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2020-11-30 18:13:50.207919+00

http://www.pacourts.us/assets/opinions/Superior/out/J-A25045-20m - 104618297120863735.pdf

J-A25045-20 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF : PENNSYLVANIA Appellee : : v. : : CARLOS MARTINEZ-DIAZ : : Appellant : No. 395 MDA 2020 Appeal from the PCRA Order Entered January 29, 2020 In the Court of Common Pleas of Berks County Criminal Division at No(s): CP-06-CR-0005162-2017 BEFORE: BOWES, J., OLSON, J., and KING, J. MEMORANDUM BY KING, J.: FILED NOVEMBER 30, 2020 Appellant, Carlos Martinez-Diaz, appeals from the order entered in the Berks County Court of Common Pleas, which denied his first petition filed pursuant to the Post Conviction Relief Act (“PCRA”).1 We reverse and remand for further proceedings. The relevant facts and procedural history of this case are as follows. On June 8, 2018, a jury convicted Appellant of two counts of corrupt organizations, two counts of criminal conspiracy, one count of criminal use of a communication facility, and six counts of delivery of a controlled substance. That day, the court sentenced Appellant to an aggregate term of 18½ to 60 years’ imprisonment. Throughout trial and sentencing, Appellant was ____________________________________________ 1 42 Pa.C.S.A. §§ 9541-9546. J-A25045-20 represented by privately retained counsel (“trial counsel”). On June 20, 2018, while still represented by trial counsel, Appellant filed a pro se post-sentence motion. Appellant alleged, inter alia, the court improperly permitted a “surprise” witness at trial and failed to grant a defense continuance, the court failed to award credit for time served, and the court imposed an excessive sentence because Appellant was not the main target of the drug investigation but he received a greater sentence than his cohorts. Because Appellant still had counsel of record, the clerk of courts docketed the pro se filing and sent a copy to trial counsel.2 On June 25, 2018, the court entered an amended sentence that expressly awarded Appellant credit for time served. The court issued a second amended sentencing order on August 21, 2018, reducing Appellant’s aggregate sentence to 18½ to 50 years’ imprisonment due to an illegal sentencing issue.3 ____________________________________________ 2 Generally, there is no constitutional right to hybrid representation at trial or on appeal. Commonwealth v. Ellis, 534 Pa. 176 , 626 A.2d 1137 (1993). “[I]ndeed, pro se motions have no legal effect and, therefore, are legal nullities.” Commonwealth v. Williams, 151 A.3d 621 , 623 (Pa.Super. 2016). Thus, when a defendant is represented by counsel, if the defendant submits a document for filing not signed by the defendant’s attorney, the clerk of courts shall accept it for filing, time stamp it with the date of receipt and make a docket entry reflecting the date of receipt, place the document in the case file, and forward it to counsel of record and the attorney for the Commonwealth within 10 days. Pa.R.Crim.P. 576(A)(4). 3 The record does not indicate if the court held a hearing on June 25, 2018 or August 21, 2018 concerning the amended sentencing orders, and contains no transcripts for those dates. Additionally, the record does not show any motion precipitating the August 21, 2018 amended sentencing order. -2- J-A25045-20 On November 9, 2018, while still represented by trial counsel, Appellant filed a pro se notice of appeal.4 Appellant purported to appeal from an October 11, 2018 sentencing order, although the record and docket entries contain no filing on that date.5 On November 16, 2018, the court ordered Appellant to file a concise statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b); Appellant filed a pro se Rule 1925(b) statement on November 29, 2018. On December 7, 2018, after learning of Appellant’s pro se notice of appeal, trial counsel filed a motion to withdraw. The court granted trial counsel’s motion to withdraw on December 12, 2018, and subsequently appointed new counsel for appeal. On March 22, 2019, this Court issued a rule to show cause why the appeal should not be quashed as untimely and as taken from a purported order that was not entered on the docket. Neither Appellant nor appointed appellate counsel responded. Consequently, on April 26, 2019, this Court quashed the appeal by per curiam order. See 1860 MDA ____________________________________________ 4 The record does not disclose whether the clerk of courts forwarded Appellant’s pro se notice of appeal to trial counsel in accordance with Rule 576(A)(4). 5In later filings, Appellant alleged he believed that his pro se post-sentence motion was denied by operation of law on or around October 11, 2018. See Pa.R.Crim.P. 720(B)(3)(a) (stating that if judge fails to decide post-sentence motion within 120 days, or fails to grant extension, motion shall be deemed denied by operation of law); Pa.R.Crim.P. 720(A)(2)(b) (stating notice of appeal shall be filed within 30 days of entry of order denying post-sentence motion by operation of law in cases in which judge fails to decide motion). -3- J-A25045-20 2018. On June 3, 2019, Appellant timely filed a pro se PCRA petition alleging trial counsel’s ineffectiveness. Specifically, Appellant alleged trial counsel failed to file a post-sentence motion on Appellant’s behalf challenging the excessiveness of Appellant’s sentence, failed to file a notice of appeal on Appellant’s behalf, and failed to have a meaningful consultation with Appellant about filing a notice of appeal. The court appointed PCRA counsel, who filed an amended PCRA petition on June 26, 2019, reiterating Appellant’s pro se claims of trial counsel’s ineffectiveness and seeking nunc pro tunc relief. On December 3, 2019, the court held a PCRA hearing at which Appellant and trial counsel testified. Appellant testified that he asked trial counsel to file an appeal on his behalf right after the jury announced its verdict. Counsel told Appellant there were no meritorious issues to appeal. Appellant said that he also asked counsel to file an appeal on his behalf after the court awarded him credit for time served. (See N.T. PCRA Hearing, 12/3/19, at 3-8). Trial counsel testified that he discussed Appellant’s post-sentence rights with Appellant after initial sentencing. Trial counsel admitted that he did not explain to Appellant the prohibition against hybrid representation, and that the post-sentence rights form does not discuss hybrid representation. Trial counsel denied that Appellant ever asked him to file post-sentence motions or a notice of appeal. Trial counsel further denied having received a copy of Appellant’s pro se post-sentence motion from the clerk of courts. Rather, trial -4- J-A25045-20 counsel stated he only became aware of Appellant’s pro se post-sentence motion when the court amended the sentence to award credit for time served on June 25, 2018. Trial counsel said the pro se post-sentence motion was attached to paperwork regarding the amended sentence. Trial counsel further stated he did not recall attending a hearing on the time-credit issue and believed the court essentially awarded credit for time served “sua sponte.” After learning of Appellant’s pro se post-sentence motion, trial counsel did not reach out to Appellant about pursuing a nunc pro tunc post-sentence motion or an appeal because he assumed the post-sentence issue (regarding time credit) was resolved. Trial counsel conceded that Appellant contacted him around August 2018, but only to request his records; Appellant did not mention anything about wanting to appeal. Trial counsel further explained that on the third day of trial, during a discussion about a plea offer from the Commonwealth, Appellant and trial counsel discussed potential appellate issues. Appellant mentioned some claims he wanted to pursue but trial counsel did not think they were worthy of appeal. (See id. at 9-21). On January 29, 2020, the court denied PCRA relief. Appellant filed a pro se notice of appeal on February 12, 2020. On February 19, 2020, the court ordered Appellant to file a Rule 1925(b) statement. On February 26, 2020, PCRA counsel filed a Rule 1925(b) statement on Appellant’s behalf. PCRA counsel also filed a notice of appeal on February 28, 2020. This Court -5- J-A25045-20 subsequently dismissed as duplicative Appellant’s pro se notice of appeal. Appellant raises one issue for our review: Did the PCRA court err by denying relief where Appellant demonstrated that he had indicated his desire to appeal both during trial and following the trial where he filed timely post-sentence motions pursuant to the post-sentence motion rights form he signed, and the mailbox rule[?] (Appellant’s Brief at 3). Our standard of review of the denial of a PCRA petition is limited to examining whether the record evidence supports the court’s determination and whether the court’s decision is free of legal error. Commonwealth v. Ford, 947 A.2d 1251 (Pa.Super. 2008), appeal denied, 598 Pa. 779 , 959 A.2d 319 (2008). This Court grants great deference to the findings of the PCRA court if the record contains any support for those findings. Commonwealth v. Boyd, 923 A.2d 513 (Pa.Super. 2007), appeal denied, 593 Pa. 754 , 932 A.2d 74 (2007). If the record supports a post-conviction court’s credibility determination, it is binding on the appellate court. Commonwealth v. Dennis, 609 Pa. 442 , 17 A.3d 297 (2011). “A PCRA court’s legal conclusions, however, are reviewed de novo.” Commonwealth v. Green, 168 A.3d 173 , 175 (Pa.Super. 2017), appeal denied, 646 Pa. 1 , 183 A.3d 340 (2018). Appellant argues that neither trial counsel nor the post-sentence rights form explained the prohibition against hybrid representation. Appellant asserts he was unaware he could not file a pro se post-sentence motion. Appellant claims he timely filed a pro se post-sentence motion pursuant to the -6- J-A25045-20 prisoner mailbox rule.6 Appellant insists that trial counsel received a copy of his pro se post-sentence motion after the 10-day post-sentence time limitation had passed but before expiration of the 30-day appeal period. Appellant contends trial counsel should have known Appellant wanted to raise post- sentencing issues based on the pro se post-sentence motion and should have filed a post-sentence motion nunc pro tunc on Appellant’s behalf. Alternatively, Appellant maintains trial counsel could have moved to withdraw his representation at that time or encouraged Appellant to seek representation from the Public Defender. Instead, Appellant complains trial counsel did nothing. Appellant also asserts that he asked trial counsel to file a direct appeal. In light of the PCRA court’s finding that trial counsel’s testimony was more credible than Appellant’s testimony on this point, however, Appellant declines to argue counsel was per se ineffective. Nevertheless, Appellant stresses that trial counsel failed to consult with Appellant about whether he wanted to appeal. Appellant avers that his conversation with counsel during trial about a potential appeal, which occurred before verdict and sentencing, did not fulfill counsel’s duty to consult with Appellant because the proceedings were ____________________________________________ 6 Appellant’s pro se post-sentence motion is postmarked June 17, 2020. Therefore, had Appellant not been represented at the time, the filing would have been timely under the prisoner mailbox rule. See Commonwealth v. DiClaudio, 210 A.3d 1070 , 1074 (Pa.Super. 2019) (stating that pursuant to prisoner mailbox rule, “a pro se prisoner’s document is deemed filed on the date he delivers it to prison authorities for mailing”). -7- J-A25045-20 incomplete at that time. Appellant emphasizes that the record demonstrates he wanted to appeal based on the filing of Appellant’s pro se post-sentence motion and pro se notice of appeal. Appellant concludes trial counsel was ineffective, and this Court must reinstate Appellant’s post-sentence and direct appeal rights nunc pro tunc. For the following reasons, we agree relief is due. The law presumes counsel has rendered effective assistance. Commonwealth v. Gonzalez, 858 A.2d 1219 , 1222 (Pa.Super. 2004), appeal denied, 582 Pa. 695 , 871 A.2d 189 (2005). Generally, when asserting a claim of ineffective assistance of counsel, the petitioner is required to plead and prove: (1) the underlying claim has arguable merit; (2) counsel had no reasonable strategic basis for his action or inaction; and (3) but for the errors and omissions of counsel, there is a reasonable probability the outcome of the proceedings would have been different. Commonwealth v. Turetsky, 925 A.2d 876 (Pa.Super. 2007), appeal denied, 596 Pa. 707 , 940 A.2d 365 (2007). “Actual or constructive denial of the assistance of counsel, however, falls within a narrow category of circumstances in which prejudice is legally presumed.” Commonwealth v. Lane, 81 A.3d 974 , 978 (Pa.Super. 2013), appeal denied, 625 Pa. 658 , 92 A.3d 811 (2014). Our Supreme Court has held: [W]here there is an unjustified failure to file a requested direct appeal, the conduct of counsel falls beneath the range of competence demanded of attorneys in criminal cases, denies the accused the assistance of counsel guaranteed by the Sixth Amendment to the United States Constitution and Article I, Section 9 of the Pennsylvania Constitution, as well -8- J-A25045-20 as the right to direct appeal under Article V, Section 9, and constitutes prejudice for purposes of Section 9543(a)(2)(ii). Therefore, in such circumstances, and where the remaining requirements of the PCRA are satisfied, the petitioner is not required to establish his innocence or demonstrate the merits of the issue or issues which would have been raised on appeal. Commonwealth v. Lantzy, 558 Pa. 214 , 226-27, 736 A.2d 564 , 572 (1999) (internal footnote omitted). In other words, if counsel neglects to file a requested direct appeal, “counsel is per se ineffective as the defendant was left with the functional equivalent of no counsel.” Commonwealth v. Markowitz, 32 A.3d 706 , 715 (Pa.Super. 2011), appeal denied, 615 Pa. 764 , 40 A.3d 1235 (2012). Even if a defendant does not expressly ask counsel to file a direct appeal, counsel still has a duty “to adequately consult with the defendant as to the advantages and disadvantages of an appeal where there is reason to think that a defendant would want to appeal.” Commonwealth v. Bath, 907 A.2d 619 , 623 (Pa.Super. 2006), appeal denied, 591 Pa. 695 , 918 A.2d 741 (2007). In this situation, where the defendant did not request counsel to file a direct appeal but counsel failed to consult with the defendant, counsel is not per se ineffective and the traditional three-prong test “is necessary to decide whether counsel rendered constitutionally ineffective assistance by failing to advise his client about his appellate rights.” Markowitz, supra at 716. Pursuant to [Roe v. Flores-Ortega, 528 U.S. 470 , 120 S.Ct. 1029 , 145 L.Ed.2d 985 (2000) and its Pennsylvania expression, Commonwealth v. Touw, 781 A.2d 1250 (Pa.Super. 2001)], counsel has a constitutional duty to -9- J-A25045-20 consult with a defendant about an appeal where counsel has reason to believe either “(1) that a rational defendant would want to appeal (for example, because there are non- frivolous grounds for appeal), or (2) that this particular defendant reasonably demonstrated to counsel that he was interested in appealing.” [Id.] at 1254 (quoting Roe[, supra] at 480, 120 S.Ct. [at 1036]). Bath, supra at 623 (emphasis added). “Where a petitioner can prove either factor, he establishes that his claim has arguable merit.” Markowitz, supra at 716 . Additionally, “Flores-Ortega makes plain that the consultation must, at minimum, encompass advice regarding an actual appeal, not simply how to preserve issues for a theoretical appeal. This is why the test requires the attorney to make a reasonable effort to discover the defendant’s wishes.” Green, supra at 177 (internal citation, quotation marks, and footnote omitted). As well, the defendant is not required to show he had meritorious issues for appeal to establish counsel was ineffective for failing to consult with the defendant regarding an appeal. Commonwealth v. Donaghy, 33 A.3d 12 (Pa.Super. 2011), appeal denied, 615 Pa. 753 , 40 A.3d 120 (2012). See also Green, supra at 178 n.5 (stating: “[A] claim that lacks merit is not necessarily wholly frivolous. The duty to consult arises if there is a non- frivolous issue to raise, not an ultimately meritorious issue”). Further, prejudice in this context means a defendant must show a reasonable probability that, but for counsel’s failure to consult, the defendant would have sought additional review. Touw, supra at 1254 . See also Donaghy, supra - 10 - J-A25045-20 (reversing order denying PCRA relief and remanding for reinstatement of appellant’s direct appeal rights nunc pro tunc, where trial counsel failed to consult with appellant about whether he wanted to file direct appeal; appellant sent trial counsel letter during 30-day appeal period asking how long appellant had to file appeal and what types of issues appellant could raise on appeal; appellant’s letter sufficiently demonstrated desire to appeal such that counsel should have made reasonable effort to discover appellant’s wishes; counsel’s testimony at PCRA hearing that counsel believed appellant had no viable reasons for appeal does not absolve counsel of his duty to ascertain appellant’s wishes; counsel’s failure to consult with appellant about filing direct appeal deprived appellant of his constitutional right to effective assistance of counsel). Instantly, the PCRA court addressed Appellant’s ineffectiveness claim as follows: In the case at bar, [Appellant] testified that he asked [trial counsel] to file a direct appeal after being found guilty, after sentencing and when he came back to court to correct his sentence. However, this is inconsistent with the testimony provided by [trial counsel]. [Trial counsel] stated that [Appellant] never asked him to file a direct appeal. This court had the opportunity to observe the demeanor of both [trial counsel] and [Appellant] and assess their credibility in court. … [Trial counsel] has been practicing criminal defense almost exclusively since 2006 and is familiar with appellate procedure. [Trial counsel] had no issues communicating with [Appellant]. [Appellant’s] testimony at the hearing on the Petition was provided in English and without the services of an interpreter. [Trial counsel] offered credible testimony regarding his - 11 - J-A25045-20 interactions with [Appellant] and had no personal interest in the outcome of this Petition. On the other hand, [Appellant] is seeking the reinstatement of his appellate rights through this Petition. [Appellant’s] testimony regarding his request for an appeal directly contradicted the testimony of [trial counsel]. This court finds that [Appellant] did not ask [trial counsel] to file a direct appeal. [Appellant] has failed to establish that [trial counsel] was per se ineffective. Although [trial counsel] was not per se ineffective, he may still be found ineffective if he did not consult with [Appellant] about his appellate rights. … * * * In this case, [trial counsel] did consult with [Appellant] about an appeal. On the third day of trial, [trial counsel] discussed the Commonwealth’s amended [plea] offer with [Appellant]. During that conversation, they discussed an appeal. [Appellant] presented his concerns to [trial counsel] and [trial counsel] informed [Appellant] that there were no clear appellate issues. Therefore, this court finds that [Appellant] reasonably demonstrated to [trial counsel] that he was interested in appealing and, in response, [trial counsel] fulfilled his constitutional duty and consulted with [Appellant] about an appeal. [Appellant] did not demonstrate to [trial counsel] that he had any further interest in appealing following this conversation. … Here, [trial counsel] and [Appellant] discussed potential appellate issues while reviewing the Commonwealth’s amended offer. [Appellant] raised one or two areas of concern but [trial counsel] informed him that there were no clear appellate issues. This court finds that [trial counsel] discharged his obligation and provided advice to [Appellant] about an actual appeal, not simply about issue preservation for a theoretical appeal. (Findings of Fact/Conclusions of Law, filed January 29, 2020, at 8-10). Initially, the PCRA court rejected Appellant’s testimony that he asked counsel to file a direct appeal. (See id. at 9). We are bound by the PCRA - 12 - J-A25045-20 court’s credibility determination in this regard. See Dennis, supra. Therefore, we agree with the PCRA court that trial counsel was not per se ineffective. See Lantzy, supra; Markowitz, supra. We disagree, however, with the PCRA court’s legal conclusion that trial counsel adequately fulfilled his duty to consult with Appellant about whether he wanted to appeal.7 See Green, supra; Ford, supra. Importantly, “the question is not simply whether consultation occurred, it is whether that consultation was adequate within the meaning of that term as expressed in Flores-Ortega, which is a conclusion of law subject to review de novo. Hence, the credibility finding does not control the outcome.” Green, supra at 177. Here, trial counsel testified at the PCRA hearing that on the third day of trial, during a conversation about a plea offer from the Commonwealth, Appellant and counsel discussed potential appellate issues. According to trial counsel, Appellant mentioned some claims he wanted to pursue but counsel did not think they were worthy of appeal. Nevertheless, trial counsel did not specify any of the issues Appellant had wanted to pursue. Additionally, trial ____________________________________________ 7 The Commonwealth suggests that the question of whether counsel failed to consult with Appellant is waived for failure to preserve it in the Rule 1925(b) statement. To the extent the concise statement is vague, we decline to find waiver. See Commonwealth v. Laboy, 594 Pa. 411 , 936 A.2d 1058 (2007) (holding appellate court should conduct merits review of claim raised in criminal appeal notwithstanding vagueness in Rule 1925(b) statement, where case is relatively straightforward, trial court readily understood appellant’s claim, and trial court addressed claim in substantial detail in its opinion). - 13 - J-A25045-20 counsel did not explain whether he explored with Appellant the advantages or disadvantages of an appeal. See Bath, supra. Further, the conversation between Appellant and trial counsel took place during trial, before the jury had rendered its verdict and before sentencing. At that juncture, trial counsel could not have adequately advised Appellant on the advantages or disadvantages of an appeal because counsel could not have known, for example, if there were potential appellate issues concerning any sentencing errors. Thus, we hold that trial counsel’s consultation with Appellant was deficient. Based on our conclusion that trial counsel’s consultation with Appellant was inadequate, “we now address whether counsel actually had a duty to consult” because “any inadequacy in the consultation is irrelevant if there was no duty to consult.” Green, supra at 178. Here, the record shows Appellant filed a pro se post-sentence motion on June 20, 2018, raising a variety of issues including but not limited to the court’s failure to award credit for time served. Regardless of whether trial counsel actually received notice from the clerk of courts, trial counsel admits he learned of Appellant’s pro se post- sentence motion on or around June 25, 2018, when the court amended Appellant’s sentence to award credit for time served. Although trial counsel testified at the PCRA hearing that he assumed the post-sentencing issues were resolved by the amended sentencing order, trial counsel made no effort to contact Appellant to see if he wanted to continue pursuit of the other issues - 14 - J-A25045-20 raised in the pro se post-sentence motion. Even though the 10-day timeframe had elapsed by the time trial counsel reviewed the pro se post-sentence motion, we agree with Appellant that trial counsel could have sought post- sentencing nunc pro tunc relief, or presented any issues that did not require preservation in post-sentence motions in a counseled direct appeal. Additionally, the timing of Appellant’s pro se post-sentence motion, which was postmarked within 10 days of the initial sentencing order, demonstrates that Appellant was attempting to assert his claims in a timely manner. Appellant also filed a pro se notice of appeal on November 9, 2018. While this appeal was untimely, Appellant’s mistaken belief that his pro se post-sentence motion was denied by operation of law on or around October 11, 2018 is not completely unreasonable given the timeline of events in this case. Under these circumstances, Appellant reasonably demonstrated his intent to appeal, and Appellant’s claim that trial counsel was ineffective for failing to consult with him about an appeal has arguable merit. See Roe, supra; Markowitz, supra; Bath, supra; Touw, supra. Further, trial counsel’s belief that Appellant had no meritorious issues for appeal did not absolve counsel of his duty to consult with Appellant about filing an appeal. See Green, supra; Donaghy, supra. The record supports Appellant’s contention that but for counsel’s deficient failure to consult with Appellant, he would have filed a timely appeal, which satisfies the prejudice prong of the ineffectiveness test. See Touw, supra. Based upon the - 15 - J-A25045-20 foregoing, trial counsel was ineffective for failing to meaningfully consult with Appellant about filing a direct appeal; and Appellant is entitled to reinstatement of his post-sentence and direct appeal rights nunc pro tunc.8 Accordingly, we reverse and remand for further proceedings. Order reversed; case remanded for further proceedings. Jurisdiction is relinquished. Judgment Entered. Joseph D. Seletyn, Esq. Prothonotary Date: 11/30/2020 ____________________________________________ 8 In light of Appellant’s pro se post-sentence motion challenging the discretionary aspects of sentencing, which requires preservation in the trial court, reinstatement of Appellant’s post-sentence rights nunc pro tunc is proper. See Commonwealth v. Liston, 602 Pa. 10 , 977 A.2d 1089 (2009) (explaining where court reinstates direct appeal rights nunc pro tunc, appellant is not automatically entitled to reinstatement of his post-sentence rights nunc pro tunc as well; however, reinstatement of post-sentence rights nunc pro tunc is proper where defendant successfully pleads and proves he was deprived of right to file and litigate post-sentence motions as result of ineffective assistance of counsel). - 16 -

2020-11-30 18:13:50.477408+00

http://www.pacourts.us/assets/opinions/Superior/out/J-S42042-20m - 104618310120865118.pdf

