrea) maintained their legal residence in Brooklyn, New York at the time of the filing of their petition herein. They timely filed a joint Federal income tax return for the year 1979 with the Internal Revenue Service Center in Holtsville, New York. Before 1979 the Osbourne family consisted of Karl and Audrea, husband and wife, and their three daughters Tinisha, Stacy, and Sonya. Karl was employed as a New York City police officer and Andrea was a housewife during 1979. Marital problems developed and Audrea left the Brooklyn residence sometime before 1979 with Stacy and Sonya, ages 11 and 13. The children were taken to the home of their grandmother in Holmesdale, Pennsylvania, where they resided during 1979. This arrangement was not pursuant to any separation agreement. Karl and Audrea were married during all of 1979. Each child earned less than $1,000 during that year. OPINION Respondent disallowed exemptions claimed by petitioners for Stacy and Sonya for the year 1979. Respondent asserts that the children1983 Tax Ct. Memo LEXIS 409">*411 did not reside with petitioners during that year, and further that petitioners have failed to prove that they furnished over one-half of each child's support. Petitioners have admitted that these children did not reside with them during 1979, but assert that they nevertheless meet the necessary statutory requirements for claiming the exemptions. Section 151(e)(1) 1 provides for an exemption of $1,000 for each dependent of a taxpayer, as defined in section 152, who is a child of the taxpayer or whose income is less than $1,000 for the claimed year. Section 152(a)(1) provides that the term "dependent" includes a daughter of the taxpayer, provided that over half of the support of the child for the calendar year in which the taxable year of the taxpayer begins was received from the taxpayer. Thus, for petitioners to be entitled to exemptions for Stacy and Sonya on their 1979 return, they must have provided over half the support for each child during that year. 2 The burden of proof to show the source and amount of support rests with petitioners. Welch v. Helvering,290 U.S. 111">290 U.S. 111, 290 U.S. 111">115 (1933);1983 Tax Ct. Memo LEXIS 409">*412 Rule 142(a), Tax Court Rules of Practice and Procedure. Petitioners have failed to carry this burden. Karl testified that he sent checks to the grandmother in the amount of $100 per month, occasionally brought food to the grandmother's house, bought all of Stacy and Sonya's clothes, and took care of the children's medical bills in 1979. However, he did not produce any of the cancelled checks, nor any proof as to the other claimed expenditures on behalf of the children. No evidence was offered to what extent, if any Audrea contributed to the support of the children during the year in question, or whether their grandmother provided any of their support. No other evidence was presented regarding the needs of Stacy or Sonya or the total amount that was expended for their support during 1979. Petitioners' evidence consisted solely of Karl's uncorroborated testimony that support was in fact provided, and no records, checks, receipts, or documentary evidence were presented. We find this testimony insufficient1983 Tax Ct. Memo LEXIS 409">*413 to establish that the expenditures were made. Evidence adduced by a taxpayer, even if uncontradicted, does not necessarily overcome the presumption in favor of respondent. Geiger v. Commissioner,440 F.2d 688">440 F.2d 688, 440 F.2d 688">689 (9th Cir. 1971), affirming a Memorandum Opinion of this Court; Sharwell v. Commissioner,419 F.2d 1057">419 F.2d 1057 (6th Cir. 1969), affirming a Memorandum Opinion of this Court. Moreover, even if petitioners expended the described sums for support of the children as Karl claims, they have provided no evidence or information from which we could deduce that the other test of section 152 was met, i.e., that such amounts comprised over one-half of the support of Stacy and Sonya for 1979. Petitioners simply stand on their naked claim that their expenditures were in excess of one-half the support. This is insufficient to overcome the presumed correctness of respondent's determination. Accordingly, we hold that they have failed to meet their burden of proof, and therefore they are not entitled to the claimed exemptions. To give effect to petitioners' concessions and our resolution of the issue presented, Decision will be entered for the respondent.1983 Tax Ct. Memo LEXIS 409">*414 Footnotes1. All section references shall be to the Internal Revenue Code of 1954 as amended and in effect during 1979.↩2. As Karl and Audrea were married and not legally separated under a written separation agreement during all of 1979, the separate support tests of section 152(e) do not apply.↩ |
19 Kan. App. 2d 37 (1993)
861 P.2d 1382
STATE OF KANSAS, Appellee,
v.
DANIEL F. JUAREZ, Appellant.
No. 69,021
Court of Appeals of Kansas.
Opinion filed November 5, 1993.
Stephen Douglas Bonney, special appellate defender, of Kansas City, Missouri, and Jessica R. Kunen, chief appellate defender, for appellant.
Terra D. Morehead, assistant district attorney, Nick A. Tomasic, district attorney, and Robert T. Stephan, attorney general, for appellee.
Before BRAZIL, P.J., RULON and PIERRON, JJ.
RULON, J.:
Daniel F. Juarez, defendant, appeals his convictions, after a jury trial, on three counts of aggravated sodomy, in violation of K.S.A. 21-3506(c)(iii), and on one count of promoting sexual performance by a minor, in violation of K.S.A. 21-3519. Defendant alleges there was insufficient evidence to support a guilty verdict and remarks made by the prosecution during closing arguments should have resulted in the district court declaring a mistrial. We affirm.
The charges against defendant arose from sexual acts defendant performed with W.C., a 16-year-old boy. During the summer of *38 1989, W.C. was living with his grandparents in Kansas City, Kansas, so he could participate in a summer job program for disabled youths. W.C. had been in special education classes throughout his school years and was considered to be educably mentally handicapped. The school xmontoya@example.com.'s school testified that W.C. had an intelligence quotient, based on the WISCR, of 67 and a mental age equivalent of seven or eight years old.
W.C. became acquainted with defendant while shopping at the American Council of the Blind Thrift Store where defendant was employed. Frequently W.C. accompanied defendant to defendant's apartment after work. While at the apartment, on at least two occasions, W.C. watched pornographic videotapes that defendant had rented. W.C. testified that on more than one occasion defendant performed oral and anal sex on him. W.C. additionally testified that he performed oral and anal sex on defendant. Defendant also took Polaroid photographs of W.C. in an undressed, sexually aroused condition and had W.C. take similar photographs of defendant.
When W.C.'s mother became aware that sexual activity might have taken place between W.C. and defendant, she took W.C. to the K.U. Medical Center for a medical evaluation. The examining physician found physical evidence to indicate that W.C. had engaged in anal intercourse. Later, W.C.'s mother contacted the police.
During trial, the State presented testimony by W.C., his school psychologist, his mother, one of his friends, and his examining physician; the photographs that W.C. and defendant had taken of each other; and statements made by defendant admitting a sexual relationship between defendant and W.C. Ultimately, defendant was convicted of three counts of aggravated criminal sodomy and one count of promoting sexual performance by a minor.
The Kansas aggravated criminal sodomy statute, K.S.A. 21-3506, provides:
"Aggravated criminal sodomy is:
(a) Sodomy with a child who is not married to the offender and who is under 16 years of age;
(b) causing a child under 16 years of age to engage in sodomy with any person or an animal; or
*39 (c) sodomy with a person who does not consent to the sodomy or causing a person, without the person's consent, to engage in sodomy with any person or an animal, under any of the following circumstances:
(i) When the victim is overcome by force or fear;
(ii) when the victim is unconscious or physically powerless;
(iii) when the victim is incapable of giving consent because of mental deficiency or disease, which condition was known by the offender or was reasonably apparent to the offender; or
(iv) when the victim is incapable of giving consent because of the effect of any alcoholic liquor, narcotic, drug or other substance administered to the victim by the offender, or by another person with the offender's knowledge, unless the victim voluntarily consumes or allows the administration of the substance with knowledge of its nature.
(2) Aggravated criminal sodomy is a class B felony." (Emphasis supplied.)
Defendant argues that in order to obtain a conviction under K.S.A. 21-3506(c)(iii), the State must prove not only that the victim is mentally deficient but also that the mental deficiency renders the victim incapable of giving consent. The State agrees that it must prove that the victim is mentally deficient, but contends the victim's capacity to consent to the sex act is solely an issue for the jury to decide, based upon the evidence presented.
In Keim v. State, 13 Kan. App. 2d 604, 777 P.2d 278 (1989), this court upheld the constitutionality of a provision in the Kansas rape statute that is nearly identical to K.S.A. 21-3506(c)(iii). Keim argued that because a nonprofessional could not judge when a mental deficiency created a situation where consent was not possible, there was no clear standard by which a defendant could determine whether an individual with a mental handicap had capacity to consent. We disagreed.
The Keim court relied upon a similar provision in the Iowa Code that had been upheld by the Iowa Supreme Court in State v. Sullivan, 298 N.W.2d 267 (Iowa 1980). The Sullivan court reasoned that "`[t]he potential offender must simply determine if his or her partner understands the nature and consequences of engaging in the sex act. Under normal circumstances a mental incapacity to consent would be apparent in ordinary social intercourse.'" 13 Kan. App.2d at 607 (quoting 298 N.W.2d at 272-73).
The Keim court further relied upon the case of State v. Degrenier, 120 N.H. 919, 424 A.2d 412 (1980), in which the New Hampshire Supreme Court construed its similarly worded statute *40 as "prohibit[ing] intercourse only with those persons whose mental deficiency renders them incapable of legally consenting to the act." 13 Kan. xmontoya@example.com. In analyzing Degrenier, the Keim court stated that "although the degree of mental defectiveness of the victim necessary to violate the statute may not be entirely clear, the statute is sufficient `to give the defendant fair warning that, by engaging in sexual intercourse with one who he knows or has reason to know is mentally defective in any recognizable and appreciable degree, he is violating the statute.'" 13 Kan. App.2d at 607 (quoting 120 N.H. at 921).
The Keim court adopted the reasoning from Sullivan and Degrenier and stated that "[t]he language [of the rape statute] sufficiently warns a person of common intelligence that engaging in sexual intercourse with one who is mentally handicapped to a degree that he or she cannot understand the nature and consequences of engaging in the act is prohibited." 13 Kan. xmontoya@example.com.
The court concluded that "[u]nder normal circumstances a mental incapacity to consent would be apparent in ordinary social intercourse." 13 Kan. xmontoya@example.com.
The same rationale is applicable to this case, where we are not concerned with a defendant's ability to determine mental incapacity to consent but rather a juror's ability to do so. Keim held that a person of common intelligence is capable of determining whether an individual's mental deficiency renders him or her incapable of giving consent. A juror, by definition, is a person of common intelligence. Therefore, when the capacity of a mentally deficient individual to consent to a sexual act is at issue, the jury is capable of determining whether that individual is able to understand the nature and consequences of engaging in such an act. In reaching its determination, the jury should evaluate the individual's behavior in normal social intercourse as well as consider any expert testimony concerning the individual's mental deficiency.
Defendant argues there was insufficient evidence presented at his trial for the jury to conclude that W.C. was incapable of consent due to mental deficiency. It is well established that "[w]hen the sufficiency of the evidence is challenged, the standard of review on appeal is whether, after review of all the evidence, *41 viewed in the light most favorable to the prosecution, the appellate court is convinced that a rational factfinder could have found the defendant guilty beyond a reasonable doubt." State v. Graham, 247 Kan. 388, 398, 799 P.2d 1003 (1990). Upon review of the record in this case, we are satisfied the State presented enough evidence for the jury to conclude that W.C. was incapable of consent because of his mental deficiency. The testimony of W.C.'s psychologist and his mother, as well as the demeanor of W.C., were more than sufficient to support such a finding. We therefore conclude defendant's sufficiency of the evidence argument is without merit.
Defendant next contends that an improper statement made by the prosecutor misled and prejudiced the jury. During closing argument, the prosecutor made the following remark:
"All the State has to prove to you is that [W.C.] was suffering from a mental deficiency or disease. We have proven that to you by [the school psychologist]. If we had not proven to you a crucial element then Judge Lamar would never have even submitted this case to you."
This statement implies that, by submitting the case to the jury, the district court is endorsing the proposition that W.C. is mentally deficient. The court clearly did not approve of the prosecution's remark but felt such remark caused no harm to the defendant.
"In deciding whether prosecutorial misconduct requires reversal, an appellate court determines whether there was little or no likelihood the error changed the result of the trial." State v. Chism, 243 Kan. 484, 493, 759 P.2d 105 (1988). "Where the evidence of guilt is of such direct and overwhelming nature that it can be said that the erroneous admission of certain other evidence could not have affected the result of the trial, such admission is harmless error." State v. Thompson, 221 Kan. 176, 183, 558 P.2d 93 (1976).
The evidence presented by the State of W.C.'s mental deficiency was so substantial that it is highly unlikely that the improper prosecutorial remark had any effect on the jury's verdict. During the trial, the prosecution called W.C.'s school psychologist, his mother, and a friend of his to testify that W.C. was mentally deficient. Further, W.C. was presented as a witness so that the jury could personally observe his demeanor. Taken together, *42 this presentation of evidence constituted overwhelming evidence of W.C.'s mental deficiency. While this court does not approve of the improper remark made by the prosecution here, we are satisfied such remark could not have affected the outcome of the trial and was therefore harmless error.
Affirmed.
|
409 N.E.2d 1211 (1980)
In the matter of the PETITION OF Ora ACKERMAN for the Commitment of Charles Hartman to the Fort Wayne State Hospital and Training Center.
No. 3-379A60.
Court of Appeals of Indiana, Fourth District.
September 24, 1980.
*1212 Theodore L. Sendak, Atty. Gen., David Michael Wallman, Deputy Atty. Gen., Indianapolis, for appellant.
Pedro J. DeJesus, Indiana Protection & Advocacy Service Com'n for the Developmentally Disabled, Indianapolis, for appellee.
Ronald M. Soskin, National Center for Law and the Handicapped, Inc., South Bend, for amicus curiae.
CHIPMAN, Judge.
The State of Indiana appeals from an order of the Elkhart Superior Court which, in part, directed the Fort Wayne State Hospital and Training Center to implement a specific treatment or habilitation program on behalf of the appellee, Charles Hartman.
We affirm.
*1213 This case concerns the rights of an individual who has been involuntarily institutionalized by the State of Indiana. Specifically, it raises the question whether an involuntarily committed mentally retarded individual has a right to treatment,[1] and if so, what level of treatment is required. The case also questions the role of our trial courts in protecting and enforcing the rights of the mentally retarded.
The appellee, Charles Hartman, is presently twenty-eight years old. At the age of nine he became a ward of the Elkhart County Department of Public Welfare and was subsequently placed in three foster homes. Each placement proved unsuccessful, and in 1964, at age twelve, Charles was admitted "voluntarily"[2] to the Fort Wayne State Hospital and Training Center and he has remained institutionalized since.
In the spring of 1977, Charles asked to be released from the hospital. In response, the hospital, through its superintendent, Ora R. Ackerman, filed with the trial court a "Petition for Involuntary Commitment." A hearing followed and on July 2, 1977, the trial court found Charles to be both gravely disabled and dangerous[3] and ordered Charles involuntarily committed until such time as the superintendent deemed him eligible for discharge. The cause was then removed from the court's active docket.
On April 6, 1978, the hospital filed with the trial court a periodic progress report for Charles along with a habilitation program plan. After a review of these materials, the court ordered Charles' involuntary commitment to continue without a hearing.
The controversy ripened on May 11, 1978, when Charles filed what was denominated as a "Request for Review or Dismissal of Regular Commitment" pursuant to Ind. Code 16-14-9.1-10(g).[4] During the hearing which followed it became apparent Charles had not responded well to the treatment he had received during his many years of institutionalization. Those who had worked with Charles over the years saw little chance for him to improve his condition given the level of treatment then available at the hospital. The trial court asked Mr. Tom Burkross, a sociologist who had *1214 worked with Charles since 1974, whether a treatment plan could be devised, given the necessary resources, which would give Charles a reasonable chance to improve. Burkross stated such a plan could be drawn up within thirty days. The trial court took Charles' petition under advisement and requested he be sent a copy of the new treatment plan. The new plan was forwarded to the court in August 1978 and shall hereinafter be referred to as the "August Plan."
On November 28, 1978, Charles filed a petition which requested the court order the implementation of the August Plan. This petition alleged Charles had constitutional and statutory rights to appropriate treatment which would give him a "decent chance" to achieve his developmental potential and facilitate his release and return to the community, a level of treatment which Charles alleged he had never been provided. Copies of the petition were served upon Superintendent Ackerman, the Department of Mental Health, and the Attorney General. A hearing was set for December 20, 1978.
On the day of the hearing, Superintendent Ackerman submitted to the trial court an alternative treatment plan for Charles (hereinafter referred to as the "December Plan"). At the hearing the court heard expert testimony concerning the relative merits of the August and December Plans, and also considered methods of financing the former, which required a larger and better trained staff. Following the hearing the trial court made findings of fact and conclusions of law[5] and entered the following order:
"1. That the respondent be recommitted to the Fort Wayne State Hospital and *1215 Training Center until the 30th day of June, 1979;
2. That the Fort Wayne State Hospital and Training Center will implement, in the interim, the treatment plan proposal tendered to the court December 20, 1978;
3. That the Fort Wayne State Hospital and Training Center and the Department of Mental Health of the State of Indiana will forthwith take all steps available to them to secure sufficient funds for the implementation of the program of August 15, 1978, such steps, not by way of limitation, being:
(a) As of July, 1978, there were approximately 140 positions on the manning table for the Hospital that were vacant. Steps should be taken to reclassify such positions to result in the creation of the additional 10 specialized positions required by the August 15, 1978, treatment plan in such a manner as so not to increase the overall budget of the hospital.
(b) To seek out any and all Federal funds that might be available for the implementation of the treatment plan of August 15, 1978, as a pilot program.
(c) To seek augmentation through the budget director and the Commission on State Budget of funds for the Hospital to implement the August 15, 1978, program;
(d) To seek transfer of funds from within the Department of Mental Health, from other State Agencies, and/or from the Governor's contingency fund so as to be able to implement fully the August 15, 1978, treatment plan;
(e) To submit to the General Assembly of the State of Indiana in the year 1979 a request for the specific funding of the Charles Hartman habilitation program of August 15, 1978.
4. The Hospital shall report to the Court on or before the 1st day of February, 1979, and the first day of each month thereafter the steps taken by them to implement the program tendered to the Court December 20, 1978, the steps taken to secure additional funding to implement fully the program of August 15, 1978, and the progress of the respondent under the program being presently maintained for him.
5. The Association for the Disabled of Elkhart County (Hereafter ADEC) shall draft a definitive proposed program to take over the services for the respondent and shall further taken (sic) all steps possible to secure funding for such program and shall report to the court at not less than 90 day intervals their progress herein.
6. The Hospital in conjunction with ADEC shall arrange a program of temporary leaves of respondent from the hospital to the control of ADEC in order to commence a process of reintegratation (sic) of the respondent into the community. The Hospital and the Department of Mental Health shall further take all steps possible to achieve funding for ADEC for such program of habilitation as ADEC will hereafter develop and tender to the court and to the Department of Mental Health for the handling of the respondent at the time of his release from commitment.
*1216 7. That the parties will appear again before the court for such further hearings as the court may from time to time hereafter order, including but not limited to a review hearing for commitment to be held in the month of June 1979.
8. That the orders entered by the Court this date shall be continuing orders and shall be in the nature of interim orders and shall not in any manner affect or impede the ability of this court to hereafter enter additional and supplemental orders controlling the actions of the parties and/or to secure funds for the implementation of a reasonable habilitation program for the respondent.
9. That the Clerk shall cause a copy of this Order to be served upon Pedro J. DeJesus, Legal Advocacy Director of the Indiana Protection and Advocacy Service Commission for the Developmentally Disabled; upon David Michael Wallman, Deputy Attorney General of the State of Indiana; upon Ora Ackerman, Superintendent, Fort Wayne State Hospital and Training Center."
The State appeals from the trial court's decision raising issues which we have rephrased as follows:
1) Whether the United States Constitution and/or companion federal and state statutes mandate a specific level of treatment for an involuntarily committed mentally retarded individual,
2) Whether there was sufficient evidence produced to establish that the treatment provided to Charles Hartman fell short of any constitutional or statutory minimum, and
3) Whether the trial court had subject matter jurisdiction to order the implementation of a specific treatment plan and to order various state officials to seek funding for such a plan.
I. RIGHT TO TREATMENT
The trial court concluded Charles Hartman had a right to treatment guaranteed by the Fourteenth Amendment to the U.S. Constitution and the Developmentally Disabled Assistance and Bill of Rights Act, Pub.L. No. 94-103, 89 Stat. 486 (1975) codified at 42 U.S.C. §§ 6001-6081 (1976). Indeed, there is now a substantial body of federal case law which recognizes a constitutional right to treatment for both mentally ill and retarded individuals who are involuntarily committed by the states. See e.g., Wyatt v. Aderholt, 503 F.2d 1305 (5th Cir.1974); Donaldson v. O'Connor, 493 F.2d 507 (5th Cir.1974), vacated 422 U.S. 563, 95 S. Ct. 2486, 45 L. Ed. 2d 396 (1975); Halderman v. Pennhurst State School and Hospital, 446 F. Supp. 1295 (E.D.Pa. 1977). affirmed in part, reversed and remanded in part, 612 F.2d 84 (3rd Cir.1979); Gary W. v. Louisiana, 437 F. Supp. 1209 (E.D.La.), modified, October 28, 1976; Davis v. Watkins, 384 F. Supp. 1196 (N.D.Ohio 1974); Welsch v. Likins, 373 F. Supp. 487 (D.Minn. 1974), affirmed in part, vacated and remanded in part, 550 F.2d 1122 (8th Cir.1977). However, we are permitted to reach constitutional questions only when such a determination is absolutely necessary. Peters v. Board of Commissioners of Gibson County (1963) 244 Ind. 544, 194 N.E.2d 619. Accordingly, we are obliged to decide whether the trial court's order can be supported on statutory grounds before we adjudicate a constitutional issue.
The Developmentally Disabled Assistance and Bill of Rights Act (hereinafter referred to as "the Act") was passed as an amendment to the Developmental Disabilities Services and Facilities Construction Act. In the so called Bill of Rights section, 42 U.S.C. § 6010, Congress clearly expressed its intention to create certain rights in favor of the developmentally disabled, a class of persons which includes the mentally retarded. Section 6010[6] provides, in part:
"(1) Persons with developmental disabilities have a right to appropriate treatment, services, and habilitation for such disabilities.
*1217 (2) The treatment, services, and habilitation for a person with developmental disabilities should be designed to maximize the developmental potential of the person and should be provided in the setting that is least restrictive of the person's personal liberty."
Each federal court which has faced the question whether the Act creates substantive rights enforceable by way of a private cause of action has responded in the affirmative. In Naughton v. Bevilacqua, 458 F. Supp. 610 (D.R.I. 1978) the plaintiff, a moderately retarded individual suffering from childhood schizophrenia, brought an action against the State of Rhode Island and the director of its Department of Mental Health to permanently enjoin and recover damages for alleged violations of rights secured by the Act. Naughton alleged he had suffered serious adverse reactions due to the excessive use of the drug Prolixin, a tranquilizer. The district court held the plaintiff had alleged facts which, if proved, would constitute a violation of his statutory "right to appropriate treatment" and "habilitation" designed to maximize his developmental potential. Id. at 614. In addition, the court found in light of the Act's legislative history, scheme and purpose, the statutory right to treatment was enforceable under 42 U.S.C. § 1983, and by way of an implied cause of action under the Act itself, eminently satisfying the criteria for implication articulated by the criteria for implication articulated by the United States Supreme Court in Court v. Ash, (1975) 422 U.S. 66, 95 S. Ct. 2080, 45 L. Ed. 2d 26, 458 F. Supp. *jonescandace@example.org.[7] Particularly persuasive was the fact the Conference Report on the bill states:
"These rights are generally included . . in recognition by the conferees that the developmentally disabled ... have a right to receive appropriate treatment for the conditions for which they are institutionalized, and that this right should be protected and assured by the Congress and the courts."
H.R.Conf.Rep. No. 94-473, 42 (1975) reprinted in [1975] U.S. Code Cong. & Admin. News, pp. 919, 943, 961. [emphasis added] Section 6012(a) of the Act also requires the states to establish independent agencies with the responsibility and authority "to pursue legal, administrative, and other appropriate remedies to insure the protection of the rights of such persons who are receiving treatment, services, or habilitation within the State." The Naughton court recognized the sheer necessity of allowing a private action to enforce rights guaranteed by the Act:
"The enforcement of individual rights ... cannot be achieved solely by withholding federal funds [from the states]; not only is the Secretary incapable of investigating every violation, but the Secretary may quite properly be unwilling to withhold funds for a single violation. Thus, the advocacy agency and a private right of action are crucial to protect the rights secured by the Act."
458 F. Supp. at 616 [bracketed material supplied]. In what now must be considered the leading case interpreting the Act, the Third Circuit U.S. Court of Appeals adopted the Naughton holding in Halderman v. Pennhurst State School and Hospital, 612 F.2d 84 (3rd Cir.1979).
The district court in Halderman had found the conditions at Pennsylvania's Pennhurst State School and Hospital, a facility for the care and treatment of the mentally retarded, to be unsanitary, dangerous, and wholly inconsistent with any principles of normalization. 451 F. Supp. 1302-1308. Finding multiple violations of both constitutional and statutory rights, the district court entered a broad remedial order which, in part, directed the defendants to close the Pennhurst facility and to establish community living arrangements and implement individualized habilitation programs for its residents. Id. at 1326. The Third Circuit affirmed most of the district court's order but declined to address the issue of a constitutional right to treatment. Quoting extensively from Judge Pettine's opinion in Naughton the Court of Appeals held:
"[T]he Developmentally Disabled Assistance and Bill of Rights Act grants to the mentally retarded a right to treatment and habilitation. We further hold that retarded persons have a private right of action under the Act."
612 jonescandace@example.org. We take this opportunity to adopt the reasoning presented in Naughton and Halderman and hold that a mentally retarded individual institutionalized by the State of Indiana has a right to treatment and habilitation guaranteed by the Developmentally Disabled Assistance and Bill of Rights Act enforceable by way of a private cause of action.
Once we acknowledge the Act creates a right to treatment for the developmentally disabled, we believe it follows a fortiori that some minimum level of treatment is required. We find it unimaginable that Congress intended to establish a right to treatment which could be satisfied only *1219 by the slightest jonescandace@example.org.[8] However, it is certainly less than clear what standard Congress had in mind.
The language of the Act speaks of a right to "appropriate treatment" which should be "designed to maximize the developmental potential of the person." 42 U.S.C. § 6010. Clearly the Act prohibits the use of physical or chemical restraints as a substitute for a treatment program. 42 U.S.C. § 6010(3)(B)(iii) & (iv). Senator Cranston, speaking in favor of the legislation, spoke in terms of "necessary" treatment:
"The Bill specifically provides that where institutional programs are appropriate, adequate support should be planned for them so that necessary treatment and habilitation can be given residential patients to develop their full potential."
121 Cong.Rec. 16,520 (1975) (emphasis added). There is also an indication Congress intended to codify what had been pronounced by the lower federal courts as a constitutional right of an involuntarily committed person to receive treatment which will give him a "realistic opportunity" to improve or be cured, Wyatt v. Stickney, 325 F. Supp. 781, 784-85 (M.D.Ala. 1971) (emphasis added), or a "reasonable opportunity to be cured...." Donaldson v. O'Connor, 493 F.2d at 520 (emphasis added). Senator Javits, speaking in support of the legislation, cited the Wyatt case. Senator Stafford, discussing the purpose of Title II the Bill of Rights section stated:
"Title II was added to the bill to assist in the protection of the rights guaranteed under our Constitution for those individuals that will require institutionalization... ."
121 Cong.Rec. 16,516 (1975).
Therefore, it is reasonable to conclude when Congress spoke of "appropriate treatment" it implied effective treatment. As one writer has so eloquently stated:
"Treatment is not adequate, or appropriate, or proper, or suitable unless it is effective, or curative, or therapeutic. In other words, treatment cannot meet any minimal standard unless it accomplishes its purpose. The terms are less important than the concept. Treatment, whatever it may be, is undertaken in order to change the behavior which led to the person's confinement."
Schwitzgebel, Right to Treatment for the Mentally Disabled: The Need for Realistic Standards and Objective Criteria, 8 Harvard Civil Rights Civil Liberties L.Rev. 513, 520 (1973). We hold that as the Act establishes a right to "appropriate" or necessary treatment, the legislation requires a treatment level which will give the person a reasonable opportunity to change the behavior which led to or requires his continual institutionalization.
II. SUFFICIENCY OF THE EVIDENCE
The State next argues that even assuming Charles Hartman has a constitutional or statutory right to treatment, there was no showing the treatment afforded Charles in the past was legally insufficient. Of course, we view this claim as we do all other questions concerning the sufficiency of evidence presented to the trier of fact; we will consider the evidence in a light most favorable to the trial court's decision.
Few of the facts in this controversy were actually in dispute. Dr. Robert Greenlee, a psychiatrist and consultant to the hospital who has seen and treated Charles since his admission in 1964, classified Charles as mildly retarded to borderline. Charles has high intellectual and vocational potential. What prevents him from achieving this potential and thereby obtaining his release is his aggressive behavior. Dr. Raymond Clausman, director of psychological services at the hospital, referred to Charles as "sociopathic" and described his behavioral problem as follows:
*1220 "I think basically Charles has learned to perceive his environment and the people in it as very threatening. He learned that young. He also learned to respond to that kind of threat with aggression, fight. The fight then became a pattern of behavior that got reinforced because he accomplished things with it. So he was able to get what we might call secondary gains and this became a condition and a pattern of behavior, so whenever he gets frightened or frustrated, or can't satisfy his needs, he uses this behavior, and he gets intermittent reinforcement for it, because he succeeds. Not always, but on an intermittent basis and this is a strong method of keeping the behavior in force. What we are wanting to do is to stop this intermittent reinforcement for this kind of behavior and make him get his rewards in more appropriate ways."
Everyone at trial agreed the key to Charles' normalization and deinstitutionalization is control of his aggressive behavior behavior characterized by physical and verbal abuse of the hospital staff and fellow residents.
Over the years Charles has been administered anti-psychotic or tranquilizing medication. In Dr. Greenlee's September 13, 1971, psychiatric evaluation of Charles, he stated, "In reviewing his medication it would appear to me that he is on what should be adequate tranquilizing medication at the present time." In his August 31, 1973 report, Dr. Greenlee wrote, "When I examined Charles, it was my impression that he was probably suffering from some degree of over medication, in that he seemed quite slow and lethargic and slurred his speech noticeably." In his July 18, 1977, evaluation of Charles, Dr. Greenlee wrote, "In reviewing Charles' medications, I note that he is currently on Mellaril 200 mg. tid and Stelazine 5 mg. bid as well as occasional Valium. I do not believe that control of this man's behavior is going to rest on medication." Finally, in Dr. Greenlee's October 2, 1978, evaluation he wrote, "I am of the opinion that behavioral control is probably not going to be possible with anti-psychotic or tranquilizing medication and I see no need for further experimentation or increase in dosage." Dr. Greenlee testified that drugs "have not achieved anything close to behavioral control."
Other efforts to deal with Charles' aggressive behavior have also proved ineffective. Behavioral "contracts", independent counseling and special reward programs were administered, but hospital staff either could not spend sufficient time which Charles to correctly reinforce his behavior, or, in spite of a more restrictive environment, Charles was able to manipulate the staff and his peers through physical intimidation. Mr. Jim Helm, program director of the maximum security module where Charles lived, testified that over the years of dealing with Charles he had basically met with failure. Tom Burkross acknowledged that given the resources of the hospital, there was little which could be done to change Charles' behavior. The only thing left for Charles to look forward to was the natural process of maturation, which even if it proved helpful, would take a minimum of five years. The trial court found:
"[T]he treatment programs instituted by the Hospital prior to December 1, 1978, on a continuum of 0 to 10 have offered the respondent not much more than a No. 2 chance of habilitation."
The August Plan, which Charles requested be implemented on his behalf, was formulated by Charles' module director, the hospital's director of social services, and by Dr. Clausman, director of psychological services. The nucleus of the August Plan was a ten member behavioral management team composed of a staff trained to deal with behavioral problems such as exhibited by Charles. Three members of the team were to be available throughout the day to respond to Charles' maladaptive behavior so as to make sure his aggression was not rewarded. Hopefully, as Charles' behavior improved he would be moved to a less restrictive area of the hospital and could then *1221 take advantage of vocational training programs. Dr. Clausman testified that because of the highly trained staff called for in the August Plan, the plan offered Charles perhaps a fifty percent chance of success. Dr. Greenlee referred to the August Plan as probably "the best possible thinking of professionals in the state of the art."
The December Plan, submitted to the court as an alternative, was similar to the August Plan except for its initial phase; the December Plan did not call for additional trained staff but was formulated to function within the existing budget of the hospital.
We believe there was sufficient evidence to show the treatment afforded Charles Hartman prior to December 1978 was no longer "appropriate" treatment because it did not offer him a reasonable opportunity to improve his condition. Drugs had proved unsuccessful and certainly could not be administered as a substitute for an appropriate habilitation program. Other behavior control programs had proved unsuccessful. Charles' only hope for improvement would not come from the treatment provided, but through the natural maturing process.
The circumstances surrounding Charles' fourteen years of institutionalization are readily distinguishable from the horrid conditions which led the federal district court to order the closing of the Pennhurst Hospital in Halderman. We are not faced in this case with inhumane, unsanitary and unsafe premises. We are dealing instead with the good faith efforts of a hospital staff to help a retarded individual achieve his developmental potential with the funds allocated by the legislature. The court in Halderman confined itself to prohibiting institutional conditions which made effective therapy for any patient impossible. The Halderman court was not faced with the much more difficult task of determining which of various forms of treatment is "appropriate", yet the court recognized the ultimate necessity of doing so:
"[T]he federal statute ... [is] focused on individual needs. Since the statutory rights to treatment, state and federal, vindicate the individual patient's fundamental interest in personal liberty, it is only fitting that the Commonwealth be required to undertake a case-by-case investigation into how each person's rights may best be facilitated."
612 jonescandace@example.org.
Indeed, as lawyers, not doctors, we view with some uneasiness the role assigned to our courts which requires a judicial determination of "appropriate" treatment. One federal district court has simply held that even were there a constitutional right to treatment, such a right would be non justiciable because "specific, judicially ascertainable and manageable standards" of adequate care are lacking. Burnham v. Department of Public Health, 349 F. Supp. 1335, 1341 (N.D.Ga. 1972), reversed 503 F.2d 1319 (5th Cir.1974). However, we cannot simply close our eyes to the fact that Congress has created a right to appropriate treatment which must be "protected and assured by ... the courts." H.R. Conf.Rep. No. 94, 473, 42 (1975), U.S.Code Cong. & Admin. News 1975, p. 961. It is worth noting Indiana now has a patient's rights statute, enacted in 1979, which guarantees the developmentally disabled appropriate treatment defined as:
"(1) Mental health services or developmental training in accordance with standards of professional practice, appropriate to his needs, and designed to afford him a reasonable opportunity to improve his condition;"
Ind. Code 16-14-1.6-2(a)(1). The individual's right to this treatment level may be enforced in any court of competent jurisdiction. Ind. Code 16-14-1.6-10(1).
It therefore appears in spite of associated problems of justiciability, both our federal and state legislatures have entrusted our courts with the responsibility of enforcing the rights of the developmentally disabled by requiring a judicial determination of *1222 whether a statutory minimum level of treatment is being afforded. We hold there was ample evidence in the present case to support the trial court's finding that treatment afforded Charles Hartman prior to December 1978 was no longer appropriate.
III.
JURISDICTION/APPROPRIATENESS OF THE TRIAL COURT'S ORDER
The State next argues the trial court erred by extending its jurisdiction to order implementation of a specific treatment plan. It is the State's position that the trial court's jurisdiction was limited to considering whether Charles Hartman was mentally ill and either gravely disabled or dangerous and in need of custody, care or treatment. While the court had the authority to examine existing facilities to select an "appropriate facility", argues the State, the court was not authorized by statute to "create" what it considered to be an appropriate facility, and had no authority to command specific treatment or order State officials to seek funding for such a treatment plan.
First, we note the State raises no issue concerning personal jurisdiction and we find no such objection was made before the trial court. Instead, the State argues the court lacked subject matter jurisdiction in this case. We disagree.
While the State accurately describes the statutory procedure to be followed by the trial court in reviewing an involuntary commitment, Ind. Code 16-14-9.1-10(g), its argument ignores the fact the petition filed by Charles Hartman requesting implementation of the August Plan, in actuality the complaint in this matter, alleged Charles was being denied federal statutory and constitutional rights. Unless Congress provides otherwise, our trial courts, as courts of general jurisdiction, have jurisdiction concurrent with the federal courts in enforcing rights conferred by the Constitution and laws of the United States. Pittsburg, C., C., & St.L.Ry. Co. v. Mitchell, (1910) 175 Ind. 196, 91 N.E. 735, rehearing denied 175 Ind. 196, 93 N.E. 996. The trial court clearly had jurisdiction to consider Charles Hartman's claim that his federal statutory rights were being violated. Once a violation was shown, the court also possessed inherent power and authority to formulate a proper remedy.
The U.S. Court of Appeals in Halderman considered the appropriateness of the broad remedial order issued by the Pennsylvania District Court in that case, and, citing Milliken v. Bradley, (1977) 433 U.S. 267, 97 S. Ct. 2749, 53 L. Ed. 2d 745, held the trial court had broad and flexible equity powers to formulate a remedy tailored to cure the violation of the federal statute. 612 jonescandace@example.org. We believe the same standard is applicable in the present case.
The State objects to that portion of the trial court's order which directed the hospital to implement the December Plan and directed State officials to seek funding for the August Plan so it could be implemented as soon as possible. Implicit in the court's order is the finding that only the August Plan would afford Charles Hartman a reasonable opportunity to improve his condition, hence the requirement State officials seek funding for its implementation.
It appears both the August and the December treatment plans were designed to lead eventually to Charles Hartman's release and return to the community, and to that extent both plans were "designed to maximize the developmental potential of the person." The difference in the plans lies in their respective probabilities of success. Neither plan guaranteed success. Mr. Loren Thomas, director of the module which housed Charles Hartman, testified the December Plan would "probably not be very successful" because it lacked the additional, well trained behavioral modification staff, which was the key to the August Plan. Mr. Helm expressed the same doubts about the December Plan:
"I really can't see it being a profitable type program. It is, like I said, similar to *1223 some that have been incorporated in the past as far as walks, programs, and they have not succeeded.
.....
[T]he main thing I don't see reading in this plan is the manpower that is going to be available to consistently carry out the new way."
Mr. Burkross also expressed his concern the December Plan could not be carried out consistently. Based upon the testimony of numerous expert witnesses, who essentially were in agreement as to the relative merits of the two plans, the trial court found the August Plan was the only treatment level which would give Charles Hartman at least as good as chance of success as it did failure. Charles was not necessarily entitled to the best possible treatment available, for the Act guarantees only treatment which affords the individual a reasonable chance of successful habilitation. It appears, however, that in light of Dr. Greenlee's characterization of the August Plan as "the best possible thinking of professionals", because of the severity of Charles' behavioral problem the "best possible" plan was the only "appropriate" plan the only plan which would give Charles a reasonable chance of improving his condition.
While the expenditure of State funds would clearly not be justification for withholding appropriate treatment from an individual, the trial court proceeded cautiously by considering the cost of the August Plan and other alternatives to Charles' continued commitment at the hospital. Dr. Clausman estimated the cost of implementing the August Plan at the hospital would be $106,000 for the first year, most of that sum representing first year salaries for additional well-trained staff members. Mr. Helm testified the behavioral modification team required by the August Plan could work with three to five other individuals with similar behavioral problems as Charles improved. The team could also instruct other hospital staff on proper ways of dealing with the aggressive behavior of a resident.
Instead of ordering the implementation of the August Plan, however, the trial court compromised by ordering various state officials to use reasonable efforts to obtain funding for the August Plan and ordered immediate implementation of the December Plan, which could be administered without additional funds. Indeed, compared with the broad order upheld by the Federal circuit court in Halderman, which necessarily would require massive expenditures by the Commonwealth of Pennsylvania, the trial court in this case exercised a great deal of restraint. We find the court's order was strictly tailored to cure the violation of the federal statute in question.
Accordingly, the decision of the trial court is affirmed.
YOUNG, P.J., and MILLER, J., concur.
NOTES
[1] The amicus brief filed by the National Center for Law and the Handicapped, Inc. points out mental retardation is primarily an educational problem and not a "disease" or disability which can be "cured" through "treatment." Strictly speaking, therefore, "treatment" is an inappropriate term. Instead, the mentally ill are in need of "habilitation." However, throughout this opinion the terms "treatment" and "habilitation" will be used interchangeably.
[2] Although the circumstances surrounding Charles' admission to the hospital in 1964 were not fully documented, a 1964 psychiatric report by Dr. Robert Greenlee stated, "Reason for admission seems to be his repeated truancies from the last three foster homes. He is reported to have become unmanageable and threatened a foster mother with a knife."
[3] At the time of Charles' involuntary commitment, Ind. Code 16-14-9.1-10(d) authorized the court to order the commitment of an individual when he or she was found to be:
"(1) mentally ill and either gravely disabled or dangerous; and
(2) in need of custody, care, treatment, or in need of continued custody, care, or treatment;"
Ind. Code 16-14-9.1-1(a) defined "mental illness" as "a psychiatric disorder which substantially disturbs a person's thinking, feeling or behavior and impairs the person's ability to function. For the purpose of this chapter, "mental illness may include, but shall not be limited to, any mental retardation...."
Ind. Code 16-14-9.1-1(b) defined "gravely disabled" as "a condition in which a person as a result of a mental illness is in danger of coming to harm because of his inability to provide for his food, clothing, shelter, or other essential human needs."
Ind. Code 16-14-9.1-1(c) defined "dangerous" as "a condition in which a person as a result of mental illness presents a substantial risk that he will harm himself or others."
[4] Ind. Code 16-14-9.1-10(g) provided, in relevant part:
"(g) Upon receiving a copy of the court order [of commitment], the patient or his representative may request a hearing for review or dismissal of the commitment. This right of review of the regular commitment is limited to one [1] review per year, unless the court determines that there is good cause for an additional review." [bracketed material supplied]
[5] The following findings of fact and conclusions of law were entered by the trial court:
"1. Charles Hartman is a developmentally disabled person as defined by statute.
2. Prior to the 1st day of December, 1978. Charles Hartman had not received in the 14 years of his confinement at Fort Wayne State Hospital and Training Center such an individualized program of habilitation as would meet his constitutional and statutory rights to a program offering him even a reasonable jonescandace@example.org.
3. A release of the respondent from commitment and return to his home community at this time would offer at best a 5% chance of succeeding in a community setting and a 95% chance that the respondent would engage in serious antisocial behavior and would ultimately, through the criminal justice system, be committed to a penal facility for such behavior.
4. That the treatment programs instituted by the Hospital prior to December 1, 1978, on a continuum of 0 to 10 have offered the respondent and would continue to offer the respondent not much more than a No. 2 chance of habilitation except through maturation, a natural process that would take 5 years or more. On the same continuum the program proposed by the Fort Wayne State Hospital and Training Center and filed herein August 15, 1978, would represent a minimum of a No. 5 chance of habilitation in a period of time of approximately 2 years.
5. On December 20, 1978, the Hospital tendered to the court a new proposed habilitation program for the respondent.
6. The habilitation program tendered December 20, 1978, represents the maximum potential program for the respondent under the present staff and other limitations of the Hospital.
7. The program tendered December 20, 1978, would offer the respondent a No. 4 chance of habilitation over a period of 2 or more years.
8. That the General Assembly of the State of Indiana will meet in session duly convened in January, 1979 to, among other things, undertake a complete budgeting process for the entire State of Indiana for the biannum commencing July 1, 1979, and ending June 30, 1981.
9. That the Fort Wayne State Hospital and Training Center and the Department of Mental Health have not taken all steps available to them through normal budgeting processes and legislative processes to secure additional funds for implementation of the best possible treatment program for the respondent Charles Hartman.
10. That the plan submitted to the Court August 15, 1978, would be the best possible program for the respondent but cannot be undertaken because of the lack of at least 10 staff positions of certain educational requirements.
11. That the Fort Wayne State Hospital and Training Center has, since approximately December 1, 1978, undertaken actions which are presently maximizing their ability to provide for and meet the rights of the respondent Charles Hartman under budget and staff limitations presently imposed upon the hospital.
Having considered the facts introduced at the hearing the Court would now make the following conclusions of law:
1. The respondent Charles Hartman is a developmentally disabled person as defined by law and is therefore entitled under the Fourteenth Amendment to the Constitution of the United States of America and the Developmentally Disabled Assistance and Bill of Rights Act (42 U.S.C.A. Section 6,000 [6001] et seq.) to a habilitation program designed to maximize his developmental potential in a setting least restrictive of his personal liberty.
2. That this Court has the power through order of court enforceable by contempt and through mandate to guarantee to this respondent and others similarly situated their constitutional and statutory rights under the constitutions and statutes of the United States of America and the State of Indiana.
3. That so long as the hospital is maximizing its present resources to meet the needs of the respondent, this court and other courts similarly situated should refrain from utilizing their inherent powers to enforce the constitutional and statutory rights of the respondent and others similarly situated."
[6] The entirety of § 6010 reads as follows:
"§ 6010. Rights of the developmentally disabled
Congress makes the following findings respecting the rights of persons with developmental disabilities:
(1) Persons with developmental disabilities have a right to appropriate treatment, services, and habilitation for such disabilities.
(2) The treatment, services, and habilitation for a person with developmental disabilities should be designed to maximize the developmental potential of the person and should be provided in the setting that is least restrictive of the person's personal liberty.
(3) The Federal Government and the States both have an obligation to assure that public funds are not provided to any institutional or other residential program for persons with developmental disabilities that
(A) does not provide treatment, services, and habilitation which is appropriate to the needs of such persons; or
(B) does not meet the following minimum standards:
(i) Provision of a nourishing, well balanced diet to the persons with developmental disabilities being served by the program.
(ii) Provision to such persons of appropriate and sufficient medical and dental services.
(iii) Prohibition of the use of physical restraint on such persons unless absolutely necessary and prohibition of the use of such restraint as a punishment or as a substitute for a habilitation program.
(iv) Prohibition on the excessive use of chemical restraints on such persons and the use of such restraints as punishment or as a substitute for a habilitation program or in quantities that interfere with services, treatment, or habilitation for such persons.
(v) Permission for close relatives of such persons to visit them at reasonable hours without prior notice.
(vi) Compliance with adequate fire and safety standards as may be promulgated by the Secretary.
(4) All programs for persons with developmental disabilities should meet standards which are designed to assure the most favorable possible outcome for those served, and
(A) in the case of residential programs serving persons in need of comprehensive health related, habilitative, or rehabilitative services, which are at least equivalent to those standards applicable to intermediate care facilities for the mentally retarded promulgated in regulations of the Secretary on January 17, 1974 (39 Fed.Reg. pt. II), as appropriate when taking into account the size of the institutions and the service delivery arrangements of the facilities of the programs;
(B) in the case of other residential programs for persons with developmental disabilities, which assure that care is appropriate to the needs of the persons being served by such programs, assure that the persons admitted to facilities of such programs are persons whose needs can be met through services provided by such facilities, and assure that the facilities under such programs provide for the humane care of the residents of the facilities, are sanitary, and protect their rights; and
(C) in the case of nonresidential programs, which assure the care provided by such programs is appropriate to the persons served by the programs."
[7] In Cort v. Ash, the U.S. Supreme Court set forth four factors to be considered in determining whether a federal statute carries with it a private remedy: 1) whether prospective plaintiffs are especial beneficiaries of the statute, 2) whether there is an indication of legislative intent to create a private remedy, 3) whether a private cause of action would further the policies of the statute, and 4) whether the cause of action is one traditionally relegated to the states.
[8] We do not mean to imply, however, that only the "slightest" effort at habilitation was made in the present case.
|
Exhibit 10.36
_____________________________________________________________________________
FRESH ADVANTAGE, INC.
"Company"
to
FIRST UNION NATIONAL BANK
"Trustee"
__________________________
TRUST INDENTURE
__________________________
Dated as of
February 1, 2001
Securing
FRESH ADVANTAGE, INC.
TAXABLE VARIABLE RATE DEMAND BONDS,
SERIES 2001
IN THE AMOUNT OF
$9,000,000
______________________________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
3
Section 101.
Definitions
3
Section 102.
Rules of Construction.
12
ARTICLE II
THE BONDS
13
Section 201.
Amount, Terms, and Issuance of Bonds
13
Section 202.
Denominations, Maturity, Dates and Interest Rates of the Bonds
13
Section 203.
Conversion of Interest Rate Determination Method
16
Section 204.
Optional Tender Provisions of the Bonds
18
Section 205.
Registered Bonds Required, Bond Registrar and Bond Register
19
Section 206.
Transfer and Exchange
19
Section 207.
Book-Entry System
20
Section 208.
Execution
22
Section 209.
Authentication
22
Section 210.
Payment of Principal and Interest; Interest Rights Preserved
22
Section 211.
Persons Deemed Owners
23
Section 212.
Mutilated, Destroyed, Lost, Stolen or Undelivered Bonds
23
Section 213.
Temporary Bonds
24
Section 214.
Cancellation of Surrendered Bonds
24
Section 215.
Conditions of Initial Issuance
24
ARTICLE III
PURCHASE AND REMARKETING OF TENDERED BONDS
26
Section 301.
Remarketings of Tendered Bonds
26
Section 302.
Purchase of Bonds Delivered to Tender Agent
27
Section 303.
Delivery of Purchased Bonds
28
Section 304.
Delivery of Proceeds of Sale of Remarketed Bonds
28
Section 305.
No Remarketing After Certain Events
29
ARTICLE IV
INITIAL PROCEEDS, REVENUES AND APPLICATION THEREOF
30
Section 401.
Initial Proceeds to Be Paid Over to Trustee
30
Section 402.
The Bond Fund
30
Section 403.
Initial Proceeds and Revenues to Be Held for All Registered Owners; Certain
Exceptions
31
ARTICLE V
DEPOSITARIES OF MONEYS, SECURITY FOR DEPOSITS AND INVESTMENT OF FUNDS
32
Section 501.
Security for Deposits
32
Section 502.
Investment of Moneys
32
Section 503.
The Credit Facility
32
ARTICLE VI
REDEMPTION OR PURCHASE OF BONDS
35
Section 601.
Redemption or Purchase Dates and Prices
35
Section 602.
Company Direction of Optional Redemptions
36
Section 603.
Selection of Bonds to be Called for Redemption
36
Section 604.
Notice of Redemption or Purchase
36
Section 605.