J-S42042-20 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF : PENNSYLVANIA : v. : : : SPENCER LONG : : Appellant : No. 3075 EDA 2018 Appeal from the Judgment of Sentence Entered June 18, 2018 in the Court of Common Pleas of Philadelphia County Criminal Division at No(s): CP-51-CR-0001874-2016 BEFORE: PANELLA, P.J., OLSON, J., and MUSMANNO, J. MEMORANDUM BY MUSMANNO, J.: FILED NOVEMBER 30, 2020 Spencer Long (“Long”) appeals from the judgment of sentence imposed following his conviction of attempted murder, aggravated assault, recklessly endangering another person, firearms not to be carried without a license, and carrying a firearm on public streets or public property in Philadelphia. 1 We affirm. On December 18, 2015, at approximately 1:00 p.m., Philadelphia Police received a report of a shooting victim at Roxborough Hospital. The victim, Marquis McClain (“McClain”), told police that he had been shot in the buttocks in the area of North 27th and West Thompson Streets in Philadelphia. ____________________________________________ 1 See 18 Pa.C.S.A. §§ 901(a), 2502, 2701(a)(1), 2705, 6106(a)(1), 6108. J-S42042-20 Detective Michael Repici (“Detective Repici”) was subsequently assigned to investigate the shooting. Detective Repici interviewed a witness, Terrence Jackson (“Jackson”), who was in the car with McClain at the time of the shooting. Jackson told Detective Repici that McClain had been arguing on the phone with someone known as “Little Spence” shortly before the shooting. Another witness, Tim Szerlik (“Szerlik”),2 identified Long from a photo array. Long was arrested on December 31, 2015. The arresting officers recovered two cell phones during the arrest—one iPhone, and one black LTE cell phone. Long confirmed that both phones belonged to him, but indicated that the iPhone was not functioning at that time. Long also confirmed his cell phone number for the LTE phone. Relevantly, on the same date, Detective Repici applied for a search warrant (“Warrant Number 192914”). The search warrant Application identified the “premises and/or location to be searched” as “Metro PCS cell phone number of 267[-]499[-XXXX]. 2250 Lakeside Blvd., Richardson, TX 75082.” Defendant’s Exhibit 3 (Application for Search Warrant and Affidavit 192914), 12/31/15. Specifically, the Application sought “[i]ncoming/outgoing call records, duration time and cell site tower location, text messages and ____________________________________________ 2 Szerlik, a construction worker, was working in the area of 27th and Thompson Streets at the time of the shooting. See N.T. (Jury Trial), 4/21/17, at 50. Approximately 45 minutes to an hour after the shooting, Szerlik called 911 to report the incident. Id. at 77; id. (wherein the audio recording of the 911 call was played in open court). Szerlik later identified Long again during the jury trial. Id. at 55-56. -2- J-S42042-20 photos for the cellular phone number of 267-449-[XXXX] from 12-16-15 to present time.” Id. In the supporting Affidavit of Probable Cause, Detective Repici alleged that the cell phone number belonged to Long, and he was seeking a search warrant “in an effort to establish that [Long] and [McClain] had contact on the day of the shooting either via text or phone call.” Id. Warrant Number 192914 was sent to Metro PCS for call records. See N.T. (Suppression), 1/19/17, at 25, 35. Call records obtained from Metro PCS revealed “numerous” phone calls between McClain and Long on the date of the shooting. Id. at 20. On January 14, 2016, Detective Repici applied for a search warrant (“Warrant Number 192930”). The search warrant Application identified the same “premises and/or persons to be searched[,]” i.e., Long’s cell phone number. Commonwealth’s Exhibit 40 (Application for Search Warrant and Affidavit 192930), 1/14/16. The Application sought “[s]ubscriber information, incoming/outgoing call records, with duration, time and location of cell site towers, text messages, photos and videos for the cell number of 267-499- [XXXX] from 12-12-15 to present.” Id. Detective Repici set forth the same supporting information in the Affidavit of Probable Cause. Id. Detective Repici provided Warrant Number 192930, as well as the phone itself, to a District Attorney’s Office forensic examiner, who performed a cell phone data “dump.” See N.T. (Suppression), 1/19/17, at 25-26. The “dump” provided -3- J-S42042-20 investigators with photographs, calls, text messages, and videos. See id. at 26. On the same date, Detective Repici applied for an additional search warrant (“Warrant Number 192931”) identifying the “premises and/or persons to be searched” as Metro PCS cell phone number of 267-438-[XXXX], 2250 Lakeside Blvd., Ricjardson [sic], TX 75082.” Defendant’s Exhibit 2 (Application for Search Warrant and Affidavit 192931), 1/14/16. The Application sought “[s]ubscriber information, incoming/outgoing cell records with duration, time and location as well as cell site tower locations, text messages, photos and videos for the number of 267-438-[XXXX] from 12-12- 15 to present time.” Id. In the supporting Affidavit, Detective Repici identified the cell phone number as belonging to Long’s girlfriend, Aaliya Porterfield (“Porterfield”),3 and alleged that “[t]he girlfriend was interviewed and relayed that [McClain] was calling her cell phone[,] arguing with [Long].” Id. On February 5, 2016, a grand jury indicted Long on attempted murder and related offenses. Based on the indictment, the Commonwealth charged Long via Criminal Information. ____________________________________________ 3Porterfield had been romantically involved with both Long and McClain. See N.T. (Jury Trial), 4/21/17, at 19 (wherein Porterfield stated, “They are all my boyfriends.”). -4- J-S42042-20 Long filed an Omnibus Motion, including, inter alia, a Motion to suppress on August 8, 2016. Specifically, Long sought suppression of all physical evidence and identification evidence, and argued that his arrest was illegal; the search was conducted without probable cause and without a warrant; and he was subjected to an unnecessarily suggestive identification procedure. Following a suppression hearing on January 19, 2017, the trial court denied Long’s Motion to suppress, citing the doctrine of inevitable discovery.4 Several Motions in limine followed. Relevantly, the trial court permitted the Commonwealth to introduce photographs of a gun found on Long’s cell phone, as well as text messages concerning Long’s purchase of a .45 caliber gun.5 Following a jury trial in April 2017, Long was convicted of the above- ____________________________________________ 4Long also filed a pro se Motion to Suppress on February 21, 2017. From the docket, it does not appear that the trial court took action on the pro se Motion. 5 On November 27, 2015, Long sent the following text message to an individual identified only as “Charlie” in his cell phone: “Yo bro I just grabbed a join last night 45 nice 60 bones bro clean lol.” Commonwealth’s Exhibit 42C (misspellings in original). The following day, Long sent another message, which included a photograph of the gun, with a message that said “Yea 70$” [sic]. Commonwealth’s Exhibit 42D; see also N.T., 4/26/17, at 5 (wherein Commonwealth’s Exhibit C42 was admitted into evidence at trial). -5- J-S42042-20 mentioned offenses.6 On June 18, 2018, the trial court sentenced Long to a term of 10 to 20 years in prison, with credit for time served, for the attempted murder conviction.7 For the remaining convictions, the trial court entered a determination of guilt without further penalty. Additionally, the trial court directed Long to receive mental health treatment. Long filed a timely Post- Sentence Motion, which was denied by operation of law. Long filed a timely Notice of Appeal and a court-ordered Pa.R.A.P. 1925(b) Concise Statement of errors complained of on appeal. Long now raises the following issues for our review: A. Did the lower court err in denying [Long’s M]otion to suppress information, phone records, text messages, photographs, and other evidence seized from a black LTE cell phone[,] in violation of the 4th Amendment of the United States Constitution[,] and the broader independent protections of Article 1, Section 8 of the Pennsylvania Constitution because: 1. The police lacked a warrant which authorized the search of a physical phone or its contents[,] because [W]arrant [N]umber 192930 is not sufficiently particularized and does not permit the search of the physical phone, but rather[,] only a search of the phone company’s records; 2. Even if a valid warrant existed authorizing a search of the phone, the police lacked a warrant to search for and seize ____________________________________________ 6 Throughout the year following Long’s conviction, sentencing was deferred on multiple occasions, as Long was deemed incompetent to proceed to a sentencing hearing. The trial court issued several Criminal Involuntary Mental Health Commitment Court Orders to defer sentencing, and Long remained in the Detention Center’s Forensic Unit. On May 14, 2018, Long was deemed competent, and the trial court scheduled a sentencing hearing. 7 Long’s aggravated assault and attempted murder convictions merged for sentencing purposes. -6- J-S42042-20 the entire contents of the phone, outside of the warrant’s specified scope; and 3. The trial court erred in finding that the discovery of the evidence was inevitable? B. Did the trial court improperly permit Edward Dixon [(“Dixon”)] to testify that [] McClain told him that “Spencer shot me” because the out[-]of[-]court statement did not satisfy any hearsay exception? Brief for Appellant at 3-4.8 In his first claim, Long argues that the trial court erred in denying his Motion to suppress, which we will address separately. First, Long claims that Warrant Number 192930 was insufficiently particular to authorize the search of his phone. Id. at 24-25. According to Long, the Warrant “does particularly describe the place or thing to be searched—the records of Metro-PCS relating ____________________________________________ 8 On November 13, 2018, Long filed a Motion for Extension of Time to file a supplemental concise statement, wherein counsel averred that he had ordered, but not yet received, the complete transcripts from the suppression hearing, trial, and sentencing. From the docket, it is unclear whether the trial court granted Long leave to file a supplemental concise statement. Long filed a Supplemental Concise Statement on August 2, 2019, which included the addition of the second issue raised in his appellate brief. We note that the transcript order was not attached to the Motion for Extension of Time, and the docket does not reflect when the transcripts were filed. See Pa.R.A.P. 1925(b)(2)(ii) (providing that “[i]f a party has ordered but not received a transcript necessary to develop the [s]tatement, the party may request an extension of the deadline to file the [s]tatement until 21 days following the date of entry on the docket of the transcript…. The party must attach the transcript purchase order to the motion for the extension.”). Nevertheless, as the trial court addressed Long’s second claim in its Opinion, we decline to deem the issue waived on this basis. -7- J-S42042-20 to cell phone number 267-499-[XXXX]. … However, the police executed that [W]arrant upon an item and place that was not specified in the [W]arrant….” Id. at 25, 28. Long asserts that because the “place” to be searched was described using the phone number, officers could not search the phone itself. Id. at 26. Long argues, [a] plain reading of [Warrant Number 192930] in no way suggests to a reasonable reader that the thing being searched is the contents of a physical phone. It says clearly that the search is of a phone number, which belongs to the carrier and is bought or rented by the user. The phone belongs to the user. Id. at 27.9 We adhere to the following standard of review: An appellate court’s standard of review in addressing a challenge to the denial of a suppression motion is limited to determining whether the suppression court’s factual findings are supported by the record and whether the legal conclusions drawn from those facts are correct. Because the Commonwealth prevailed before the suppression court, we may consider only the evidence of the Commonwealth and so much of the evidence for the defense as remains uncontradicted when read in the context of the record as a whole. Where the suppression court’s factual findings are supported by the record, the appellate court is bound by those findings and may reverse only if the court’s legal conclusions are erroneous. Where the appeal of the determination of the suppression court turns on allegations of legal error, the ____________________________________________ 9 The Commonwealth argues that Long waived this claim because, during the suppression hearing, Long “led the court to believe that he was not moving to suppress any of the cellular evidence that had been transmitted by his phone but only that which had not been transmitted.” Commonwealth’s Brief at 22 (emphasis in original); see also id. at 22-25. However, Long’s argument in that regard was based on his assertion that Warrant Number 192930 should have applied to the carrier (which purportedly would have records of transmitted data), rather than the phone itself. We decline to deem this issue waived. -8- J-S42042-20 suppression court’s legal conclusions are not binding on an appellate court, whose duty it is to determine if the suppression court properly applied the law to the facts. Thus, the conclusions of law of the courts below are subject to plenary review. Commonwealth v. Smith, 164 A.3d 1255 , 1257 (Pa. Super. 2017) (citation, brackets, and ellipses omitted). The Fourth Amendment categorically prohibits the issuance of any warrant except one particularly describing the place to be searched and the persons or things to be seized. This requirement is meant to prevent general searches and ensures that the search will be carefully tailored to its justifications, and will not take on the character of the wide-ranging exploratory searches the Framers intended to prohibit. Along those lines, the scope of a lawful search is defined by the object of the search and the places in which there is probable cause to believe that it may be found. Commonwealth v. Turpin, 216 A.3d 1055 , 1063-64 (Pa. 2019) (internal citations, quotation marks and brackets omitted). As this Court has explained, [i]t is a fundamental rule of law that a warrant must name or describe with particularity the property to be seized and the person or place to be searched…. The particularity requirement prohibits a warrant that is not particular enough and a warrant that is overbroad. These are two separate, though related, issues. A warrant unconstitutional for its lack of particularity authorizes a search in terms so ambiguous as to allow the executing officers to pick and choose among an individual’s possessions to find which items to seize. This will result in the general “rummaging” banned by the Fourth Amendment. A warrant unconstitutional for its overbreadth authorizes in clear or specific terms the seizure of an entire set of items, or documents, many of which will prove unrelated to the crime under investigation. … An overbroad warrant is unconstitutional because it authorizes a general search and seizure. Commonwealth v. Orie, 88 A.3d 983 , 1002-03 (Pa. Super. 2014) (citation and brackets omitted); see also id. at 1003 (stating that the particularity requirement of Article I, Section 8 of the Pennsylvania Constitution is more -9- J-S42042-20 stringent than that of the Fourth Amendment, and therefore, “if the warrant is satisfactory under the Pennsylvania Constitution it will also be satisfactory under the federal Constitution.”). Further, “the Pennsylvania Supreme Court has instructed that search warrants should be ‘read in a common sense fashion and should not be invalidated by hypertechnical interpretations. This may mean, for instance, that when an exact description of a particular item is not possible, a generic description will suffice.’” Id. at 1003 (quoting Commonwealth v. Rega, 933 A.2d 997 , 1012 (Pa. 2007). “[W]here the items to be seized are as precisely identified as the nature of the activity permits … the searching officer is only required to describe the general class of the item he is seeking.” Commonwealth v. Kane, 210 A.3d 324 , 333 (Pa. Super. 2019) (citation and quotation marks omitted). Specifically, regarding electronic devices, “a warrant may permit the seizure of electronic equipment so long as the search of the equipment is limited to looking for evidence of the specific crimes that the police had probable cause to believe the defendant committed.” Commonwealth v. Green, 204 A.3d 469 , 481 (Pa. Super. 2019). Here, our review discloses that Warrant Number 192930 identified the “premises to be searched” as Long’s cell phone, i.e., “Metro PCS cell phone number of 267-499-[XXXX]. 2250 Lakeside Blvd., Richardson, TX 75082.” Commonwealth’s Exhibit 40 (Application for Search Warrant and Affidavit 192930), 1/14/16. In the search warrant Application, Detective Repici - 10 - J-S42042-20 identified the “owner” of the items to be searched, with the designation “(subscriber)” listed behind Long’s cell phone number. Id. Further, the Application specified the following items to be searched: “Subscriber information, incoming/outgoing call records, with duration, time and location of cell site towers, text messages, photos and videos for the cell number of 267-499-[XXXX] from 12-12-15 to present.” Id.10 Additionally, in the Affidavit of Probable Cause, Detective Repici avers that Jackson (identified in the Affidavit as “T.J.”) told detectives that McClain was arguing with someone by the name of “Little Spence” shortly before the shooting. Id. Detective Repici also averred that the identified phone number belongs to Long, and that Warrant Number 192930 requested the described information to “establish that [Long] and [McClain]” had contact on the date of the shooting either via text or phone call.” Id. The trial court concluded that Warrant Number 192930 was supported by probable cause, and the information requested “was appropriate for extraction from the cell[ ]phone.” Trial Court Opinion, 11/20/19, at 9. The court also concluded that the Warrant specifically described the item to be seized, i.e., Long’s cell phone. Id.; see also id. at 10 (stating that “[Detective ____________________________________________ 10By contrast, Warrant Number 192914, which was served on Metro PCS, the carrier, does not include “subscriber information” in its description of “items to be searched.” See Defendant’s Exhibit 3 (Application for Search Warrant and Affidavit 192914), 12/31/15. - 11 - J-S42042-20 Repici] could not state with any greater specificity where evidence of the shooting could be stored in the phone.”). The trial court’s findings are supported by the record. The Affidavit of Probable Cause specifically sought call records, text messages, photographs and videos from Long’s cell phone. See Commonwealth’s Exhibit 40 (Application for Search Warrant and Affidavit 192930), 1/14/16. During the suppression hearing, Detective Repici explained that a phone “dump” would retrieve “[e]verything physical out of the phone: Texts, call logs, subscriber information.” N.T. (Suppression), 1/19/17, at 26. Detective Repici testified that he took Warrant Number 192930 and the cell phone to the District Attorney’s Office for inspection. Id. at 26, 41. According to Detective Repici, he has never received text messages directly from a cell phone carrier. Id. at 39. Additionally, Devon Campbell (“Campbell”), a mobile device forensic examiner at the Philadelphia District Attorney’s Office, explained that when her lab receives a mobile device for examination, it is typically accompanied by a search warrant or consent form. Id. at 64. Campbell testified that text messages, photos, and videos cannot be obtained through a carrier. Id. at 69. Campbell explained that she uses a forensic tool to obtain data in a “dump,” and that everything on the cell phone is transferred to a computer during the process. Id. at 71-72; see also id. at 74 (wherein Campbell stated that “there is no way to limit what you get from that dump.”). According to - 12 - J-S42042-20 Campbell, at the time data is downloaded in a “dump,” there is no way to determine when the texts, photographs, or videos were created. Id. at 73. However, Campbell testified that after a “dump” has been completed, she can create a report using a specified time period. Id. at 75. The report returned to investigators is based on the date the file was created. See id. at 76-77; see also id. at 77-78 (wherein Campbell testified, “[W]hen we [the mobile forensic lab] are given a search warrant with a date timeline, to the best of our abilities, we look at what the phone dump has given us and then only give back active artifacts that were found through that timeframe.”). We recognize that it may have been more prudent for Detective Repici to identify the cell phone’s serial number or other identifying information, as opposed to simply referencing the provider information in the search warrant Application. Nevertheless, we cannot agree with Long’s assertion that Warrant Number 192930 was insufficiently particular to support a search of the phone’s contents, as opposed to carrier records. The specific items identified in Warrant Number 192930 make clear that Detective Repici intended to search the contents of the phone. See Kane, supra (explaining that a description of the general class of items to be searched may be sufficient). The suppression hearing testimony of both Detective Repici and Campbell bolster this conclusion. Because the trial court’s conclusions are sound, and we discern no error in its application of the law, Long is not entitled to relief on this claim. - 13 - J-S42042-20 Second, Long asserts that even if Warrant Number 192930 is valid, the search extended beyond the scope of the warrant. Brief for Appellant at 29. Specifically, Long points to photographs and text messages, stored in November 2015, which the Commonwealth introduced regarding Long’s purchase of a gun. Id. Long argues that because Warrant Number 192930 limited the search to items “from 12-12-15 to present[,]” the texts and photographs about the gun were outside the scope of the warrant. Id. Long contends that police cannot be permitted to “download a phone’s entire contents and then rummage through every file, app, and photograph with complete disregard to the warrant’s limitations….” Id. at 34.11 Here, Warrant Number 192930 specifically sought “[s]ubscriber information, incoming/outgoing call records, with duration, time and location of cell site towers, text messages, photos and videos for the cell number of 267-499-[XXXX] from 12-12-15 to present.” Commonwealth’s Exhibit 40 (Application for Search Warrant and Affidavit 192930), 1/14/16 (emphasis added). The trial court determined that the Commonwealth’s use of evidence ____________________________________________ 11 From the record, it is unclear what evidence was included in the evidence report provided to investigators, or when the Commonwealth received the challenged text messages and photographs. The Commonwealth filed its Motion in limine seeking to introduce this evidence on April 13, 2017. We further observe that the certified record does not contain a copy of the transcripts from April 18, 2017, hearing, during which the Commonwealth addressed its Motion in limine. - 14 - J-S42042-20 created prior to December 12, 2015 (i.e., pictures of Long’s gun in his bedroom, and text messages concerning his purchase of the gun) did not constitute a search and seizure outside the scope of the warrant. See Trial Court Opinion, 11/20/19, at 10-11. Pointing to Campbell’s testimony, the trial court reasoned that “it was impossible to limit the data extracted from [Long’s] cell[ ]phone….” Id.12 ____________________________________________ 12 We note our disagreement with the trial court’s characterization of Campbell’s testimony. During the suppression hearing, Campbell testified that, during the phone “dump,” all of the phone’s data will be retrieved, and cannot be limited. See N.T. (Suppression), 1/19/17, at 73, 74. However, significantly, Campbell testified that after the forensics lab completes the “dump,” the data retrieved can be identified by the date it is created, and the lab can create an evidence report based on a date specified in a search warrant. See id. 74-75. Campbell specifically explained as follows: [Campbell]: So, in the forensic software that we use, it talks directly to the phone in a forensics manner and there is no way to limit what you get from that dump. We dump the phone, the search says a certain date. We give you all that information that we can find on the phone from that date. So, yes, I can see when pictures were taken, messages were sent, phone calls were made and stuff like that. So, yes, I can see from that. I can also look on the phone, myself, but in the preservation of evidence, we do not like to directly look at the phone. We like to use the forensic copy that is made from the phone and use that as what we show the detectives or [Assistant District Attorneys]. And then that is also given to defense counsel or whoever else needs a copy of it. [Assistant District Attorney]: When you actually dump the entire phone, you then create a report and the report only includes the evidence that is from the date that’s specified on the warrant? [Campbell]: Yes, that is -- when they ask for a certain date, that is what I get back. Id. - 15 - J-S42042-20 Moreover, the trial court concluded that any error in its admission of the challenged evidence was harmless. Id. at 11. The trial court stated as follows: Though the dates of [Commonwealth’s Exhibit] 42-C [a text message from Long’s phone indicating that he purchased a gun] and –D [a text message with included video, which appears to show a gun in Long’s bedroom] were outside the scope of the search warrant, [Long] was not unfairly prejudiced. Neither piece of evidence was directly related to the events, which occurred on the date of the shooting. In the context of the week-long trial, and in consideration of all of the direct and circumstantial evidence, admission of the two (2) pieces of evidence was not unfairly prejudicial to [Long] and was, at best, harmless error. Id. The harmless error doctrine, as adopted in Pennsylvania, reflects the reality that the accused is entitled to a fair trial, not a perfect trial. …. Harmless error exists if the record demonstrates either: (1) the error did not prejudice the defendant or the prejudice was de minimis; or (2) the erroneously admitted evidence was merely cumulative of other untainted evidence which was substantially similar to the erroneously admitted evidence; or (3) the properly admitted and uncontradicted evidence of guilt was so overwhelming and the prejudicial effect of the error was so insignificant by comparison that the error could not have contributed to the verdict. Commonwealth v. Hairston, 84 A.3d 657 , 671-72 (citations, quotation marks and paragraph breaks omitted). The record supports the trial court’s determination that any error in admitting the evidence pre-dating Warrant Number 192930’s parameters was - 16 - J-S42042-20 harmless, in light of the other evidence supporting the guilty verdict. 13 The Commonwealth presented the testimony of Porterfield, who stated that she was with Long until approximately 11:00 a.m. on the day of the shooting, when she dropped him off at the Johnson Projects, and that she picked Long up again at approximately 12:30 p.m. See N.T. (Jury Trial), 4/21/17, at 6-7. Porterfield testified that, at some time that day, while she was with Long, McClain called her and told her that he had been shot. See id. at 11-12. The Commonwealth also introduced Porterfield’s and McClain’s phone records (including cell tower use), which display numerous phone calls between Porterfield and Long, Porterfield and McClain, and Long and McClain, on December 18, 2015. See Commonwealth’s Exhibits C-68A (McClain’s 12/18/15 Phone Calls (Short Version)), C-69A (Porterfield’s 12/18/15 Phone Calls (Short Version)); see also N.T. (Jury Trial), 4/25/17, at 94-114 (wherein Detective Anthony Vega—an FBI Violent Crimes Task Force member detailed to the Philadelphia Police Department, and an expert in historical cell site analysis—explained the information contained in the phone records); N.T. (Jury Trial), 4/26/17, at 5 (wherein Commonwealth’s Exhibits C-68A and C- 69A were admitted into evidence). ____________________________________________ 13 As Long does not challenge the sufficiency of the evidence supporting the guilty verdicts, we decline to undertake a full sufficiency analysis. Rather, we highlight herein key evidence supporting Long’s convictions. - 17 - J-S42042-20 Further, Szerlik, who witnessed the shooting, testified at trial. Szerlik testified that he called 911, and gave a short statement to dispatch about the shooting. N.T. (Jury Trial), 4/21/17, at 77. Within the following week, Szerlik provided a witness statement to Detective Repici. Id. at 78-79. Szerlik testified that he had identified Long from a photo array. Id. at 80-82, 84. Additionally, Szerlik provided an in-court identification of Long. Id. at 55-56. Thus, in light of the quantum of evidence supporting Long’s guilty verdicts, any prejudicial effect of the challenged evidence was de minimis, and is unlikely to have contributed to the verdict. See Hairston, supra. Because the trial court’s finding of harmless error is supported by the record, Long is not entitled to relief on this claim. Long next argues that the trial court erred in applying the doctrine of inevitable discovery. Brief for Appellant at 35. Long argues that the trial court’s application of the doctrine was premised on the violation of Long’s Miranda14 rights. Id. at 37. Instead, Long argues that because the search of his phone was not supported by a valid warrant, the doctrine of inevitable discovery cannot apply. Id. at 37-38. ____________________________________________ 14 See Miranda v. Arizona, 384 U.S. 436 (1966). In its Opinion, the trial court states that “[t]here is no dispute that Detective Repici unlawfully obtained [Long’s] cell[ ]phone number when the detective questioned him without first reading the Miranda rights.” Trial Court Opinion, 11/20/19, at 6. The trial court then concluded that the police inevitably would have discovered Long’s phone number based on their independent investigation. See id. at 7. - 18 - J-S42042-20 Initially, we observe that both Long’s original and Supplemental Concise Statement include a claim that all data from Long’s phone should have been suppressed “because the search was the fruit of a non-[M]irandized custodial interrogation and an involuntary statement….” Concise Statement, 11/13/18; Supplemental Concise Statement, 8/2/19. Long does not raise an argument pursuant to Miranda in his appellate brief. Thus, the trial court’s analysis concerning the doctrine of inevitable discovery on this basis is not relevant to the instant appeal. Moreover, as we explained supra, the search of Long’s phone was supported by a valid warrant. Long is therefore not entitled to relief on this issue. In his second claim, Long contends that the trial court erred in admitting McClain’s statement, made to Dixon,15 that “Spencer shot me,” under the excited utterance exception to the prohibition against hearsay. Brief for Appellant at 28. According to Long, “the Commonwealth presented no evidence to show that the statement was made as a spontaneous response to the excitement as opposed to a contemplated response made after calm reflection.” Id. Long claims that McClain did not make the contested statement to Dixon until their second phone call, allowing him time for reflection. Id. at 41. Long also points to Dixon’s testimony that, at the time ____________________________________________ 15Dixon was involved in a romantic relationship with McClain’s mother. While Dixon is described as McClain’s stepfather throughout the record, McClain testified that Dixon and his mother never married. See N.T. (Jury Trial), 4/21/17, at 123. - 19 - J-S42042-20 he made the statement, McClain “sounded a little playful[.]” Id. Long also argues that McClain made inconsistent statements throughout the investigation and during his trial testimony, which suggests that he is not trustworthy. Id. at 42. “The admission of evidence is a matter vested within the sound discretion of the trial court, and such a decision shall be reversed only upon a showing that the trial court abused its discretion.” Commonwealth v. Antidormi, 84 A.3d 736 , 749 (Pa. Super. 2014) (citation omitted). “An abuse of discretion is not merely an error of judgment, but is rather the overriding or misapplication of the law, or the exercise of judgment that is manifestly unreasonable, or the result of bias, prejudice, ill-will or partiality, as shown by the evidence of record.” Id. (citation and quotation marks omitted). Hearsay is an out-of-court statement offered to prove the truth of the matter asserted. Pa.R.E. 801. Hearsay is generally inadmissible, unless a specific, enumerated exception applies. Pa.R.E. 802; see also Commonwealth v. Savage, 157 A.3d 519 , 524 (Pa. Super. 2017). Pennsylvania Rule of Evidence 803(2) provides an exception to the rule against hearsay for excited utterances: (2) Excited Utterance. A statement relating to a startling event or condition, made while the declarant was under the stress of excitement that it caused. When the declarant is unidentified, the proponent shall show by independent corroborating evidence that the declarant actually perceived the startling event or condition. Pa.R.E. 803(2). - 20 - J-S42042-20 Additionally, “[t]here is no set time interval following a startling event or condition after which an utterance relating to it will be ineligible for exception to the hearsay rule as an excited utterance.” Id., cmt; see also Commonwealth v. Carmody, 799 A.2d 143 , 147 (Pa. Super. 2002) (stating that “there is no bright line rule regarding the amount of time that may elapse between the declarant’s experience and her statement.”). In considering whether a statement qualifies as an excited utterance, courts may consider 1) whether the declarant, in fact, witnessed the startling event; 2) the time that elapsed between the startling event and the declaration; 3) whether the statement was in narrative form (inadmissible); and, 4) whether the declarant spoke to others before making the statement, or had the opportunity to do so. These considerations provide the guarantees of trustworthiness which permit the admission of a hearsay statement under the excited utterance exception. It is important to note that none of these factors, except the requirement that the declarant have witnessed the startling event, is in itself dispositive. Rather, the factors are to be considered in all the surrounding circumstances to determine whether a statement is an excited utterance. Commonwealth v. Keys, 814 A.2d 1256 , 1258 (Pa. Super. 2003) (emphasis in original; citations omitted). “The crucial question, regardless of the time lapse, is whether, at the time the statement is made, the nervous excitement continues to dominate while the reflective processes remain in abeyance.” Id. Initially, we observe that the portion of the trial transcripts that include Dixon’s testimony are not included in the certified record. See Commonwealth v. Metts, 787 A.2d 996 , 1003 (Pa. Super. 2001) (stating that “[i]t is [the a]ppellant’s duty to provide a complete record to facilitate - 21 - J-S42042-20 meaningful appellate review.”). We also note that the trial court summarized the relevant portion of testimony as follows: Ten (10) to fifteen (15) minutes after [] Dixon heard gunshots, [McClain] called him. (N.T., 04/24/17[,] at 45). [McClain] told [] Dixon, “[C]all my mom.” Id. Approximately five (5) minutes later, [McClain] again called [] Dixon and said, “Spencer shot me.” Id. at 46. Trial Court Opinion, 11/20/19, at 13. The Commonwealth and Long each provide similar summaries in their appellate briefs. Though we cannot fully evaluate Long’s claim absent the relevant trial transcripts, we observe the trial court’s conclusion regarding this issue. Specifically, the trial court noted that McClain made the second call to Dixon “merely fifteen (15) minutes after [Long] shot him[;]” McClain was bleeding and traveling to the hospital at the time he made the statement; and “there was no evidence that [McClain] spoke to anyone else.” Id. at 13. The trial court therefore concluded that “[McClain’s] statement was made so near the occurrence both in time and place as to exclude the likelihood that the statement emanated in whole or in part from [McClain’s] reflective faculties.” Id. Further, the trial court concluded that any error in permitting the challenged testimony was harmless. Id. For the reasons set forth in response to Long’s previous claim, we conclude that, even if Long had supplied us with a complete record and established that the trial court improperly admitted the challenged testimony, any such error would be harmless. The record reveals significant evidence to - 22 - J-S42042-20 support Long’s convictions, including, inter alia, cell phone records and a witness identification. Thus, any prejudice resulting from the admission of Dixon’s statement was de minimis, and unlikely to have contributed to the verdict. See Hairston, supra. Accordingly, we cannot grant Long relief on this claim.16 Judgment of sentence affirmed. Judgment Entered. Joseph D. Seletyn, Esq. Prothonotary Date: 11/30/2020 ____________________________________________ 16To the extent that Long challenges McClain’s credibility, we note that it is the exclusive province of the fact finder to make credibility determinations, and we will not reassess those determinations on appeal. See Commonwealth v. Mack, 850 A.2d 690 , 693 (Pa. Super. 2004). - 23 -

2020-11-30 18:13:50.615114+00

http://www.pacourts.us/assets/opinions/Superior/out/J-S43027-20m - 104618187120855510.pdf

J-S43027-20 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 COMMONWEALTH OF PENNSYLVANIA IN THE SUPERIOR COURT OF PENNSYLVANIA Appellee v. CLIFFORD TAYLOR GREEN Appellant No. 218 WDA 2020 Appeal from the PCRA Order Entered February 14, 2020 In the Court of Common Pleas of Allegheny County Criminal Division at No: CP-02-CR-0015533-2014 BEFORE: SHOGAN, J., STABILE, J., and KING, J. MEMORANDUM BY STABILE, J.: FILED NOVEMBER 30, 2020 Appellant, Clifford Taylor Green, who is serving a sentence of imprisonment for his conviction under 18 Pa.C.S.A. § 6105 (persons not to possess firearms), appeals from an order dismissing his petition for relief under the Post Conviction Relief Act (“PCRA”), 42 Pa.C.S.A. §§ 9541-9546. Appellant claims that trial counsel was ineffective for failing to object, under the corpus delicti doctrine, to the admission of his written confession that he possessed a firearm on October 19, 2014. We conclude that this argument is devoid of merit, and we affirm. The following evidence was adduced during trial. The parties stipulated that Appellant was convicted of third-degree murder in 1998. In mid-October 2014, Appellant escaped from a correctional facility in Pittsburgh, and a warrant was issued for his arrest. J-S43027-20 On October 19, 2014, Borough of Wilkinsburg Police Sergeant Cuiffi was assisting City of Pittsburgh police in searching for Appellant, whom they suspected was in the East Hills section of Pittsburgh. Sergeant Cuiffi received Appellant’s description and photograph and learned that he had fled into a wooded area of the East Hills that borders Wilkinsburg. At approximately 8:50 p.m., Sergeant Cuiffi observed Appellant standing in front of a store in the 1700 block of Montier Street. Sergeant Cuiffi radioed other officers for backup and notified them that he located an individual matching Appellant’s description. Sergeant Cuiffi drove past Appellant, turned his vehicle around, and approached Appellant. At that time, Appellant crossed the street and walked toward a Dollar General store. Sergeant Cuiffi parked his vehicle, opened the door, and told Appellant to stop. Appellant ignored Sergeant Cuiffi and entered the Dollar General store. Officers Hamlin and Waz arrived on the scene and assisted Sergeant Cuiffi in setting up a perimeter around the Dollar General store. Sergeant Cuiffi covered the rear entrance, Officer Waz covered the front entrance, and Officer Hamlin covered the side entrance. Videotape surveillance footage depicted Appellant entering the store and bearing to the left. About one minute after entering, Appellant walked to the back of the store, through double doors, into a storage area, and out the side door. Appellant was inside the store no longer than a minute when he then exited through a storage area -2- J-S43027-20 that led into the parking lot. Officer Hamlin took Appellant into custody. The officers recovered a small amount of cocaine from Appellant’s front right pants pocket. Following the search, Officer Waz transported Appellant to the police station. Sergeant Cuiffi entered the Dollar General store after Appellant’s arrest and a store employee, Addie Thorn, told him that a firearm had been located on one of the shelves.1 The sergeant accompanied Thorn to that shelf and recovered a semiautomatic weapon. According to the affidavit of probable cause appended to the criminal complaint, which the Commonwealth submitted into evidence during Appellant's stipulated non-jury trial, Appellant had been seen walking down the first aisle, the same aisle in which the firearm was located. At the police station, Appellant was read his Miranda2 rights and signed a Miranda rights waiver form. Sergeant Cuiffi questioned Appellant about the firearm, and Appellant provided a written statement that he found the firearm in the East Hills woods and discarded it in the Dollar General store because the police were following him. ____________________________________________ 1 In its opinion filed during Appellant’s direct appeal, the trial court stated that Thorn had cleaned the shelf before Appellant entered the store, and there was no firearm present at that time. The Commonwealth, however, did not introduce these facts into evidence during Appellant’s trial; it mentioned these details only during closing argument. Since these facts were not admitted as evidence, we do not take them into account in this decision. 2 Miranda v. Arizona, 384 U.S. 436 (1966). -3- J-S43027-20 Approximately one hour later, Appellant called for Sergeant Cuiffi and requested to add something to his statement. Sergeant Cuiffi provided Appellant a new statement form, wherein Appellant provided a statement that omitted mention of a firearm and ended with a request for an attorney. Prior to that time, Appellant had not requested an attorney. Appellant did not have a license to carry a firearm. Appellant was charged with persons not to possess firearms (18 Pa.C.S.A. § 6105), carrying a firearm without a license (18 Pa.C.S.A. § 6106) and possession of a controlled substance, cocaine (35 P.S. § 780-113(a)(16)). The trial court held a hearing on Appellant’s motion to suppress his custodial statement and denied the motion. The case proceeded to a non-jury trial in which the parties stipulated to admission of the testimony taken during the suppression hearing as well as several exhibits, including his custodial statement and the affidavit of probable cause underlying the criminal complaint. Appellant also gave additional testimony in his defense. Following the conclusion of trial, the court found Appellant guilty of all charges. The court sentenced Appellant to concurrent terms of three to six years’ imprisonment on the Section 6105 and Section 6106 charges and one to two years’ imprisonment on the drug possession charge. On direct appeal, this Court reversed the conviction on the Section 6106 charge due to the Commonwealth’s failure to prove that Appellant concealed the firearm. Commonwealth v. Green, 2015 WL 4150473 , *4 (Pa. Super., Sep. 19, -4- J-S43027-20 2017). Appellant also argued that the corpus delicti doctrine barred the admission of his custodial statement. We held that Appellant waived this argument by failing to raise it in the trial court, and we dismissed this claim without prejudice to Appellant’s right to raise it in a PCRA petition. Id. at *5. On February 15, 2018, our Supreme Court denied Appellant’s petition for allowance of appeal. Appellant did not appeal to the United States Supreme Court. On May 16, 2019, Appellant filed a timely PCRA petition 3 arguing that (1) trial counsel was ineffective for failing to object to admission of his custodial statement during trial under the corpus delicti doctrine, and (2) the trial court imposed an illegal sentence on Appellant’s drug possession charge. Subsequently, Appellant filed an amended PCRA petition through counsel. The PCRA court held that Appellant’s sentence on the drug possession charge exceeded the statutory maximum.4 On January 22, 2020, the PCRA court issued a notice of intent to dismiss the remaining argument in Appellant’s amended PCRA petition, the corpus delicti claim. The court reasoned: [T]he evidence admitted at [Appellant’s] stipulated non-jury trial clearly established, albeit circumstantially, that [he] was the individual who possessed and placed the firearm on the shelves of ____________________________________________ 3 Appellant’s judgment of sentence became final on May 16, 2018, his deadline for appealing to the United States Supreme Court. 42 Pa.C.S.A. § 9545(b)(3). The PCRA’s one-year statute of limitations began running on this date. 42 Pa.C.S.A. § 9545(b)(1). Appellant filed his PCRA petition on the last day for doing so under Section 9545(b)(1). 4 This ruling is not in question in this appeal. -5- J-S43027-20 the Dollar General Store on the date is question. Additionally, there was no dispute during the stipulated non-jury [trial] that [Appellant] had been previously pled guilty to third degree murder and as such, was not a person legally permitted to possess a firearm due to that conviction. Notice of Intent, 1/22/20, at 3. On February 14, 2020, the PCRA court entered an order of dismissal. Appellant filed a timely appeal to this Court. The PCRA court did not order Appellant to file a Pa.R.A.P. 1925(b) statement or file a Pa.R.A.P. 1925(a) opinion. The absence of a Rule 1925 opinion does not hamper appellate review, however, because the PCRA court provided the above-referenced reasons for denying the corpus delicti argument in its notice of intent. Appellant raises a single issue in this appeal: Whether the PCRA Court erred in summarily dismissing [Appellant’s] contention that trial counsel was ineffective in waiving and failing to assert or otherwise preserve a meritorious pretrial and trial corpus delicti challenge to the admission of [Appellant’s] pretrial confession which acknowledged possession of a firearm, where that confession was the only evidence presented by the prosecution on the essential elements of possession and identity. Appellant’s Brief at 5. Appellate review of a PCRA court’s dismissal of a PCRA petition is limited to the examination of “whether the PCRA court’s determination is supported by the record and free of legal error.” Commonwealth v. Maxwell, 232 A.3d 739 , 744 (Pa. Super. 2020). “The PCRA court’s findings will not be disturbed unless there is no support for the findings in the certified record.” Id. “This Court grants great deference to the findings of the PCRA court, and -6- J-S43027-20 we will not disturb those findings merely because the record could support a contrary holding.” Id. In contrast, we review the PCRA court’s legal conclusions de novo. Id. Appellant argues that trial counsel was ineffective for failing to raise a corpus delicti objection to the introduction of his confession admitting that he possessed a firearm and discarded it at the Dollar General store. To obtain relief on a claim of ineffective assistance of counsel, Appellant must prove that: (1) the underlying claim has arguable merit; (2) counsel lacked a reasonable basis for his actions or failure to act; and (3) the petitioner was prejudiced by counsel's deficient performance such that there is a reasonable probability that the result of the proceeding would have been different absent counsel's error or omission. Commonwealth v. Pierce, 527 A.2d 973 , 975 (Pa. 1987). “A claim of ineffectiveness will be denied if the petitioner's evidence fails to satisfy any one of these prongs.” Commonwealth v. Busanet, 54 A.3d 35 , 45 (Pa. 2012). Counsel is presumed to have rendered effective assistance. Commonwealth v. Sepulveda, 55 A.3d 1108 , 1117 (Pa. 2012). The corpus delicti rule provides that “a criminal conviction may not stand merely on the out-of-court confession of one accused, and thus a case may not go to the fact-finder where independent evidence does not suggest that a crime has occurred.” Commonwealth v. Cuevas, 61 A.3d 292 , 295 (Pa. Super. 2013). The rule exists because courts are hesitant to convict a person -7- J-S43027-20 of a crime solely on the basis of his statements. Id. The corpus delicti, or “body of the crime,” consists of two elements: (1) the occurrence of a loss or injury, and (2) some person’s criminal conduct as the source of that loss or injury. Id. The corpus delicti may be proven by circumstantial evidence. Id. Establishing the corpus delicti is a two-step process. The first step concerns the trial judge’s admission of the accused’s statements and the second step concerns the fact finder’s consideration of those statements. In order for the statement to be admitted, the Commonwealth must prove the corpus delicti by a preponderance of the evidence. In order for the statement to be considered by the fact finder, the Commonwealth must establish the corpus delicti beyond a reasonable doubt. Commonwealth v. Murray, 174 A.3d 1147 , 1154 (Pa. Super. 2017). To be clear, the second step is satisfied by proof beyond a reasonable doubt that loss or injury occurred and that “some person’s criminal conduct [w]as the source of this loss or injury.” Commonwealth v. Chambliss, 847 A.2d 115 , 119 (Pa. Super. 2004). Appellant contends that the Commonwealth failed the second step because it did not establish the corpus delicti beyond a reasonable doubt. Section 6105, a provision in the Uniform Firearms Act (18 Pa.C.S.A. §§ 6101- 6128), provides in relevant part: (1) A person who has been convicted of an offense enumerated in subsection (b), within or without this Commonwealth, regardless of the length of sentence or whose conduct meets the criteria in subsection (c) shall not possess . . . a firearm in this Commonwealth. -8- J-S43027-20 (b) Enumerated offenses.—The following offense shall apply to subsection (a): *** Section 2502 (relating to murder). 18 Pa.C.S.A. § 6105. Third-degree murder is one of three categories of murder within Section 2502. 18 Pa.C.S.A. § 2502(c). Applying the corpus delicti rule to this statute, the Commonwealth had to prove two elements through non-confession evidence beyond a reasonable doubt for the factfinder to consider Appellant’s confession in its verdict: (1) someone possessed a firearm, and (2) whoever did so was convicted of a crime listed in Section 6105(b). The PCRA court concluded, in so many words, that Appellant’s corpus delicti argument was a red herring, because the non-confession evidence not only established the corpus delicti (the body of the crime) but proved Appellant’s guilt under Section 6105 beyond a reasonable doubt. We agree. The evidence, viewed in the light most favorable to the Commonwealth, would have been sufficient to establish Appellant’s guilt under Section 6105 even if the trial court did not take his confession into account. There is no dispute that Appellant was convicted of a crime listed in Section 6105(b), third-degree murder. Furthermore, the non-confession evidence demonstrates that Appellant was in constructive possession of the firearm. -9- J-S43027-20 To prove the element of possession when the defendant does not have actual possession of an item at the time of arrest, the Commonwealth must establish constructive possession of the item. Commonwealth v. Parrish, 191 A.3d 31 , 36 (Pa. Super. 2018). Constructive possession is a legal fiction, a pragmatic construct to deal with the realities of criminal law enforcement. Constructive possession is an inference arising from a set of facts that possession of the contraband was more likely than not. We have defined constructive possession as conscious dominion. . . . We subsequently defined conscious dominion as the power to control the contraband and the intent to exercise that control. . . . To aid application, we have held that constructive possession may be established by the totality of the circumstances. Commonwealth v. Cruz, 21 A.3d 1247 , 1253 (Pa. Super. 2011). The Commonwealth can prove constructive possession with circumstantial evidence. Commonwealth v. Johnson, 26 A.3d 1078 , 1094 (Pa. 2011). A defendant’s mere presence at the scene, however, does not establish constructive possession of contraband. Commonwealth v. Vargas, 108 A.3d 858 , 869 (Pa. Super. 2014) (en banc); see also Parrish, 191 A.3d at 37 (location and proximity of actor to the contraband alone is not conclusive of guilt). Here, a chain of circumstantial, non-confession evidence establishes Appellant’s constructive possession of the firearm. A police sergeant saw Appellant on a public street and recognized him as a fugitive from a correctional facility. The sergeant directed Appellant to stop, but Appellant ignored him and entered a Dollar General store. The store’s surveillance - 10 - J-S43027-20 videotape showed that Appellant turned left upon entering the store and walked down the first aisle. After less than a minute, Appellant attempted to leave the store through a side door, but a second police officer apprehended him. Appellant’s flight from the sergeant and his attempt to evade capture signify his consciousness of guilt. Commonwealth v. Hargrave, 745 A.2d 20 , 23 (Pa. Super. 2005) (“[f]light does indicate consciousness of guilt, and a trial court may consider this as evidence, along with other proof, from which guilt may be inferred”). A store employee informed the sergeant that a firearm had been located on one of the shelves. The sergeant recovered the firearm from a shelf in the first aisle, where Appellant had been seen walking minutes earlier. Viewed together, the evidence of (1) Appellant’s recent escape from a correctional facility, (2) his flight after the sergeant directed him to stop, (3) his attempt to escape through the side door of the store, and (4) the discovery of the firearm on the path that Appellant had taken through the store moments earlier demonstrates Appellant’s constructive possession of the firearm beyond a reasonable doubt. See Commonwealth v. Roberts, 133 A.3d 759 , 767-68 (Pa. Super. 2016) (evidence was sufficient for jury to conclude that two bags of cocaine were dropped by defendant during pursuit by police officers, and therefore was sufficient to prove constructive possession as element of possession with the intent to deliver controlled substance; officers did not discover cocaine on defendant’s person, but officer testified that he backtracked defendant’s path during chase in attempt to find - 11 - J-S43027-20 his dropped radio, and that, in area where he observed defendant run around parked vehicle, he found cell phone with picture of defendant as screen saver and bags of cocaine). Appellant argues that the evidence did not prove possession because the store was open to the public, so some visitor other than Appellant might have brought the firearm into the store. We find this argument speculative. There is no evidence that anybody else was in the aisle that Appellant passed through at or near the time of these events. Indeed, there is no evidence that any other person visited the store that day (or, indeed, on any other day). Absent such evidence, we cannot infer that another visitor brought the firearm into the store. For these reasons, we conclude that Appellant’s claim of ineffective assistance lacks arguable merit. Since it fails this prong, we need not consider the remaining two prongs of the ineffectiveness test. Busanet, 54 A.3d at 45. The PCRA court correctly determined that Appellant is not entitled to relief. Order affirmed. Judgment Entered. Joseph D. Seletyn, Esq. Prothonotary Date: 11/30/2020 - 12 -

2020-11-30 18:13:50.752878+00

http://www.pacourts.us/assets/opinions/Superior/out/J-A20045-20m - 104618322120866727.pdf

J-A20045-20 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF : PENNSYLVANIA : v. : : : CARL LEE FIELDS : : Appellant : No. 1630 WDA 2019 Appeal from the PCRA Order Entered October 22, 2019 in the Court of Common Pleas of Allegheny County Criminal Division at No(s): CP-02-CR-0013464-1993 COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF : PENNSYLVANIA : v. : : : CARL LEE COLLINS : : Appellant : No. 1632 WDA 2019 Appeal from the PCRA Order Entered October 22, 2019 in the Court of Common Pleas of Allegheny County Criminal Division at No(s): CP-02-CR-0012112-1993 BEFORE: BOWES, J., OLSON, J., and MUSMANNO, J. MEMORANDUM BY MUSMANNO, J.: FILED NOVEMBER 30, 2020 J-A20045-20 Carl Lee Collins (“Collins”) appeals from the Order denying his Petition for relief filed pursuant to the Post Conviction Relief Act (“PCRA”).1 We affirm.2 The PCRA court summarized the procedural history relevant to the instant appeal as follows: In 1993, [Collins] was charged at the above-referenced docket numbers with criminal homicide, aggravated assault, robbery, carrying a firearm without a license, and conspiracy.[3] [Collins] was convicted of second-degree murder and the remaining charges following a jury trial in 1994. At the time [Collins] committed [these] offense[s], [Collins] was 16 years old. On October 11, 2017, pursuant to the United States Supreme Court decision in Miller v. Alabama, 567 U.S. 460 (2012), [Collins] was resentenced before the Honorable Judge Donna Jo McDaniel [(“Judge McDaniel” or “the resentencing judge”)]. At that time, [Collins’s] sentence of life without parole was vacated[,] and Judge McDaniel sentenced [Collins] to serve a period of thirty (30) years to life incarceration.[4] [Collins’s] sentence was affirmed on direct appeal. [See Commonwealth v. Collins, 194 A.3d 714 (Pa. Super. 2018).] On January 16, 2019, [Collins] filed a pro se PCRA Petition. Due to Judge McDaniel’s retirement, this matter was assigned to [the Honorable Thomas E. Flaherty (“the ____________________________________________ 1 See 42 Pa.C.S.A. §§ 9541-9546. 2 Collins properly filed a separate Notice of Appeal at each of the above-stated docket numbers, in accordance with Commonwealth v. Walker, 185 A.3d 969 (Pa. 2018). This Court consolidated the proceedings by an Order entered on November 12, 2019. We note that the use of two docket numbers was the result of Collins’s use of two names at the time of the incident: Carl Lee Collins and Carl Lee Fields. On January 6, 1994, the Commonwealth filed a Motion to Join the proceedings as the assignment of two docket numbers was the result of an “administrative error.” See Motion to Join, 1/6/94, at 6. The record reflects no trial court order disposing of this Motion. 3 See 18 Pa.C.S.A. §§ 2501, 2702(a), 3701(1)(1), 6106(a), 903. 4 Judge McDaniel imposed no further penalty on Collins’s remaining convictions. -2- J-A20045-20 PCRA judge”)]. Counsel was appointed for [Collins], as it was his first PCRA following his resentencing…. PCRA Court Notice of Intention to Dismiss, 9/4/19, at 1 (footnotes and citation added). By appointed counsel, Collins filed an Amended PCRA Petition. After appropriate Notice pursuant to Pa.R.Crim.P. 907, the PCRA court dismissed Collins’s Amended Petition without a hearing. Thereafter, Collins filed the instant timely appeal, followed by a court-ordered Pa.R.A.P. 1925(b) Concise Statement of matters complained of on appeal. Collins presents the following claims for our review: 1. Did the PCRA court err in dismissing [Collins’s] claim that resentencing counsel was ineffective in failing to object to the resentencing court’s reliance on [Collins’s] prior assertions of innocence[,] and [the] prosecution of his third action pursuant to the PCRA[,] as aggravating sentencing factors, impermissibly burdening his federal and Pennsylvania constitutional privilege against self-incrimination, and his Pennsylvania constitutional rights to open courts, to appeal, and to seek writ of habeas corpus? 2. Did the PCRA court err in dismissing [Collins’s] claim that resentencing counsel was ineffective in failing to tether her demonstration of [Collins’s] rehabilitability to a particular term- of-years sentence by resort to extant comparator cases? 3. Did the PCRA court err in dismissing [Collins’s] claim that his sentence is unconstitutional and illegal because it is a de facto life sentence[,] where there is an emerging national consensus that a term of 30 years to life imprisonment is a de facto term of life imprisonment within the meaning of the federal constitutional prohibition on cruel and unusual punishment, an issue currently before the Supreme Court of Pennsylvania in Commonwealth v. Felder, [ 187 A.3d 909 (Pa. 2018)] ? Brief for Appellant at 4. -3- J-A20045-20 In reviewing the grant or denial of PCRA relief, an appellate court considers whether the PCRA court’s conclusions are supported by the record and free of legal error. Commonwealth v. Crispell, 193 A.3d 919 , 927 (Pa. 2018). Moreover, the factual findings of a post-conviction court, which hears evidence and passes on the credibility of witnesses, should be given deference. See Commonwealth v. Spotz, 84 A.3d 294 , 312, 319 (Pa. 2014). In order to qualify for relief under the PCRA, a petitioner must establish, by a preponderance of the evidence, that his conviction or sentence resulted from one or more of the enumerated errors in 42 Pa.C.S.[A.] § 9543(a)(2). These errors include, inter alia, a violation of the Pennsylvania or United States Constitutions, or instances of ineffectiveness of counsel that “so undermined the truth-determining process that no reliable adjudication of guilt or innocence could have taken place.” Id. § 9543(a)(2)(i) and (ii); Crispell, 193 A.3d at 927…. Additionally, to obtain relief under the PCRA based on a claim of ineffectiveness of counsel, a PCRA petitioner must satisfy the performance and prejudice test set forth in Strickland v. Washington, 466 U.S. 668 … (1984). In Pennsylvania, we have applied the Strickland test by requiring a petitioner to establish that: (1) the underlying claim has arguable merit; (2) no reasonable basis existed for counsel’s action or failure to act; and (3) the petitioner suffered prejudice as a result of counsel’s error, with prejudice measured by whether there is a reasonable probability that the result of the proceeding would have been different. Commonwealth v. Pierce, … 786 A.2d 203 , 213 (Pa. 2001). Counsel is presumed to have rendered effective assistance, and, if a claim fails under any required element of the Strickland test, the court may dismiss the claim on that basis. Commonwealth v. Ali, … 10 A.3d 282 , 291 (Pa. 2010)…. Commonwealth v. Housman, 226 A.3d 1249 , 1260-61 (Pa. 2020). -4- J-A20045-20 Collins first claims that the PCRA court improperly dismissed his claim of ineffective assistance of resentencing counsel. Brief for Appellant at 16. Specifically, Collins argues that counsel should have objected when the resentencing court relied on Collins’s prior assertions of innocence, and his pursuit of a third PCRA Petition, as aggravating sentencing factors. Id. at 16. According to Collins, his counsel “ably demonstrated that he was already rehabilitated, much less rehabilitatable.” Id. Collins argues that the Commonwealth then improperly countered with evidence of his prior assertions of innocence, and Collins’s prosecution of his third PCRA Petition. Id. Collins asserts that the resentencing court relied on this evidence as an aggravating sentencing factor, which impacted his credibility and ability to be rehabilitated. Id. Collins argues that in doing so, the resentencing court violated and burdened his federal and state constitutional privilege against self-incrimination, and his right to petition for writ of habeas corpus. Id. at 16-17. In particular, Collins directs our attention to the Commonwealth’s inquiry related to the claims raised in his 2008 PCRA Petition. Id. at 17-18. According to Collins, the Commonwealth used the averments in his 2008 PCRA Petition as evidence that he was “still trying to get out and putting forth lies before the [c]ourt in order to get released[.]” Id. (citation omitted). Collins asserts that the Commonwealth also referred to this evidence in its closing argument at the resentencing hearing. See id. at 19. Collins argues that his -5- J-A20045-20 resentencing counsel rendered ineffective assistance by not objecting to the presentation of this evidence, and the Commonwealth’s argument. Id. According to Collins, the trial court further relied on this evidence as an aggravating sentencing factor, in its statement of reasons for the sentence imposed. Id. at 19-21, 21-22. Collins argues that by considering impermissible sentencing factors, the resentencing court impermissibly burdened the exercise of his constitutional rights. Id. at 26. Collins cites North Carolina v. Pearce, 395 U.S. 711 (1969), which recognized that “penalizing those who choose to exercise constitutional rights, would be patently unconstitutional. … And the very threat inherent in the existence of such a punitive policy would, with respect to those still in prison, serve to chill the exercise of basic constitutional rights….” Id. at 724 . According to Collins, his counsel had no reasonable basis for her failure to object to this evidence. See Brief for Appellant at 30. As a result, Collins argues, he suffered prejudice at resentencing. Id. In its Pa.R.Crim.P. 907 Notice of Intent to Dismiss (“PCRA Notice”), which the PCRA court incorporated into its Pa.R.A.P. 1925 Opinion, the PCRA court addressed this claim as follows: At [Collins’s] resentencing, [the resentencing court] permitted the Commonwealth to inquire about [Collins’s] prior PCRA Petition[,] wherein he proffered evidence that purportedly exonerated him. This line of inquiry was taken in the context of challenging [Collins’s] statement at the resentencing hearing that he was remorseful and taking responsibility for his actions. After careful -6- J-A20045-20 review of the resentencing hearing transcript, it is clear that the [resentencing court] did not place an emphasis on this fact when fashioning [the] sentence. [The resentencing judge] merely stated that it was “interesting.” [The resentencing judge] found that the most significant factor was the fact that [Collins] began to take classes and better himself in 1995, which was before Miller [] found mandatory life sentences for juveniles to be unconstitutional. It proved to [the resentencing judge] that [Collins] was sincere in his rehabilitation efforts. As the record fails to establish that [the resentencing judge] used [Collins’s] prior profession of innocence in any manner in fashioning [Collins’s] sentence, it cannot be ineffective assistance of counsel to fail to object to the same. PCRA Court Notice, 9/4/19, at 2 (citations omitted). Because the record supports the PCRA court’s determination that Collins’s underlying claim lacks arguable merit, we affirm on the basis of the PCRA court’s reasoning, as set forth above, with regard to Collins’s first claim. See id.; see also Ali, 10 A.3d at 291 (stating that if an ineffectiveness claim fails under any required element of the Strickland test, the court may dismiss the claim on that basis). In his second claim, Collins argues that his resentencing counsel rendered ineffective assistance by failing “to tether her demonstration of [Collins’s] rehabilitability to a particular term-of-years sentence by resort to extant comparator cases.” Brief for Appellant at 32. Collins sets forth a summary of the sentences imposed for 16-year-old offenders convicted of second-degree murder throughout Pennsylvania. Id. at 33. Collins challenges the PCRA court’s reliance on Commonwealth v. Lekka, 210 A.3d -7- J-A20045-20 343 (Pa. Super. 2019), in holding that consideration of “comparator’s sentences” is legally impermissible. Brief for Appellant at 34. Collins contends that at the hearing, his counsel demonstrated that Collins was “essentially already rehabilitated,” and that the gravity of his offense, “essentially a robbery gone wrong[,]” was consistent with cases that had resulted in lower minimum sentences. Id. at 35. According to Collins, counsel’s ineffectiveness caused him prejudice, “as there is a reasonable probability that providing a frame of reference for post-Miller resentencing would have persuaded the resentencing court to impose a minimum term of less than 30 years [of] imprisonment.” Id. at 36. When imposing sentence, a trial court must consider the relevant sentencing guideline ranges, as well as “the factors set out in 42 Pa.C.S.A. § 9721(b), that is, the protection of the public, gravity of offense in relation to impact on victim and community, and rehabilitative needs of the defendant.” Commonwealth v. Coulverson, 34 A.3d 135 , 144 (Pa. Super. 2011) (citation omitted). In Commonwealth v. Celestin, 825 A.2d 670 (Pa. 2003), this Court addressed whether a sentencing court may consider “factually similar cases in which plea bargains resulted in sentences below the guideline range,” as a factor in sentencing the defendant. Id. at 679. In concluding that such evidence constituted an impermissible sentencing factor, this Court recognized that “a sentencing court in one case cannot possibly know all of -8- J-A20045-20 the various considerations and factors underlying a negotiated plea in another case.” Id. at 680. In Lekka, following the decision in Miller, the trial court resentenced the defendant to 45 years to life in prison. Lekka, 210 A.3d at 348. The defendant filed a motion to reconsider his sentence, at which time he sought to introduce an exhibit analyzing the resentencing of 120 juvenile offenders in Pennsylvania, following Miller. Id. The resentencing court precluded the admission of this exhibit, and denied reconsideration of the defendant’s sentence. Id. On appeal, the defendant challenged, inter alia, the preclusion of the exhibit analyzing the sentences imposed on other juvenile offenders, following Miller. Id. at 353. This Court rejected the defendant’s claim, concluding that (a) the defendant had failed to present the exhibit at his original resentencing hearing; and, significantly, (b) the exhibit was not relevant. Id. Regarding the exhibit’s lack of relevance, this Court explained, in part, that “[t]he consideration of the sentences[,] by themselves[,] is also contrary to Pennsylvania’s individual sentencing scheme, which mandates that courts consider in each case the nature and circumstances of the crime and character of the defendant[,] rather than only looking to the mere fact of the offense committed.” Id. Further, “uniformity in sentencing does not obviate the requirement that the sentence be individualized with respect to the factors of the particular defendant and criminal offense.” Id. at 354-55. -9- J-A20045-20 Here, as in Celestin and Lekka, we conclude that evidence related to “comparable cases” would have been irrelevant to the individualized sentencing of Collins required by Pennsylvania’s Sentencing Code. See Commonwealth v. Walls, 926 A.2d 957 , 966 (Pa. 2007) (stating that “Pennsylvania’s sentencing system, as evidenced by the Sentencing Code and our case law, is based upon individualized sentencing.”). As such, comparable cases evidence would have constituted an impermissible sentencing factor. See Celestin, 825 A.2d 679 . Because there is no arguable merit to Collins’s underlying claim, this claim of ineffective assistance of resentencing counsel fails. See Ali, 10 A.3d at 291 (recognizing that if a claim fails under any required element of the Strickland ineffectiveness test, the court may dismiss the claim on that basis). Finally, Collins argues that the PCRA court erred in rejecting his challenge to the legality of the sentence, as “there is an emergent consensus that a term of 30 years to life imprisonment is a de facto term of life imprisonment,” and therefore violates the constitutional prohibition on cruel and unusual punishment. Brief for Appellant at 41. Collins directs our attention to other jurisdictions, arguing that there is a growing national consensus that, “at least, somewhere between 25 and 30 years [of] imprisonment is the upper limit before the chance at parole must be provided.” Id. at 43. Collins also states that the issue is presently before our Supreme - 10 - J-A20045-20 Court in Commonwealth v. Felder, 181 A.3d 1252 (Pa. Super. 2017) (unpublished memorandum), appeal granted, 187 A.3d 909 (Pa. 2018). “[A] claim challenging a sentencing court’s legal authority to impose a particular sentence presents a question of sentencing legality.” Commonwealth v. Batts, 163 A.3d 410 , 434-35 (Pa. 2017) (“Batts II”) (citations omitted). “The determination as to whether a trial court imposed an illegal sentence is a question of law; an appellate court’s standard of review in cases dealing with questions of law is plenary.” Commonwealth v. Crosley, 180 A.3d 761 , 771 (Pa. Super. 2018) (citation omitted). In Felder, our Supreme Court granted allowance of appeal as to the following issue: Does not a sentence of 50 years to life imposed upon a juvenile constitute a de facto life sentence requiring the sentencing court, as mandated by this Court in [Batts II,] first find permanent incorrigibility, irreparable corruption or irretrievable depravity beyond a reasonable doubt? Felder, 187 A.3d 909 (Pa. 2018) (emphasis added). Here, Collins was sentenced to a minimum prison term of 30 years. Thus, on its face, any holding in Felder would be distinguishable from the instant case. Upon our review, we agree with the PCRA court’s Notice, which stated the following: [W]ith regard to [Collins’s] assertion that a sentence of 30 to life is a de facto life sentence, it is important to remember that [Collins] has been incarcerated since he was 16 years old. At his resentencing, [Collins] was given credit for time served since his - 11 - J-A20045-20 initial sentence. Thus, [Collins] will be eligible for parole at the age of 47. While a court is prohibited from sentencing a juvenile homicide defendant to a term-of-years sentence that results in a de facto life sentence, a sentence is not a de facto life sentence if a defendant has a “meaningful chance of surviv[ing]” until he has served his minimum sentence. … Lekka, 210 A.3d at 357-58. [Collins] … clearly has a “meaningful chance of survival” to meet his minimum sentence, as he will be 47 years of age when he reaches his minimum sentence. As such, the sentence of thirty (30) [years] to life is not a de facto life sentence. PCRA Court Notice, 9/4/19, at 3-4. We agree with the analysis and conclusion of the PCRA court, as set forth above, and affirm on this basis with regard to Collins’s third claim. See id. Order affirmed. Judgment Entered. Joseph D. Seletyn, Esq. Prothonotary Date: 11/30/2020 - 12 -

2020-11-30 18:13:50.888254+00

http://www.pacourts.us/assets/opinions/Superior/out/J-A20035-20m - 104618232120858452.pdf

J-A20035-20 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF : PENNSYLVANIA : v. : : : EDWARD STEPHEN DELGROS : : Appellant : No. 1822 WDA 2019 Appeal from the Order Entered November 15, 2019 in the Court of Common Pleas of Mercer County Criminal Division at No(s): CP-43-CR-0001496-2014 BEFORE: BOWES, J., OLSON, J., and MUSMANNO, J. MEMORANDUM BY MUSMANNO, J.: FILED NOVEMBER 30, 2020 Edward Stephen Delgros (“Delgros”) appeals from the judgment of sentence imposed following his conviction of receiving stolen property.1 We affirm. Our Supreme Court previously summarized the factual history of this case as follows: [I]n June of 2001, [Delgros] hired Robert Croyle [(“Croyle”)] to install a double-wide mobile home on his property. Croyle purchased two I-beams, described as being lightweight magnesium and more than twenty feet long, for $1,400.00 each[,] and employed them to move the double-wide into position. Croyle left the I-beams and other materials on [Delgros]’s property, intending to pick them up at a later time. When Croyle returned, his materials were not at the site, and [Delgros] denied knowledge of their whereabouts. Croyle reported the I-beams missing to the Hermitage Police Department. [] Deputy Chief Eric Jewel [(“Deputy Chief Jewel”)] questioned [Delgros] about the I- ____________________________________________ 1 18 Pa.C.S.A. § 3925(a). J-A20035-20 beams[. Delgros] reiterated that he did not know where they had gone. With [Delgros]’s authorization, Deputy Chief Jewel searched the premises to no avail. Several months later, [Delgros] told his father that he had Croyle’s I-beams and asked for his father’s assistance in hiding the[ I-beams] in the woods. Five to seven years thereafter, [Delgros] and his father used the I-beams to build a porch on [Delgros]’s house. In April of 2014, Hermitage police received a report that the I-beams were on [Delgros]’s property. [Delgros]’s father subsequently told Deputy Chief Jewel that [Delgros] had used Croyle’s I-beams in the construction of his porch. Deputy Chief Jewel went to [Delgros]’s residence and saw the I-beams supporting the porch roof in plain view. After obtaining a warrant, photographs and samples of the I-beams were taken, which indicated that the beams were made of aluminum. When Croyle was asked about his prior claim that the missing beams were made of magnesium, he explained that he thought the beams were magnesium, but that they could have been aluminum. Based on holes present in the I-beams[;] however, Croyle identified the I-beams photographed in [Delgros]’s porch as being those that went missing years earlier. Commonwealth v. Delgros, 183 A.3d 352 , 353-54 (Pa. 2018). Following a jury trial, Delgros was convicted of the above-mentioned offense. The trial court deferred sentencing and ordered a pre-sentence investigation report. On June 23, 2015, the trial court sentenced Delgros to pay costs, restitution in the amount of $2,800.00, and a fine of $15,000.00. On July 1, 2015, Delgros filed a Post-Sentence Motion. In his Motion, Delgros argued, inter alia, that his trial counsel rendered ineffective assistance of counsel. After oral argument, the trial court denied Delgros’s request for an evidentiary hearing on his claims of ineffective assistance of counsel, because those claims were not raised in a petition for relief under the Post -2- J-A20035-20 Conviction Relief Act (“PCRA”).2 On December 13, 2016, this Court affirmed Delgros’s judgment of sentence. See Commonwealth v. Delgros, 159 A.3d 1003 (Pa. Super. 2016) (unpublished memorandum). The Supreme Court granted allowance of appeal to address whether “[Delgros], who is ineligible for collateral review under the [PCRA] because he was sentenced only to pay a fine, is entitled to review of ineffective assistance of counsel claims presented in post-sentence motions.” Delgros, 183 A.3d at 356. The Supreme Court held that trial courts are required to examine ineffectiveness claims when the defendant is statutorily precluded from PCRA review. See id. at 353. The Supreme Court reversed this Court and remanded the instant case to the trial court. Id. Subsequently, on February 27, 2019, the trial court granted Delgros leave to file a new post-sentence motion, nunc pro tunc. On April 25, 2019, Delgros filed a Motion requesting a 60-day extension in order to file his post- sentence motion. The trial court granted Delgros’s Motion. On June 25, 2019, Delgros filed his Post-Sentence Motion, alleging that his trial counsel rendered ineffective assistance of counsel for his failures to: (1) investigate and introduce evidence of Croyle’s five prior convictions of crimen falsi; (2) impeach Croyle with his five prior convictions of crimen falsi; (3) object to hearsay testimony provided by Delgros’s family; and (4) request ____________________________________________ 2 42 Pa.C.S.A. §§ 9541-9546. -3- J-A20035-20 jury instructions related the previous claims. Additionally, Delgros asserted that the victim impact statement provided by Croyle constituted after- discovered evidence. On October 2, 2019, following a status conference on Delgros’s Post-Sentence Motion, the parties stipulated that Croyle had five crimen falsi convictions against him. On October 8, 2019, Delgros filed a Motion for an Extension of Time pursuant to Pa.R.Crim.P. 720(B)(3)(b), which the trial court granted on October 9, 2019. On October 30, 2019, the trial court entered an Order memorializing the parties’ stipulation that Delgros’s trial counsel was unaware of Croyle’s crimen falsi convictions and, thus, those convictions were not introduced at trial. Additionally, the trial court ordered both parties to submit briefs concerning Delgros’s Post-Sentence Motion. In his Post-Sentence Motion Memorandum of Law, Delgros raised, for the first time, a claim that the Commonwealth had suppressed Croyle’s five convictions of crimen falsi in violation of Brady.3, 4 On November 15, 2019, the trial court denied Delgros’s Post-Sentence Motion. ____________________________________________ 3 See Brady v. Maryland, 373 U.S. 83 , 87 (1963) (holding that the prosecution must disclose evidence favorable to the accused that is material either to guilt or punishment). 4 We observe that Delgros did not include this claim in his Post-Sentence Motion. However, as discussed infra, the trial court, in its Opinion, was able to aptly address Delgros’s Brady claim. See Trial Court Opinion, 2/5/20, at 8-9. Accordingly, we decline to deem this issue waived. -4- J-A20035-20 On November 25, 2019, Delgros filed a Motion for Reconsideration of his Post- Sentence Motion. On December 13, 2019, before the trial court ruled on the Motion for Reconsideration, Delgros filed a timely Notice of Appeal and court-ordered Pa.R.A.P. 1925(b) Concise Statement of errors complained of on appeal.5 Delgros now raises the following claims for our review: 1. Did the trial court err in fail[]ing to grant a new trial based on a[] serious Brady violation? ____________________________________________ 5 We observe that Delgros’s Motion for Reconsideration of his Post-Sentence Motion was still pending at the time he filed his Notice of Appeal. The Comment to Rule 720 (relating to timeliness of post-sentence motions) states the following: If the trial judge decides the motion within the time limits of this rule, the judge may grant reconsideration on the post-sentence motion pursuant to 42 Pa.C.S.[A.] § 5505 or Pa.R.A.P. 1701.1, but the judge may not vacate the sentence pending reconsideration. Rule 720(B)(3). The reconsideration period may not be used to extend the timing requirements set forth in paragraph (B)(3) for decision on the post-sentence motion: the time limits imposed by paragraphs (B)(3)(a) and (B)(3)(b) continue to run from the date the post-sentence motion was originally filed. The trial judge’s reconsideration must therefore be resolved within the 120-day decision period of paragraph (B)(3)(a) or the 30-day extension period of paragraph (B)(3)(b), whichever applies. If a decision on the reconsideration is not reached within the appropriate period, the post-sentence motion, including any issues raised for reconsideration, will be denied pursuant to paragraph (B)(3)(c). Pa.R.Crim.P.. 720, cmt. (emphasis added). Here, the trial court denied Delgros’s Post-Sentence Motion on November 15, 2019. Accordingly, Delgros’s Notice of Appeal, filed on December 13, 2019, is timely, and we will address the merits of his claims. See id. -5- J-A20035-20 2. Was trial counsel ineffective for failing to investigate and introduce evidence that the alleged victim [Croyle] had five prior crimen falsi convictions? Brief for Appellant at 8 (some capitalization omitted). In his first claim, Delgros argues that the trial court erred when it denied his Post-Sentence Motion requesting a new trial based upon the alleged Brady violation. Brief for Appellant at 12. Delgros asserts that the Commonwealth withheld and suppressed evidence of Croyle’s five prior crimen falsi convictions. Id. at 12-15. Delgros acknowledges that Croyle’s convictions are of public record, but contends that the Commonwealth had an affirmative duty to provide any material and exculpatory evidence. Id. at 13-15. Delgros claims that convictions of crimen falsi go to the credibility of the witness and, thus, the Commonwealth is required to disclose such evidence. Id. at 16-17. Additionally, Delgros contends that he was prejudiced by the suppression of Croyle’s convictions because Delgros was unable to adequately cross-examine Croyle. Id. at 18-19. Our Supreme Court has explained that in order to establish a Brady violation, a defendant must show that: (1) the evidence was suppressed by the state, either willfully or inadvertently; (2) the evidence was favorable to the defendant either because it was exculpatory or because it could have been used for impeachment; and (3) the evidence was material in that its omission resulted in prejudice to the defendant. However, the mere possibility that an item of undisclosed information might have helped the defense, or might have affected the outcome of the trial, does not establish materiality in the constitutional sense. Rather, evidence is material only if there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different. A -6- J-A20035-20 reasonable probability is a probability sufficient to undermine confident in the outcome. Commonwealth v. Williams, 168 A.3d 97 , 109 (Pa. 2017) (citations, quotation marks, and brackets omitted). Further, “[t]o obtain a new trial based on the Commonwealth’s failure to disclose evidence affecting a witness’s credibility, the defendant must demonstrate that the reliability of the witness may be determinative of the defendant’s guilt or innocence.” Commonwealth v. Tharp, 101 A.3d 736 , 747 (Pa. 2014). In its Opinion, the trial court concluded that “[Delgros] has failed to meet [his] burden o[f] proving, by reference to the record, that evidence was withheld or suppressed by the prosecution.” Trial Court Opinion, 2/5/20, at 9. Additionally, Delgros concedes that Croyle’s convictions were matters of public record. See Brief for Appellant at 13-15. Our review of the record confirms that Croyle’s convictions are matters of public record and, thus, were equally available to both Delgros and the Commonwealth. See Williams, supra; see also Commonwealth v. Spotz, 896 A.2d 1191 , 1248 (Pa. 2006) (stating that “no Brady violation occurs where parties had equal access to information or if the defendant knew or could have known such evidence existed with reasonable diligence”) (citation omitted); Commonwealth v. Wilson, 147 A.3d 7 , 14 (Pa. Super. 2016) (stating that “information contained in a witness’[s] criminal record is not within the Commonwealth’s exclusive control and, thus, not Brady material.”). Accordingly, we cannot grant Delgros relief on this claim. -7- J-A20035-20 In his second claim, Delgros argues that his trial counsel’s failure to investigate, and introduce evidence of, Croyle’s five prior crimen falsi convictions constituted ineffective assistance of counsel. Brief for Appellant at 21. Delgros asserts that Croyle had five crimen falsi convictions and that his trial counsel stipulated that “he was unaware of the [crimen falsi] offenses.” Id. at 23. Delgros claims that multiple convictions of crimen falsi are “obviously important evidence” and that “there is no apparent strategic reason that might explain or excuse [his trial] counsel’s mistake.” Id. at 22- 23. Delgros contends that, if his trial counsel had impeached Croyle with the five convictions of crimen falsi, the outcome of his trial would have been different because the convictions demonstrate that Croyle is dishonest. Id. at 25. Further, Delgros argues “that if the jury disbelieved the testimony of [Croyle,] the outcome of the trial may have been different.” Id. Counsel is presumed to be effective and “the burden of demonstrating ineffectiveness rests on [the] appellant.” Commonwealth v. Rivera, 10 A.3d 1276 , 1279 (Pa. Super. 2010). To prevail on a claim of ineffective assistance of counsel, an appellant must establish the following three factors: “first [that] the underlying claim has arguable merit; second, that counsel had no reasonable basis for his action or inaction; and third, that [a]ppellant was prejudiced.” Commonwealth v. Charleston, 94 A.3d 1012 , 1020 (Pa. Super. 2014) (citation omitted). “Failure to satisfy any prong of the test will result in rejection of the appellant’s ineffective assistance of counsel claim.” -8- J-A20035-20 Commonwealth v. Holt, 175 A.3d 1014 , 1018 (Pa. Super. 2017) (internal citations and quotation marks omitted). In order to demonstrate prejudice, the petitioner must demonstrate that “there is a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceedings would have been different.” Commonwealth v. King, 57 A.3d 607 , 613 (Pa. 2012). “[A] reasonable probability is a probability that is sufficient to undermine confidence in the outcome of the proceedings.” Commonwealth v. Ali, 10 A.3d 282 , 291 (Pa. 2010). In its Opinion, the trial court concluded that Delgros had not demonstrated prejudice resulting from trial counsel’s alleged ineffectiveness, and addressed Delgros’s claim as follows: [Croyle] merely testified that he left I-beams, axles, and wheels at [Delgros]’s property[,] which were missing when [] Croyle subsequently returned to retrieve them. [Delgros] told [] Croyle [that] he did not know what happened to [Croyle’s] property. [] Croyle reported the missing items to the Hermitage Police Department. This [incident] occurred in 2001. [] Croyle [ga]ve a description of the missing I-beams. [Croyle] initially described them as being made of magnesium[,] and he told police that one beam was 24 feet long and the other was 22 feet long. Importantly, [] Croyle did not provide evidence establishing that [Delgros] was responsible for the items going missing. [Several] years after [] Croyle’s report, [Delgros]’s brother- in-law[,] Joby Hackett [(“Hackett”)], told police that he had seen I-beams on [Delgros]’s property when [Hackett] had been hunting thereon. [Delgros]’s father, Joseph Delgros [(“Father”)], provided the most important testimony offered during the trial[,] when he testified that [Delgros] showed [Father] the I-beams on [Delgros]’s property and [Delgros] told [Father] that the I-beams came from [Croyle]. [Father] also admitted that he hauled the I- beams to [Delgros]’s mobile home where [Delgros] used them in the construction of a patio. -9- J-A20035-20 Based on tips from [Delgros]’s family, [Deputy Chief Jewel] went to [Delgros]’s home and observed the I-beams. After obtaining a search warrant, [Deputy Chief Jewel] measured the beams; one beam was 24 feet[,] 6 inches and the other was 24 feet[,] 3 inches. [Deputy Chief Jewel] also took samples of the beams and sent them to a lab for testing. The beams were aluminum and not magnesium. The above facts show that the evidence which established [Delgros]’s guilt came from his family members and not [Croyle]. Also, [Croyle]’s initial description of the beams was not consistent with the actual beams in multiple ways, so it is not as though his testimony was entirely favorable to the Commonwealth. For these reasons, the [trial c]ourt denies [Delgros]’s [claim]. Trial Court Opinion, 2/5/20, at 7-8. We agree with and adopt the reasoning of the trial court, which is supported by the evidence of record. See id.; see also Holt, supra. Because Delgros failed to establish prejudice, we cannot grant relief on this claim. Judgment of sentence affirmed. Judgment Entered. Joseph D. Seletyn, Esq. Prothonotary Date: 11/30/2020 - 10 -

2020-11-30 18:13:51.09892+00

http://www.pacourts.us/assets/opinions/Superior/out/J-S34004-20m - 104618633120884116.pdf