Bonds Redeemed or Purchased in Part
37
ARTICLE VII
PARTICULAR REPRESENTATIONS, WARRANTIES, COVENANTS AND PROVISIONS
38
Section 701.
Company Representations, Warranties and Covenants by the Company
38
Section 702.
Covenant to Pay Bonds
39
Section 703.
Covenants to Perform Obligations under this Indenture
39
Section 704.
Existence, Sale of Assets, Consolidation or Merger
39
Section 705.
Default Certificates
40
Section 706.
Notification to Trustee
40
Section 707.
Observe Laws
40
Section 708.
Assignment of Indenture by the Company
40
Section 709.
Inspection of Bond Register
40
ARTICLE VIII
DEFAULT AND REMEDIES
41
Section 801.
Defaults
41
Section 802.
Acceleration and Annulment Thereof
42
Section 803.
Trustee Exercising Rights
43
Section 804.
Legal Proceedings by Trustee
43
Section 805.
Discontinuance of Proceedings by Trustee
43
Section 806.
Credit Facility Issuer or Registered Owners May Direct Proceedings
43
Section 807.
Limitations on Actions by Registered Owners
44
Section 808.
Trustee May Enforce Rights Without Possession of Bonds
44
Section 809.
Remedies Not Exclusive
44
Section 810.
Delays and Omissions Not to Impair Rights
44
Section 811.
Application of Moneys in Event of Default
44
Section 812.
Trustee and Registered Owners Entitled to All Remedies Under Law
45
Section 813.
Trustee May File Claim in Bankruptcy
45
Section 814.
Receiver
46
ARTICLE IX
CONCERNING THE TRUSTEE
47
Section 901.
Acceptance of Trusts
47
Section 902.
Reserved
48
Section 903.
Trustee to Give Notice
48
Section 904.
Trustee Entitled to Indemnity
48
Section 905.
Trustee Not Responsible for Insurance, Taxes, Execution of Indenture, Acts of
the Company or Application of Moneys Applied in Accordance with this Indenture
49
Section 906.
Compensation
50
Section 907.
Trustee to Preserve Records
50
Section 908.
Trustee May be Registered Owner
50
Section 909.
Trustee Not Responsible for Recitals
50
Section 910.
No Responsibility for Recording or Filing
50
Section 911.
Certain Rights of the Trustee
51
Section 912.
Qualification of the Trustee
52
Section 913.
Resignation and Removal of Trustee
52
Section 914.
Successor Trustee
53
Section 915.
Co-Trustee
54
Section 916.
Notice to Moody's or S&P
54
ARTICLE X
EXECUTION OF INSTRUMENTS BY REGISTERED OWNERS AND PROOF OF OWNERSHIP OF BONDS
56
Section 1001.
Execution of Instruments by Registered Owners and Proof of Ownership of Bonds
56
Section 1002.
Preservation of Information
56
ARTICLE XI
THE REMARKETING AGENT; THE TENDER AGENT; THE PLACEMENT AGENT
57
Section 1101.
The Remarketing Agent
57
Section 1102.
The Tender Agent
57
Section 1103.
The Placement Agent
59
Section 1104.
Notices
59
ARTICLE XII
AMENDMENTS AND SUPPLEMENTS
60
Section 1201.
Amendments and Supplements Without Registered Owners' Consent
60
Section 1202.
Amendments With Registered Owners' and Credit Facility Issuer's Consent
60
Section 1203.
Supplemental Indentures Affecting Rights of Credit Facility Issuer
61
Section 1204.
Amendment of Credit Facility
61
Section 1205.
Trustee Authorized to Join in Amendments and Supplements; Reliance on Counsel
61
ARTICLE XIII
DEFEASANCE; OTHER PAYMENTS
62
Section 1301.
Defeasance
62
Section 1302.
Deposit of Funds for Payment of Bonds
63
Section 1303.
Effect of Purchase of Bonds
63
ARTICLE XIV
MISCELLANEOUS PROVISIONS
64
Section 1401.
Covenants of Company to Bind its Successors
64
Section 1402.
Notices
64
Section 1403.
Trustee as Paying Agent
64
Section 1404.
Rights Under Indenture
65
Section 1405.
Form of Certificates and Opinions
65
Section 1406.
Severability
65
Section 1407.
State Law Governs
65
Section 1408.
Payments Due on Days Other Than Business Days
65
Section 1409.
Execution in Counterparts
65
EXHIBIT A
Refunding Request
A-1
EXHIBIT B
Form of Notice of Conversion to New Interest Rate Determination Method
B-1
EXHIBIT C
Form of Bond
C-1
TRUST INDENTURE
THIS TRUST INDENTURE,
dated as of February 1, 2001 (the "Indenture"), is made and entered into by and
between FRESH ADVANTAGE, INC., a Virginia corporation (the "Company") and FIRST
UNION NATIONAL BANK, a national banking association, having an office in
Richmond, Virginia (in such capacity, together with its successors in trust, the
"Trustee");
WITNESSETH
:
WHEREAS, the Company intends to (i) issue and sell its Taxable Variable Rate
Demand Bonds, Series 2001 in the aggregate principal amount of $9,000,000 (the
"Bond" or "Bonds"), (ii) use the proceeds of the Bonds to refund all of the
outstanding Carrollton Payroll Development Authority Industrial Development
Revenue Bonds (KMB Produce, Inc. Project), Series 1999 issued in the original
aggregate principal amount of $9,000,000 (the "Prior Bonds") which were issued
to finance the acquisition, construction, installation, renovation or equipping
of a manufacturing facility located in Carrollton County, Georgia and to pay
costs associated with the issuance of the Bonds, and (iii) secure the payment of
the principal of, interest on and purchase price of the Bonds by the delivery to
the Trustee of an irrevocable direct-pay letter of credit in the initial amount
of $9,187,500 issued by First Union National Bank (in such capacity, the "Bank")
for the account of the Company; and
WHEREAS, the Company is the successor by merger and operation of law to KMB
Produce, Inc., and the Company has assumed all the rights and obligations of KMB
Produce, Inc.; and
WHEREAS, the Trustee has accepted the trusts created by this Indenture and in
evidence thereof has joined in the execution hereof; and
WHEREAS, the Company has determined that the Bonds to be issued hereunder shall
be substantially in the form attached as Exhibit C to this Indenture, with such
variations, omissions and insertions as are required or permitted by this
Indenture; and
NOW, THEREFORE, in consideration of the premises, of the acceptance by the
Trustee of the trusts hereby created, and of the purchase and acceptance of the
Bonds by the Registered Owners, and also for and in consideration of the sum of
One Dollar paid to the Company by the Trustee at or before the execution and
delivery of this Indenture, the receipt of which is hereby acknowledged, and for
the purpose of fixing and declaring the terms and conditions upon which the
Bonds are to be issued, delivered, secured and accepted by the Registered Owners
and any and all other persons who shall from time to time be or become
Registered Owners thereof, and in order to secure the payment of the Bonds at
any time issued and outstanding hereunder and the interest thereon according to
their tenor, purport and effect, and in order to secure the performance and
observance of all the covenants, agreements and conditions therein and herein
contained;
THE COMPANY DOES HEREBY PLEDGE AND ASSIGN, and grant a security interest unto
the Trustee and its successors and assigns for the benefit of the Registered
Owners of the Bonds all right, title and interest of the Company presently owned
or hereafter acquired in and to all money or securities at any time on deposit
in, in transit to or credited to any fund or account created hereunder,
including without limitation the Project Fund and the Bond Fund, and investment
income with respect to any moneys or securities held in any fund or account
created hereunder (collectively, the "Trust Estate"); and it is so mutually
agreed and covenanted by and between the parties hereto for the equal and
proportionate benefit and security of the Registered Owners without preference,
priority or distinction as to lien or otherwise, except as hereinafter provided,
of any one Bond over any other Bond, by reason of priority in the issue, sale or
negotiation thereof or otherwise, for the benefit of the Registered Owners and
as security for the fulfillment of the obligations of the Company hereunder;
TO HAVE AND TO HOLD the same forever, subject, however, to the exceptions,
reservations and matters therein and herein recited but IN TRUST, nevertheless,
for the benefit and security of the Registered Owners from time to time of the
Bonds delivered hereunder and issued by the Company and outstanding;
PROVIDED, HOWEVER, that if, after the right, title and interest of the Trustee
in and to the Trust Estate pledged and assigned to it under this Indenture shall
have ceased, terminated and become void in accordance with Article XIII hereof,
the principal of and interest on the Bonds and any other obligations arising
hereunder shall have been paid to the Registered Owners or shall have been paid
by the Company pursuant to Article XIII hereof, then, this Indenture and all
covenants, agreements and other obligations of the Company hereunder shall
cease, terminate and be void, and thereupon the Trustee shall cancel and
discharge this Indenture and execute and deliver to the Company such instruments
in writing as shall be required to evidence the discharge hereof; otherwise,
this Indenture shall be and remain in full force and effect; and
PROVIDED, FURTHER, that the Trustee neither undertakes nor assumes any
obligations of the Company as set forth in this Indenture.
THIS INDENTURE FURTHER WITNESSETH, and it is expressly declared, that the Bonds
issued and secured hereunder are to be issued and delivered and the Trust Estate
herein pledged and assigned are to be dealt with and disposed of under, upon and
subject to the terms, conditions, stipulations, covenants, agreements, trusts,
uses and purposes as hereinafter expressed, and the Company has agreed and
covenants, and does hereby agree and covenant, with the Trustee and with the
Registered Owners of said Bonds, as follows, that is to say:
ARTICLE I
DEFINITION
Section 101. Definitions. The following words and terms as used in this
Indenture shall have the following meanings unless some other meaning is plainly
intended:
"Affiliate" means, with respect to any Person, (i) any other Person directly or
indirectly owning 5% or more of the voting stock or rights of such named Person
or of which the named Person owns 5% or more of such voting stock or rights;
(ii) any Person controlling, controlled by or under common control with such
named Person; (iii) any officer, director or employee of such named Person or
any Affiliate of the named Person; and (iv) any family member of the named
Person or any Affiliate of such named Person.
"Alternate Credit Facility" means an irrevocable direct pay letter of credit or
similar credit enhancement or support facility issued by a national or state
chartered banking institution for the benefit of the Trustee, the terms of which
Alternate Credit Facility shall in all respects material to the Registered
Owners be the same (except for the term set forth in such Alternate Credit
Facility) as the Letter of Credit as set forth in Section 503 hereof.
"Alternate Rate" means the LIBOR Rate for a period equal to one (1) month.
"Alternate Semiannual Rate" means the LIBOR Rate for a period equal to six (6)
months.
"Available Moneys" means (a) with respect to any payment date occurring during
any period that the Bonds are entitled to the benefit of a Credit Facility, (i)
any moneys, if in the written opinion of Counsel experienced in bankruptcy law
matters (which opinion shall be delivered to the Trustee at or prior to the time
of the deposit of such moneys with the Trustee), the deposit and use of such
moneys will not constitute an avoidable preferential payment pursuant to Section
547 of the Bankruptcy Code, recoverable from Holders of the Bonds pursuant to
Section 550 of the Bankruptcy Code in the event of an Event of Bankruptcy, and
(ii) moneys on deposit with the Trustee representing proceeds from the
remarketing by the Remarketing Agent of Bonds to persons other than the Company
or any Affiliate as described in Article III hereof, which, in each case, were
at all times since their deposit with the Trustee held in a separate and
segregated account or accounts or sub-account or sub-accounts in which no moneys
were at any time held and (iii) moneys drawn under a Credit Facility which in
each case were at all times since their deposit with the Trustee held in a
separate and segregated account or accounts or sub-account or sub-accounts in
which no moneys (other than those drawn under a Credit Facility) were at any
time held and (b) with respect to any payment date not occurring during a period
that the Bonds are entitled to the benefit of a Credit Facility, any moneys
furnished to the Trustee and the proceeds from the investment thereof. The
Trustee may presume that no Event of Bankruptcy has occurred unless notified in
writing to the contrary by the Company, the Credit Facility Issuer or the
Registered Owners of not less than 25% in aggregate principal amount of Bonds
Outstanding.
"Bank" means First Union National Bank, as the issuer of the Letter of Credit.
"Bank Account" means the account of that name established in the Bond Purchase
Fund pursuant to Section 302 hereof.
"Bankruptcy Code" means Title 11 of the United States Code, as amended, and any
successor statute or statutes having substantially the same function.
"Beneficial Owner" shall have the meaning set forth in Section 207 hereof.
"Bond" or "Bonds" means any bond or bonds authenticated and delivered under this
Indenture.
"Bond Documents" means collectively the Indenture, the Bonds, the Placement
Agreement, the Remarketing Agreement, the Private Placement Memorandum, the
Letter of Credit, the Reimbursement Agreement and any other documents relating
to the issuance of the Bonds or to the Letter of Credit.
"Bond Fund" means the trust fund so designated which is established pursuant to
Section 402(a) hereof.
"Bond Purchase Fund" means the trust fund so designated which is established
pursuant to Section 302 hereof.
"Bond Register" means the Bond Register as designated in Section 205 hereof.
"Bond Registrar" means the Bond Registrar as designated in Section 205 hereof.
"Business Day" means any day on which the offices of the Credit Facility Issuer
at which drawings on the Credit Facility are made (if such a Credit Facility is
in effect), the Trustee, the Paying Agent, the Tender Agent, the Bond Registrar
and the Remarketing Agent are each open for business and on which the New York
Stock Exchange is not closed.
"Calculation Period" means (a) with respect to the Bonds bearing interest at a
Weekly Rate, the period from and including the day following the end of the
Initial Rate Period to and including the next Wednesday, the period from and
including the Conversion Date on which the Interest Rate Determination Method is
changed to the Weekly Rate to and including the next Wednesday and, in each
case, each succeeding period from and including each Thursday to and including
the following Wednesday, (b) with respect to the Bonds bearing interest at a
Monthly Rate, the period from and including the Conversion Date on which the
Interest Rate Determination Method is changed to the Monthly Rate to and
including the last day of the calendar month in which such Conversion Date
occurred and each succeeding period from and including the first day of each
calendar month to and including the last day of such calendar month, and
(c) with respect to Bonds bearing interest at a Semiannual Rate, the period from
and including the Conversion Date on which the Interest Rate Determination
Method is changed to and including the dated immediately preceding the next
Interest Payment Date which is six months from such Conversion Date and each
succeeding six-month period from and including the first day of the next
calendar month to and including the last day of the calendar month which is six
months thereafter.
"Cede & Co." means Cede & Co., the nominee of DTC or any successor nominee of
DTC with respect to the Bonds.
"Conversion Date" means any Interest Payment Date by the Company in accordance
with Section 203 hereof as the effective date of conversion of the interest rate
on the Bonds from any Variable Rate to another Variable Rate or to the Fixed
Rate.
"Counsel" means an attorney or firm of attorneys acceptable to the Trustee and
may, but need not, be counsel to the Credit Facility Issuer or the Company.
"Credit Facility" means the Letter of Credit or, upon delivery of any Alternate
Credit Facility delivered to the Trustee pursuant to Article V hereof and
acceptance thereof, such Alternate Credit Facility.
"Credit Facility Issuer" means the Bank while the Letter of Credit secures the
Bonds or, upon delivery of any Alternate Credit Facility to the Trustee and
acceptance of such Alternate Credit Facility by the Trustee pursuant to Article
V hereof, the institution issuing such Alternate Credit Facility.
"Credit Substitution Date" means the date on which an Alternate Credit Facility
is accepted by the Trustee pursuant to Section 503(c) hereof.
"DTC" means The Depository Trust Company, a limited purpose company organized
under the laws of the State of New York, and its successors and assigns.
"DTC Participant" or "DTC Participants" means securities brokers and dealers,
banks, trust companies and clearing corporations that have access to the DTC
system.
"Defaulted Interest" has the meaning provided in Section 210 hereof.
"Determination Date" means (a) the Business Day next preceding the first day of
each Calculation Period during which the Bonds bear interest at a Weekly Rate,
(b) the last Business Day of the calendar month next preceding each Calculation
Period during which the Bonds bear interest at a Monthly Rate, (c) the Business
Day next preceding the first day of each Calculation Period during which the
Bonds will bear interest at a Semiannual Rate and (d) a date that is not more
than twenty (20) days nor less than two (2) days prior to any Fixed Rate
Conversion Date.
"Event of Bankruptcy" means a petition by or against the Company or any
Affiliate of the Company under the Bankruptcy Code or under any similar law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts (other than proceedings instituted by the Company or any
Affiliate of the Company against third parties) unless such petition shall have
been dismissed and such dismissal shall be final and not subject to appeal.
"Event of Default" means any of the events specified in Section 801 hereof to be
an Event of Default.
"First Principal Amount Increase Period" means the period from the date of
issuance of the Bonds until the earlier of (i) August 1, 2001, or (ii) the Fixed
Rate Conversion Date.
"Fixed Rate" means the fixed rate of interest established pursuant to
Section 202(e) hereof.
"Fixed Rate Conversion Date" means the day on which the Interest Rate
Determination Method is converted to a Fixed Rate.
"Fixed Rate Period" means the period during which the Fixed Rate is in effect.
"Fixed Rate Redemption Period" means the period beginning on the fourth
anniversary of the Fixed Rate Conversion Date and ending on the earlier of
(i) the Maturity Date or (ii) the date on which principal, accrued interest and
redemption premium, if any, on the Bonds have been paid in full.
"Government Obligations" means (i) direct obligations of the United States of
America, (ii) obligations unconditionally guaranteed by the United States of
America, and (iii) securities or receipts evidencing ownership interests in
obligations or specified portions (such as principal or interest) of obligations
described in clause (i) or (ii) above the full and timely payment of which
securities, receipts or obligations is unconditionally guaranteed by the United
States of America.
"Indenture" means this Trust Indenture as amended or supplemented in accordance
with the provisions of Article XII hereof at the time in question.
"Initial Interest Rate" means the initial rate of interest on the Bonds
established by the Placement Agent on the date of initial authentication and
delivery of the Bonds.
"Initial Rate Period" means the period from and including the date of initial
authentication and delivery of the Bonds to and including February 7, 2001.
"Interest Payment Date" means (i) with respect to any Variable Rate Period, the
first Business Day of each calendar month commencing the first Business Day of
March, 2001, and any date specified as a Conversion Date in accordance with
Section 203 hereof and (ii) with respect to any Fixed Rate Period, the first
Business Day of March or September following the Fixed Rate Conversion Date.
"Interest Rate Determination Method" means any of the methods of determining the
interest rate on the Bonds described in Sections 202(d) and 202(e) hereof.
"Investment Obligations" means:
(a) Government Obligations maturing within one year from the date of acquisition
thereof;
(b) obligations of any state or political subdivision of the United States or
any agency or instrumentality thereof if (i) such obligations are secured by
cash, Government Obligations or a combination thereof (A) which have been
deposited into a segregated escrow account for and irrevocably pledged to the
payment, when due, of the principal or redemption price of and interest on such
obligations and (B) which are sufficient, without reinvestment, to provide for
the payment, when due, of the principal or redemption price of and interest on
such obligations; or (ii) such obligations are insured as to timely payment of
principal or redemption price and interest by an insurance company or commercial
bank with capital, surplus and undivided profits in excess of $10,000,000 and
are rated by Moody's or by S&P in the highest rating category assigned by such
rating service to obligations of the same type;
(c) bonds, debentures, notes or other evidences of indebtedness issued by any of
the following agencies or such other like governmental or government sponsored
agencies which may be hereafter created: Bank for Cooperatives; Federal
Intermediate Credit Banks; Federal Financing Bank; Federal Home Loan Bank
System; Export-Import Bank of the United States; Farmers Home Administration;
Small Business Administration; Inter-American Development Bank; International
Bank for Reconstruction and Development; Federal Land Banks; Government National
Mortgage Association; or Tennessee Valley Authority;
(d) direct and general obligations of any state of the United States, to the
payment of the principal of and interest on which the full faith and credit of
such state is pledged, if at the time of their purchase such obligations are
rated in any of the two highest rating categories by S&P and Moody's;
(e) negotiable and non-negotiable certificates of deposit which are issued by
banks, trust companies or savings and loan associations maturing within one year
from the date of acquisition thereof, provided that the aggregate principal
amount of all such certificates issued to or for the benefit of the Company or
any Affiliate of the Company by any such institution shall not at any time
exceed 10% of the combined capital and surplus of such institution;
(f) repurchase agreements for Government Obligations which (i) are entered into
with banks, trust companies or dealers in government bonds which report to,
trade with and are recognized as primary dealers by a Federal Reserve Bank, and
(ii) such Government Obligations shall have a fair market value on the date of
the repurchase agreement equal to at least 100% of the amount of the related
repurchase obligations, and (iii) such Government Obligations are transferred to
the Trustee or a third party agent of the Trustee by physical delivery or by an
entry made on the records of the issuer of such Government Obligations;
(g) obligations of any state or political subdivision thereof or any agency or
instrumentality of such a state or political subdivision, the payment of
principal or redemption price of and interest on which is secured by an
unconditional, irrevocable letter of credit issued by a bank, trust company,
savings and loan association or other financial institution, provided that at
the time of its purchase both such obligation and the long term unsecured,
uncollateralized debt of such financial institutions are rated in either of the
two highest rating categories by S&P and Moody's;
(h) shares of an open-end, diversified investment company which is registered
under the Investment Company Act of 1940, as amended, and which (i) invests its
assets exclusively in Government Obligations having a final maturity date of
less than one year from their date of purchase or invests its assets in
repurchase agreements described in (f) above; (ii) seeks to maintain a constant
net asset value per share; and (iii) has aggregate net assets of not less than
$10,000,000 on the date of purchase of such shares; provided that, at the time
of purchase, such shares are rated in either of the two highest rating
categories by S&P and Moody's;
(i) Commercial paper rated P-1 by Moody's, or A-1 by S&P, or F-1 by Fitch IBCA,
Inc.; and
(j) any other investment authorized by the applicable law of the State and
approved in writing by the Credit Facility Issuer.
"LIBOR Rate" means, for any period, an interest rate per annum (based on a
360-day year) determined by the Remarketing Agent to be the rate or the
arithmetic mean of rates (rounded upward, if necessary, to the nearest
one-sixteenth (1/16) of one percentage point of the rate per annum) for deposits
in immediately available and freely transferable dollars of the United States of
America that appears on Telerate Screen, page 3750, as published daily by the
British Bankers Association Interest Settlement Rates (or another comparable
international financial data service satisfactory to the Remarketing Agent in
its discretion if Telerate no longer publishes such rates) and that is offered
by first class banks in the London interbank market to the offices of the
Remarketing Agent at 10:00 a.m. on the applicable Determination Date.
"Letter of Credit" means the irrevocable direct pay letter of credit no.
SM407968C (as amended by that Amendment No. 1 to letter of credit no.
SM407968C), dated March 19, 1999, in the amount of $9,187,500 issued by the
Bank, including any extensions or amendments thereof.
"Majority Registered Owners" means the Registered Owners of more than 50% of the
aggregate principal amount of the Bonds Outstanding.
"Material Adverse Effect" means a material adverse effect upon, or material
adverse change in, any of (i) the financial condition, operations, business,
properties or prospects of the Company; (ii) the ability of the Company to
perform under any of the Bond Documents in any material respect or any other
material contract to which the Company is a party in any material respect; or
(iii) the legality, validity or enforceability of this Indenture or any other
Bond Document.
"Maturity Date" means March 1, 2019.
"Monthly Rate" means the interest rate on the Bonds established in accordance
with Section 202(d)(2).
"Monthly Rate Period" means any period during which the Bonds bear interest at a
Monthly Rate.
"Moody's" means Moody's Investors Service, a Delaware corporation, its
successors and assigns, and, if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating
agency, "Moody's" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Remarketing Agent, with the consent
of the Company and the Credit Facility Issuer.
"Optional Tender Date" means (i) during any Weekly Rate Period, any Business Day
and (ii) during any Monthly Rate Period or any Semiannual Rate Period, the first
Business Day of each Calculation Period.
"Optional Tender Notice" means a notice from the Registered Owner (or Beneficial
Owner during any time when the Bonds are held under a book-entry system) of a
Bond to the Tender Agent in the form attached to the Bond as Exhibit A.
"Outstanding" in connection with Bonds means, as of the time in question, all
Bonds authenticated and delivered under this Indenture, except:
(a) Bonds theretofore cancelled or required to be cancelled under Section 214
hereof;
(b) Bonds which are deemed to have been paid in accordance with Article XIII
hereof; and
(c) Bonds in substitution for which other Bonds have been authenticated and
delivered pursuant to Article II hereof.
In determining whether the owners of a requisite aggregate principal amount of
Bonds Outstanding have concurred in any request, demand, authorization,
direction, notice, consent or waiver under the provisions hereof, Bonds which
are held by or on behalf of the Company (unless all of the Outstanding Bonds are
then owned by the Company) or an Affiliate of the Company shall be disregarded
for the purpose of any such determination; provided that the Trustee can assume
that no Bonds are owned by an Affiliate of the Company unless the Trustee has
received written notice from the Company as to the identity of such Affiliate.
"Paying Agent" means the Paying Agent as designated under Section 1403 hereof.
"Payment Date" has the meaning provided in Section 402(d) hereof.
"Placement Agent" means First Union Securities, Inc. or any other person
designated by the Company meeting the requirements of Section 1103 hereof.
"Placement Agreement" means the Placement Letter Agreement of even date
herewith, between the Company and the Placement Agent.
"Preliminary Fixed Rate" means the rate of interest per annum determined by the
Placement Agent at least 25 days prior to the Fixed Rate Conversion Date to be
that rate which, in the sole judgment of the Placement Agent based on market
conditions prevailing on the date such rate is determined, is the minimum fixed
annual rate of interest necessary to enable the Placement Agent to arrange for
the sale of all of the Bonds in the secondary market at a price equal to the
principal amount thereof, for which the Placement Agent would be so required to
arrange for the sale on the Fixed Rate Conversion Date pursuant to
Section 202(e) hereof.
"Private Placement Memorandum" or "Placement Memorandum" means the Private
Placement Memorandum dated the date of issuance of the Bonds.
"Proposed Rate" means, with respect to any Monthly Rate or Semiannual Rate, the
rate of interest, determined on the applicable Proposed Rate Determination Date,
that the Remarketing Agent, taking into account market conditions prevailing on
the Proposed Rate Determination Date, anticipates to be the minimum rate of
interest per annum necessary, in the judgment of the Remarketing Agent, to
enable the Remarketing Agent to arrange for the sale of all of the Bonds on the
Determination Date in the secondary market at a price equal to the principal
amount thereof (plus accrued interest to the date of settlement).
"Proposed Rate Determination Date" means each date that is six (6) days prior to
each Determination Date with respect to a Monthly Rate Period (or if such day is
not a Business Day, the next preceding Business Day) or (b) twenty (20) days
prior to each Determination Date with respect to a Semiannual Rate Period (or if
such day is not a Business Day, the next preceding Business Day).
"Registered Owner" or "Registered Owners" means (a) in the event that the
book-entry system of evidence of transfers of ownership in the Bonds is employed
pursuant to Section 207, Cede & Co., or the nominee of any other custodian
selected by the Trustee to provide for a book-entry system and (b) in all other
cases, the person or persons in whose names any Bond or Bonds are registered on
the books and records of the Bond Registrar pursuant to Section 205 of this
Indenture.
"Regular Record Date" means (a) in respect of any Interest Payment Date during
the Variable Rate Period, the close of business on the Business Day immediately
preceding each such Interest Payment Date, and (b) in respect of any Interest
Payment Date during the Fixed Rate Period, the 1st day (whether or not a
Business Day) of the calendar month next preceding each such Interest Payment
Date.
"Reimbursement Agreement" means the Letter of Credit and Reimbursement Agreement
of even date herewith between the Company and the Bank, as the same may be
amended from time to time and filed with the Trustee, and any agreement of the
Company with a Credit Facility Issuer setting forth the obligations of the
Company to such Credit Facility Issuer arising out of any payments under a
Credit Facility and which provides that it shall be deemed to be a Reimbursement
Agreement for the purpose of this Indenture.
"Remarketing Account" means the account of that name established in the Bond
Purchase Fund pursuant to Section 302 hereof.
"Remarketing Agent" means First Union Securities, Inc., and its successors as
provided in Section 1101 hereof.
"Remarketing Agreement" means any Remarketing Agreement between the Company and
a Remarketing Agent, as amended, restated, modified or supplemented from time to
time.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.,
its successors and assigns, and, if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Remarketing Agent, with the consent
of the Company and the Credit Facility Issuer.
"Semiannual Rate" means the interest rate on the Bonds established in accordance
with Section 202(d)(3).
"Semiannual Rate Period" means any period during which the Bonds bear interest
at a Semiannual Rate.
"Special Record Date" means for purpose of payment of Defaulted Interest on the
Bonds, the date fixed by the Trustee pursuant to Section 210 hereof.
"State" means the State of Georgia.
"Tender Agent" means First Union National Bank and its successors as provided in
Section 1102 hereof.
"Tendered Bonds" means those Bonds delivered or deemed delivered by the
Registered Owners for purchase pursuant to an Optional Tender Notice or on any
Conversion Date.
"Trustee" means First Union National Bank and its successors in the trust
hereunder.
"Undelivered Bonds" means (i) any Bond for which an Optional Tender Notice has
been given pursuant to Section 204 hereof and which has not been delivered to
the Tender Agent on the date specified for purchase and (ii) any Bond which has
not been delivered to the Trustee for redemption or purchase when called for
redemption or purchase on any optional or mandatory redemption or purchase date
or a Conversion Date; provided that in either case the Trustee has on hand and
available on such date funds sufficient to purchase or redeem said Bond.
"Variable Rate" means a Weekly Rate, Monthly Rate or Semiannual Rate.
"Variable Rate Period" means that period during which the Bonds bear interest at
a Variable Rate.
"Weekly Rate" means the interest rate on the Bonds established in accordance
with Section 202(d)(1).
"Weekly Rate Period" means any period during which the Bonds bear interest at a
Weekly Rate.
Section 102. Rules of Construction.
(a) Words of the masculine gender shall be deemed and construed to include
correlative words of the feminine and neuter genders. Unless the context shall
otherwise indicate, the words "Bond", "Registered Owners", and "person" shall
include the plural as well as the singular number; the word "person" shall
include any individual, corporation, partnership, limited liability company,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
(b) Words importing the redemption or calling for redemption of the Bonds shall
not be deemed to refer to or connote payment of Bonds at their stated maturity.
(c) The Table of Contents, captions and headings in this Indenture are for
convenience only and in no way limit the scope or intent of any provision or
section of this Indenture.
(d) All references herein to particular articles or sections are references to
articles or sections of this Indenture unless some other reference is indicated.
(e) All references herein to time shall be prevailing Eastern time.
ARTICLE II
THE BONDS
Section 201. Amount, Terms, and Issuance of Bonds
The Bonds shall be limited to $9,000,000 in aggregate principal amount and shall
contain substantially the terms recited in the form of Bond attached hereto as
Exhibit C and as set forth in this Indenture. No Bonds may be issued under this
Indenture except in accordance with this Article II. The Bonds may bear such
endorsement or legend satisfactory to the Trustee as may be required to conform
to usage or law with respect thereto, including the imposition of CUSIP or other
identifying numbers. Upon satisfaction of the conditions set forth in
Section 215 hereof, the Company shall issue the Bonds, and the Trustee shall, at
the Company's request, authenticate the Bonds and deliver them as specified in
the request.
Section 202. Denominations, Maturity, Dates and Interest Rates of the Bonds
(a) Denominations, Maturity, Dates. The Bonds shall be designated "Fresh
Advantage, Inc. Taxable Variable Rate Demand Bonds, Series 2001." The Bonds
shall be issuable as fully registered Bonds in the denomination of $100,000 or
any integral multiple of $5,000 in excess thereof, provided that if less than
$100,000 principal amount of Bonds is outstanding only one Bond shall be issued
in such smaller denomination. Except when only one Bond remains outstanding, no
amount of Bonds may be tendered, retained or redeemed under the terms of the
Indenture which would result in the ownership of Bonds in denominations other
than approved hereunder. All Bonds shall bear the date of their authentication,
shall bear interest from the most recent date to which interest has been paid or
duly provided for or, if authenticated on an Interest Payment Date, from that
date, or if no interest has been paid or duly provided for, from the original
date of authentication, and shall mature, subject to prior redemption as
provided in Article VI hereof, on the Maturity Date.
(b) Interest Rates. The Bonds shall bear interest at the applicable rate
provided below. On each Interest Payment Date, interest accrued through the day
immediately preceding such Interest Payment Date shall be payable. While the
Bonds bear interest at any Variable Rate, interest shall be computed on the
basis of the number of days actually elapsed over a 360-day year. After the
Fixed Rate Conversion Date, interest on the Bonds shall be computed on the basis
of a 360-day year of 12 months of 30 days each.
(c) Initial Interest Rate. For the Initial Rate Period, the Bonds shall bear
interest at the Initial Interest Rate.
(d) Variable Rate. Following the Initial Rate Period and until any Conversion
Date, the Bonds shall bear interest at the Weekly Rate. During the Variable Rate
Period, the Remarketing Agent shall give telephonic, facsimile or written notice
on the Determination Date to the Trustee and the Company of the Variable Rate to
be in effect for the next succeeding Calculation Period. The determination of
any Variable Rate by the Remarketing Agent shall be conclusive and binding upon
the Registered Owners, the Beneficial Owners, the Company, the Trustee, the
Tender Agent, the Remarketing Agent and the Credit Facility Issuer.
Notwithstanding anything herein to the contrary, each Interest Rate
Determination Method in effect from time to time shall continue in effect until
the date on which such Interest Rate Determination Method is changed as
described in Section 203.
(1) Weekly Rate. During any Weekly Rate Period the Bonds will bear interest at
the Weekly Rate. During any Weekly Rate Period, the Remarketing Agent will
determine the Weekly Rate for the applicable Calculation Period on the
applicable Determination Date. Each Weekly Rate shall be the rate of interest
per annum determined by the Remarketing Agent on and as of each applicable
Determination Date as the minimum rate of interest per annum necessary, in the
judgment of the Remarketing Agent taking into account market conditions
prevailing on the Determination Date, to enable the Remarketing Agent to arrange
for the sale of all of the Bonds on the first day of the applicable Calculation
Period in the secondary market at a price equal to the principal amount thereof
(plus accrued interest to the date of settlement). If the Remarketing Agent
fails to certify such rate, or if for any reason the Weekly Rate is held to be
invalid or unenforceable by a court of competent jurisdiction for any period,
the Weekly Rate for such Calculation Period shall be the Alternate Rate.
Notwithstanding anything else contained herein, the Weekly Rate shall not in any
event exceed the lesser of (i) 15% per annum or (ii) the maximum rate permitted
by law.
(2) Monthly Rate. During any Monthly Rate Period the Bonds will bear interest at
the Monthly Rate. During any Monthly Rate Period, the Remarketing Agent will
determine the Proposed Rate for the applicable Calculation Period on the
Proposed Rate Determination Date. Thereafter, the Remarketing Agent will
determine a Monthly Rate on the applicable Determination Date; provided,
however, that such rate shall not be less than the Proposed Rate determined by
the Remarketing Agent on the immediately preceding Proposed Rate Determination
Date. Each Monthly Rate shall be the rate of interest per annum determined by
the Remarketing Agent on and as of each applicable Determination Date as the
minimum rate of interest per annum necessary, in the judgment of the Remarketing
Agent taking into account market conditions prevailing on the Determination Date
and subject to the foregoing proviso concerning the Proposed Rate, to enable the
Remarketing Agent to arrange for the sale of all of the Bonds on the first day
of the applicable Calculation Period in the secondary market at a price equal to
the principal amount thereof (plus accrued interest to the date of settlement).
If the Remarketing Agent fails to certify such rate or if, for any reason, the
Monthly Rate is held to be invalid or unenforceable by a court of competent
jurisdiction for any Calculation Period, the Monthly Rate for such Calculation
Period shall be the Alternate Rate. In connection with any change in the
Interest Rate Determination Method to a Monthly Rate pursuant to Section 203,
the Proposed Rate shall be determined as provided above on the applicable
Proposed Rate Determination Date and the initial Monthly Rate shall be
determined as provided above on the applicable Determination Date.
Notwithstanding anything else contained herein, the Monthly Rate shall not in
any event exceed the lesser of (i) 15% per annum or (ii) the maximum rate
permitted by law.
(3) Semiannual Rate. During any Semiannual Rate Period the Bonds will bear
interest at the Semiannual Rate. During any Semiannual Rate Period, the
Remarketing Agent will determine the Proposed Rate for the next Calculation
Period on the Proposed Rate Determination Date. Thereafter, the Remarketing
Agent will determine a Semiannual Rate for the next Calculation Period on the
applicable Determination Date; provided, however, that such Semiannual Rate
shall not be less than the Proposed Rate determined by the Remarketing Agent on
the immediately preceding Proposed Rate Determination Date. Each Semiannual Rate
shall be the rate of interest per annum determined by the Remarketing Agent on
and as of each applicable Determination Date as the minimum rate of interest per
annum necessary, in the judgment of the Remarketing Agent taking into account
market conditions prevailing on the Determination Date and subject to the
foregoing proviso concerning the Proposed Rate, to enable the Remarketing Agent
to arrange for the sale of all of the Bonds on the first day of the applicable
Calculation Period in the secondary market at a price equal to the principal
amount thereof (plus accrued interest to the date of settlement). If the
Remarketing Agent fails to certify such rate or if, for any reason, the
Semiannual Rate is held to be invalid or unenforceable by a court of competent
jurisdiction for any Calculation Period, the Semiannual Rate for such
Calculation Period shall be the Alternate Semiannual Rate. In connection with
any change in the Interest Rate Determination Method to a Semiannual Rate
pursuant to Section 203, the Proposed Rate shall be determined as provided above
on the applicable Proposed Rate Determination Date and the initial Semiannual
Rate shall be determined as provided above on the applicable Determination Date.
Notwithstanding anything else contained herein, the Semiannual Rate shall not in
any event exceed the lesser of (i) 15% per annum or (ii) the maximum rate
permitted by law.
(e) Fixed Rate. During the Fixed Rate Period, the Bonds shall bear interest at
the Fixed Rate.
(1) On the Fixed Rate Conversion Date the Fixed Rate shall be established as
follows:
(A) if the Placement Agent shall have arranged for the sale of any or all
Tendered Bonds at a price equal to the principal amount thereof, the Fixed Rate
shall be equal to the interest rate or rates at which such Bonds were sold by
the Placement Agent, provided that all Tendered Bonds shall be sold at par and
at a rate greater than or equal to the Preliminary Fixed Rate; or
(B) if the Placement Agent shall have arranged for the sale of none of the
Tendered Bonds, the Fixed Rate shall be equal to the Preliminary Fixed Rate.
(2) If, for any reason, the Fixed Rate is held to be invalid or unenforceable by
a court of competent jurisdiction, the Fixed Rate will be 10% per annum.
Notwithstanding anything to the contrary contained herein or in the Indenture,
the Fixed Rate shall in no event be a rate of interest in excess of the maximum
rate permitted by law.
(3) On or before the Fixed Rate Conversion Date, all Bonds shall be presented to
the Trustee for stamping or otherwise noting thereon of the legend:
"The interest rate on this Bond has been fixed at _____% per annum in accordance
with the provisions of this Bond and Section 202(e) of the Indenture.
Section 203. Conversion of Interest Rate Determination Method.
(a) Conversion Notice. The Interest Rate Determination Method may be changed, at
the direction of the Company, from any Variable Rate to any other Interest Rate
Determination Method on any Conversion Date, in whole but not in part, upon
delivery of written notice of such change (a "Conversion Notice") by the Company
to the Remarketing Agent, the Trustee, the Credit Facility Issuer and the Tender
Agent. The Conversion Notice must be delivered (i) not less than 15 days prior
to the proposed Conversion Date if the Interest Rate Determination Method is
converted to a Weekly Rate or Monthly Rate or (ii) not less than 35 nor more
than 60 days prior to the proposed Conversion Date if the Interest Rate
Determination Method is converted to a Semiannual Rate or Fixed Rate.
Each Conversion Notice shall state (i) that the Company elects to change the
Interest Rate Determination Method to a new Interest Rate Determination Method,
(ii) the proposed Conversion Date, (iii) the Interest Rate Determination Method
to be in effect from and after such Conversion Date, (iv) whether a Credit
Facility is to be in effect from and after such Conversion Date, and, if so, the
terms of such Credit Facility, and (v) if a Fixed Rate is to be in effect from
and after such Conversion Date, designation of a Placement Agent together with a
copy of the agreement between the Placement Agent and the Company concerning the
placement of the Bonds at the Fixed Rate.
The Placement Agent or Remarketing Agent, as applicable, shall promptly notify
the Trustee and the Company of the determination of the Preliminary Fixed Rate
or Proposed Rate, as applicable, by telephone, telecopier, telex, telegram or
other telecommunication device and upon request shall confirm such notice in
writing. Upon receipt of notice of the Proposed Rate or the Preliminary Fixed
Rate (or the Conversion Notice, if the new Interest Rate Determination Method is
the Weekly Rate), the Trustee shall, as soon as practicable (but in no event
more than two Business Days thereafter), send by first class mail, in the name
of the Company, a notice to the Registered Owners of the Bonds, which notice
shall be in the form attached hereto as Exhibit B.
If the Company elects to convert the Interest Rate Determination Method to any
new Interest Rate Determination Method, all Bonds shall be deemed to have been
tendered by the Registered Owners thereof on the Conversion Date. Registered
Owners of Bonds which are deemed tendered shall not be entitled to any payment
(including any interest to accrue subsequent to the Conversion Date) other than
the purchase price for such Bonds which shall be equal to the unpaid principal
amount of such Bonds, and any such Bonds shall cease to accrue interest and
shall no longer be entitled to the benefits of this Indenture, except for the
purpose of payment of the purchase price therefor and interest payable on the
Conversion Date. Payment of the purchase price of any such Bonds shall be made
only upon the presentment and surrender of such Bonds to the Tender Agent. Upon
request, the Trustee shall provide the Tender Agent with the address set forth
on the Bond Register for such Registered Owner. In the case of any Bond deemed
tendered, the Company shall cause to be executed, and the Trustee shall
authenticate and deliver to the new Registered Owner as provided in Section 301
hereof, a new Bond of like date and tenor in lieu of and in substitution for
such Bond deemed to be tendered. Notwithstanding the foregoing provisions of
this paragraph, if the Bonds are being held pursuant to a book-entry system as
provided in Section 207 hereof, Beneficial Owners, not Registered Owners, shall
be deemed to have tendered their interests in the Bonds on the Conversion Date.
(b) Conversion Date. The Conversion Date must be an Interest Payment Date.
(c) Failure or Revocation of Conversion. If an Event of Default shall have
occurred and be continuing hereunder, the Interest Rate Determination Method for
the Bonds shall not be changed on the Conversion Date and the Trustee shall
immediately notify by telephone, confirmed in writing, the Credit Facility
Issuer, if any, the Remarketing Agent, the Company and the Tender Agent that the
Interest Rate Determination Method for the Bonds shall not be changed on the
Conversion Date.
Notwithstanding any other provision in this Indenture to the contrary, no
conversion of the Interest Rate Determination Method to the Fixed Rate shall
occur if the Company, not later than 10:00 a.m., on the Business Day immediately
preceding the applicable Determination Date, directs the Remarketing Agent not
to change the Interest Rate Determination Method to the Fixed Rate by written
notice, with a copy to the Trustee, the Tender Agent, the Remarketing Agent and
the Credit Facility Issuer, if any.
If a proposed conversion of the Interest Rate Determination Method is cancelled
pursuant to the provisions of the two preceding paragraphs, all Bonds shall
nevertheless be deemed to have been tendered for purchase on the Conversion Date
and shall be purchased on the Conversion Date. The Bonds shall continue to bear
interest in accordance with the Interest Rate Determination Method in effect
prior to the Conversion Date; provided, however, that (i) the rate of interest
that the Bonds will bear shall be determined on the Conversion Date and (ii) if
the Interest Rate Determination Method in effect prior to the Conversion Date is
an Interest Rate Determination Method that requires the Remarketing Agent to set
a Proposed Rate, for purposes of this Section 203(c), the provisions of this
Indenture requiring the setting of such Proposed Rate shall not be applicable.
(d) Failure to Mail Certain Notices. Failure of the Trustee to mail the notice
described in Section 203(a), or any defect therein, shall not affect the
validity of any interest rate or change in the Interest Rate Determination
Method on any of the Bonds or the requirement that the Bonds shall be tendered
pursuant to Section 203 or extend the period for tendering any of the Bonds for
purchase, and the Trustee shall not be liable to any Registered Owner or
Beneficial Owner by reason of its failure to mail such notice or any defect
therein.
(e) Credit Facility Upon Conversion to Fixed Rate. If a Credit Facility is to be
in effect immediately following the Fixed Rate Conversion Date, such Credit
Facility must provide for drawings with respect to the interest component
thereunder to pay 210 days' interest on the Bonds at the actual interest rates
in effect, plus any premium payable pursuant to Section 601(a)(2). The Bank has
no obligation to provide such Credit Facility.
Section 204. Optional Tender Provisions of the Bonds.
(a) While the Bonds bear interest at a Variable Rate, any Bond or portion
thereof in an authorized denomination (other than a Bond registered in the name
of the Company) shall be purchased on the demand of the Registered Owner
thereof, on any Optional Tender Date at a purchase price equal to 100% of the
principal amount thereof plus accrued interest to the purchase date, if the
Registered Owner of such Bond delivers to the Tender Agent at its address filed
with the Trustee an Optional Tender Notice (i) at least seven (7) days prior to
the purchase date specified in such Optional Tender Notice during any Weekly
Rate Period or Monthly Rate Period or (ii) at least twenty (20) days prior to
the purchase date specified in such Optional Tender Notice during any Semiannual
Rate Period.
(b)Any Optional Tender Notice delivered pursuant to the preceding paragraph
shall automatically constitute: (i) an irrevocable offer to sell such Bond on
the Optional Tender Date at a price equal to 100% of the principal amount of
such Bond plus accrued interest to such Optional Tender Date; and (ii) an
irrevocable authorization and instruction to the Bond Registrar to effect
transfer of such Bond to the purchaser thereof on the Optional Tender Date. No
purchase of Bonds pursuant to the provisions of this Section 204 shall be deemed
a redemption thereof.
(c) Any Registered Owner who delivers an Optional Tender Notice pursuant to this
Section 204 shall deliver such Bond to the Tender Agent, at its address filed
with the Trustee, not less than five days prior to the Optional Tender Date
specified in the aforesaid Optional Tender Notice. All Bonds delivered to the
Tender Agent pursuant to this Section 204 must be duly endorsed for transfer in
blank in form satisfactory to the Trustee.
(d) If a Registered Owner who gives the Optional Tender Notice shall fail to
deliver the Bond or Bonds identified in the Optional Tender Notice to the Tender
Agent at or prior to 10:00 a.m. on the Optional Tender Date, such Undelivered
Bond shall be purchased and shall cease to accrue interest on such Optional
Tender Date and the Registered Owner thereof shall thereafter be entitled only
to payment of the purchase price therefor and to no other benefits of this
Indenture, and the Company, to the extent permitted by law, shall execute and
the Trustee shall authenticate and deliver a substitute Bond or Bonds in lieu of
the Undelivered Bond and the Bond Registrar shall register such Bond in the name
of the purchaser or purchasers thereof pursuant to Section 206 hereof. The
Tender Agent shall notify the Trustee and the Bond Registrar of any Undelivered
Bonds. The Trustee shall (i) notify the Remarketing Agent of such Undelivered
Bonds and (ii) place a stop transfer against such Undelivered Bonds until the
Undelivered Bonds are properly delivered to the Tender Agent. Upon notice of
such delivery, the Bond Registrar shall make any necessary adjustment to the
Bond Register.
(e) Notwithstanding anything to the contrary contained herein, the rights of the
Registered Owners to tender Bonds pursuant to this Section 204 shall cease
immediately and without further notice from and including the date payment of
the Bonds is accelerated following an Event of Default pursuant to Article VIII
hereof.
(f) If the Bonds are being held pursuant to a book-entry system as provided in
Section 207 hereof, then an Optional Tender Notice may be delivered by a
Beneficial Owner. Such Optional Tender Notice must be delivered as required
under Section 204(a) and must state that the Beneficial Owner will cause its
beneficial interest or portion thereof in an authorized denomination to be
tendered, the amount of such interest to be tendered, the Optional Tender Date
on which such interest is to be tendered and the identity of the DTC Participant
through which the Beneficial Owner maintains its interest. Upon delivery of such
notice, such Beneficial Owner must arrange to have its beneficial ownership
interest in the Bonds being tendered transferred to the Tender Agent at or prior
to 10:00 a.m. on the Optional Tender Date but need not otherwise comply with the
provisions of Section 204(c).
Section 205. Registered Bonds Required, Bond Registrar and Bond Register. All
Bonds shall be issued in fully registered form. The Bonds shall be registered
upon original issuance and upon subsequent transfer or exchange as provided in
this Indenture.
The Company hereby appoints the Trustee to act as "Bond Registrar." Upon
appointment of a successor Trustee pursuant to Section 914 and acceptance of
such appointment, such successor Trustee shall also assume the duties of Bond
Registrar.
The Bond Registrar shall act as registrar and transfer agent for the Bonds.
There shall be kept at an office of the Bond Registrar a register (the "Bond
Register") in which, subject to such reasonable regulations as the Company or
the Bond Registrar may prescribe, there shall be provisions for the registration
of the Bonds and for the registration or transfers of the Bonds. The Company
shall cause the Bond Registrar to designate, by a written notification to the
Company, a specific office location (which may be changed from time to time,
upon similar notification) at which the Bond Register is kept. In the absence of
a specific designation by the Bond Registrar, the principal corporate trust
office of the Trustee in Richmond, Virginia shall be deemed the office at which
the Bond Register is kept.
Section 206. Transfer and Exchange. Subject to the provisions of Section 207
below, the following provisions shall be applicable to all transfers and
exchanges of Bonds. Upon surrender for transfer of any Bond, the Company shall
execute and the Trustee shall authenticate and deliver in the name of the
transferee or transferees, one or more new fully registered Bonds of authorized
denomination in the aggregate principal amount which the Registered Owner is
entitled to receive; provided that if monies for the purchase of such Bond have
been provided pursuant to a draw under the Credit Facility, such Bond shall not
be transferable to anyone other than the Company or its assignee or pledgee.
Except for transfers in connection with the purchase of Bonds pursuant to
Section 204 and the remarketing thereof pursuant to Article III, which shall be
effected at the office of the Tender Agent, Bonds shall be surrendered for
transfer at the principal corporate trust office of the Trustee in Richmond,
Virginia. Also, the Company shall execute and the Trustee shall authenticate and
deliver Bonds in lieu of Undelivered Bonds.
All Bonds presented for transfer, exchange, redemption or payment (if so
required by the Company, the Bond Registrar or the Trustee), shall be
accompanied by a written instrument or instruments of transfer or authorization
for exchange, in form satisfactory to the Bond Registrar, which may include a
signature guarantee, duly executed by the Registered Owner or by his attorney
duly authorized in writing.
No service charge shall be made to a Registered Owner for any exchange or
transfer of Bonds, but the Company or the Bond Registrar may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto.
Except in connection with the purchase of Bonds pursuant to Section 204 hereof
and the remarketing thereof pursuant to Article III, neither the Company, the
Trustee nor the Bond Registrar shall be required to issue, transfer or exchange
any Bond selected for redemption in whole or in part or to issue, transfer or
exchange any of the Bonds during the period of five days preceding the date a
notice of redemption is sent.
New Bonds delivered upon transfer or exchange shall be valid obligations of the
Company, evidencing the same debt as the Bonds surrendered, shall be secured by
this Indenture and shall be entitled to all of the security and benefits hereof
to the same extent as the Bonds surrendered.
Section 207. Book-Entry System. The Company may make appropriate arrangements
for the Bonds (or any portion thereof) to be issued or held by means of a
book-entry system administered by DTC with no physical distribution of Bonds
made to the public (other than those Bonds, if any, not held under such
book-entry system). References in this Section 207 to a Bond or the Bonds shall
be construed to mean the Bond or the Bonds that are held under the book-entry
system. In such event, one Bond of each maturity shall be issued to DTC and held
under the FAST system or such other system as permitted by DTC. A book-entry
system shall be employed, evidencing ownership of the Bonds in Authorized
Denominations, with transfers of beneficial ownership effected on the records of
DTC and the DTC Participants pursuant to rules and procedures established by
DTC.
Each DTC Participant shall be credited in the records of DTC with the amount of
such DTC Participant's interest in the Bonds. Beneficial ownership interests in
the Bonds may be purchased by or through DTC Participants. The holders of these
beneficial ownership interests are hereinafter referred to as the "Beneficial
Owners." The Beneficial Owners shall not receive Bonds representing their
beneficial ownership interests. The ownership interests of each Beneficial Owner
shall be recorded through the records of the DTC Participant from which such
Beneficial Owner purchased its Bonds. Transfers of Ownership interests in the
Bonds shall be accomplished by book entries made by DTC and, in turn, by DTC
Participants acting on behalf of Beneficial Owners. SO LONG AS CEDE & CO., AS
NOMINEE FOR DTC, IS THE REGISTERED OWNER OF THE BONDS, THE TRUSTEE SHALL TREAT
CEDE & CO. AS THE ONLY HOLDER OF THE BONDS FOR ALL PURPOSES UNDER THIS
INDENTURE, INCLUDING RECEIPT OF ALL PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST
ON THE BONDS, RECEIPT OF NOTICES, VOTING AND REQUESTING OR DIRECTING THE TRUSTEE
TO TAKE OR NOT TO TAKE, OR CONSENTING TO, CERTAIN ACTIONS UNDER THIS INDENTURE.
Payments of principal, interest, premium, if any, and purchase price with
respect to the Bonds, so long as DTC is the only Registered Owner of the Bonds,
shall be paid by the Trustee directly to DTC or its nominee, Cede & Co. as
provided in the Letter of Representations dated January 19, 2001 from the
Company, the Remarketing Agent and the Trustee in its capacities as such and as
Tender Agent and Paying Agent to DTC (the "Letter of Representations") with
respect to the Bonds. DTC shall remit such payments to DTC Participants, and
such payments thereafter shall be paid by DTC Participants to the Beneficial
Owners. Neither the Company nor the Trustee shall be responsible or liable for
payment by DTC to DTC Participants, for sending transaction statements or for
maintaining, supervising or reviewing records maintained by DTC or DTC
Participants.
In the event that (1) DTC determines not to continue to act as securities
depository for the Bonds or (2) the Company determines that the continuation of
the book-entry system of evidence and transfer of ownership of the Bonds would
adversely affect the Company's interests or the interests of the Beneficial
Owners of the Bonds, the Company shall discontinue the book-entry system with
DTC with respect to the Bonds. If the Company fails to identify another
qualified securities depository to replace DTC, the Trustee shall authenticate
and deliver replacement Bonds in the form of fully registered Bonds to each
Beneficial Owner upon the receipt of instructions from the Company.
THE COMPANY, THE REMARKETING AGENT, THE TENDER AGENT AND THE TRUSTEE SHALL NOT
HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO DTC OR ANY DTC PARTICIPANT OR ANY
BENEFICIAL OWNER WITH RESPECT TO (i) THE BONDS; (ii) THE ACCURACY OF ANY RECORDS
MAINTAINED BY DTC OR ANY DTC PARTICIPANT; (iii) THE PAYMENT BY DTC OR ANY DTC
PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE
PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS; (iv) THE DELIVERY OR
TIMELINESS OF DELIVERY BY DTC OR ANY DTC PARTICIPANT OF ANY NOTICE DUE TO ANY
BENEFICIAL OWNER THAT IS REQUIRED OR PERMITTED UNDER THE TERMS OF THIS INDENTURE
TO BE GIVEN TO BENEFICIAL OWNERS; (v) THE SELECTION OF BENEFICIAL OWNERS TO
RECEIVE PAYMENTS IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; OR
(vi) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC, OR ITS NOMINEE, CEDE & CO.,
AS REGISTERED OWNER.
In the event that a book-entry system of evidence and transfer of ownership of
the Bonds is discontinued pursuant to the provisions of this Section, the Bonds
shall be delivered solely as fully registered Bonds without coupons in the
authorized denominations, shall be lettered "R" and numbered separately from 1
upward, and shall be payable, executed, authenticated, registered, exchanged and
canceled pursuant to the provisions hereof.
The Trustee shall not be limited to utilizing a book-entry system maintained by
DTC but may enter into a custody agreement (with the consent of the Company)
with any bank or trust company serving as custodian (which may be the Trustee
serving in the capacity of custodian) to provide for a book-entry or similar
method for the registration and registration of transfer of all or a portion of
the Bonds.
SO LONG AS A BOOK-ENTRY SYSTEM OF EVIDENCE OF TRANSFER OF OWNERSHIP OF ALL THE
BONDS IS MAINTAINED IN ACCORDANCE HEREWITH, THE PROVISIONS OF THIS INDENTURE
RELATING TO THE DELIVERY OF PHYSICAL BOND CERTIFICATES WITH RESPECT TO THE BONDS
SHALL BE DEEMED INAPPLICABLE OR BE OTHERWISE SO CONSTRUED AS TO GIVE FULL EFFECT
TO SUCH BOOK-ENTRY SYSTEM.
Section 208. Execution. The Bonds shall be executed by the manual or facsimile
signature of the President or other authorized representative of the Company,
and, if applicable, the seal of the Company shall be affixed, imprinted,
lithographed or reproduced thereon and shall be attested by the manual or
facsimile signature of the Secretary or Assistant Secretary of the Company.
Bonds executed as above provided may be issued and shall, upon request of the
Company, be authenticated by the Trustee, notwithstanding that any officer
signing such Bonds or whose facsimile signature appears thereon shall have
ceased to hold office at the time of issuance or authentication or shall not
have held office at the date of the Bond.
Section 209. Authentication. No Bond shall be valid for any purpose until the
Trustee's Certificate of Authentication thereon shall have been duly executed as
provided in this Indenture, and such authentication shall be conclusive proof
that such Bond has been duly authenticated and delivered under this Indenture
and that the Registered Owner thereof is entitled to the benefit of the trust
hereby created, subject to the provisions of Section 203, Section 204(d) and
Article XIII hereof.
Section 210. Payment of Principal and Interest; Interest Rights Preserved. The
principal and redemption price of any Bond shall be payable, upon surrender of
such Bond, at the principal corporate trust office of the Trustee. Interest on
each Interest Payment Date shall be payable by check, mailed on the Interest
Payment Date to the address of the person entitled thereto on the Regular Record
Date or, if applicable, the Special Record Date, as such address shall appear in
the Bond Register. Interest shall also be payable by wire transfer to any
Registered Owner of Bonds in the principal amount of $500,000 or more at the
written request of the Registered Owner received by the Trustee at least five
days prior to the Regular Record Date or Special Record Date. If the Interest
Payment Date is not a Business Day, interest shall be mailed or sent by wire
transfer on the next succeeding Business Day as if made on the Interest Payment
Date.
Interest on any Bond which is payable, but is not punctually paid or provided
for, on any Interest Payment Date ("Defaulted Interest") shall forthwith cease
to be payable to the Registered Owner of such Bonds on the relevant Regular
Record Date solely by virtue of such Registered Owner having been such
Registered Owner on the Regular Record Date, and such Defaulted Interest shall
be paid, pursuant to Section 811 hereof, to the person in whose name the Bond is
registered at the close of business on a Special Record Date to be fixed by the
Trustee, such date to be not more than 15 nor less than 10 days prior to the
date of proposed payment. The Trustee shall cause notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor to be mailed,
first class postage prepaid, to each Registered Owner, at its address as it
appears in the Bond Register, not less than 10 days prior to such Special Record
Date.
Subject to the foregoing provisions of this Section 210, each Bond delivered
under this Indenture upon transfer of or exchange for or in lieu of any other
Bond shall carry the rights to interest accrued and unpaid, and to accrue, on
such other Bond.
Section 211. Persons Deemed Owners. The Company, the Trustee and the Bond
Registrar may deem and treat the person in whose name any Bond is registered as
the absolute owner thereof (whether or not such Bond shall be overdue and
notwithstanding any notation of ownership or other writing thereon made by
anyone other than the Trustee or the Bond Registrar) for the purpose of
receiving payment of or on account of the principal of (and premium, if any,
on), and (subject to Section 210) interest on such Bond, and for all other
purposes, and neither the Company, the Trustee nor the Bond Registrar shall be
affected by any notice to the contrary. All such payments so made to any such
Registered Owner, or upon his order, shall be valid and, to the extent of the
sum or sums so paid, effectual to satisfy and discharge the liability for moneys
payable upon any such Bond.
Section 212. Mutilated, Destroyed, Lost, Stolen or Undelivered Bonds. If any
Bond shall become mutilated, the Company shall execute, and the Trustee shall
thereupon authenticate and deliver, a new Bond of like tenor and denomination in
exchange and substitution for the Bond so mutilated, but only upon surrender to
the Trustee of such mutilated Bond for cancellation, and the Company and the
Trustee may require reasonable indemnity therefor. If any Bond shall be reported
lost, stolen or destroyed, evidence as to the loss, theft or destruction thereof
shall be submitted to the Company and the Trustee; and if such evidence shall be
satisfactory to both and indemnity satisfactory to both shall be given, the
Company shall execute, and thereupon the Trustee shall authenticate and deliver,
a new Bond of like tenor and denomination. The cost of providing any substitute
Bond under the provisions of this Section shall be borne by the Registered
Owners for whose benefit such substitute Bond is provided. If any such
mutilated, lost, stolen or destroyed Bond shall have matured or be about to
mature, the Company may, with the consent of the Trustee, pay to the Registered
Owner the principal amount of such Bond upon the maturity thereof and the
compliance with the aforesaid conditions by such Registered Owner, without the
issuance of a substitute Bond therefor.
The Company shall execute and the Trustee shall authenticate and deliver a
substitute Bond in lieu of each Undelivered Bond.
Every substitute Bond issued pursuant to this Section 212 shall constitute an
additional contractual obligation of the Company, whether or not the Bond
alleged to have been destroyed, lost or stolen shall be at any time enforceable
by anyone, and shall be entitled to all of the benefits of this Indenture
equally and proportionately with any and all other Bonds duly issued hereunder.
All Bonds shall be held and owned upon the express condition that the foregoing
provisions are, to the extent permitted by law, exclusive with respect to the
replacement or payment of mutilated, destroyed, lost, stolen or undelivered
Bonds and shall preclude any and all other rights or remedies.
Section 213. Temporary Bonds. Pending preparation of definitive Bonds, or by
agreement with the purchasers of all Bonds, the Company may issue, and, upon
request, the Trustee shall authenticate, in lieu of definitive Bonds one or more
temporary printed or typewritten Bonds of substantially the tenor recited above
in any denomination authorized under Section 202. Upon request of the Company,
the Trustee shall authenticate definitive Bonds in exchange for and upon
surrender of an equal principal amount of temporary Bonds. Until so exchanged,
temporary Bonds shall have the same rights, remedies and security hereunder as
definitive Bonds.
Section 214. Cancellation of Surrendered Bonds. Bonds surrendered for payment,
redemption, transfer or exchange and Bonds surrendered to the Trustee by the
Company for cancellation shall be cancelled by the Trustee and disposed of in
accordance with the Trustee's document retention policies. Bonds purchased
pursuant to Section 204 shall not be surrendered Bonds and, unless otherwise
specifically provided in this Indenture, shall be Outstanding Bonds.
Section 215. Conditions of Initial Issuance. Prior to or simultaneously with the
initial authentication and delivery of the Bonds by the Trustee, the Trustee
shall have received written notice from the Bank that the conditions for the
issuance of the Letter of Credit as set forth in Article VII of the
Reimbursement Agreement have been satisfied and there shall be filed with the
Trustee the following:
(a) From the Company, a copy, certified by the Secretary of the Company, of a
resolution of the Company authorizing the issuance of the Bonds, and directing
the authentication and delivery of the Bonds to or upon the order of the
purchaser(s) therein named upon payment of the purchase price therein set forth.
(b) The Amendment No. 1 to the original executed Letter of Credit.
(c) Executed counterparts of the Reimbursement Agreement (as amended), the
Remarketing Agreement, the Placement Agreement and this Indenture.
(d) An opinion of Counsel to the Company to the effect that the issuance of the
Bonds and the execution and delivery of this Indenture, the Reimbursement
Agreement, the Placement Agreement, and the Remarketing Agreement have been duly
and validly authorized by the Company, that this Indenture, the Reimbursement
Agreement, the Placement Agreement, and the Remarketing Agreement have been duly
executed and delivered by the Company, and that the Bonds, this Indenture, the
Reimbursement Agreement, the Placement Agreement, and the Remarketing Agreement,
assuming due authorization, execution and delivery thereof by the other parties
thereto, if any, and due registration and filing under federal and state
securities laws or due exemption from any such requirements, are valid, binding
and enforceable against the Company in accordance with their terms, subject to
the qualification that enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and limitations imposed by general principles of
equity upon specific enforcement, injunctive relief or other equitable remedies.
When the documents mentioned in clauses (a) through (d) of this Section shall
have been filed with the Trustee or the Credit Facility Issuer, as applicable,
and when the Bonds shall have been executed as required by this Indenture, the
Trustee shall authenticate the Bonds and deliver them to or upon the order of
the purchaser(s) named in the resolution or resolutions mentioned in clause
(a) of this Section but only upon payment to the Trustee for the account for the
Company of the purchase price of the Bonds. The Trustee shall be entitled to
rely conclusively upon such resolution or resolutions, or documents approved
thereby, as to the name of the purchasers and the amount of such purchase price.
ARTICLE III
PURCHASE AND REMARKETING OF TENDERED BONDS
Section 301. Remarketings of Tendered Bonds.
(a) Not later than the close of business on the date the Tender Agent receives
an Optional Tender Notice, the Tender Agent shall notify the Remarketing Agent
and the Company by telephone, telex or telecopier, confirmed in writing to the
Company and to the Remarketing Agent if requested, specifying the Optional
Tender Date and the aggregate principal amount of Bonds to be purchased on the
Optional Tender Date pursuant to such Optional Tender Notices.
(b) Not later than the close of business on the 10th day prior to a Conversion
Date, the Trustee shall notify the Placement Agent or the Remarketing Agent, as
applicable, and the Company by telephone, telex or telecopier, confirmed in
writing to the Company and to the Placement Agent or Remarketing Agent if
requested, specifying the aggregate principal amount of Bonds deemed tendered
for mandatory purchase on such Conversion Date.
(c) Except as provided in paragraph (d) below and Section 305, upon receipt by
the Remarketing Agent of notice from the Tender Agent pursuant to Section 301(a)
or (b) hereof and by the Placement Agent of notice from the Trustee pursuant to
Section 301(b) hereof, the Remarketing Agent or the Placement Agent, as the case
may be, shall use its best efforts to arrange for the sale, at par plus accrued
interest, if any, of such Bonds for settlement on the Optional Tender Date or
Conversion Date, as applicable. At or before 4:00 p.m. on the Business Day
preceding the Optional Tender Date or Conversion Date, the Remarketing Agent or
the Placement Agent, as applicable, shall give notice by telephone, telecopier
or telex, promptly confirmed in writing if requested, to the Trustee and the
Tender Agent specifying the principal amount of such Bonds, if any, to be placed
by it and to the Trustee the names, addresses and social security numbers or
other tax identification numbers of the proposed purchasers thereof.
(d) Notwithstanding the provisions of paragraph (c) above, any Bond purchased
pursuant to the terms of this Indenture after the date notice of redemption or
conversion is given shall not be remarketed except to a buyer who agrees at the
time of such purchase to tender such Bond for redemption or purchase on the
redemption or purchase date.
(e) During any Variable Rate Period, the Remarketing Agent shall continue to use
its best efforts to arrange for the sale, at par plus accrued interest, if any,
of any Bonds purchased with moneys advanced under the Credit Facility pursuant
to Section 302(a)(2) hereof; provided that Bonds purchased with moneys advanced
under the Credit Facility shall not be resold unless (i) the Credit Facility has
been reinstated by the amount drawn thereunder to pay the purchase price for
such Bonds or will be concurrently reinstated by such amount from the proceeds
of such sale upon delivery to the Credit Facility Issuer of the proceeds of such
sale and any reinstatement certificate required to be delivered by the Trustee
to such Credit Facility Issuer and (ii) the Credit Facility Issuer has given
written release of such Bonds.
Section 302. Purchase of Bonds Delivered to Tender Agent.
(a) There is hereby established with the Tender Agent a Bond Purchase Fund out
of which the purchase price for Bonds tendered for purchase on an Optional
Tender Date, a Mandatory Purchase Date under Section 601(b) (a "Mandatory
Purchase Date") or a Conversion Date shall be paid. There are hereby established
in the Bond Purchase Fund two separate and segregated accounts, to be designated
the "Remarketing Account" and the "Bank Account." Funds received from purchasers
of Tendered Bonds (other than the Company, any Affiliate of the Company or the
Credit Facility Issuer) shall be deposited by the Remarketing Agent or the
Placement Agent, as the case may be, in the Remarketing Account. At or prior to
9:00 a.m. on each Optional Tender Date, Mandatory Purchase Date or any
Conversion Date, the Remarketing Agent or the Placement Agent, as the case may
be, shall deliver to the Tender Agent for deposit in the Remarketing Account of
the Bond Purchase Fund immediately available funds, payable to the order of the
Tender Agent, in an amount equal to the purchase price of the Bonds to be
delivered to the Tender Agent that have been remarketed by the Remarketing Agent
or placed by the Placement Agent as specified in the notice delivered pursuant
to Section 301(c) hereof and shall verify that such Bonds were not remarketed to
the Company, any Affiliate of the Company or the Credit Facility Issuer. Funds,
if any, drawn by the Trustee under the Credit Facility pursuant to Section
302(b) below in an amount equal to the aggregate purchase price of Bonds
tendered for purchase less the amount available in the Remarketing Account
shall, at the direction of the Trustee, be delivered by the Credit Facility
Issuer to the Tender Agent for deposit in the Bank Account of the Bond Purchase
Fund. On each Optional Tender Date, Mandatory Purchase Date and on any
Conversion Date, the Tender Agent shall effect the purchase, but only from the
funds listed below, from the Registered Owners of such Bonds as are tendered or
deemed tendered at a purchase price equal to the principal amount thereof, plus
accrued interest, if any, to the date of purchase and such payment shall be made
in immediately available funds. Funds for the payment of such purchase price
shall be derived from the following sources in the order of priority indicated:
(1) proceeds of the remarketing of such Bonds pursuant to Section 301(c) hereof
which constitute Available Moneys;
(2) moneys furnished by the Trustee to the Tender Agent representing proceeds of
a drawing by the Trustee under the Credit Facility; and
(3) any other moneys available for such purposes.
(b) The Tender Agent shall advise the Trustee by telex or telecopier and shall
advise the Credit Facility Issuer by telephone, in each case no later than 9:15
a.m., on each Optional Tender Date, Mandatory Purchase Date or Conversion Date,
as the case may be, of the amount of any drawing under the Credit Facility
necessary to make full and timely payments hereunder. The Trustee shall promptly
(and in no event later than 9:30 am) take all action necessary to draw on the
Credit Facility the specified amount. All amounts received from a drawing under
the Credit Facility shall be held by the Tender Agent in the Bank Account
pending application of such moneys as provided in this Article III. The Trustee
shall provide to the Tender Agent the funds referred to in Section 302(a)(2)
prior to the time the Tender Agent is required to apply such funds to effect the
purchase of Bonds and shall notify the Tender Agent promptly after receipt of
notice from the Credit Facility Issuer reinstating the Credit Facility. The
Remarketing Agent shall deliver funds from the sale of Bonds held by the Credit
Facility Issuer as pledgee of the Company pursuant to Section 301(e) to the
Tender Agent for deposit in the Remarketing Account, which funds shall be
promptly paid by the Tender Agent on behalf of the Company to the Credit
Facility Issuer as reimbursement under the Reimbursement Agreement. The Tender
Agent shall notify the Trustee of any such reimbursement and the Trustee shall
promptly deliver to the Credit Facility Issuer any reinstatement certificate
required by the Credit Facility.
Section 303. Delivery of Purchased Bonds.
(a) Bonds purchased shall be delivered as follows:
(1) Bonds placed by the Remarketing Agent or the Placement Agent pursuant to
Section 301(c) hereof shall be delivered by the Tender Agent thereof to the
Remarketing Agent or the Placement Agent, as the case may be, on behalf of the
purchasers thereof.
(2) Bonds purchased with moneys described in Section 302(a)(2) shall be
delivered to the Credit Facility Issuer as pledgee of the Company pursuant to
the terms of the Reimbursement Agreement or to the Credit Facility Issuer's
designee.
(b) Except as otherwise set forth herein, Bonds delivered as provided in this
Section 303 shall be registered by the Bond Registrar in the manner directed by
the recipient thereof.
(c) In the event that any Bond to be delivered to the Tender Agent is not
delivered by the Registered Owner thereof on or prior to the Optional Tender
Date, Mandatory Purchase Date or the Conversion Date, as the case may be, and
there has been irrevocably deposited with the Tender Agent an amount sufficient
to pay the purchase price thereof, which amount may be held by the Tender Agent
in a non-interest bearing account, the Company shall execute and the Trustee or
the Authenticating Agent shall authenticate and deliver a substitute Bond in
lieu of the Undelivered Bond and the Bond Registrar shall register such Bond in
the name of the purchaser thereof.
(d) Notwithstanding the foregoing, Bonds purchased with funds identified in
Section 302(a)(2) hereof shall be held by the Credit Facility Issuer or the
Tender Agent and shall not be delivered to subsequent purchasers thereof or any
other person until the Trustee has notified the Tender Agent that the Credit
Facility has been reinstated to the extent of the purchase price of such Bonds
and that the Credit Facility Issuer has provided written notice of the release
of such Bonds. Such Bonds shall not bear interest under the terms of the
Indenture until such Bonds are released by the Credit Facility Issuer.
Section 304. Delivery of Proceeds of Sale of Remarketed Bonds. The proceeds of
the placement by the Remarketing Agent of any Bonds delivered to the Tender
Agent on any Optional Tender Date or by the Placement Agent or Remarketing Agent
of Bonds tendered or deemed tendered on the Mandatory Purchase Date or
Conversion Date shall be paid first, to the tendering Registered Owners of such
Bonds; second, to the Credit Facility Issuer, to the extent of any amounts drawn
under the Credit Facility in connection with the payment of the purchase price
for such Bonds and not reimbursed to the Credit Facility Issuer as of the time
of sale of such Bonds; and third, to the Company.
Section 305. No Remarketing After Certain Events. Anything in this Indenture to
the contrary notwithstanding, there shall be no remarketing of Bonds pursuant to
this Article III after the principal of the Bonds shall have been accelerated
pursuant to Section 802 hereof.
V
INITIAL PROCEEDS, REVENUES AND APPLICATION THEREOF
Section 401. Initial Proceeds to Be Paid Over to Trustee. The Company shall
cause the initial proceeds of the sale of the Bonds to be paid directly to the
Trustee. The Trustee shall establish a special fund to be designated "Fresh
Advantage, Inc. Refunding Fund" (the "Refunding Fund"). Moneys in the Refunding
Fund shall be used by the Trustee to refund the Prior Bonds and pay costs of
issuance relating to the Bonds upon the written request of the Company as set
forth in Exhibit A attached hereto and made a part hereof. In addition, the
Company shall deposit $55,350 of its own funds into the Refunding Fund.
Section 402. The Bond Fund
(a) There is hereby established with the Trustee a special fund to be designated
"Fresh Advantage, Inc. Taxable Variable Rate Demand Bonds Bond Fund" (the "Bond
Fund"), the moneys in which (1) in accordance with Section 402(c), the Trustee
shall apply to pay (i) the principal or redemption price of Bonds as they mature
or become due, upon surrender thereof, and (ii) the interest on the Bonds as it
becomes payable or (2) the Trustee shall hold and invest at the direction of the
Company, and shall distribute in accordance with the terms hereof. There are
hereby established with the Trustee within the Bond Fund two separate and
segregated accounts, to be designated the "Repayments Account," and the "Credit
Facility Account."
(b) There shall be deposited into the accounts of the Bond Fund from time to
time the following:
(1) into the Repayments Account, (i) all payments of principal of, redemption
price of or interest on the Bonds, and (ii) all other moneys received by the
Trustee under and pursuant to the provisions of this Indenture, when accompanied
by written directions from the person depositing such moneys that such moneys
are to be paid into such account of the Bond Fund. All amounts deposited in the
Repayments Account shall be segregated and held, with the earnings thereon,
separate and apart from other funds in the Bond Fund until such amounts become
Available Moneys. At such time as funds deposited in the Repayments Account
become Available Moneys, they may be commingled with other Available Moneys in
the Repayments Account; and
(2) into the Credit Facility Account, all moneys drawn by the Trustee under the
Credit Facility to pay the principal or redemption price of and interest on the
Bonds.
(c) Except as provided in Section 811 hereof, moneys in the Bond Fund shall be
used solely for the payment of the principal or redemption price of and interest
on the Bonds whether for acceleration, redemption or otherwise, from the
following sources but only in the following order of priority:
(1) moneys drawn under the Credit Facility and held in the Credit Facility
Account, provided that in no event shall moneys held in the Credit Facility
Account be used to pay any amounts due on Bonds which are held by or for the
account of the Company, including without limitation, Bonds pledged to the
Credit Facility Issuer, or to pay any portion of the redemption premiums
required pursuant to Section 601(a)(2) unless such Credit Facility provides for
payment of such premiums;
(2) moneys held in the Repayments Account to the extent such amounts qualify as
Available Moneys; and
(3) any other moneys furnished to the Trustee for deposit in the Bond Fund.
(d) On the Business Day preceding each date on which principal or redemption
price of or interest on the Bonds is due and payable (each, a "Payment Date"),
the Trustee shall notify the Company and the Credit Facility Issuer in writing
of the amounts of principal and redemption price and interest on the Bonds due
on such Payment Date. Not later than 9:30 a.m. on each Payment Date, the Trustee
shall present a draft or drafts under the Credit Facility in the amounts due and
payable on the Bonds. Such funds shall be wired by the Credit Facility Issuer to
be deposited in the Credit Facility Account and payments due under the Bonds
shall be made by the Trustee in accordance with Section 210 and Section 402(c)
hereof. Following such payment to the Registered Owners, the Trustee shall, on
behalf of the Company, promptly pay moneys on deposit in the Repayments Account
in an amount equal to the amount of such drawing or drawings to the Credit
Facility Issuer as reimbursement to the Credit Facility Issuer under the terms
of the Reimbursement Agreement; provided, however, the Company may, at its
option, reimburse the Credit Facility Issuer directly pursuant to the terms of
the Reimbursement Agreement. So long as a Credit Facility is in effect and has
not been wrongfully dishonored, and no amounts are owed by the Company to the
Credit Facility Issuer under the Reimbursement Agreement, any amounts remaining
in the Repayments Account on the Business Day next following an Interest Payment
Date shall be paid to the Company upon request with the consent of the Credit
Facility Issuer.
Section 403. Initial Proceeds and Revenues to Be Held for All Registered Owners;
Certain Exceptions. The initial proceeds of the sale of the Bonds and the other
moneys held in Refunding Fund and the Bond Fund shall, until applied as provided
in this Indenture, be held by the Trustee in trust for the benefit of the
Registered Owners of all Outstanding Bonds, except that any moneys representing
the principal or redemption price of any Bonds, and interest on any Bonds
previously matured or called for redemption in accordance with Article VI of
this Indenture, shall be held for the benefit of the Registered Owners of such
Bonds only.
ARTICLE V
DEPOSITARIES OF MONEYS, SECURITY FOR DEPOSITS AND INVESTMENT OF FUNDS
Section 501. Security for Deposits. All moneys deposited with the Trustee under
the provisions of this Indenture shall be held in trust and applied only in
accordance with the provisions of this Indenture and shall not be subject to
lien (other than the lien created hereby) or attachment by any creditor of the
Trustee or the Company.
Section 502. Investment of Moneys. At the request and the direction of the
Company (confirmed in writing), moneys held for the credit of the Bond Fund
(including any amount therein) shall be invested and reinvested by the Trustee
in Investment Obligations which shall mature not later than the respective dates
when the moneys held for the credit of the Bond Funds will be required for the
purposes intended, provided that moneys held in the Credit Facility Account of
the Bond Fund shall be invested and reinvested by the Trustee only in Government
Obligations which shall mature not later than the date on which such moneys will
be required to be paid. The Trustee shall be entitled to rely on instructions
from the Company. The Trustee shall be fully protected in relying solely upon
the directions of the Company in making investments of funds held hereunder.
Obligations so purchased as an investment of moneys in any Fund shall be deemed
at all times to be a part of such Fund, and the interest accruing thereon and
any profit realized from such investment shall be credited to the Bond Fund, and
any loss resulting from such investment shall be charged to such Fund. The
Trustee shall sell at market price or present for redemption any obligation so
purchased whenever it shall be necessary so to do in order to provide cash to
meet any payment or transfer from any such Fund or account. The Trustee shall
not be liable or responsible for any loss resulting from any such investment or
the sale of any such investment made pursuant to the terms of this Section.
For the purpose of the Trustee's determination of the amount on deposit to the
credit of the Bond Fund, obligations in which moneys in the Bond Fund have been
invested shall be valued at the lower of cost or market.
The Trustee may make any and all investments permitted by this Section through
its own bond or investment department, unless otherwise directed in writing by
the Company, and absent written direction from the Company, the Trustee shall
invest in Investment Obligations subject to the limitation regarding the Credit
Facility Account in the first paragraph of Section 502.
Section 503. The Credit Facility.
(a) Initial Letter of Credit. The Letter of Credit shall be a direct pay letter
of credit and shall provide for direct payments to or upon the order of the
Trustee as hereinafter set forth and shall be the irrevocable obligation of the
Bank to pay to or upon the order of the Trustee, upon request and in accordance
with the terms thereof, an amount of $9,187,500 of which (a) $9,000,000 shall
support the payment of principal on the Bonds when due and that portion of the
purchase price corresponding to principal of Tendered Bonds not remarketed on
any Optional Tender Date or sold on any Conversion Date, and (b) $187,500 shall
support the payment of up to 50 days' interest at an assumed rate of 15% per
annum on the Bonds when due and that portion of the purchase price corresponding
to interest on Tendered Bonds not remarketed on any Optional Tender Date or sold
on any Conversion Date.
The Letter of Credit shall terminate automatically on the earliest of (i) the
date on which a drawing under the Letter of Credit has been honored upon the
maturity or acceleration of the Bonds or redemption of all the Bonds, (ii) the
second day after the date that the Credit Facility Issuer receives a certificate
stating that the Bonds have been converted to a Fixed Rate, (iii) the date on
which the Bank receives notice from the Trustee that an Alternate Credit
Facility is substituted for the Letter of Credit and is in effect, (iv) the date
on which the Bank receives notice from the Trustee that there are no longer any
Bonds Outstanding, or (v) the expiration date stated in the Letter of Credit as
it may be extended pursuant to the terms thereof.
The Bank's obligation under the Letter of Credit may be reduced to the extent of
any drawing thereunder, subject to reinstatement as provided therein. The Letter
of Credit shall provide that, with respect to a drawing by the Trustee solely to
pay interest on the Bonds on any Interest Payment Date, if the Trustee shall not
have received from the Bank within ten days from the date of such drawing a
notice by telecopier, by telex or in writing that the Bank has not been
reimbursed, the Trustee's right to draw under the Letter of Credit with respect
to the payment of interest shall be reinstated on or before the 11th calendar
day following such drawing in an amount equal to such drawing. With respect to
any other drawing by the Trustee, the amount available under the Letter of
Credit for payment of the principal, purchase price or redemption price of the
Bonds and interest on the Bonds shall be reinstated in an amount equal to any
such drawing but only to the extent that the Bank is reimbursed in accordance
with the terms of the Reimbursement Agreement for the amounts so drawn.
The Letter of Credit shall provide that if, in accordance with the terms of the
Indenture, the Bonds shall become or be declared immediately due and payable
pursuant to any provision of the Indenture, the Trustee shall be entitled to
draw on the Letter of Credit to the extent that the amounts are available
thereunder to pay the aggregate principal amount of the Bonds then Outstanding
plus an amount of interest not to exceed 50 days.
(b) Expiration. Unless all of the conditions of Section 503(d) have been met at
least 35 days before the Interest Payment Date next preceding the expiration
date of a Credit Facility, the Trustee shall call the Bonds for redemption in
accordance with Section 601(b). If at any time there shall cease to be any Bonds
Outstanding hereunder, the Trustee shall promptly surrender the then current
Credit Facility to the Credit Facility Issuer for cancellation. The Trustee
shall comply with the procedures set forth in the Credit Facility relating to
the termination thereof.
(c) Alternate Credit Facilities. While the Bonds bear interest at the Variable
Rate, the Company may, at its option, provide for the delivery to the Trustee of
an Alternate Credit Facility by providing 35 days' written notice to the Trustee
and Remarketing Agent. On or before the date of delivery of an Alternate Credit
Facility, the Company shall furnish to the Trustee (i) an opinion of Counsel
stating that the delivery of such Alternate Credit Facility to the Trustee is
authorized under this Indenture and complies with the terms hereof and that such
Alternate Credit Facility is enforceable against the Credit Facility Issuer
thereof in accordance with its terms, (ii) if the Bonds are not then rated by
Moody's or S&P, an opinion of Counsel stating that payments of principal and
interest on the Bonds with the proceeds of a draw under the Alternate Credit
Facility in accordance with the terms of the Indenture will bot be recoverable
from the Holders of the Bonds pursuant to Section 550 of the Bankruptcy Code as
avoidable preferential payments under Section 547 of the Bankruptcy Code upon
the occurrence of an Event of Bankruptcy, and (iii) if the Bonds are rated by
Moody's and/or S&P, written evidence from Moody's, if the Bonds are rated by
Moody's, and from S&P, if the bonds are rated by S&P, in each case to the effect
that such rating agency has reviewed the proposed Alternate Credit Facility and
that the substitution of the proposed Alternate Credit Facility for the then
current Credit Facility will not, by itself, result in (A) a permanent
withdrawal of its rating of the Bonds or (B) a reduction of the then current
rating of the Bonds, or if the Bonds are not rated by Moody's and/or S&P,
written evidence that the commercial paper of the bank or institution issuing
the proposed Alternate Credit Facility is rated P-1 or higher by Moody's or A-1
or higher by S&P. The Trustee shall then accept such Alternate Credit Facility
and surrender the previously held Credit Facility to the previous Credit
Facility Issuer for cancellation promptly on or before the 15th day after the
Alternate Credit Facility becomes effective. Notwithstanding the foregoing, the
Trustee shall have made such drawings, if any, and taken such other actions, if
any, thereunder as shall be required under this Indenture in order to provide
sufficient money for payment of the purchase price of Bonds tendered or deemed
tendered on the Credit Substitution Date to the extent necessary pursuant to
Section 302(a), and shall have received the proceeds of such drawing from the
Credit Facility Issuer.
(d) Notices of Substitution or Replacement of Credit Facility.
(1) The Trustee shall, at least 30 days prior to the proposed replacement of a
Credit Facility with an Alternate Credit Facility, give notice thereof by first
class mail to Registered Owners of the Bonds.
(2) The Trustee shall promptly give notice of any replacement of the Credit
Facility to the Issuer, the Tender Agent and the Remarketing Agent.
ARTICLE VI
REDEMPTION OR PURCHASE OF BONDS
Section 601. Redemption or Purchase Dates and Prices. The Bonds shall be subject
to redemption, and, in certain instances, to purchase, prior to maturity in the
amounts, at the times and in the manner provided in this Article VI. Payments of
the redemption price or the purchase price of any Bond shall be made only upon
the surrender to the Trustee or the Tender Agent as required hereunder of any
Bond so redeemed or purchased.
(a) Optional Redemption.
(1) Optional Redemption During Variable Rate Period. While the Bonds bear
interest at a Variable Rate, the Bonds shall be subject to redemption on any
Interest Payment Date, at the option of the Company, but only upon at least 45
days prior written direction of the Company delivered to the Trustee, with the
prior written consent of the Credit Facility Issuer (which may not be
unreasonably withheld), in whole or in part, at a redemption price equal to 100%
of the principal amount thereof, without premium, plus accrued interest on the
redemption date.
(2) Optional Redemption With Premium During Fixed Rate Period. While the Bonds
bear interest at the Fixed Rate, the Bonds shall be subject to redemption, at
the option and upon the written direction of the Company delivered to the
Trustee at least 45 days prior to the date set for redemption, in whole or in
part, on any Interest Payment Date occurring on or after the dates set forth
below, at the redemption prices (expressed as percentages of the principal
amount to be redeemed) set forth below plus accrued interest to the redemption
date as follows:
Commencement of Fixed
Rate Redemption Period
Redemption Period
Four years from the Fixed Rate Conversion Date
103%, declining by 1/2% on each succeeding anniversary of the first day of the
Fixed Rate Redemption Period until reaching 100% and thereafter at 100%
(b) Extraordinary Mandatory Redemption or Purchase. The Bonds shall be subject
to mandatory redemption or purchase in whole during any Variable Rate Period at
100% of the principal amount thereof, without premium, plus accrued interest, if
any, thereon to the date of redemption, on the Interest Payment Date occurring
closest to but not less than 15 days prior to the date of expiration of the then
current Credit Facility, unless an Alternate Credit Facility has been provided
in accordance with Article V hereof. The Company shall notify the Trustee with a
copy to the Credit Facility Issuer, Remarketing Agent and Tender Agent, of its
election to purchase Bonds under this Section 601(b).
(c) Mandatory Purchase on Conversion Date. As provided in Section 203(a), the
Bonds shall be subject to mandatory purchase at 100% of the principal amount
thereof, without premium, plus accrued interest, if any, thereon to the date of
purchase, on any Conversion Date.
(d) Mandatory Purchase on Credit Substitution. The Bonds are subject to
mandatory tender for purchase on the date that the Trustee accepts an Alternate
Credit Facility at 100% of the principal amount thereof, without premium, during
any Variable Rate Period, plus accrued interest, if any therein to the date of
purchase.
Section 602. Company Direction of Optional Redemptions. So long as a Credit
Facility is then held by the Trustee, the Trustee shall only call Bonds for
optional redemption if it has Available Moneys in the Repayments Account of the
Bond Fund or has been notified by the Credit Facility Issuer that the Trustee
will receive moneys pursuant to the Credit Facility, in the aggregate,
sufficient to pay the redemption price of the Bonds to be called for redemption,
plus accrued interest thereon. No optional redemptions shall be effected at the
option of the Company during the Variable Rate Period under this Article VI
without the prior written consent of the Credit Facility Issuer, which consent
shall not be unreasonably withheld.
Section 603. Selection of Bonds to be Called for Redemption or Purchase. Except
as otherwise provided herein or in the Bonds, if less than all the Bonds are to
be redeemed, the particular Bonds to be called for redemption or purchase shall
be selected by the Trustee in the following order of priority: first, bonds
pledged to the Credit Facility Issuer pursuant to the Reimbursement Agreement,
second, Bonds owned by the Company and third, Bonds selected by lot from among
the Registered Owners of less than $1,000,000 in aggregate principal amount;
provided that if there are no such Registered Owners, or if after selection from
among such Registered Owners such selection has resulted in redemption of less
than a sufficient amount of Bonds or in Bonds outstanding in unauthorized
denominations, then the remaining amount of Bonds to be redeemed shall be
selected from among the Registered Owners of $1,000,000 or more in aggregate
principal amount of Bonds. In no event shall the Trustee select Bonds for
redemption if such redemption will result in any Registered Owner owning Bonds
in principal amounts other than in authorized denominations under Section 202(a)
hereof. If a redemption cannot be effected to result in such authorized
denominations, the Trustee shall select Bonds for redemption by lot and the
denomination of the remaining Bonds outstanding shall be deemed authorized under
Section 202(a) hereof.
Section 604. Notice of Redemption or Purchase.
(a) When required to redeem or purchase Bonds under any provision of this
Article VI, or when directed to do so by the Company, the Trustee shall cause
notice of the redemption or purchase to be given not more than 60 days and not
less than 30 days prior to the redemption or purchase date by mailing a copy of
all notices of redemption or purchase by first class mail, postage prepaid, to
all Registered Owners of Bonds to be redeemed or purchased at their addresses
shown on the Bond Register. Failure to mail any such notice or any defect in the
mailing thereof in respect of any Bond shall not affect the validity of the
redemption or purchase of any other Bond. Notices of redemptions or purchases
shall also be mailed to the Remarketing Agent and the Credit Facility Issuer, if
any. Any such notice shall be given in the name of the Company, shall identify
the Bonds to be redeemed or purchased (and, in the case of partial redemption or
purchase of any Bonds, the respective principal amounts thereof to be redeemed
or purchased), shall specify the redemption or purchase date, and shall state
that on the redemption or purchase date the redemption or purchase price of the
Bonds called for redemption will be payable at the principal corporate trust
office of the Trustee, or in the case of mandatory purchases pursuant to Section
601(b) at the office of the Tender Agent and that from that date interest will
cease to accrue. The Trustee may use "CUSIP" numbers in notices of redemption or
purchase as a convenience to Registered Owners, provided that any such notice
shall state that no representation is made as to the correctness of such numbers
either as printed on the Bonds or as contained in any notice of redemption or
purchase and that reliance may be placed only on the identification numbers
containing the prefix established under the Indenture.
(b) With respect to any notice of redemption of Bonds in accordance with
Section 601(c), such notice shall also specify the date of the expiration of the
term of the Credit Facility.
(c) If at the time of mailing of notice of any optional redemption, there shall
not have been deposited with the Trustee moneys sufficient to redeem all the
Bonds called for redemption, such notice may state that it is conditional on the
deposit of Available Moneys with the Trustee not later than the redemption date,
and such notice shall be of no effect unless such moneys are so deposited.
Provided, further, the notice may state that if the Trustee does not have
sufficient Available Moneys on the redemption date, such redemption shall not
occur.
(d) Upon redemption of less than all of the Bonds, the Trustee shall furnish to
the Credit Facility Issuer a notice in the form specified by the Credit Facility
Issuer to reduce the coverage provided by the Credit Facility and upon
redemption of all of the Bonds, the Trustee will surrender the Credit Facility
to the Credit Facility Issuer for cancellation.
(e) Purchases under Section 601(b) hereof shall be in accordance with
Section 503(d).
Section 605. Bonds Redeemed or Purchased in Part. Any Bond which is to be
redeemed or purchased only in part shall be surrendered at a place stated in the
notice provided for in Section 604 (with due endorsement by, or a written
instrument of transfer in form satisfactory to the Trustee duly executed by, the
Registered Owner thereof or his attorney duly authorized in writing) and the
Company shall execute and the Trustee shall authenticate and deliver to the
Registered Owner of such Bond without service charge, a new Bond or Bonds, of
any authorized denomination as requested by such Registered Owner in aggregate
principal amount equal to and in exchange for the unredeemed and unpurchased
portion of the principal of the Bond so surrendered.
ARTICLE VII
PARTICULAR REPRESENTATIONS, WARRANTIES, COVENANTS AND PROVISIONS
Section 701. Company Representations, Warranties and Covenants by the Company.
The Company represents, warrants and covenants as follows (provided that an
incorrect representation shall not subject the Company to liability for punitive
damages):
(a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the state of its organization, and is qualified to do
business in such state, has legal authority to enter into and to perform the
agreements and covenants on its part contained in the Bond Documents to which it
is a party, and has duly authorized the execution, delivery and performance of
the Bond Documents to which it is a party.
(b) The issuance of the Bonds, the execution and delivery of the Bond Documents
to which it is a party, the consummation of the transactions contemplated
thereby, and the fulfillment of or compliance with the terms and conditions
thereof do not and will not violate, conflict with or constitute a breach of or
default under or require any consent (except for such consents and approvals as
have heretofore been obtained) pursuant to the Articles of Incorporation or
By-Laws of the Company, any law or regulation of the United States or the State
(other than federal and state securities laws requiring registration or filing
of the Bonds or qualification of the Indenture under the Trust Indenture Act of
1939) or, to the best knowledge of the Company, of any other jurisdiction
presently applicable to the Company, any order of any court, regulatory body or
arbitral tribunal or any agreement or instrument to which the Company is a party
or by which it or any of its property is bound.
(c) The Company will cause the proceeds of the Bonds to be used for the purposes
set forth herein.
(d) Assuming due authorization, execution and delivery by the other parties
thereto and due registration and filing under federal and state securities laws
or due exemption from any such requirements, when executed and delivered, the
Bond Documents to which the Company is a party will be the valid and binding
obligations or agreements of the Company enforceable in accordance with their
respective terms, subject to limitations imposed by general principles of equity
affecting the remedies provided for in the Bond Documents.
(e) There is no action, suit or proceeding at law or in equity or by or before
any governmental instrumentality or agency or arbitral body now pending, or to
the knowledge of the Company, threatened against or affecting the Company or any
properties or rights of the Company which, if adversely determined, would
materially impair the right of the Company to carry on its business
substantially as now conducted or would materially adversely affect the
financial condition, business or operations of the Company or the transactions
contemplated by, or the validity of, any of the Bond Documents.
(f) The Company has filed all federal, state and local tax returns which are
required to be filed by it and has paid or caused to be paid all taxes as shown
on said returns or on any assessment received by it, to the extent that such
taxes have become due, and no controversy in respect of additional income taxes,
state or federal, of the Company is pending or, to the knowledge of the Company,
threatened which has not heretofore been disclosed in writing to the Trustee and
which, if adversely determined, would materially and adversely affect the
financial condition or operations of the Company.
(g) None of the Bond Documents to which the Company is a party contains any
misrepresentation or untrue statement of a material fact relating to the Company
or the Project or omits to state a material fact relating to the Company or the
Project necessary in order to make any such representation or statement
contained therein not misleading.
(h) The Company possesses all necessary patents, licenses, trademarks, trademark
rights, trade names, trade name rights and copyrights to conduct its business as
now conducted, without known conflict with any patent, license, trademark, trade
name or copyrights of any other Person.
(i) No approval, consent or authorization of, or registration, declaration or
filing (other than registration and filing under federal and state securities
laws) with any governmental or public body or authority is required in
connection with the valid execution, delivery and performance by the Company of
the Bond Documents to which it is a party which has not heretofore been
obtained.
All of the above representations, warranties and covenants shall survive the
execution of this Indenture and the issuance of the Bonds.
Section 702. Covenant to Pay Bonds. The Company covenants that it will promptly
pay the principal of and interest on and other amounts payable under the Bonds
at the places, on the dates and in the manner provided herein and in the Bonds
according to the true intent and meaning thereof. The obligation of the Company
to make the payments required under the Bonds shall be absolute and
unconditional. The Company will pay without abatement, diminution or deduction
(whether for taxes or otherwise) all such amounts regardless of any cause or
circumstance whatsoever including, without limitation, any defense, set-off,
recoupment or counterclaim that the Company may have or assert against the
Trustee or any Bondholder.
Section 703. Covenants to Perform Obligations under this Indenture. The Company
covenants that it will faithfully perform at all times any and all covenants,
undertakings, stipulations and provisions contained in this Indenture, in the
Bonds executed and delivered hereunder and in all proceedings of the Company
pertaining thereto and will faithfully observe and perform at all times any and
all covenants, undertakings, stipulations and provisions of this Indenture on
its part to be observed or performed.
Section 704. Existence, Sale of Assets, Consolidation or Merger. Unless the
Trustee consents in writing, the Company will maintain its existence, will not
dissolve or otherwise dispose of all or substantially all of its assets and will
not enter into any transaction of merger or consolidation; provided, however, so
long as the Credit Facility is in full force and effect and no default has
occurred thereunder, the Credit Facility Issuer may approve any dissolution,
sale or merger relating to the Company so long as the Company promptly notifies
the Trustee thereof.
Section 705. Default Certificates. The Company shall deliver to the Trustee
forthwith, upon obtaining knowledge of an Event of Default hereunder or the
Reimbursement Agreement, or an event which would constitute such an Event of
Default but for the requirement that notice be given or time elapse or both, a
certificate of the Company specifying the nature and period of existence thereof
and what action the Company proposes to take with respect thereto.
Section 706. Notification to Trustee. The Company shall notify the Trustee in
writing promptly, but in any event within five Business Days, of the occurrence
of any of the following, with respect to the Company:
(a) any levy of an attachment, execution or other process against its assets,
which may have a Material Adverse Effect on the Company;
(b) any change in any existing agreement or contract which may have a Material
Adverse Effect on the Company; and
(c) any change in ownership of the Company which results in a change of control
of the Company.
Section 707. Observe Laws. The Company shall comply in all material respects
with all applicable laws, regulations and other valid requirements of any
regulatory authority with respect to its operations.
Section 708. Assignment of Indenture by the Company. Except with the prior
written consent of the Credit Facility Issuer and the Trustee, the rights of the
Company under this Indenture may not be assigned.