J-S34004-20 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF : PENNSYLVANIA : v. : : : MARENDA LENAY DAVI : : Appellant : No. 2012 MDA 2019 Appeal from the Judgment of Sentence Entered November 14, 2019 In the Court of Common Pleas of Dauphin County Criminal Division at No(s): CP-22-CR-0003705-2017 COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF : PENNSYLVANIA : v. : : : MARENDA LENAY DAVI : : Appellant : No. 316 MDA 2020 Appeal from the Judgment of Sentence Entered November 14, 2019 In the Court of Common Pleas of Dauphin County Criminal Division at No(s): CP-22-CR-0001737-2019 BEFORE: PANELLA, P.J., BENDER, P.J.E., and FORD ELLIOTT, P.J.E. MEMORANDUM BY PANELLA, P.J.: FILED NOVEMBER 30, 2020 Marenda Lenay Davi appeals from the judgments of sentence entered in the Dauphin County Court of Common Pleas following the revocation of her probation. Davi contends that the sentencing court abused its discretion by failing to consider her rehabilitative needs and ability to reform and by imposing a manifestly excessive sentence. We affirm. J-S34004-20 In 2017, Davi was arrested for obtaining telecommunication and phone services through fraudulent means and without consent of the service providers. At docket number CP-22-CR-0003705-2017 (“the 2017 case”), Davi pled guilty to theft of services and identity theft. The trial court sentenced her to five years’ probation. While on probation, Davi was twice charged with new criminal activity. The Commonwealth ultimately declined to prosecute the first set of charges, which included charges for bad checks. Davi’s probation continued, but she was required thereafter to wear an ankle monitor. Later, police again arrested Davi and charged her with forgery, identify theft, theft by unlawful taking, receiving stolen property, access device fraud, and bad checks. At docket number CP-22-CR-0001737-2019 (“the 2019 case”), Davi entered a guilty plea to all charges, and the court ordered a presentence report. In the meantime, Dauphin County Probation Services filed a detainer alleging Davi’s guilty plea violated her probationary sentence. Davi appeared before the court for a hearing. Ultimately, the court acceded to requests from the Commonwealth and the probation officer to revoke Davi’s probation and sentenced her to a term of incarceration. The court resentenced Davi in the 2017 case to 2 ½-5 years’ incarceration. In the 2019 case, the court sentenced Davi to 1-2 years’ incarceration, consecutive with the revocation sentence imposed in the 2017 case. As a result, Davi received an aggregate sentence of 3 ½-7 years’ -2- J-S34004-20 incarceration. Davi filed a post-sentence motion to modify her sentence on both dockets. Shortly thereafter, she filed timely notices of appeal at each docket.1 This appeal is now properly before us.2 In her only issue, Davi challenges the discretionary aspects of her sentences in both the 2017 and 2019 cases as well as the trial court’s decision to impose these sentences consecutively. She claims that these sentences were not consistent with the protection of the public, the gravity of the underlying offenses or her rehabilitative needs. See Appellant’s Brief, at 23. Davi also alleges that the aggregate sentence of 3 ½-7 years’ imprisonment was unreasonable and manifestly excessive. See id., at 20. ____________________________________________ 1In Commonwealth v. Walker, 185 A.3d 969 , 971 (Pa. 2018), our Supreme Court held that “where a single order resolves issues arising on more than one docket, separate notices of appeal must be filed for each of those cases.” Our review of the record reveals that Davi filed separate notices of appeal at each docket and therefore has complied with Walker. 2 The trial court entered the judgment of sentence on November 14, 2019 following the revocation of probation. Davi filed a timely post-sentence motion on November 21, 2019. Davi filed a notice of appeal on December 11, 2019. The trial court ruled on the post-sentence motion on December 18, 2019, after Davi filed her notice of appeal. Under Pa.R.Crim.P. 708(E), “[a] motion to modify a sentence imposed after a revocation shall be filed within 10 days of the date of imposition. The filing of a motion to modify sentence will not toll the 30-day appeal period.” Accordingly, the notice of appeal was timely filed. However, the trial court’s December 18, 2019 order is a legal nullity as the trial court was divested of jurisdiction as more than 30 days had elapsed after the judgment of sentence was imposed. The appeals were consolidated on February 27, 2020, upon Davi’s application to consolidate. -3- J-S34004-20 The right to challenge the discretionary aspects of sentencing on appeal is not absolute. See Commonwealth v. Bynum–Hamilton, 135 A.3d 179 , 184 (Pa. Super. 2016). An appellant must petition this Court for permission to appeal the discretionary aspects of her sentence. See Commonwealth v. Ali, 197 A.3d 742 , 760 (Pa. Super. 2018) (citation omitted). Then, we must conduct a four part analysis to determine whether: (1) the appeal is timely; (2) the appellant preserved the issue; (3) the appellant’s brief does not contain a fatal defect; and (4) the appellant raised a substantial question that the sentence is inappropriate under the Sentencing Code. See Commonwealth v. Barnes, 167 A.3d 110 , 122 (Pa. Super. 2017) (en banc). Here, Davi properly preserved her claims by filing a post-sentence motion, referencing both dockets, and timely notices of appeal. Additionally, Davi’s brief contains the required Pa.R.A.P. 2119(f) statement. Next, we must determine whether Davi’s claim constitutes a substantial question. This Court has held that “a substantial question exists only when the appellant advances a colorable argument that the sentencing judge’s actions were either: (1) inconsistent with a specific provision of the Sentencing Code; or (2) contrary to the fundamental norms which underlie the sentencing process.” Commonwealth v. Moury, 992 A.2d 162 , 170 (Pa. Super. 2010) (internal quotations and citation omitted). An appellant’s contention that the trial court failed to consider relevant sentencing criteria, including the protection of the public, the gravity of the underlying offense, and her -4- J-S34004-20 rehabilitative needs, presents a substantial question for our review. See Commonwealth v. Derry, 150 A.3d 987 , 992 (Pa. Super. 2016). Further, a substantial question also exists where an appellant alleges the sentencing court failed to sufficiently state its reasons for the sentence imposed. See Commonwealth v. McNabb, 819 A.2d 54 , 56 (Pa. Super. 2003). In her 2119(f) statement, Davi raises three challenges to the discretionary aspects of her sentence. We therefore proceed to analyze whether any of these challenges present substantial questions. Davi’s first and second challenge focus on the sentences imposed in her 2017 and 2019 cases. Specifically, she claims that the court abused its discretion by imposing sentences that focused solely on the nature of her criminal conduct. In doing so, she argues the trial court failed to consider all three of the sentencing factors required by 42 Pa.C.S.A. § 9721(b): (1) the protection of the public, (2) the gravity of the underlying offenses, and (3) the defendant’s rehabilitative needs. See Appellant’s Brief, at 18; see also 42 Pa.C.S.A. § 9721(b). Furthermore, Davi alleges the trial court failed to state its reasons for imposing either sentence. See Appellant’s Brief, at 23. Taken together, we find these challenges raise substantial questions. See Commonwealth v. Macias, 968 A.2d 773 , 776 (Pa. Super. 2009) (stating that “an averment that the court sentenced based solely on the seriousness of the offense and failed to consider all relevant factors raises a substantial question”); see also Commonwealth v. Coulverson, 34 A.3d -5- J-S34004-20 135, 143 (Pa. Super. 2011) (recognizing that the trial court’s failure to offer specific reasons for the sentence raises a substantial question). Davi’s third challenge focuses on the trial court’s imposition of consecutive sentences. In particular, she claims her aggregate sentence was manifestly excessive given her limited criminal history. See Appellant’s Brief, at 23-24. Although a challenge to consecutive sentences ordinarily does not raise a substantial question, we have held that this issue must be examined on a case-by-case basis. See Commonwealth v. Marts, 889 A.2d 608 , 612-613 (Pa. Super. 2005). “The imposition of consecutive, rather than concurrent, sentences may raise a substantial question in only the most extreme circumstances, such as where the aggregate sentence is unduly harsh, considering the nature of the crimes and the length of imprisonment.” Moury, 992 A.2d at 171-172 . To determine whether the imposition of consecutive sentences presents a substantial question, we decide “whether the decision to sentence consecutively raises the aggregate sentence to, what appears upon its face to be, an excessive level in light of the criminal conduct at issue in the case.” Commonwealth v. Gonzalez-Dejusus, 994 A.2d 595 , 599 (Pa. Super. 2010). Here, we conclude that Davi has not established that her aggregate sentence of 3 ½-7 years’ incarceration was so extreme and excessive in light of the criminal conduct at issue in this case as to create a substantial question. -6- J-S34004-20 However, even if this claim did present a substantial question, it would not merit relief. Therefore, we turn now to the merits of each challenge. In her first challenge, Davi argues the trial court failed to consider the relevant sentencing factors set forth in 42 Pa.C.S.A. § 9721(b). Davi further contends the trial court failed to provide reasons on the record for its revocation sentence that comport with the considerations required by 42 Pa.C.S.A. § 9721(b). Sentencing is within the sound discretion of the trial court, and a sentence will not be disturbed absent an abuse of that discretion. See Commonwealth v. Jones, 640 A.2d 914 , 916 (Pa. Super. 1994). An abuse of discretion is not merely an error of judgment, but a misapplication of the law or an unreasonable exercise of judgment. See Commonwealth v. Sitler, 144 A.3d 156 , 163 (Pa. Super. 2016) (en banc). When imposing a sentence, the trial court must consider the factors set forth in 42 Pa.C.S.A. § 9721(b), that is, the protection of the public, the gravity of the offense, and the defendant’s rehabilitative needs. See Commonwealth v. Shugars, 895 A.2d 1270 , 1274 (Pa. Super. 2006). The trial court must also disclose on the record the reason or reasons for its sentence. See 42 Pa.C.S.A. § 9721(b). However, where the trial court had the benefit of reviewing a pre- sentence report, we must presume the court was aware of and weighed relevant information regarding a defendant’s character along with mitigating statutory factors. See Commonwealth v. Devers, 546 A.2d 12 , 18 (Pa. -7- J-S34004-20 1988) (stating that “it would be foolish, indeed, to take the position that if a court is in possession of the facts, it will fail to apply them to the case at hand”). At the sentencing hearing following Davi’s revocation of probation, the trial court heard from Davi’s counsel. Counsel for Davi argued against a sentence of total confinement given Davi’s limited criminal history and her traumatic childhood. See N.T., Revocation and Sentencing Hearing, 11/14/19, at 6-7. Counsel also highlighted that Davi suffers from an unspecified mental health condition, which contributed to her criminal conduct. See id., at 7. Further, Counsel asserted that, if Davi were allowed to continue with her probationary sentence, Davi would be able to seek the necessary mental health treatment for her condition. See id. Despite Counsel’s arguments, the trial court imposed a sentence of incarceration. But the trial court specifically stated on the record that Davi was to be housed at a mental health focused state correctional institution where she could receive care for her mental health condition. See id., at 9. As such, it is apparent from the record that the trial court considered the protection of the public, the gravity of Davi’s offense and her rehabilitative needs when imposing sentence. Furthermore, even though the trial court did not disclose the above mentioned reasons for its sentence, the record shows that the court reviewed -8- J-S34004-20 the pre-sentence report before imposing a sentence of total confinement.3 Thus, the trial court satisfied the requirement that reasons for imposing sentence be placed on the record by indicating it reviewed the pre-sentence report. See Commonwealth v. Burns, 765 A.2d 1144 , 1151 (Pa. Super. 2000). Therefore, based upon the foregoing, we conclude the record confirms the trial court properly considered the factors set forth in § 9721(b) and reviewed the pre-sentence report before imposing its sentence. As such, we discern no abuse of discretion. Next, Davi claims, as she did previously, that the trial court failed to consider the facts and circumstances of the case or her rehabilitative needs as required by 42 Pa.C.S.A. § 9721(b) and imposed a sentence in the 2019 case without providing any reasons for the sentence. Once again, it is clear that the trial court considered the facts and circumstances of the case and Davi’s rehabilitative needs in the 2019 case. At the sentencing hearing, the trial court made its sentencing decision after hearing from the victims in the case who were Davi’s elderly aunt and uncle. The trial court heard from the victims how Davi betrayed their trust and stole ____________________________________________ 3 “We’ll make the pre-sentence [report] part of the record, as well as the sentencing memorandum.” N.T., Revocation and Sentencing Hearing, 11/14/19, at 9. -9- J-S34004-20 their money. See N.T., Revocation and Sentencing Hearing, 11/14/19, 3-6. Furthermore, the trial court also had the benefit of reviewing yet another pre- sentence report before imposing a sentence in the 2019 case.4 See Devers, 546 A.2d at 18 . Therefore, we cannot conclude that the trial court abused its discretion here. In her final challenge, Davi contends that her consecutive sentences resulted in a manifestly excessive aggregate sentence of 3 ½-7 years’ incarceration. As noted above, the trial court imposed consecutive sentences following the revocation of Davi’s probation. Despite describing her criminal history as minor, we note that Davi continued to commit fraudulent crimes while she was on probation for the convictions in the 2017 case. The trial court was entitled to consider this recidivism as more than minor criminal conduct. Further, the trial court was clearly concerned with providing Davi mental health treatment while eliminating the temptation to commit yet more crimes. As Davi has not presented any circumstance that indicates the trial court erred or imposed an unreasonable aggregate sentence, we cannot conclude that the trial court abused its discretion in imposing consecutive sentences. See Commonwealth v. Swope, 123 A.3d 333 , 341 (Pa. Super. 2015). ____________________________________________ 4 “A county pre-sentence [report] was completed, and I had an opportunity to review that, as well as . . . a sentencing memorandum completed by [counsel].” N.T., Revocation and Sentencing Hearing, 11/14/19, at 3. - 10 - J-S34004-20 Additionally, we conclude that Davi’s aggregate post-revocation sentence of 3 ½-7 years’ incarceration is not manifestly excessive in light of Davi’s criminal conduct and the failure of rehabilitation through the previous sentence of probation. Therefore, Davi’s final challenge merits no relief. Judgments of sentence affirmed. Judgment Entered. Joseph D. Seletyn, Esq. Prothonotary Date: 11/30/2020 - 11 -

2020-11-30 18:13:51.351348+00

http://www.pacourts.us/assets/opinions/Superior/out/J-S42040-20m - 104618432120873057.pdf

J-S42040-20 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF : PENNSYLVANIA : v. : : : ASHLEY CIERRA COLE : : Appellant : No. 160 EDA 2019 Appeal from the Judgment of Sentence Entered December 11, 2018 in the Court of Common Pleas of Montgomery County Criminal Division at No(s): CP-46-CR-0006153-2014 BEFORE: PANELLA, P.J., OLSON, J., and MUSMANNO, J. MEMORANDUM BY MUSMANNO, J.: FILED NOVEMBER 30, 2020 Ashley Cierra Cole (“Cole”) appeals from the judgment of sentence imposed following the revocation of her probation. We affirm. On January 23, 2015, Cole entered a negotiated guilty plea to one count of retail theft.1 On the same day, the trial court imposed a sentence of time served to 23 months, plus two years of probation. On April 11, 2016, the Montgomery County Adult Probation and Parole Department (“County Probation”) issued a Notice charging Cole with violating ____________________________________________ 1 18 Pa.C.S.A. § 3929(a)(1). Based on Cole’s previous convictions for retail theft, the offense was graded as a third-degree felony. Id. § 3929(b)(1)(iv). J-S42040-20 the conditions of her parole. Cole stipulated to the violation at a Gagnon II2 hearing. The revocation court revoked Cole’s parole, and sentenced Cole to serve the balance of her original sentence, including the two years of consecutive probation following the expiration of her parole. Cole was re-paroled on July 11, 2016. On August 3, 2018, while Cole was on probation, she was arrested for retail theft, after a store employee observed Cole and another individual attempting to leave the store with stolen merchandise. County Probation issued a Notice, on August 14, 2018, charging Cole with violating the conditions of her probation based on the arrest, and for a failure to pay amounts due on her fines, costs, and restitution. Cole waived her rights to a Gagnon I hearing. Cole proceeded to a Gagnon II hearing on December 11, 2018. Prior to the hearing, the Commonwealth informed the revocation court that Cole had pled guilty to the charges arising from the August 2018 arrest, and provided Cole and the court with a copy of a report generated by the Pennsylvania Justice Network (“JNET”). The JNET report indicated that Cole’s name was listed as an alias for “Quaasia Barnwell.”3 At the hearing, Cole provided a statement, wherein she admitted that she was in violation of her ____________________________________________ 2 See Gagnon v. Scarpelli, 411 U.S. 778 (1973). Cole waived her rights to a hearing pursuant to Gagnon I. 3 According to the Revocation Court Opinion, Cole’s counsel notified the revocation court, shortly after the hearing, that their research indicated that the JNET report was inaccurate. Revocation Court Opinion, 1/16/20, at 7. -2- J-S42040-20 probation and requested that she be provided with mental health treatment. However, Cole denied committing the crimes for which she had pled guilty, and denied using an alias. The Commonwealth, in conjunction with County Probation, requested that the trial court impose a sentence of 8 to 23½ months in jail, plus one year of consecutive probation. The Commonwealth also referenced the contents of the JNET report, at which time the revocation court asked the Commonwealth to provide a copy of the JNET report to the court and to Cole. The revocation court then revoked Cole’s probation, and imposed a sentence of 7 to 23 months in prison, followed by one year of probation. Cole filed a post-sentence Motion, requesting that the revocation court modify her sentence. Before the revocation court ruled on Cole’s post- sentence Motion, Cole filed a timely Notice of Appeal, and a court-ordered Pa.R.A.P. 1925(b) Concise Statement of matters complained of on appeal.4, 5 Cole raises the following issue for our review: “Did the revocation court err in considering[,] in a Gagnon II sentencing determination[,] late- produced evidence that was not provided to defense counsel?” Brief for Appellant at 2. ____________________________________________ 4 The docket reflects that Cole was granted parole on January 10, 2019, the same day that Cole filed her timely Notice of Appeal. 5 We note that the Revocation Court Opinion is dated January 16, 2020, while the docket lists the date as January 16, 2019. -3- J-S42040-20 Cole argues that the revocation court erred in considering the contents of the JNET report when determining Cole’s sentence. Id. at 9. Specifically, Cole claims that the Commonwealth brought the JNET report to the attention of Cole and the revocation court in an off-the-record meeting just before the Gagnon II hearing and, thus, deprived Cole of the opportunity to defend herself from the contents of the JNET report. Id. at 9-10. Cole concedes that the JNET report was not introduced into evidence at the JNET hearing, and Cole’s counsel did not object to the revocation court’s instruction for the Commonwealth to provide the court and Cole with a copy of the report at the conclusion of the hearing. Id. at 10-11. Nevertheless, Cole claims that the revocation court improperly allowed the JNET report to color its sentencing. Id. Further, Cole claims that the contents of the report itself were proven to be inaccurate after the Gagnon II hearing, and the Commonwealth’s failure to correct the record constituted error. Id. at 11-12.6 “[I]n an appeal from a sentence imposed after the court has revoked probation, we can review the validity of the revocation proceedings, the ____________________________________________ 6 To the extent that Cole argues that the revocation court considered the JNET report as an improper sentencing factor, such claim is waived because it is wholly undeveloped in Cole’s brief, and her brief does not include a separate Pa.R.A.P. 2119(f) statement. See Commonwealth v. Moury, 992 A.2d 162 , 169-70 (Pa. Super. 2010) (stating that, prior to reviewing the merits of a challenge to the discretionary aspects of sentence, it is mandatory for an appellant to attach a separate concise statement pursuant to Rule 2119(f)); Commonwealth v. Wise, 171 A.3d 784 , 791 (Pa. Super. 2017) (finding an issue waived where the appellant failed to develop any argument or cite to controlling case law). -4- J-S42040-20 legality of the sentence imposed following revocation, and any challenge to the discretionary aspects of the sentence imposed.” Commonwealth v. Wright, 116 A.3d 133 , 136 (Pa. Super. 2015) (quoting Commonwealth v. Cartrette, 83 A.3d 1030 , 1033 (Pa. Super. 2013) (en banc)). “Revocation of a probation sentence is a matter committed to the sound discretion of the trial court, and that court’s decision will not be disturbed on appeal in the absence of an error of law or an abuse of discretion.” Commonwealth v. McNeal, 120 A.3d 313 , 322 (Pa. Super. 2015) (citations and quotation marks omitted). In reviewing the revocation of probation, we are cognizant that [t]he Gagnon II hearing entails, or may entail, two decisions: first, a “consideration of whether the facts determined warrant revocation.” Morrissey v. Brewer, [ 408 U.S. 471 ,] 488 [1972]. “The first step in a Gagnon II revocation decision ... involves a wholly retrospective factual question: whether the parolee [or probationer] has in fact acted in violation of one or more conditions of his parole [or probation].” Gagnon …, 411 U.S. at 784 …. It is this fact that must be demonstrated by evidence containing “probative value.” Commonwealth v. Kates, … 305 A.2d [701,] 710 [(Pa. 1973)]. “Only if it is determined that the parolee [or probationer] did violate the conditions does the second question arise: should the parolee [or probationer] be recommitted to prison or should other steps be taken to protect society and improve chances of rehabilitation?” Gagnon …, 411 U.S. at 784 …. Thus, the Gagnon II hearing is more complete than the Gagnon I hearing in affording the probationer additional due process safeguards, specifically: (a) written notice of the claimed violations of [probation or] parole; (b) disclosure to the [probationer or] parolee of evidence against him; (c) opportunity to be heard in person and to present witnesses and documentary evidence; (d) the right to confront and cross-examine adverse witnesses (unless the hearing officer specifically finds good cause for not allowing confrontation); (e) a “neutral -5- J-S42040-20 and detached” hearing body such as a traditional parole board, members of which need not be judicial officers or lawyers; and (f) a written statement by the factfinders as to the evidence relied on and reasons for revoking [probation or] parole. Gagnon … , 411 U.S. at 786 …. Commonwealth v. Davis, 336 A.2d 616 , 621 (Pa. Super. 1975) (some citations omitted). Here, at the Gagnon II hearing, Cole stipulated to being in violation of her probation by virtue of her pleading guilty to a subsequent criminal offense. N.T., 12/11/18, at 5-6 (wherein Cole testified that she received the Notice of violation from County Probation, and admitted that she was in violation of her probation because of the new arrest and failure to pay court costs). Significantly, the evidence contested by Cole—the JNET report—was not admitted into evidence at the hearing. See N.T., 12/11/18, at 19 (wherein the revocation court instructed the Commonwealth to provide a copy of the report to the revocation court and Cole’s counsel after the hearing concluded). Additionally, the revocation court specifically stated in its Opinion that it “did not consider the JNET [report] presented just prior to the hearing by the Commonwealth[,] or the possibility of another alias in formulating [Cole]’s sentence.” Revocation Court Opinion, 1/16/20, at 12. Cole also points to the revocation court’s reference to Cole’s “history … of making other identifications of herself” as an indication that the revocation court improperly considered the JNET report when imposing its sentence. -6- J-S42040-20 Brief for Appellant at 10-11. The Gagnon II hearing transcript reveals the following statement by the revocation court: Significantly, in rendering my decision in this case, [Cole]’s criminal history includes a total of 14 arrests in the Commonwealth of Pennsylvania. She has incurred ten arrests for retail theft, two assault-related arrests, one arrest for possession of a controlled substance, and one arrest for false identification to law enforcement. So she has a history somewhat of making other identifications of herself, which we frequently see in retail theft cases to avoid further prosecution after being convicted of retail thefts under a real name.” N.T., 12/11/18, at 22-23 (emphasis added). However, the record does not disclose any evidence that the revocation court was referring to the JNET report in its reference to Cole’s prior instances of providing false identification, rather than to Cole’s history of being arrested for providing false identification to law enforcement. See id. Accordingly, we conclude that the revocation court did not abuse its discretion or deprive Cole of her due process rights under Gagnon, and Cole is not entitled to relief on her sole claim. See Ferguson, supra. Judgment of sentence affirmed. Judgment Entered. Joseph D. Seletyn, Esq. Prothonotary Date: 11/30/2020 -7-

2020-11-30 18:13:51.71329+00

http://www.pacourts.us/assets/opinions/Superior/out/J-S75028-19m - 104618201120856022.pdf

J-S75028-19 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 SHELLY M. BROADWATER : IN THE SUPERIOR COURT OF : PENNSYLVANIA Appellant : : v. : : JOSEPH E. MATERKOWSKI, : No. 1021 WDA 2019 INDIVIDUALLY AND AS AGENT FOR : ABACUS MANAGEMENT SYSTEMS, : LLC; ABACUS MANAGEMENT : SYSTEMS, LLC; DEREK VIRGILI, : INDIVIDUALLY AND AS AGENT FOR : BERKSHIRE HATHAWAY : HOMESERVICES THE PREFERRED : REALTY; AND BERKSHIRE : HATHAWAY HOMESERVICES THE : PREFERRED REALTY : Appeal from the Order Entered June 11, 2019, in the Court of Common Pleas of Fayette County, Civil Division at No(s): 1725 of 2017 GD. BEFORE: STABILE, J., KUNSELMAN, J., and PELLEGRINI, J.* MEMORANDUM BY KUNSELMAN, J.: FILED NOVEMBER 30, 2020 I. Introduction In this dispute over a sale of residential property, Shelly M. Broadwater (“the Buyer”) appeals an order involuntarily discontinuing her lawsuit against all four defendants. Those defendants are (1) the company that flipped and sold her the home in question, (2) its manager,1 (3) the Seller’s real-estate ____________________________________________ * Retired Senior Judge assigned to the Superior Court. 1 We refer to defendants one and two (Abacus Management Systems and Joseph E. Materkowski) collectively as “the Seller.” J-S75028-19 agent, and (4) the agent’s firm.2 During discovery, the Buyer settled her claims against the Seller for an undisclosed amount of money (“the Release”). The trial court concluded that the Release of the Seller also released the Agency, because the Agency had cross-sued the Seller for contribution and indemnification. Relying on Pennsylvania Rule of Civil Procedure 229, which governs voluntary discontinuances, the trial court involuntarily discontinued the entire lawsuit. This was incorrect. The Buyer did not execute a general release, so her claims against the Agency remain viable, as do the Agency’s cross-claims against the Seller. We therefore reverse the order discontinuing this action. II. Factual & Procedural Background The Buyer purchased a remodeled home from the Seller. The Buyer alleges there were substantial defects that all defendants concealed prior to the closing. She therefore brought counts for fraud, breach of contract, and violation of the Real Estate Disclosure Act3 against Seller. She also brought a separate count of fraud against the Agency. Finally, the Buyer alleged a count for violation of the Unfair Trade Practices and Consumer Protection Law 4 by all defendants. ____________________________________________ 2We refer to defendants three and four (Derek Virgili and Berkshire Hathaway) collectively as “the Agency.” Originally, the real-estate agency was Northwood Realty Service, but that defendant changed to Berkshire Hathaway while this matter was before the trial court. 3 68 Pa.C.S.A. § 7301. 4 73 Pa.C.S.A. § 201.1. -2- J-S75028-19 The Agency filed a cross-claim against the Seller, claiming if the Agency was ultimately liable to the Buyer, then the Seller is jointly and severally liable. In other words, the Agency sought reimbursement from the Seller for any money it might ultimately owe the Buyer. The Seller filed no Answer to the Buyer’s Complaint. Nor has it filed an Answer to the Agency’s cross-claim. After a year, the Buyer signed the Release and agreed to release the Seller: from any and all actions, causes of action, claims or demands, of whatever kind or nature, for any known or unknown injuries, losses, or damages allegedly sustained by [Buyer] and related in any way to the legal action instituted by the undersigned in the Court of Common Pleas of Fayette County, Pennsylvania, at Docket No. 1725 of 2017. Buyer’s 10/24/18 Release at 1. The Release made no direct reference to the Agency or the Buyer’s claims against the Agency. The Buyer then praeciped to discontinue her action against the Seller without permission from the trial court or the Agency. Four months later, the Agency asked the trial court to strike the discontinuance against the Seller, under Pa.R.C.P. 229. The court denied that request “without prejudice to re- present should the [Seller] fail to file a Motion for Leave of Court to discontinue the action” as to all defendants. 4/12/19 Order. Next, the Seller moved to terminate the Buyer’s case in its entirety, under Rule 229. The Seller argued that, because the Buyer did not obtain permission from the court or the Agency to file her praecipe to discontinue -3- J-S75028-19 regarding the Seller, the Buyer misled opposing counsel and the Seller into believing that they were fully and forever released and discharged from all actions or causes of action, claims, or demands in this matter. The Buyer replied to the motion by specifically denying she “intended, or represented, that the Praecipe to . . . Discontinue ended all claims against all Defendants. On the contrary, [the praecipe] clearly indicates, on its face, that it applies to claims against the [Seller] only.” Buyer’s Answer and New Matter to Seller’s 5/6/19 Motion at 2. She also indicated that Pa.R.C.P. 229 does not allow the trial court to dismiss a case. See id. In her New Matter, the Buyer sought the trial court’s approval of her already-filed praecipe to discontinue as to the Seller, under Rule 229(b)(1). See id. at 4. The trial court entered an order discontinuing the action completely — i.e., as to all four defendants. This timely appeal followed. III. Analysis The Buyer raises two issues that we combine for ease of disposition – whether the trial court committed an error of law or abused its discretion by dismissing this case. See Buyer’s Brief at 4. In the Agency’s responsive brief, it argues that we should affirm the order discontinuing this case with prejudice on alternative grounds. See Agency’s Brief at 3-9. We address both parties’ issues in turn. A. Discontinuance under Rule 229 With only two pages of argument, the Buyer’s brief is quite succinct. See id. at 7-8. She argues that Rule 229 does not authorize the trial court to -4- J-S75028-19 discontinue a case against all defendants as penalty for failure to obtain leave of court. She also contends her noncompliance with the Rule, if any, did not prejudice the defendants. Thus, the Buyer believes the trial court misapplied Rule 229 and thereby abused its discretion in discontinuing this case. The Seller’s response expresses frustration with what Seller perceives to be the Buyer’s anticipatory repudiation (if not outright breach) of the Release. The Seller claims the Buyer and her counsel “are acting in bad-faith,” and it should receive “attorney fees and costs per the full-and-final disclosure, which assures that [the Buyer] will reimburse for all losses or damages . . . sustained related in any way to legal action instituted by the [Buyer].” Seller’s Brief at 4 (some punctuation and capitation omitted). According to the Seller, “The trial court must be upheld and [the Buyer] and her counsel’s bad faith cannot be permitted under any circumstances as this conduct is unconscionable in this Commonwealth.” Id. at 6. The Seller contends that the Buyer promised “full indemnification in exchange for the settlement payment.” Id. at 9 (emphasis in original). In the Seller’s view, the Buyer’s procedural error “clearly prejudiced” it, because the Seller fears exposure to liability from the Agency’s cross-claim “that [the Seller is] responsible for any and all wrongdoing.” Id. (emphasis in original).5 ____________________________________________ 5 Also, Seller claims “that five contractors were paid $30,000.00 for the work done in the home” and that the decision to settle involved Ms. Broadwater’s alleged need to join those contractors as co-defendants. See Seller’s Brief at 5-6, 13. Whatever may have transpired during settlement negotiations or -5- J-S75028-19 Initially, we observe that the Seller erroneously states our standard of review. It asserts “the trial court has absolute discretion over the application of discontinuances pursuant to Rule 229.” Seller’s Brief at 3 (citing Becker v. M.S. Reilly, Inc., 123 A.3d 776 (Pa. Super. 2015)). Were we to afford trial court’s absolute discretion to discontinue a plaintiff’s case, we would abdicate our duty of appellate review. Instead, the Becker Court said, “The causes which will move the [trial] court to withdraw its assumed leave and set aside the discontinuance are addressed to its discretion . . . .” Becker, 123 A.3d at 779. Thus, our “standard of review of a trial court’s order granting a request for discontinuance is [an] abuse of discretion.” Truesdale ex rel. Truesdale v. Albert Einstein Med. Ctr., 767 A.2d 1060 , 1063 (Pa. Super. 2001), as revised (Mar. 30, 2001). “An abuse of discretion occurs when the trial judge misapplies the law, or exercises his or her judgment in a manner that is manifestly unreasonable, or the result of bias, prejudice, or ill will.” Id. (some punctuation omitted). In other words, we defer to a trial court’s decision to discontinue a party or parties, if (1) the ruling is reasonable and (2) it is based upon a correct interpretation of the rules of civil procedure. ____________________________________________ may have appeared in discovery are absent from the record. Thus, these supposed facts are beyond our scope of review. Generally, if it is not in the record, it does not exist. See, e.g., Stumpf v. Nye, 950 A.2d 1032 , 1041 (Pa. Super. 2008). -6- J-S75028-19 “To the extent that the question presented involves interpretation of rules of civil procedure, our standard of review is de novo.” Brown v. Quest Diagnostics, 209 A.3d 386 , 389 (Pa. Super. 2019). We owe the trial court’s interpretation of Rule 229 no deference whatsoever. When interpreting the rules of civil procedure our goal “is to ascertain and effectuate the intention of the Supreme Court.” Pa.R.C.P. 217(a). If “the words of a rule are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit.” Id. We must also strive to give effect to all of the words within a rule, if possible. See id. Mindful of these directives, we turn to Rule 229, which provides, in relevant part: (a) A discontinuance shall be the exclusive method of voluntary termination of an action, in whole or in part, by the plaintiff before commencement of the trial. (b)(1) Except as otherwise provided in subdivision (b)(2), a discontinuance may not be entered as to less than all defendants except upon the written consent of all parties or leave of court upon motion of any plaintiff or any defendant for whom plaintiff has stipulated in writing to the discontinuance . . . (c) The court, upon petition and after notice, may strike off a discontinuance in order to protect the rights of any party from unreasonable inconvenience, vexation, harassment, expense, or prejudice. Pa.R.C.P. 229. Under the plain language of the Rule, the Buyer is correct. There is no penalty for violating Pa.R.C.P. 229, and it especially does not authorize the -7- J-S75028-19 imposition of summary judgment as to all defendants, which was the practical result of the trial court’s order. The Rule is not a proper basis for involuntary termination (a.k.a., “summary judgment”), because Pa.R.A.P. 229 is “the exclusive method of voluntary termination of an action . . . .” Id. (emphasis added). The trial court acknowledged that “the Rule does not state a clear remedy when a party fails to comply with that Rule.” Trial Court Opinion, 9/16/19, at 6. The court then said that there “does not appear to be any case law directly on point with this issue.” Id. As we explain below, some precedent exists, but none of it supports the trial court’s order. Paragraph (b)(1) of the Rule specifically deals with cases such as this, where a plaintiff attempts to discontinue her action against less than all of the defendants in her lawsuit. That paragraph’s language unambiguously supports the trial court and the Seller’s view that the Buyer needed to obtain “the written consent of all parties or leave of court . . . .” prior to praeciping to her discontinue as to only the Seller. Pa.R.C.P. 229(b)(1). However, in construing Rule 229, the Supreme Court of Pennsylvania has held that seeking leave of court before filing the praecipe is a technical formality, observed more often in the breach than in the keeping. The trial court presumptively grants its leave, as a matter of ancient practice, predating the rules of civil procedure. Rule 229(b)(1) “reflects the longstanding practice in Pennsylvania, which was well-described in Consolidated National Bank v. McManus, 217 Pa. 190 , 66 A. 250 (1907). In McManus, the plaintiff -8- J-S75028-19 entered a discontinuance, the defendant filed a rule to show cause why it should not be stricken, and the [trial] court discharged the rule.” Fancsali ex rel. Fancsali v. Univ. Health Center of Pittsburgh, 761 A.2d 1159 , 1161 (Pa. 2000). The McManus Court deemed the discharging of the rule to show cause as the “equivalent to a grant of leave” to discontinue, even though the plaintiff never moved for such leave. McManus, 66 A. at 250. The Court explained that: A discontinuance in strict law must be by leave of court, but it is the universal practice in Pennsylvania to assume such leave in the first instance . . . All the cases show that a discontinuance must be founded on the express or implied leave of the court. In England, this leave is obtained on motion in the first instance, [but, in American practice,] it is taken without the formality of an application, but subject to be withdrawn on cause shown . . . that is the whole difference. Id. at 250. The Supreme Court of Pennsylvania promulgated Pa.R.C.P. 229(b)(1) in light of McManus (as reaffirmed in Fancsali). The statement that a plaintiff “may not” enter a discontinuance without the consent of all parties or leave of court, then, is mandatory, but the Buyer’s violation of the Rule does not warrant the discontinuance of her action. In the American practice, the Buyer could presume that she had the leave of the court to file her praecipe without actually requesting it, if she were discontinuing the action as to all defendants. But that presumption does not apply to a discontinuance of only some -9- J-S75028-19 defendants. Where, as here, a plaintiff files a discontinuance as to only some defendants without express leave of court, the Rule allows her to do so without penalty. However, the remaining defendants may then move for the striking of the discontinuance, as the Agency did here. The burden of convincing the trial court to strike the discontinuance, then falls upon any remaining parties under 229(c). See also, Becker, 123 A.3d at 779 (framing the issue as whether the trial court should “withdraw its assumed leave and set aside the discontinuance”) (emphasis added). Here, the Agency attempted to do just that, but the trial court denied it relief. Instead, the court essentially reinstated English procedure. By faulting the Buyer for not obtaining the court’s leave before filing the praecipe to discontinue, the trial court required that “leave [be] obtained on motion in the first instance.” McManus, 66 A. at 250. This was error; the trial court should have limited its inquiry to the single issue the Agency raised — i.e., whether the Buyer could discontinue as to the Seller without prejudicing the Agency. If the discontinuance of the Seller prejudiced the Agency, the proper remedy was not the discontinuance of the whole matter. Instead, the trial court should have stricken the discontinuance as to the Seller and allowed the case to proceed to trial against all four defendants. Under McManus, Fancsali, Becker, and Pa.R.C.P. 229(b)(1), the Buyer needed leave of court to discontinue the Seller. However, the trial court also erred as a matter of law when it manufactured a summary-judgment-like penalty for the Buyer’s Rule 229 violation and discontinued the case. There - 10 - J-S75028-19 is nothing in Rule 229 that calls for such a draconian result. Accordingly, we agree with the Buyer; the trial court committed an error of law by misapplying Rule 229. The court therefore abused its discretion when it discontinued this case as to all parties. B. The Release and UCATA Our review cannot end here, however, because the Agency asks us to affirm the dismissal of the Buyer’s suit on alternative grounds. This Court is “not bound by the rationale of the trial court and may affirm on any basis.” Sw. Energy Prod. Co. v. Forest Res., LLC, 83 A.3d 177 , 184 (Pa. Super. 2013) (quotations and citations omitted). The Agency claims that the trial court properly interpreted and enforced the Release, which was the true basis for the trial court’s decision, not Rule 229. In essence, the Agency asserts the Buyer signed a general release. It believes the Uniform Contribution Among Tortfeasors Act (“UCATA”)6 bars the Buyer from any additional recovery. This issue requires us to interpret the UCATA statute and the Release. “Because this claim raises an issue of statutory construction, which is a question of law, this Court’s standard of review is de novo, and the scope of review is plenary.” Cash Am. Net of Nevada, LLC v. Com., Dep't of Banking, 8 A.3d 282 , 289 (Pa. 2010). We use the same scope and standard ____________________________________________ 6 42 Pa.C.S.A. §§ 8321 – 8327. - 11 - J-S75028-19 of review to interpret the Release, because the “interpretation of a contract is [also] a question of law.” Gen. Refractories Co. v. Ins. Co. of N. Am., 906 A.2d 610 , 612 (Pa. Super. 2006). When interpreting a statute our goal “is to ascertain and effectuate the intention of the General Assembly.” 1 Pa.C.S.A. § 1921(a). “When the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit.” 1 Pa.C.S.A. § 1921(b). “Words and phrases shall be construed according to rules of grammar and according to their common and approved usage,” while any words or phrases that have a “peculiar and appropriate meaning” are construed according to that meaning. 1 Pa.C.S.A. § 1903(a). Critically, statutes relating to the same subjects are in pari materia, and they “shall be construed together, if possible, as one statute.” 1 Pa.C.S.A. § 1932. UCATA’s seven sections, 42 Pa.C.S.A. §§ 8321 – 8327, relate to the same subject – i.e., damages apportionment among joint tortfeasors, especially after a plaintiff has released less than all joint tortfeasors. Thus, we hold that UCATA’s provisions are in pari materia and must be read and construed together as one statute. As for the Release, “it is well settled that the effect of a release is to be determined by the ordinary meaning of its language.” Taylor v. Solberg, 778 A.2d 664 , 667 (Pa. 2001). In other words, we read and apply a release’s language like any other contract. - 12 - J-S75028-19 By way of background, the legislature enacted UCATA to supplant the common law. “UCATA abrogated the broader, common-law rule that payment by one tortfeasor would release all others regardless of the parties’ intent, insofar as it applied to joint tortfeasors.” Maloney v. Valley Med. Facilities, Inc., 984 A.2d 478 , 481 n.4 (Pa. 2009). UCATA “drastically changed the law on this subject, and, since its enactment, a release by the injured party to one jointly liable does not release others also liable, unless the release expressly so provides.” Brown v. City of Pittsburgh, 186 A.2d 399 , 402 (Pa. 1962). The statute therefore allows a plaintiff to execute a “general release.” General releases surrender the plaintiff’s right to sue, not only whichever defendants’ names appear in the release, but also the rest of the world. For example, in Buttermore v. Aliquippa Hospital, 561 A.2d 733 (Pa. 1989), the plaintiff was severally injured in a car accident and the hospital treated his injuries. According to Mr. and Mrs. Buttermore, medical malpractice had worsened his injuries and caused irreversible, nerve damage to his spine. They sued the hospital and its doctors, who moved for judgment as a matter of law, based on a release Mr. Buttermore had previously executed with the driver who caused the underlying accident. That release’s all-encompassing language was as follows: I . . . hereby remise, release, acquit, and forever discharge [negligent driver] et al. . . . and any and all other persons . . . or corporations, whether known or unknown, suspected or unsuspected, past, present and future claims, demands, damages, actions, third-party actions, causes of action, or suits at law or in equity, indemnity of whatever nature, for or because of any matter or thing done, omitted or suffered - 13 - J-S75028-19 to be done, on account of or arising from damage to property, bodily injury, or death resulting or to result from an accident which occurred on or about the 3rd day of December, 1981 at or near Aliquippa, Pennsylvania for which I/We have claimed the said [negligent driver] et al. to be legally liable . . . . Buttermore, 561 A.2d 733 , 734 (quoting release). The trial court granted summary judgment to the hospital and doctors based upon the general release. This Court reversed, and the Supreme Court of Pennsylvania granted review and reinstated summary judgment as to Mr. Buttermore’s personal-injury claims.7 Citing the universality of the release’s language, the Supreme Court explained that “a release given to a particular individual and ‘any and all other persons whether herein named or not’ [applies] to all tortfeasors, despite the fact that they were not specifically named.” Id. at 735. Litigants are therefore free to fashion settlement agreements however they wish. If parties require that “the matter must end then and forever . . . they are at liberty to do so. They may agree . . . that they will not sue each other or any one [else] for the event in question. However, improvident their agreement may be or subsequently prove for either party, their agreement, absent fraud, accident, or mutual mistake, is the law of their case.” Id. Thus, one tortfeasor may demand that, as a condition for settlement, that a plaintiff forfeit all claims against other tortfeasors. ____________________________________________ 7The Supreme Court affirmed this Court as to Mrs. Buttermore’s claim for loss of consortium, because she had not signed the release. Her cause of action, while procedurally linked to her husband’s claim, stood alone. - 14 - J-S75028-19 The Release at bar, however, does not contain the universal language found in Buttermore. Unlike the Buttermore release, the Buyer’s Release contains no “et al.” and no “and any and all other persons . . . or corporations, whether known or unknown” clauses. Additionally, this Release makes no mention of the Agency and no mention of the two counts that the Buyer has alleged against the Agency. Instead, it releases only the Seller: The [Buyer] hereby fully and forever releases, acquits, and discharges JOSEPH E. MATERKOWSKI and ABACUS MANAGEMENT SYSTEMS, LLC from any and all actions, causes of action, claims or demands, of whatever kind or nature, for any known or unknown injuries, losses, or damages allegedly sustained by the [Buyer] and related in any way to the legal action instituted by the undersigned in the Court of Common Pleas of Fayette County, Pennsylvania, at Docket No. 1725 of 2017. Buyer’s 10/24/2018 Release at 1 (emphasis added). Thus, the Release was solely and exclusively as to the Buyer’s claims against the Seller. Because the Release does not provide for the discharge of the Agency (or anyone else other than the Seller), the Agency’s reliance upon the Release to exit this lawsuit is misplaced. Indeed, were we to apply the Release as the Agency suggests and end this case, we would override UCATA and return to the common law, when payment from one of many tortfeasors to a plaintiff terminated the remainder of the case. Still, the Agency argues that such a result would be unjust, because it has cross-claims for contribution and indemnification pending against the Seller, whom the Buyer has now fully and finally released from liability in this - 15 - J-S75028-19 action. The Agency believes that, in order for the Buyer to preserve her claims against it, she needed to include language in the Release so stating. This was also the primary concern for the trial court, which opined: The [Agency] filed a cross-claim against the [Seller], asserting that the [Seller was] responsible for any and all wrongdoing, or that [it was] jointly liable. The [Buyer] and the [Seller] then entered into the . . . Release, which released the [Seller] from the case in its entirety. The [Seller] paid consideration to the [Buyer] as a settlement. The [Buyer] then filed its Discontinuance as to the [Seller] only, without seeking leave of court or consent of the [Agency]. Legally, however, a discontinuance between a plaintiff and defendants does not preclude cross-claims between defendants and additional defendants. See Ross v. Tomlin, 969 A.2d 230 (Pa. Super. 1997). This means that the [Agency’s] continued presence in the action would also continue [its] cross-claim against the [Seller]. As a result, the [Seller] could still be liable for damages to the [Buyer] if the [Agency] and the [Buyer] went to trial, even though the [Seller] settled [its] case with the [Buyer, who] released the [Seller] from the action. In deciding whether to grant the [Seller’s] Motion for Leave of Court to Discontinue as to All Parties, this Court determined that discontinuing against all defendants was the only option consistent with the apparent intention of the . . . Release between the [Buyer] and the [Seller]. Further, by not discontinuing the [Agency], [its] cross-claim against the [Seller] would have continued to be valid, which would have greatly prejudiced the [Seller]. Trial Court Opinion, 9/16/19, at 7-8. The trial court’s reasoning ignores UCATA and impermissibly converts the Buyer’s specific release of only the Seller into a general release of the whole world. As explained above, under Buttermore, supra, the Buyer did - 16 - J-S75028-19 not execute a general release. Thus, the trial court’s discontinuance as to the Agency directly contradicted the General Assembly’s directives in UCATA that a “release by the injured person of one joint tortfeasor . . . does not discharge the other tortfeasors, unless the release so provides.” 42 Pa.C.S.A. § 8326 (emphasis added) (some punctuation omitted). Indeed, under the plain language of UCATA, the Seller remains liable to the Agency for contribution and indemnification, notwithstanding the Release of the Seller by the Buyer. The UCATA “does not impair any right of indemnity under existing law.” 42 Pa.C.S.A. § 8323. “The right of contribution exists among joint tortfeasors.” 42 Pa.C.S.A. § 8324(a) (some punctuation omitted). Finally, a “release by the injured person of one joint tortfeasor does not relieve him [i.e., the released tortfeasor] from liability to make contribution to another tortfeasor . . . .” 42 Pa.C.S.A. § 8327 (some punctuation omitted) (emphasis added). The only exception to that provision is if “the release [(1)] is given before the right of the other tortfeasor to secure a money judgment for contribution has accrued and [(2)] provides for a reduction to the extent of the pro rata share of the released tortfeasor of the injured person's damages recoverable against all the other tortfeasors.” Id. (emphasis added). Currently, the Release only satisfies the first part of the exception, as Buyer gave it before the Agency’s right to secure its judgment for contribution from the Seller has accrued. As for the second part, the Release does not provide for a pro rata reduction of the Seller’s share from any judgment that - 17 - J-S75028-19 the Buyer might, in the end, recover from the Agency. Hence, the exception to Section 8327 of UCATA does not apply, and we may not hold that this Release automatically relieves the Seller “from liability to make contribution to [the Agency]” under UCATA. Id. By concluding the Release automatically canceled the Agency’s cross- claim for contribution and indemnity against the Seller, the trial court failed to apply the plain language of 42 Pa.C.S.A. §§ 8323, 8324(a), 8327. Total discontinuation of this case relieved a released tortfeasor (Seller) from contribution to its potential, joint tortfeasor (the Agency), based solely upon the fact that the Buyer had entered a release with the Seller. Automatic discontinuance of the whole action was error as a matter of law. IV. Conclusion In sum, because the trial court misapplied Pennsylvania Rule of Civil Procedure 229, its effective grant of summary judgment under Rule 229 must be reversed. The pro tanto Release that Seller executed with Buyer does not permit the Seller to exit this lawsuit, because a pro tanto Release does not settle or discontinue Seller’s potential liability to the Agency on the cross- claims for indemnification and contribution. Order reversed. Case remanded for further proceedings. Jurisdiction relinquished. Judge Stabile joins the memorandum. Judge Pellegrini concurs in the result. - 18 - J-S75028-19 Judgment Entered. Joseph D. Seletyn, Esq. Prothonotary Date: 11/30/2020 - 19 -