Section 709. Inspection of Bond Register. At reasonable times and upon
reasonable regulations established by the Bond Registrar, the Bond Register may
be inspected and copied by and at the expense of the Company or any Registered
Owner.
ARTICLE VIII
DEFAULT AND REMEDIES
Section 801. Defaults. Each of the following events is hereby declared an "Event
of Default":
(a) Payment of interest on any of the Bonds shall not be made when the same
shall become due; or
(b) Payment of the principal or redemption price of any of the Bonds shall not
be made when the same shall become due, whether at maturity or upon call for
redemption or otherwise; or
(c) The failure of the Company to perform any of its obligations, or the breach
by the Company of its obligations, under Sections 705 or 706 hereof; or
(d) The occurrence of an "Event of Default" or "event of default" under any of
the other Bond Documents; or
(e) Any representation or warranty of the Company contained herein, or in any
document, instrument or certificate delivered pursuant hereto or in connection
with the issuance and sale of the Bonds, shall be false or misleading in any
material respect on the date as of which made; or
(f) The commencement against the Company of an involuntary case under the
Bankruptcy Code or any other applicable federal or state bankruptcy, insolvency
or other similar law, or of any action or proceeding for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company or for any substantial part of its property, or for the
winding-up or liquidation of its affairs and the continuance of any such case,
action, or proceeding unstayed and in effect for a period of 60 consecutive
days; or
(g) The commencement by the Company of a voluntary case under the Bankruptcy
Code or any other applicable federal or state bankruptcy, insolvency or other
similar law, or the consent by it to, or its acquiescence in the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or of any substantial
part of its property, or the making by it of or the consent by it to any
assignment for the benefit of creditors, or the taking of any action by the
Company in furtherance of any of the foregoing; or
(h) The Trustee receives written notice from the Credit Facility Issuer that an
"Event of Default" under the Reimbursement Agreement has occurred and has not
been waived or cured; or
(i) The Trustee receives, on or before the close of business on the tenth day
following a drawing under a Credit Facility to pay interest on the Bonds, notice
by telecopier, by telex or in writing from the Credit Facility Issuer that the
Credit Facility has not been reinstated for the amount so drawn; or
(j) Payment of the purchase price of any Bond tendered pursuant to Section 204
is not made when payment is due; or
(k) The Company shall default in the due and punctual performance of any of the
covenants, conditions, agreements and provisions contained in the Bonds or in
this Indenture on the part of the Company to be performed other than as referred
to in the preceding paragraphs of this Section; provided, however, that such
default under this subsection (m) shall not constitute an Event of Default until
written notice specifying such default and requiring the same to be remedied
shall have been given to the Company by the Trustee, which may give notice in
the Trustee's discretion and shall give such notice at the written direction of
the Registered Owners of not less than 25% in aggregate principal amount of
Bonds then Outstanding, and the Company shall have had 30 days after receipt of
such notice to correct said default and shall not have corrected said default
within the applicable period.
Section 802. Acceleration and Annulment Thereof. Subject to the requirement that
the Credit Facility Issuer's consent to any acceleration must be obtained in the
case of an Event of Default described in subsections (c), (d), (e), (f), (g), or
(k) of Section 801 hereof, upon the occurrence of an Event of Default, the
Trustee may, and upon (i) the written request of the Registered Owners of not
less than 25% in aggregate principal amount of Bonds then Outstanding, (ii) the
written request of the Credit Facility Issuer, or (iii) the occurrence of an
Event of Default described in Section (a), (b), (h), (i) or (j) of Section 801
hereof, the Trustee shall, by written notice to the Company, declare the entire
unpaid principal of and interest on the Bonds due and payable; and upon such
declaration, the said principal, together with interest accrued thereon, shall
become payable immediately at the place of payment provided therein, anything in
this Indenture or in the Bonds to the contrary notwithstanding. Upon the
occurrence of any acceleration hereunder, the Trustee shall, to the extent it
has not already done so, immediately draw upon the Credit Facility to the extent
permitted by the terms thereof, and payment shall be made to Registered Owners
as soon as practicable. Interest on the Bonds shall cease to accrue upon the
declaration of acceleration by the Trustee.
Immediately after any acceleration because of the occurrence of an Event of
Default under Sections 801(a), (b), (h), (i) or (j), the Trustee shall notify in
writing the Company and the Credit Facility Issuer of the occurrence of such
acceleration. Within five days of the occurrence of any acceleration hereunder,
the Trustee shall notify by first class mail, postage prepaid, the Registered
Owners of all Bonds then Outstanding of the occurrence of such acceleration.
If, after the principal of the Bonds has become due and payable, all arrears of
interest upon the Bonds are paid by the Company, and the Company also performs
all other things in respect to which it may have been in default hereunder and
pays the reasonable charges of the Trustee and the Registered Owners, including
reasonable attorneys' fees, then, and in every such case, the Credit Facility
Issuer or the Majority Registered Owners, by written notice to the Company and
the Trustee, may annul such acceleration and its consequences, and such
annulment shall be binding upon the Trustee and upon all Registered Owners of
Bonds, issued hereunder; provided, however, that the Trustee shall not annul any
acceleration without the consent of the Credit Facility Issuer unless such
acceleration has resulted from the failure of the Credit Facility Issuer to
honor a proper draw for payment under the Credit Facility.
Notwithstanding the foregoing, the Trustee shall not annul any acceleration
which has resulted from an Event of Default resulting in a drawing under the
Credit Facility unless the Trustee has received written notice that the Credit
Facility has been reinstated in accordance with its terms to an amount equal to
the principal amount of the Bonds then Outstanding plus 50 days' interest
accrued thereon (210 days' interest if the Bonds then bear interest at the Fixed
Rate) at an annual rate of 15% per annum. The Trustee shall forward a copy of
any notice from Registered Owners received by it pursuant to this paragraph to
the Company. Immediately upon such annulment, the Trustee shall cancel, by
notice to the Company, any demand for payment of the Bonds made by the Trustee
pursuant to this Section 802.
Section 803. Trustee Exercising Rights. In exercising the rights given the
Trustee under this Article VIII, the Trustee shall take such action as, in the
judgment of the Trustee applying the standards described in Section 902 hereof,
would best serve the interests of the Registered Owners. It is the intention of
the parties hereto that the Trustee shall not be required to expend or risk its
own funds or otherwise incur any financial liability in the performance of any
of its duties hereunder or in the exercise of its rights or powers.
Section 804. Legal Proceedings by Trustee. If any Event of Default has occurred
and is continuing, the Trustee in its discretion may, and upon the written
request of the Credit Facility Issuer or the Registered Owners of not less than
25% in aggregate principal amount of all Bonds then Outstanding and receipt of
indemnity to its satisfaction shall, in its own name:
(a) By mandamus, or other suit, action or proceeding at law or in equity,
enforce all rights of the Registered Owners hereunder;
(b) Bring suit upon the Bonds and the Credit Facility (but only to the extent
the Credit Facility Issuer shall have wrongfully dishonored drawings made in
strict conformity with the terms thereof); and
(c) By action or suit in equity enjoin any acts or things which may be unlawful
or in violation of the rights of the Registered Owners.
Section 805. Discontinuance of Proceedings by Trustee. If any proceeding
commenced by the Trustee on account of any default is discontinued or is
determined adversely to the Trustee, then the Company, the Credit Facility
Issuer, the Trustee and the Registered Owners shall be restored to their former
positions and rights hereunder as though no proceedings had been commenced.
Section 806. Credit Facility Issuer or Registered Owners May Direct Proceedings.
Anything to the contrary in this Indenture notwithstanding, either the Credit
Facility Issuer, if a Credit Facility is in effect, or the Majority Registered
Owners shall have the right, after furnishing indemnity satisfactory to the
Trustee, to direct the method and place of conducting all remedial proceedings
by the Trustee hereunder, provided that such direction shall not be in conflict
with any rule of law or with this Indenture or unduly prejudice the rights of
minority Registered Owners; provided, however, the consent of the Credit
Facility Issuer shall not be required if the Credit Facility Issuer has failed
to honor any draws under the Credit Facility.
Section 807. Limitations on Actions by Registered Owners. No Registered Owner
shall have any right to bring suit on the Credit Facility. No Registered Owner
shall have any right to pursue any other remedy hereunder unless:
(a) the Trustee shall have been given written notice of an Event of Default;
(b) the Registered Owners of not less than 25% in aggregate principal amount of
all Bonds then Outstanding shall have requested the Trustee, in writing, to
exercise the powers hereinabove granted or to pursue such remedy in its or their
name or names;
(c) the Trustee shall have been offered indemnity satisfactory to it against
costs, expenses and liabilities, except that no offer of indemnification shall
be required for a declaration of acceleration under Section 802 or for a drawing
under the Credit Facility; and
(d) the Trustee shall have failed to comply with such request within a
reasonable time.
Notwithstanding the foregoing provisions of this Section 807 or any other
provision of this Indenture, the obligation of the Company shall be absolute and
unconditional to pay hereunder the principal or redemption price of, and
interest on, the Bonds to the respective Registered Owners thereof on the
respective due dates thereof, and nothing herein shall affect or impair the
right of action, which is absolute and unconditional, of such Registered Owners
to enforce such payment .
Section 808. Trustee May Enforce Rights Without Possession of Bonds. All rights
under this Indenture and the Bonds may be enforced by the Trustee without the
possession of any Bonds or the production thereof at the trial or other
proceedings relative thereto, and any proceeding instituted by the Trustee shall
be brought in its name for the ratable benefit of the Registered Owners of the
Bonds.
Section 809. Remedies Not Exclusive. No remedy herein conferred is intended to
be exclusive of any other remedy or remedies, and each remedy is in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute.
Section 810 Delays and Omissions Not to Impair Rights. No delays or omission in
respect of exercising any right or power accruing upon any default shall impair
such right or power or be a waiver of such default, and every remedy given by
this Article VIII may be exercised from time to time and as often as may be
deemed expedient.
Section 811 Application of Moneys in Event of Default. Any moneys received by
the Trustee under this Article VIII shall be applied in the following order;
provided that any moneys received by the Trustee from a drawing under the Credit
Facility shall be applied to the extent permitted by the terms thereof only as
provided in clause (b) below with respect to the principal of, and interest
accrued on, Bonds other than Bonds held by or for the Company:
(a) To the payment of the reasonable costs of the Trustee, including counsel
fees, any disbursements of the Trustee with interest thereon at the Trustee's
prime rate per annum and its reasonable compensation; and
(b) To the payment of principal or redemption price (as the case may be) and
interest on the Bonds, and in case such moneys shall be insufficient to pay the
same in full, then to the payment of principal or redemption price and interest
ratably, without preference or priority of one over another or of any
installment of interest over any other installment of interest.
The surplus, if any, shall be paid to the Company, or the person lawfully
entitled to receive the same as a court of competent jurisdiction may direct;
provided that, if the Trustee has received payments under the Credit Facility
following the Event of Default, the surplus shall be paid to the Credit Facility
Issuer to the extent of such payments.
Section 812. Trustee and Registered Owners Entitled to All Remedies Under Law.
It is the purpose of this Article VIII to provide such remedies to the Trustee
and the Registered Owners as may be lawfully granted, but should any remedy
herein granted be held unlawful, the Trustee and the Registered Owners shall
nevertheless be entitled to every remedy provided by law. It is further intended
that, insofar as lawfully possible, the provisions of this Article shall apply
to and be binding upon any trustee or receiver appointed under applicable law.
Section 813. Trustee May File Claim in Bankruptcy. In case of the pendency of
any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other similar judicial proceeding
relative to the Company or any other obligor upon the Bonds or to property of
the Company, or such other obligor or the creditors of any of them, the Trustee
(irrespective of whether the principal of the Bonds shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand on the Company for the payment on
the Bonds of an amount equal to overdue principal or interest or additional
interest) shall be entitled and empowered, by intervention in such proceeding or
otherwise:
(a) to file and prove a claim for the whole amount of principal and interest
owing and unpaid in respect of the Bonds and to file such other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of the
Registered Owners allowed in such judicial proceeding; and
(b) to collect and receive any moneys or other property payable or deliverable
on any such claims and to distribute the same; and any receiver, assignee,
trustee, liquidator or sequestrator (or other similar official) in any such
judicial proceeding is hereby authorized by the Registered Owners to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Registered Owners, to pay to the Trustee
any amount due to it for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 811 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept, or adopt on behalf of the Registered Owners, any plan
of reorganization, arrangement, adjustment or composition affecting the Bonds or
the rights of any Registered Owner thereof, or to authorize the Trustee to vote
in respect of the claim of the Registered Owners in any such proceeding.
All moneys received by the Trustee pursuant to any right given or action taken
under this Indenture shall, after payment of the costs and expenses of the
proceedings resulting in the collection of such moneys and the fees and expenses
of the Trustee, be deposited in the Bond Fund and applied to the payment of the
principal of, redemption premium, if any, and interest then due and unpaid on
the Bonds in accordance with the provisions of this Indenture.
Section 814. Receiver. Upon the occurrence of an Event of Default and upon the
filing of a suit or other commencement of judicial proceedings to enforce the
rights of the Trustee and of the Registered Owners under this Indenture, the
Trustee shall be entitled, as a matter of right, to the appointment of a
receiver or receivers of the amounts payable under this Indenture pending such
proceedings, with such powers as the court making such appointment shall confer,
whether or not any such amounts payable shall be deemed sufficient ultimately to
satisfy the Bonds.
ARTICLE IX
CONCERNING THE TRUSTEE
Section 901. Acceptance of Trusts. The Trustee hereby represents and warrants to
the Company (for the benefit of the Registered Owners as well as the Company)
that it is a national banking association and that it is duly authorized under
such laws and the laws of the State to accept and execute trusts of the
character herein set out.
The Trustee accepts and agrees to execute the trusts imposed upon it by this
Indenture, but only upon the terms and conditions set forth in this Article and
subject to the provisions of this Indenture including the following express
terms and conditions, to all of which the parties hereto and the Registered
Owners agree, except:
(a) prior to the occurrence and continuance of an Event of Default, the Trustee
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and
(b) in the absence of bad faith on its part, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions expressed
therein, upon directions of the Company and upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture;
but in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not they
conform on their face to requirements of this Indenture but need not verify the
accuracy of the contents thereof.
In case an Event of Default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee from
liability for its own grossly negligent action, its own grossly negligent
failure to act, or its own willful misconduct, except that:
(1) this subsection shall not be construed to limit the effect of the preceding
provisions of this Section 901;
(2) the Trustee shall not be liable for any error of judgment made in good faith
by a responsible officer or officers of the Trustee unless it shall be proved
that the Trustee was grossly negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action taken or omitted
to be taken by it in good faith in accordance with the direction of the Majority
Registered Owners relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee under this Indenture.
Whether or not therein expressly so provided, every provision of this Indenture
that in any way relates to the Trustee, including without limitation Sections
903 and 904 hereof, shall be subject to the provisions of this Section 901.
The Trustee also accepts, and agrees to do and perform the duties and
obligations imposed upon it but only upon the terms and conditions set forth in
this Indenture.
Section 902. Reserved
Section 903. Trustee to Give Notice.
(a) If any default or Event of Default occurs and is continuing hereunder and if
the Trustee has received written notice thereof or is deemed to have notice
pursuant to Section 903(b), the Trustee shall give to all Registered Owners, the
Company, the Remarketing Agent and to the Credit Facility Issuer written notice
of such default or Event of Default within 30 days after receipt of such
information. For the purpose of this Section 903 only, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default under Section 801 hereof.
(b) The Trustee shall not be required to take notice or be deemed to have notice
of any default or Event of Default hereunder except for a default or Event of
Default referred to in Section 801(a) or (b), unless the Trustee shall have
received written notice of such Event of Default by the Company, the Credit
Facility Issuer or by the Registered Owners of 25% in aggregate principal amount
of the Bonds then Outstanding.
Section 904. Trustee Entitled to Indemnity.
(a) The Company shall indemnify the Trustee, its officers, directors and
employees (herein, the "Indemnitees") against any loss, liability or expense
incurred by them arising out of or in connection with the acceptance or
administration of their duties under this Indenture, except as set forth in
subsection (b). An Indemnitee shall notify the Company promptly of any claim for
which it may seek indemnity. Except where the Company is the claimant, the
Company shall defend the claim, and the Indemnitee shall cooperate in the
defense. An Indemnitee may have separate counsel, and the Company shall pay the
reasonable fees and expenses of such counsel. An Indemnitee shall not be
required to give any bond or surety in respect to the execution of its rights
and obligations hereunder.
(b) The Company shall not be obligated to reimburse any expense or to indemnify
against any loss or liability incurred by an Indemnitee through gross negligence
or willful misconduct.
(c) To secure the Company's payment obligations in this Section, the Trustee
shall have a lien prior to the lien created by this Indenture for the benefit of
the owners of the Bonds on all money or property held or collected by the
Trustee other than money derived from a draw on the Credit Facility. Such
obligations shall survive the satisfaction and discharge of this Indenture.
(d) When the Trustee incurs expenses or renders services after an Event of
Default, the expenses and compensation for the services are intended to
constitute expenses of administration under any applicable bankruptcy law.
(e) The Trustee may, nevertheless, begin suit, or appear in and defend suit, or
do anything else in its judgment proper to be done by it as Trustee, without
indemnity, and in such case the Company shall reimburse the Trustee for all
costs and expenses, outlays and counsel fees and other reasonable disbursements
properly incurred in connection therewith; provided, however, that the Trustee
shall (i) make all payments hereunder of principal and redemption price of and
interest on the Bonds and of the purchase price of Bonds tendered at the option
of the Registered Owners thereof or purchased by the Company in lieu of
redemption, (ii) accelerate the Bonds when required to do so hereunder other
than at the direction of the Registered Owners, and (iii) draw on the Credit
Facility when required to do so hereunder, each without the necessity of the
Registered Owners providing security or indemnity to the Trustee. If the Company
shall fail to make reimbursement, the Trustee may reimburse itself from any
moneys in its possession under the provisions of this Indenture (other than
monies derived from a draw on the Credit Facility) and shall be entitled with
respect thereto to a preference over the Bonds.
(f) Subject to the standards described in Sections 901 and 902 hereof, prior to
taking action under this Indenture except for a declaration of acceleration
under Section 802 or a drawing under the Credit Facility or the payment of
principal and interest on the Bonds, the Trustee may require that satisfactory
indemnity be furnished to it for reimbursement of all expenses to which it may
be put and to protect it against all liability by reasons of any action so
taken, except liability resulting from its gross negligence or willful
misconduct. None of the provisions contained in this Indenture is intended to
require the Trustee to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties or other exercise of its
rights or powers hereunder.
Section 905. Trustee Not Responsible for Insurance, Taxes, Execution of
Indenture, Acts of the Company or Application of Moneys Applied in Accordance
with this Indenture. The Trustee shall be under no obligation to effect or
maintain insurance or to renew any policies of insurance or to inquire as to the
sufficiency of any policies of insurance carried by the Company, or to report,
or make or file claims or proof of loss for, any loss or damage insured against
or which may occur, or to keep itself informed or advised as to the payment of
any taxes or assessments, or to require any such payment to be made. The Trustee
shall have no responsibility in respect of the validity, sufficiency, due
execution or acknowledgment of this Indenture by the Company or the validity or
sufficiency of the security provided thereunder or in respect of the validity of
the Bonds or the due execution or issuance thereof. The Trustee shall be under
no obligation to see that any duties herein imposed upon any party other than
itself, or any covenants herein contained on the part of any party other than
itself to be performed, shall be done or performed, and the Trustee shall incur
no liability for failure to see that any such duties or covenants are so done or
performed.
The Trustee shall not be liable or responsible because of the failure of the
Company or of any of its employees or agents to make any collections or deposits
or to perform any act herein required of the Company or because of the loss of
any moneys arising through the insolvency or the act or default or omission of
any other depositary in which such moneys shall have been deposited under the
provisions of this Indenture. The Trustee shall not be responsible for the
application of any of the proceeds of the Bonds or any other moneys deposited
with it and paid out, withdrawn or transferred hereunder if such application,
payment, withdrawal or transfer shall be made in accordance with the provisions
of this Indenture.
The immunities and exemptions from liability of the Trustee hereunder shall
extend to its directors, officers, employees and agents.
Section 906. Compensation. Subject to the provisions of any contract relating to
the compensation of the Trustee, the Company shall pay to the Trustee as
administrative expenses its reasonable fees and charges incurred in performing
its duties hereunder, including but not limited to, the reasonable fees and
expenses of attorneys, consultants and others. In computing the Trustee's
compensation, the parties shall not be limited by any law on the compensation of
an express trust. If the Company shall fail to make any payment required by this
Section 906, the Trustee may, but shall be under no obligation to, make such
payment from any moneys in its possession under the provisions of this Indenture
and shall be entitled to a preference therefor over the Bonds hereunder;
provided that no payments under this Section 906 shall be made with moneys drawn
under the Credit Facility.
Section 907. Trustee to Preserve Records. All records and files pertaining to
the Bonds in the custody of the Trustee shall be open at all reasonable times to
the inspection of the Company, the Credit Facility Issuer and their agents and
representatives.
Section 908. Trustee May be Registered Owner. The institution acting as Trustee
under this Indenture and its directors, officers, employees or agents, may in
good faith buy, sell, own, hold and deal in the Bonds issued under and secured
by this Indenture, and may join in the capacity of a Registered Owner in any
action which any Registered Owner may be entitled to take with like effect as if
such institution were not the Trustee under this Indenture.
Section 909. Trustee Not Responsible for Recitals. The recitals, statements and
representations contained herein and in the Bonds shall be taken and construed
as made by and on the part of the Company and not by the Trustee, and the
Trustee shall have no responsibility for the correctness of the same.
Section 910. No Responsibility for Recording or Filing. The Trustee shall be
under no obligation to see to the recording or filing of this Indenture, any
financing statements or any other instrument or otherwise to the giving to any
person of notice of the provisions hereof or thereof.
Section 911. Certain Rights of the Trustee.
(a) Subject to the provisions of Sections 901 and 902 hereof, the Trustee shall
be protected and shall incur no liability in acting or proceeding, or in not
acting or not proceeding, in good faith and in accordance with the terms of this
Indenture, upon any resolution, order, notice, request, consent, waiver,
certificate, statement, affidavit, requisition, bond or other paper or document
which it shall in good faith believe to be genuine and to have been adopted or
signed by the proper board or person or to have been prepared and furnished
pursuant to any of the provisions of this Indenture, or upon the written opinion
of any attorney, engineer, accountant or other expert believed by it to be
qualified in relation to the subject matter, and the Trustee shall have no duty
to make any investigation or inquiry as to any statements contained or matters
referred to in any such instrument.
(b) Whenever in the administration of this Indenture the Trustee shall deem it
desirable that a matter be proved or established prior to taking, suffering, or
omitting any action hereunder, the Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
a certificate of the Company.
(c) The Trustee may consult with legal counsel and the written advice of such
legal counsel or any opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by the
Trustee hereunder in good faith and in reliance thereon.
(d) The Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond or other paper or
document, but the Trustee, in its sole discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it shall
be entitled to have any of its employees, agents or attorneys examine the books,
records and premises of the Company.
(e) The Trustee may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through agents or attorneys, may pay
reasonable compensation to such agents and attorneys, and shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney (unless an employee) appointed with due care by it hereunder.
(f) Except for information provided by the Trustee concerning the Trustee, the
Trustee shall have no responsibility with respect to any information in any
offering memorandum or other disclosure material distributed with respect to the
Bonds and the Trustee shall have no responsibility for compliance with
securities laws in connection with the issuance and sale of the Bonds.
(g) Except as otherwise especially provided by the provisions of this Indenture,
the Trustee shall not be obligated or required to give or furnish any notice,
demand, report, request, reply, statement, advice or opinion to any Bondholder
of any Bond or to the Company or any other person, and the Trustee shall incur
no liability for its failure or refusal to give or furnish the same unless
obligated or required to do so by the express provisions of the Indenture.
(h) The Trustee shall not be required to give any bond or surety with respect to
the performance of its duties or the exercise of its powers under this
Indenture.
Section 912. Qualification of the Trustee.
(a) There shall at all times be a Trustee hereunder; which shall be (i) an
association or a corporation organized and doing business under the laws of the
United States of America or of any state, authorized under such laws or the
applicable laws of the State to exercise corporate trust powers and act as Bond
Registrar hereunder, having a combined capital and surplus, either individually
or together with its holding company, of at least $100,000,000, and subject to
supervision or examination by federal or state authority. If such association or
corporation is not a commercial bank or trust company, it shall also have a
rating by Moody's (if the Bonds are then rated by Moody's) of Baa3/P-3 or
higher, or by S&P (if the Bonds are then rated by S&P) of BBB/A3 or higher or
shall otherwise be approved in writing by Moody's or S&P, as the case may be. If
such association or corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 912, the combined
capital and surplus of such association or corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published.
(b) If at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 912, it shall resign immediately in the manner and
with the effect specified in Section 913 hereof.
Section 913. Resignation and Removal of Trustee.
(a) No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 914 hereof.
(b) The Trustee may resign at any time by giving written notice thereof to the
Company. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the retiring Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by an instrument or instruments in
writing signed by the Registered Owners of more than 50% in aggregate principal
amount of Bonds then Outstanding or by their attorneys, legal representatives or
agents and delivered to the Trustee, and the Company (such instruments to be
effective only when received by the Trustee, accompanied by a signed acceptance
by a successor trustee).
(d) If at any time:
(1) the Trustee shall cease to be eligible under Section 912 hereof, and shall
fail to resign after written request therefor by the Company or by the Majority
Registered Owners, or
(2) the Trustee shall become incapable of acting or shall be adjudged a bankrupt
or insolvent or a receiver of the Trustee or its property shall be appointed or
any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then, in any such case, (i) the Company may remove the Trustee, or
(ii) any Registered Owner may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor.
(e) If the Trustee shall resign, be removed or become incapable of acting, or if
a vacancy shall occur in the office of Trustee for any cause, the Company shall
promptly appoint a successor. If, within 60 days after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by act of the Majority Registered Owners delivered to the Company and
the retiring Trustee, the successor Trustee so appointed shall forthwith upon
its acceptance of such appointment become the successor Trustee and supersede
the successor Trustee appointed by the Company. If within such 60-day period no
successor Trustee shall have been so appointed by the Company or the Majority
Registered Owners and accepted appointment in the manner hereinafter provided,
any Registered Owner, if he has been a bona fide Registered Owner of a Bond for
at least six months, may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal of the
Trustee, and each appointment of a successor Trustee by mailing written notice
of such event by first-class mail, postage prepaid, to each Registered Owner.
Each notice shall include the name and address of the principal corporate trust
office of the successor Trustee.
Section 914. Successor Trustee. Every successor Trustee appointed hereunder
shall execute, acknowledge and deliver to its predecessor, and also to the
Company, an instrument in writing accepting such appointment hereunder, and
thereupon such successor Trustee, without any further act, shall become fully
vested with all the rights, immunities, powers and trusts, and subject to all
the duties and obligations, of its predecessor; but such predecessor shall,
nevertheless, on the written request of its successor or of the Company and upon
payment of the expenses, charges and other disbursements of such predecessor
which are payable pursuant to the provisions of Section 906 hereof, execute and
deliver an instrument transferring to such successor Trustee all the rights,
immunities, powers and trusts of such predecessor hereunder; and every
predecessor Trustee shall deliver all property and moneys held by it hereunder
to its successor, subject, nevertheless, to its preference, if any, provided for
in Sections 904 and 906 hereof. Should any instrument in writing from the
Company be required by any successor Trustee for more fully and certainly
vesting in such Trustee the rights, immunities, powers and trusts hereby vested
or intended to be vested in the predecessor Trustee, any such instrument in
writing shall and will, on request, be executed, acknowledged and delivered by
the Company.
Notwithstanding any of the foregoing provisions of this Article, any bank or
trust company having power to perform the duties and execute the trusts of this
Indenture and otherwise qualified to act as Trustee hereunder with or into which
the bank or trust company acting as Trustee, may be merged or consolidated, or
to which the assets and business of such bank or trust company may be sold,
shall be deemed the successor of the Trustee.
Section 915. Co-Trustee. It is the purpose of this Indenture that there shall be
no violation of any law of any jurisdiction denying or restricting the right of
certain banking corporations or associations to transact business as trustee as
contemplated herein in such jurisdiction. It is recognized that in case of
litigation under this Indenture upon the occurrence of an Event of Default, it
may be necessary that the Trustee appoint an additional individual or
institution as a separate Trustee or Co-Trustee, which shall be satisfactory to
the Company. The following provisions of this Section 915 are adapted to these
ends.
In the event of the incapacity or lack of authority of the Trustee, by reason of
any present or future law of any jurisdiction, to exercise any of the rights,
powers and trusts herein granted to the Trustee or to hold title to the Trust
Estate or to take any other action which may be necessary or desirable in
connection therewith, each and every remedy, power, right, claim, demand, cause
of action, immunity, estate, title, interest and lien expressed or intended by
this Indenture to be exercised by or vested in or conveyed to the Trustee with
respect thereto shall be exercisable by and vest in such separate Trustee or
Co-Trustee but only to the extent necessary to enable the separate Trustee or
Co-Trustee to exercise such rights, powers and trusts, and every covenant and
obligation necessary to the exercise thereof shall run to and be enforceable by
such separate Trustee or Co-Trustee.
Should any deed, conveyance or instrument in writing from the Company be
required by the separate Trustee or Co-Trustee so appointed by the Trustee in
order to more fully and certainly vest in and confirm to him or it such
properties, rights, powers, trusts, duties and obligations, any and all such
deeds, conveyances and instruments shall, on request, be executed, acknowledged
and delivered by the Company. In case any separate Trustee or Co-Trustee or a
successor to either, shall die, become incapable of acting, resign or be
removed, all the estates, properties, rights, powers, trusts, duties and
obligations of such separate Trustee or Co-Trustee, so far as permitted by law,
shall vest in and be exercised by the Trustee until the appointment of a new
Trustee or successor to such separate Trustee or Co-Trustee.
The combined fees and compensation of any separate Trustee or Co-Trustee and the
Trustee shall not exceed the fees and compensation that the Trustee acting alone
would otherwise be entitled to under the fee arrangement then in effect between
the Trustee and the Company.
Section 916. Notice to Moody's or S&P. At any time during which the Bonds are
rated by Moody's and/or S&P, the Trustee shall notify Moody's and/or S&P, as
applicable, promptly of (i) any change in the Trustee, (ii) the expiration,
termination or substitution of the Credit Facility during any Variable Rate
Period, (iii) a change in the interest rate borne by the Bonds from one Interest
Rate Determination Method to another, (iv) the payment of all of the Bonds or
(v) any change to this Indenture, the Reimbursement Agreement, the Credit
Facility or the Remarketing Agreement.
ARTICLE X
EXECUTION OF INSTRUMENTS BY REGISTERED OWNERS AND PROOF OF OWNERSHIP OF BONDS
Section 1001. Execution of Instruments by Registered Owners and Proof of
Ownership of Bonds. Any request, direction, consent or other instrument in
writing required or permitted by this Indenture to be signed or executed by a
Registered Owner may be signed or executed by the Registered Owner or its
attorneys or legal representatives. Proof of the execution of any such
instrument and of the ownership of the Bonds shall be sufficient for any purpose
of this Indenture and shall be conclusive in favor of the Trustee with regard to
any action taken by it under such instrument if made in the following manner:
The fact and date of the execution by any person of any such instrument may be
proved by the verification of any officer in any jurisdiction who, by the laws
thereof, has power to take affidavits within such jurisdiction, to the effect
that such instrument was subscribed and sworn to before him, or by an affidavit
of a witness to such execution, and where such execution is by an officer of a
corporation or association or a member of a partnership on behalf of such
corporation, association or partnership, such verification or affidavit shall
also constitute sufficient proof of his authority.
Nothing contained in this Section 1001 shall be construed as limiting the
Trustee to such proof, it being intended that the Trustee may accept any other
evidence of the matters herein stated which may be sufficient. Any request or
consent of a Registered Owner shall bind every future Registered Owner of the
Bonds to which such request or consent pertains or any Bonds issued in lieu
thereof in respect of anything done by the Trustee pursuant to such request or
consent.
Notwithstanding any of the foregoing provisions of this Section 1001, the
Trustee shall not be required to recognize any person as an owner of Bonds or to
take any action at his request unless the Bonds shall be deposited with it.
Section 1002. Preservation of Information. The Trustee shall preserve in the
Bond Register, in as current a form as is reasonably practicable, the name and
address of each Registered Owner received by the Trustee in its capacity as Bond
Registrar.
ARTICLE XI
THE REMARKETING AGENT; THE TENDER AGENT;
THE PLACEMENT AGENT
Section 1101. The Remarketing Agent.
(a) The Company hereby appoints First Union Securities, Inc. as Remarketing
Agent under this Indenture. The Remarketing Agent and any successor Remarketing
Agent, by written instrument delivered to the Trustee and the Company, shall
accept the duties and obligations imposed on it under this Indenture and the
Remarketing Agreement.
(b) In addition to the other obligations imposed on the Remarketing Agent
hereunder, the Remarketing Agent shall agree to keep such books and records in
connection with its activities as Remarketing Agent hereunder as shall be
consistent with prudent industry practice and make such books and records
available for inspection by the Trustee, the Credit Facility Issuer and the
Company at all reasonable times.
(c) The Remarketing Agent shall at all times be a member of the National
Association of Securities Dealers, Inc. or registered as a Municipal Securities
Dealer under the Securities Exchange Act of 1934, as amended, or a national
banking association or a bank or a trust company, in each case authorized by law
to perform its obligations hereunder.
(d) If at any time the Remarketing Agent is unable or unwilling to act as
Remarketing Agent, the Remarketing Agent, upon 15 Business Days' prior written
notice to the Trustee, the Tender Agent and the Company, may resign. The
Remarketing Agent may be removed at any time by the Company, by written notice
signed by the Company delivered to the Trustee, the Remarketing Agent and the
Tender Agent. Upon resignation or removal of the Remarketing Agent, the Company
shall appoint a substitute Remarketing Agent meeting the qualifications of
Section 1101(c).
(e) In the event that the Company shall fail to appoint a successor Remarketing
Agent upon the resignation or removal of the Remarketing Agent or upon its
dissolution, insolvency or bankruptcy, the Trustee may, but is not required to,
appoint a Remarketing Agent or itself act as Remarketing Agent until the
appointment of a successor Remarketing Agent in accordance with this
Section 1101.
(f) Notwithstanding any other provisions herein, the Remarketing Agent may at
any time assign its duties as Remarketing Agent to an Affiliate of the
Remarketing Agent. In the event of such assignment, the Remarketing Agent shall
deliver written notice to the Trustee, the Tender Agent and the Company.
Section 1102. The Tender Agent.
(a) The Company hereby appoints First Union National Bank as Tender Agent under
this Indenture, which agent has a corporate trust office in Richmond, Virginia.
The Tender Agent and any successor Tender Agent, by written instrument delivered
to the Trustee and the Company, shall accept the duties and obligations imposed
on it under this Indenture.
(b) The Tender Agent shall at all times be a member of the National Association
of Securities Dealers, Inc. having a capitalization of at least $15,000,000 and
a rating by Moody's (if the Bonds are then rated by Moody's) of Baa3/P-3 or
higher, or a national banking association or a bank or a trust company having
capital and surplus of at least $50,000,000, in each case authorized by law to
perform its obligations hereunder.
(c) If at any time the Tender Agent is unable or unwilling to act as Tender
Agent, the Tender Agent, upon 60 days' prior written notice to the Trustee, the
Remarketing Agent and the Company, may resign; provided, however, that in no
case shall such resignation become effective until the appointment of a
successor Tender Agent. The Tender Agent may be removed at any time by the
Company by written notice signed by the Company delivered to the Trustee, the
Remarketing Agent, the Credit Facility Issuer and the Tender Agent. Upon
resignation or removal of the Tender Agent, the Company shall appoint a
substitute Tender Agent meeting the qualifications of Section 1102(b); provided,
however, that in no case shall such removal or resignation become effective
until the appointment of a successor Tender Agent.
(d) In the event the Company shall fail to appoint a successor Tender Agent upon
the resignation or removal of the Tender Agent or upon its dissolution,
insolvency or bankruptcy, the Trustee may at its discretion, but is not required
to, act as Tender Agent until the appointment of a successor Tender Agent in
accordance with this Section 1102.
(e) The Tender Agent shall have no responsibility with respect to the source of
any funds provided to it for the purpose of paying the purchase price of the
Bonds. The Tender Agent shall have no responsibility to determine the amount
representing accrued interest which may be payable in connection with the
purchase of the Bonds and may rely conclusively on the computation of such
accrued interest by the Trustee pursuant to the Indenture. The Tender Agent
shall have no obligation to expend its own funds in connection with any such
purchase, and shall have no obligation to pay the purchase price in any type of
funds other than that received by the Tender Agent for such purpose as
aforesaid.
(f) The Company shall, to the fullest extent permitted by law, indemnify and
hold the Tender Agent harmless from any and all liability, losses, damages,
costs and expenses of any nature (including interest and reasonable counsel fees
and disbursements) arising out of or in connection with its duties, or those of
its employees or agents arising from their performance under this Agreement and
the Indenture, except for liabilities, losses, damages, costs, expenses and fees
arising out of the gross negligence or willful misconduct of the Tender Agent or
its employees or agents.
(g) The Company shall pay the Tender Agent such fees and charges as shall be
agreed upon between them from time to time. The Company shall reimburse the
Tender Agent for all reasonable out-of-pocket expenses of the Tender Agent
including, but not limited to counsel fees, special stationery, checks, postage,
wire tender of funds, shipping, insurance, telecommunications and such other
expenses associated with the giving of notices and messenger delivery.
Section 1103. The Placement Agent. The Placement Agent shall be a member of the
National Association of Securities Dealers, Inc. and registered as a Municipal
Securities Dealer under the Securities Exchange Act of 1934, as amended, or a
national banking association or a bank or trust company, in each case authorized
by law to perform its obligations described in Sections 202(e) and 203 hereof.
The Placement Agent shall agree to establish the Preliminary Fixed Rate and to
use its best efforts to arrange for the sale of Tendered Bonds on the Fixed Rate
Conversion Date, all as more particularly described in Sections 202(e) and 203
hereof.
Section 1104 Notices. The Trustee shall, within 30 days of the resignation or
removal of the Remarketing Agent or the Tender Agent or the appointment of a
successor Placement Agent or a successor Remarketing Agent or Tender Agent, give
notice thereof by first-class mail, postage prepaid, to the Registered Owners of
the Bonds.
ARTICLE XII
AMENDMENTS AND SUPPLEMENTS
Section 1201. Amendments and Supplements Without Registered Owners' Consent.
This Indenture may be amended or supplemented by the Company and the Trustee at
any time and from time to time, without the consent of the Registered Owners,
but with the consent of the Credit Facility Issuer, if a Credit Facility is in
effect, and with the consent of the Tender Agent, if such amendment affects the
rights, duties and responsibilities of the Tender Agent, by a supplemental
indenture authorized by a resolution of the Company's Board of Managers filed
with the Trustee, for one or more of the following purposes:
(a) to add additional covenants of the Company or to surrender any right or
power herein conferred upon the Company;
(b) for any purpose not inconsistent with the terms of this Indenture or to cure
any ambiguity or to correct or supplement any provision contained herein or in
any supplemental indenture which may be defective or inconsistent with any other
provision contained herein or in any supplemental indenture, or to make such
other provisions in regard to matters or questions arising under this Indenture
which shall not adversely affect the interests of the Registered Owners of the
Bonds;
(c) to permit the Bonds to be converted to certificated securities;
(d) to permit the appointment of a co-trustee under this Indenture;
(e) to modify, eliminate or add to the provisions of this Indenture to such
extent as shall be necessary to effect the qualification of this Indenture under
the Trust Indenture Act of 1939, or under any similar federal statute hereafter
enacted, and to add to this Indenture such other provisions as may be expressly
permitted by the Trust Indenture Act of 1939;
(f) except as otherwise provided in Section 1202 hereof, to modify, eliminate or
add to the provisions of this Indenture to such extent as shall be necessary to
obtain a rating of the Bonds from Moody's or S&P; or
(g) to amend the administrative provisions hereof to accommodate the provisions
of an Alternate Credit Facility.
Section 1202. Amendments With Registered Owners' and Credit Facility Issuer's
Consent. This Indenture may be amended by the Company and the Trustee from time
to time, except with respect to (1) the principal, redemption price, purchase
price, or interest payable upon any Bonds, (2) the Interest Payment Dates, or
the purchase provisions of any Bonds, and (3) this Article XII, by a
supplemental indenture consented to by the Credit Facility Issuer (if a Credit
Facility is in effect) and approved by the Majority Registered Owners in
aggregate principal amount of the Bonds then Outstanding which would be affected
by the act proposed to be taken. This Indenture may be amended with respect to
the matters enumerated in clauses (1) through (3) of the preceding sentence only
with the unanimous consent of all Registered Owners and the Credit Facility
Issuer (if a Credit Facility is in effect).
Section 1203. Supplemental Indentures Affecting Rights of Credit Facility
Issuer. Anything herein to the contrary notwithstanding, a supplemental
indenture under this Article XII which in the judgment of the Credit Facility
Issuer (if a Credit Facility is in effect) adversely affects the rights of the
Credit Facility Issuer hereunder shall not become effective unless or until the
Credit Facility Issuer shall have consented to the execution and delivery
thereof.
Section 1204. Amendment of Credit Facility. The initial Credit Facility may be
amended to increase the amount of the Credit Facility or to such extent as shall
be necessary to obtain a rating of the Bonds from Moody's or S& P provided in
either case that (a) the Company consents to such amendment or supplement and
(b) such amendment or supplement will not adversely affect the interests of the
Registered Owners. The Trustee shall notify the Registered Owners of any
proposed amendment of the Credit Facility which would adversely affect the
interests of the Registered Owners and may consent thereto with the consent of
at least a majority in aggregate principal amount of the Bonds then Outstanding
which would be affected by the action proposed to be taken; provided, that the
Trustee shall not, without the unanimous consent of the Registered Owners of all
Bonds then Outstanding, consent to any amendment which would decrease the amount
payable under the Credit Facility or reduce the term of the Credit Facility.
Section 1205. Trustee Authorized to Join in Amendments and Supplements; Reliance
on Counsel. The Trustee is authorized to join with the Company in the execution
and delivery of any supplemental indenture or amendment permitted by this
Article XII and in so doing shall be fully protected by an opinion of Counsel
that such supplemental indenture or amendment is so permitted and has been duly
authorized by the Company and that all things necessary to make it a valid and
binding agreement have been done; provided that certain amendments may, by
agreement between the Trustee and the Credit Facility Issuer, require the prior
consent of the Credit Facility Issuer.
ARTICLE XIII
DEFEASANCE; OTHER PAYMENTS
Section 1301. Defeasance.
(a) When the principal or redemption price (as the case may be) of, and interest
on all Bonds issued hereunder have been paid, together with the compensation of
the Trustee and all other sums payable hereunder by the Company, the right,
title and interest of the Trustee in and to the Trust Estate shall thereupon
cease, and the Trustee, on written demand of the Company, shall release this
Indenture and shall execute such documents to evidence such release as may be
reasonably required by the Company and shall turn over to the Company or to such
person, body or authority as may be entitled to receive the same all balances
then held by it hereunder; provided, that if any payments have been received by
the Trustee from the Credit Facility in connection with such release, such
balances shall be paid to the Credit Facility Issuer to the extent of such
payments. If payment or provision therefor is made with respect to less than all
of the Bonds, the particular Bonds (or portion thereof) for which provision for
payment shall have been considered made shall be selected by lot by the Trustee
and thereupon the Trustee shall take similar action for the release of this
Indenture with respect to such Bonds.
(b) Provision for the payment of Bonds shall be deemed to have been made when
the Trustee holds in the Bond Fund, in trust and irrevocably sets aside
exclusively for such payment, (i) moneys sufficient to make such payment,
provided that if a Credit Facility is then held by the Trustee, such moneys
shall constitute Available Moneys or (ii) noncallable Government Obligations
maturing as to principal and interest in such amounts and at such times as will
provide sufficient moneys without reinvestment to make such payment and, while
in the Bonds are in Variable Rate, written notification from S & P and Moody's
that the then current ratings on the Bonds shall not be withdrawn or reduced;
provided that such provision for payment may only be made after the Fixed Rate
Conversion Date, and provided further, that if a Credit Facility is then held by
the Trustee, such Government Obligations shall have been on deposit with the
Trustee in a separate and segregated account for a period of 366 days during and
prior to which no Event of Bankruptcy has occurred or which Government
Obligations were purchased with Available Moneys.
No Bonds in respect of which a deposit under clause (b) above has been made
shall be deemed paid within the meaning of this Article unless the Trustee is
satisfied that the amounts deposited are sufficient to make all payments that
might become due on the Bonds including purchase price payments for Bonds
tendered at the option of the Registered Owners or purchased by the Company in
lieu of redemption, if any. Notwithstanding the foregoing, no delivery to the
Trustee under this subsection (b) shall be deemed a payment of any Bonds which
are to be redeemed prior to their stated maturity until such Bonds shall have
been irrevocably called or designated for redemption on a date thereafter on
which such Bonds may be redeemed in accordance with the provisions of this
Indenture or the Company shall have given the Trustee, in form satisfactory to
the Trustee, irrevocable instructions to give notice of redemption. Neither the
obligations nor moneys deposited with the Trustee pursuant to this Section shall
be withdrawn or used for any purpose other than, and shall be segregated and
held in trust for, the payment of the principal of, redemption price of,
purchase price if applicable of, and interest on the Bonds with respect to which
such deposit has been made. In the event that such moneys or obligations are to
be applied to the payment of principal or redemption price of any Bonds more
than 60 days following the deposit thereof with the Trustee, the Trustee shall
mail a notice stating that such moneys or obligations have been deposited and
identifying the Bonds for the payment of which such moneys or obligations are
being held to all Registered Owners of such Bonds at their addresses shown on
the Bond Register.
(c) Anything in Article XII to the contrary notwithstanding, if moneys or
Government Obligations have been deposited or set aside with the Trustee
pursuant to this Article for the payment of the principal or redemption price of
the Bonds and the interest thereon and the principal or redemption price of such
Bonds and the interest thereon shall not have in fact been actually paid in
full, no amendment to the provisions of this Article shall be made without the
consent of the Registered Owner of each of the Bonds affected thereby.
Notwithstanding the foregoing, those provisions relating to the maturity of
Bonds, interest payments and dates thereof, and the dates, premiums and notice
requirements for optional and mandatory redemption and the Trustee's remedies
with respect thereto, and provisions relating to exchange, transfer and
registration of Bonds, replacement of mutilated, destroyed, lost or stolen
Bonds, the safekeeping and cancellation of Bonds, nonpresentment of Bonds, the
holding of moneys in trust and repayments to the Company or the Credit Facility
Issuer from the Bond Fund and the duties of the Trustee in connection with all
of the foregoing and the fees, expenses and indemnities of the Trustee, shall
remain in effect and shall be binding upon the Trustee, the Company and the
Registered Owners, notwithstanding the release and discharge of the lien of this
Indenture.
Section 1302. Deposit of Funds for Payment of Bonds. If the principal or
redemption price of any Bonds becoming due, either at maturity or by call for
redemption or otherwise, together with all interest accruing thereon to the due
date, has been paid or provisions therefor made in accordance with Section 1301
hereof, all interest on such Bonds shall cease to accrue on the due date and all
liability of the Company with respect to such Bonds shall likewise cease, except
as hereinafter provided. Thereafter the Registered Owners of such Bonds shall be
restricted exclusively to the funds so deposited for any claim of whatsoever
nature with respect to such Bonds, and the Trustee shall hold such funds in
trust for such Registered Owners.
Section 1303. Effect of Purchase of Bonds. No purchase of Bonds pursuant to
Section 303 shall be deemed to be a payment or redemption of such Bonds or any
portion thereof and such purchase will not operate to extinguish or discharge
the indebtedness evidenced by such Bonds.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
Section 1401. Covenants of Company to Bind its Successors. In the event of the
dissolution of the Company, all of the covenants, stipulations, obligations and
agreements contained in this Indenture by or on behalf of or for the benefit of
the Company shall bind or inure to the benefit of the successor or successors of
the Company from time to time and any officer, board, commission, authority,
agency or instrumentality to whom or to which any power or duty affecting such
covenants, stipulations, obligations and agreements shall be transferred by or
in accordance with law, and the word "Company" as used in this Indenture shall
include such successor or successors.
Section 1402. Notices. Any notice, demand, direction, request or other
instrument authorized or required by its Indenture to be given to or filed with
the Trustee, the Company or the Credit Facility Issuer shall be in writing and
shall be deemed given or filed for all purposes of this Indenture when delivered
by hand delivery, Federal Express or other overnight delivery service, return
receipt requested, or received by first-class, postage prepaid, registered or
certified mail, addressed as follows:
If to the Company, Fresh Advantage, Inc., 1142 Avenue South, Post Office Box
535789, Richmond, Virginia 23230;
If to the Trustee, First Union National Bank, 800 East Main, Lower Mezzanine,
Richmond, Virginia 23219 (Attention: Corporate Trust Department), or if to any
successor Trustee or Co-Trustee, addressed to it at its principal corporate
trust office;
If to the Credit Facility Issuer, First Union National Bank, 7 North 8th Street,
Richmond, Virginia 23219.
and if sent by telegraph, telegram report of delivery requested, addressed as
above, at the time and date appearing on the report of delivery.
All documents received by the Trustee under the provisions of this Indenture, or
photographic copies thereof, shall be retained in its possession until this
Indenture shall be released in accordance with the provisions hereof, subject at
all reasonable times to the inspection of the Company and the Registered Owners
and the agents and representatives thereof.
The Trustee, the Credit Facility Issuer and the Company may, by notice given
hereunder, designate any further or different addresses to which subsequent
notices, certificates or other communications shall be sent.
Section 1403. Trustee as Paying Agent. The Trustee is hereby designated and
agrees to act as Paying Agent for and in respect of the Bonds.
Section 1404. Rights Under Indenture. Except as herein otherwise expressly
provided, nothing in this Indenture expressed or implied is intended or shall be
construed to confer upon any person, firm or corporation other than the parties
hereto, the Company and the Registered Owners of the Bonds issued under and
secured by this Indenture, any right, remedy or claim, legal or equitable, under
or by reason of this Indenture or any provision hereof, this Indenture and all
its provisions being intended to be and being for the sole and exclusive benefit
of the parties hereto, the Company and the Registered Owners from time to time
of the Bonds issued hereunder.
Section 1405. Form of Certificates and Opinions. Except as otherwise provided in
this Indenture, any request, notice, certificate or other instrument from the
Company shall be deemed to have been signed by the proper party or parties if
signed by the President or other authorized representative of the Company, and
the Trustee may accept and rely upon a certificate signed by the such party as
to any action taken by the Company.
Section 1406. Severability. In case any one or more of the provisions of this
Indenture or of the Bonds issued hereunder shall for any reason be held to be
illegal or invalid, such illegality or invalidity shall not affect any other
provision of this Indenture or of the Bonds, but this Indenture and the Bonds
shall be construed and enforced as if such illegal or invalid provision had not
been contained therein. In case any covenant, stipulation, obligation or
agreement of the Company contained in the Bonds or in this Indenture shall for
any reason be held to be in violation of law then such covenant, stipulation,
obligation or agreement shall be deemed to be the covenant, stipulation,
obligation or agreement of the Company to the full extent permitted by law.
Section 1407. State Law Governs. This Indenture shall be governed by and
construed in accordance with the laws of the State.
Section 1408. Payments Due on Days Other Than Business Days. In any case where
the date of maturity of interest on or principal of the Bonds or the date fixed
for redemption of the Bonds shall be a day other than a Business Day, then
payment of interest or principal need not be made on such date but may be made
on the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption, provided that interest
shall accrue for the period of any such extension.
Section 1409. Execution in Counterparts. This Indenture may be executed in
multiple counterparts, each of which shall be regarded for all purposes as an
original, and such counterparts shall constitute but one and the same
instrument, and no one counterpart of which need be executed by all parties.
IN WITNESS WHEREOF, the Company has caused this Indenture to be executed in its
name and on its behalf by an authorized representative and the official seal of
the Company to be impressed hereon and attested by an officer of the Company;
and the Trustee has caused this Indenture to be executed in its name and on its
behalf by an authorized officer, all as of the date and year first above
written.
FRESH ADVANTAGE, INC.
By:
Name:
Title:
FIRST UNION NATIONAL BANK
, as Trustee
By: ____________________________________
Title: ____________________________________
(Signature page to the Indenture.)
EXHIBIT A
REFUNDING REQUEST
February 1, 2001
First Union National Bank, as Trustee
800 East Main
Lower Mezzanine
Richmond, Virginia 23219
Attention: Corporate Trust Department
Re: Fresh Advantage, Inc. Taxable Variable Rate Demand Bonds, Series 2001 in an
aggregate principal amount of $9,000,000
Ladies and Gentlemen:
Fresh Advantage, Inc. (the "Company") hereby requests that all proceeds from the
sale of the Fresh Advantage, Inc. Taxable Variable Rate Demand Bonds, Series
2001 issued by the Company and dated as of February 1, 2001 (the "Bonds"), which
funds are held by you in the Refunding Fund in accordance with the Trust
Indenture (the "Indenture") dated as of February 1, 2001, from the Company to
you, the sum of $9,000,000 from the Refunding Fund and the sum of $55,350 from
the Refunding Fund representing Company funds to pay costs of issuance for a
total requisition of ($9055,350.00). All amounts held by you in various funds
under that certain Trust Indenture, dated as of March 1, 1999 (the "Prior
Indenture"), between the Carrollton Payroll Development Authority and you, shall
be transferred to the Company to an account designated by the Company. Monies in
the Refunding Fund shall be used to redeem, refund or satisfy the outstanding
principal amount of the Carrollton Payroll Development Authority Industrial
Development Revenue Bonds (KMB Produce, Inc. Project), Series 1999 in the
original aggregate principal amount of $9,000,000 (the "Prior Bonds") on
February 1, 2001 and pay certain costs of issuance as set forth in the schedule
attached hereto. Interest due on the Prior Bonds to the redemption date shall be
paid from a draw under the Letter of Credit. The Company further requests that
the redeemed Prior Bonds be destroyed as permitted under the Prior Indenture.
FRESH ADVANTAGE, INC.
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
EXHIBIT B
FORM OF NOTICE OF CONVERSION TO
NEW INTEREST RATE DETERMINATION METHOD
Date: ________________
To: [Registered Owners of Bonds]
Re: Fresh Advantage, Inc. Taxable Variable Rate Demand Bonds, Series 2001
Ladies and Gentlemen:
(1) The interest rate on the above-captioned Bonds is being converted to the
[Weekly] [Monthly] [Semiannual] [Fixed] Rate (as defined in, and to be
determined in, the Indenture) effective on ______________ ___, ____ (the
"Conversion Date" as defined in the Indenture).
(2) After ________________ ___, ____ (the tenth day preceding the Conversion
Date), Registered Owners of Bonds shall not be entitled to deliver Bonds to
First Union National Bank, as Tender Agent, for purchase pursuant to Section 204
of the Indenture.
[do not include paragraphs 3 and 4 if converting to Weekly Rate]
(3) The [Proposed Rate] [Preliminary Fixed Rate] (as defined in, and determined
as described in, the Indenture) is ________%.
(4) Depending on market conditions, the [Monthly] [Semiannual] [Fixed] Rate may
be higher but in no event shall be lower than the [Proposed Rate] [Preliminary
Fixed Rate].
(5) Payment of the Bonds [will] [will not] be supported by a Credit Facility (as
defined in the Indenture) after the Conversion Date [, which Credit Facility
will be issued by __________________ effective on the Conversion Date and
expiring on _______________ ___, _____ unless otherwise terminated by the terms
thereof].
(6) All Bonds will be deemed to have been tendered by their Registered Owners on
the Conversion Date. In order to receive payment of the purchase price of any
Bond which is deemed to have been tendered, the Registered Owner of such Bond
must deliver such Bond to the principal corporate trust office of First Union
National Bank, as Tender Agent, at ________________ before 10:00 a.m. on the
Conversion Date.
First Union National Bank, as Trustee
By: ____________________________________
Title: ____________________________________
EXHIBIT C
[Form of Bond]
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to issuer or its agent
for registration of transfer, exchange, or payment and any certificate issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
CUSIP
THIS BOND MAY BE TENDERED FOR PURCHASE AS DESCRIBED HEREIN. DELIVERY OF AN
OPTIONAL TENDER NOTICE WITH RESPECT TO THIS BOND CONSTITUTES AN IRREVOCABLE
OFFER TO SELL THIS BOND ON THE DATE SPECIFIED THEREIN AND IS BINDING ON
SUBSEQUENT REGISTERED OWNERS OF THIS BOND. IN THE EVENT THE REGISTERED OWNER
FAILS TO DELIVER THIS BOND TO THE TENDER AGENT ON THE SPECIFIED PURCHASE DATE,
THE OWNER HEREOF SHALL THEREAFTER BE ENTITLED ONLY TO PAYMENT OF THE PURCHASE
PRICE AND NOT TO THE BENEFITS OF THE INDENTURE. THIS BOND ALSO IS SUBJECT TO
MANDATORY TENDER AND PURCHASE AS DESCRIBED HEREIN.
$9,000,000
Fresh Advantage, Inc. Taxable Variable Rate Demand Bonds,
Series 2001
No. R-________
Registered Owner: CEDE & CO.
Principal Amount: $___________________
Maturity Date: March 1, 2019
Interest Rate: The Bonds shall initially bear a variable rate of interest
determined by the Placement Agent on the Date of Issuance. Thereafter, the Bonds
shall bear interest at the Weekly Rate unless converted as provided herein.
Interest Payment Dates: During any Variable Rate Period: The first Business Day
of each calendar month commencing the first Business Day of March, 2001 and on
any Conversion Date, through the earlier of a Fixed Rate Conversion Date or the
Maturity Date.
During a Fixed Rate Period: The first Business Day of each March and September,
commencing the first Business Day of the first September following a Fixed Rate
Conversion Date, through the earlier of the Maturity Date or the date on which
principal of and interest on the Bonds shall have been paid in full or provision
shall have been made for the payment thereof in accordance with the Indenture.
Original Delivery Date: February __, 2001
Fresh Advantage, Inc. (the "Company"), for value received, hereby promises to
pay to the Registered Owner, or registered assigns, the Principal Amount on the
Maturity Date and to pay interest thereon from the Interest Payment Date next
preceding the Date of Authentication indicated hereon, unless it is
authenticated on an Interest Payment Date, in which event it shall bear interest
from such date, or if it is authenticated prior to March 1, 2001, in which event
it shall bear interest from the Date of Authentication, payable on each Interest
Payment Date, until payment of said principal sum has been made or provided for,
at the rate or rates per annum provided for below. Principal and interest and
premium, if any, shall be paid in any coin or currency of the United States of
America which, at the time of payment, is legal tender for the payment of public
and private debts. Interest shall be paid on each Interest Payment Date by check
mailed to the person in whose name this Bond is registered at the close of
business on the Regular Record Date (as hereinafter defined) next preceding such
Interest Payment Date; provided, however, that interest shall also be payable by
wire transfer to the account at a member bank of the Federal Reserve System of
any Registered Owner of Bonds in the aggregate principal amount of $500,000 or
more at the written request (identifying such account by number) of the
registered owner received by the Trustee (as hereinafter defined) at least five
(5) days before the Regular Record Date or Special Record Date (as defined in
the Indenture). While the Bonds bear interest at a Variable Rate (as hereinafter
defined), the Regular Record Date will be the close of business on the Business
Day immediately preceding each Interest Payment Date. While the Bonds bear
interest at the Fixed Rate (as hereinafter defined), the Regular Record Date
will be the 15th day of the calendar month preceding each Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered owner on such Regular Record Date, and may
be paid to the person in whose name this Bond is registered at the close of
business on a Special Record Date (as defined in the Indenture) for the payment
of such defaulted interest to be fixed by the Trustee, or may be paid at any
time in any other lawful manner, all as more fully provided in the Indenture.
Principal, accrued interest and redemption premium, if any, shall be paid upon
surrender of this Bond at the principal corporate trust office of First Union
National Bank, as Trustee, in the City of Richmond, Virginia. Payment of the
purchase price of Bonds purchased as described herein shall be paid, upon
surrender of such Bonds, at the office of First Union National Bank (in such
capacity, the "Tender Agent") in the City of Richmond, Virginia.
This Bond is one of the Bonds of a duly authorized issue of taxable variable
rate demand bonds of the Company in the aggregate principal amount of $9,000,000
and is known as Fresh Advantage, Inc. Taxable Variable Rate Demand Bonds, Series
2001 (the "Bonds").
The Bonds have been issued in order to provide funds to refund all of the
outstanding Carrollton Payroll Development Authority Industrial Development
Revenue Bonds (KMB Produce, Inc. Project), Series 1999 issued in the original
aggregate principal amount of $9,000,000 (the "Prior Bonds") which were issued
to finance the acquisition, construction, installation, renovation or equipping
of a manufacturing facility located in Carrollton County, Georgia and to pay
costs associated with the issuance of the Bonds.
This Bond is issued under and pursuant to a Trust Indenture dated as of February
1, 2001 (said Trust Indenture, together with all such supplements and amendments
thereto as therein permitted, being herein called the "Indenture"), by and
between the Company and First Union National Bank, as Trustee (said banking
institution and any successor trustee or co-trustee under the Indenture being
herein called the "Trustee"). An executed counterpart of the Indenture is on
file at the principal corporate trust office of the Trustee. Reference is hereby
made to the Indenture for the provisions, among others, with respect to the
custody and application of the proceeds of the Bonds, the collection and
disposition of revenues, a description of the funds charged with and pledged to
the payment of the principal of and interest on and any other amounts payable
under the Bonds, the nature and extent of the security, the terms and conditions
under which the Bonds are or may be issued, the rights, duties and obligations
of the Company and of the Trustee and the rights of the registered owners of the
Bonds, and, by the acceptance of this Bond, the registered owner hereof assents
to all of the provisions of the Indenture.
Credit Facility
. The Company has entered into a Letter of Credit and Reimbursement Agreement
dated as of March 1, 1999, as amended (the "Reimbursement Agreement") with First
Union National Bank (in such capacity, the "Bank"). Pursuant to the
Reimbursement Agreement, the Company has caused a Letter of Credit issued by the
Bank (the "Letter of Credit"), to be delivered to the Trustee, as provided in
the Indenture. The Trustee shall be entitled under the Letter of Credit to draw
up to an amount of $9,187,500 of which (a) $9,000,000 shall support the payment
of principal or that portion of the purchase price corresponding to principal of
the Bonds and (b) $187,500 shall support the payment of up to 50 days' interest
or that portion of the purchase price corresponding to interest on the Bonds at
an assumed rate of 15% per annum. Subject to the provisions of the Indenture,
the Company is required during a Variable Rate Period to maintain with the
Trustee the Letter of Credit or an alternate credit facility with terms and
provisions substantially the same as those of the Letter of Credit (an
"Alternate Credit Facility"). During any Variable Rate Period, unless the Letter
of Credit or the then current Alternate Credit Facility is replaced prior to its
expiration in accordance with the terms of the Indenture, this Bond will become
subject to mandatory redemption as provided in the Indenture upon expiration of
the Credit Facility.
Source of Funds
. The principal of, premium, if any, and interest on the Bonds are payable
solely from moneys held by the Trustee under the Indenture for such purpose,
including, with respect to principal and interest only, moneys drawn by the
Trustee under the Letter of Credit or such other credit facility or facilities,
if any, as may then be held by the Trustee under the Indenture for the benefit
of the Registered Owners (the Letter of Credit or any Alternate Credit Facility
is hereafter referred to as the "Credit Facility" and the Bank as the issuer of
the Letter of Credit and any institution issuing an Alternate Credit Facility
are herein called the "Credit Facility Issuer"). Except as otherwise specified
in the Indenture, this Bond is entitled to the benefits of the Indenture equally
and ratably both as to principal (and redemption and purchase price) and
interest with all other Bonds issued under the Indenture.
Interest Rates
. The Bonds shall bear interest at the applicable rate provided below. On each
Interest Payment Date, interest accrued through the day immediately preceding
such Interest Payment Date shall be payable. While the Bonds bear interest at
any Variable Rate, interest shall be computed on the basis of the number of days
actually elapsed over a 360-day year. After the Fixed Rate Conversion Date,
interest on the Bonds shall be computed on the basis of a 360-day year of 12
months of 30 days each.
Initial Interest Rate
. This Bond shall bear interest from the Date of Authentication to and including
February __, 2001 at the Initial Interest Rate.
Variable Rate
. Following the Initial Rate Period (as defined in the Indenture) and until any
Conversion Date (as defined in the Indenture), the Bonds shall bear interest at
the Weekly Rate (hereinafter defined). During the Variable Rate Period (as
defined in the Indenture), the Remarketing Agent shall give telephonic or
written notice on the Determination Date (as defined in the Indenture) to the
Trustee and the Company of the Variable Rate to be in effect for the next
succeeding Calculation Period (as defined in the Indenture). The determination
of any Variable Rate by the Remarketing Agent shall be conclusive and binding
upon the Registered Owners, the Beneficial Owners, the Company, the Trustee, the
Tender Agent, the Remarketing Agent and the Credit Facility Issuer.
Notwithstanding anything herein to the contrary, each Interest Rate
Determination Method (as defined in the Indenture) in effect from time to time
shall continue in effect until the date on which such Interest Rate
Determination Method is changed as described in Section 203 of the Indenture.
(A) Weekly Rate. During any Weekly Rate Period (as defined in the Indenture) the
Bonds will bear interest at the Weekly Rate. During any Weekly Rate Period, the
Remarketing Agent will determine the Weekly Rate for the applicable Calculation
Period on the applicable Determination Date. Each Weekly Rate shall be the rate
of interest per annum determined by the Remarketing Agent on and as of each
applicable Determination Date as the minimum rate of interest per annum
necessary, in the judgment of the Remarketing Agent taking into account market
conditions prevailing on the Determination Date, to enable the Remarketing Agent
to arrange for the sale of all of the Bonds on the first day of the applicable
Calculation Period in the secondary market at a price equal to the principal
amount thereof (plus accrued interest to the date of settlement). If the
Remarketing Agent fails to certify such rate, the Weekly Rate for any
Calculation Period, or if for any reason the Weekly Rate is held to be invalid
or unenforceable by a court of competent jurisdiction for any period, the Weekly
Rate for such Calculation Period shall be the Alternate Rate (as defined in the
Indenture). Notwithstanding anything else contained herein, the Weekly Rate
shall not in any event exceed the lesser of (i) 15% per annum or (ii) the
maximum rate permitted by law.
(B) Monthly Rate. During any Monthly Rate Period (as defined in the Indenture)
the Bonds will bear interest at the Monthly Rate. During any Monthly Rate
Period, the Remarketing Agent will determine the Proposed Rate (as defined in
the Indenture) for the applicable Calculation Period on the Proposed Rate
Determination Date. Thereafter, the Remarketing Agent will determine a Monthly
Rate on the applicable Determination Date; provided, however, that such rate
shall not be less than the Proposed Rate determined by the Remarketing Agent on
the preceding Proposed Rate Determination Date (as defined in the Indenture).
Each Monthly Rate shall be the rate of interest per annum determined by the
Remarketing Agent on and as of each applicable Determination Date as the minimum
rate of interest per annum necessary, in the judgment of the Remarketing Agent
taking into account market conditions prevailing on the Determination Date and
subject to the foregoing proviso concerning the Proposed Rate, to enable the
Remarketing Agent to arrange for the sale of all of the Bonds on the first day
of the applicable Calculation Period in the secondary market at a price equal to
the principal amount thereof (plus accrued interest to the date of settlement).
If the Remarketing Agent fails to certify such rate or if, for any reason, the
Monthly Rate is held to be invalid or unenforceable by a court of competent
jurisdiction for any Calculation Period, the Monthly Rate for such Calculation
Period shall be the Alternate Rate. In connection with any change in the
Interest Rate Determination Method to a Monthly Rate pursuant to Section 203,
the Proposed Rate shall be determined as provided above on the applicable
Proposed Rate Determination Date and the initial Monthly Rate shall be
determined as provided above on the applicable Determination Date.
Notwithstanding anything else contained herein, the Monthly Rate shall not in
any event exceed the lesser of (i) 15% per annum or (ii) the maximum rate
permitted by law.
(C) Semiannual Rate. During any Semiannual Rate Period the Bonds will bear
interest at the Semiannual Rate. During any Semiannual Rate Period, the
Remarketing Agent will determine the Proposed Rate for the next Calculation
Period on the Proposed Rate Determination Date. Thereafter, the Remarketing
Agent will determine a Semiannual Rate for the next Calculation Period on the
applicable Determination Date; provided, however, that such Semiannual Rate
shall not be less than the Proposed Rate determined by the Remarketing Agent on
the preceding Proposed Rate Determination Date. Each Semiannual Rate shall be
the rate of interest per annum determined by the Remarketing Agent on and as of
each applicable Determination Date as the minimum rate of interest per annum
necessary, in the judgment of the Remarketing Agent taking into account market
conditions prevailing on the Determination Date and subject to the foregoing
proviso concerning the Proposed Rate, to enable the Remarketing Agent to arrange
for the sale of all of the Bonds on the first day of the applicable Calculation
Period in the secondary market at a price equal to the principal amount thereof
(plus accrued interest to the date of settlement). If the Remarketing Agent
fails to certify such rate or if, for any reason, the Semiannual Rate is held to
be invalid or unenforceable by a court of competent jurisdiction for any
Calculation Period, the Semiannual Rate for such Calculation Period shall be the
Alternate Semiannual Rate (as defined in the Indenture). In connection with any
change in the Interest Rate Determination Method to a Semiannual Rate pursuant
to Section 203, the Proposed Rate shall be determined as provided above on the
applicable Proposed Rate Determination Date and the initial Semiannual Rate
shall be determined as provided above on the applicable Determination Date.
Notwithstanding anything else contained herein, the Semiannual Rate shall not in
any event exceed the lesser of (i) 15% per annum or (ii) the maximum rate
permitted by law.
Fixed Rate
. During the Fixed Rate Period, the Bonds shall bear interest at the Fixed Rate.
(1) On the Fixed Rate Conversion Date (as defined in the Indenture) the Fixed
Rate shall be established as follows:
(a) if the Placement Agent shall have arranged for the sale of any or all
Tendered Bonds (as defined in the Indenture) at a price equal to the principal
amount thereof, the Fixed Rate shall be equal to the interest rate or rates at
which such Bonds were sold by the Placement Agent, provided that all Tendered
Bonds shall be sold at par and at a rate greater than or equal to the
Preliminary Fixed Rate (as defined in the Indenture); or
(b) if the Placement Agent shall have arranged for the sale of none of the
Tendered Bonds, the Fixed Rate shall be equal to the Preliminary Fixed Rate.
(2) If, for any reason, the Fixed Rate is held to be invalid or unenforceable by
a court of competent jurisdiction, the Fixed Rate will be 10% per annum.
Notwithstanding anything to the contrary contained herein or in the Indenture,
the Fixed Rate shall in no event be a rate of interest in excess of the maximum
rate permitted by law.
(3) On or before the Fixed Rate Conversion Date, all Bonds shall be presented to
the Trustee for stamping or otherwise noting thereon of the legend:
"The interest rate on this Bond has been fixed at _____% per annum in accordance
with the provisions of this Bond and Section 202(e) of the Indenture."
Interest Rate Determination Binding
. The determination of the interest rate on the Bonds in accordance with the
terms of the Indenture shall be conclusive and binding upon the Registered
Owners, the Beneficial Owners, the Company, the Trustee, the Remarketing Agent,
the Placement Agent, the Tender Agent and the Credit Facility Issuer.
REDEMPTION OR PURCHASE OF BONDS
Optional Redemption
.
(a) While the Bonds bear interest at a Variable Rate, the Bonds shall be subject
to redemption on any Interest Payment Date, at the option of the Company, but
only upon the 45 days prior written direction of the Company delivered to the
Trustee, with the prior written consent of the Credit Facility Issuer, in whole
or in part, at a redemption price equal to 100% of the principal amount thereof
plus accrued interest to the redemption date.
(b) While the Bonds bear interest at the Fixed Rate, the Bonds shall be subject
to redemption, at the option and upon the written direction of the Company
delivered to the Trustee at least 45 days prior to the date set for redemption,
in whole or in part, on any Interest Payment Date occurring on or after the
dates specified below at the redemption prices (with a premium expressed as a
percentage of the principal amount thereof to be redeemed) specified below plus
accrued interest to the redemption date.
Commencement of Fixed
Rate Redemption Period
Redemption Price
Four years from the Fixed Rate Conversion Date
103%, declining by 1/2% on each succeeding anniversary of the first day of the
Fixed Rate Redemption Period until reaching 100% and thereafter at 100%
Extraordinary Mandatory Redemption or Purchase
. During any Variable Rate Period, the Bonds shall be subject to mandatory
redemption or purchase, at the option of the Issuer, in whole on the Interest
Payment Date occurring closest to but not less than 15 days prior to the date of
expiration of the then current Credit Facility unless an Alternate Credit
Facility has been provided in accordance with the Indenture, at a redemption
price equal to 100% of the principal amount thereof plus accrued interest to the
redemption or purchase date. The Company shall notify the Trustee with a copy to
the Credit Facility Issuer, Remarketing Agent and Tender Agent of its election
to purchase.
Notice of Redemption and Selection of Bonds
. Any notice of redemption, identifying the Bonds or portions thereof to be
redeemed, shall be given by the Trustee not more than 60 days and not less than
30 days prior to the redemption date, by mailing a copy of the redemption notice
by first class mail to the registered owner of each Bond to be redeemed in whole
or in part at the address shown on the Bond Register maintained by the Bond
Registrar. Notice of optional redemption may be conditioned upon the deposit of
moneys with the Trustee before the date fixed for redemption and such notice
shall be of no effect unless such moneys are so deposited. All Bonds so called
for redemption, including Bonds purchased by the Company as provided in the
Indenture but not yet surrendered for payment of the purchase price, will cease
to bear interest on the specified redemption date provided funds for their
redemption price and any accrued interest payable on the specified redemption
date are on deposit with the Tender Agent. If less than all the Bonds are to be
redeemed, the particular Bonds to be called for redemption shall be selected in
the following order of priority: first, Bonds pledged to the Credit Facility
Issuer, second Bonds owned by the Company, and third, Bonds selected by lot as
further provided in the Indenture.
Mandatory Purchase on Conversion Date
. The Bonds shall be subject to mandatory purchase in whole at 100% of the
principal amount thereof, without premium, plus accrued interest, if any,
thereon to the date of purchase, on any Conversion Date.
Mandatory Purchase on Credit Substitution.
The Bonds are subject to mandatory tender for purchase on the date that the
Trustee accepts an Alternate Credit Facility at 100% of the principal amount
thereof, without premium, during any Variable Rate Period, plus accrued
interest, if any therein to the date of purchase.
THE OWNER OF THIS BOND, BY ACCEPTANCE HEREOF, AGREES TO THE MANDATORY PURCHASE
OF THIS BOND AS PROVIDED IN THE INDENTURE, AND AGREES THAT THIS BOND SHALL BE
PURCHASED ON THE DATE SPECIFIED UPON DEPOSIT WITH THE TRUSTEE OF AN AMOUNT
SUFFICIENT TO PAY THE PURCHASE PRICE HEREOF. THE OWNER OF THIS BOND ALSO
UNDERSTANDS AND AGREES THAT IN THE EVENT THE OWNER FAILS TO DELIVER THIS BOND,
PROPERLY ENDORSED FOR TRANSFER, TO THE TRUSTEE ON THE DATE SPECIFIED, INTEREST
SHALL CEASE TO ACCRUE HEREON AND THE OWNER HEREOF SHALL THEREAFTER BE ENTITLED
ONLY TO PAYMENT OF THE PURCHASE PRICE AND NOT TO THE BENEFITS OF THE INDENTURE.
Purchase at option of Registered Owner During Variable Rate Period
. While the Bonds bear interest at a Variable Rate, any Bond or portion thereof
in an authorized denomination shall be purchased on the demand of the Registered
Owner thereof on any Optional Tender Date (as defined in the Indenture) at a
purchase price equal to 100% of the principal amount thereof, plus accrued
interest, if any, to the date of purchase upon delivery to the Tender Agent of
an Optional Tender Notice in the form attached hereto as Exhibit B (the
"Optional Tender Notice") at least seven (7) days prior to the Optional Tender
Date specified in such Optional Tender Notice during any Weekly Rate Period or
Monthly Rate Period or at least twenty (20) days prior to the Optional Tender
Date specified in such Optional Tender Notice during any Semiannual Rate Period.
Unless the Bonds are held pursuant to a book-entry system as described below, to
receive payment of the purchase price, the owner will be required to deliver
such Bond to the Tender Agent, accompanied by an executed form of assignment and
any other instruments of transfer satisfactory to the Tender Agent, not less
than five days prior to the purchase date specified in such notice as provided
in the Indenture. No purchase of Bonds at the option of the owner thereof or on
the Conversion Date shall be deemed to be a payment or redemption of the Bonds
or any portion thereof. Notwithstanding the foregoing, no owner shall have a
right to tender his Bond(s) for purchase as described in this paragraph
following acceleration of the payment of the Bonds pursuant to the terms of the
Indenture. THE OWNER OF THIS BOND, BY ACCEPTANCE HEREOF, AGREES THAT DELIVERY OF
THE WRITTEN NOTICE DESCRIBED IN THIS PARAGRAPH BY THE OWNER CONSTITUTES AN
IRREVOCABLE OFFER TO SELL THIS BOND ON THE DATE SPECIFIED, AND THAT THIS BOND
SHALL BE PURCHASED ON SUCH DATE UPON DEPOSIT WITH THE TENDER AGENT OF AN AMOUNT
SUFFICIENT TO PAY THE PURCHASE PRICE HEREOF. THE OWNER OF THIS BOND UNDERSTANDS
AND AGREES THAT IN THE EVENT THE OWNER FAILS TO DELIVER THIS BOND, PROPERLY
ENDORSED FOR TRANSFER, TO THE TENDER AGENT ON THE DATE SPECIFIED IN THE NOTICE,
THIS BOND SHALL BE HELD BY THE OWNER AS AGENT FOR THE COMPANY, INTEREST SHALL
CEASE TO ACCRUE HEREON AND THE OWNER HEREOF SHALL THEREAFTER BE ENTITLED ONLY TO
PAYMENT OF THE PURCHASE PRICE AND NOT TO THE BENEFIT OF THE INDENTURE AND THE
COMPANY SHALL, TO THE EXTENT PERMITTED BY LAW, EXECUTE AND THE TRUSTEE SHALL
AUTHENTICATE AND DELIVER A SUBSTITUTE BOND IN LIEU OF THE UNDELIVERED BOND.
Tender Agent
. The Company has appointed First Union National Bank as Tender Agent. The
Tender Agent may be changed at any time by the Company.
Authorized Denominations
. Subject to the provisions of the Indenture, the Bonds are issuable as
registered Bonds in the denomination of $100,000 or any integral multiple of
$5,000 in excess thereof; provided that if less than $100,000 principal amount
of Bonds is outstanding, one Bond shall be issued in such smaller denomination.
Subject to the limitations provided in the Indenture and upon payment of any tax
or governmental charge, if any, Bonds may be exchanged for a like aggregate
principal amount of Bonds of other authorized denominations. Except as provided
in this paragraph, in no event shall Bonds be redeemed or selected for
redemption if such redemption will result in any Registered Owner owning Bonds
in principal amounts other than authorized denominations.
Transfer
. This Bond is transferable by the registered owner hereof or his duly
authorized attorney at the principal corporate trust office of First Union
National Bank as Bond Registrar, in Richmond, Virginia, in compliance with the
terms and conditions set forth in the Indenture and upon surrender of this Bond,
accompanied by a duly executed instrument of transfer in form satisfactory to
the Bond Registrar, subject to such reasonable regulations as the Company, the
Bond Registrar or the Trustee may prescribe, and upon payment of any tax or
other governmental charge incident to such transfer, PROVIDED, THAT IF MONEYS
FOR THE PURCHASE OF THIS BOND HAVE BEEN PROVIDED PURSUANT TO A DRAW UNDER THE
CREDIT FACILITY, THIS BOND IS NOT TRANSFERABLE TO ANYONE OTHER THAN THE COMPANY
OR ITS ASSIGNEE OR PLEDGEE. Upon any such transfer, a new Bond or Bonds
registered in the name of the transferee or transferees in denominations
authorized by the Indenture and in the same aggregate principal amount as the
principal amount of this Bond will be issued to the transferee. Except as set
forth in this Bond and as otherwise provided in the Indenture, the person in
whose name this Bond is registered shall be deemed the owner hereof for all
purposes, and neither the Company, the Bond Registrar nor the Trustee shall be
affected by any notice to the contrary.
The Trustee may make appropriate arrangements for the Bonds (or any portion
thereof) to be issued or held by means of a book-entry system administered by
The Depository Trust Company ("DTC") with no physical distribution of Bonds made
to the public (other than those Bonds, if any, not held under such book-entry
system). References in the remainder of this paragraph and in the next five
succeeding paragraphs to a Bond or the Bonds shall be construed to mean the Bond
or Bonds held under the book-entry system. In such event, one Bond for each
maturity shall be issued to DTC, and immobilized in its custody. A book-entry
system shall be employed, evidencing ownership of the Bonds in Authorized
Denominations, with transfers of beneficial ownership effected on the records of
DTC and the DTC Participants pursuant to rules and procedures established by
DTC.
Each DTC Participant shall be credited in the records of DTC with the amount of
such DTC Participant's interest in the Bonds. Beneficial ownership interests in
the Bonds may be purchased by or through DTC Participants. The holders of these
beneficial ownership interests are hereinafter referred to as the "Beneficial
Owners." The Beneficial Owners shall not receive Bonds representing their
beneficial ownership interests. The ownership interests of each Beneficial Owner
shall be recorded through the records of the DTC Participant from which such
Beneficial Owner purchased its Bonds. Transfers of ownership interests in the
Bonds shall be accomplished by book entries made by DTC and, in turn, by DTC
Participants acting on behalf of Beneficial Owners. SO LONG AS CEDE & CO., AS
NOMINEE FOR DTC, IS THE REGISTERED OWNER OF THE BONDS, THE TRUSTEE SHALL TREAT
CEDE & CO. AS THE ONLY HOLDER OF THE BONDS FOR ALL PURPOSES UNDER THE INDENTURE,
INCLUDING RECEIPT OF ALL PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE
BONDS, RECEIPT OF NOTICES, VOTING AND REQUESTING OR DIRECTING THE TRUSTEE TO
TAKE OR NOT TO TAKE, OR CONSENTING TO, CERTAIN ACTIONS UNDER THE INDENTURE.
Payments of principal, premium, interest and purchase price with respect to the
Bonds, so long as DTC is the only owner of the Bonds, shall be paid by the
Trustee directly to DTC or its nominee, Cede & Co. as provided in the Letter of
Representations dated _________________, 2001, from the Company, the Remarketing
Agent and the Trustee (in its capacities as such and as Tender Agent and Paying
Agent) to DTC (the "Letter of Representations"). DTC shall remit such payments
to DTC Participants, and such payments thereafter shall be paid by DTC
Participants to the Beneficial Owners. Neither the Company nor the Trustee shall
be responsible or liable for payment by DTC or DTC Participants, for sending
transaction statements or for maintaining, supervising or reviewing records
maintained by DTC or DTC Participants.
In the event that (a) DTC determines not to continue to act as securities
depository for the Bonds or (b) the Company determines that the continuation of
the book-entry system of evidence and transfer of ownership of the Bonds would
adversely affect its interests or the interests of the Beneficial Owners of the
Bonds, the Company shall discontinue the book-entry system with DTC. If the
Company fails to identify another qualified securities depository to replace
DTC, the Trustee shall authenticate and deliver replacement Bonds in the form of
fully registered Bonds to each Beneficial Owner.
THE COMPANY, THE REMARKETING AGENT, THE TENDER AGENT AND THE TRUSTEE SHALL NOT
HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO DTC OR ANY DTC PARTICIPANT OR ANY
BENEFICIAL OWNER WITH RESPECT TO (i) THE BONDS; (ii) THE ACCURACY OF ANY RECORDS
MAINTAINED BY DTC OR ANY DTC PARTICIPANT; (iii) THE PAYMENT BY DTC OR ANY DTC
PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE
PRINCIPAL OF AND INTEREST ON THE BONDS; (iv) THE DELIVERY OR TIMELINESS OF
DELIVERY BY DTC OR ANY DTC PARTICIPANT OF ANY NOTICE DUE TO ANY BENEFICIAL OWNER
THAT IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN TO
BENEFICIAL OWNERS; (v) THE SELECTION OF BENEFICIAL OWNERS TO RECEIVE PAYMENTS IN
THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; OR (vi) ANY CONSENT GIVEN OR
OTHER ACTION TAKEN BY DTC, OR ITS NOMINEE, CEDE & CO., AS REGISTERED OWNER.
In the event that a book-entry system of evidence and transfer of ownership of
the Bonds is discontinued pursuant to the provisions of the Indenture, the Bonds
shall be delivered solely as fully registered Bonds without coupons in the
Authorized Denominations, shall be lettered "R" and numbered separately from 1
upward, and shall be payable, executed, authenticated, registered, exchanged and
canceled pursuant to the provisions hereof and of the Indenture.
The owner of this Bond shall have no right to enforce the provisions of the
Indenture or to institute action to enforce the covenants therein, or to take
any action with respect to any Event of Default under the Indenture, or to
institute, appear in or defend any suit or other proceeding with respect
thereto, except as provided in the Indenture.
In certain events, on the conditions, in the manner and with the effect set
forth in the Indenture, the principal of this Bond may become or may be declared
due and payable before the stated maturity hereof, together with the interest
accrued hereon.
Modifications or alterations of the Indenture and any supplement or amendment
thereto may be made only to the extent and in the circumstances permitted by the
Indenture and may be made in certain cases without the consent of the owners of
the Bonds.
Anything herein or in the Indenture to the contrary notwithstanding, the
obligations of the Company hereunder shall be subject to the limitation that
payment of interest to the owner of this Bond shall not be required to the
extent that receipt of any such payment by the owner of this Bond would be
contrary to the provisions of law applicable to such Bond which limits the
maximum rate of interest which may be charged or collected by such owner.
This Bond shall be governed by and construed in accordance with the laws of the
State of Georgia.
All acts, conditions and things required to happen, exist and be performed
precedent to and in the issuance of this Bond and the execution of the Indenture
have happened, exist and have been performed as so required.
IN WITNESS THEREOF, the Company has caused this Bond to be executed with the
manual or facsimile signature of its authorized representative as of the
Original Delivery Date set forth above.
FRESH ADVANTAGE, INC.
By:
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds of the series designated therein and issued under
the provisions of the within-mentioned Indenture.
FIRST UNION NATIONAL BANK, as Trustee
By: ____________________________________
Authorized Signatory
Date of Authentication: __________________
(Form of Abbreviations)
The following abbreviations, when used in the description on the face of the
within Bond, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM -as tenants in common
TEN ENT -as tenants by the entireties
JT TEN as joint tenants with the right of survivorship and not as tenants in
common
UTMA - Uniform Transfers to Minors Act
Custodian for
(Cust)
(Minor)
under Uniform Transfers to Minors Act of
(State)
Additional abbreviations may also be used though not in the above list.
[Form of Assignment]
For value received, the undersigned hereby sells, assigns and transfers unto
_________________________ the within Bond and all rights thereunder, and hereby
irrevocably constitutes and appoints ______________________, attorney to
transfer the said Bond on the bond register, with full power of substitution in
the premises.
Dated: __________________________________________
Signature of Assignor
Social Security Number or
Tax Identification
Number of Transferee: __________________________________________
Signature guaranteed by an
institution which is a participant
in the Securities Transfer Agents
Medallion Program ("STAMP")
or similar program: __________________________________________
NOTICE: The assignor's signature to this Assignment must correspond with the
name as it appears on the face of the within Bond in every particular without
alteration or any change whatever.
EXHIBIT A
(To the Bond)
FORM OF REGISTERED OWNER'S OPTIONAL TENDER NOTICE
Date ______________
First Union National Bank, as Tender
Agent for the Bonds issued under the
Trust Indenture dated as of February 1, 2001
(the "Indenture") between First
Union National Bank, as Trustee,
And Fresh Advantage, Inc. (the "Company")
Attention: Corporate Trust Department
Re: Fresh Advantage, Inc. Taxable Variable Rate Demand Bonds, Series 2001
numbered ____________, CUSIP in the principal amount of $9,000,000 (the
"Bonds").
(1) The undersigned hereby certifies that it is the lawful registered owner (or
beneficial owner, if the Bonds are held under a book-entry system) of the Bonds
described above on the date hereof and that such Bonds are free and clear of any
liens or encumbrances.
(2) Pursuant to the provisions of the Indenture, the undersigned hereby
irrevocably request(s) the purchase of the Bonds described above.
(3) The date on which the Bonds shall be purchased shall be
________________ ___, ____. [Note: This date must be an Optional Tender Date (as
defined in the Indenture) at least seven (7) days after delivery of this notice
to the Tender Agent during any Weekly Rate Period or Monthly Rate Period or at
least twenty (20) days after delivery of this notice to the Tender Agent during
any Semiannual Rate Period].
(4) The person or persons to whom or to whose order the proceeds of the purchase
of the Bonds are to be paid is and the address or addresses of such payee or
payees is ________________, and the address or addresses of such payee or payees
is
_____________________________________________________________________________.
(5) The undersigned hereby irrevocably authorizes and instructs the Trustee or
the Bond Registrar (as defined in the Bonds) to effect the transfer of such
Bonds (or any Bond(s) exchanged therefor), upon payment of the purchase price
therefor, to the purchaser(s) thereof, whether or not it delivers such Bonds as
agreed pursuant to paragraph (7) hereof.
(6) The undersigned hereby acknowledges that, even if it fails to deliver such
Bonds, the Bonds may nevertheless be purchased pursuant to the Indenture, and
that, in any event, on and after the proposed purchase date set forth in
paragraph 3 hereof, the Bonds will cease to be outstanding for all purposes
under the Indenture, to evidence the indebtedness of the Company with respect
thereto and to bear interest.
(7) The undersigned hereby undertakes to deliver the Bonds to you, as Tender
Agent, at 800 East Main, Lower Mezzanine, Richmond, Virginia 23219, Attention:
Corporate Trust Department at least five days prior to the proposed purchase
date set forth in paragraph 3 above duly endorsed in blank for transfer.
Name of Registered Owner:
(Type or Print)
Signature:
Signature Guaranteed by:
Signature(s) must be guaranteed by an institution which is participating in the
Securities Transfer Agent's Medallion Program ("STAMP") or similar program.
Date: _________________________________
|
531 F. Supp. 821 (1982)
FANTASY BOOK SHOP, INC., et al., Plaintiffs,
v.
CITY OF BOSTON, et al., Defendants.
Civ. A. No. 80-2585-MC.
United States District Court, D. Massachusetts.
February 16, 1982.
*822 Regina L. Quinlan and Leonard A. Lucas, Boston, Mass., for plaintiffs.
Margaret M. Brown, Harry G. Stoddard, Boston, Mass., for Robert Ryan and Boston Redevelopment Authority.
Laurie Burt, Foley, Hoag & Eliot, Boston, Mass., for Chinese Economic Development Inc.
Arlene S. LaPenta, Boston, Mass., for City of Boston, Kevin White and Joanne Prevost.
Nicholas Foundas, Legal Advisor, Boston, Mass., for Boston Police Dept.
MEMORANDUM AND ORDER
McNAUGHT, District Judge.
This action came on to be heard on the motion to dismiss of the Chinese Economic Development Council, Inc., Michael O'Bryon, and William J. Leong (collectively, the CEDC, hereinafter).[1] At the hearing, a bench memorandum was read into the record and counsel agreed that it correctly set forth the arguments of both parties. That memorandum, in pertinent part, read as follows:
Plaintiffs brought this action seeking declaratory and injunctive relief for alleged violations of rights guaranteed to them by the First and Fourteenth Amendments and protected by various civil rights statutes.
The court denied a preliminary injunction on January 16, 1981. In Fantasy Books v. City of Boston, 652 F.2d 1115 *823 (1st Cir. 1981), the First Circuit found that the licensing ordinance was not per se unconstitutional, that the licensing scheme was procedurally adequate, that three of the licensing criteria (relating to noise, traffic, and disruptive conduct) were facially constitutional, that the fourth criteria ("legitimate protectible interests of ... affected citizens") provided for "purely subjective evaluations of wholly unrestricted factors" and was unconstitutionally vague, and finally that the denials (based on probable increased disruptive conduct) must be based on, and accompanied by, specifically identifiable findings regarding the basis for defendant Prevost's conclusion that the licenses would lead to disruptive conduct and whether that conclusion rather than content-based considerations motivated the denials of plaintiffs' applications.
CEDC now moves for dismissal of Counts III, IV and V (the only counts mentioning CEDC) for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted.
CEDC contends that Count III (violation of 42 U.S.C. § 1983) fails to state a cause of action since it lacks allegations of "state action" by CEDC. Its actions, says CEDC, were purely private in nature and did not involve state action. Under none of the three theories of private liability can its actions be considered state action, argues the CEDC, [those theories being: (1) where private entity performs a "public function", (2) where there is close and extensive involvement of state in acts of private entity, or (3) where there is a sufficient nexus between the state and acts of a private party].
CEDC argues that its purchase of the property in question does not amount to performance of a public function; that its receipt of public funds does not establish the "symbiotic relationship" necessary for finding "state action"; and that it is in no way regulated or controlled by the government.
CEDC's second argument for dismissal is that the claim of plaintiffs does not involve a federally protected constitutional right which CEDC has infringed. Expression of opposition to granting of licenses for peep shows, argues CEDC, does not constitute injury to plaintiffs' rights. CEDC characterizes plaintiffs' injuries as "commercial frustration" in being unable to locate their businesses where they would choose.
CEDC argues that there is no allegation of racial or other class-based invidiously discriminatory animus behind its actions. CEDC also argues the failure to allege material facts showing the existence of a conspiracy.
Plaintiffs argue that Count III sufficiently alleges that CEDC's actions constitute state actions in eliminating existing adult uses for the premises in question. They contend that after evaluating all of the facts, a symbiotic relationship between the CEDC and the state is shown. They argue that pronouncements of public officials in support of the CEDC redevelopment project and of eliminating the Combat Zone show a relationship sufficient to establish state action. Also, they argue that CEDC's participation in the conspiracy alleged in Count IV is sufficient to establish state action under § 1983.
The interest protected by the Constitution, say plaintiffs, is the right to conduct adult business. The licensing requirements, city ordinances, and redevelopment are being used to eliminate the adult uses in the Zone, they contend.
The plaintiffs argue that the adult uses are subject to the full array of First Amendment protections. The factual circumstances of the case, say plaintiffs, indicate that they are being discriminated against because of the adult uses for which they use the premises.
Claims Under 42 U.S.C. § 1983
42 U.S.C. § 1983 provides,
Every person who under color of any statute, ordinance, regulation, custom or usage, of any State or Territory, subjects, *824 or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured...
The action which is prohibited by that section is "state action". Shelley v. Kraemer, 334 U.S. 1, 13, 68 S. Ct. 836, 842, 92 L. Ed. 1161 (1947). The determination of what actions meet the requirement of "state action" is difficult. The Supreme Court has declined to "fashion and apply a precise formula for recognition of state responsibility", Burton v. Wilmington Parking Authority, 365 U.S. 715, 722, 81 S. Ct. 856, 860, 6 L. Ed. 2d 45 (1961), and has warned that the determination of the existence of "state action" depends upon the facts and circumstances of each particular case. The Court, however, has indicated that "state action" may be established by showing the existence of a "symbiotic relationship", Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 175, 92 S. Ct. 1965, 1972, 32 L. Ed. 2d 627 (1972), (discussing Burton, supra), or a "sufficiently close nexus" between the state and the defendant so that the action of defendant may be treated as that of the state. Jackson v. Metropolitan Edison Co., 419 U.S. 345, 351, 95 S. Ct. 449, 453, 42 L. Ed. 2d 477 (1974).
Plaintiffs have attempted to show "state action" by pointing to a number of facts, the combination of which they say establishes that the acts of the CEDC may be construed as acts of the state. Those facts are:
1) that much of the funding for CEDC's renovation of the Boylston Building is to be provided by state and federal sources,
2) that the City and the Boston Redevelopment Authority (BRA) have publicly endorsed the project,
3) that CEDC and the BRA opposed the issuance of licenses to the plaintiffs for the exhibition of "peep shows".
4) that the defendant Prevost denied the plaintiffs' license applications, and
5) that on the same day on which Prevost issued letters of denial of license applications, a criminal complaint issued against the president of Fantasy Books charging the operation of his "peep show" business without a license.
None of these factors, however, singly or in combination, justify finding "state action" on the part of CEDC.
Clearly, CEDC is not performing a public function in renovating the Boylston Building, in opposing the granting of licenses to the plaintiffs, or in evicting tenants of that building. Those actions are not those which are "traditionally reserved exclusively to the state". Jackson v. Metropolitan Edison Co., 419 U.S. 345, 352, 95 S. Ct. 449, 454, 42 L. Ed. 2d 477 (1974). CEDC's receipt of state and federal funding for the redevelopment project does not transform its actions into the performance of a public function.
The allegations of the complaint are insufficient to state a claim under the "symbiotic relationship" standard of Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S. Ct. 856, 6 L. Ed. 2d 45 (1961). The First Circuit has identified several factors which, if shown to be present, tend to indicate the "intertwined relationship" required under the Burton standard. Rendell-Baker v. Kohn, 641 F.2d 14, 23 (1st Cir. 1981). Those factors are: (1) the use of public property by the private party, (2) actual control by the state of the management of the private institution, (3) an expression by the state that a party is under its control, and (4) founding of the private institution to avoid the requirements of the Constitution. Id. None of those factors is alleged to exist in this case. Another factor, discussed in Burton, supra, and Rendell-Baker, supra, is the existence of a mutually-beneficial relationship between the public and private parties. Plaintiffs argue that the City of Boston will derive benefit from the renovation of the Boylston Building and from the eviction of the bookstores from that building. Such a benefit is carterchristopher@example.net. Plaintiffs' eviction from the Boylston Building does not prevent them from relocating elsewhere in the Adult Entertainment *825 District of Boston. Whatever benefit may be derived by the City's relationship with the CEDC is not the type of benefit contemplated by the Court in Burton, supra.
Finally, plaintiffs' allegations are insufficient to establish "state action" under the "nexus" standard of Jackson v. Metropolitan Edison Co., 419 U.S. 345, 95 S. Ct. 449, 42 L. Ed. 2d 477 (1974). As previously noted, the CEDC does not perform a public function; nor is it subject to extensive regulation by a public entity. The actions of the CEDC (opposing the granting of licenses to the plaintiffs and evicting the plaintiffs) and the actions of the public defendants (refusing to grant licenses and supporting the redevelopment of the Boylston Building) show close cooperation between the public and private defendants but do not establish the "nexus" required to show "state action" on the part of CEDC.
Even if plaintiffs were able to establish that CEDC's actions amounted to "state action", the allegations of Count III would not establish that those actions violated a constitutional right. The plaintiffs have the right to sell books and magazines and to exhibit "peep shows"; that right is guaranteed by the First and Fourteenth Amendments. The plaintiffs have not alleged that they will not be able to pursue that business because of the actions of the defendants here. Those actions merely prohibit the plaintiffs from conducting their businesses in the Boylston Building. That surely does not amount to a violation of a constitutional right.
For the foregoing reasons, plaintiffs' claim against the CEDC under 42 U.S.C. § 1983 must be dismissed.
Claim Under 42 U.S.C. § 1985(3)
42 U.S.C. § 1985(3) prohibits conspiracies to deprive any person of the equal protection of the laws or of equal privileges and immunities under those laws. In order to sufficiently plead a claim for a violation of that section, the complaint must show that the conspirators exhibited a "class-based invidiously discriminatory animus". Griffin v. Breckenridge, 403 U.S. 88, 102, 91 S. Ct. 1790, 1798, 29 L. Ed. 2d 338 (1971). The First Circuit has interpreted the holding in that case to require that plaintiffs be members of a class readily recognizable or traditionally protected by the Civil Rights Act, that the defendants conspired to deny plaintiffs equal protection because of their membership in the class, and that the criteria defining that class were invidious. DesVergenes v. Seekonk Water District, 448 F. Supp. 1256, 1261 (D.Mass.1978); Harrison v. Brooks, 519 F.2d 1358, 1359-60 (1st Cir. 1975); Bricker v. Crane, 468 F.2d 1228, 1232-1233 (1st Cir. 1972).