2020-11-30 18:14:03.636387+00

http://www.tsc.state.tn.us/sites/default/files/hernandez.christopher.opn_.pdf

11/30/2020 IN THE COURT OF CRIMINAL APPEALS OF TENNESSEE AT NASHVILLE Assigned on Briefs October 13, 2020 CHRISTOPHER N. HERNANDEZ v. STATE OF TENNESSEE Appeal from the Circuit Court for Rutherford County No. F-70399 Royce Taylor, Judge No. M2019-01160-CCA-R3-PC The petitioner, Christopher N. Hernandez, appeals the denial of his petition for post- conviction relief, which petition challenged his convictions of rape of a child, aggravated sexual battery, and solicitation of a minor,1 alleging that he was deprived of the effective assistance of counsel. Discerning no error, we affirm the denial of post-conviction relief. Tenn. R. App. P. 3; Judgment of the Circuit Court Affirmed JAMES CURWOOD WITT, JR., J., delivered the opinion of the court, in which D. KELLY THOMAS, JR., and ROBERT H. MONTGOMERY, JR., JJ., joined. Thomas E. Parkerson and Cody F. Fox (on appeal), and Amanda Gentry (at hearing), Murfreesboro, Tennessee, for the appellant, Christopher N. Hernandez. Herbert H. Slatery III, Attorney General and Reporter; Ruth Anne Thompson, Assistant Attorney General; Jennings H. Jones, District Attorney General; and Hugh Ammerman, Assistant District Attorney General, for the appellee, State of Tennessee. OPINION Because the trial record is not included in the record before us and because no direct appeal was filed in the underlying case, the facts of the petitioner’s trial, convictions, and sentencing in the record are scarce. From the post-conviction court’s order, we glean that the petitioner’s first trial resulted in a mistrial. At a second trial, a jury convicted the petitioner of nine counts of rape of a child, two counts of aggravated sexual battery, and one count of solicitation of a minor. The petitioner agreed to a negotiated sentence of 20 years in exchange for his waiving his right to appeal. 1 Because the record on appeal does not include the trial record or judgments of conviction other than one corrected judgment for count 7, we glean the facts of this case from the post-conviction court’s order.  The petitioner filed a timely, pro se petition for post-conviction relief, alleging the ineffective assistance of counsel. After the appointment of counsel, the petitioner had a bifurcated evidentiary hearing on November 9, 2018, and May 24, 2019. At the evidentiary hearing, trial counsel testified that, after the petitioner was convicted at his second trial, counsel met with him and discussed potential errors that could be raised on appeal, and counsel believed there was a particular error that “would possibly lead to a new trial.” He also discussed the possibility of negotiating an agreed sentence “in light of the fact that we may have a decent chance of getting a new trial.” Over the course of a couple of months, prior to the sentencing hearing, counsel continued to discuss the matter with the petitioner, explaining to the petitioner that he could “very well” face consecutive sentences that could result in an effective life sentence. Ultimately, the petitioner decided to accept the negotiated sentence and waive his right to appeal although counsel knew “that he was somewhat torn about that. It was a tough decision for him.” Counsel stated that he reviewed the entire agreement with the petitioner. Counsel also said that the negotiated sentence agreement was a strategic decision to mitigate the petitioner’s sentencing exposure because counsel could not be certain of the result of a motion for new trial and appeal. Trial counsel stated that, in the course of his representation, he “did everything” the petitioner asked of him. After the mistrial, counsel moved to dismiss the case on double jeopardy grounds and sought an interlocutory appeal of the trial court’s denial of that motion. His attempt at an interlocutory appeal was denied, but the issue was preserved for direct appeal. Counsel stated that he kept the petitioner abreast of the proceedings on the motion to dismiss and provided him with copies of the documents. At the second trial, counsel had the benefit of having heard all of the witnesses’ testimony previously, and his theory of defense remained the same from the first trial to the second. The petitioner did not indicate that he wanted anything handled differently in the second trial. Counsel discussed with the petitioner the possibility of calling certain other witnesses at the second trial but made the strategic decision not to do so because he could get the same evidence from the petitioner’s testimony and would not risk those witnesses denying certain facts. Counsel acknowledged that he may have been late to certain court appearances but denied that he was late for trial. Counsel stated that, although he was representing a party involved in an unrelated, high-profile rape case at the same time as he represented the petitioner, his work on that case did not inhibit his representation of the petitioner. During cross-examination, trial counsel stated that the primary difference in the first and second trials “was the approach of the prosecution.” His defense strategy at -2- both trials was to emphasize that no evidence corroborated the victim’s allegations and that the victim had a motive to fabricate the allegations. Counsel acknowledged that he did not call a medical expert to testify but explained that he was able to get the evidence he needed from the State’s medical expert on cross-examination. After the conclusion of the second trial, counsel immediately began researching issues that he believed were trial errors, and he met with the petitioner one or two days later to discuss the issues. Counsel explained to the petitioner that he was facing a possible sentence of approximately 100 years if the court ran the sentences consecutively, and, although counsel could not predict what the court would do, he believed the circumstances of the offenses would permit consecutive sentences. Before the petitioner agreed to the negotiated sentence, counsel prepared to call the petitioner’s mother and several other family members to testify at the sentencing hearing. Although counsel believed that the petitioner had a good chance at receiving a new trial on appeal, he was less optimistic about achieving a different result at a new trial. Counsel explained that at the first trial, the State called several witnesses who were beneficial to the defense on cross-examination. The State opted not to call those same witnesses at the second trial, and counsel also decided not to call them because he did not believe he could get the same beneficial testimony from them on direct examination. Trial counsel acknowledged that he represented the petitioner for a reduced fee of approximately $10,000 but asserted that he gave the petitioner “100 percent, . . . doing everything that we could possibly do.” Counsel said that the petitioner did not owe him any money at the conclusion of his second trial. He explained that when a client retains him for trial, he routinely offers to represent the client on appeal by appointment. Although the petitioner did not pay counsel any additional funds after his conviction, counsel stated that he was prepared to argue the motion for new trial and to appeal the case if the petitioner opted to reject the sentencing agreement. Counsel denied making any guarantees to the petitioner regarding the outcome of his case. The petitioner testified that, prior to the second trial, trial counsel advised him to reject a plea offer from the State for a 12-year sentence “because we were going to win this trial.” The petitioner stated, “In his words, he was a God in Murfreesboro after what he had done to” the previous district attorney. The petitioner said that the second trial was “totally different” from the first trial, explaining that the State did not call the same witnesses at the second trial. The petitioner considered the witnesses that the State declined to call to be “crucial to [his] case because they actually worked in [his] favor.” The petitioner stated that he did not learn that the State would not call those witnesses until the day of the second trial. The petitioner said that he asked counsel “several times” to call a medical expert to rebut the testimony of the State’s medical expert, but counsel told the petitioner that they did not need their own expert. The petitioner stated that if counsel had -3- “told me the exact stats that I know now,” he would have accepted the State’s plea offer and not have gone to trial; however, because the petitioner relied on counsel’s advice that “we were almost guaranteed a win” at trial, he rejected the plea offer. The petitioner testified that he met with counsel only twice to prepare for trial and otherwise saw him on a weekly basis to make a payment toward his fee. The petitioner said that, after the second trial, counsel told him that he would begin the appeal process but also told him it would not “do you any good” because the motion for a new trial would be heard by the same trial judge who would have addressed at trial any issue he believed to be in error. Because the petitioner understood counsel’s advice to mean that an appeal would “be obsolete” and that he would lose a new trial, he decided to forgo the appeal. The petitioner stated that counsel visited him after his conviction and told him that he had found two potential errors at trial but that they were “really irrelevant.” Counsel suggested negotiating for a 20-year sentence. The petitioner acknowledged that counsel explained his maximum sentencing exposure, telling him that if he did not accept the sentencing agreement, he “would most likely get 100 years” and that he “would most likely lose the appeal process because I would have the same judge.” The petitioner stated that he accepted the sentencing agreement because “that was the best option” and because he “felt that that was the only thing that I could do.” The petitioner also said that because he had paid counsel “$30,000 to do his best for me,” he relied on counsel’s advice. The petitioner stated that when trial counsel first began representing him, counsel promptly responded to the petitioner’s inquiries; however, after counsel began working on another high-profile case, the petitioner “could no longer get in touch with him through text message” or by phone. The petitioner explained that during the first trial, his relationship with counsel “was pretty decent” and that counsel “was there” and “always on time.” During the second trial, however, “there was no relationship.” In preparation for the second trial, the petitioner met with counsel once, for only 53 minutes, after having waited 45 minutes for counsel to arrive. The petitioner estimated that, after the second trial, counsel spent “[p]robably a total of 30 minutes” discussing his options regarding the sentencing agreement and option to appeal. The petitioner stated that after the second trial, counsel told him that to continue representation, he would require a new contract and payment of “twice as much” as what the petitioner paid for trial representation, amounting to $60,000. During cross-examination, the petitioner clarified that if he had known that “85 percent of these cases end in a loss regardless of medical evidence or any other kind of evidence,” he would have accepted the plea offer and not gone to trial. The petitioner stated that he would have felt like he had had a fair trial if counsel had called medical experts and presented the medical records that the petitioner had requested. The petitioner -4- also indicated that counsel was unprepared for the second trial because he did not know that the State was not going to call certain witnesses that it had called at the first trial. In its written order denying post-conviction relief, the post-conviction court found that trial counsel met with the petitioner in preparation for the second trial, interviewed witnesses, and filed certain pretrial motions. The court also noted that trial counsel “was already extremely familiar with the [p]etitioner’s case because he had previously tried the case in the first trial.” Further, the post-conviction court found that counsel’s decision to not call certain witnesses at the second trial was strategic. Finally, the court found that counsel negotiated an agreed sentence with the State, giving the petitioner “an option to avoid a possible 100 year sentence.” In this timely appeal, the petitioner argues that the cumulative effect of trial counsel’s errors prejudiced the outcome of his case. The State argues, first, that the record is insufficient to facilitate our review. Alternatively, the State argues that the post- conviction court did not err by denying the petitioner relief. We first address the sufficiency of the record. Although certified as complete, the post-conviction record submitted to this court lacked the transcript and exhibit of the November 9, 2018 portion of the bifurcated evidentiary hearing. Upon order of this court, the record was supplemented with the necessary documents to form a complete record of the post-conviction proceedings below. Accordingly, the record is sufficient to facilitate our review, and we will review the case on its merits. We view the petitioner’s claim with a few well-settled principles in mind. Post-conviction relief is available only “when the conviction or sentence is void or voidable because of the abridgment of any right guaranteed by the Constitution of Tennessee or the Constitution of the United States.” T.C.A. § 40-30-103. A post-conviction petitioner bears the burden of proving his or her factual allegations by clear and convincing evidence. Id. § 40-30-110(f). On appeal, the appellate court accords to the post-conviction court’s findings of fact the weight of a jury verdict, and these findings are conclusive on appeal unless the evidence preponderates against them. Henley v. State, 960 S.W.2d 572 , 578-79 (Tenn. 1997); Bates v. State, 973 S.W.2d 615 , 631 (Tenn. Crim. App. 1997). By contrast, the post-conviction court’s conclusions of law receive no deference or presumption of correctness on appeal. Fields v. State, 40 S.W.3d 450 , 453 (Tenn. 2001). Before a petitioner will be granted post-conviction relief based upon a claim of ineffective assistance of counsel, the record must affirmatively establish, via facts clearly and convincingly established by the petitioner, that “the advice given, or the services rendered by the attorney, are [not] within the range of competence demanded of attorneys in criminal cases,” see Baxter v. Rose, 523 S.W.2d 930 , 936 (Tenn. 1975), and -5- that counsel’s deficient performance “actually had an adverse effect on the defense,” Strickland v. Washington, 466 U.S. 668 , 693 (1984). In other words, the petitioner “must show that there is a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome.” Id. at 694 . Should the petitioner fail to establish either deficient performance or prejudice, he is not entitled to relief. Id. at 697 ; Goad v. State, 938 S.W.2d 363 , 370 (Tenn. 1996). Indeed, “[i]f it is easier to dispose of an ineffectiveness claim on the ground of lack of sufficient prejudice, . . . that course should be followed.” Strickland, 466 U.S. at 697 . When considering a claim of ineffective assistance of counsel, a reviewing court “begins with the strong presumption that counsel provided adequate assistance and used reasonable professional judgment to make all significant decisions,” Kendrick v. State, 454 S.W.3d 450 , 458 (Tenn. 2015) (citation omitted), and “[t]he petitioner bears the burden of overcoming this presumption,” id. (citations omitted). We will not grant the petitioner the benefit of hindsight, second-guess a reasonably based trial strategy, or provide relief on the basis of a sound, but unsuccessful, tactical decision made during the course of the proceedings. Adkins v. State, 911 S.W.2d 334 , 347 (Tenn. Crim. App. 1994). Such deference to the tactical decisions of counsel, however, applies only if the choices are made after adequate preparation for the case. Cooper v. State, 847 S.W.2d 521 , 528 (Tenn. Crim. App. 1992). Here, the record supports the post-conviction court’s conclusion that trial counsel’s performance was not deficient. The petitioner asserts that counsel should have called a medical expert and introduced certain medical records into evidence at the second trial, but the petitioner failed to present the testimony of a medical expert or the records that he claims would have benefited his defense. Likewise, the petitioner has failed to show what additional evidence counsel could have discovered with further investigation. Generally, a petitioner fails to establish his claim that counsel did not properly investigate or call a witness if he does not present the witness or evidence to the post-conviction court because a court may not speculate “on the question of . . . what a witness’s testimony might have been if introduced” at trial. Black v. State, 794 S.W.2d 752 , 757 (Tenn. Crim. App. 1990) (“When a petitioner contends that trial counsel failed to discover, interview, or present witnesses in support of his defense, these witnesses should be presented by the petitioner at the evidentiary hearing.”). Consequently, the petitioner cannot show that counsel performed deficiently by declining to present certain witnesses or evidence at trial. Moreover, the post-conviction court accredited trial counsel’s testimony that he was prepared for trial and that the decision to not call certain witnesses was strategic. Because the petitioner has failed to provide the testimony of those witnesses that he contends would have benefited his defense, the evidence does not preponderate against the -6- post-conviction court’s findings. As to the petitioner’s assertion that he rejected the State’s plea offer because counsel told him that he was “a God in Murfreesboro” and that he was “almost guaranteed a win” at trial, counsel’s testimony established that he made no guarantees to the petitioner as to the outcome of his case. The petitioner argues that, even if trial counsel’s individual errors, standing alone, do not fall below the constitutionally required standard of performance, the cumulative effect of those errors resulted in counsel’s deficient performance and prejudiced the petitioner’s defense. The cumulative error doctrine, however, does not function in the post-conviction context as the petitioner asserts. Instances of ineffective assistance of counsel are deemed to constitute a single rendering of ineffective assistance. Thompson v. State, 958 S.W.2d 156 , 161 (Tenn. Crim. App. 1997) (“Ineffective assistance of counsel is generally ‘a single ground for relief’ under the post-conviction statute.” (quoting Cone v. State, 927 S.W.2d 579 , 581-82 (Tenn. Crim. App. 1995))). As such, a petitioner may assert via post-conviction law, that an aggregation of instances establishes the prejudice prong of Strickland. Here, because none of counsel’s actions amounted to deficient performance, no prejudice can be shown because there are no acts of deficient performance which may be aggregated. Accordingly, the judgment of the post-conviction court is affirmed. _________________________________ JAMES CURWOOD WITT, JR., JUDGE -7-

2020-11-30 19:01:51.438475+00

https://www.courts.ca.gov/opinions/nonpub/C086317A.PDF

Filed 11/30/20 P. v. Ramos CA3 Opinion following rehearing NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Yuba) ---- THE PEOPLE, C086317 Plaintiff and Respondent, (Super. Ct. No. CRF15078) v. JOHN RAMOS, Defendant and Appellant. Appointed counsel for defendant John Ramos asked this court to review the record and determine whether there are any arguable issues on appeal. (People v. Wende (1979) 25 Cal.3d 436 (Wende).) After we issued our original decision in this appeal, we granted rehearing and requested supplemental briefing from the parties addressing changes in the law. Having reviewed the record and the supplemental briefs, we will remand the matter to permit the trial court to determine whether defendant is eligible for pretrial mental 1 health diversion pursuant to Penal Code section 1001.36,1 which became effective June 27, 2018 (Stats. 2018, ch. 34, § 24). I Defendant entered the victim’s house in 2015 with the intent to commit theft. The victim contacted law enforcement and defendant was apprehended. Defendant refused to cooperate and fought with the officers, ramming a shopping cart into one of the officers while trying to get away. A criminal complaint charged defendant with first degree burglary (§ 459 -- count I) and resisting arrest with force or violence (§ 69 -- count II), both felonies. The complaint further alleged defendant had a prior strike conviction for making criminal threats. Based on two separate mental evaluations of defendant’s competency, the trial court declared defendant incompetent to stand trial and committed him to Napa State Hospital. The trial court subsequently received a certification of defendant’s mental competency pursuant to section 1372 and reinstated criminal proceedings. Defendant pleaded no contest to both counts in exchange for his presentence release on his own recognizance pursuant to a Cruz waiver.2 He agreed that if he violated the conditions of his Cruz waiver, he would be allowed to withdraw his plea to count II and his plea to count I would become a “straight up” plea, meaning he would be exposed to 2, 4, or 6 years in state prison. The parties stipulated to a factual basis for defendant’s plea. Defendant failed to appear for sentencing. The trial court was informed defendant was in custody in Madera County and had committed two new misdemeanors in Yuba 1 Undesignated statutory references are to the Penal Code. 2 People v. Cruz (1988) 44 Cal.3d 1247 , 1250 (Cruz). 2 County. Finding defendant violated his Cruz waiver, the trial court issued a bench warrant for his arrest. Nearly two years later, defendant admitted he was in violation of his Cruz waiver. However, he moved to withdraw his plea claiming his attorney at the time of entry of the plea failed to advise him of the nature and consequences of his Cruz waiver, he was not properly educated about the nature and consequences of a Cruz waiver while admitted at Napa State Hospital, and he was not in his proper state of mind at the time of entry of the plea due to his medications. The trial court denied defendant’s motion to withdraw his plea. It reiterated the previous finding that defendant violated his Cruz waiver, denied probation, and sentenced defendant as follows: the upper term of six years on the burglary conviction (count I), to be served concurrent to the time defendant was serving in the Madera County case. The trial court had previously dismissed the prior strike allegation. The trial court imposed various fines and fees and awarded defendant 479 days of presentence credit (251 actual days plus 228 conduct days). The trial court granted defendant’s request for a certificate of probable cause. II Appointed counsel filed an opening brief setting forth the facts of the case and asking this court to review the record and determine whether there are any arguable issues on appeal. (Wende, supra, 25 Cal.3d 436 .) Defendant was advised by counsel of the right to file a supplemental brief within 30 days of the date of filing the opening brief. More than 30 days elapsed and we received no communication from defendant. After we issued our original decision in this appeal, we granted rehearing and requested supplemental briefing from the parties on changes in the law. A We asked the parties to address the applicability of section 1001.36, which authorizes a trial court to grant pretrial diversion -- postponement of prosecution to allow 3 the defendant to undergo mental health treatment -- if the defendant meets specified requirements. (§ 1001.36, subds. (a), (c).) Successful completion of diversion results in the dismissal of the original charges. (§ 1001.36, subd. (e).) Section 1001.36, subdivision (b)(1) identifies the pertinent criteria, including that “defendant suffers from a mental disorder” and that the “mental disorder was a significant factor in the commission of the charged offense.” (§ 1001.36, subd. (b)(1)(A), (B).) Defendant urged retroactive application of section 1001.36, and the California Supreme Court has now decided the issue, confirming retroactive application to cases not yet final when the statute took effect, and providing for a limited remand for the trial court to conduct a mental health diversion eligibility hearing. (People v. Frahs (2020) 9 Cal.5th 618 .) Because defendant’s case is not yet final and the record affirmatively discloses that defendant appears to meet at least one of the section 1001.36 eligibility requirements (a recent, qualifying mental disorder diagnosis), we will direct the trial court to retroactively apply the provisions of section 1001.36 as though the statute existed at the time defendant was initially charged. B At defendant’s request, we also asked the parties to file supplemental briefing addressing defendant’s ability to pay the imposed fines, fees and assessments. Defendant relies on People v. Dueñas (2019) 30 Cal.App.5th 1157 (Dueñas). In that case the court held it was improper to impose a restitution fine and court operations and facilities assessments without first determining the defendant’s ability to pay. (Id. at pp. 1168, 1172.) Some courts have subsequently criticized Dueñas’s legal analysis. (See, e.g., People v. Hicks (2019) 40 Cal.App.5th 320 , review granted Nov. 26, 2019, S258946.) Our review of the record indicates the trial court considered defendant’s ability to pay at sentencing. It expressly found that defendant had an inability to pay the mandatory $10 fine required by section 1202.5, and it informed defendant that because he 4 is indigent, counsel would be appointed to represent him on appeal, but it nevertheless imposed the restitution fines and assessments with an understanding of defendant’s ability to pay. Defendant’s Dueñas challenge lacks merit. Having undertaken an examination of the entire record and having reviewed the supplemental briefing, we have found no other arguable error that would result in a disposition more favorable to defendant. DISPOSITION The judgment is conditionally reversed and the cause is remanded to the trial court with directions to conduct a mental health diversion eligibility hearing consistent with People v. Frahs, supra, 9 Cal.5th 618 . If the trial court determines defendant qualifies for diversion under section 1001.36, then the court may grant diversion. If defendant successfully completes diversion, then the trial court shall dismiss the charges. However, if the trial court determines that defendant is ineligible for diversion, or defendant does not successfully complete diversion, then his conviction and sentence shall be reinstated. The judgment is otherwise affirmed. /S/ MAURO, J. We concur: /S/ HULL, Acting P. J. /S/ MURRAY, J. 5