Plaintiffs have not established that they are members of a class protected by the Civil Rights Act. It appears from their brief that plaintiffs assert that the adult uses for which the premises are used are the actual plaintiffs in this case. Since those uses are protected by the First Amendment, say plaintiffs, they constitute a class protected by the Civil Rights Act. Uses cannot constitute a class; persons must. The Civil Rights Act was designed to provide remedies to persons or classes of persons for violations of their civil rights. Assuming, without so deciding, that the plaintiffs do constitute a class protected by § 1985, plaintiffs have failed to establish that the defendants conspired to deny them equal protection because of their membership in that class; nor have they alleged that they were treated differently than other tenants of the Boylston Building.
Since claims under 42 U.S.C. § 1986 must fall where the claims under § 1985 are rejected, Hahn v. Sargent, 523 F.2d 461, 469 (1st Cir. 1075), the § 1986 claim against the CEDC must be dismissed.
For the foregoing reasons, the claims against CEDC, Michael O'Bryon, and William J. Leong under Counts III, IV, and V are hereby dismissed.
NOTES
[1] At the hearing the parties stipulated to the dismissal of the defendant Joseph Jordan, the Police Commissioner of the City of Boston.
|
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 19-cv-61365-BLOOM/Valle
SOUTHPOINT CONDOMINIUM
ASSOCIATION, INC.,
Plaintiff,
v.
LEXINGTON INSURANCE COMPANY,
Defendant.
___________________________________/
ORDER ON MOTION FOR LEAVE TO AMEND
ANSWER AND AFFIRMATIVE DEFENSES
THIS CAUSE is before the Court upon Defendant Lexington Insurance Company’s
(“Defendant”) Motion for Leave to Amend Its Answer and Affirmative Defenses, ECF No. [22]
(“Motion”). Plaintiff Southpoint Condominium Association, Inc. (“Plaintiff”) filed its Response
in Opposition, ECF No. [23] (“Response”), to which Defendant filed its Reply, ECF No. [28]
(“Reply”). The Court has considered the Motion, the Response, the Reply, the record in this case,
the applicable law and is otherwise fully advised. For the reasons set forth below, the Motion is
granted.
I. BACKGROUND
This matter stems from a lawsuit Plaintiff initiated in the Seventeenth Judicial Circuit in
and for Broward County, Florida against Defendant on May 16, 2019. ECF No. [1].
According to the Complaint, ECF No. [1-2], Plaintiff suffered physical damage to its
property due to high winds from Hurricane Irma in September 2017. Id. at ¶ 6. During the relevant
time period, Defendant insured Plaintiff under a commercial property coverage insurance policy.
Case No. 19-cv-61365-BLOOM/Valle
Id. at ¶ 4. Plaintiff alleges that the wind/hurricane damages to the property are covered under the
policy. Id. at ¶ 7. After Plaintiff applied for insurance benefits for the damages, Defendant
allegedly “accepted coverage for Plaintiff’s claim, but it failed to pay the full amount of benefits
Plaintiff is entitled to receive for this loss.” Id. at ¶ 9. Plaintiff asserts that it has not received the
“full cost of repair of the damage to the property, including but not limited to, complete repair to
the structure, emergency services, and all other coverages afforded by the policy for this loss.” Id.
at ¶ 15. Plaintiff alleges a single count of breach of contract based upon Defendant’s failure to pay
the full benefits due and owing under the insurance policy. Id. at ¶¶ 11-17.
On May 31, 2019, Defendant filed its Notice of Removal, ECF No. [1], pursuant to 28
U.S.C. §§ 1441 and 1446, removing the pending lawsuit to this Court on diversity jurisdiction. On
June 7, 2019, Defendant filed its Answer and Affirmative Defenses to Plaintiff’s Complaint, ECF
No. [7] (“Answer and Affirmative Defenses”), in which it asserted ten affirmative defenses. The
Court’s Scheduling Order, ECF No. [11], established August 24, 2019 as the deadline for all
motions to amend pleadings and March 24, 2020 as the deadline for all discovery to be completed.
With this background and deadlines in square view, Defendant now moves this Court for leave to
amend its Answer and Affirmative Defenses to assert additional affirmative defenses because of
Plaintiff’s alleged breach of the policy’s “Concealment, Misrepresentation or Fraud” provision.1
ECF No. [22] at 7.
The Motion represents that leave to amend is warranted because of “recently discovered
evidence indicating that Plaintiff breached the Policy’s ‘Concealment, Misrepresentation or Fraud’
1
The “Concealment, Misrepresentation or Fraud” provision provides that coverage “is void in any
case of fraud by you as it relates to this Coverage Part at any time. It is also void if you or any
other Insured, at any time, intentionally conceal or misrepresent a material fact concerning: 1. This
Coverage Part; 2. The Covered Property; 3. Your interest in the Covered Property; or 4. A claim
under this Coverage Part.” See ECF No. [22-1] at 7-8.
2
Case No. 19-cv-61365-BLOOM/Valle
provision by misrepresenting the cause and extent of its alleged damages.” Id. at 1. Before the
lawsuit was filed, Defendant’s consultants inspected the property at issue but determined that the
alleged damages were not caused by Hurricane Irma winds and that the majority of the claimed
damage pre-existed Hurricane Irma. See id. at 2. In response, Plaintiff’s adjuster, GlobalPro,
retained an engineering firm, Falcon, to determine the cause and scope of the damage caused by
Hurricane Irma, and a construction consultant firm, DSS, to determine the cost of repairs. Id. In
October 2018, Defendant received a report from Falcon dated August 22, 2018, id. at ECF No.
[22-2] (“August Falcon report”), and an estimate from DSS, id. at ECF No. [22-3]. These records
were submitted by GlobalPro to Defendant to support the damages to the property from Hurricane
Irma totaling approximately $29.5 million. ECF No. [22] at 2-3. Defendant nonetheless did not
pay the full claim submitted by Plaintiff. Consequently, Plaintiff initiated the instant lawsuit. Id.
at 3.
During discovery, Defendant served subpoenas on non-parties, Falcon and DSS, and
received certain documents and records that Plaintiff did not disclose as part of its discovery
responses. Id. Specifically, a March 23, 2018 report from Falcon, ECF No. [22-4] (“March Falcon
Report”), and an email dated April 4, 2018 between DSS employees purporting to express
GlobalPro’s concern with the March Falcon Report, ECF No. [22-7]. Defendant states that due to
Plaintiff’s failure to disclose the March Falcon Report, Defendant was unaware of its contents
when Plaintiff and GlobalPro were deposed in December 2019. ECF No. [22] at 4. Defendant
further adds that although it was aware in December 2019 that GlobalPro had received a draft
Falcon report prior to the date listed on the version sent to Defendant, ECF No. [22-8], Defendant’s
inquiries into this issue at GlobalPro’s deposition did not reveal the existence of the March Falcon
3
Case No. 19-cv-61365-BLOOM/Valle
Report nor substantive changes between the August Falcon Report and a prior version. ECF No.
[22] at 4.
According to Defendant, the new discovery depicts that “dramatic revisions were made”
to the March Falcon Report, which revisions ultimately were reflected in the August Falcon Report
that Defendant received. Id. In particular, Defendant states that (1) the March Falcon Report
attributes certain claimed damage to deterioration and corrosion, which causes do not appear in
the August Falcon Report, (2) the March Falcon Report attributes damage in certain photographs
to corrosion and deterioration without mentioning wind damage but the August Falcon Report
contains the exact same photographs and attributes the same damages entirely to wind, and (3) the
March Falcon Report recommends re-caulking windows while the August Falcon Report
recommends replacing the windows. Id. at 4-5. Defendant represents that the changes made to the
March Falcon Report inflated the insurance claim and downplayed that much of the damage was
due to pre-existing conditions rather than Hurricane Irma. See id. at 5.
Defendant further alleges that Plaintiff knew—but did not disclose to Defendant in its
interrogatory responses—that pre-Hurricane Irma, the subject property had suffered various
damages to the premises’ roof, windows, and doors and that Plaintiff had initiated a lawsuit against
a roofing contractor relating to those prior issues. See id. at 5-6. Similarly, Defendant states that it
received from DSS a roofing assessment report prepared for Plaintiff in September 2013
identifying certain problems with the roofs, ECF No. [22-13], but Plaintiff did not produce this
report to Defendant in discovery. ECF No. [22] at 6. Defendant also notes that it received a post-
Irma report from Plaintiff’s roofing consultant, ECF No. [22-14], that concluded that the property’s
roofs do not need to be replaced, which conclusion stands in contrast to Plaintiff’s insurance claim
that all roofs need to be replaced. ECF No. [22] at 6. Defendant contends that it has discovered
4
Case No. 19-cv-61365-BLOOM/Valle
repair bids, ECF No. [11], to fix the interior repairs for far less than the amount Plaintiffs claimed
in damages. ECF No. [22] at 5. Additionally, Defendant represents that it has uncovered evidence
of pre-Hurricane Irma issues with the windows that caused damage to the property, ECF No. [22-
15], but that Plaintiff now claims these damages were caused by Hurricane Irma. ECF No. [22] at
6-7.
“In light of all the newly discovered material information,” Defendant argues that leave to
amend the Answer and Affirmative Defenses is warranted even though the deadline to seek leave
to amend has expired. See id. at 7.2 Specifically, Defendant contends that Rule 15, Fed. R. Civ. P.,
favors liberal amendments to pleadings, id. at 8, the March Falcon Report was not discovered until
December 2019 because it was “improperly withheld by Plaintiff,” id., there has been no undue
delay, bad faith, dilatory motive, or repeated failure to cure deficiencies, and Plaintiff is not
prejudiced by the proposed amendment because discovery has not concluded and the proposed
amendment “is consistent with Lexington’s previous position that the claim is overstated.” Id. at
10.
Plaintiff responds that amendment is inappropriate because the scope and price of the
alleged damages forms “the essence of this lawsuit.” ECF No. [23] at 1. Plaintiff maintains that
although the parties differ on the causes of the damages, amendment should not be granted because
the proposed affirmative defenses are futile and are not plead with particularity. Id. at 2. In
particular, Plaintiff challenges the language included in proposed affirmative defenses eleven,
twelve, and thirteen, and argues that Defendant does not plead intent by Plaintiff to defraud
Defendant. Id. at 2-3. Further, Plaintiff posits that Defendant mischaracterizes the differences
2
The proposed amended answer and affirmative defenses is attached to the Motion, ECF No. [22-1]. In the
proposed amendment, Defendant adds three additional affirmative defenses, numbers eleven, twelve, and
thirteen, based on the “Concealment, Misrepresentation or Fraud” provision in the policy. Id.
5
Case No. 19-cv-61365-BLOOM/Valle
between the March Falcon Report and the August Falcon Report and overstates the significance
of the evidence mentioned in the Motion. Id. at 4-6.
In the Reply, Defendant asserts that Plaintiff’s argument that the proposed amendments do
not satisfy the particularity standard for fraud is incorrect because Defendant’s proposed
affirmative defenses are “contractual fraud” claims, and Plaintiff is conflating a cause of action for
common law fraud with affirmative defenses regarding the policy’s “Concealment,
Misrepresentation or Fraud” provision. ECF No. [28] at 1-4. Defendant, thus, concludes that its
proposed amendments comport with the governing pleading standard. Id. at 4-6. Further,
Defendant maintains that the amendments are not futile and that it would be “severely prejudiced”
if the Motion is denied because it would be “deprived of the right to assert affirmative defenses . . .
which, if proven, expressly preclude coverage under the Policy at issue in this litigation.” Id. at 7-
9. The Motion is ripe for consideration.
II. LEGAL STANDARD
Generally, Rule 15 of the Federal Rules of Civil Procedure governs amendment to
pleadings. Apart from initial amendments permissible as a matter of course, “a party may amend
its pleading only with the opposing party’s written consent or the court’s leave.” Fed. R. Civ. P.
15(a)(2). “The court should freely give leave when justice so requires.” Id. However, “[a] district
court need not . . . allow an amendment (1) where there has been undue delay, bad faith, dilatory
motive, or repeated failure to cure deficiencies by amendments previously allowed; (2) where
allowing amendment would cause undue prejudice to the opposing party; or (3) where amendment
would be futile.” Bryant v. Dupree, 252 F.3d 1161, 1163 (11th Cir. 2001). Ultimately, “the grant
or denial of an opportunity to amend is within the discretion of the District Court[.]” Forman v.
Davis, 371 U.S. 178, 182 (1962). See also Espey v. Wainwright, 734 F.2d 748, 750 (11th Cir.
6
Case No. 19-cv-61365-BLOOM/Valle
1984) (“This policy of Rule 15(a) in liberally permitting amendments to facilitate determination
of claims on the merits circumscribes the exercise of the trial court’s discretion; thus, ‘[u]nless
there is a substantial reason to deny leave to amend, the discretion of the district court is not broad
enough to permit denial.’”) (citation omitted).
Under the Rules of Civil Procedure, district courts are required to enter a scheduling order
that limits the time to amend the pleadings. See Fed. R. Civ. P. 16(b)(3). Scheduling orders may
be modified only “for good cause and with the judge’s consent.” See id. at R. 16(b)(4). “This good
cause standard precludes modification unless the schedule cannot be met despite the diligence of
the party seeking the extension.” Sosa v. Airprint Sys., Inc., 133 F.3d 1417, 1418 (11th Cir. 1998)
(quoting Fed. R. Civ. P. 16 advisory committee’s note) (quotations omitted). Accordingly, when
a motion to amend is filed after a scheduling order deadline, Rule 16 is the proper guide for
determining whether a party’s delay may be excused. Id. at 1418 n.2; see also Smith v. Sch. Bd. of
Orange Cty., 487 F.3d 1361, 1366-67 (11th Cir. 2007) (holding that “where a party files an
untimely motion to amend, [we] must first determine whether the party complied with Rule 16(b)’s
good cause requirement,” before considering whether “justice so requires” allowing amendment).
If the party seeking relief “was not diligent, the [good cause] inquiry should end.” Sosa, 133 F.3d
at 1418 (quoting Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992)).
Therefore, when a motion for leave to amend a pleading is filed after the deadline set in a
court’s scheduling order, the court employs a two-step analysis. Id. at 1419. First, the movant must
demonstrate good cause under Rule 16(b) of the Federal Rules of Civil Procedure. Good cause
exists when the deadline could not “be met despite the diligence of the party seeking the
extension.” Id. at 1418 (quoting Fed. R. Civ. P. 16 advisory committee note). Courts consider three
factors in assessing diligence: (1) whether the movant failed to ascertain facts prior to filing the
7
Case No. 19-cv-61365-BLOOM/Valle
pleading or failed to acquire information during the discovery period, (2) whether the information
supporting the proposed amendment was available to the movant, and (3) whether the movant
delayed in requesting leave to amend even after acquiring the information. See id. at 1419. If the
movant demonstrates good cause, the court proceeds to determine whether an amendment to the
pleadings is proper under Rule 15(a) of the Federal Rules of Civil Procedure. Id.
Through this lens, the Court addresses the instant Motion.
III. DISCUSSION
Deciding whether Defendant is entitled to amend its Answer and Affirmative Defenses
raises two overarching issues. The first is whether “good cause” exists pursuant to Rule 16(b) for
amending the Answer and Affirmative Defenses months after the deadline set forth in the
Scheduling Order, ECF No. [11], to amend pleadings had expired. The second is whether there is
a “substantial reason” to deny leave to amend under Rule 15(a), such as if amendment would be
futile or would cause undue prejudice to Plaintiff. The Court will address these issues in turn.
A. Good cause for seeking leave after the Scheduling Order deadline
The Scheduling Order set August 24, 2019 as the deadline to file all motions to amend
pleadings. ECF No. [11]. The lawsuit was removed to this Court on May 31, 2019, ECF No. [1],
and the instant Motion was filed on January 16, 2020—approximately five months after the
deadline to amend had passed.
Defendant asks this Court to excuse its untimely filing because the evidence that it relies
upon to justify amending its Answer and Affirmative Defenses “was not discovered until late
December 2019.” ECF No. [22] at 7. Plaintiff does not assert that the Motion should be denied
because it is untimely nor does it challenge Defendant’s diligence in seeking the nathanielburns@example.com.
8
Case No. 19-cv-61365-BLOOM/Valle
Moreover, Plaintiff does not argue that “good cause” to alter the Scheduling Order deadline is
lacking.
Upon consideration, the Court finds that good cause exists pursuant to Rule 16(b)(4) to
excuse Defendant’s belated filing of the Motion. The documents and records relied upon by
Defendant in the Motion were not disclosed by Plaintiff despite its discovery obligations but
instead came to light through non-party discovery after the amendment deadline passed.3 The
Motion and the Response do not demonstrate that prior to this time, Defendant had been dilatory
or had failed to actively pursue discovery from Plaintiff and non-parties. In fact, Defendant
pursued leads during GlobalPro’s deposition in December 2019 concerning revisions to prior
versions of the August Falcon Report but did not discover the existence of the March Falcon Report
nor its contents at that time. ECF No. [22] at 4 (citing ECF No. [22-9]). Additionally, the Motion
was brought within weeks of Defendant discovering the documents and nathanielburns@example.com. Under
these circumstances, good cause is satisfied. See, e.g., Virciglio v. Work Train Staffing LLC, 674
F. App’x 879, 885 (11th Cir. 2016) (holding that district court “clearly” did not abuse its discretion
in finding good cause and granting plaintiff’s motion for leave to amend where plaintiff did not
have information necessary to assert the amendment in spite of diligence until after the scheduling
order amendment deadline had expired); Warfield v. Stewart, No. 2:07CV332-FTM-33DNF, 2009
WL 425996, at *5 (M.D. Fla. Feb. 20, 2009) (holding that plaintiff should have been granted leave
to amend complaint where any delay in the amendment was caused by defendant’s failure to timely
produce a discovery document); Allegheny Cas. Co. v. Archer-W./Demaria Joint Venture III, No.
8:13-CV-128-T-24-TGW, 2014 WL 10915507, at *3 (M.D. Fla. June 16, 2014) (finding good
cause for delay in seeking leave to amend affirmative defenses where the information was revealed
3
DSS, for instance, produced an email dated March 26, 2018 that transmitted the March Falcon Report to
Plaintiff, ECF No. [22-5], but Plaintiff did not produce this email to Defendant.
9
Case No. 19-cv-61365-BLOOM/Valle
in discovery after the answer and affirmative defenses had initially been filed and the motion was
made within four weeks of learning the new information).
Accordingly, the Court will proceed to determine whether amendment is appropriate
pursuant to Rule 15(a)(2), Fed. R. Civ. P.
B. No substantial reasons to deny leave to amend
Plaintiff does not argue, nor does the Court find, that the Motion is the result of undue
delay, bad faith, dilatory motive, or repeated failure to cure deficiencies by amendments previously
allowed. Bryant, 252 nathanielburns@example.com. The Motion is Defendant’s first request to amend its pleadings
and was made within a reasonable time after Defendant discovered the new evidence. Further,
Plaintiff does not argue, nor does the Court find, that granting amendment would cause undue
prejudice to it. See id. The deadline to complete discovery is March 24, 2020, ECF No. [11], and
the proposed amendments appear to be “consistent with Lexington’s previous position that the
claim is overstated.” ECF No. [22] at 10. See also ECF No. [23] at 3-4 (noting that the proposed
amendment to the Answer and Affirmative Defenses is “based on this same position that the
damages were pre-existing”). What Plaintiff argues, instead, is that the Motion should be denied
because amendment is futile on the merits and that the proposed affirmative defenses do not satisfy
Rule 9(b)’s particularity standard. ECF No. [23]. The Court will address each basis for denial.
i. No futility of amendment
Regarding the alleged futility, Plaintiff asserts that the allegations raised in the Motion “do
not support the new affirmative defenses.” Id. at 2. Specifically, although it concedes that changes
were made from the March Falcon Report to the August Falcon Report, Plaintiff claims that the
revisions (i.e., omitting the words “deterioration” and “corrosion”) were made to “more clearly
state [Falcon’s] opinion that these damages were attributable to wind” and to avoid
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Case No. 19-cv-61365-BLOOM/Valle
“misconce[ptions]” that might arise from these words. Id. at 4. Plaintiff further opines that there
was “nothing improper or fraudulent” about GlobalPro editing the March Falcon Report for clarity,
and that, although the reports note differing recommendations regarding re-caulking or replacing
windows, “there is nothing fraudulent about the engineer adjusting its repair recommendations to
ensure that his opinions align with all of the information he has received to date.” Id. Additionally,
Plaintiff contends that the bid repair and incurred expenses referenced in the Motion, ECF Nos.
[22-10] and [22-11], in the amount of approximately $2 million do not reflect “complete work that
needs to be completed at the property” and that work is “ongoing” with final costs “yet unknown.”
Id. at 5-6. Finally, Plaintiff adds that it did not reveal in its interrogatory responses the existence
of a prior lawsuit concerning prior damage to the roofs because “those issues were repaired and
completely resolved prior to Hurricane Irma” and “any windows that were problematic before the
hurricane were re-sealed before the hurricane[.]” Id. at 6.
Defendant responds that its proposed amendments are not futile. ECF No. [28]. Futility,
according to Defendant, occurs only when it cannot set forth a valid defense under any set of facts.
Id. at 7-8. Defendant contends that so long as the affirmative defenses could potentially apply, a
finding of futility is improper. Id. The Court agrees.
The burden on a party seeking to amend a pleading “is minimal” under Rule 15. See Cohen
v. Gulfstream Training Acad., Inc., No. 07-60331-CIV, 2007 WL 2904150, at *3 (S.D. Fla. Oct.
3, 2007) (granting defendant’s motion for leave to assert a counterclaim for fraud and rejecting
plaintiff’s futility argument because “[a]t the pleading amendment stage, the burden on the party
timely seeking amendment is minimal”) (citing Forman, 371 U.S. at 182) (“If the underlying facts
or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded
an opportunity to test his claim on the merits.”)). See also Waite v. AII Acquisition Corp., No. 15-
11
Case No. 19-cv-61365-BLOOM/Valle
CV-62359, 2016 WL 2346768, at *12 (S.D. Fla. Mar. 10, 2016), aff’d sub nom. Waite v. All
Acquisition Corp., 901 F.3d 1307 (11th Cir. 2018) (granting motion for leave to file an amended
answer and affirmative defenses and rejecting futility argument because the proposed amendments
identified potential bases for alternative liability, discovery had not concluded, and the new
defenses did “not alter the basic issues in this case”).
Courts have found amendments to defenses to be futile where they would “necessarily fail”
or are so lacking in merit on their face. See Guarantee Ins. Co. v. Brand Mgmt. Serv., Inc., No. 12-
61670-CIV, 2013 WL 4496510, at *2 (S.D. Fla. Aug. 22, 2013) (noting that “courts have found
amendments to defenses futile if they would ‘necessarily fail’” and explaining that “in the context
of affirmative defenses, the futility standard necessarily merges with the standard for striking
defense under Rule 12(f), Fed. R. Civ. P.”); Denarii Sys., LLC v. Arab, No. 12-24239-CIV, 2013
WL 500826, at *6 (S.D. Fla. Feb. 11, 2013) (“With respect to futility of amendment, the case law
states that ‘[i]f . . . it is so clearly established that the [pleader] cannot, with leave to amend, cure
the legal defects, leave to amend would be futile[.]”) (citation omitted). Stated differently, futility
equates with “inadequacy as a matter of law. See Burger King Corp. v. Weaver, 169 F.3d 1310,
1315 (11th Cir. 1999); see also JCW Software, LLC v. Embroidme.com, Inc., No. 10-80472-CIV,
2011 WL 13227829, at *4 (S.D. Fla. Dec. 14, 2011) (“A defense is ‘insufficient as a matter of law
only if: (1) on the face of the pleadings, it is patently frivolous, or (2) it is clearly invalid as a matter
of law.’ A finding of futility, therefore, is, in effect, a legal conclusion that the proposed defense
would necessarily fail.”) (internal citation omitted).
Whether Plaintiff intentionally concealed or misrepresented a material fact concerning
coverage or the insurance claim is disputed by the parties and inappropriate for determination at
this stage. See Chicken Kitchen US.A, LLC v. Maiden Specialty Ins. Co., No. 14-23282-CIV, 2015
12
Case No. 19-cv-61365-BLOOM/Valle
WL 11233084, at *2 (S.D. Fla. Oct. 7, 2015) (denying motion to strike amended answer and
affirmative defenses and explaining that whether an affirmative defense “will ultimately be
successful is not the issue at the amended pleadings stage; the issue at the amended pleadings stage
is whether the affirmative defense ‘would necessarily fail’”). The Motion, however, provides
sufficient evidence that Plaintiff did not timely disclose potentially adverse discovery documents
and records to Defendant. These items collectively attribute a differing cause of the alleged
damages and value of the subject loss than what Plaintiff initially represented in its insurance
claim.4 Therefore, while the Court makes no findings about the ultimate viability of the proposed
amendments, the record supports a finding that the “Concealment, Misrepresentation or Fraud”
provision in the policy may be implicated to bar coverage in this case. Given these circumstances,
the Court is unconvinced that the proposed amendments are futile on their merits as that term is
construed. See Alamo-Cruz v. Evanston Ins. Co., No. 17-60671-CIV, 2019 WL 3531512, at *4
(S.D. Fla. Aug. 2, 2019) (rejecting futility argument for proposed fraudulent inducement
affirmative defense where the allegations showed a plausible claim that plaintiffs engaged in
fraudulent inducement, and stating that whether the alleged misrepresentation was material or
whether reliance was justifiable involves “factual inquiries that are best reserved on either a motion
for summary judgment or for the jury to decide”).
4
The Court also notes that Plaintiff has recently amended its answers to Defendant’s interrogatory requests
after Defendant filed the Motion. ECF No. [28-1]. For instance, Plaintiff originally responded “none” when
asked to list all lawsuits prior to the date of loss in which the physical condition of the property was, in
whole or in part, at issue, ECF No. [22-12] at interrogatory 2, but Plaintiff now lists two lawsuits. ECF No.
[28-1] at interrogatory 2. Plaintiff additionally previously stated that its total monetary damages were
approximately $27 million, ECF No. [22-12] at interrogatory 22, but it now states that its total damages are
“[u]ndetermined at this time” because it is awaiting final reports from experts and contractors. ECF No.
[28-1] at interrogatory 22.
13
Case No. 19-cv-61365-BLOOM/Valle
ii. The proposed amendments are adequately pled
Regarding the particularity argument, Plaintiff claims that the proposed amendments are
not pled with the “appropriate degree of particularity required to assert a fraud defense.” ECF No.
[23] at 2. Specifically, Plaintiff asserts that the amendments do not satisfy Rule 9(b) because they
“fail to allege who made the fraudulent statements, what was said, when the statements were made,
or how the statements misled the Defendant.” Id. at 7. Defendant counters that the traditional
pleading requirements of Rule 9(b) do not apply to the specific affirmative defenses raised because
they are “contractual fraud” claims. ECF No. [28]. Defendant further adds that Plaintiff’s argument
has already been rejected by another court in this district that analyzed the same insurance
provision as here in a similar setting. Id. (citing Nova Hills Villas Condo. Ass’n, Inc. v. Aspen
Specialty Ins. Co., No. 07-60939-CIV, 2008 WL 179878 (S.D. Fla. Jan. 21, 2008)). Moreover,
Defendant maintains that Plaintiff has fair notice of the alleged fraudulent misrepresentations, id.
at 4, and that Rule 9(b)’s pleading standards are applied less stringently when specific factual
information concerning the alleged fraud is within the opposing party’s control. See id. at 6. After
review, the Court finds Defendant’s arguments to be well taken.
Nova Hills is instructive for what allegations are deemed sufficient to assert a plausible
defense under the “Concealment, Misrepresentation or Fraud” provision in the policy. In that case,
plaintiff brought suit against defendant insurer for breach of contract after the insurer did not pay
the full value of a claim for property damage following Hurricane Wilma. See 2008 WL 179878,
at *1. The defendant counterclaimed for fraudulent concealment arising from a supplemental claim
submitted by plaintiff that sought significantly higher amounts of damages than what was initially
reported and paid by the defendant. Id. During its investigation, defendant discovered that the
supplemental claim had been fraudulently overvalued. Specifically, plaintiff failed to disclose that
14
Case No. 19-cv-61365-BLOOM/Valle
roofing repairs and replacements had been made to the property after Hurricane Wilma for far less
than what the claim represented. See id. Further, defendant alleged that plaintiff knew the true cost
of the replaced roofs at the time it made the supplemental claim but failed to disclose this or even
that the roof repairs had already been conducted. See id. Thus, defendant concluded that plaintiff’s
actions violated the “Concealment, Misrepresentation or Fraud” provision. See id.5 Plaintiff then
moved to dismiss the counterclaim on the basis that it was not pled with sufficient particularity
under Rule 9(b). Id. at *2.
Like here, plaintiff alleged that the counterclaim failed to satisfy the particularity standard
because it did not “plead the who, what, when, where, and why of the alleged fraud.” Id. at *4.
Upon analysis, the court explained that plaintiff’s argument “would have had more appeal had the
counterclaim alleged a traditional common law fraud claim under Florida law.” Id. Instead, the
court noted that the counterclaim needed to be evaluated “within its unique context—a contractual
fraudulent concealment claim against an insured by an insurer pursuant to the express provisions
of a policy.” Id. According to that court, “the traditional requirements of a fraud claim do not
necessarily apply by the same measure to such a contractual fraud claim.” Id. (citing Mich. Millers
Mut. Ins. Corp. v. Benfield, 140 F.3d 915 (11th Cir. 1998)). “The stated public policy rationale for
this rule is that, if there is no consequence when a policyholder makes a false representation to his
or her insurance company even if not relied upon, the policy provision would be rendered
meaningless, which would be inconsistent with the principle that every provision in a contract is
to be given meaning and effect.” Id.
Therefore, that court reframed the issue as whether the counterclaim’s allegations were
sufficient to plead a fraudulent concealment claim arising under the applicable policy provision.
5
Notably, defendant’s fraudulent concealment claim was also raised as an affirmative defense to plaintiff’s
complaint. See 2008 WL 179878, at *2.
15
Case No. 19-cv-61365-BLOOM/Valle
Id. at *5. In evaluating the allegations, the court rejected plaintiff’s argument that the “who, what,
when and why” factual allegations were insufficient, and it found that defendant’s allegations
adequately pled that plaintiff concealed material facts during the claims process to obtain a greater
recovery on the policy. See id. Significantly, the court explained that the allegations are “factual
and specific, not merely conclusory” and that the insured “is clearly on notice of the alleged
fraudulent concealment in order to defend against it. The ‘who’ was the insured, the ‘what’ was
the supplemental policy claim, the ‘when’ was after the repairs were already conducted, and the
‘why’ was to obtain more than what the insured was entitled to under the policy.” See id.
Accordingly, the court denied the motion to dismiss and concluded that “[a]s a matter of pleading,
there are no material allegations that are missing from the Counterclaim” and that from what was
alleged, “a sufficient interference of fraud-as per the parties’ contract-has been pled consistent with
Rule 9(b).” Id.
Under the guidance of Nova Hills,6 the Court finds that the proposed amendments satisfy
the pleading standards to set forth valid contractual fraud affirmative defenses under the policy
provision. Rule 9(b)’s particularity requirement “differ[s] from case to case” and must be read in
conjunction with Rule 8’s notice pleading requirements. See id. at *3. Fair notice, thus, is the most
basic consideration underlying Rule 9(b). See Guarantee Ins. Co., 2013 WL 4496510, at *6-7.
Plaintiff’s allegations satisfy this threshold.7 Specifically, Plaintiff is on notice of the alleged
6
The Court agrees with Defendant that Allstate Ins. Co. v. Advanced Health Prof’ls, P.C., 256 F.R.D. 49
(D. Conn. 2008) is inapplicable. That decision is neither binding nor persuasive, and it does not address a
contractual fraud claim generally, the “Concealment, Misrepresentation or Fraud” provision specifically,
or affirmative defenses.
7
Rule 9(b) is applied less stringently when “specific factual information [about the fraud] is peculiarly
within the [other party’s] knowledge or control.” See Hill v. Morehouse Med. Assocs., Inc., No. 02-14429,
2003 WL 22019936, at *3 (11th Cir. Aug. 15, 2003); see also United States v. Baxter Int’l, Inc., 345 F.3d
866, 881 (11th Cir. 2003) (“Courts typically allow the pleader an extra modicum of leeway where the
information supporting the complainant’s case is under the exclusive control of the defendant.”). Plaintiff
16
Case No. 19-cv-61365-BLOOM/Valle
misrepresentations made during the claims process—the documents and records analyzed in the
Motion—and the specific bases of the misrepresentations—the differing causes of the damage and
value of the insurance claim—so as to satisfy the “who, what, when and why” of the fraud inquiry.
See also Mazel Investments, LLC v. Axa Corp. Sols. Excess & Surplus Lines Ins. Co., No. 609-
CV-1410-ORL31GJK, 2010 WL 996539, at *1 (M.D. Fla. Mar. 17, 2010) (denying motion to
strike “Concealment, Misrepresentation and Fraud” provision affirmative defense and explaining
that Rule 9(b) is inapplicable because “the allegations in that defense do not sound in fraud” but
rather in voiding coverage “due to Plaintiff’s intentional concealment of material facts”) (emphasis
in original).
Because (1) this circuit embraces a policy of granting liberal amendments, (2) the Federal
Rules of Civil Procedure dictate that leave should be given freely when justice so requires, (3)
Defendant would be prejudiced if the Motion was not granted, and (4) there being no “substantial
reason” to deny the Motion, the Court finds that Defendant has carried its burden under Rule
15(a)(2) and Rule 16(b)(4), Fed. R. Civ. P.
IV. CONCLUSION
Accordingly, it is ORDERED AND ADJUDGED that Defendant’s Motion for Leave to
Amend Its Answer and Affirmative Defenses, ECF No. [22] is GRANTED. Defendant shall file
its Amended Answer and Affirmative Defenses by February 12, 2020.
did not produce the March Falcon Report to Defendant nor other evidence listed in the Motion. In fact,
Defendant discovered the materials after the amendment deadline only through non-party discovery. Under
these circumstances, the Court does not agree with Plaintiff that the ordinary heightened pleading standard
for Rule 9(b) fraud claims applies with full force nor that the proposed amendments fail to support an
affirmative defense founded on the subject policy provision.
17
Case No. 19-cv-61365-BLOOM/Valle
DONE AND ORDERED in Chambers at Miami, Florida, on February 10, 2020.
_________________________________
BETH BLOOM
UNITED STATES DISTRICT JUDGE
Copies to:
Counsel of Record
18
|
829 F.2d 1119Unpublished Disposition
NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.In re Jeffrey Lynwood BLACKSTON, Petitioner.
No. 87-8029
United States Court of Appeals, Fourth Circuit.
Submitted August 31, 1987.Decided September 25, 1987.
Jeffrey Lynwood Blackston, pro se.
Before DONALD RUSSELL, CHAPMAN and WILKINS, Circuit Judges.
PER CURIAM:
1
Jeffrey L. Blackston, a federal inmate, has filed with this Court an original petition for a writ of prohibition in the nature of mandamus, asking that the Bureau of Prisons be enjoined from collecting $25 periodically from his prison account to be used to satisfy the restitution obligation imposed on him at his sentencing by the district court. He has also filed in this Court a motion for a stay, seeking to bar collection of any more payments from his account. We find that we have no jurisdiction over this action and it is therefore dismissed.
2
Although the district court has authority under 28 U.S.C. Sec. 1361 to compel an officer or agency of the United States to perform a duty owed to the plaintiff, this Court's mandamus authority extends only to the issuance of writs necessary or appropriate in aid of its jurisdiction, 28 U.S.C. Sec. 1651. Blackston presently has two appeals pending in this Court, one from the district court's refusal to reduce his sentence and another from the district court's rejection of his post-conviction claim that the credit union he robbed was not federally insured. The mandamus relief sought by Blackston is neither necessary nor appropriate to the exercise of this Court's jurisdiction.
3
Accordingly, leave to proceed in forma pauperis is denied and the petition and associated motion for stay are dismissed. We dispense with oral argument because the dispositive issues have recently been decided authoritatively.
4
DISMISSED.
|
887 A.2d 303 (2005)
TRIAGE, INC., Appellee,
v.
PRIME INSURANCE SYNDICATE, INC., Appellant.
Superior Court of Pennsylvania.
Argued September 29, 2005.
Filed November 7, 2005.
*304 Adrian J. Gordon, Philadelphia, for appellant.
Jeffrey B. Killino, Philadelphia, for appellee.
Before: JOYCE, LALLY-GREEN and JOHNSON, JJ.
OPINION BY JOHNSON, J.:
¶ 1 Prime Insurance Syndicate, Inc. (Prime) appeals the judgment of the trial court entered on a "case stated"[*] awarding Triage, Inc. a full refund of unearned premiums it paid on an insurance policy Prime had issued. Although Prime had previously refunded amounts it actually received, the court's decision also compelled it to return amounts it did not receive that were retained by insurance broker United Risk Management Services (URMS). The trial court reasoned that Prime remained liable because URMS had collected the premiums as Prime's agent. Prime contends that no agency relationship existed. We find no merit in Prime's assertion. Accordingly, we affirm the judgment entered.
¶ 2 Consistent with their designation of this matter as a "case stated," the parties stipulated the following facts:
1. Prime is a company and a member of the Illinois Insurance Exchange ("INEX") engaged in the business of insurance and doing business in Pennsylvania on a surplus lines basis pursuant to 40 P.S. § 991.1601, et seq.
2. Triage is a corporation established under the laws of the Commonwealth of Pennsylvania with its principal place of business as set forth in its complaint in this matter.
3. Prime provided commercial automobile liability insurance to Triage for various periods in 2001 (the "Policies").
Stipulation of Agreed Facts, at 1.
4. Prime transmitted the Policies to United Risk and United Risk was *305 authorized to and in fact delivered the policies to Triage.
Supplemental Stipulation of Agreed Facts, at 1 (paragraph renumbered for clarity).
5. As a result of early cancellation and other endorsements[,] a return premiu[m] in the amount of $121,169.00 was generated not later that October 13, 2001. True and correct copies of the two endorsements reflecting this return premium are attached hereto as Exhibit "A".
6. On or about January 2, 2003[,] Prime paid Triage $32,791.09 of the return premium amount.
7. The parties agree that the return premium generated less the amount paid by Prime as set forth in paragraph five is $88,377.91.
8. Of the $88,377.91 set forth in the preceding paragraph, Prime never received $56,410.62.
9. United Risk received all premiums including the $56,410.62.
10. United Risk never forwarded the $56,410.62 to Prime.
11. United Risk Management was a surplus lines broker authorized to place policies with non-admitted insurers in the surplus line market and to make surplus lines filings and pay surplus lines taxes.
12. United Risk acted as the surplus lines broker for the placement of the Policies.
13. There was a written broker's agreement between United Risk and Prime[,] a copy of which is attached hereto as Exhibit "B".
14. Peter Andersen testified to the relationship between Prime and United Risk in his deposition at page 9, line 23 through page 10, line 23. A copy of this testimony is attached hereto as Exhibit "C".
Stipulation of Agreed Facts, at 1-2 (paragraphs renumbered for clarity). The "written broker's agreement" to which the parties have stipulated established and described URMS's relationship with Prime. Although the agreement authorized URMS to broker Prime's policies and required it to deliver to Prime all premiums paid, it also attempted to negate any inference of agency that might arise from the parties' formal relationship. The following provision is illustrative:
5. NO BINDING AUTHORITY
The parties hereto understand and agree that in no event, nor under any circumstance whatsoever, shall this agreement ever be interpreted or construed to the effect that the Surplus Lines Broker [URMS] may bind COMPANY [Prime] or any company or underwriter represented by Surplus Lines Broker. Broker is deemed to possess absolutely no implied or apparent authority to act on behalf of [Prime] at any time.
Prime Insurance Syndicate Contract, 12/1/00, at 2. Notwithstanding this provision, the trial court, the Honorable Gene D. Cohen, concluded that URMS had been engaged in a "double agency" relationship with both Triage and Prime and found that, under such circumstances, controlling caselaw would compel Prime to refund all premium that Triage had paid, regardless of whether URMS had actually paid the premium to Prime. Accordingly, Judge Cohen awarded Triage $88,377.91, plus legal interest from October 13, 2001. The court later denied Prime's motion for post-trial relief and Prime filed this appeal.
¶ 3 Prime now raises the following question for our review:
Whether the trial court erred in determining that a broker can be the agent of *306 an insurer for purposes of collection of premium and thereby bind the insurer for repayment of unearned premium which the broker failed to deliver to the insurer where the insurer took no voluntary action which would reasonably lead the insured to believe that the broker was the insurer's agent.
Brief for Appellant at 4.
¶ 4 When a case is submitted on stipulated facts, the rulings of the trial court are limited to questions of law. See Kmonk-Sullivan v. State Farm Mut. Auto. Ins. Co., 746 A.2d 1118, 1120 (Pa.Super.1999) (en banc). Accordingly, our standard of review allows us to evaluate only whether the trial court committed legal error. See id. Our scope of review is plenary. See id.
¶ 5 In support of the question it presents, Prime argues that the trial court erred in characterizing its relationship with URMS as one of principal and agent because a finding of apparent authority or ostensible agency must rest upon some affirmative act of the principal that a third party might reasonably perceive to authorize the putative agent to act on its behalf. Brief for Appellant at 10 (citing Joyner v. Harleysville Ins. Co., 393 Pa.Super. 386, 574 A.2d 664 (1990)). Prime argues, as a corollary, that because it could not, as a surplus lines carrier, transact business directly with its insureds in Pennsylvania, it was compelled to do so through a broker. Brief for sjones@example.org. Prime reasons that because its relationship with its insureds was thereby legally limited, its relationship with URMS was mandated and should not be deemed an agency. Brief for sjones@example.org. We find both arguments unsustainable.
¶ 6 Pennsylvania's insurance code allows for "surplus lines" coverage where the coverage the insured needs is not otherwise available from a carrier admitted in this Commonwealth. See 40 P.S. § 991.1604(2). Accordingly,
[a] surplus lines carrier is an unlicensed insurer designated by the insurance commissioner to provide insurance to Pennsylvanians which they would not otherwise be able to procure, provided that a licensed agent has made a diligent effort to procure such insurance from a licensed insurer, that the premium charged is not lower than the lowest premium approved by the commissioner for use by a licensed insurer, and that the policy or contract used by the surplus lines insurer does not differ materially from policies or contracts customarily used by licensed insurers.
Tudor Ins. Co. v. Township of Stowe, 697 A.2d 1010, 1018 n. 7 (Pa.Super.1997) (citing 40 P.S. § 991.1604). Ostensibly because the surplus lines carrier is not licensed to conduct business in Pennsylvania, the insurance code mandates, without regard to agency status, that payment of premium tendered to a surplus lines broker is, at law, payment to the carrier itself:
§ 991.1614. Effect of payment to surplus lines licensee
A payment of premium to the producing broker or to a surplus lines licensee acting for a person other than himself in negotiating, continuing or reviewing any contract of insurance under this article shall be deemed to be payment to the insurer, whatever conditions or stipulations may be inserted in the contract notwithstanding.
40 P.S. § 991.1614. Although we find no case interpreting this section to impose on a surplus lines carrier the obligation to refund unearned premiums that the carrier itself did not receive, cases interpreting the duties of licensed insurers have so held on grounds of apparent authority.
*307 ¶ 7 "Apparent authority exists where a principal, by words or conduct, leads people with whom the alleged agent deals to believe that the principal has granted the agent the authority he or she purports to exercise." Joyner, 574 sjones@example.org. The requisite indicia of agency need not, however, be especially overt, as the broker's mere placement of the policy and collection of premium may suffice. See Sands v. Granite Mut. Ins. Co., 232 Pa.Super. 70, 331 A.2d 711, 716 (1974) (quoting Thomas v. Western Ins. Co., 5 Pa.Super. 383, 389 (1897)) ("It requires no extended discussion or citation of authorities to establish the proposition that a person authorized to deliver a policy of insurance and receive and receipt [sic] for the premiums is the agent of the company for that purpose, and the payment of the premium to him is a good payment."). This Court so recognized almost a century ago, reasoning that even a broker who enjoyed no express agency relationship with an insurer could assume an implied agency relationship merely upon delivering the carrier's policy and accepting payment on the carrier's behalf:
On the 5 June, 1882, [sic] the policy in suit, containing an acknowledgment of the receipt of $30.00, the cash premium, was by the company executed and forwarded to Clifford B. Pease, the Boston broker, who was thus intrusted with the delivery. Although not the agent of the company, in any general sense, he thereby became the agent for this particular purpose upon payment of the premium. The agency is necessarily implied from the nature of the transaction itself; the policy was placed in his hands for the very purpose of delivery, and the delivery, by its express terms, was conditioned upon payment of the premium; it is clear, therefore, that the authority of Pease was limited accordingly.... The company might have retained the policy until the premium was paid, or they might have sent it directly to the insured, with instructions to remit the amount; in either case, the contract would have been ineffective until the condition of the policy had been complied with.
Gosch v. Firemen's Ins. Co., 33 Pa.Super. 496, 500 (1906) (quoting Lebanon Mut. Ins. Co. v. Erb, 112 Pa. 149, 4 A. 8, 10 (1886)).
¶ 8 We applied this rationale in Joyner, recognizing a broker as the insurer's agent based on the fact that he had collected and remitted the insured's premiums in the past with the insurer's knowledge and, ostensibly, its acquiescence. See 574 sjones@example.org. When, as in Joyner, the broker later failed to remit a premium to the insurer, potentially voiding the insurer's coverage obligation, the trial court required the insurer to honor the contract the insured had attempted to purchase. Id. at 670. The trial court reasoned, and we affirmed, that the insurer, by allowing the broker to act on its behalf in the past, had vested him with apparent authority as its agent. Id. at 669-70.
Harleysville was aware of the role that Seers had adopted, and approved of Seers' course of dealing to the extent that Harleysville accepted Mr. Joyner's renewal request through Seers and accepted Mr. Joyner's premium payments in the form of the Seers checks, rather than insisting upon direct payment by the Joyners. We hold that Seers had apparent authority to receive the premiums on behalf of Harleysville, and thus was Harleysville's agent for purposes of receiving and remitting the premium payments.
Id. at 669. Significantly, we reached our conclusion even in the face of contractual language that, as here, attempted to deny any agency relationship:
*308 Despite the language in the Plan application which denied any agency relationship between the producer and the assigned insurer, Harleysville knowingly permitted Seers to accept the premium payments and process Mr. Joyner's requests for changes in policy and renewal. * * * * Thus, we find that the clause in the application denying an agency relationship is not dispositive of the question of the agency relationship between Harleysville and Seers.
Id.
¶ 9 Although we acknowledge that the circumstances in Joyner included a longer history of acts by the putative agent/broker than is present in this case, the implicit premise of the panel's decision remains applicable. By allowing collection of premiums and delivery of the policy by the designated broker, the insurer had engaged in affirmative acts consistent with an agency relationship and therefore is sufficient to create one. Proceeding from that premise, the panel in Joyner reaffirmed that "`[p]ayment to insurer's agent [sic], authorized or having apparent authority to receive the premium, is equivalent to payment to insurer; and the policy has its inception from the instant such payment is made. And it is no defense to the company that the agent has not remitted at all ...'" Id. at 670 (quoting Transcontinental Oil Co. v. Atlas Assurance Co., 278 Pa. 558, 123 A. 497, 499 (1924)).
¶ 10 This conclusion, reached in Joyner in the context of a transaction between a licensed insurer and its insured, mirrors the language of the insurance code that prescribes the "[e]ffect of payment to [a] surplus lines licensee." 40 P.S. § 991.1614. Both sources of authority mandate that premiums paid by an insured to the agent or licensee be treated as payments to the insurer. See id.; see also Joyner, 574 A.2d at 670 (quoting Transcontinental Oil Co., 123 A. at 499). In the context of licensed insurers, our caselaw directs further that premiums paid to the insurer's ostensible agent must be refunded by the insurer even if the agent failed to remit to the insurer. See Gosch, 33 Pa.Super. at 500. Having addressed one such scenario in Gosch, we concluded that just as non-payment of premium by a broker/agent to the insurer would not excuse the insurer's obligation under the insurance contract, it would not vitiate its obligation to refund unearned premiums after cancellation of the policy:
[I]f, under the conditions now before us, the law declares that the company may not be heard to allege nonpayment of the premium to escape the greater obligation of indemnity, for the same reason must it turn a deaf ear to the same allegation, when advanced to escape the lesser obligation to return the unearned premium in case of cancellation. We are impelled, therefore, alike by reason and authority, to hold that for all the purposes of this case, the premium on the policy of the plaintiffs was paid, and the rights and obligations of the company, under the cancellation clause quoted, must be determined just as if the money of the plaintiffs had been paid directly into the home office.
Id.
¶ 11 This same conclusion is in order here. To the extent that payments made to a surplus lines licensee under section 991.1614 are "deemed to be payment to the insurer," 40 P.S. § 991.1614, we discern no reason why, like payments made to the agent of a licensed insurer, they should not be refunded by the insurer in the event that the "licensee" defaults and fails to remit those premiums to the insurer. See Gosch, 33 Pa.Super. at 500. Although Prime challenges this conclusion, we find its argument unconvincing. Regardless *309 of whether USRM was Prime's agent (and recognizing Prime's argument that it was not), the statutory language of section 991.1614 establishes that "[a] payment of premium to the producing broker or to a surplus lines licensee acting for a person other than himself" must be treated as payment to Prime. Thus, Prime's agency argument is immaterial; the plain language of the statute establishes that Triage's payment to the licensee was payment to the insurer. Although the basis in law upon which the receipt is deemed to have occurred may be different (apparent agency status versus statutory mandate), no source of authority establishes that any special status inures to a surplus lines insurer to excuse it from obligations that are otherwise imposed on licensed carriers. Moreover, no source of authority suggests that insured clients of a surplus lines carrier should enjoy any less protection upon the default of a licensee broker than should insured clients of a licensed insurer. Indeed, the very purpose of the mandate of "deemed receipt" in section 991.1614, which mirrors the rationale in Gosch, can be only to extend the same protections. As established in Gosch, unearned premiums must be refunded by the insurer to its insured even where the agent who received the premium never paid it to the insurer. Given the presumption of section 991.1614, we find no compelling reason why the result should be to the contrary here. Accordingly, we affirm the judgment of the trial court.
¶ 12 Judgment AFFIRMED.
NOTES
[*] By amendment to the Rules of Civil Procedure adopted August 9, 1996, effective January 1, 1997, the Supreme Court of Pennsylvania abolished the procedural device of the "case stated," see Pa.R.C.P. 1038.2, and provided for the submission of a case on stipulated facts, see Pa.R.C.P. 1038.1. Thus, the currently accurate term to describe the procedural device at issue is "case submitted on stipulated facts." We use the term "case stated" here merely to remain consistent with the use applied by the parties. Its appearance should not be construed, however, to reintroduce either the device or the term into the lexicon of Pennsylvania jurisprudence. Proper use and practice remains as stated in Pa.R.C.P.1038.1 (Case Submitted on Stipulated Facts).
|
T.C. Summary Opinion 2020-7
UNITED STATES TAX COURT
RELIABLE COMPUTER SERVICES, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
PATRICK LIND AND MARY BETH BLOTNICK LIND, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 24302-15S, 24303-15S. Filed January 22, 2020.
Patrick Lind (an officer), for petitioner Reliable Computers, Inc.
Patrick Lind, pro se.
Mayah Solh-Cade, for respondent.
-2-
SUMMARY OPINION
CARLUZZO, Chief Special Trial Judge: These cases, consolidated by order
dated September 9, 2016, are subject to the provisions of section 74631 of the
Internal Revenue Code in effect when the petition in each case was filed. Pursuant
to section 7463(b), the decisions to be entered are not reviewable by any other
court, and this opinion shall not be treated as precedent for any other case.
In a notice of deficiency dated June 22, 2015, respondent determined
deficiencies and section 6662(a) penalties with respect to Reliable Computer
Services, Inc.’s (Reliable) Federal income tax for tax years ended June 30, 2011
(fiscal year 2011), and June 30, 2012 (fiscal year 2012). In a notice of deficiency
also dated June 22, 2015, respondent determined deficiencies and section 6662(a)
penalties with respect to the 2010, 2011, and 2012 Federal income tax of Patrick
Lind and Mary Beth Blotnick Lind.
1
Unless otherwise indicated, section references are to the Internal Revenue
Code of 1986, as amended, in effect for the years in issue, and Rule references are
to the Tax Court Rules of Practice and Procedure. Dollar amounts have been
rounded to the nearest dollar.
-3-
After concessions,2 the issues for decision are whether: (1) the Linds are
entitled to a deduction for other expenses claimed on a Schedule C, Profit or Loss
From Business, included with their 2010 Federal income tax return; (2) the Linds
accurately reported the cost of goods sold (COGS) on a Schedule C included with
their 2010 Federal income tax return; (3) the Linds received but failed to report
dividend income of $20,294, $27,797, and $63,706 from Reliable3 in 2010, 2011,
and 2012, respectively; (4) the Linds properly reported the gains from the sale of
Reliable’s inventory as capital gain on Schedules D, Capital Gains and Losses,
included with their 2011 and 2012 Federal income tax returns; (5) Reliable is
entitled to various business expense deductions for the years in issue; (6) Reliable
properly reported COGS for the years in issue; (7) Reliable had ending inventory
of $8,105 and $30,406 for fiscal years 2011 and 2012, respectively; (8) Reliable
understated gross receipts by $56,048 for fiscal year 2012; and (9) the Linds
and/or Reliable are liable for a section 6662(a) accuracy-related penalty for any
year in issue.
2
Reliable concedes that it is not entitled to a net operating loss carryforward
deduction of $2,435 for fiscal year 2011. Respondent now concedes that Reliable
is entitled to the $3,492 deduction for taxes and licenses expenses claimed on its
return for fiscal year 2012.
3
At all times relevant, Mr. Lind operated and controlled Reliable.
-4-
Background
Some of the facts have been stipulated and are so found. At all times
relevant, the Linds lived in Illinois, which was also the principal place of
Reliable’s business.
Mr. Lind is the sole shareholder and an officer of Reliable, a C corporation.
Reliable computes its Federal income tax liability on the basis of a fiscal year
ending June 30. Reliable’s business is located in a 5,000-square-foot warehouse
in Lockport, Illinois. In the warehouse Reliable stored the used electronic devices
it purchased from Fermi National Accelerator Laboratory, U.S. Department of
Energy (Fermilab), pursuant to the terms of a sales agreement entered into with
Fermilab. According to those terms, over a 5-year period Reliable was entitled to
purchase used electronic equipment for 13 cents per pound. The sales agreement
obligated Reliable to collect the used electronic equipment at a location and time
Fermilab designated. Mr. Lind routinely used his privately owned pickup trucks
to transport the used electronic equipment from Fermilab to Reliable’s warehouse.
Reliable resold some of the used electronic equipment it purchased from
Fermilab to buyers through eBay. Reliable received payments through PayPal,
Inc. (PayPal), for most, if not all, items sold. Reliable shipped the merchandise to
its buyers via UPS. Some of the used electronic devices were sold as is, while
-5-
some were dismantled and sold as components. Reliable stored a considerable
amount of unsold used electronic equipment in the warehouse.
Reliable maintained receipts, invoices, and statements, including UPS and
AT&T statements, which were used to maintain a general ledger.
The Linds maintained a joint bank account at Harris Bank (joint account)
during the years in issue. Reliable maintained a corporate bank account at Harris
Bank (corporate account) during the years in issue. Mr. Lind received checks
from the corporate account, which he deposited into the Linds’ joint account, of
$38,450, $65,900, and $102,400 in 2010, 2011, and 2012, respectively. Some of
the deposits represent the wages Reliable paid Mr. Lind; however, Reliable also
made payments to petitioner in excess of the wages reported on the Linds’ returns.
Reliable was profitable during the relevant periods, and Mr. Lind often used funds
from the corporate account to pay his personal expenses, including cell phone and
telephone bills, medical expenses, taxes, and “warehouse expenses”.
Reliable’s timely filed Federal corporate income tax returns for fiscal years
2011 and 2012 were prepared by a paid income tax return preparer. On its Federal
corporate income tax returns for fiscal years 2011 and 2012, Reliable checked the
box for the “Accrual” accounting method and reported its business activity as
“sales”.
-6-
On its Federal corporate income tax returns for fiscal years 2011 and 2012,
Reliable reported gross sales of $117,025 and $122,628, respectively, and COGS
of $37,468 and $42,153, respectively, consisting of the following:
COGS 2011 2012
Purchases -0- $22,301
Advertising sales and
production costs $1,675 7,391
Equipment rental 2,400 -0-
Freight delivery and
logistics 5,880 2,515
Parts and supply 8,105 1,368
Process costs 1,751 -0-
Shipping 9,681 -0-
Shop supply 528 1,366
Subcontract and commission 1,110 -0-
Warehouse expense 6,338 7,212
Total 37,468 42,153
Reliable did not report any beginning or ending inventory on its tax returns and
did not use inventory accounting for either tax or financial accounting purposes
for its fiscal years in issue. Since its incorporation, Reliable has reported no
opening or closing inventories on its tax returns; instead it treated purchases as
current expenses each year.
As relevant, Reliable claimed other deductions of $17,314 and $22,704 on
its Federal corporate income tax returns for fiscal years 2011 and 2012,
respectively, consisting of the following expenses:
-7-
Other deductions 2011 2012
Accounting $1,485 $2,025
Dues and subscriptions 279 -0-
Insurance 2,974 2,955
Office expense 424 2,040
Telephone 3,107 3,183
Truck expense 5,288 8,593
Utilities 3,757 3,908
Total 17,314 22,704
Reliable also claimed a $2,435 net operating loss deduction on its Federal
corporate income tax return for fiscal year 2011.
The Linds’ joint Federal income tax returns for 2010 and 2012, as well as
their amended joint Federal income tax return for 2011, were prepared by the same
paid income tax return preparer that prepared Reliable’s returns. The Linds and
Reliable employed that income tax return preparer for over 30 years.
As relevant, the Linds’ 2010 return included a Schedule C showing Mr.
Lind as the proprietor of a “sales” business. On the Schedule C they reported
gross sales of $6,000 and COGS of $1,008. They also reported a $1,950 deduction
for other expenses, consisting entirely of outside services. The income reported
and deductions claimed on the Schedule C are computed under the cash method.
-8-
The Linds attached a Schedule D to their 2011 and 2012 returns in which
they reported net long-term capital gains of $21,749 and $57,100, respectively,
from the sale of Reliable’s assets.
In the notice of deficiency related to the Linds, respondent: (1) disallowed
the $1,950 deduction for other expenses claimed on the Schedule C for 2010;
(2) disallowed COGS of $1,008 on the Schedule C for 2010; (3) determined that
they received but failed to report dividend income of $20,294, $27,797, and
$63,706 from Reliable in 2010, 2011, and 2012, respectively, for personal
expenses paid from the corporate account plus cash distributions in excess of
wages; (4) disallowed the capital gains reported on Schedules D of $21,749 and
$57,100 for 2011 and 2012, respectively; and (5) imposed a section 6662(a)
accuracy-related penalty on various grounds for each year. Some of the
adjustments made in the notice are computational and will not be discussed.
In the notice of deficiency related to Reliable, respondent: (1) disallowed
$14,767 of the $37,468 of COGS for fiscal year 2011;4 (2) disallowed $5,249 of
4
The disallowed COGS for fiscal year 2011 consists of “Adv Sales and
Production Costs” of $1,675, “Equipment Rental” of $2,400, “Freight Delivery
and Logistics” of $5,880, “Shop Supply” of $528, “Subcontract and Commission”
of $1,110, and “Warehouse Expense” of $3,174.
-9-
the $42,153 of COGS for fiscal year 2012;5 (3) disallowed $1,405 of the $3,107 of
deductions for telephone expenses for fiscal year 2011; (4) disallowed $6,080 of
$22,704 for other trade or business expense deductions for fiscal year 2012;6
(5) increased Reliable’s gross receipts by $56,048 for fiscal year 2012;
(6) disallowed a net operating loss carryforward deduction of $2,435 for fiscal
year 2011; (7) determined that Reliable had ending inventories of $8,105 and
$30,406 for fiscal years 2011 and 2012, respectively; and (8) imposed a section
6662(a) accuracy-related penalty on various grounds for each year. Some of the
adjustments in the notice have been conceded by one or the other of the parties
and need not be addressed.
Discussion
I. Burden of Proof
As a general rule, the Commissioner’s determination of a taxpayer’s Federal
income tax liability in a notice of deficiency is presumed correct, and the taxpayer
5
The disallowed COGS for fiscal year 2012 consists of “Shop Supply” of
$1,366, “Parts and Supply” of $1,368, and “Freight Delivery and Logistics” of
$2,515.
6
The disallowed other trade or business expense deductions for fiscal year
2012 consist of telephone expenses of $3,055, accounting expenses of $985, and
office expenses of $2,040.
- 10 -
bears the burden of proving that the determination is erroneous. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933).7
II. COGS, Section 162 Deductions, and Inventory
A. COGS and Section 162 Deductions
The Linds reported COGS of $1,008 and a $1,950 deduction for other
expenses, consisting entirely of outside services, on their Schedule C for 2010.
Reliable reported COGS of $37,468 and $42,153 on its Federal corporate income
tax returns for fiscal years 2011 and 2012, respectively. Reliable also reported
other trade or business deductions of $17,314 and $22,704 on its Federal corporate
income tax returns for fiscal years 2011 and 2012, respectively.
Respondent disallowed the entire amount of COGS and the deduction for
other expenses reported on the Linds’ Schedule C for 2010. Respondent
disallowed portions of the amounts reported as COGS as well as portions of the
deductions for trade or business expenses on Reliable’s Federal corporate income
tax returns for fiscal years 2011 and 2012. According to the Linds and Reliable,
these amounts constitute either COGS or deductible trade or business expenses
7
The Linds and Reliable do not claim and the record does not otherwise
demonstrate that the provisions of sec. 7491(a) are applicable here, and we
proceed as though they are not.
- 11 -
under section 162. Respondent contends that the Linds and Reliable have not
substantiated these expenses.
Section 162 allows a taxpayer to deduct all ordinary and necessary expenses
paid or incurred by the taxpayer in carrying on a trade or business; but personal,
living, or family expenses are not generally deductible. Secs. 162(a), 262; Boyd v.
Commissioner, 122 T.C. 305, 313 (2004). Whether an expense is deductible
pursuant to section 162 is a question of fact to be decided on the basis of all
relevant facts and circumstances. Cloud v. Commissioner, 97 T.C. 613, 618
(1991) (citing Commissioner v. Heininger, 320 U.S. 467, 473-475 (1943)).
COGS is an adjustment to gross income and is computed with proper
adjustment for opening and closing inventories for the year. See secs. 1.61-3(a),
1.162-1(a), Income Tax Regs. Technically, it is not treated as a deduction from
gross income, and it is not subject to the limitations on deductions in sections 162
and 274. See Metra Chem Corp. v. Commissioner, 88 T.C. 654, 661 (1987); B.C.
Cook & Sons, Inc. v. Commissioner, 65 T.C. 422, 428 (1975), aff’d per curiam,
584 F.2d 53 (5th Cir. 1978); secs. 1.61-3(a), 1.162-1(a), 1.471-3, Income Tax
Regs.
A taxpayer is required to maintain records sufficient to substantiate
deductions and COGS claimed on the taxpayer’s return. See sec. 6001; New
- 12 -
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); sec. 1.6001-1(a), Income
Tax Regs.; see also Higbee v. Commissioner, 116 T.C. 438, 440 (2001). As a
general rule, if a taxpayer provides sufficient evidence that the taxpayer has paid
or incurred an expense contemplated by section 162(a) but the taxpayer is unable
to adequately substantiate the amount of the expense, then the Court may estimate
the amount of the expense and allow the section 162(a) deduction to that extent.
Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930). However, in order
for the Court to estimate the amount of an expense, there must be some basis upon
which an estimate may be made. Vanicek v. Commissioner, 85 T.C. 731, 742-743
(1985). Otherwise, any allowance would amount to unguided largesse. Williams
v. United States, 245 F.2d 559, 560 (5th Cir. 1957). The Cohan rule applies to
COGS. See Goldsmith v. Commissioner, 31 T.C. 56, 62 (1958).
Deductions for expenses attributable to travel (“including meals and lodging
while away from home”), entertainment, gifts, and the use of “listed property” (as
defined in section 280F(d)(4) and including passenger automobiles), if otherwise
allowable, are subject to strict rules of substantiation. See sec. 274(d); Sanford v.
Commissioner, 50 T.C. 823, 827 (1968), aff’d per curiam, 412 F.2d 201 (2d Cir.
1969); sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov.
6, 1985). With respect to deductions for these types of expenses, section 274(d)
- 13 -
requires that the taxpayer substantiate either by adequate records or by sufficient
evidence corroborating the taxpayer’s own statement: (1) the amount of the
expense, (2) the time and place the expense was incurred, (3) the business purpose
of the expense, and (4) in the case of an entertainment or gift expense, the business
relationship to the taxpayer of each expense incurred. For “listed property”
expenses, the taxpayer must establish the amount of business use and the amount
of total use for such property. See sec. 1.274-5T(b)(6)(i)(B), Temporary Income
Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).
Substantiation by adequate records requires the taxpayer to maintain an
account book, a diary, a log, a statement of expense, trip sheets, or a similar record
prepared contemporaneously with the expenditure and documentary evidence
(e.g., receipts or bills) of certain expenditures. Sec. 1.274-5(c)(2)(iii), Income Tax
Regs.; sec. 1.274-5T(c)(2), Temporary Income Tax Regs., 50 Fed. Reg. 46017
(Nov. 6, 1985). Substantiation by other sufficient evidence requires the
production of corroborative evidence in support of the taxpayer’s statement
specifically detailing the required elements. Sec. 1.274-5T(c)(3), Temporary
Income Tax Regs., 50 Fed. Reg. 46020 (Nov. 6, 1985).
The Linds offered no explanation for COGS or the deduction for other
expenses reported on their Schedule C for 2010. Accordingly, they are not
- 14 -
entitled to COGS or the deduction for other expenses reported on their Schedule C
for 2010.
At trial Mr. Lind testified generally about the nature of Reliable’s COGS
and trade or business expenses for fiscal years 2011 and 2012. In support of the
above-referenced COGS and deductions, he also submitted Reliable’s general
ledger along with receipts, invoices, and statements, all of which we have
carefully reviewed. Handwritten notations accompanying the documents attempt
to tie each expenditure to a deduction claimed on Reliable’s Federal corporate
income tax returns. For example, he labeled numerous purchases at White Castle
and Dunkin Donuts “office” expenses.
As best we can tell from the general ledger and accompanying records,
COGS and deductions in excess of the amounts respondent already allowed were
not substantiated by written evidence, or if so, the written evidence fails to meet
the strict substantiation requirements of section 274(d) that apply to expenses for
car and truck, travel, and meals and entertainment. Otherwise, with respect to
certain expense deductions not subject to the strict substantiation requirements of
section 274(d), Reliable has failed to establish that the expenses are ordinary and
necessary expenses related to its trade or business. The generalized evidence
introduced on the point provides neither proper support for COGS or the
- 15 -
deductions nor any basis for us to estimate the amounts of these expenses that it
might have incurred during its fiscal years in issue. See Cohan v. Commissioner,
39 F.2d at 543-544; see also Vanicek v. Commissioner, 85 T.C. 742-743.
Accordingly, Reliable is not entitled to COGS or deductions for the trade or
business expenses in excess of any amounts respondent already allowed for the
years in issue.
B. Inventory
During the years in issue Reliable reported its income on the accrual method
but did not account for its inventory in the calculation of COGS, instead choosing
to include the amount of its yearly purchases in its computation of COGS even
though it is clear that not all of the items purchased during the year were sold
during the year. In the notice respondent made adjustments to Reliable’s ending
inventory for fiscal year 2011 and beginning and ending inventories for fiscal year
2012. Respondent’s calculations are based on purchases made in fiscal years 2011
and 2012 as reflected in Reliable’s Federal corporate income tax returns for those
years.
Taxpayers are required to take “inventories at the beginning and end of each
taxable year” in which “the production, purchase, or sale of merchandise is an
income-producing factor.” Sec. 1.471-1, Income Tax Regs.
- 16 -
Section 1.446-1(a)(4)(i), Income Tax Regs., provides that a taxpayer who is
involved in the production, purchase, or sale of merchandise must account for
merchandise on hand at the beginning and end of each year, so as to compute
properly taxable income for each year. The regulation further provides that such
merchandise is to be accounted for under the methods of computing inventories
provided in sections 471 and 472, and the regulations thereunder.
Applying the regulations under section 446, it becomes apparent that it is
necessary for Reliable to use inventories. See sec. 1.471-1, Income Tax Regs.
Although less than clear, it appears that Reliable contends that the
considerable inventory stored in its 5,000-square-foot warehouse had no value and
therefore its practice of including each year’s purchases in COGS without regard
to an inventory accounting method was appropriate. We find Reliable’s position
unpersuasive and inconsistent with its position that the items remaining at the end
of each year had, at the very least, scrap value. Moreover, Reliable has failed to
introduce any evidence contradicting respondent’s calculations of inventories, and
therefore we find that Reliable has failed to carry its burden of proof with respect
to this issue.
- 17 -
III. Constructive Dividends
According to respondent, Mr. Lind received dividends of $20,294, $27,797,
and $63,706 from Reliable in 2010, 2011, and 2012, respectively, consisting of the
following:
Dividend 2010 2011 2012
Personal cell phone $702 $702 -0-
Personal telephone -0- -0- $3,055
Warehouse expenses
deemed personal 1,142 1,645 -0-
Payments in excess
of wages 18,450 25,450 57,400
Medical expenses of
shareholder -0- -0- 1,367
Personal taxes of
shareholder -0- -0- 1,884
Total 20,294 27,797 63,706
A dividend is a distribution of property made by a corporation to its
shareholders from its earnings and profits. Sec. 316(a). A shareholder may
receive a dividend even though the corporation has not formally declared a
distribution. Truesdell v. Commissioner, 89 T.C. 1280, 1295 (1987). If a
corporation makes a noncompensatory payment on behalf of a shareholder without
a business purpose or expectation of repayment, then this amount constitutes a
constructive dividend to the shareholder. Benjamin v. Commissioner, 66 T.C.
1084, 1115 (1976), aff’d, 592 F.2d 1259 (5th Cir. 1979).
- 18 -
Reliable’s payments of Mr. Lind’s personal expenses are distributions to
him. See id. At trial Mr. Lind acknowledged that he paid personal expenses from
Reliable’s corporate account during the years in issue. Furthermore, the Linds
have failed to meet their burden of proving that there were insufficient earnings
and profits to support respondent’s determinations of constructive dividends. See
Truesdell v. Commissioner, 89 T.C. 1295-1296. The Linds have shown no
other error in respondent’s determinations of their unreported constructive
dividends from Reliable for the years in issue. Accordingly, we hold that the
Linds have unreported constructive dividends from Reliable as determined in the
notice.
IV. Net Long-Term Capital Gains
The Linds attached Schedules D to their 2011 and 2012 returns in which
they reported net long-term capital gains of $21,749 and $57,100, respectively.
According to respondent, the items giving rise to the reported net long-term capital
gains were from the sale of Reliable’s assets, a point not disputed by the Linds.
Because the gains derived from the sale of Reliable’s property, the income is
properly reported on Reliable’s Federal corporate income tax returns.
Accordingly, respondent’s disallowance of the capital gains reported on the Linds’
Schedule D of $21,749 and $57,100 for 2011 and 2012, respectively, is sustained.
- 19 -
V. Gross Receipts or Sales
Reliable reported gross receipts of $122,628 on its Federal corporate income
tax return for fiscal year 2012. In the notice respondent increased Reliable’s gross
receipts by $56,048 for fiscal year 2012 on account of Reliable’s own books and
records as well as the corporate bank account and PayPal statements.
This adjustment flows from respondent’s disallowance of the $57,100 net
long-term capital gain reported on the Linds’ 2012 return that we have already
determined should properly be reported on Reliable’s Federal corporate income
tax return for fiscal year 2012. Moreover, a review of Reliable’s books and
records and corporate bank account and PayPal statements confirms respondent’s
determination, and Reliable has not provided any evidence to the contrary.
Respondent’s adjustment increasing Reliable’s gross receipts by $56,048 for fiscal
year 2012 is sustained.
VI. Section 6662(a) Accuracy-Related Penalties
Lastly, we consider whether the Linds and/or Reliable are liable for a
section 6662(a) accuracy-related penalty for any year in issue. The evidence
shows that respondent has met his burden of production with respect to the
imposition of accuracy-related penalties for the Linds and Reliable on the basis of
- 20 -
an underpayment due to negligence and/or a substantial understatement of income
tax for each period involved. See sec. 6662(a) and (b)(1) and (2).
The accuracy-related penalty does not apply, however, to any part of an
underpayment of tax if it is shown that the taxpayer acted with reasonable cause
and in good faith with respect to that portion. Sec. 6664(c)(1). The determination
of whether a taxpayer acted in good faith is made on a case-by-case basis, taking
into account all the pertinent facts and circumstances. Sec. 1.6664-4(b)(1),
Income Tax Regs. The Linds and Reliable bear the burden of proving that they
had reasonable cause and acted in good faith with respect to the underpayments.
See Higbee v. Commissioner, 116 T.C. 449.
Reliance on professional advice will absolve the taxpayer if “such reliance
was reasonable and the taxpayer acted in good faith.” Sec. 1.6664-4(b)(1), Income
Tax Regs. Under certain circumstances, a taxpayer’s reliance upon professional
advice may establish the taxpayer’s “reasonable cause” and “good faith” with
respect to an underpayment of tax if the taxpayer establishes that: (1) the
professional was provided with complete and accurate information, (2) an
incorrect return was a result of the preparer’s mistakes, and (3) the taxpayer
demonstrates good-faith reliance on a competent professional. See Estate of
Goldman v. Commissioner, 112 T.C. 317, 324 (1999), aff’d without published
- 21 -
opinion sub nom. Schutter v. Commissioner, 242 F.3d 390 (10th Cir. 2000);
see also Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43, 99 (2000),
aff’d, 299 F.3d 221 (3d Cir. 2002).
The Linds and Reliable engaged a paid income tax return preparer to
prepare their Federal income tax returns for the years in issue. We are satisfied
that they relied completely upon the preparer not only for advice in the preparation
of the relevant Federal income tax returns but also during the examinations of the
returns and the preparations for trial in these cases. The return preparer testified
on behalf of the Linds and Reliable in response to questions presented by Mr. Lind
but, more likely than not, drafted by the return preparer. We are further satisfied
that the Linds and Reliable presented what financial information each had before
each return was drafted, and it is the return preparer who is responsible for the
positions taken on each of those returns. Although we now reject some of those
positions, we find that the Linds’ and Reliable’s reliance on the return preparer
was made in good faith. The Linds and Reliable employed the same return
preparer for more than 30 years before the years in issue, and nothing in the record
suggests they had any reasons to question the return preparer’s competence.
As to the return preparer’s competence, we note that he testified on behalf
of the Linds and Reliable at trial and his competence was not attacked during
- 22 -
cross-examination. We can envision circumstances that could support a finding of
a return preparer’s incompetence from nothing other than the improper positions
taken on a Federal income tax return. This, however, is not that case, and we are
reluctant to assume or infer incompetence here. It follows and we find the Linds
and Reliable are not liable for a section 6662(a) accuracy-related penalty for any
year in issue.
To reflect the foregoing,
Decisions will be entered under
Rule 155.
|
974 So. 2d 1131 (2008)
Warren S. DANIELS, Appellant,
v.
The STATE of Florida, Appellee.
No. 3D07-311.
District Court of Appeal of Florida, Third District.
February 6, 2008.
Warren S. Daniels, in proper person.
Bill McCollum, Attorney General, and Juliet S. Fattel, Assistant Attorney General, for appellee.
Before GERSTEN, C.J., and RAMIREZ, and WELLS, JJ.
PER CURIAM.
Warren Daniels ("Daniels") appeals the trial court's order denying his post-sentencing pro se motion to withdraw his plea. We affirm.
Daniels filed a motion to withdraw his plea nine months after entering a guilty plea. Daniels claimed his counsel coerced and misadvised him into taking the plea. The record shows that his motion was untimely under Florida Rule of Criminal Procedure 3.170(l). McKnight v. State, 964 So. 2d 803 (Fla. 3d DCA 2007).
Therefore, we affirm, but our affirmance is without prejudice to Daniels filing a sworn motion for post-conviction relief in conformance with Florida Rule of Criminal Procedure 3.850. Douze v. State, 945 So. 2d 653 (Fla. 4th DCA 2007).
Affirmed.
|
IN THE
Indiana Supreme Court
Supreme Court Case No. 19S-PC-548 FILED
Nov 17 2020, 10:41 am
Donnell Dontrell Wilson CLERK
Indiana Supreme Court
Appellant (Petitioner Below) Court of Appeals
and Tax Court
–v–
State of Indiana
Appellee (Respondent Below)
Argued: November 26, 2019 | Decided: November 17, 2020
Appeal from the Lake County Superior Court,
No. 45G01-1608-PC-7
The Honorable Salvador Vasquez, Judge
The Honorable Kathleen A. Sullivan, Magistrate
On Petition to Transfer from the Indiana Court of Appeals,
No. 18A-PC-3041
Opinion by Justice Massa
Justices David and Goff concur.
Chief Justice Rush concurs in result.
Justice Slaughter concurs in Parts I and II.A and dissents from Parts II.B and
II.C, with separate opinion.
Massa, Justice.
Donnell Wilson was sentenced to 181 years for the murders of Charles
Wood and Shaqwone Ham; the lengthy term of years also included a
sentence for robbery and a criminal gang enhancement. Wilson, who was
sixteen when he committed the crimes, now challenges his sentence on
post-conviction review after his conviction was affirmed on direct appeal.
On post-conviction review, Wilson argues his sentence constitutes a de
facto juvenile life sentence that triggers additional constitutional
sentencing considerations under Miller v. Alabama, 567 U.S. 460 (2012). He
also alleges that both his trial counsel and appellate counsel were
ineffective.
After a thorough review of U.S. Supreme Court precedent on juvenile
sentencing, we reject Wilson’s contention that his sentencing falls under
Miller. We conclude, however, that his appellate counsel was ineffective
on direct appeal when counsel failed to bring an Appellate Rule 7(B)
challenge to the appropriateness of Wilson’s sentence. Conducting this
review now, we reduce Wilson’s aggregate sentence to 100 years.
Facts and Procedural History.
In March 2013, sixteen-year-old Donnell Wilson, his then-girlfriend, her
brother Jonte Crawford, and another of the Crawfords’ relatives were all
walking home from playing basketball in their hometown of Gary,
Indiana. When the group encountered fifteen-year-old Derrick Thompson,
Wilson and Jonte flashed the handguns they were carrying and began
harassing and intimidating Thompson, making references to the local Tre
7 gang. The pair then took Thompson’s smartphone and headphones and
walked away.
A short time later, the group happened upon brothers Shaqwone Ham
and Charles Wood. Wilson and Jonte were members of several
interrelated gangs, including the Get Fresh Boys, Tre 7, and Glen Park
Affiliated, which were all at odds with the Bottom Side gang, to which
Ham and Wood belonged. Wilson had previously argued in person with
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 2 of 30
the brothers and their disputes had continued online with the brothers
threatening to fight Wilson. The groups initially exchanged greetings, but
Wilson and Jonte soon began to argue with the brothers. Wilson
exclaimed, “Oh, y’all looking for me? I’m in your hood.” DA Tr. Vol. 1,
p.153. 1 Seconds later, he fatally shot Wood in the head. When Ham tried
to run, Jonte shot him several times, killing him too. It is unclear from the
record if Wilson also timothythompson@example.com. The brothers were unarmed.
Three hours before the murders, Wilson—who had previously made
several gang-related posts on Twitter—sent out a new tweet declaring
“Glen Park or get shot,” referring to the Gary neighborhood where he
lived. DA Ex. Vol. 1, p.43. An hour after the murder, he tweeted “Chillen
wit my bros #[GetFreshBoys].” Id., p.42. Jonte and Wilson were quickly
arrested, and police found Thompson’s possessions on Jonte. Wilson was
charged with two counts of murder, Class B felony armed robbery, and a
Class D felony conspiracy to commit criminal gang activity. 2 The State
also sought a criminal gang enhancement.3
While Wilson was lodged in the Lake County Jail awaiting trial, he told
his cellmate he killed Ham and Wood because they were affiliated with
the rival Bottom Side gang. He also explained how his gang affiliation had
led to Twitter disputes with members of the Bottom Side gang. Wilson,
along with some fellow inmates, later jumped this cellmate because he
was from the “other side of the bridge” dividing Gary. DA Tr. Vol. 2,
p.410. During this period, Wilson was also recorded on a jailhouse video
conference stating he wanted to “smash” a member of a rival gang
incarcerated in the same facility and indicated a desire to continue
participating in gang activity. DA Tr. Vol. 4, p.745.
1“DA” refers to the direct appeal materials from Wilson’s original conviction. “PCR”
indicates citations to the record in the present post-conviction proceedings.
2See Ind. Code § 35-42-1-1(1) (2013) (murder); I.C. § 35-42-5-1(1) (Class B armed robbery); I.C.
§ 35-45-9-3 (conspiracy to commit gang activity).
3 I.C. § 35-50-2-15 (criminal gang enhancement).
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 3 of 30
After a four-day trial beginning in June 2014, a jury found Wilson
guilty on all counts. The trial court sentenced Wilson to a term of sixty
years for the first murder conviction, fifty-five consecutive years for the
second murder conviction, six consecutive years for armed robbery, and
two years for criminal gang activity, with an additional sixty consecutive
years added under the criminal gang enhancement, for an aggregate
sentence of 183 years. Wilson’s trial counsel did not retain any experts in
preparation for the sentencing hearing and did not present any timothythompson@example.com. When handing down the sentence, the court cited several
aggravating factors, but found Wilson’s youth to be a mitigating factor.
In a separate proceeding, Jonte was initially charged identically to
Wilson, but he later pled guilty to a single count of murder and robbery as
part of a plea agreement. Jonte’s plea deal capped his maximum possible
sentence at sixty-five years, and he was ultimately sentenced to sixty-one
years of incarceration.
On direct appeal, Wilson challenged his convictions on three grounds,
contending that (1) the trial court erred by admitting Twitter messages
into evidence without foundation, (2) his conviction for conspiracy to
commit criminal gang activity should be vacated because it was
duplicative of the gang enhancement, and (3) the trial court erred when it
excluded Wilson from a portion of his trial after a violent outburst. The
Court of Appeals found in favor of Wilson on the criminal-gang-activity
issue and vacated the conviction, thereby reducing his sentence by two
years. See Wilson v. State, 30 N.E.3d 1264, 1269 (Ind. Ct. App. 2015), trans.
denied. Wilson’s other arguments were rejected, id. at 1268–71, and we
denied transfer.
Wilson then sought post-conviction relief arguing that—since he was a
juvenile—the criminal gang enhancement was unconstitutional as applied
to him under both the U.S. and Indiana constitutions. Second, Wilson
argued that both his trial counsel and appellate counsel were ineffective.
Specifically, Wilson argued that (1) both his trial counsel and appellate
counsel should have challenged his 181-year aggregate sentence as a
violation of the Eighth Amendment, (2) that trial counsel did not present
adequate mitigation evidence at sentencing or properly investigate his
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 4 of 30
background, and (3) appellate counsel was ineffective for not raising an
Appellate Rule 7(B) appropriateness challenge to his sentence.
When the post-conviction court held an evidentiary hearing in March
2018, both Wilson’s trial and appellate counsel testified. Trial counsel
testified that he met with Wilson five to eight times in jail and that Wilson
had rejected a 100-year plea agreement. To prepare for the sentencing
hearing, trial counsel talked to Wilson and his family to investigate his
background and learn of any mitigating evidence. He also reviewed the
pre-sentencing report with his client, which indicated Wilson was not
taking any medication and had no history of mental health issues. Based
on his review of the records and these conversations, trial counsel
concluded there was no need to hire a mental health expert. Further, since
Wilson was not facing a life without parole sentence, counsel testified that
the U.S. Supreme Court’s Miller v. Alabama decision—holding that
mandatory life-without-parole sentences for juvenile offenders are
unconstitutional— “wasn’t even on my radar.” PCR Tr., p.15.
Wilson’s appellate counsel testified that he was unfamiliar with Miller
at the time of the direct appeal. Instead, appellate counsel homed in on the
clear error in the duplicity of the gang activity conviction. But in
retrospect, he conceded that he should have also challenged the sentence’s
appropriateness under Appellate Rule 7(B). Appellate counsel also
admitted that, at the time, he was unfamiliar with two recent Appellate
Rule 7(B) decisions issued by this Court, both addressing the
appropriateness of de facto life sentences for juvenile double murderers.
At the post-conviction review hearing, new evidence about Wilson’s
background was introduced. Dr. Charles Ewing, a forensic psychologist
who examined Wilson while in prison, concluded that he was suffering
from PTSD linked to growing up in a violent neighborhood where
someone once attempted to firebomb his childhood home and where he
witnessed the shooting of two friends. Dr. Ewing concluded that Wilson’s
decision to shoot the victims was based in fear stemming from previous
traumatic experiences and that he did not appreciate the consequences of
his actions. He also testified that Wilson likely had a good chance of being
rehabilitated after he reached age twenty-five. But Dr. Ewing conceded
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 5 of 30
that Wilson had never previously been formally diagnosed with a mental
health issue and a mental health professional only saw Wilson once. The
testimony of developmental psychologist Dr. James Garbarino provided a
similar positive outlook on Wilson’s chances for rehabilitation.
The post-conviction court, however, denied Wilson’s petition for relief.
The Court of Appeals reversed, finding that Wilson’s trial counsel was
ineffective when he failed “to present any evidence related to youth and
its attendant characteristics or to Wilson’s own youth, environment,
mental health, good character, or prospects of rehabilitation,” as it found
was required by U.S. Supreme Court precedent for de facto juvenile life
sentences. Wilson v. State, 128 N.E.3d 492, 502 (Ind. Ct. App. 2019), vacated.
Ordering a new sentencing hearing, the Court of Appeals declined to
address Wilson’s other arguments. Id. at 503.
The State sought transfer, which we granted.
Standard of Review.
A post-conviction proceeding is a civil proceeding in which a defendant
may present limited collateral challenges to a conviction and sentence.
Ind. Post-Conviction Rule 1(1)(b); Gibson v. State, 133 N.E.3d 673, 681 (Ind.
2019), reh’g denied, cert. denied, --- S. Ct. ----, No. 19-8904, 2020 WL 6037221
(Oct. 13, 2020). Potential relief is limited in scope to issues unknown at
trial or unavailable on direct appeal. Ward v. State, 969 N.E.2d 46, 51 (Ind.
2012) (citing Pruitt v. State, 903 N.E.2d 899, 905 (Ind. 2009)). “Issues
available on direct appeal but not raised are waived, while issues litigated
adversely to the defendant are res judicata.” Id. We do not review a
“freestanding claim of error, either ‘fundamental’ or otherwise,” on post-
conviction review when it was not raised on direct appeal if the claim was
known and available to him. Stephenson v. State, 864 N.E.2d 1022, 1029
(Ind. 2007). We have also limited free-standing post-conviction
constitutional claims under the Eighth Amendment to only assertions
based in “evolving standards of decency, changes in the legal landscape,
and the development of a national consensus since [a defendant’s
previous appeal] such that [the] sentence now constitutes cruel and
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 6 of 30
unusual punishment.” Baird v. State, 831 N.E.2d 109, 115–16 (Ind. 2005)
(quotation marks omitted).
The defendant bears the burden of establishing his claims by a
preponderance of the evidence. P-C.R. 1(5). “When, as here, the defendant
appeals from a negative judgment denying post-conviction relief, he ‘must
establish that the evidence, as a whole, unmistakably and unerringly
points to a conclusion contrary to the post-conviction court’s decision.’”
Gibson, 133 N.E.3d at 681 (quoting Ben-Yisrayl v. State, 738 N.E.2d 253, 258
(Ind. 2000)). “When a defendant fails to meet this ‘rigorous standard of
review,’ we will affirm the post-conviction court’s denial of relief.” Id.
(quoting DeWitt v. State, 755 N.E.2d 167, 169–70 (Ind. 2001)).
Discussion and Decision.
Wilson’s claims for post-conviction relief fall into three main branches.
First, he argues that his 181-year cumulative sentence amounts to a cruel
and unusual punishment under the Eighth Amendment. While Wilson’s
briefing in the Court of Appeals presented this constitutional argument as
both a free-standing constitutional claim and as an ineffective assistance of
counsel (IAC) claim, on transfer, he focuses on the IAC rationale. Second,
he argues his trial counsel was ineffective for failing to adequately
investigate and present mitigation evidence at his sentencing hearing.
Third, Wilson argues his appellate counsel was also ineffective because he
failed to challenge the appropriateness of the sentence under Indiana
Appellate Rule 7(B) on direct appeal. We address each claim in turn.
I. Wilson’s 181-year sentence is not cruel and
unusual punishment under the Eighth
Amendment.
Wilson originally presented his Eighth Amendment argument as both a
free-standing constitutional claim and as an IAC claim based on his
counsel’s failure to raise the unconstitutionality argument on direct
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 7 of 30
appeal. These arguments both fail because Wilson’s sentencing was
appropriate under the Eighth Amendment.4
The Eighth Amendment states that “[e]xcessive bail shall not be
required, nor excessive fines imposed, nor cruel and unusual punishments
inflicted.” U.S. Const. amend. VIII. To determine what constitutes a cruel
and unusual punishment, “courts must look beyond historical conceptions
to the evolving standards of decency that mark the progress of a maturing
society.” Graham v. Florida, 560 U.S. 48, 58 (2010) (citations omitted), as
modified. “This is because the standard of extreme cruelty is not merely
descriptive, but necessarily embodies a moral judgment.” Id. (quotations
omitted). What constitutes cruel and unusual punishment changes “as the
basic mores of society change.” Kennedy v. Louisiana, 554 U.S. 407, 419
(2008) (quotation omitted).
A. The recent evolution in Eighth Amendment juvenile
sentencing requirements.
The U.S. Supreme Court has recently explained how its evolving Eighth
Amendment standard should be applied to juvenile offenders. In Roper v.
Simmons, it held that the Eighth Amendment bars capital punishment for
juvenile offenders—which it defined as those who committed the crime
before age eighteen. 543 U.S. 551, 578 (2005). Finding that the juvenile
offenders were categorically less culpable for their crimes than adults due
to their (1) lack of impulse control, (2) heightened vulnerability to negative
influences from “outside pressures,” and (3) “more transitory, less fixed”
personalities, the Court held that juveniles were no longer among the
narrow class of “worst offenders” deserving of the death penalty. Id. at
4As we explain in greater detail in Section II below, an IAC claim requires Wilson to prove (1)
that his counsel’s performance fell short of prevailing professional norms, and (2) that
counsel’s deficient performance prejudiced his defense. Strickland v. Washington, 466 U.S. 668
(1984). Since we find the 181-year sentence imposed to be constitutional under our current
understanding of the Eighth Amendment, Wilson’s constitutional IAC claims necessarily fail
the second prong of the Strickland test because he cannot be prejudiced by his counsel’s failure
to bring a constitutional argument on direct appeal that we now conclude to be a losing one.
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 8 of 30
569–70. In the opinion, however, the Court assured the states that life-
without-parole sentences would continue to be available for juvenile
killers, thereby providing a sufficient deterrent because such a sentence
“is itself a severe sanction, in particular for a young person.” Id. at 572; see
also Conley v. State, 972 N.E.2d 864, 877–80 (Ind. 2012) (holding that
Indiana’s scheme of discretionary life without parole sentencing for
juvenile murderers—which expressly requires the consideration of
aggravating and mitigating factors—is constitutional under both the U.S.
and Indiana constitutions).
Echoing Roper, the Court soon barred imposing life-without-parole
sentences for non-homicide juvenile offenders but allowed the states to
develop their own “means and mechanisms for compliance” with its new
rule that offenders be given “some meaningful opportunity to obtain
release based on demonstrated maturity and rehabilitation.” Graham, 560
U.S. at 82, 75. The Court reasoned that the same factors that diminished
juveniles’ culpability in Roper applied to lesser crimes making juveniles
“less deserving of the most severe punishments.” Id. at 68 (citing Roper,
543 U.S. at 569). The Court held that life without parole—which it noted
was “the second most severe penalty permitted by law” sharing “some
characteristics with death sentences that are shared by no other
sentences”—should not be applied to juvenile “defendants who do not
kill” because such defendants are “categorically less deserving of the most
serious forms of punishment than are murderers.” Id. at 69 (quotations
omitted) (emphasis added).
Two years later, the U.S. Supreme Court held that the Eighth
Amendment also “forbids a sentencing scheme that mandates life in
prison without possibility of parole for juvenile [murderers].” Miller v.
Alabama, 567 U.S. 460, 479 (2012) (emphasis added). Since “juveniles have
diminished culpability and greater prospects for reform, . . . ‘they are less
deserving of the most severe punishments.’” Id. at 471 (quoting Graham,
560 U.S. at 68). Because “mandatory [life-without-parole] penalty schemes
. . . prevent the sentencer from taking [into] account [the] central
considerations” of youth, the mandatory life sentences “contravene[d]
Graham’s (and also Roper’s) foundational principle: that imposition of a
State’s most severe penalties on juvenile offenders cannot proceed as
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 9 of 30
though they were not children.” Id. at 474 (citations omitted). Applying
the holding, the Court noted that the sentencing court, “[a]t the least, . . .
should look at” the “hallmark features” of youth, the defendant’s
background, and “the circumstances of the homicide offense” before
imposing a discretionary life without parole sentence. Id. at 477–78. And,
the Court predicted, the “appropriate occasions” for imposing “this
harshest possible penalty will be uncommon.” Id. at 479.
In 2016, the U.S. Supreme Court held that Miller “announced a
substantive rule of constitutional law,” requiring its retroactive
application to juveniles sentenced pre-Miller. Montgomery v. Louisiana, 136
S. Ct. 718, 736 (2016), as revised. The opinion required the state to grant the
defendant—who was serving a mandatory life without parole sentence for
killing a deputy sheriff at age seventeen in 1963—either a new sentencing
hearing or parole eligibility. Id. at 725, 736. It was the opinion’s description
of the procedural sentencing requirements imposed by Miller, however,
that has since created the most debate in courts. The Court in Montgomery
concluded that Miller “did more than require a sentencer to consider a
juvenile offender’s youth before imposing life without parole,” explaining
that
[e]ven if a court considers a child’s age before sentencing him
or her to a lifetime in prison, that sentence still violates the
Eighth Amendment for a child whose crime reflects
unfortunate yet transient immaturity. Because Miller
determined that sentencing a child to life without parole is
excessive for all but the rare juvenile offender whose crime
reflects irreparable corruption, it rendered life without parole
an unconstitutional penalty for a class of defendants because of
their status—that is, juvenile offenders whose crimes reflect the
transient immaturity of youth.
Id. at 734 (citations omitted). Despite this language, the Court in
Montgomery also acknowledged that “Miller did not require trial courts to
make a finding of fact regarding a child’s incorrigibility,” writing that
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 10 of 30
states could develop independent procedures to enforce the constitutional
requirement. Id. at 735.
Montgomery’s murkiness has resulted in a split of authority among state
high courts as to whether Miller requires a court to make a specific factual
finding that the juvenile is irreparably corrupt (or permanently
incorrigible) before it can issue a life sentence. See People v. Skinner, 917
N.W.2d 292, 322 (Mich. 2018) (McCormack, J., dissenting) (observing a
“split of authority in state courts post-Miller on whether a court must
make a specific ‘finding’ of irreparable corruption”); see also Alice
Reichman Hoesterey, Confusion in Montgomery’s Wake, Appendix B:
Irreparable Corruption Determination, 45 Fordham Urb. L.J. 149, 190–93
(2017) (listing appellate opinions falling on different sides of the debate).
The U.S. Supreme Court seems poised to better define the scope of
Miller’s procedural requirements in the near future, as earlier this year it
granted certiorari on a petition asking the Court to determine if the Eighth
Amendment requires the sentencing court to find a defendant to be
permanently incorrigible before imposing a sentence of life without
parole. See Jones v. State, 285 So. 3d 626 (Miss. Ct. App. 2017), cert. granted,
140 S. Ct. 1293 (2020).5 While a decision by the U.S. Supreme Court would
certainly clarify some issues, it is unlikely to completely resolve the Eighth
Amendment constitutional questions before us because the defendant in
Jones was sentenced to life imprisonment for a single murder, not a
discretionary term of years sentence for multiple offenses like Wilson. See
id. at 627.
Since Miller, a separate split in authority has developed over whether a
term of years sentence constitutes a de facto life without parole sentence
that implicates Miller’s procedural sentencing requirements. Miller and
Montgomery both involved juveniles who were sentenced to de jure life-
without-parole sentences for committing single murders. Miller, 567 U.S.
at 465–66; Montgomery, 136 S. Ct. at 725–26. And the defendant in Graham
had been sentenced to a de jure life without parole sentence for a single
5 The Court heard oral argument in this case on November 3, 2020.
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 11 of 30
count of armed burglary, with an additional fifteen years for attempted
armed robbery. Graham, 560 U.S. at 57. So these opinions do not directly
address whether the same heightened fact-finding requirements apply
directly to discretionary term-of-years sentences.
Recently, many federal circuit courts and state appellate courts have
issued opinions on the Eighth Amendment’s requirements for de facto life-
without-parole sentences, falling into three main categories. In the first
group are jurisdictions who have held that Miller’s required consideration
of age and attendant circumstances is applicable to term-of-years
sentences long enough to be considered a de facto life sentence. See, e.g.,
Moore v. Biter, 725 F.3d 1184, 1191 (9th Cir. 2013) (Miller and Graham apply
because the defendant’s “sentence of 254 years is materially
indistinguishable from a life sentence without parole.”); State v. Null, 836
N.W.2d 41, 71 (Iowa 2013) (“[A] 52.5–year minimum prison term for a
juvenile based on the aggregation of mandatory minimum sentences for
second-degree murder and first-degree robbery triggers the protections . .
. afforded under Miller.”); State v. Ramos, 387 P.3d 650, 659, 661 n.6 (Wash.
2017) (finding “Miller applies equally to literal and de facto life-without
parole-sentences[,]” and “[i]t is undisputed that [the defendant’s] 85-year
aggregate sentence is a de facto life sentence”).
The second view finds Miller analysis inapplicable to aggregate
sentences that exceed the juvenile’s life expectancy.6 See, e.g., United
States v. Sparks, 941 F.3d 748, 754 (5th Cir. 2019) (holding that “a term-of-
years sentence cannot be characterized as a de facto life sentence[;] Miller
6 To be sure, some courts appear to fall somewhere between these categories. The Seventh
Circuit, for instance, recently found that “the logic of Miller applies” to a de facto life 100-year
cumulative sentence (50-year murder sentence enhanced by 50 years for use of a firearm).
McKinley v. Butler, 809 F.3d 908, 911, 909 (7th Cir. 2016). The opinion, however, does not
address its previous decision (also authored by then-Judge Posner), considering successive
jailhouse disciplinary sanctions, where the court stated that “every sentence[ ] must be
treated separately, not cumulatively, for purposes of determining whether it is cruel and
unusual.” Pearson v. Ramos, 237 F.3d 881, 886 (7th Cir. 2001) (emphasis added). It is unclear if
the Seventh Circuit’s views on sentence aggregation for Eighth Amendment analysis have
evolved following Miller, or if the two opinions can be harmonized if the 100-year sentence in
McKinley is viewed as a sentence for one crime: murder with a firearm.
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 12 of 30
dealt with a statute that specifically imposed a mandatory sentence of
life”), cert. denied, 140 S. Ct. 1281 (2020); Bunch v. Smith, 685 F.3d 546, 547,
553 (6th Cir. 2012) (finding Miller inapplicable to an eighty-nine-year
aggregate fixed term for robbing, kidnapping, and raping a twenty-two-
year-old college student); Proctor v. Kelley, 562 S.W.3d 837, 839, 841–42
(Ark. 2018) (holding that a 240-year aggregate sentence—for eleven
different robbery counts, none of which would singularly constitute a de
facto life sentence—does not fall under the purview of Graham, which dealt
with a life without parole sentence for a single crime), cert. denied, 140 S.
Ct. 481 (2019); State v. Helm, 431 P.3d 1213, 1215 (Ariz. Ct. App. 2018)
(refusing to find Miller analysis applicable to juvenile serving consecutive
murder sentences because “we do not consider the aggregate sentence
when conducting a proportionality analysis under the Eighth
Amendment” but instead look to the sentence imposed for each specific
crime) (citations omitted).
Third, are jurisdictions who have found Miller’s requirements only
apply to de jure life-without-parole sentences and therefore are
inapplicable to other discretionary sentences, including life with the
possibility of parole. See, e.g., Lucero v. People, 394 P.3d 1128, 1133 (Colo.