2020-11-30 19:01:52.433088+00

https://www.courts.ca.gov/opinions/nonpub/B299112.PDF

Filed 11/30/20 Payne v. County of Los Angeles CA2/2 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION TWO WHITFIELD DERICK PAYNE, B299112 Plaintiff and Appellant, (Los Angeles County Super. Ct. No. BC720423) v. COUNTY OF LOS ANGELES et al., Defendants and Respondents. APPEAL from an order of the Superior Court of Los Angeles County. Terry A. Green, Judge. Affirmed. Whitfield Derick Payne, in pro. per., for Plaintiff and Appellant. Nelson & Fulton, Henry Patrick Nelson and Elise H. Hur for Defendant and Respondent County of Los Angeles. Garrett & Tully, Candie Y. Chang and Charles G. Gomez for Defendant and Respondent B&D Property Investment, LLC. Haven Law and Peter T. Haven for Defendants and Respondents Hawthorne Business Center, LLC, 3719 Canfield Avenue, LLC, Evans-Milner, LLC, 3530 Hughes Avenue, LLC, E III Real Estate Investments, Inc. and CA Exchange, LLC. Kaufman Dolowich Voluck, Andrew J. Waxler and Jennifer E. Newcomb for Defendant and Respondent Joel D. Ruben. _________________________________ Whitfield Derick Payne appeals from an order granting respondents’ motion to strike under Code of Civil Procedure section 426.16, the anti-SLAPP statute.1 Respondents Hawthorne Business Center, LLC, 3719 Canfield Avenue, Evans- Milner, LLC, 3530 Hughes Avenue, LLC, E III Real Estate Investments, Inc. and CA Exchange, LLC (collectively HBC) obtained a stipulated unlawful detainer judgment against Payne concerning office units that Payne leased from HBC. Respondent Joel D. Ruben was their lawyer. The judgment required Payne to pay past due rent and holdover damages. On behalf of his clients, Ruben obtained a writ of execution to collect on the judgment. The writ was levied on a rental property that Payne owned on Visalia Avenue in Compton (the Visalia Property). After Payne made several unsuccessful attempts to avoid the sale of that property through bankruptcy filings, respondent B&D Property Investment, LLC (B&D) purchased the property at a sheriff’s sale. 1Subsequent undesignated statutory references are to the Code of Civil Procedure. “SLAPP” is an acronym for “[s]trategic lawsuit against public participation.” (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106 , 1109, fn. 1.) 2  Payne then filed this lawsuit, seeking damages and return of the Visalia Property on various causes of action alleging that the sale of the property was improper.2 We affirm. Payne’s claims arise from conduct that is protected under section 425.16. Those claims are all based on alleged communicative conduct in connection with litigation or other official government proceedings. And Payne failed to show that he was likely to prevail on his claims. The conduct that Payne challenges was protected by the litigation privilege, and in any event Payne did not provide evidence of any wrongdoing. BACKGROUND 1. The Unlawful Detainer Action Payne previously rented two office units in Inglewood from HBC (the Inglewood Property). Payne fell behind in his rent in 2015, and HBC, represented by Ruben, filed an unlawful detainer action (the UD Action) to evict him. Payne then filed a chapter 13 bankruptcy petition. HBC successfully moved for relief from the bankruptcy stay under title 11 United States Code sections 362(d)(1) and 362(d)(2). Payne’s bankruptcy case was subsequently dismissed on January 13, 2016. The UD Action settled on the day of trial. Payne stipulated to a judgment dated December 16, 2015 (the UD Judgment). The UD Judgment awarded possession of the Inglewood Property to 2 Payne sued HBC and Ruben on various claims relating to alleged fraud, he sued the County of Los Angeles (County) on the ground that it allowed the sheriff’s sale to proceed, and he sued B&D for the return of the Visalia Property and for quiet title. We refer to HBC, Ruben, B&D, and the County collectively as Respondents. 3 HBC and required Payne to vacate the property by January 15, 2016. The UD Judgment also awarded $25,000 to HBC for past due rent and holdover damages. The UD Judgment contained a standard provision with a checked box indicating that Payne’s security deposit “shall be retained by the plaintiff and defendant(s) waive(s) any claim to its return.” A handwritten addition to that paragraph stated that “[t]he $25,000 under ¶ 2 above and the security deposit will be all the damages Plaintiffs are entitled to through January 15, 2016.”3 Another handwritten addition to the UD Judgment stated that Payne “will amend his Chapter 13 plan in his bankruptcy case, and any payments made under the plan will be credited against the $25,000 under ¶ 2 above.” The UD Judgment was entered the following day, on December 17, 2015. 2. Enforcement of the UD Judgment In preparation for executing the money judgment, HBC obtained a writ of execution on December 22, 2015, and an abstract of judgment (subsequently amended) on January 15, 2016. On May 6, 2016, the Los Angeles County Sheriff’s Department (Sheriff) levied the writ of execution on the Visalia Property. 3 As discussed further below, Payne claimed that Ruben checked the box forfeiting Payne’s security deposit and added the handwritten provision after Payne had already executed the stipulation for the UD Judgment. Ruben denied this allegation, testifying that he checked the box concerning the security deposit and made all the handwritten additions to the UD Judgment pursuant to the parties’ agreement before the stipulation was executed. Payne did not submit any evidence supporting his allegation. 4  In response to the levy, Payne filed an ex parte application in superior court seeking to vacate the writ. Payne argued that the writ was not authorized by the UD Judgment. Payne claimed that he and HBC “agreed as to the method whereby the judgment would be satisfied, and that was through [Payne’s] Bankruptcy Chapter 13 Plan. No alternate method of collection was agreed to, for had that been the case, [Payne] would not have executed the judgment, and would have gone to trial.” The trial court denied Payne’s ex parte application. The trial court’s ruling was later affirmed in an opinion by the appellate division of the superior court on May 10, 2018. (Hawthorne Business Center v. Payne (May 10, 2018, No. BV031883, App. Div. Super. Ct. L.A. County [nonpub. opn.]).) In July 2016, Payne filed another bankruptcy petition. In May 2017 the bankruptcy court confirmed a chapter 13 plan in that proceeding, which included a payment schedule. HBC received distributions from Payne’s second bankruptcy in the amount of $5,282.90. However, on February 26, 2018, the bankruptcy court granted a motion by the trustee to dismiss the bankruptcy case on the ground that Payne had failed to make payments required under the chapter 13 plan. According to the trustee, at the time the motion was filed in November 2017, Payne was delinquent in payments under the payment plan in the amount of $10,104. The dismissal order stated that “debtor is prohibited from filing any new bankruptcy petition within 180 days of the date of entry of this order.” Following the dismissal, HBC filed a notice in the UD Action stating that the bankruptcy stay had terminated. HBC also filed an “Acknowledgment of [Partial] Satisfaction of 5 Judgment” reflecting the $5,282.90 that it had received from the bankruptcy proceeding. HBC then requested that the Sheriff proceed with the sale of the Visalia Property. The Sheriff noticed the sale for April 18, 2018. On April 3, 2018, Payne filed another ex parte application in superior court seeking an injunction to preclude the sale. The application alleged that Ruben had given false information to the Sheriff concerning the amount due on the UD Judgment. The court denied the application. Payne then filed a third bankruptcy petition on April 13, 2018. A few days later, prior to the Sheriff’s sale, Payne filed a “Defendant’s Notice of Chapter 13 Protection” in the UD Action, claiming that the bankruptcy filing stayed all proceedings. Despite that filing, the Sheriff’s sale of the Visalia Property proceeded as scheduled on April 18, 2018. B&D purchased the Visalia Property for $164,000. HBC received $26,284.05 from the sale. The remaining amount was disbursed to Payne. On May 22, 2018, the bankruptcy court issued an order to show cause re dismissal (OSC), citing Payne’s “apparent attempt to use a false social security number and violation of a prohibition against filing any new bankruptcy petition within 180 days pursuant to the dismissal order entered on February 26, 2018.” The bankruptcy court dismissed Payne’s third bankruptcy case following the hearing on the OSC. 3. Payne’s Complaint Payne filed his complaint in this action on September 4, 2018. The complaint alleged that Ruben and HBC altered the UD Judgment in two ways after Payne had executed the 6 stipulation for the judgment. After obtaining Payne’s signature, Ruben allegedly checked the box indicating that Payne had agreed to surrender his security deposit, and also added the handwritten language “to falsely indicate that the $25,000 principal and Security Deposit were damages merely for the period of time until January 15, 2016, a date one month thereafter.” The complaint also alleged that Ruben and HBC provided false information to the Sheriff in connection with the sale of the Visalia Property. Ruben allegedly provided lienholder instructions to the Sheriff identifying the judgment amount as $25,000, without crediting Payne’s security deposit or the amount that HBC had received from Payne’s second bankruptcy. Ruben also allegedly informed the Sheriff that it was appropriate to proceed with the sale despite Payne’s third bankruptcy filing on April 13, 2018. The complaint alleged causes of action for conversion; negligence; quiet title; fraud; interference with prospective economic advantage; unfair business practices; intentional infliction of emotional distress; and “restitution.” 4. The Anti-SLAPP Motions Ruben filed an anti-SLAPP motion. The motion was supported by his own declaration with exhibits explaining the sequence of events concerning the UD Judgment and the steps Ruben took on behalf of HBC to enforce it. HBC, B&D, and the County joined in the motion. In opposition, Payne submitted a memorandum and his own brief declaration. The declaration did not respond to Ruben’s description of the relevant events, but simply asserted 7 that the UD Judgment did not allow an abstract of judgment or a “Writ of Execution/Money Judgment.” The trial court granted the anti-SLAPP motions. The court ruled that Payne’s claims arose from protected petitioning activity under section 425.16, subdivision (e), as they concerned Respondents’ “efforts to levy on a stipulated judgment.” The court also found that Payne had failed to meet his burden of demonstrating a probability of success on his claims. The court concluded that Payne “has no probability of prevailing, because enforcing a court judgment is protected by the litigation privilege set forth in Civil Code § 47(b).” The court also found that the “record reveals no wrongdoing” by Respondents. DISCUSSION 1. The Anti-SLAPP Procedure Section 425.16 provides for a “special motion to strike” when a plaintiff asserts claims against a person “arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue.” (§ 425.16, subd. (b)(1).) Such claims must be stricken “unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (Ibid.) Thus, ruling on an anti-SLAPP motion involves a two-step procedure. First, the “moving defendant bears the burden of identifying all allegations of protected activity, and the claims for relief supported by them.” (Baral v. Schnitt (2016) 1 Cal.5th 376 , 396 (Baral).) At this stage, the defendant must make a “threshold showing” that the challenged claims arise from protected activity. (Rusheen v. Cohen (2006) 37 Cal.4th 1048 , 1056 (Rusheen).) 8  Second, if the defendant makes such a showing, the “burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated.” (Baral, supra, 1 Cal.5th at p. 396.) Without resolving evidentiary conflicts, the court determines “whether the plaintiff’s showing, if accepted by the trier of fact, would be sufficient to sustain a favorable judgment.” (Ibid.) The plaintiff’s showing must be based upon admissible evidence. (HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204 , 212.) Section 425.16, subdivision (e) defines the categories of acts that are in “ ‘furtherance of a person’s right of petition or free speech.’ ” Those categories include “any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law,” and “any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law.” (§ 425.16, subd. (e)(1)–(2).) An appellate court reviews the grant or denial of an anti- SLAPP motion under the de novo standard. (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057 , 1067.) 2. Payne’s Claims Arise from Protected Activity A cause of action that arises from a defendant’s litigation activity challenges protected petitioning conduct and is therefore subject to an anti-SLAPP motion. (§ 425.16, subd. (e)(1); Rusheen, supra, 37 Cal.4th at p. 1056.) A claim arises from protected litigation conduct if it seeks liability based upon “communicative conduct such as the filing, funding, and 9 prosecution of a civil action. [Citation.] This includes qualifying acts committed by attorneys in representing clients in litigation.” (Rusheen, at p. 1056.) Thus, “all communicative acts performed by attorneys as part of their representation of a client in a judicial proceeding . . . are per se protected as petitioning activity by the anti-SLAPP statute.” (Cabral v. Martins (2009) 177 Cal.App.4th 471 , 480; see Birkner v. Lam (2007) 156 Cal.App.4th 275 , 281 [“The prosecution of an unlawful detainer action indisputably is protected activity within the meaning of section 425.16”].) Payne’s claims primarily challenge the conduct of Ruben and HBC in obtaining and enforcing the UD Judgment against the Visalia Property. The claims are based on communicative acts by Ruben and HBC. Payne’s complaint alleges that Ruben: (1) falsely told Payne during settlement discussions that the UD Judgment would be less than $25,000 after accounting for Payne’s security deposit and sums that HBC received from Payne’s prior bankruptcy proceedings; (2) altered the UD Judgment after Payne had stipulated to it; (3) filed a memorandum of costs and lienholder instructions for the Sheriff’s sale that failed to account for sums that should have been deducted from the judgment amount; and (4) falsely told the Sheriff that it was appropriate to proceed with the sale of the Visalia Property despite Payne’s initiation of new bankruptcy proceedings shortly before the sale. In opposing Respondents’ anti-SLAPP motions, Payne also argued that Ruben committed fraud by failing to disclose in settlement negotiations that he intended to levy a writ of execution against the Visalia Property. These were all alleged 10 communications related to the UD Action. Payne’s claims therefore arise from protected litigation conduct. Payne’s complaint also alleges that the County is liable for conversion and/or negligence because it improperly proceeded with the Sheriff’s sale after learning of Payne’s bankruptcy filing. Government entities may invoke the anti-SLAPP statute when they are sued for conduct falling within the protection of the statute. (Vargas v. City of Salinas (2009) 46 Cal.4th 1 , 17–18; Schaffer v. City and County of San Francisco (2008) 168 Cal.App.4th 992 , 1003–1004.) The County’s alleged act of proceeding with the sale may not itself have been a “statement or writing” for purposes of section 425.16, subdivisions (e)(1) and (2). However, that act was “necessarily related” to the alleged wrongful communicative acts leading to the sale. (See Rusheen, supra, 37 Cal.4th at p. 1065 [litigation privilege extended to act of enforcing a writ of execution allegedly obtained through fraud]; Tom Jones Enterprises, Ltd. v. County of Los Angeles (2013) 212 Cal.App.4th 1283 , 1294–1297 (Tom Jones) [claim against the County for negligent levy of a writ of execution was barred by the litigation privilege]; Flatley v. Mauro (2006) 39 Cal.4th 299 , 322– 323 (Flatley) [“Past decisions of this court and the Court of Appeal have looked to the litigation privilege as an aid in construing the scope of section 425.16, subdivision (e)(1) and (2)”].) Moreover, Payne’s complaint also predicated the County’s liability on protected communications. The complaint alleges that “[t]he Notice of the Sheriff’s Sale failed to disclose that the Real Property was an asset of a bankruptcy estate in a pending bankruptcy action. The Sheriff’s Department likewise failed to announce to the members of the public in attendance at the 11 Sheriff’s Sale that the Real Property was an asset of a bankruptcy estate.” Finally, Payne did not argue below and does not argue on appeal that his claims against the County arise from unprotected, noncommunicative conduct. He has therefore forfeited the issue. (Badie v. Bank of America (1998) 67 Cal.App.4th 779 , 784–785 [“When an appellant fails to raise a point . . . we treat the point as waived”].) On appeal, Payne does not dispute that his claims arise from litigation activity by Ruben and HBC. He argues only that Ruben’s alleged conduct is not within the scope of the anti- SLAPP statute because Ruben and HBC engaged in fraud and “extortion.” In Payne’s reply brief, he supports that argument with a citation to our Supreme Court’s decision in Flatley. In Flatley, the court held that a defendant cannot meet his or her burden to show that the plaintiff’s claims arise from protected activity when “either the defendant concedes, or the evidence conclusively establishes, that the assertedly protected speech or petition activity was illegal as a matter of law.” (Flatley, supra, 39 Cal.4th at p. 320.) The court emphasized that a plaintiff’s mere allegation of illegality is not sufficient to preclude a defendant from showing that his or her challenged conduct is protected under section 425.16: “If, however, a factual dispute exists about the legitimacy of the defendant’s conduct, it cannot be resolved within the first step [of the anti-SLAPP procedure] but must be raised by the plaintiff in connection with the plaintiff’s burden to show a probability of prevailing on the merits.” (Flatley, at p. 316; see also Birkner v. Lam, supra, 156 Cal.App.4th at p. 285 [“ ‘[C]onduct that would otherwise come within the scope of the anti-SLAPP statute does not lose its 12 coverage . . . simply because it is alleged to have been unlawful or unethical’ ”], quoting Kashian v. Harriman (2002) 98 Cal.App.4th 892 , 910–911.) Respondents dispute that they engaged in any unlawful activity. And, in responding to Respondents’ anti-SLAPP motions, Payne did not provide any evidence of alleged illegal activity, much less evidence that “conclusively establishes” that Respondents engaged in unlawful activity “as a matter of law.” (Flatley, supra, 39 Cal.4th at p. 320.) Payne’s declaration in opposition to the anti-SLAPP motions did not support any of his allegations of fraud. The declaration simply asserted that “[t]here were no terms” in the stipulated UD Judgment that allowed an abstract of judgment or a writ of execution. That was not evidence of fraud or of any other kind of wrongdoing.4 The UD Judgment contained a money judgment in favor of HBC, which HBC was entitled to collect by executing against Payne’s assets using the legal mechanisms available to enforce judgments. No express provision in the UD Judgment was necessary to give HBC the right to execute the judgment against real property that Payne owned. (See § 695.010, subd. (a) [“Except as otherwise provided by law, all property of the judgment debtor is subject to enforcement of a money judgment”].) Moreover, the superior court rejected this same argument. As discussed above, long before the Sheriff’s sale Payne moved 4Nor was it even admissible. The trial court sustained Ruben’s objections to this testimony, and Payne does not challenge that ruling on appeal. 13 unsuccessfully to vacate the writ of execution levied on the Visalia Property on the ground that the UD Judgment did not authorize that relief. The appellate division of the superior court affirmed the order denying that motion, rejecting Payne’s argument that the UD Judgment “did not allow [HBC] to enforce the judgment by levying on his real property.” (Hawthorne Business Center v. Payne, supra, No. BV031883.) Payne could not prove that Ruben and HBC engaged in fraudulent litigation conduct by pursuing a remedy that two courts had already ruled was proper. Payne failed to provide any proof of fraud, much less proof that was conclusive as a matter of law. Respondents therefore met their burden under the first step of the anti-SLAPP procedure. 3. Payne Failed to Show a Probability of Success The trial court correctly ruled that Payne’s claims would fail because enforcement of the UD Judgment was protected under the litigation privilege. The litigation privilege established by Civil Code section 47 applies to “ ‘any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.’ ” (Rusheen, supra, 37 Cal.4th at p. 1057, quoting Silberg v. Anderson (1990) 50 Cal.3d 205 , 212.) The privilege applies to communications in connection with litigation, even if those communications include false claims or perjurious evidence. (Rusheen, at p. 1058.) And the privilege applies to the alleged wrongful enforcement of a judgment if the plaintiff’s claim of wrongdoing is based upon communicative conduct during the litigation. (Id. at pp. 1062–1063.) 14  As discussed above, Payne’s claims against Ruben, HBC and B&D are based on alleged fraud in procuring and enforcing the UD Judgment. The alleged fraud consisted of communicative acts that are protected by the litigation privilege. Payne’s claims against the County are also barred by the litigation privilege, as they are based on alleged negligence that is necessarily related to communicative acts. (See Rusheen, supra, 37 Cal.4th at p. 1065; Tom Jones, supra, 212 Cal.App.4th at pp. 1294–1297.)5 Payne therefore failed to meet his burden under the second step of the anti-SLAPP procedure, and the trial court correctly granted Respondents’ anti-SLAPP motions. 4. The Timing of the Hearing on Respondents’ Anti-SLAPP Motions Did Not Preclude the Trial Court from Considering Them Payne argues that the trial court did not have jurisdiction to consider the Respondents’ anti-SLAPP motions because the motions were heard more than 30 days after they were served. Payne relies on section 425.16, subdivision (f), which provides that an anti-SLAPP motion “shall be scheduled by the clerk of the 5 Payne also did not provide any evidence supporting his claim that the County was negligent in proceeding with the sale of the Visalia Property while a bankruptcy proceeding was pending. Payne did not rebut Respondents’ evidence that the bankruptcy proceeding was Payne’s third such proceeding, which Payne filed under a different social security number and in violation of the bankruptcy court’s prior order prohibiting Payne from filing any other bankruptcy action for 180 days. As the trial court correctly observed, under title 11 United States Code section 362(b)(21), a bankruptcy petition does not stay enforcement of a lien against real property if the petition was filed in violation of a bankruptcy court order in a prior case. 15 court for a hearing not more than 30 days after the service of the motion unless the docket conditions of the court require a later hearing.” Payne’s argument fails for several reasons. First, Payne did not raise the argument or object to the timing of the hearing in the trial court and he has therefore forfeited the issue. (San Ramon Valley Fire Protection Dist. v. Contra Costa County Employees’ Retirement Assn. (2004) 125 Cal.App.4th 343 , 351– 352.) Second, Payne’s argument is wrong on the merits. As this court explained in Karnazes v. Ares (2016) 244 Cal.App.4th 344 , “a trial court may not properly deny an anti-SLAPP motion on the grounds that the hearing was not scheduled within 30 days after service of the motion. Instead, section 425.16, subdivision (f) ‘requires the court clerk to schedule a special motion to strike for a hearing no more than 30 days after the motion is served if such a hearing date is available on the court's docket, but does not require the moving party to ensure that the hearing is so scheduled and does not justify the denial of a special motion to strike solely because the motion was not scheduled for a hearing within 30 days after the motion was served.’ ” (Karnazes, at p. 352, quoting Hall v. Time Warner, Inc. (2007) 153 Cal.App.4th 1337 , 1349.) Payne cites his prior experience in filing a motion to “Set Aside [a] Judgment” under section 660. However, that motion was subject to a different rule. Unlike the anti-SLAPP statute, section 660 (which governs a motion for a new trial) and section 663a (which governs a motion to set aside a judgment) expressly require that the court’s power to rule on the motion expires 75 days after service of notice of the judgment. Those sections state 16 that, if that time expires, “the effect shall be a denial of the motion without further order of the court.” (§ 660, subd. (c); § 663a, subd. (b).) 5. Payne’s Claim of Bias Is Baseless Payne argues that the trial judge was biased against him because of his race. Nothing in the record supports that allegation. The trial court made a correct legal ruling based upon a well-supported anti-SLAPP motion. We therefore reject the argument. DISPOSITION The trial court’s order is affirmed. Respondents are entitled to their costs on appeal. NOT TO BE PUBLISHED. LUI, P. J. We concur: ASHMANN-GERST, J. CHAVEZ, J. 17

2020-11-30 19:01:52.69296+00

https://www.courts.ca.gov/opinions/nonpub/B299820.PDF

Filed 11/30/20 Minkovitch v. Mansouri CA2/2 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION TWO YAN MINKOVITCH, B299820 Plaintiff and Appellant, (Los Angeles County Super. Ct. No. 19STCV06902) v. PEDRAM MANSOURI et al., Defendants and Respondents. APPEAL from an order of the Superior Court of Los Angeles County. Gregory Keosian, Judge. Affirmed. Yan Minkovitch, in pro. per., for Plaintiff and Appellant. Kaufman Dolowich & Voluck, Barry Z. Brodsky and Jodi L. Girten for Defendants and Respondents. _________________________________  Yan Minkovitch appeals from the trial court’s order granting a motion to strike under Code of Civil Procedure section 425.16, the anti-SLAPP statute.1 Respondents Pedram Mansouri, Christine Otero and The Mansouri Law Offices (collectively Respondents) were the lawyers for Minkovitch’s ex- wife in their marital dissolution proceedings. Minkovitch claims that during those proceedings: (1) Mansouri physically assaulted him with rolled-up motion papers; (2) the Mansouri firm made false allegations against him in a contempt proceeding; (3) Mansouri threatened him in an email; and (4) Mansouri falsely reported Minkovitch’s child support obligations to the Department of Child Support Services. The trial court struck all but the first category of claims under section 425.16. We affirm. The claims that the trial court struck all arise out of protected litigation and other protected petitioning conduct. Except for Minkovitch’s cause of action for malicious prosecution, each of those claims is also barred by the litigation privilege. And the malicious prosecution claim could not have succeeded because such a claim cannot be predicated on unsuccessful motions in a marital dissolution action. 1Subsequent undesignated statutory references are to the Code of Civil Procedure. “SLAPP” is an acronym for “[s]trategic lawsuit against public participation.” (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106 , 1109, fn. 1.) 2  BACKGROUND 1. The Dissolution Action Respondents represent Minkovitch’s ex-wife, Lina, in the former couple’s dissolution action (Dissolution Action).2 On January 11, 2018, Respondents filed an Order to Show Cause re Contempt in the Dissolution Action (Contempt OSC). The Contempt OSC claimed that Minkovitch had failed to pay 14 months of court-ordered spousal support and child support for the couple’s two children, resulting in payment arrears of $15,266. Pursuant to a court order, Lina had previously received $13,000 in child and spousal support payments from an escrow account containing funds from the sale of the couple’s house. The court had authorized the use of such funds for support payments when Minkovitch was more than 5 days late in paying support. Lina claimed that the house had been her separate property and that the funds in the escrow account therefore belonged to her rather than to Minkovitch. The Dissolution Action was tried in November and December 2018. After trial, the court ruled that the couple’s house had in fact been Lina’s separate property. The court found that the support payments that Lina received from the escrow account were therefore from her separate property, and gave Minkovitch no credit toward his outstanding support obligations from those payments. The court found that Minkovitch had paid nothing in spousal support and only $550 in child support between March 6, 2016, and November 14, 2018. The court consequently found that 2For clarity, we refer to Lina Minkovitch using her first name. No disrespect is intended. 3 Minkovitch owed Lina a total of $20,638 in child and spousal support arrears, which the court ordered him to pay at a rate of $500 per month. The court ordered future child support payments by Minkovitch in the amount of $131 per month. However, the court concluded that the “parties have the same or similar net spendable incomes,” and therefore did not award any ongoing spousal support. On the morning of December 20, 2018, the day after trial had concluded, Minkovitch sent Mansouri an e-mail informing him that Minkovitch intended to file a lawsuit against Mansouri and his firm and demanding that Mansouri preserve relevant documents. Minkovitch’s e-mail said that the lawsuit would include claims for breach of fiduciary duty, fraud, embezzlement, theft, malpractice, perjury, malicious prosecution, intentional inflicting of emotional distress, and “other claims.” Mansouri responded with the following e-mail (the December 20 email): “Hi Yan- [¶] I’m confused. Weren’t you celebrating outside the courtroom yesterday? I thought you won a big victory yesterday? What happened? You seem disregulated this morning (I know that’s a tough word for you – look it up). Did you wake up this morning and reality hit you like a ton of bricks? [¶] Lina and I also want to thank you for producing all of the evidence that carried the day for us. We could not have done it without the profit and loss you created or even the deeds and the loan applications that we did not have until you produced them! Not to mention your unbelievable testimony! You were our star witness. You literally would have won if you didn’t do anything. Lol. [¶] Btw we are now in the process of having DCSS revoke 4 your agent and loan broker license, as well as your passport and drivers license due to your arrears. Once you lose Your license you will then lose custody because you can’t drive the girls anywhere. [¶] Also, you contact me again or come to my office I will call the police and/or get a restraining order. [¶] Govern yourself accordingly. [¶] Pedram.” The trial court entered judgment in the Dissolution Action on April 2, 2019. 2. Minkovitch’s Complaint Minkovitch filed his complaint in this action on March 1, 2019. The complaint’s first two causes of action—for assault and battery and intentional infliction of emotional distress—are based on an alleged incident that occurred in court on November 13, 2018. Minkovitch claimed that, after checking in with the court clerk, Mansouri “approached the plaintiff and rolled up Plaintiff’s motion and Mr. Mansouri’s responsive declaration and hit plaintiff across the face.” The complaint’s third, fourth, fifth, and sixth causes of action were for malicious prosecution, abuse of process, intentional infliction of emotional distress, and defamation, respectively. Each of these causes of action was based on the Contempt OSC, which Minkovitch alleged was “false.” The complaint alleged that Mansouri had falsely claimed in the Contempt OSC that “he did not receive any support payment” even though Mansouri had actually received spousal and child support payments on behalf of Lina from the escrow fund. The complaint alleged that, after the hearing on the Contempt OSC, “the case was dismissed.” The complaint’s seventh, eighth, and ninth causes of action—for civil harassment, intentional infliction of emotional 5 distress, and abuse of process—were based upon Mansouri’s December 20 e-mail. Minkovitch alleged that, after trial, Mansouri started threatening Minkovitch with “physical harm,” and that Mansouri’s “verbal threats continued via email.” The complaint cited Mansouri’s statement in the December 20 e-mail that he was “in the process” of reporting Minkovitch to the “department of children services,” to “get plaintiff’s license and children taken away.” Minkovitch alleged that Mansouri “fulfilled his threats by giving [the] department of children services the wrong information where they then implemented the wrong wage garnishment order.” 3. The Anti-SLAPP Motion Respondents filed an anti-SLAPP motion, seeking to strike Minkovitch’s entire complaint. Respondents argued that each of Minkovitch’s claims arose from conduct that is protected under section 425.16, subdivision (e), because those claims concerned Respondents’ “role as counsel for Lisa . . . and would have no basis in the absence of their protected activities in that role.” Respondents supported the motion with declarations from Mansouri and Otero. Otero’s declaration explained the circumstances and proceedings surrounding the Contempt OSC. Mansouri’s declaration responded to Minkovitch’s allegations concerning the November 13, 2018 incident in court and the December 20 e-mail. Mansouri denied ever physically striking Minkovitch or “physically or verbally” threatening him. Mansouri stated that, while in court on November 13, 2018, he tried to locate Minkovitch’s counsel. He did not see her, but he did see Minkovitch. Mansouri attempted to hand Minkovitch the opposition papers to an ex parte application that Minkovitch had 6 filed, but Minkovitch refused to take the papers. Mansouri said that he therefore “lightly tossed the papers on [Minkovitch’s] lap and walked away.” Mansouri acknowledged stating in his December 20 e-mail that his client would seek enforcement of the court-ordered child support, “which could include a revocation of [Minkovitch’s] driver’s license and real estate license by the Department of Child Support Services [DCSS].” However, Mansouri testified that he “had no involvement in any actions or inactions that might or were taken by the DCSS to enforce the child support order.” Minkovitch opposed the anti-SLAPP motion and filed his own declaration in support of his opposition.3 The trial court granted the motion in part and denied it in part. The trial court denied the motion with respect to Minkovitch’s claims concerning the alleged assault in court, finding that the claims did not arise from protected litigation activity. The court concluded that “striking someone with rolled up papers is not litigation-related activities under the anti- SLAPP statute,” and the fact that the incident occurred in a courthouse was merely incidental.4 However, the trial court granted the motion with respect to Minkovitch’s remaining claims. The court found that the 3 Although the trial court’s order refers to Minkovitch’s declaration, Minkovitch did not include a copy of the declaration in the appellate record. 4 Respondents did not appeal from this portion of the trial court’s ruling, and Minkovitch’s first and second causes of action are therefore not at issue in this appeal. We refer to Minkovitch’s remaining claims as the “Appealed Claims.” 7 Contempt OSC and the December 20 e-mail were both protected litigation communications. The court concluded that the December 20 e-mail “concerns the subject matter of the litigation and informs Minkovitch of Mansouri’s next steps in the litigation, which Minkovitch alleges he ‘fulfilled’ by obtaining a wage garnishment order.” With respect to the merits of Minkovitch’s Appealed Claims, the court found that each of those claims except for Minkovitch’s third cause of action for malicious prosecution was barred by the litigation privilege established by Civil Code section 47, subdivision (b). Quoting Bidna v. Rosen (1993) 19 Cal.App.4th 27 , 37 (Bidna), the court concluded that Minkovitch also could not prevail on his malicious prosecution cause of action because “ ‘no malicious prosecution action may arise out of unsuccessful family law motions or OSC’s.’ ” DISCUSSION 1. The Anti-SLAPP Procedure Section 425.16 provides for a “special motion to strike” when a plaintiff asserts claims against a person “arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue.” (§ 425.16, subd. (b)(1).) Such claims must be stricken “unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (Ibid.) Thus, ruling on an anti-SLAPP motion involves a two-step procedure. First, the “moving defendant bears the burden of identifying all allegations of protected activity, and the claims for relief supported by them.” (Baral v. Schnitt (2016) 1 Cal.5th 376 , 396 (Baral).) At this stage, the defendant must make a 8 “threshold showing” that the challenged claims arise from protected activity. (Rusheen v. Cohen (2006) 37 Cal.4th 1048 , 1056 (Rusheen).) “A claim arises from protected activity when that activity underlies or forms the basis for the claim.” (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057 , 1062 (Park).) Second, if the defendant makes such a showing, the “burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated.” (Baral, supra, 1 Cal.5th at p. 396.) Without resolving evidentiary conflicts, the court determines “whether the plaintiff’s showing, if accepted by the trier of fact, would be sufficient to sustain a favorable judgment.” (Ibid.) The plaintiff’s showing must be based upon admissible evidence. (HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204 , 212.) Section 425.16, subdivision (e) defines the categories of acts that are in “ ‘furtherance of a person’s right of petition or free speech.’ ” Those categories include “any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law,” and “any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law.” (§ 425.16, subd. (e)(1)–(2).) An appellate court reviews the grant or denial of an anti- SLAPP motion under the de novo standard. (Park, supra, 2 Cal.5th at p. 1067.) 9 2. Minkovitch’s Appealed Claims All Arise From Protected Conduct The trial court correctly concluded that Minkovitch’s Appealed Claims all arise from protected petitioning conduct. Those claims are based upon statements that were either made in the course of litigation or in connection with official proceedings by a government agency. Minkovitch’s third through sixth causes of action all arise from Respondents’ filing and prosecution of the Contempt OSC. Regardless of how it is labeled, each of these causes of action is based upon Respondents’ alleged false statements in the Contempt OSC. (See Navellier v. Sletten (2002) 29 Cal.4th 82 , 92 [“The anti-SLAPP statute’s definitional focus is not the form of the plaintiff’s cause of action but, rather, the defendant’s activity that gives rise to his or her asserted liability”].)5 Pleadings filed in litigation are a paradigmatic example of protected petitioning conduct. (See Rusheen, supra, 37 Cal.4th at p. 1056 [an act in furtherance of the right to petition under section 425.16 “includes communicative conduct such as the filing, funding, and prosecution of a civil action”].) Minkovitch’s seventh, eighth, and ninth causes of action also arise from litigation conduct. Each of those causes of action is based upon Mansouri’s statements in the December 20 e-mail. As the trial court correctly observed, the contents of the e-mail 5 No exception exists under the anti-SLAPP statute for actions for malicious prosecution or for abuse of process. (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728 , 734–735; Rusheen, supra, 37 Cal.4th at p. 1065.) 10 concern prior court proceedings and Mansouri’s intended next steps on behalf of his client. Like pleadings, communications by counsel concerning ongoing litigation are protected petitioning conduct. “ ‘Under the plain language of section 425.16, subdivision (e)(1) and (2), as well as the case law interpreting those provisions, all communicative acts performed by attorneys as part of their representation of a client in a judicial proceeding or other petitioning context are per se protected as petitioning activity by the anti-SLAPP statute.’ ” (Contreras v. Dowling (2016) 5 Cal.App.5th 394 , 408–409 [attorney’s letter to opposing counsel was “unquestionably protected activity”], quoting Cabral v. Martins (2009) 177 Cal.App.4th 471 , 479–480; see Rusheen, supra, 37 Cal.4th at p. 1056 [protected conduct “includes qualifying acts committed by attorneys in representing clients in litigation”].)6 6 Minkovitch’s complaint contains a vague allegation that Mansouri “started threatening” him with “physical harm.” However, the complaint does not contain any specific allegation of a threat other than the December 20 e-mail. The appellate record also does not contain any evidence of physical threats. The trial court stated in its ruling that it “cannot locate the alleged physical threat that Minkovitch refers to in his Complaint.” Because Minkovitch did not include his declaration opposing the anti-SLAPP motion in the appellate record, we must presume that the trial court was correct in this characterization of the evidence. (See In re Kathy P. (1979) 25 Cal.3d 91 , 102 [appellant has the “burden of showing error by an adequate record”].) Thus, there is nothing in the record to support a conclusion that Mansouri allegedly made threats outside the context of litigation. 11  Minkovitch’s claim that Mansouri gave false information to DCSS also arises from protected litigation conduct. Mansouri allegedly gave DCSS information about Minkovitch’s child support obligations as determined by the court in the Dissolution Action. Minkovitch’s claim therefore challenged statements made “in connection with” the issues in that action. (See Kenne v. Stennis (2014) 230 Cal.App.4th 953 , 967 (Kenne) [allegedly false police reports “dealt with efforts at service of papers in an existing litigation and thus were ‘made in connection with an issue under consideration or review by a . . . judicial body’ ”], quoting § 425.16, subd. (e)(2).) Mansouri also made his challenged statements in anticipation of official proceedings by DCSS. “Communications that are preparatory to or in anticipation of commencing official proceedings come within the protection of the anti-SLAPP statute.” (Siam v. Kizilbash (2005) 130 Cal.App.4th 1563 , 1569– 1570 (Siam) [reports of child abuse to mandatory reporters were protected under section 425.16, as they were “designed to prompt action by law enforcement or child welfare agencies”].) Minkovitch argues that his Appealed Claims did not arise from conduct that is protected under section 425.16 because Respondents’ challenged conduct was not actually “in furtherance” of any constitutional rights. (§ 425.16, subd. (b)(1).) Minkovitch claims that Respondents’ challenged statements were not “valid” exercises of any constitutional right because they were false and unlawful and were intended to intimidate rather than further any legitimate purpose. Minkovitch’s argument confuses the first and second step of the anti-SLAPP analysis. To show that a claim arises from protected conduct under the first step of the anti-SLAPP 12 procedure, a defendant need not prove that his or her conduct involved the valid exercise of a constitutional right. “That the Legislature expressed a concern in the statute’s preamble with lawsuits that chill valid exercise of First Amendment rights does not mean that a court may read a separate proof-of-validity requirement into the operative sections of the statute. [Citations.] Rather, any ‘claimed illegitimacy of the defendant’s acts is an issue which the plaintiff must raise and support in the context of the discharge of the plaintiff’s [secondary] burden to provide a prima facie showing of the merits of the plaintiff’s case.’ ” (Navellier v. Sletten, supra, 29 Cal.4th at p. 94, quoting Paul for Council v. Hanyecz (2001) 85 Cal.App.4th 1356 , 1367.) Our Supreme Court has recognized an exception to this rule when “either the defendant concedes, or the evidence conclusively establishes, that the assertedly protected speech or petition activity was illegal as a matter of law.” (Flatley v. Mauro (2006) 39 Cal.4th 299 , 320 (Flatley).) However, in Flatley the court emphasized that a plaintiff’s mere allegation of illegality is not sufficient to preclude a defendant from showing that his or her challenged conduct is protected under section 425.16: “If, however, a factual dispute exists about the legitimacy of the defendant’s conduct, it cannot be resolved within the first step [of the anti-SLAPP procedure] but must be raised by the plaintiff in connection with the plaintiff’s burden to show a probability of prevailing on the merits.” (Id. at p. 316; see Birkner v. Lam (2007) 156 Cal.App.4th 275 , 285 [“ ‘[C]onduct that would otherwise come within the scope of the anti-SLAPP statute does not lose its coverage . . . simply because it is alleged to have been unlawful or unethical’ ”], quoting Kashian v. Harriman (2002) 98 Cal.App.4th 892 , 910–911.) 13  Thus, where the alleged illegality of the defendant’s conduct is disputed, claims that the defendant made false statements in litigation or to government agencies in connection with official proceedings will support an anti-SLAPP motion. (See Suarez v. Trigg Laboratories, Inc. (2016) 3 Cal.App.5th 118 , 123 [protection under section 425.16 applied “even against allegations of fraudulent promises made during the settlement process”]; Kenne, supra, 230 Cal.App.4th at pp. 966–967 [alleged false police report was within the scope of the anti-SLAPP statute where defendants denied that the report was false or illegal].) Respondents did not concede that they engaged in any unlawful conduct. They also submitted evidence that, at a minimum, created factual disputes as to whether they had made any false statements. The exception under Flatley for conduct that is illegal as a matter of law therefore does not apply here. 3. Minkovitch Failed to Show a Probability of Success on His Appealed Claims a. The litigation privilege bars Minkovitch’s fourth through ninth causes of action The trial court correctly found that the litigation privilege precludes each of Minkovitch’s Appealed Claims except for his third cause of action for malicious prosecution. “Pursuant to [Civil Code] section 47[, subdivision] (b), the [litigation] privilege bars a civil action for damages for communications made ‘[i]n any (1) legislative proceeding, (2) judicial proceeding, (3) in any other official proceeding authorized by law, or (4) in the initiation or course of any other proceeding authorized by law and reviewable pursuant to [statutes governing writs of mandate],’ with certain statutory exceptions . . . . The privilege established by this subdivision often is referred to as an ‘absolute’ privilege, and it 14 bars all tort causes of action except a claim for malicious prosecution.” (Hagberg v. California Federal Bank (2004) 32 Cal.4th 350 , 360 (Hagberg), quoting Civ. Code, § 47, subd. (b).) The litigation privilege applies to communications that further the objects of litigation, even if those communications include false claims or perjurious evidence. (Hagberg, supra, 32 Cal.4th at p. 361; Rusheen, supra, 37 Cal.4th at p. 1058.) The privilege also protects communications “ ‘to or from governmental officials which may precede the initiation of formal proceedings.’ ” (Hagberg, at p. 362, quoting Slaughter v. Friedman (1982) 32 Cal.3d 149 , 156, italics omitted.) The litigation privilege therefore clearly applies to Minkovitch’s claims relating to the Contempt OSC (other than his cause of action for malicious prosecution). Those claims are based upon pleadings filed during the Dissolution Action. The privilege also applies to the statements in Mansouri’s December 20 e-mail. That e-mail directly related to issues in the Dissolution Action and concerned Respondents’ next steps with respect to those issues. (See Silberg v. Anderson (1990) 50 Cal.3d 205 , 212 [the litigation privilege applies to “any publication required or permitted by law in the course of a judicial proceeding to achieve the objects of the litigation, even though the publication is made outside the courtroom and no function of the court or its officers is involved”].) Minkovitch cites Siam in support of an argument that the privilege did not protect Mansouri’s allegedly false statements to DCSS. That decision does not apply here. The court in that case concluded that the privilege under Civil Code section 47, subdivision (b) did not protect the defendant’s alleged knowingly false report of child abuse to police and to mandated reporters of 15 such abuse. (Siam, supra, 130 Cal.App.4th at pp. 1567–1568, 1577.) The court relied on Penal Code section 11172, subdivision (a), which expressly permits damage claims against voluntary reporters who knowingly or recklessly make false reports of child abuse to the authorities. Agreeing with a prior decision, the court concluded that this specific statute overrides the litigation privilege with respect to the particular communications that the statute makes actionable. (Siam, at p. 1577, citing Begier v. Strom (1996) 46 Cal.App.4th 877 , 885.) Penal Code section 11172 thus falls within the category of statutes whose provisions permitting a specific legal remedy (such as criminal sanctions for perjury and filing a false police report) prevail over the general privilege in Civil Code section 47. (See Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232 , 1246 [the court’s recognition of crimes constituting exceptions to the litigation privilege “has been guided by the ‘rule of statutory construction that particular provisions will prevail over general provisions’ ”].) Minkovitch does not cite any statute permitting a claim for damages for false statements to the DCSS concerning child support obligations. The exception to the litigation privilege recognized in Siam therefore does not apply to Mansouri’s alleged statements to DCSS. (See Kenne, supra, 230 Cal.App.4th at p. 972 [the holding in Siam did not apply to the defendant’s alleged conduct in making false police reports because Penal Code section 11172, subdivision (a) did not apply to such reports].) 16  b. Minkovitch could not prevail on his third cause of action for malicious prosecution because such actions may not be based on family law proceedings The court in Bidna recognized a “bright line” rule barring any claim for malicious prosecution based upon unsuccessful motions or OSC’s in family law proceedings. (Bidna, supra, 19 Cal.App.4th at pp. 29–30, 37.) The court concluded that such a rule is justified because of (1) the “unique propensity for bitterness” in family law litigation; (2) the sanctions available in such litigation to deter improper litigation conduct; and (3) the need for sensitivity and flexibility in imposing family law remedies. (Id. at p. 35.) Minkovitch acknowledges this holding but argues that it does not apply to contempt proceedings. Minkovitch cites the fact that the contempt remedy is governed by the Code of Civil Procedure rather than the Family Code. We reject the argument. The source of the authority for a contempt remedy is immaterial. The pertinent fact is that the remedy is sought in a family law proceeding. A motion or OSC seeking a contempt order in a family law case, like other types of remedies sought in such a case, is subject to the concerns the court identified in Bidna. Family law actions may include remedies that are also available outside the family law context. (See L.G. v. M.B. (2018) 25 Cal.App.5th 211 , 224.) But it is the family law context, not the statutory source of the remedy, that is the important factor. The court in Bidna clearly intended to include contempt motions within the scope of the bright line rule that it created. The court cited with approval several prior decisions revealing an “abiding judicial reluctance to entertain malicious prosecution 17 actions which arise either out of motions or OSC’s, or originate in family law proceedings,” including contempt motions. (See Bidna, supra, 19 Cal.App.4th at pp. 32–34, citing Twyford v. Twyford (1976) 63 Cal.App.3d 916 ; Chauncey v. Niems (1986) 182 Cal.App.3d 967 ; Green v. Uccelli (1989) 207 Cal.App.3d 1112 .) We also conclude that a malicious prosecution action may not be predicated on an unsuccessful OSC re contempt in a family law action. Minkovitch therefore could not show a probability of success on his third cause of action for malicious prosecution. DISPOSITION The trial court’s order is affirmed. Respondents are entitled to their costs on appeal. NOT TO BE PUBLISHED. LUI, P. J. We concur: ASHMANN-GERST, J. CHAVEZ, J. 18

2020-11-30 19:01:52.948502+00

https://www.courts.ca.gov/opinions/nonpub/B297370.PDF

Filed 11/30/20 Kerley v. Weber CA2/2 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION TWO SARAH L. KERLEY, as B297370 Administrator, etc., (Los Angeles County Plaintiff and Respondent, Super. Ct. No. YS024039) v. MARCIA ANN WEBER, Defendant and Appellant. APPEAL from an order of the Superior Court of Los Angeles County. Deirdre H. Hill, Judge. Affirmed. Haney & Young and Steven H. Haney for Defendant and Appellant. Hill, Farrer & Burrill, Julia L. Birkel, Dean E. Dennis and Clayton J. Hix for Plaintiff and Respondent. _________________________________  Marcia Ann Weber appeals from a postjudgment order concerning the amount that she currently owes on the judgment. The judgment at issue is for restitution that Weber owes following her criminal conviction for theft from an elder under Penal Code section 368, subdivision (d). On appeal from the restitution order, this court affirmed the trial court’s decision to award prejudgment interest on the restitution amount. (People v. Weber (Oct. 4, 2013, No. B244008 [nonpub. opn.], mod. Oct. 13, 2013 (Weber I).) The victim’s then-conservator, Sarah L. Kerley,1 filed this action to enforce the judgment that the Estate obtained for the restitution amount (the Restitution Judgment). The Estate obtained an order to sell Weber’s residence to satisfy the Restitution Judgment. Weber appealed from that order. In that appeal, we held that the restitution payments Weber made prior to entry of the Restitution Judgment should be credited to the principal amount of the judgment rather than to accrued interest. (See Kerley v. Weber (2018) 27 Cal.App.5th 1187 , 1200–1201 (Weber II).) We remanded and directed the trial court to calculate the amount remaining on the Restitution Judgment after crediting prejudgment payments to principal. (Ibid.) Following remand, the trial court did so. Weber now appeals from the trial court’s order calculating the judgment amount. Weber argues that: (1) she was entitled to a jury trial concerning that calculation; (2) the trial court improperly included prejudgment interest in the amount of the 1The victim, Philippa Johnston, died during the criminal prosecution. Her estate, administered by Kerley (Estate), is the respondent in this appeal. 2 Restitution Judgment for purposes of calculating postjudgment interest; and (3) the trial court should have credited postjudgment payments to principal before interest. We reject all three arguments and affirm. BACKGROUND 1. The Restitution Judgment We briefly summarize only the facts relevant to this appeal. A more complete factual and procedural background is set forth in Weber I, supra, B244008, and Weber II, supra, 27 Cal.App.5th, 1187 . Following Weber’s conviction, Weber and the prosecution agreed to a total restitution amount of $700,000, which they stipulated should be reduced to $414,545.99 to account for restitution payments that Weber had already made. (Weber II, supra, 27 Cal.App.5th at pp. 1192, 1200.) On July 11, 2012, the Estate obtained the Restitution Judgment. (Id. at p. 1192.) That judgment ordered restitution to the Estate in the amount of $700,000 “plus interest at 10 percent per year from the date of loss” (i.e., March 15, 2006).2 In Weber I, this court upheld the award of prejudgment interest in the Restitution Judgment even though the court in the criminal prosecution did not mention interest in the original restitution order. We concluded that interest was mandatory under Penal Code section 1202.4, and that the Restitution 2 The $700,000 amount represented the “ ‘total amount of restitution awarded,’ and did not ‘purport to abrogate the stipulation with respect to the offset’ ” for the restitution amounts that Weber had already paid. (Weber II, supra, 27 Cal.App.5th at p. 1192, fn. 6, quoting Weber I.) 3 Judgment was a “ ‘valid modification of the restitution order.’ ” (Weber II, supra, 27 Cal.App.5th at p. 1192, quoting Weber I.) The Estate filed the Restitution Action to enforce the Restitution Judgment. The Estate sought an order for the sale of a house in Manhattan Beach belonging to Weber. The trial court granted that order. In calculating the amount due on the Restitution Judgment in its order for the sale, the court credited Weber’s prejudgment restitution payments to accrued prejudgment interest rather than to the $700,000 principal. (Weber II, supra, 27 Cal.App.5th at pp. 1192, 1199.) Weber appealed from that order. 2. The Probate Judgment The Estate also pursued a separate action against Weber under the Probate Code (the Probate Action). Among other things, the Estate sought enhanced damages under Probate Code section 859. (Weber II, supra, 27 Cal.App.5th at p. 1193.) The Estate obtained a judgment in the Probate Action for $1.4 million—twice the amount of the restitution award—plus attorney fees and costs (the Probate Judgment). (Weber II, supra, 27 Cal.App.5th at p. 1193.) Weber appealed that judgment. 3. Weber II Weber II considered the consolidated appeals in the Restitution Action and the Probate Action. We affirmed the Probate Judgment in full. (Weber II, supra, 27 Cal.App.5th at p. 1201.) We also affirmed the Restitution Judgment in all respects except for the trial court’s ruling crediting Weber’s prejudgment restitution payments to accrued interest rather than to principal. We concluded that the interested parties had agreed to credit the prejudgment payments to principal rather than to interest, and we gave effect to that agreement under Civil 4 Code section 1479. (Weber II, supra, 27 Cal.App.5th at pp. 1199– 1200.) We ordered the Restitution Action remanded to the trial court “with directions to calculate the amount remaining on the Restitution Judgment after crediting Weber’s payments prior to July 11, 2012, to the principal amount of the restitution obligation.” (Id. at p. 1201.) 4. Proceedings on Remand Following remand, the Estate filed a “Motion After Remittitur to Determine the Balance Owed on the Judgment and for Issuance of Amended Order for Sale of Dwelling.” The motion was supported by a declaration from a certified public accountant, Brandy Ungar, calculating the amount due on the Restitution Judgment after crediting Weber’s prejudgment restitution payments to principal rather than to interest. Ungar applied Weber’s restitution payments to principal until July 11, 2012, the date of the Restitution Judgment. As of that date, the remaining principal amount was $398,545.99 and the accrued prejudgment interest was $381,558.81. Ungar combined those two amounts into a total judgment amount of $780,104.80. Ungar then credited Weber’s postjudgment payments first to postjudgment interest and then to the principal amount of $780,104.80. This resulted in a total amount of $639,383.04 due on the Restitution Judgment as of the date of the Estate’s motion (Jan. 9, 2019), consisting of $441,122.39 in principal and $198,260.65 in accrued postjudgment interest. Weber opposed the Estate’s motion. Weber argued that she was entitled to a jury trial on the issue of the amount due under the Restitution Judgment. She also argued that Ungar’s methodology was incorrect. 5  Weber submitted a declaration from her own expert accountant, Jacqueline Benyamini. Unlike Ungar, Benyamini did not combine the outstanding principal and the accrued prejudgment interest to compute a new principal amount for the Restitution Judgment. And she credited all of Weber’s restitution payments—both before and after the Restitution Judgment—first to principal and then to accrued interest. This methodology resulted in the conclusion that Weber had completely paid off the principal amount of the Restitution Judgment by July 2013, when Weber made a large payment of $389,000. Benyamini calculated a remaining interest amount of $398,858 at that time, which Weber’s subsequent payments reduced to $359,858 at the time of the Estate’s motion.3 The trial court granted the Estate’s motion. The trial court rejected Weber’s argument that she was entitled to a jury trial. The trial court also accepted Ungar’s methodology for calculating the amount due on the Restitution Judgment. The court concluded that “post judgment interest accrues on the full amount of the judgment which judgment necessarily included prejudgment interest.” Consistent with Ungar’s calculations, the court found that the “principal remaining on the civil judgment as of January 9, 2019, is $441,122.30 plus accrued interest of $198,383.04, for a total of $639,383.04, with interest accruing from January 9, 2019, at the rate of $120.85 per day.” 3 Thus, even under Weber’s methodology, she still owed a significant amount of accrued interest on the Restitution Judgment at the time of the Estate’s motion. Weber’s assertion in this appeal that she “overpaid and, as a result, her home cannot be sold,” is therefore puzzling. 6  DISCUSSION 1. Weber’s Appeal is Not Moot The Estate argues that Weber’s appeal is moot because the Restitution Judgment has now been satisfied. The Estate requested, and we granted, judicial notice of documents showing that, during this appeal, the Estate obtained an order in the Probate Action for the sale of Weber’s house. That sale resulted in a credit that satisfied the Restitution Judgment. The noticed documents show that, in ordering the sale of Weber’s house, the court in the Probate Action identified the Restitution Judgment as a senior lien to be satisfied from the sale proceeds. The court’s order stated that the amount of the lien was $639,383.04—the full amount that the trial court ruled was owed on the Restitution Judgment. It appears that the amount due on the Probate Judgment before the sale was $2,844,427.49, and that the house sold for $1,395,000. Thus, the sale of Weber’s house satisfied the Restitution Judgment, but was apparently not sufficient to satisfy the Probate Judgment. Satisfaction of the Restitution Judgment does not moot this appeal. If successful, Weber’s appeal could reduce the amount that should have been credited toward the lien for the Restitution Judgment from the sale of Weber’s house. That would in turn increase the amount that the Estate should have received from the sale as payment on the Probate Judgment. Thus, the issue raised in this appeal—whether the trial court correctly calculated the amount owed on the Restitution Judgment—could have an effect on Weber’s current obligation on the Probate Judgment. There is no indication in the record that the Estate has forgiven any amount of that judgment. 7  The fact that the Restitution Judgment has now been satisfied through an involuntary sale on a writ of execution would not preclude Weber from seeking a remedy for an overpayment on the Restitution Judgment, such as a greater credit against the Probate Judgment or restitution of the amount of the overpayment. This court has the authority to make an order directing “that the parties be returned so far as possible to the positions they occupied before the enforcement of or execution on” an order that has been reversed on appeal. (See Code Civ. Proc., § 908.)4 The trial court has “inherent authority to afford similar relief.” (Gunderson v. Wall (2011) 196 Cal.App.4th 1060 , 1064– 1065 [trial court had discretion to order the restitution of interest that the appellant had paid on a punitive damage award that was reversed on appeal].) This appeal is therefore not moot, and we proceed to consider the issues that Weber has raised. 2. Weber Was Not Entitled to a Jury Trial to Determine the Amount Due on the Restitution Judgment5 Weber argues that she had a right to a jury trial on the issue of the amount due on the Restitution Judgment because, in remanding the case following Weber II, this court identified a “factual dispute” on the effect of crediting prejudgment payments 4Subsequent undesignated statutory references are to the Code of Civil Procedure. 5 The parties agree that the de novo standard of review applies to the issues on this appeal. We concur. (See People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415 , 432 [issues of law are reviewed de novo].) 8 to principal. (Weber II, supra, 27 Cal.App.5th at p. 1201.) We reject the argument. In Weber II, we noted that the parties disputed whether the Restitution Judgment had already been satisfied if Weber’s prejudgment payments were credited to principal rather than to interest. We then explained that, in light of this “factual dispute,” we “leave it to the trial court to determine whether a sum remains owing on the Restitution Judgment and, if so, the amount of that sum.” (Weber II, supra, 27 Cal.App.5th at pp. 1200–1201.) That direction to the trial court was consistent with the court’s role under the governing statutes. Sections 724.010 through 724.100 govern the procedure for satisfaction of judgments. Under section 724.030, a judgment creditor is required to file an acknowledgment of satisfaction of judgment when a judgment has been satisfied. In the event of a dispute, section 724.050, subdivision (d) assigns to the trial court the responsibility to determine if a judgment has in fact been satisfied. That section provides that, if a judgment creditor does not comply with a judgment debtor’s request to provide an acknowledgment of satisfaction of judgment, “the person making the demand may apply to the court on noticed motion for an order requiring the judgment creditor to comply with the demand. . . . If the court determines that the judgment has been satisfied and that the judgment creditor has not complied with the demand, the court shall either (1) order the judgment creditor to comply with the demand or (2) order the court clerk to enter satisfaction of the judgment.” (§ 724.050, subd. (d), italics added.) “This section has been interpreted to require the trial court to first determine whether the judgment has been satisfied in fact 9 before ordering entry of satisfaction of judgment.” (Schumacher v. Ayerve (1992) 9 Cal.App.4th 1860 , 1863, italics added; see Pierson v. Honda (1987) 194 Cal.App.3d 1411 , 1414, fn. 4.) This statutory procedure is the exclusive mechanism for obtaining an order compelling an acknowledgment that a judgment has been satisfied. (Quintana v. Gibson (2003) 113 Cal.App.4th 89 , 90.) Thus, the Legislature has determined that it is the task of the trial court, not a jury, to determine whether a judgment has been satisfied. The trial court here properly complied with this court’s directions and with the governing statutes by determining on remand whether any amount was still due on the Restitution Judgment and, if so, how much. Weber cites section 592, which provides for a jury trial on issues of fact in “actions for the recovery of specific, real or personal property, with or without damages, or for money claimed as due upon contract, or as damages for breach of contract, or for injuries.” The trial court’s order did not decide any claim for the return of property or money or for damages. It simply decided the amount due on a judgment that already existed. Moreover, we presume that the Legislature intended section 724.050, which specifically governs the procedure for determining whether a judgment has been satisfied, to control that procedure rather than section 592, which is a general statute on the right to a jury trial. (See Estate of Kramme (1978) 20 Cal.3d 567 , 576 [“if a specific statute is enacted covering a particular subject, the specific statute controls and takes priority over a general statute encompassing the same subject”].) Weber also suggests that even if she did not have a right to a jury trial, she was at least entitled to an evidentiary hearing. She cites no authority for that proposition. The procedure under 10 section 724.050 for a noticed motion to determine if a judgment has been satisfied is inconsistent with a requirement for an evidentiary hearing. Motions on collateral issues are generally decided by means of declarations rather than live testimony. (See § 2009; Elkins v. Superior Court (2007) 41 Cal.4th 1337 , 1355–1356.) So far as the record shows, Weber also did not request an evidentiary hearing. Weber did argue below that she was entitled to a jury trial, but she did not ask for the opportunity to present oral testimony in the event the court decided to hear the matter on noticed motion. Under California Rules of Court, rule 3.1306(b) she was required to file a written statement three days before the hearing on the Estate’s motion “stating the nature and extent of the evidence proposed to be introduced and a reasonable time estimate for the hearing.” She did not do so, and has therefore forfeited the issue. (Estate of Fraysher (1956) 47 Cal.2d 131 , 135 [parties could not question the propriety of deciding an issue based on affidavits when they did not object below and participated in the procedure].) In any event, based on the record following remand from Weber II, there was no factual dispute to resolve through either a jury trial or an evidentiary hearing. The only dispute between the parties concerned the legal issue of the proper methodology for calculating interest. There was no dispute over factual questions such as how much Weber had actually paid. The Estate’s expert, Ungar, accepted Weber’s testimony concerning the dates and amounts of her restitution payments. As in this appeal, the parties disputed whether prejudgment interest should be included in the Restitution 11 Judgment amount for purposes of calculating postjudgment interest. The parties’ experts also took different positions on whether Weber’s postjudgment payments should be credited to principal or interest.6 These are legal issues. Weber did not claim below, and does not argue on appeal, that Ungar failed to credit particular payments or used faulty math. Thus, even if Weber had a right to a jury trial or an evidentiary hearing to resolve factual disputes concerning the amount of the Restitution Judgment, the record does not show that any such disputes existed. 3. The Trial Court Properly Included Prejudgment Interest in the Amount of the Restitution Judgment The Restitution Judgment ordered restitution in the amount of $700,000 “plus interest at 10 percent per year from the date of the loss.” Thus, the Restitution Judgment included prejudgment interest as a part of the money judgment. The Restitution Judgment is enforceable in the same manner as any other civil judgment. Penal Code section 1202.4, subdivision (i) provides that a “restitution order imposed pursuant to subdivision (f) shall be enforceable as if the order 6 Weber’s expert, Benyamini, credited payments that occurred after entry of the Restitution Judgment to principal. Those postjudgment payments included a large payment of $389,000 in July 2013, a year after the Restitution Judgment had been entered. Benyamini applied that payment to principal, which she concluded paid off the principal in full, leaving only a remaining balance for accumulated interest. In contrast, Ungar credited postjudgment payments first to the accrued postjudgment interest and then to principal. 12 were a civil judgment.” Similarly, Penal Code section 1214, subdivision (b) states that if a criminal defendant stipulates to the amount of restitution (as Weber did here), a restitution order “shall be fully enforceable by a victim as if the restitution order were a civil judgment, and enforceable in the same manner as is provided for the enforcement of any other money judgment.” (Weber II, supra, 27 Cal.App.5th at p. 1194.) Because prejudgment interest was included in the Restitution Judgment as a part of the money judgment, the trial court properly treated the accumulated prejudgment interest as part of the principal amount of the Restitution Judgment for purposes of calculating postjudgment interest. Contrary to Weber’s argument, that procedure was not an improper use of compound interest. “ ‘Although compound interest generally is not allowable on a judgment, it is established that a judgment bears interest on the whole amount from its date even though the amount is in part made up of interest. . . . As a consequence, compound interest may in effect be recovered on a judgment whereby the aggregate amount of principal and interest is turned into a new principal.’ ” (Big Bear Properties, Inc. v. Gherman (1979) 95 Cal.App.3d 908 , 913 (Big Bear), quoting 45 Am.Jur.2d, Interest and Usury, § 78, p. 71; see Westbrook v. Fairchild (1992) 7 Cal.App.4th 889 , 894–895 [“The only exception to the rule that interest on interest (i.e. compound interest) may not be recovered is in situations in which interest is included in a judgment which then bears interest at the legal rate”].) This principle applies regardless of the nature of the action underlying the judgment. (Big Bear, supra, 95 Cal.App.3d at pp. 913–914.) The principle is reflected in rule 3.1802 of the 13 California Rules of Court, which directs that a clerk entering a judgment “include in the judgment any interest awarded by the court.” Weber cites our Supreme Court’s decision in Hess v. Ford Motor Co. (2002) 27 Cal.4th 516 (Hess), but that case does not apply here. In Hess, the court decided that the specific language of Civil Code section 3291 did not permit compounding interest by including prejudgment interest in the judgment amount. Civil Code section 3291 states that if a plaintiff makes a statutory settlement offer pursuant to Code of Civil Procedure section 998 and then obtains a more favorable judgment, the plaintiff is entitled to interest “ ‘from the date of the plaintiff’s first offer . . . which is exceeded by the judgment . . . until the satisfaction of judgment.’ ” (Hess, supra, 27 Cal.4th at pp. 530, 531.) The court in Hess concluded that “the statute carefully defines the time period for accruing interest using a date before the judgment—the date of the [Code of Civil Procedure] section 998 offer—and a date after the judgment—the date the judgment is satisfied. [Citation.] Thus, [Civil Code] section 3291 provides for a single award of interest and expressly eschews any division of this award into separate prejudgment and postjudgment components.” (Hess, supra, 27 Cal.4th. at p. 531.) The court also concluded that the legislative history of Civil Code section 3291 supported this interpretation. (Hess, at pp. 531–532.) The court held that the specific statutory language in Civil Code section 3291 controlled over former rule 875 of the California Rules of Court (the predecessor to rule 3.1802). (See Hess, supra, 27 Cal.4th at p. 532.) The court specifically distinguished Big Bear and other cases on the ground that they “involved statutes or contracts with different language and/or 14 legislative histories than Civil Code section 3291.” (Hess, at pp. 532–533.) Weber has not identified any statute similar to Civil Code section 3291 that would preclude computing postjudgment interest on the full amount of the Restitution Judgment. The statutes that govern the enforcement of restitution awards as a civil judgment do not contain any such provision. Penal Code section 1202.4, subdivision (f)(3)(G) authorizes as an element of restitution “[i]nterest, at the rate of 10 percent per annum, that accrues as of the date of sentencing or loss, as determined by the court.” (See Weber I, supra, B244008 [“Section 1202.4 clearly mandates the imposition of interest on every award of victim restitution”].) Such interest is a component of the “dollar amount” that Penal Code section 1202.4, subdivision (f)(3) directs “shall be . . . sufficient to fully reimburse the victim or victims for every determined economic loss incurred as the result of the defendant’s criminal conduct.” Nothing in this language precludes following the otherwise applicable procedure of incorporating accrued prejudgment interest in the principal amount of a restitution judgment for purposes of calculating postjudgment interest. Indeed, as mentioned, the governing statutes specifically state that a judgment issued on a restitution award should be treated as a civil judgment. (See Pen. Code, §§ 1202.4, subd. (i), 1214, subd. (b) [order to pay restitution “shall be fully enforceable by a victim as if the restitution order were a civil judgment, and enforceable in the same manner as is provided for the enforcement of any other money judgment”].) Under the rules that apply to civil judgments, postjudgment interest is calculated 15 based on the entire amount of the judgment, including accrued prejudgment interest that is included in the judgment amount. 4. The Trial Court Properly Calculated the Amount Due on the Restitution Judgment by Crediting Postjudgment Payments First to Accrued Interest and Then to Principal Weber claims that “[w]ith respect to the restitution payments made by [Weber] after the July 2013 lump sum payment, it was erroneous as a matter of law, for the Trial Court to apply those payments against interest.”7 Weber is wrong. As this court noted in Weber II, section 695.220 provides that “ ‘[m]oney received in satisfaction of a money judgment’ should first be applied to fees and accumulated interest” and then to “ ‘the principal amount of the judgment remaining unsatisfied.’ ” (Weber II, supra, 27 Cal.App.5th at p. 1199, citing § 695.220, subds. (a)–(d).) The trial court properly followed this 7 It is unclear why Weber attributes any significance to the July 2013 date. That date was a year after the Restitution Judgment was entered. Moreover, Ungar’s calculations, on which the trial court’s order was based, accounted for Weber’s postjudgment payments in the same manner both before and after the July 2013 payment. Ungar consistently applied Weber’s postjudgment payments first to accrued interest and then to principal. Ungar properly credited the July 2013 “lump sum” payment of $389,000 first to pay off the accrued postjudgment interest (at that time amounting to $51,396.36), and then to the outstanding principal of $780,104.80, which reduced the principal to $442,501.16. 16 procedure in crediting Weber’s postjudgment payments first to accrued interest and then to principal.8 DISPOSITION The trial court’s order is affirmed. The Estate is entitled to its costs on appeal. NOT TO BE PUBLISHED. LUI, P. J. We concur: ASHMANN-GERST, J. CHAVEZ, J. 8 In contrast, as discussed above, Weber’s expert calculations were flawed because they credited Weber’s postjudgment payments first to principal rather than to accrued interest. That included the $389,000 payment in July 2013, which Benyamini incorrectly concluded paid off the remaining principal. 17

2020-11-30 19:01:53.168163+00

https://www.courts.ca.gov/opinions/nonpub/A157517.PDF

Filed 11/30/20 In re M.T. CA1/3 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE In re M.T., a Person Coming Under the Juvenile Court Law. THE PEOPLE OF THE STATE OF CALIFORNIA, Plaintiff and Respondent, A157517 v. (City & County of M.T., San Francisco Super. Ct. Defendant and Appellant; No. JW176102) M.T., a minor in an out-of-home placement, challenges a probation condition requiring him to participate in “any programs of counseling” or “any other programs and/or services” referred to him and “deemed appropriate” by probation. He contends the condition improperly delegates judicial authority to the probation officer to decide in the first instance the specific programs M.T. must participate in to successfully complete probation. We disagree and affirm. BACKGROUND While walking in downtown San Francisco one evening with his smartphone in hand, S.C. was suddenly hit on the side of his head. He fell to 1 the ground. He was surrounded by four people who continuously hit him and knocked the phone out of his hands. They grabbed the device and ran. Using the phone’s tracking software, police officers located S.C.’s phone moving towards Civic Center. Near an area known for stolen goods trafficking, officers spotted individuals matching the description of the suspects and followed them on foot. The officers saw one of them, who was later identified as M.T.’s co-defendant, attempt to sell a phone to passersby. The officers approached, identified themselves, took the phone, and detained him so he could not flee. The officers identified M.T. as one of the seller’s three companions. M.T. fled and was later detained nearby. After the victim verified the recovered phone was his, it was returned to him. The District Attorney filed a juvenile wardship petition (Welf. & Inst. Code, § 602, subd. (a)) charging M.T. with second-degree robbery (Pen. Code, § 211) and misdemeanor resisting or obstructing a peace officer (Pen. Code, § 148). At the contested jurisdictional hearing, all the responding officers, S.C., and M.T. testified. M.T. admitted participating in the robbery and identified himself in surveillance video of the incident. That day, he met friends downtown and planned to steal phones. He did not know his friend was going to punch S.C. beforehand. Normally, they would just snatch the phone and run. M.T. said he took no part in hitting S.C. The court sustained the second-degree robbery and resisting arrest allegations. M.T. also admitted a felony grand theft allegation (Pen. Code, § 487, subd. (c)) in another petition related to an earlier phone theft from a different victim. 2  At the contested disposition hearing, the court removed M.T. from the custody of his mother and ordered out-of-home placement in the Catholic Charities Boys’ and Girls’ Home. The court also imposed a series of probation conditions. One condition in the court’s minute order states M.T. shall: “Participate fully in any programs of counseling deemed appropriate by your probation officer which may include individual, group and family counseling as well as drug counseling, testing and treatment, or any other programs and/or services you are referred to by your probation officer.” The condition immediately following states he shall: “Participate in individual/family therapy.” In orally pronouncing judgment, the court announced these conditions and advised M.T., “You must participate fully in any programs or counseling deemed appropriate by any probation officer, which may include individual, group, and family counseling—and I’d like to urge mom to participate fully in family counseling—as well as drug counseling, testing and treatment, or any other programs and/or services you’re referred to by your probation officer. Understand that, [M.T.]?” After M.T. said he understood, the court further advised, “You must also participate in individual or family therapy.” This appeal followed. DISCUSSION M.T. argues the probation condition requiring him to participate in counseling programs including individual, group, and family counseling as well as drug counseling, testing, and treatment or “any other programs and/or services” that are “deemed appropriate” by his probation officer was an unlawful delegation of judicial authority. He says the condition must be stricken or at minimum modified. We disagree. 3  We generally review a juvenile court’s imposition of a probation condition for an abuse of discretion. (In re Malik J. (2015) 240 Cal.App.4th 896 , 901.) However, when a term of probation is challenged as unconstitutionally vague or overbroad or because it impermissibly delegates judicial authority, the claim presents a question of law which we review de novo. (In re J.H. (2007) 158 Cal.App.4th 174 , 183; In re Shaun R. (2010) 188 Cal.App.4th 1129 , 1143.) “[A juvenile] court may impose and require any and all reasonable conditions that it may determine fitting and proper to the end that justice may be done and the reformation and rehabilitation of the ward enhanced.” (Welf. & Inst. Code, § 730, subd. (b).) Indeed, juvenile probation conditions may be broader than those pertaining to adult probationers “because juveniles are deemed to be more in need of guidance and supervision than adults, and because a minor’s constitutional rights are more circumscribed.” (In re Antonio R. (2000) 78 Cal.App.4th 937 , 941.) When the state asserts jurisdiction over a minor, it acts as parens patriae—standing in the shoes of the parents. (In re Frank V. (1991) 233 Cal.App.3d 1232 , 1242.) “ ‘ “[A] condition of probation that would be unconstitutional or otherwise improper for an adult probationer may be permissible for a minor under the supervision of the juvenile court.” ’ ” (In re Sheena K. (2007) 40 Cal.4th 875 , 889.) Here, M.T.’s out-of-home placement triggers considerations that influence our review of the trial court’s order. “When a minor is committed to a county facility and ordered to complete a treatment program, juvenile courts can and do delegate the day-to-day supervision of the minor, while retaining the ultimate authority to determine whether the minor has successfully completed the program.” (In re J.C. (2019) 33 Cal.App.5th 741 , 4 747.) M.T. was placed in the Catholic Charities Boys’ and Girls’ Home. He was thus placed in a licensed community care facility identified by probation officials with fundamentally different considerations than would arise from a grant of probation with the minor remaining with a parent in the community. (See Welf. & Inst. Code, § 727, subd. (a).) When viewed in light of the statutory objectives, the challenged condition that M.T. participate in any programs and services deemed appropriate by his probation officer does no more than enable the probation officer to make directives that are necessary for effective implementation of the facility’s program of rehabilitation and the supervision of M.T.’s compliance with the conditions of the program. In any event, the condition cannot be deemed to confer on the probation officer unfettered discretion to impose additional conditions unrelated to the facility’s program of rehabilitation because the juvenile court has no power to impose unreasonable probation conditions, and hence cannot delegate such power to the probation officer by means of this kind of general condition. (See People v. Kwizera (2000) 78 Cal.App.4th 1238 , 1240; accord People v. Stapleton (2017) 9 Cal.App.5th 989 , 996-997.) Thus, inherent in the condition challenged in this case is that the probation officer, as an officer of the court, will only require defendant to comply with reasonable conditions that promote his reformation under the assigned residential program. “Probation officers have wide discretion to enforce court-ordered conditions, and directives to the probationer will not require prior court approval if they are reasonably related to previously imposed terms.” (In re Pedro Q. (1989) 209 Cal.App.3d 1368 , 1373.) When we interpret a probation condition we give it “ ‘the meaning that would appear to a reasonable, objective reader.’ ” (People v. Olguin (2008) 45 Cal.4th 375 , 382.) Here, a simple, common sense reading of the words and language of the challenged 5 condition discloses the sufficiency of their meaning to put M.T. on notice of what was expected of him: he was to reside at the Catholic Charities Boys’ and Girls’ Home, follow its rules and regulations, and participate in directed programs and therapy considered necessary for his successful completion of his program. There was no unlawful delegation of judicial authority. The cases M.T. relies upon do not convince us otherwise. In People v. Cervantes (1984) 154 Cal.App.3d 353 , the adult defendant’s probation officer was allowed to determine the amount of restitution the defendant had to pay. (Id. at p. 358.) In re Shawna M. (1993) 19 Cal.App.4th 1686 , was a juvenile dependency case in which the court vacated an order that allowed the social service agency to determine how often and under what circumstances a mother could have visits with her dependent child. The court determined the frequency and length of visits were matters for judicial determination that could not be delegated. (Id. at pp. 1690-1691.) In In re Danielle W. (1989) 207 Cal.App.3d 1227 , also a dependency case, the court rejected a claim that excessive discretion was vested in a social worker to control visitation. (Id. at p. 1237.) In re Moriah T. (1994) 23 Cal.App.4th 1367 , is yet another dependency case that affirmed an order allowing a social worker to administer the details of court ordered visits. (Id. at pp. 1374-1375.) None of these cases concludes that an order directing a minor placed in a county or group facility to complete programs and therapy as directed by his or her probation officer is an unlawful delegation of judicial authority. DISPOSITION The judgment is affirmed. 6  _________________________ Siggins, P.J. WE CONCUR: _________________________ Fujisaki, J. _________________________ Petrou, J. In re M.T., A157517 7