2017) (finding that “the analysis in Miller is limited to the sentence at issue
in that case, mandatory life without parole, and does not extend to
lengthy aggregate sentences or life sentences with the possibility of
parole”); Veal v. State, 810 S.E.2d 127, 128–29 (Ga. 2018) (upholding six
consecutive life-with-parole sentences for rape by juvenile because it
found Miller’s requirements applied only to de jure life-without-parole
sentences); State v. Slocumb, 827 S.E.2d 148, 156 (S.C. 2019) (holding that
since the U.S. Supreme Court declined to also address a term of years
sentence in Graham, it would hue to the narrow holding that Miller and
Graham only apply to de jure life-without-parole sentences). All told, courts
around the country are split approximately evenly on whether Graham
and Miller should be extended to at least some de facto life sentences. See
Slocumb, 827 S.E.2d at 156 n.16.
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B. A term of years sentence does not implicate Miller.
Given this split in authority, we take counsel in language from Miller
and Graham suggesting their holdings should be read narrowly, absent
further guidance from that Court.7
Graham and Miller both explicitly state that their holdings are limited to
the “particular” penalty of life without parole. See Lucero, 394 P.3d at 1133
(quoting Graham, 560 U.S. at 61; Miller, 567 U.S. at 483) (“In Graham, the
Court categorically barred the ‘particular’ sentence of life without parole
for juvenile nonhomicide offenders, saying nothing about consecutive or
aggregate sentences. . . . Miller likewise speaks only of the sentence of life
without parole, calling it a ‘particular penalty.’”). The majority in Graham
explicitly differentiated life-without-parole sentences from other penalties,
calling life-without-parole sentences “the second most severe penalty
permitted by law [after death,]” and noting that they “share some
characteristics with death sentences that are shared by no other
sentences.” 560 U.S. at 69 (citations omitted). Indeed, dissenting in
Graham, Justice Alito noted that “[n]othing in the Court’s opinion affects
the imposition of a sentence to a term of years without the possibility of
parole.” Id. at 124 (Alito, J., dissenting). Likewise, the Court’s analysis in
Miller “distinguished the mandatory sentencing schemes at issue in Miller
from the impliedly constitutional alternatives whereby ‘a judge or jury
could choose, rather than a life-without-parole sentence, a lifetime prison
term with the possibility of parole or a lengthy term of years.’” Lucero, 394
P.3d at 1133 (quoting Miller, 567 U.S. at 489). The implication from this
distinction is that the holding was not meant to extend to these other types
of sentences. See id.
7Due to this holding, we see no need to separately address Wilson’s as-applied constitutional
challenge to the criminal gang enhancement. To the extent Wilson presents a new
constitutional argument differing from the general Eighth Amendment challenge we address
above, this novel argument was waived by Wilson’s failure to bring it on direct appeal, see
Ward v. State, 969 N.E.2d 46, 51 (Ind. 2012), and counsel’s failure to advance the argument
does not constitute deficient performance, see Bieghler v. State, 690 N.E.2d 188, 194 (Ind. 1997).
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 14 of 30
In fact, in the context of adult offenders, the U.S. Supreme Court has in
the past explicitly cautioned against expanding Eighth Amendment
protections by relying on general similarities between sentences. In
Harmelin v. Michigan, an adult defendant was sentenced to a mandatory
life without parole sentence for possessing 672 grams of cocaine despite
having no prior felony convictions. 501 U.S. 957, 961, 994 (1991). The
defendant argued that before the court imposed such a harsh sentence, he
should have received an individualized sentencing hearing, equivalent to
what is constitutionally required in death penalty cases. Id. at 994. Writing
for the Court, Justice Scalia acknowledged several similarities between the
death penalty and a life without parole sentence, but he found such
reasoning by analogy would lead to an ever-expanding category of
sentences requiring additional protections. Id. at 996 (“It is true that
petitioner’s [life without parole] sentence is unique in that it is the second
most severe known to the law; but life imprisonment with possibility of
parole is also unique in that it is the third most severe.”). Instead, the
Court acknowledged it had already “drawn the line of required
individualized sentencing at capital cases” and chose not to “extend[ ] it
further.” Id. (emphasis added).
The Court later distinguished juvenile life-without-parole sentences
from the holding of Harmelin because it found life-without-parole
sentences to be a categorically more severe punishment for juveniles—
both due to the greater amount of time they would likely serve and
juveniles’ unique characteristics. See Miller, 567 U.S. at 480–81. However,
Harmelin’s core lesson regarding the Eighth Amendment’s cruel and
unusual punishment clause’s constitutional analysis is still valid. That is,
determining the reach of the clause is inherently a line drawing exercise
best left to the U.S. Supreme Court.
And determining what sentence constitutes a “de facto life sentence”
would be a task completely unmoored from the language of Miller. See
Bunch, 685 F.3d at 552 (“At what number of years would the Eighth
Amendment become implicated in the sentencing of a juvenile: twenty,
thirty, forty, fifty, some lesser or greater number? Would gain time be
taken into account? Could the number vary from offender to offender
based on race, gender, socioeconomic class or other criteria? Does the
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 15 of 30
number of crimes matter?”) (quotation omitted); Sparks, 941 F.3d at 754
(noting that an attempt at determining what constitutes a de facto life
sentence would be a line drawing exercise “not bound by law”). Indeed,
well-meaning attempts at fully defining de facto life sentences can end up
creating requirements that would vastly alter sentencing procedures for a
large swath of juveniles. See United States v. Grant, 887 F.3d 131, 150–53 (3d
Cir. 2018) (proposing a “rebuttable presumption that a non-incorrigible
juvenile offender should be afforded an opportunity for release before the
national age of retirement” while also requiring trial courts hold a
separate hearing to determine an offender’s “life expectancy before
sentencing him or her to a term-of-years” based on demographic
information8), reh'g en banc granted, opinion vacated; see also Kelly v. Brown,
851 F.3d 686, 688 (7th Cir. 2017) (Posner, J., dissenting) (arguing, based on
third party actuarial data on juvenile prisoners, that a sentence requiring a
juvenile to be released after age fifty is a de facto life sentence). These
examples make clear that any attempt to define a de facto life sentence
without further guidance from the U.S. Supreme Court would be largely
guesswork and would likely require significant (and likely unnecessary)
change to Indiana’s existing discretionary sentencing scheme.9
In sum, “while we are duty-bound to enforce the Eighth Amendment
consistent with the Supreme Court’s directives,” we must interpret this
precedent based “upon case-specific holdings rather than general
expressions in an opinion that exceed the scope of any particular holding.”
Slocumb, 827 timothythompson@example.com. As a result, Miller’s enhanced protections do
not currently apply to Wilson’s 181-year term of years sentence. The
8In addition to the practical implications of such hearings, we would be deeply concerned by
the constitutional implications of sentencing someone to a longer sentence based on their
immutable characteristics because of life expectancy differences.
9 While U.S. Supreme Court precedent does not currently apply the Miller factors to de facto
life sentences, trial courts would be well served to explicitly consider the factors relied on by
Miller before imposing a sentence that would certainly result in a juvenile defendant spending
the rest of his life incarcerated. This analysis would likely inoculate their sentencing
determinations from further scrutiny if the U.S. Supreme Court expands Miller’s reach. Such
careful analysis would also serve to better explain why the imposed sentence is appropriate if
Appellate Rule 7(B) review is sought.
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 16 of 30
sentence does not violate the Eighth Amendment because Miller, Graham,
and Montgomery expressly indicate their holdings apply only to life-
without-parole sentences.
C. Wilson’s sentencing suffices under Miller.
Even assuming the standards in Miller apply to a de facto juvenile life
sentence, the judge adequately considered youth and attendant
circumstances during sentencing. Since “Miller did not impose a formal
factfinding requirement,” a sentence cannot “be vacated merely because
the [sentencing] court failed to quote certain magic words from the
Supreme Court’s Miller decision.” Sparks, 941 F.3d at 756 (quotation
omitted).
While the sentencing judge may not have used the “irreparable
corruption” language of Miller, he expressly considered Wilson’s youth
and immaturity as the main mitigating factor throughout sentencing. He
also considered the defendant’s background—including his three prior
referrals to the juvenile justice system and previous conviction for a
possession of a dangerous firearm—as evidence of Wilson’s corruption.
And testimony was presented that even while awaiting trial, Wilson
continued to engage in gang activity and expressed that he hoped to
“smash” members of a rival gang also incarcerated at the same facility—
evidence he was irreparably corrupted. DA Tr. Vol. 4, p.745. While the
sentencing judge did not delve into a detailed discussion of Wilson’s
home environment at sentencing, such a discussion appeared unnecessary
based on what the judge knew of Wilson’s background at the time because
being raised by a stable two-parent family in a bad neighborhood is not a
significant mitigator.
The sentencing judge also knew of the gang-centric neighborhood
environment to which Wilson was exposed. The victims were members of
the rival Bottom Side gang and significant testimony at trial discussed the
activities and disputes between these different gangs. Looking at the
information considered by the trial judge, as a whole, the sentencing court
sufficiently considered Wilson’s background, environment and
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 17 of 30
immaturity before determining that Wilson was sufficiently corrupted and
his crimes so serious that he deserved a long term of years sentence.
II. Wilson’s ineffective assistance of counsel claims.
To prevail on his IAC claims, Wilson must show (1) that his counsel’s
performance fell short of prevailing professional norms, and (2) that
counsel’s deficient performance prejudiced his defense. Strickland v.
Washington, 466 U.S. 668 (1984). “A showing of deficient performance
under the first of these two prongs requires proof that legal representation
lacked ‘an objective standard of reasonableness,’ effectively depriving the
defendant of his Sixth Amendment right to counsel.” Gibson, 133 N.E.3d at
682 (quoting Overstreet v. State, 877 N.E.2d 144, 152 (Ind. 2007)). “To
demonstrate prejudice, the defendant must show a reasonable probability
that, but for counsel’s errors, the proceedings below would have resulted
in a different outcome.” Id. (citing Wilkes v. State, 984 N.E.2d 1236, 1240–41
(Ind. 2013)). “A reasonable probability is a probability sufficient to
undermine confidence in the outcome.” Strickland, 466 U.S. at 694.
When assessing the counsel’s performance, we rely on some basic
guidelines. First, we start by strongly presuming that, throughout the
proceedings, counsel exercised “reasonable professional judgment” and
rendered adequate legal assistance. Stevens v. State, 770 N.E.2d 739, 746
(Ind. 2002). Second, defense counsel enjoys “considerable discretion”
when developing legal strategies for a client, demanding deference during
judicial review. Id. at 746–47. Third, counsel’s “[i]solated mistakes, poor
strategy, inexperience, and instances of bad judgment do not necessarily
render representation ineffective.” Id. at 747.
Wilson brings two types of IAC claims. First, Wilson argues that his
trial counsel was ineffective when counsel failed to adequately investigate
Wilson’s background so he could present mitigating and aggravating
factors at the sentencing hearing. Second, Wilson asserts that appellate
counsel was ineffective for failing to raise significant issues on appeal—
including the previously discussed Eighth Amendment constitutional
argument—and for failing to seek evaluation of Wilson’s 181-year
sentence under our inherent revisory authority as part of his direct appeal.
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 18 of 30
We find his trial counsel’s preparation for sentencing were within the
bounds of prevailing professional norms. But, given precedent existing at
the time, the grounds for relief under Appellate Rule 7(B) should have
been significant and obvious to appellate counsel; therefore, we consider
and grant 7(B) relief reducing Wilson’s sentence to 100 aggregate-years.
A. Wilson’s trial counsel was not ineffective.
Wilson claims his trial counsel was ineffective for failing to investigate
and present mitigation timothythompson@example.com. Specifically, he contends
that his trial counsel should have presented expert testimony regarding
the mitigating qualities of youth and conducted a more thorough
investigation of Wilson’s background, including his mental health history.
The post-conviction court made factual findings rejecting these
arguments. It concluded that the trial court had conducted an adequate
analysis of Wilson’s background in line with prevailing professional
norms and that trial counsel did not miss the importance of age as the
major mitigating factor and had “argued it competently.” Appellant’s
Corr. App. Vol. 2, p.234.
Appealing a factual conclusion by the post-conviction court is an uphill
battle requiring Wilson to establish “that the evidence, as a whole,
unmistakably and unerringly points to a conclusion contrary to the post-
conviction court’s decision.” Ben-Yisrayl, 738 timothythompson@example.com. The evidence
here is not that one-sided in Wilson’s favor.
Arguing that his trial counsel should have presented expert testimony
on how his age reduced his criminal culpability and his prospects for
rehabilitation, Wilson cites no evidence that this presentation was
required by “prevailing professional norms” in 2014. See Strickland, 466
U.S. at 688. In fact, his brief cites only to American Bar Association
guidelines, in effect at the time, applicable to the presentation of
mitigation evidence in the death penalty context. Wilson simply fails to
establish that it was standard practice among defense counsel to present
such expert testimony at a sentencing hearing for a juvenile facing a
lengthy term of years sentence.
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 19 of 30
Wilson also claims that his trial counsel’s sentencing investigation was
inadequate because he failed to uncover Wilson’s mental health issues—a
PTSD diagnosis discovered by experts hired during the post-conviction
investigation. We have previously explained that the Constitution does
not demand a “scorch-the-earth strategy” in conducting a mitigation
investigation. Ward, 969 N.E.2d at 56 (quotation omitted). Instead, “[w]hat
is reasonable depends on the circumstances of each case, including the
facts of the crime, information gleaned from the defendant and others, and
other readily available sources of information.” Id. Here, trial counsel
investigated Wilson’s background by speaking to members of his family,
reviewing the pre-sentencing investigation report with his client and
making his own observations about Wilson’s mental state during their
meetings. The investigative report indicated Wilson had no mental illness.
Counsel’s interview with family and counsel’s own observations did not
contradict this evaluation. Because sufficient evidence supports the post-
conviction court’s conclusion—finding trial counsel’s investigation to be
adequate—we affirm its holding.
B. Wilson was provided ineffective assistance of appellate
counsel when his attorney failed to seek relief under
Indiana Appellate Rule 7(B).
Wilson is entitled to effective assistance of counsel under the Sixth
Amendment not only at trial but also on direct appeal. Timberlake v. State,
753 N.E.2d 591, 604 (Ind. 2001). These claims are also judged under the
two-part Strickland test. Id. at 603. “Ineffective assistance of appellate
counsel claims generally fall into three basic categories: (1) denial of access
to an appeal, (2) waiver of issues, and (3) failure to present issues well.”
Reed v. State, 856 N.E.2d 1189, 1195 (Ind. 2006) (citation omitted) (emphasis
added). Wilson argues that appellate counsel failed to raise significant
issues on appeal, which falls into the second category.
“To show that counsel was ineffective for failing to raise an issue on
appeal thus resulting in waiver for collateral review, the defendant must
overcome the strongest presumption of adequate assistance, and judicial
scrutiny is highly deferential.” Gallien v. State, 19 N.E.3d 303, 307 (Ind. Ct.
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 20 of 30
Ohio App. 2014) (citing Reed, 856 N.E.2d at 1195). “To evaluate the performance
prong when counsel waived issues upon appeal, we apply the following
test: (1) whether the unraised issues are significant and obvious from the
face of the record and (2) whether the unraised issues are clearly stronger
than the raised issues.” Reed, 856 N.E.2d at 1195 (quotation omitted)
(emphasis added). IAC is very rarely found in cases where a defendant
asserts that appellate counsel failed to raise an issue on direct appeal, in
part, because the decision of what issues to raise is one of the most
important strategic decisions to be made by appellate counsel. Bieghler v.
State, 690 N.E.2d 188, 193–94 (Ind. 1997). Though instances of successful
claims are “very rare,” one ground for past successful IAC claims is
appellate counsel’s failure “to locate[ ] and rel[y] upon” recent precedent
from this Court that is “not out-of-date or obscure” and would have
directly supported a meritorious argument for relief. Hopkins v. State, 841
N.E.2d 608, 614 (Ind. Ct. App. 2006).
Wilson’s appellate counsel raised three issues on appeal: (1) whether
the trial court properly admitted Twitter messages into evidence, (2)
whether Wilson’s convictions for conspiracy to commit a criminal gang
activity and the resulting enhancement violated double jeopardy, and (3)
whether the trial court properly excluded Wilson from the courtroom after
an outburst. The Court of Appeals easily affirmed both the admission of
tweets and Wilson’s removal from the courtroom on direct appeal, and we
denied transfer. See Wilson, 30 N.E.3d at 1267–71. The Court of Appeals,
however, agreed that the conspiracy to commit gang activity charge was
impermissibly duplicative and it vacated the conviction and its two-year
sentence. Id. at 1269. So, Wilson’s sentence was only reduced from 183 to
181 years.
Wilson now argues on post-conviction review that his appellate counsel
on direct appeal should have brought an independent claim for appellate
review under Indiana Appellate Rule 7(B). The rule provides that “[t]he
Court may revise a sentence authorized by statute if, after due
consideration of the trial court’s decision, the Court finds that the sentence
is inappropriate in light of the nature of the offense and the character of
the offender.” Ind. Appellate Rule 7(B). “This appellate review and revise
authority derives from Article 4 of the Indiana Constitution, and includes
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 21 of 30
the power to either reduce or increase a criminal sentence on appeal.”
McCain v. State, 148 N.E.3d 977, 985 (Ind. 2020) (quotation omitted)
(cleaned up).
At the post-conviction review hearing, Wilson’s appellate counsel
admitted that in retrospect his appeal strategy was poor. PCR Tr., p.36 (“I
saw the clear error in the gang activity [conspiracy] sentence, which
surprised me a bit. And I realized, however, that it made virtually no
difference in [Wilson]’s sentence. And I believe I should have gone
further and considered more the appropriateness of the sentence [under
Appellate Rule 7(B)].”) (emphasis added). In short, appellate counsel
himself conceded that an Appellate Rule 7(B) challenge was clearly
stronger than the issues he raised on appeal.
Further, counsel conceded that at the time he was unfamiliar with this
Court’s recent companion decisions reducing long sentences for juvenile
double murderers. See Fuller v. State, 9 N.E.3d 653, 659 (Ind. 2014); Brown
v. State, 10 N.E.3d 1, 8 (Ind. 2014). Fuller and Brown involved two
teenagers—ages fifteen and sixteen years old, respectively—who were
convicted of the robbery and murder of an Anderson couple in their own
home; both juvenile defendants were originally given 150-year sentences.
Fuller, 9 N.E.3d at 654–55; Brown, 10 N.E.3d at 2–3. However, after
reviewing the character of the offenders and the circumstances of their
crimes, we found both sentences inappropriate under our Appellate Rule
7(B) discretionary review authority. Fuller, 9 N.E.3d at 659; Brown, 10
N.E.3d at 8. We reduced their aggregate sentences to eighty-five years and
eighty years, respectively. Fuller, 9 N.E.3d at 659; Brown, 10 N.E.3d at 8. To
be sure, Wilson—who also faced an additional gang enhancement—was
not necessarily entitled to an identical sentence, but even a cursory
reading of Fuller and Brown shows that the facts of the cases closely track
Wilson’s crimes and that the reasoning we used to reduce those sentences
is also largely applicable to his sentence.
The post-conviction court dismissed Wilson’s Appellate Rule 7(B) IAC
claim, reasoning that his counsel’s failure to bring the claim was harmless
because Indiana appellate courts have the power to find a sentence
inappropriate sua sponte. The court cited as an example our decision in
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 22 of 30
Ritchie v. State, a death penalty appeal, in support of this proposition. 875
N.E.2d 706 (Ind. 2007). In Ritchie, we found that “counsel cannot be
criticized for failing to raise” an Appellate Rule 7(B) claim on direct appeal
because it is “an issue this Court routinely addressed on its own
initiative.” Id. at 724. A close reading of Ritchie, however, makes clear that
observation is confined to the context of death penalty cases where—prior
to later statutory amendments—“this Court as a matter of course
reviewed and revised sentences . . . without the need of counsel raising
this claim.” Id.
A few years later, however, we clarified that a request under Appellate
Rule 7(B) to “revise a lawfully entered sentence” requires that outside of
capital cases the defendant “persuade the appellate court that his or her
sentence has met this inappropriateness standard of review.” Kimbrough v.
State, 979 N.E.2d 625, 630 (Ind. 2012) (citing Childress v. State, 848 N.E.2d
1073, 1080 (Ind. 2006)) (quotations omitted). Since the defendant in
Kimbrough “made no such request . . . there was no issue in this regard to
be considered by a reviewing court.” Id. As Kimbrough demonstrates, it has
not been our custom to sua sponte consider a sentence’s appropriateness
under Appellate Rule (7)(B). We do not generally review a sentence’s
appropriateness unless prompted by the defendant because this policy
allows the defendant to challenge specific parts of trial procedure or his
sentencing without risking the possibility the appellate court would find
his overall sentence inappropriately low and increase it. See McCain, 148
N.E.3d at 985 (noting the appellate court’s authority to “either reduce or
increase” sentences) (quotation omitted). Any other policy would only
chill a criminal defendant’s incentive to litigate meritorious appeals.
Despite the high bar required to bring an IAC claim, we find the
attorney’s failure to bring a claim for Appellate Rule 7(B) constituted
deficient performance under Strickland. By appellate counsel’s own
admission, he was ignorant of important recent precedents: Brown and
Fuller—involving juvenile double murderers who also committed armed
robbery yet had their sentences significantly reduced. Counsel also
conceded he had no other strategic reason for not bringing an argument
under Appellate Rule 7(B). Appellate “[c]ounsel should have located and
relied upon these cases,” and “[w]e also are confident” that had this
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 23 of 30
authority been presented on direct appeal, the Court of Appeals would
have revised Wilson’s sentence. See Hopkins, 841 timothythompson@example.com. Since
requesting review of the appropriateness of a sentence prompts a review
“to either reduce or increase a criminal sentence on appeal,” McCain, 148
N.E.3d at 985 (quotation omitted) (emphasis added), we would ordinarily
be especially hesitant to second guess an appellate counsel’s strategic
decision to forgo this review. But Wilson’s case is different, because even
an upward revision of his sentence by an appellate court would have put
him in no worse position since he was already going to die in prison.
In sum, we find that due to the availability of the on-point Brown and
Fuller decisions, a request for review of the sentence’s appropriateness had
a high likelihood of success. Since the claims appellate counsel brought on
direct appeal resulted in an insignificant two-year reduction in Wilson’s
sentence, his claim for Appellate Rule 7(B) revision was “clearly stronger
than the raised issues,” as appellate counsel himself conceded. Reed, 856
N.E.2d at 1195 (quotation omitted).
“Based on the Indiana authority available at the time of” his sentencing,
there is support for Wilson’s argument that an appropriateness challenge
to his sentence had a high likelihood of success, and his appellate counsel
“should have challenged” his aggregate sentence. Taylor v. State, 840
N.E.2d 324, 342 (Ind. 2006). “We find that failure to do so amounted to
deficient performance,” and Wilson “was prejudiced and deprived a fair
appeal by his counsel’s failure to raise his sentence as an issue.” Id. The
correct remedy for this failure, in this instance, is to give Wilson a new
chance to present an Appellate Rule 7(B) claim. But rather than remand
for consideration, in the interest of judicial economy, we choose to now
conduct a review of the sentence under Appellate Rule 7(B).
C. Applying Appellate Rule 7(B) to Wilson’s sentence.
Examining only the facts available on direct appeal, we conclude that a
downward adjustment to Wilson’s sentence is appropriate. We modify a
sentence only when we find that “the sentence is inappropriate in light of
the nature of the offense and the character of the offender.” App. R. 7(B).
“The principal role of [Appellate Rule 7(B)] review should be to attempt to
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 24 of 30
leaven the outliers.” Cardwell v. State, 895 N.E.2d 1219, 1225 (Ind. 2008).
The point is “not to achieve a perceived correct sentence.” Knapp v. State, 9
N.E.3d 1274, 1292 (Ind. 2014) (quotation omitted). Rather, “appellate
review and revision ultimately boils down to the appellate court’s
collective sense of what is appropriate.” Brown, 10 N.E.3d at 8 (quotation
omitted). “Whether a sentence should be deemed inappropriate ‘turns on
our sense of the culpability of the defendant, the severity of the crime, the
damage done to others, and [a] myriad [of] other factors that come to light
in a given case.’” McCain, 148 N.E.3d at 985 (quoting Cardwell, 895 N.E.2d
at 1224). Because “the number of counts that can be charged and proved is
virtually entirely at the discretion of the prosecution[,] . . . appellate
review should focus on the forest—the aggregate sentence—rather than
the trees—consecutive or concurrent, number of counts, or length of the
sentence on any individual count.” Cardwell, 895 timothythompson@example.com.
At sentencing, Wilson was given (1) an enhanced sixty years for the
murder of Charles Wood, which was automatically doubled under the
criminal gang enhancement, (2) a consecutive (advisory) fifty-five-year
sentence for his role as an accomplice in the murder of Shaqwone Ham,
and (3) a minimum six-year sentence for armed robbery. See Wilson, 30
N.E.3d at 1267; see also Ind. Code § 35-50-2-3 (2013) (providing for a
sentence of forty-five to sixty-five years for murder, with a fifty-five-year
advisory sentence); I.C. § 35-50-2-5 (providing for a sentence between six
and twenty years for a Level 3 felony, with a ten-year advisory sentence).
i. Nature of the offense.
First, like in Brown, “although senseless and reprehensible, . . . there is
no evidence that the victims were tortured, beaten, or lingered in pain.” 10
N.E.3d at 5. Wilson fired a single gunshot at Wood, instantly killing him,
and was an accomplice to Ham’s death—who was shot almost
simultaneously. Although shocking, these shootings do not rise to the
same level of heinousness of recent murders by juveniles where we found
an enhanced sentence appropriate. See, e.g., Conley, 972 N.E.2d at 876
(finding the heinousness of the murder justified a life without parole
sentence for a seventeen-year-old because—while babysitting his ten-year-
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 25 of 30
old brother—he strangled the young child to death for over twenty
minutes while the victim begged him to stop before slamming the victim’s
head on the concrete to ensure he was dead).
That said, the crime’s gang connection justifies an enhanced sentence,
and this is accounted for in the mandatory criminal gang enhancement.
The General Assembly has found a crime committed as part of gang
activity to be deserving of enhanced punishment and enacted a statute
that allows for the proportional doubling of “the longest sentence
imposed for the underlying felonies.” I.C. § 35-50-2-15. The connection to
ongoing gang activity here is legitimate grounds for an enhanced
sentence. The conduct of Wilson and his gang and their turf wars likely
caused significant harm to his neighborhood and was surely especially
harmful to other adolescents living there. The sentencing enhancement
enacted by the General Assembly more than adequately captures this
point. So, the appropriate sentence here will be greater than what we
found appropriate for a double murder and robbery in Fuller, where the
perpetrators were not part of a gang. See 9 N.E.3d at 654–55.
ii. Character of the offender.
Weighing against Wilson’s character is his previous misdemeanor and
his actions while incarcerated, but we find these factors to be outweighed
by Wilson’s age. Wilson’s juvenile record is not especially egregious: he
was convicted of a single misdemeanor for dangerous possession of a
firearm, providing little support for a more severe enhancement. See, e.g.,
Prickett v. State, 856 N.E.2d 1203, 1208–09 (Ind. 2006) (finding that a
twenty-one-year-old’s juvenile convictions for “incorrigibility, burglary,
and theft” were not “weighty enough” or “sufficiently similar” to justify a
ten-year enhancement to an adult Class A child molestation conviction).
Wilson’s conduct while incarcerated and awaiting trial also evinces that
he had learned little following his arrest. In a recorded jailhouse
conversation, Wilson stated a desire to “smash” a member of a rival gang
incarcerated in the same facility, bragged about the murders to a cellmate,
and showed a desire to continue to participate in gang activity. DA Tr.
Vol. 4, p.745. These facts weigh against his character.
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 26 of 30
As we have stated repeatedly, when reviewing the appropriateness of a
juvenile’s term of years sentence that is so long that it “forswears
altogether the rehabilitative ideal” and “means denial of hope,” we look
closely at “an offender’s youth and its attendant characteristics.” Brown, 10
N.E.3d at 8, 7 (quotations omitted); Fuller, 9 N.E.3d at 658, 657 (quotations
omitted). Since Wilson was only sixteen, his age is a major factor that
requires careful consideration during Appellate Rule 7(B) review. Even
though the heightened constitutional requirements in Miller and Graham
were limited by the U.S. Supreme Court to life-without-parole sentences,
in Brown and Fuller we made clear that we are free to apply the
developmental science undergirding those cases more broadly through
our unique ability to consider a sentence’s appropriateness by looking
beyond the aggravators and mitigators relied on by the sentencing court.
See Fuller, 9 N.E.3d at 658 (“Consistent with the Supreme Court’s
reasoning[,] this Court has not been hesitant to reduce maximum
sentences for juveniles convicted of murder.”). While we find, just as in
Brown, that the sentencing court “acted well within its broad discretion in
imposing this sentence,” 10 N.E.3d at 4, we today—both here and in State
v. Stidham, No. 20S-PC-634, --- N.E.3d ---- (Ind. 2020) (reducing a 138-year
sentence to an aggregate eighty-eight-year sentence)—use our power of
independent appellate review and revision under the Indiana
Constitution to leaven this outlier based on our review of other similarly
situated teenagers who also committed murder.
As noted above, in both Fuller and Brown, where the defendants’
offenses were largely analogous to Wilson’s, we reduced each defendant’s
aggregate sentence to eighty-five years and eighty years, respectively,
which means the defendants both have a realistic chance at release by
their early sixties. Fuller, 9 N.E.3d at 659; Brown, 10 N.E.3d at 8. We have
made similar reductions in the past even under the old, more deferential
“manifestly unreasonable” standard; for instance, we reduced to fifty
years a fourteen-year-old’s maximum sixty-year sentence for the brutal
murder of a seven-year-old girl, recognizing, among other things, his
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 27 of 30
“very youthful age.” 10 Carter v. State, 711 N.E.2d 835, 841–43 (Ind. 1999).
And in the case of a sixteen-year-old who brutally beat and stabbed his
adoptive parents to death while they slept, we reduced a maximum 120–
year sentence to eighty years when, along with his mental illness and lack
of criminal history, we considered the age of “this offender.” Walton v.
State, 650 N.E.2d 1134, 1135, 1137 (Ind. 1995).
To be sure, lifetime imprisonment may sometimes be appropriate for a
juvenile. In Conley, for instance, we found a life without parole sentence to
be appropriate for the seventeen-and-a-half-year-old who brutally
strangled his ten-year-old brother to death while babysitting. 972 N.E.2d
at 876–77. We found it appropriate due to the especially heinous nature of
the crime, the defendant’s lack of significant mental health issues reducing
his culpability, and evidence suggesting a “hardened character.” Id.
Although technically not a juvenile, the Court of Appeals similarly
considered age and maturity when affirming an aggregate 175-year
sentence for a twenty-one-year-old who was convicted of multiple crimes,
including murder (as an accomplice) with a gang enhancement, attempted
murder, and kidnapping. Armstrong v. State, 22 N.E.3d 629, 636, 644–46
(Ind. Ct. App. 2014) (finding defendant’s previous six felony and twelve
misdemeanor convictions along with the brutal nature of the crime
justified an enhanced sentence despite defendant’s youth), trans. denied.
Fuller and Brown—as factually analogous cases—provide us baseline
sentences (eighty-five- and eighty-year sentences) for what is appropriate
for a sixteen-year-old who committed robbery and a double murder.
Comparing the nature of Wilson’s offense and his character to these cases,
we conclude that Wilson’s sentence should be reduced to an aggregate 100
years. This includes two concurrent fifty-year sentences for the murders of
Wood and Ham, a fifty-year criminal gang enhancement for Wood’s
murder, and a concurrent six-year robbery sentence. Unlike Fuller and
Brown, Wilson was also convicted of a criminal gang enhancement and we
10At the time, our appellate rules permitted reviewing courts to revise a sentence if it was
“manifestly unreasonable.” The current version of Indiana Appellate Rule 7(B), effective
January 1, 2003, allows us to revise sentences that are “inappropriate.”
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 28 of 30
must respect the legislature’s determination that the corrosive nature of
gang activity justifies a higher sentence than what Fuller and Brown
received.
Nevertheless, the main factor weighing in favor of a shorter sentence is
Wilson’s age. A 100-year sentence means that after receiving good time
credit Wilson will likely be eligible for release in his mid-to-late sixties,
meaning that he has reasonable hope for a life outside prison. If Fuller,
Brown, and Crawford are all able to envision a life outside prison walls,
we collectively find it an outlier that Wilson is not provided a similar
opportunity and incentive to rehabilitate.
Conclusion.
We hold that Wilson’s original 181-year sentence was not
unconstitutional under the Eighth Amendment because the protections
outlined in Miller for juvenile life-without-parole sentences are
inapplicable to a term of years sentence. Furthermore, we find even if the
sentence were subject Miller’s requirements—that age and attendant
circumstances be considered—the trial court’s consideration of such
factors in the present case was adequate. But we conclude Wilson’s
appellate counsel performed inadequately when he failed to request
appellate review of the sentence’s appropriateness under Appellate Rule
7(B). After reviewing Wilson’s character and the nature of the offense, we
revise Wilson’s sentence downward to an aggregate 100 years.
David and Goff, JJ., concur.
Rush, C.J., concurs in result.
Slaughter, J., concurs in Parts I and II.A and dissents from Parts II.B
and II.C, with separate opinion.
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 29 of 30
ATTORNEYS FOR APPELLANT
Amy E. Karozos
Public Defender of Indiana
Katherine Province
Mark S. Koselke
Deputy Public Defenders
Indianapolis, Indiana
ATTORNEYS FOR APPELLEE
Curtis T. Hill, Jr.
Attorney General of Indiana
Stephen R. Creason
Chief Counsel, Appeals Division
Indianapolis, Indiana
Ellen H. Meilaender
Monika P. Talbot
Deputy Attorneys General
Indianapolis, Indiana
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 30 of 30
Slaughter, J., concurring in part, dissenting in part.
I agree with the Court that Wilson’s term-of-years sentence does not
violate the Eighth Amendment’s ban on cruel-and-unusual punishments.
To date, the Supreme Court of the United States has not extended its
evolving legal standard for juvenile life-without-parole sentences to “de
facto” LWOP sentences. Thus, I concur in Part I of our Court’s opinion. I
also concur in Part II.A of the opinion because I agree that Wilson’s trial
counsel was not ineffective. But I respectfully dissent from Parts II.B and
II.C. I cannot agree that Wilson’s appellate counsel was ineffective and
that Wilson is entitled to relief under Appellate Rule 7(B).
Until today, we have never held that counsel’s failure to raise Rule 7(B)
on direct appeal amounts to constitutionally deficient performance under
Strickland v. Washington, 466 U.S. 668 (1984). We adopted Rule 7(B) to
effectuate the 1970 amendment to our state constitution’s Judicial Article,
which (among other things) conferred in our Court the power “to review
and revise the sentence imposed” in a criminal case. Ind. Const. art. 7, § 4.
Conferring a court with the power to act is not the same as bestowing a
defendant with a right to relief. Relief in 7(B) cases is purely a matter of
judicial grace. There would be no violation of a defendant’s rights—and
the defendant would have no judicial recourse—were we to withhold our
prerogative under this provision or were the People to amend the
constitution and rescind this provision altogether. I would hold as a
matter of law that counsel is never deficient for failing to argue that a
sentence is inappropriate under Rule 7(B).
The practical effect of today’s decision will be to encourage the filing of
more claims seeking relief under Rule 7(B), even if there is little or no
chance of success, just to avoid the charge that counsel failed to provide
the minimal level of competence guaranteed under the Sixth Amendment.
At present, there is no shortage of claims seeking this relief. By my count,
in 2019 the court of appeals issued 335 written decisions addressing a 7(B)
claim, representing nearly one-sixth of its decisions. Of these 335
decisions, 330 denied 7(B) relief; only five found relief under 7(B) to be
warranted—a success rate of about 1.5 percent.
Today’s decision highlights the need for a workable 7(B) standard,
especially considering that 7(B) claims—most of which will fail—require
an enormous commitment of appellate resources. As we noted in Cardwell
v. State, our 7(B) decisions show that “we have not adopted a consistent
methodology in reviewing sentences.” 895 N.E.2d 1219, 1224 (Ind. 2008)
(cleaned up). Yet crafting a consistent method should be, in my view, our
primary task. I would give full weight to Cardwell’s charge not only to
“leaven the outliers,” but also to “identify some guiding principles for
trial courts and those charged with improvement of the sentencing
statutes”. Id. at 1225. Today we lack such “guiding principles”. Our
prevailing criteria for identifying and remedying an “inappropriate”
sentence are not susceptible to clear judicial standards.
Without a consistent framework for applying 7(B), I would avoid the
discretionary review of sentences like Wilson’s altogether. Although
reviewing and revising trial courts’ lawful sentencing decisions are clearly
within our constitutional power, exercising this power is not mandatory
but discretionary. As our rule says, “[t]he Court may revise a sentence”.
App. R. 7(B) (emphasis added). To be clear, I am not referring to unlawful
sentences. If a criminal sentence is unlawful, then of course the aggrieved
defendant should receive all the relief available under law. And our
appellate courts stand ready to provide such relief. But where, as here, the
trial court’s sentence was lawful, providing relief under 7(B) amounts to
substituting our view of an appropriate sentence for that of the trial judge.
Before undertaking the costly process of reconsidering sentencing
decisions, I would first provide meaningful “guiding principles” for lower
courts. Cardwell, 895 timothythompson@example.com.
For these reasons, I would hold that Wilson’s appellate counsel was not
ineffective and affirm the trial court’s judgment denying post-conviction
relief.
Indiana Supreme Court | Case No. 19S-PC-548 | November 17, 2020 Page 2 of 2
|
Filed 7/17/15 P. v. Franco 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
THE PEOPLE,
Plaintiff and Respondent, E061412
v. (Super.Ct.No. FVA1400082)
IVAN GARCIA FRANCO, OPINION
Defendant and Appellant.
APPEAL from the Superior Court of San Bernardino County. Gerard S. Brown,
Judge. Affirmed with directions.
Mark D. Johnson, under appointment by the Court of Appeal, for Defendant and
Appellant.
Kamala D. Harris, Attorney General, Julie L. Garland, Assistant Attorney General,
Randall D. Einhorn and Peter Quon, Jr., Deputy Attorneys General, for Plaintiff and
Respondent.
1
I
INTRODUCTION
On May 7, 2014, a jury found defendant and appellant Ivan Garcia Franco guilty
of first degree burglary under Penal Code section 4591 (count 1); making criminal threats
under section 422 (count 2); assault with a deadly weapon under section 245, subdivision
(a)(1) (count 3); felony spousal battery under section 243, subdivision (e)(1) (count 4);
violating a domestic restraining order under section 273.6, subdivision (a) (count 5); and
misdemeanor infliction of mental suffering to a child under section 273a, subdivision (b)
(counts 6 and 7). They jury also found true the special allegation that another person was
present during the burglary under section 667.5, subdivision (c).
On June 6, 2014, the court sentenced defendant to state prison for the aggregate
term of six years for his burglary conviction (count 1); imposed and stayed sentences for
counts 2, 3 and 4 under section 654; and imposed concurrent sentences for counts 5, 6
and 7. Moreover, the court ordered defendant to pay $750 for defense costs, and $505 for
the preparation of the probation officer’s report.
On June 24, 2014, defendant filed a timely notice of appeal. On appeal, defendant
contends that the trial court erred in awarding attorney fees and a probation investigation
cost assessment. For the reasons set forth below, we shall remand the case to the trial
court to determine defendant’s ability to pay the fees and assessment.
1 All statutory references are to the Penal Code unless otherwise specified.
2
II
STATEMENT OF FACTS
On January 12, 2014, defendant and the victim were married, but legally
separated. Therefore, the victim and the couple’s four children, ranging in ages from 19
years old to five years old, lived in Fontana, apart from defendant.
In August 2013, the victim obtained a restraining order that directed defendant to
stay away from the victim and the couple’s children, and from certain places including
the couple’s Fontana home. The victim was given full custody of the couple’s children.
About 5:30 a.m. on January 12, 2014, the victim was awakened by defendant
standing next to her bed in the Fontana home. He signaled her to be quiet. He then
grabbed her face with his left hand and said that he would kill her. He was holding a
kitchen knife in his right hand.
While defendant was distracted by his young children in the bedroom, the victim
called 911 and told the operator that defendant was in her home with a knife. When
defendant moved as if to strike her with the knife, she grabbed his arm and struggled with
him to keep the knife away from her. Defendant eventually dropped the knife after the
couple’s daughter entered the room and began to argue with him. Defendant was still in
the victim’s bedroom when police arrived. As a result of the struggle with defendant, the
victim had several cuts on her fingers. Defendant was arrested.
3
III
ANALYSIS
Defendant argues that the trial court erred in ordering him to pay $750 in defense
costs and $505 for the probation officer’s investigation and report.
A. Background
At sentencing, the trial court ordered defendant to pay $750 in appointed counsel
fees and $505 to compensate the probation officer for the costs of investigation and
preparation of the presentence report. The court did not indicate the authority for the
order and did not make a factual inquiry into defendant’s ability to pay. Defendant did
not object to the trial court’s order.
B. Probation Investigation Costs
Defendant contends that the trial court erred in assessing a $505 fee to reimburse
the probation department for its investigation costs under section 1203.1b. Defendant
specifically contends that the court failed to find whether he had the ability to pay the fee.
The People contend that defendant has forfeited his claim by failing to object to the trial
court’s imposition of the probation investigation fee. We agree.
Section 1203.1b sets forth a process that trial courts must follow before it may
impose a fee for probation investigation costs. First, the court must order the defendant
to report to the probation officer, who will then determine the defendant’s ability to pay.
(§1203.1b, subd. (a).) After the probation officer determines the amount the defendant
can pay, the probation officer must inform the defendant that he or she is entitled to a
hearing, during which the court will determine the defendant’s ability to pay and the
4
payment amount. (Ibid.) Section 1203.1b entitles the defendant to representation by
counsel during this hearing. A defendant may waive his or her right to a hearing, but he
or she must do so knowingly and intelligently. (Ibid.) If the defendant fails to waive his
or her right to the hearing, the probation officer must refer the matter back to the trial
court, and the trial court will determine the defendant’s ability to pay. (§1203.1b, subd.
(b).)
In a recent opinion, the California Supreme Court stated as follows:
“Notwithstanding the statute’s procedural requirements, we believe to place the burden
on the defendant to assert noncompliance with section 1203.1b in the trial court as a
prerequisite to challenging the imposition of probation costs on appeal is appropriate.”
(People v. Trujillo (2015) 60 Cal. 4th 850, 858.) The court went on to state: “Our
reasoning in Scott [People v. Scott (1994) 9 Cal. 4th 331] applies by analogy here.
‘Although the court is required to impose sentence in a lawful manner, counsel is charged
with understanding, advocating, and clarifying permissible sentencing choices at the
hearing. Routine defects in the court’s statement of reasons are easily prevented and
corrected if called to the court’s attention.’ (Scott, supra, 9 Cal.4th at p. 353.) In the
context of section 1203.1b, a defendant’s making or failing to make a knowing and
intelligent waiver occurs before the probation officer, off the record and outside the
sentencing court’s presence. Although the statute contemplates that when the defendant
fails to waive a court hearing, the probation officer will refer the question of the
defendant’s ability to pay probation costs to the court, the defendant—or his or her
counsel—is in a better position than the trial court to know whether the defendant is in
5
fact invoking the right to a court hearing. In Scott the existence, per se, of procedural
safeguards in the sentencing process, such as the right to counsel and to present evidence
and argument, did not prevent us from holding the forfeiture rule should apply with
respect to the trial court’s discretionary sentencing choices. The same conclusion follows
with respect to the imposition of the fees challenged here.” (Ibid., fn. omitted.)
In reaching its conclusion, the Supreme Court noted that important constitutional
rights are not at stake in this case. “Thus, unlike cases in which either statute or case law
requires an affirmative showing on the record of the knowing and intelligent nature of a
waiver, in this context defendant’s counsel is in the best position to determine whether
defendant has knowingly and intelligently waived the right to a court hearing. It follows
that an appellate court is not well positioned to review this question in the first instance.”
(People v. Trujillo, supra, 60 Cal.4th at p. 860.)
The Supreme Court, however, noted that defendant raising this issue is not wholly
without recourse. The court set forth numerous methods by which a defendant can have
this issue addressed by the probation department or sentencing court. (See People v.
Trujillo, supra, 60 costalaura@example.com. 860-861.)
Therefore, based on the recently published decision by the Supreme Court, we
hold that defendant has forfeited his claim to challenge the trial court’s imposition of
probation investigation costs. (People v. Trujillo, supra, 60 Cal. 4th 850.)
6
C. Ineffective assistance of counsel
In the alternative, defendant argues his trial counsel was ineffective for failing to
object to the probation supervision costalaura@example.com. “To prevail on a claim of
ineffective assistance of counsel, a defendant must show both that counsel’s performance
was deficient and that the deficient performance prejudiced the defense. [Citations.]
Counsel’s performance was deficient if the representation fell below an objective
standard of reasonableness under prevailing professional norms.” (People v. Benavides
(2005) 35 Cal. 4th 69, 92-93, citing Strickland v. Washington (1984) 466 U.S. 668, 687-
688, 693-694.) However, “‘[if] the record on appeal sheds no light on why counsel acted
or failed to act in the manner challenged . . . unless counsel was asked for an explanation
and failed to provide one, or unless there simply could be no satisfactory explanation,’
the claim on appeal must be rejected.” (People v. Wilson (1992) 3 Cal. 4th 926, 936.)
In this case, we agree with defendant that his counsel’s performance was deficient.
Prior to the sentencing hearing, the probation officer submitted his report to the court
with sentencing recommendations. Included in the report was defendant’s self-report that
prior to his arrest in this case, he was employed as a warehouse worker for 18 months
making $10 per hour. Defendant also indicated that he had no assets and had credit card
debt. In the report, the probation officer recommended that the court impose $750 for
appointed counsel, $505 for reimbursement of investigation costs, and $7,200 for
restitution. This probation report was filed in the lower court on May 29, 2014, eight
days before defendant’s sentencing hearing.
7
At the sentencing hearing, the trial court rejected the probation officer’s
recommendation that defendant be ordered to pay $7,200 as a restitution fine. Instead,
the court reduced that restitution fine to $1,200. However, despite defendant’s minimal
earnings and the fact he had no assets, and he had credit card debt, there is nothing in the
record showing that defense counsel argued or urged the court that defendant did not
have the ability to pay the recommended attorney fees and investigation costs. Therefore,
in addition to the $1,200 restitution fine, the trial court imposed defendant’s sentence,
including the order that defendant pay $750 for appointed counsel fees and $505 for
investigation costs. No defense objection or later discussion was made pertaining to
those fees and costs orders. Based on these facts, we find that defense counsel’s
performance was deficient for failing to raise defendant’s inability to pay.
The People, however, argue that defense counsel’s performance was not deficient
because counsel must have raised defendant’s ability to pay the fee during the in-
chambers discussion prior to the hearing. The record, however, does not support the
People’s contention. Moreover, as defendant points out, if “the fines and fees were
discussed [as the People contend,] it must also [be] conclude[d] that [defendant] has not
forfeited his right to raise the disputed costs on appeal.” We, therefore, reject the
People’s argument.
As to the second prong of defendant’s IAC claim, we find defense counsel’s
failure to object to the imposition of the fees to be prejudicial since an objection would
have yielded a hearing on defendant’s ability or inability to pay the fines. Based on the
8
probation officer’s report, it seems likely that defendant would not have the ability to pay
the fines and fees imposed.
Based on defense counsel’s ineffective assistance of counsel, we hereby remand
this case to the trial court to conduct a hearing on defendant’s ability to pay the probation
investigation costs.
D. Attorney Fees
Defendant also contends that the trial court erred in assessing $750 to pay for the
cost of his appointed counsel. Defendant specifically complains that the court failed to
provide him an ability to pay hearing, and there is no substantial evidence to justify this
award.
The People again argue that defendant has forfeited his challenge to the attorney
fees because he failed to object when the court imposed that fee. However, despite
defendant’s failure to object, courts are reluctant to find forfeiture in light of the unusual
nature of attorney fee awards in criminal cases and because the Legislature extensively
protects defendants with procedural minimum that trial courts must follow before
imposing such fees. (People v. Pacheco (2010) 187 Cal. App. 4th 1392, 1397, overruled
in part on another ground found in People v. McCullough (2013) 56 Cal. 4th 589, 598-
599; People v. Viray (2005) 134 Cal. App. 4th 1186, 1214-1216.) Also, it may be
inequitable to find forfeiture based on an attorney’s failure to object to his own fees; the
conflict of interests between the attorney’s and his or her client’s pecuniary interests
militates against a finding of forfeiture. (Viray, supra, at pp. 1215-1216.)
9
In a companion case to People v. Trujillo, supra, 60 Cal. App. 4th 850, the
California Supreme Court in People v. Aguilar (2015) 60 Cal. 4th 862, addressed this
issue. In Aguilar, the Supreme Court found it appropriate to apply the forfeiture rule in
challenges to the award of attorney fees under section 987.8. (Aguilar, at pp. 867-868.)
The court, however, pointed out that its opinion did not apply to appointed counsel, as in
this case: “This case does not present, and we therefore do not address, the question
whether a challenge to an order for payment of the cost of the services of appointed
counsel is forfeited when the failure to raise the challenge at sentencing may be
attributable to a conflict of interest on trial counsel’s part. (See, e.g., People v. Viray
(2005) 134 Cal. App. 4th 1186, 1216-1217.)” (Id. at p. 868, fn. 4.)
Section 987.8, subdivision (b), entitled defendant to a noticed hearing to determine
his “present ability” to pay the attorney fees. (§ 987.8, subd. (b); People v. Prescott
(2013) 213 Cal. App. 4th 1473, 1476.) Although the presentence probation report put
defendant on notice that the probation department recommended an attorney fee award, it
does not appear that he received notice that the court would conduct a hearing to
determine his ability to pay the fee. Moreover, the trial court did not either expressly or
impliedly find whether defendant had the ability to pay.
Ordinarily, the appropriate remedy would be to remand the matter to the trial court
to hold a hearing on defendant’s ability to pay. (People v. Prescott, supra, 213
Cal.App.4th at p. 1476.) Therefore, because this case is already being remanded for the
trial court to hold a hearing regarding defendant’s ability to pay the probation
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investigation costs, we hereby remand this matter for a hearing on defendant’s ability to
pay the attorney fees.
IV
DISPOSITION
The case is remanded to the trial court to hold a hearing on defendant’s ability to
pay the probation investigation costs and attorney fees. In all other respects, the
judgment is affirmed.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
McKINSTER
J.
We concur:
RAMIREZ
P. J.
MILLER
J.
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