2020-11-30 19:02:17.384234+00

http://courts.delaware.gov/Opinions/Download.aspx?id=313580

IN THE COURT OF COMMON PLEAS FOR THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY RANDY DAVID WILSON, ) ) Defendant/Appellant, ) ) V. ) Case No.: CPU4-19-004583 ) DELMARVA POWER AND ) LIGHT COMPANY, ) ) Plaintiff/Appellee, ) ) V. ) ) Submitted: September 29, 2020 Decided: November 30, 2020 Paul G. Enterline, Esq. Lisa C. McLaughlin, Esq. Paul G. Enterline, P.A. Paul S. Seward, Esq. 113 South Race Street Phillips Goldman McLaughlin P.O. Box 826 & Hall, P.A. Georgetown, DE 19947 1200 North Broom Street Attorney for Wilmington, DE 19806 Defendant-Below/Appellee Attorneys for Plaintiff-Below Appellee OPINION AND ORDER Manning, J. FACTUAL AND PROCEDURAL HISTORY On February 15, 2019, Plaintiff-Below/Appellee Delmarva Power & Light Co., (“Delmarva”) filed a Complaint in the Justice of the Peace Court against Defendant-Below/Appellant, Randy David Wilson, (“Wilson”) and Defendant- Below Robert John Daniels (“Daniels”)! to recover $10,813.17 in damages, plus costs and interest. Delmarva alleged that on or about May 27, 2017, a vehicle owned by Wilson and Daniels struck a utility pole owned by Delmarva. On April 8, 2019, Wilson was served and, on advice from a family member, filed a form Answer on April 16, 2019, in which he demanded a trial. On April 29, 2019, a Trial was scheduled for July 17, 2019, in the Justice of the Peace Court, and notice was sent out to the parties. However, Wilson failed to appear for trial and, consequently, the court entered judgment against him in the amount of $10,813.17. Daniels also failed to appear for trial, and default judgment was likewise entered against him in the amount of $10,813.17. On September 23, 2019, Delmarva filed a Request for a Certified Copy of Judgment, which was issued on September 27, 2019, with Transcript of Judgment and Execution for Transfer to Superior Court. Wilson claimed he only became aware of the default judgment when he received a letter from counsel for Delmarva dated October 4, 2019, directed to the ' Daniels is not a party to this appeal. Department of Motor Vehicle, regarding the suspension of Wilson’s driver’s license. A few days later, Wilson contacted counsel for Delmarva to discuss the matter and received a follow-up letter from counsel dated October 18, 2019. Five days later, on October 23, 2019, Wilson retained counsel, and on October 25, 2019, Wilson’s counsel mistakenly filed a Motion to Vacate the default judgment in Superior Court.” On November 6, 2019, the filing error was corrected, and the Motion to Vacate was properly filed in the Justice of the Peace Court. On November 15, 2019, the Justice of the Peace Court held a hearing on Wilson’s motion to vacate. Ultimately, the court denied Wilson’s motion due to a lack of excusable neglect or extraordinary circumstances, as well as filing of an extremely untimely motion.’ On November 27, 2019, Wilson timely filed an appeal of the decision of the Justice of the Peace Court’s Order denying his Motion to Vacate to the Court of Common Pleas. On February 19, 2020, a hearing was held in this Court on the Motion to Vacate, at the conclusion of which I reserved decision and scheduled the matter for an Evidentiary Hearing. 2 Judgment was filed in Superior Court for execution purposes. 3 Del. J.P. Order, C.A. No. JP13-19-002206, Portance, J. (Nov. 15, 2019). 3 EVIDENTIARY HEARING After numerous delays due to the on-going COVID-19 pandemic, the Evidentiary Hearing took place on September 29, 2020. At the hearing, I heard testimony from two witnesses, Wilson’s brother, David Wilson (“David”), and Wilson himself.* First, David testified that in 2019 he owned the property Wilson lived on with his mother and another tenant, Robert Lusby (“Lusby”), in rural Harrington, Delaware. The property was relatively large and contained multiple buildings, including a repair shop, a live-in camper, and a separate dwelling. David testified that the property received all mail at the same address in one central mailbox. David explained that in March of 2019, Wilson lived in the back of the shop, Lusby lived in the separate dwelling out front, and that David’s mother lived in the camper. Lusby had lived there for about five years, but due to on-going problems, he was evicted on March 21, 2019, and ultimately vacated the property in June. David elaborated that Lusby acted as the unofficial “keeper of the mail” and would usually deliver it to the various other tenants when he lived there. David stated that even after being evicted, he observed Lusby return to the property on numerous occasions over the next year to retrieve his mail. David noted that after the eviction his relationship with Lusby became strained and violent due to Lusby’s * To avoid confusion, I will refer to Plaintiff’s brother solely by his first name of David throughout. continued drug use and money Lusby owed to David. Further, David testified to a conversation he had with Daniels, a friend, and longtime employee. Daniels told him that he had been trying to get in touch with Wilson “about a lawsuit.” Daniels told David that his vehicle had been stolen and “there was nothing [for Wilson] to worry about” because he would “take care of it.” David testified that he informed Wilson what Daniels had told him. Next, Wilson testified and explained the car “arrangement” he had with Daniels. According to Wilson, the vehicle in question was purchased by Daniels through Daniels’ wife, who was a salesperson for Preston Ford, Inc. Wilson thought he was only co-signing to help Daniels secure financing for the vehicle. Wilson maintained that, despite his name being on the title, he never at any time possessed or operated the vehicle. After filing his Answer to Delmarva’s lawsuit, Wilson attempted to reach out to Daniels multiple times with no luck, so when he heard from David that Daniels confirmed the matter had been taken care of, he said that he believed it was. Wilson testified he never received notice of the trial in J.P. Court— presumably due to the falling out with a Lusby with whom he shared a mailbox. However, as soon as he found out about the entry of default judgment, he acted. Finally, it is important to note that during the Evidentiary Hearing, Delmarva did not offer any evidence to rebut Wilson or David’s testimony. Furthermore, Delmarva conceded that Wilson would have a meritorious defense at trial because Delmarva would not be able to prove that Wilson had custody or control of the vehicle at the time of the accident or would be in any way liable for the accident. At the conclusion of the Evidentiary Hearing, I reserved decision. This is my decision after consideration of the arguments and evidence presented at the Hearing. PARTIES POSITIONS In its briefing to the Court and at oral argument, Delmarva argues that the appropriate standard of review to be applied to the Motion to Vacate the Default Judgment is an abuse of discretion standard. Moreover, Delmarva argues that even if the Court finds that the applicable review is de novo, under Rule 60(b)(1) Wilson’s neglect was not excusable. Delmarva further argues if the Court finds that Wilson’s conduct was excusable, under Rule 60(b)(6), the “extraordinary circumstances” test is not met and the Motion to Vacate the Default Judgment should be denied. In contrast, Wilson asserts that the appropriate standard of review is de novo, and that relief from judgment under Rule 60(b)(1) is appropriate because Wilson’s neglect was excusable, his defense is meritorious and Delmarva will not suffer substantial prejudice if relief is granted. Additionally, Wilson argues, under Rule 60(b)(6), Wilson also meets the “extraordinary circumstances test.” DISCUSSION A. Applicable Standard of Review I recognize that there are inconsistencies in the application of the standard of review in appeals from the Justice of Peace Court to the Court of Common Pleas. Cases that support both the de novo and abuse of discretion standard of review exist.° However, after reviewing the relevant statutes and case-law, I am satisfied that 10 Del. C. § 9571 “requires an independent determination of the merits of the matter on appeal”—that is, a de novo review, as the statute requires.° Notwithstanding the line of cases in which an abuse of discretion review was applied, the relevant statute, 10 Del. C. § 9571, was amended in 1991 to specify that such appeals shall be “de novo.” Prior to 1991, the right to appeal from a decision of the Justice of the Peace Court was set forth in 10 Del. C. § 9570, which did not specify the applicable standard of review.’ > See Krutz v. Pomerantz, No. S15A-10-001 MJB, 2016 (Del. Super. Aug. 19, 2016) (ORDER) (analyzing diverging case law applying abuse of discretion and de novo standards of review). 6 Id. ’ Specifically, 10 Del. C. § 9570 provided: (a) A party against whom a judgment is given by a justice of the peace may appeal to Superior Court if the judgment is given without a referee trial, and the amount exceeds $5, exclusive of costs. (b) A plaintiff or defendant, as the case may be, may appeal to the Superior Court on a judgment given by a justice of the peace if the judgment is given without a referee trial, and any part of the plaintiff's demand, or the defendant’s counterclaim or setoff, exceeding $5 is disallowed or defalked. In 1991, 10 Del. C. § 9571 was amended and now explicitly calls for a de novo review: § 9571 Appeal in civil actions. (a) From any final order, ruling, decision or judgment of the Court ina civil action there shall be the right of appeal to the Superior Court of the State in the county in which said order, ruling, decision or judgment was rendered. (b) The appeal shall be taken within fifteen days of the final order, ruling, decision or judgment. (c) The appeal shall be a trial de novo. (d) The Superior Court shall establish appeal procedures and supersedeas bond requirements by rule.® In 1992, following the 1991 statutory amendment, Kenyon v. Setting was decided, and set new precedent by applying a de novo review to an appeal of a Justice of the Peace Court’s denial of a motion to vacate.’ Following Kenyon, a string of cases unequivocally solidified that de novo review is proper.’° Specifically, as recently as 2015 and 2019, the Superior Court determined that a hearing on a motion to vacate a default judgment was to be de novo and not abuse of discretion.!! Intending no disrespect to my colleagues in the Court of Common Pleas or the Superior Court whom may have concluded otherwise, I find that reliance on case- ® Del. S.B. 88, 136th Gen. Assem. (1991). Note: In 1994, jurisdiction over appeals from the Justice of the Peace Court was transferred to the Court of Common Pleas, and 10 Del. C. § 9571 was further amended by striking “Superior Court” and replacing it with “Court of Common Pleas.” ° Kenyon v. Setting, 1992 WL 52200 , at *1-2 (Del. Super. Feb. 20, 1992). 10 See August v. Lin, 2019 WL 3976040 , at *1-5 (Del. Super. Aug. 20 2009); Sharon Krutz Comfort Palace, LLC v. Pomerantz, 2015 WL 5926933 , at *1-3 (Del. Com. PI. Oct. 8, 2015); Montgomery v. Weemes, 2006 WL 2641588 , at *1 (Del. Com. Pl. Sept. 12, 2006); Gilbert v. Nicholson, 2006 WL 1476887 , at *1 (Del. Com. Pl. Apr. 19, 2006). 'l August, 2019 WL 3976040 at *1-5; Pomerantz, 2015 WL 5926933 at *1-3. 8 law that cites to the pre-1991 statute, or utilizes an abuse of discretion standard of review is misplaced. Based on the unambiguous mandate set forth in 10 Del. C. § 9571 that all appeals from the Justice of the Peace Court be reviewed de novo and relying on cases such as Kenyon, I will review the instant Motion to Vacate the Default Judgment de novo. B. Wilson’s Motion to Vacate Default Judgment Under Rule 60(b)(1), relief from a default judgment may be granted due to mistake, inadvertence, surprise, or excusable neglect if a court finds the plaintiff has met the three factors.'* For public policy reasons, Delaware courts favor deciding cases on the merits over a resolution by default judgment.!? First, a court must analyze whether plaintiff has shown excusable neglect by determining if plaintiff's conduct was reasonable.'* A court only needs to consider the second and third prongs of a meritorious defense and substantial prejudice to the defendant if excusable neglect has been found.!° Delaware courts have found a movant’s conduct to be reasonable where the movant did not simply ignore the legal proceedings but believed in good faith that they had properly participated in the litigation.’° In contrast, it is well established !2 Watson v. Simmons, 2009 WL 1231145 , at *2 (Del. Super. Apr. 30, 2009). 3 Green Tree Servicing LLC v. Hawkins, 2013 WL 5314996 , at *1 (Del. Super. Sept. 6, 2013). i4 Id !5 Johnson v. American Car Wash, Inc., 2012 WL 2914186 , at *2 (Del. Super. July 17, 2012) (ORDER). '© Hawkins, 2013 WL 5314996 at *1. under Delaware law that a complete disregard of legal proceedings does not qualify as reasonable behavior. For example, in Apartment Communities Corp. v. Martinelli and Perry v. Wilson, the court found that failing to answer the complaint and lack of understanding of the judicial process was not excusable neglect.'” However, unlike Martinelli and Perry, there is evidence in the record that Wilson’s inaction after answering the Complaint was excusable. At the Evidentiary Hearing, Wilson and David testified, that after Wilson filed the Answer, Daniels told Wilson that the matter was taken care of. Since Wilson did not own the car or have any further interaction with it after it was purchased, and as an unsophisticated litigant, it is reasonable to determine that Wilson had not ignored the judicial process altogether and acted in good faith. Furthermore, at the Hearing, Wilson and David testified to mailbox issues at Wilson’s residence and the likelihood that he never received actual notice of the original trial. Similar to the case at hand, Montgomery v. Weemes involved a plaintiff who testified that she did not receive notice of a hearing due to shared mailbox issues.'® This Court found that since she did not have actual notice of the hearing and filed a motion as soon as she learned for the default judgment, her conduct was that of a reasonably prudent person under the circumstances and there was a finding '7 Td. at *3. '8 Montgomery, 2006 WL 2641588 at *1. 10 of excusable neglect.!? Additionally, although there is no actual time limit for a plaintiff to file a Motion to Vacate, the time it takes to file the Motion is examined under excusable neglect and must be pursued diligently and without unreasonable delay.”° Despite the three month gap from Trial to when the Motion was filed, within days of learning of the judgment, Wilson contacted counsel for Delmarva and then promptly hired an attorney who filed the Motion to Vacate. Under those circumstances, I find that Wilson timely reacted as a reasonable person would if they discovered a default judgment against them. Therefore, Wilson has met the burden of showing excusable neglect. In addition to proving excusable neglect, Wilson has also met the burden of showing a meritorious defense and lack of substantial prejudice to Delmarva. On September 29, 2020, at the Evidentiary Hearing, Delmarva conceded that Wilson does have a meritorious defense. Additionally, Delmarva has not shown substantial prejudice that will be or may be suffered if the Motion to Vacated is granted and the case is litigated. Finally, I find that vacating the default judgment is appropriate under the “extraordinary circumstances” test set forth in Rule 60(b)(6). Delaware has adopted 19 7d. 20 Shipley v. New Castle County, 975 A. 2d 764 , 770 (Del. 2009). 11 the extraordinary circumstances test established by the United States Supreme Court, which “vests power in courts adequate to enable them to vacate judgments whenever such action is appropriate to accomplish justice.””! In this case, based on the facts outlined herein, I find that justice dictates that the default judgment be vacated. CONCLUSION For the foregoing reasons, the judgment is VACATED and the case REMANDED to the Justice of the Peace Court for a trial on the merits as to the Appealing Defendant. IT IS SO ORDERED wie Ie Bradley V. &fanning, Judge cc: Pat Thomas, Judicial Case Manager 21 Jewell v. Division of Social Services, 401 A. 2d 88 , 90 (Del. 1979), (quoting Klapprott v. United States, 335 U.S. 601 , 615(1949)). 12

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https://www.courts.state.hi.us/wp-content/uploads/2020/11/CAAP-19-0000600mop.pdf

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 30-NOV-2020 07:55 AM Dkt. 108 MO NO. CAAP-XX-XXXXXXX (Consolidated with No. CAAP-XX-XXXXXXX) IN THE INTERMEDIATE COURT OF APPEALS OF THE STATE OF HAWAI#I CAAP-XX-XXXXXXX IN THE INTEREST OF KKA, BORN ON 00/00/0000 APPEAL FROM THE FAMILY COURT OF THE FIRST CIRCUIT (FC-S No. 19-00026) and CAAP-XX-XXXXXXX IN THE MATTER OF THE ADOPTION OF A FEMALE CHILD, BORN ON 00/00/0000 BY KA AND LA, HUSBAND AND WIFE APPEAL FROM THE FAMILY COURT OF THE FIRST CIRCUIT (FC-A No. 05-1-0502) MEMORANDUM OPINION (By: Leonard, Presiding Judge, Hiraoka and Nakasone, JJ.) Petitioner-Appellant State of Hawai#i Department of Human Services (DHS) appeals from orders entered by the Family Court of the First Circuit1 in two cases concerning the same adopted minor child. In CAAP-XX-XXXXXXX, DHS appeals from the "Orders [sic] Concerning Child Protective Act" entered in FC-S No. 19-00026 (the Child Protective Act Case) on August 13, 2019. In CAAP-XX-XXXXXXX, DHS appeals from the "Orders [sic] Setting Aside and Rescinding the Adoption Decree Filed on January 13, 2006[,]" entered in FC-A No. 05-1-0502 (the Adoption Case) on 1 The Honorable Bode A. Uale entered the orders on appeal.  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER August 13, 2019. We consolidated the appeals on September 4, 2019. For the reasons explained below we vacate both orders, without prejudice to further proceedings in the Child Protective Act Case. BACKGROUND KKA (Child) was born in 2003. The parental rights of Child's natural mother and father were terminated by order of the family court on February 8, 2005. KA (Adoptive Father) and LA (Adoptive Mother) filed the Adoption Case, seeking to adopt Child. The family court entered "Findings and Decision of the Court Granting Petition for Adoption" and an "Adoption Decree". KA and LA became Child's adoptive parents effective December 20, 2005. Child was two years old at the time. Adoptive Father died in 2018, when Child was 15 years old. At some point after Adoptive Father's death, Adoptive Mother and Child moved to Virginia with Adoptive Mother's fiancé. Adoptive Mother's fiancé works for the federal department of defense. The following findings of fact by the family court are unchallenged:2 3. [Child] stated to adoptive mother that she did not want to be with her and that she wanted to return to her biological mother . . . . 7. While in Virginia, [Child] got into drugs and she was placed in an Alternative Learning Center ("ALC"). Adoptive mother was concerned about [Child] being exposed to bad influences while at the ALC. 8. In addition, [Child] used marijuana. 9. [Child]'s marijuana use could jeopardize adoptive mother's fiancé's job [with the federal department of defense]. 10. Adoptive mother sent [Child] to Hawai#i under Power of Attorney ("POA")to live with [Child's] adult sister[.] 2 The family court entered identical findings of fact and conclusions of law in the Adoption Case and in the Child Protective Act Case. 2 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER 11. In September 2018, [Child] ran away from her sister's home to stay with her biological mother. 12. During this time, [Child]'s biological mother became homeless, and [Child] lived with her on the beach. 13. This runaway behavior was the same type of behavior [Child] engaged in in Virginia — running away, interference and defiance. 14. Adoptive mother resided in Virginia while [Child] resided in Hawai#i, and there was no legal caretaker for [Child] in Hawai#i, despite the POA. 15. Adoptive mother tried to get [Child] to return to Virgina [sic], but [Child] continued to run away from her adult sister. 16. [Child] was then arrested and placed into the Kapolei Detention Center pending her return to her adoptive mother in Virginia. 17. [Child] expressed to adoptive mother that she did not want to live with adoptive mother. 18. [Child] expressed to adoptive mother that she did not want to live in Virginia. 19. [Child] expressed to adoptive mother that she did not want to live with adoptive mother's eldest daughter, who currently resides in Las Vegas, Nevada, which was the original plan. . . . . 22. In January 22, 2019, DHS assumed placement responsibility for [Child] based on [alleged] physical neglect by adoptive mother. On that date, [Child] was placed in an emergency shelter to last through to [sic] May 10, 2019. . . . . 24. While placed at the emergency shelter, she ran away for a period of four weeks. She eventually returned. 25. On June 28, 2019, she again ran away from her placement at the shelter. 26. [Child] wishes to remain in Hawai#i with her birth mother or adult sister. . . . . 28. On March 23, 2019, Foster Custody of the [Child] was awarded to the DHS. . . . . 30. On July 15, 2019, a review hearing was held by the Honorable Bode A. Uale. . . . 31. At that hearing, and after colloquy, the Court found that [Child]'s adoptive mother . . . "knowingly, 3  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER willingly, and voluntarily waived her right to counsel and proceeded pro se at today's hearing." . . . 32. The Court further found, after colloquy, that "[Adoptive Mother] knowingly, willingly, and voluntarily consented and agreed [sic] to rescind and set aside the adoption of [Child]" and "the adoptive mother . . . has knowingly, voluntarily, and willingly consented to rescind the adoption of [Child] and the adoption is set aside." On July 15, 2019, in the Child Protective Act Case, the family court entered an order setting aside the Adoption Decree and discharging Adoptive Mother as a party. DHS moved for reconsideration. The motion was heard on August 13, 2019. The family court denied reconsideration and entered the orders in the Child Protective Act Case and the Adoption Case from which DHS appeals. STANDARD OF REVIEW [T]he family court possesses wide discretion in making its decisions and those decision[s] will not be set aside unless there is a manifest abuse of discretion. Thus, we will not disturb the family court's decisions on appeal unless the family court disregarded rules or principles of law or practice to the substantial detriment of a party litigant and its decision clearly exceeded the bounds of reason. Fisher v. Fisher, 111 Hawai#i 41, 46, 137 P.3d 355 , 360 (2006) (citation omitted). The family court's findings of fact are reviewed under the "clearly erroneous" standard. Fisher, 111 Hawai#i at 46, 137 P.3d at 360 . A finding of fact is clearly erroneous when the record lacks substantial evidence to support the finding, or despite substantial evidence in support of the finding, we are nonetheless left with a definite and firm conviction that a mistake has been made. Id. "Substantial evidence" is credible evidence which is of sufficient quality and probative value to enable a person of reasonable caution to support a conclusion. Id. "It is well-settled that an appellate court will not pass upon issues dependent upon the credibility of witnesses and the weight of evidence; this is the province of the trier of fact." Id. (citation omitted). 4  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER The family court's conclusions of law are ordinarily reviewed de novo, under the right/wrong standard, "and are freely reviewable for their correctness." Fisher, 111 Hawai#i at 46, 137 P.3d at 360 . However, when a conclusion of law presents mixed questions of fact and law, we review it under the "clearly erroneous" standard because the court's conclusions are dependent on the facts and circumstances of each individual case. Estate of Klink ex rel. Klink v. State, 113 Hawai#i 332, 351, 152 P.3d 504 , 523 (2007). A conclusion of law that is supported by the trial court's findings of fact and reflects an application of the correct rule of law will not be overturned. Id. DISCUSSION DHS contends the family court erred by: (1) setting aside Child's adoption by Adoptive Mother for reasons not authorized under Hawaii Revised Statutes (HRS) § 578-12; and (2) relying upon "the best interests of the child" to set aside the Adoption Decree.3 1. The family court erred by setting aside the Adoption Decree in the Adoption Case. HRS § 578-12 (2018) provides, in relevant part: At any time within one year from the date of entry of any decree of adoption, the court may, for good cause, set aside or modify the decree and, in connection therewith, may make appropriate orders, concerning the custody of the minor child and the disposition and handling of the record of adoption by the department of health. The setting aside or modification of any decree of adoption shall not affect any property rights which have become vested between the date of the entry of the decree or the effective date of the decree and the effective date of any order setting aside or modifying the decree of adoption. No decree of adoption shall be subject to attack in any collateral proceeding, and, after the expiration of one 3 DHS's statement of points also challenges the family court's finding of fact no. 34(a) and conclusions of law nos. 1-5, but the opening brief presents no discernable arguments on those issues and we deem the points waived. Hawai#i Rules of Appellate Procedure, Rule 28(b)(7); see In re Guardianship of Carlsmith, 113 Hawai#i 236, 246, 151 P.3d 717 , 727 (2007) (noting that an appellate court "may disregard a particular contention if the appellant makes no discernible argument in support of that position") (cleaned up) (citations omitted). 5  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER year from the date of its entry, no decree of adoption shall be subject to direct attack upon any ground other than fraud rendering the decree void as of the time of its entry. (Emphasis added.) DHS argues that the family court erred in 2019 when it set aside the 2006 Adoption Decree. We agree for three reasons. First, the Child Protective Act Case was a proceeding collateral to the Adoption Case. HRS § 578-12 prohibits a collateral attack on a decree of adoption; the family court lacked authority to order the Adoption Decree set aside as part of the Child Protective Act Case. Second, we have held that HRS § 578-12 is a one-year statute of limitations prohibiting a direct attack on an adoption decree except for fraud which renders the decree void ab initio. In re Adoption of Male Minor Child, 1 Haw. App. 364 , 370, 619 P.2d 1092 , 1097 (1980). In the Adoption Case, the family court set aside the Adoption Decree 13 years after the decree was entered, on grounds other than fraud; the family court erred when it set aside the Adoption Decree in the Adoption Case. Third, HRS Chapter 578 was enacted based largely upon recommendations contained in U.S. Children's Bureau, Pub. No. 331-1949, Essentials of Adoption Law and Procedure (1949), https://babel.hathitrust.org/cgi/pt?id=mdp.39015018389950&view=1u p&seq=1. In re Adoption of Male Minor Child, 1 Haw. App. at 369, 619 P.2d at 1096 . The federal publication states: Adoption establishes a permanent relationship. With the provision of adequate social study and supervision before the decree is granted, there should be no need for annulment. The adoptive parent has recourse to the remedies that are available to a natural parent: [they] may formally relinquish the child; consent to the child's adoption; . . . or disown [the child] when [their] will is made. The adopting parents' rights may be terminated when necessary by the court in accordance with the provisions existing for the protection of children. Essentials of Adoption Law and Procedure at 22-23 (emphasis added). As discussed in the next section, HRS § 571-61(a) contemplates relinquishment of parental rights for an adopted 6  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER child. It was error for the family court to set aside the Adoption Decree. 2. The family court erred when it terminated Adoptive Mother's parental rights in the Child Protective Act Case. DHS filed the Child Protective Act Case in the family court under HRS §§ 571-11 (2018) and 587A-5 (2018). Those statutes provide, in relevant part: [§ 571-11] Jurisdiction; children. Except as otherwise provided in this chapter, the [family] court shall have exclusive original jurisdiction in proceedings: . . . . (9) For the protection of any child under chapter 587A[.] [§ 587A-5] Jurisdiction. Pursuant to section 571-11(9), the [family] court shall have exclusive original jurisdiction: (1) In a child protective proceeding concerning any child who is or was found within the State at the time specified facts and circumstances occurred, are discovered, or are reported to [DHS] . . . [that] constitute the basis for the court's finding that the child's physical or psychological health or welfare is subject to imminent harm, has been harmed, or is subject to threatened harm by the acts or omissions of the child's family[.] The family court found, and DHS does not contest, that Child told Adoptive Mother she did not want to be with Adoptive Mother in Virginia, and wanted to return to her biological mother. Adoptive Mother sent Child with a power of attorney to live with Child's adoptive sister in Hawai#i. Child ran away from her adoptive sister's home to stay with her biological mother. Child's biological mother was homeless; they lived on the beach. Adoptive Mother tried to get Child to return to Virginia, but Child continued to run away from her adoptive sister. Child was arrested and placed into the Kapolei Detention Center. Child ran away from the detention center, and a warrant for her arrest was issued. 7  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER During a review hearing conducted on July 15, 2019, the family court had the following colloquy with Adoptive Mother, who attended the hearing in person and agreed to relinquish her parental rights: THE COURT: Okay. Well, you still live in Virginia then, right? [ADOPTIVE MOTHER]: I do live in Virginia. THE COURT: Okay. The problem is is that she's here and you're not here. So when there's no legal caretaker, then the State has to step in and try to provide her with shelter. I know you sent her with a power of attorney, is that right? [ADOPTIVE MOTHER]: Yes. THE COURT: Okay. So that -- that doesn't really work for everything because of her age and all of the things that she needs. It's really up to you. If you -- if you -- if you want to fight for her and -- are you planning on taking her back with you to Virginia? What is your plan? [ADOPTIVE MOTHER]: Well, originally, before all of this started, I was trying to get her to come back to Virginia. But she kept running away so it was just impossible for me to get her back. And then when she got into more trouble and was placed in the detention home, I couldn't take her back. And so while she was on the run, you know, she would text me sometimes and tell me that she's okay. So I had told her, you know, turn yourself in, [Child], because it's not right for you to be out there, it's not safe. THE COURT: Yeah. [ADOPTIVE MOTHER]: Turn yourself in and tell them, you guys, what you want because I can't do it for you no more. If I could do it for you, I would do it for you but -- but I can't -- I can't make you do what is right. I can't make the decisions for you. I can, but it doesn't mean that you're going to do it, which is where I'm at right now. And so she did. She listened to me. That night, she turned herself in. She knows she was going to detention home, which she went. And, you know -- and then I got the report and I -- well, I got the court paperwork after I got the phone call from here. When you guys did the first proceeding and when I read the paperwork, it said that I'm being charged for neglect. I guess I'm being charged for neglect basing on the fact that I couldn't get my child back to Virginia in my custody, is because she kept running away. But, you know, it was then that she said she doesn't want to live with me. She doesn't want to live with me. She doesn't want to live in Virginia. She doesn't want to live with my daughter who was part -- the reason I -- my daughter came into the picture was because she was part of the adoption plan in the beginning. She -- my daughter currently now resides in 8 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER Nevada, in Las Vegas, and she said she doesn't want to live with my daughter, she doesn't want to live in Las Vegas. She wants to live with her mother, her birth mother, or her oldest sister[.] And so, you know, if that's what she wants, then that's what I'm going to advocate for. I know it's not the best place for her, but forcing her to live with me even though I want to bring her back with me, it's not going to help solve whatever is going on in her mind. For me, I think what I would want for her, I want her to be with me because I know I'm the best person to provide care for her. But being the best caretaker doesn't mean that I'm the best person for her. And she had already stated that she doesn't want to be with me. So at this point, I do believe that forcing her to come back with me to Virginia is not going to be in her best interest. And she had said if she can't live with her mom or live with her sister, she would want to age out of the system 'cause she was comfortable being where she was. Apparently, that's not so anymore because she's gone again, you know, and -- THE COURT: Well, let me just say that I -- I don't -- I don't believe you've been neglectful. I think you've tried your best to help her. You know, when they turn 16, 17, kind of hard to force anybody to do anything, and that's how I see her because we've had her in our custody and tried to help her. She ran. It's kind of hard to tell any 16-year-old what to do. [ADOPTIVE MOTHER]: Yeah. THE COURT: Yeah? And so is there a warrant out for her arrest on the J side or not? . . . . [DEPUTY A.G.]: There is. . . . . THE COURT: Okay. It's really up to you, ma'am. What I can do is I -- like I said, I don't believe you've been neglectful. You've been a unfortunate mother to a 16-year-old who's basically going to do what she going to do. If you want, I can -- if you want me to -- because I don't believe that I'm -- forcing her to go back to you is going to help, 'cause even if we -- we force her to go back, she's not going to -- she going board the plane, what you going to do? You not going do -- you not going be able to force her to get on the plane. And even if she gets on the plane, once she's in Virginia, if she runs again, then she runs, you know. If you'd like me to, I can rescind the adoption, and then we can work with her within the system. You can go back to Virginia. And I know this is not the optimum thing because I know you love her and care for her, but I don't think that we're -- I mean even -- you're not -- how long are you here for? [ADOPTIVE MOTHER]: I -- I have to go back to work on the 28th. 9 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER THE COURT: See, so even that time, we -- we not sure if we can get her back. . . . . . . . Because she's on the run. The police are probably going to -- we -- we cannot do anything until they come back for a hearing. . . . . . . . And, you know, in four days, you got to go back. So my offer to you -- and I -- I make no judgment on you, ma'am, because I think you've tried your best. I mean, you even had your daughter try to take care of her. But [Child] going do what [Child] wants to do -- [ADOPTIVE MOTHER]: Yes. THE COURT: -- you know. She -- she's got a mind of her own, and unfortunately, she's not making some good choices. So if you'd like me to, I can set aside the adoption, she can be back in DHS custody, and then we can try to reunify her with her mom folks if that's what she wants. But we got to get her back. So if -- if she -- if we can get her back, we can try to do that. So it's up to you. I don't want to make you go through a trial because a trial, I mean, what -- what will that accomplish? Nothing really, because we can't really force her to do anything. As a judge, even me, I cannot force her to go anywhere or do -- [ADOPTIVE MOTHER]: Yeah. THE COURT: -- anything. So when I talk to kids, I tell them you got to do this and if you don't do it, there's consequences. You know what I mean? You got to go here, stay there. But if they -- if they go there and they run away, I mean, you know, the next thing is just try to do the next step to try to help them. So, [Adoptive Mother], it's up to you. If you want me to go ahead and set aside the adoption today, that way, you can go on living your life. Hopefully, she still have some connection to you. You can talk to her and help her as you can. But at least you will not be responsible for her. She's back in the system. We don't know where she is. We'll try to get her back, and we'll do our best to do that, and then we can try, once we get her back, to try to see if we can reunify her with her mother folks or with the oldest sister. But we got to get ahold of them and see what their status is and what their situation is even before we do that. So what -- what would you like me to do? [ADOPTIVE MOTHER]: I -- I would like to move forward with your suggestion to rescind it, not because I don't love her but because I do love her and I don't think that I'm the best person for her right now. It's not me. She needed me when she was baby. But now that she's so old and she's making her own choices and sadly it's not the right choices, you know. I've been praying -- I pray for all my kids. I pray that they all never have to go through this, and I get 10  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER [Child] going through this, you know. But I would like to rescind it so that she can get the proper care that she need for -- to become a -- a contributing citizen to the community. THE COURT: Okay. And like I said, I make no judgment on you. I believe that you've tried your best. You even went to the extent of sending her to your daughter to try to help her. [Child] is -- she's almost an adult. She's going to have to make better choices for herself. And I'm hoping she does. But in the meantime, I'm going to go ahead and do what I said because you agree. I'm not doing it unless you agree so if you -- [ADOPTIVE MOTHER]: I -- I agree. THE COURT: If you agree, I'm going to set aside the adoption, and I'm going to award foster custody to [DHS], and then we'll go from there. Hopefully we can get her back and try to help her the best that we can. I don't -- I don't believe you neglected her. I think you tried your best to help her. But at that age, she just have to make better choices in her life. And hopefully we can help her because it is not a safe world out there. . . . . . . . But in the meantime, I think the best course of action is we try to help her from within -- within DHS and try to assist her on the juvenile calendar, 'cause she got a hearing, too, and do our best to get her back in from the cold and try to help her to straighten up a little bit and make some better choices for herself. [ADOPTIVE MOTHER]: Thank -- thank you -- THE COURT: Okay -- [ADOPTIVE MOTHER]: -- you know. THE COURT: -- so based on my conversation with adoptive mother, I'm going to set aside the adoption, award foster custody to the [DHS]. During the August 13, 2019 hearing on DHS's motion for reconsideration, the family court explained: Okay. Well, so we have a situation here where we have a child that was basically out of control of an adoptive mother. Adoption was performed here via DHS. And so she sent her daughter to be with an older daughter. . . . And then that daughter was not able to control her. . . . . . . . Anyway, with regard to adoptive mother, . . . she did come in and tell me how it had stressed her and that the daughter would not stay with her where -- where she's at. I believe -- is she in Virginia? . . . . 11  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER . . . In Virginia. And the daughter was on the run. So we have the girl back. The [adoptive] mother lives in Virginia. It would do nothing. It would be no -- do no good for this child to try to force her on an airplane to go back to her mother -- her adoptive mother where she does not want to be. She is here. Mother lives in Virginia. [Child] will not go back. Sounds like a CPS case to me. . . . [DHS's] motion [for reconsideration] is denied. I believe it is in the best interest of this child that my order is maintained. I do believe that this child can be helped, but I think we need to help her from our vantage point rather than sending her back to her [adoptive] mother who cannot control her and most likely will find her back here in Hawaii in no time if I were -- if -- even I were able to get her to go back to Virginia. Therefore, based on all of those factors and the fact -- in fact, I'm going to appoint a -- an attorney for the girl. . . . . Okay, I'm going to appoint an attorney for the girl to advocate for her rights, and then we'll go from there. Based on the substantial evidence in the record, it appears that the family court suggested and accepted Adoptive Mother's relinquishment of parental rights to (in the words of the court) "try to see if we can reunify [Child] with her [biological] mother folks or with the oldest sister." However, HRS § 571-61 provides, in relevant part: (a) Relinquishment. The parents or either parent or the surviving parent who desire to relinquish parental rights to any natural or adopted child and thus make the child available for adoption or readoption, may petition the family court of the circuit in which they or he or she resides, or of the circuit in which the child resides, or was born, for the entry of a judgment of termination of parental rights. The petition shall be verified and shall be substantially in such form as may be prescribed by the judge or senior judge of the family court. To relinquish her parental rights, Adoptive Mother was required to file a verified petition with the family court. Adoptive Mother stated her desire to relinquish her parental rights during the July 15, 2019 hearing in the Child Protective Act Case, but the record does not reflect that Adoptive Mother was sworn to tell the truth before her colloquy with the family court. The family court exceeded its authority when it accepted Adoptive 12  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER Mother's apparent relinquishment of parental rights without following the procedure prescribed by HRS § 571-61(a).4 CONCLUSION Based upon the foregoing, the "Orders [sic] Setting Aside and Rescinding the Adoption Decree Filed on January 13, 2006[,]" entered in FC-A No. 05-1-0502 on August 13, 2019, is vacated. The "Orders [sic] Concerning Child Protective Act" entered in FC-S No. 19-00026 on August 13, 2019, is vacated, without prejudice to further proceedings in the family court consistent with HRS § 571-61. DATED: Honolulu, Hawai#i, November 30, 2020. On the briefs: /s/ Katherine G. Leonard Nara E. Sitachitta, Presiding Judge for Petitioner-Appellant State of Hawai#i /s/ Keith K. Hiraoka Department of Human Services. Associate Judge Crystal K. Glendon, /s/ Karen T. Nakasone for Respondent-Appellee Associate Judge Court Appointed Special Advocates Program. 4 HRS § 571-61(b) (2018) authorizes the family court to involuntarily terminate the parental rights of any legal parent on the grounds set forth in the statute. The family court made no findings in the Child Protective Act Case that would support involuntary termination of Adoptive Mother's parental rights. 13

2020-01-17 22:01:29.403395+00

Miluken

*979OPINION. Miluken: By Sections 162, 163, and 164 of the California Civil Code, it is provided that all property owned by either spouse before marriage, or thereafter acquired by gift, bequest, devise, or descent, with the rents, issues, and profits thereof, is separate property, and all other property acquired after marriage by either constitutes community property. Blair v. Roth, 22 Fed. (2d) 932. All community income in California is returnable by and taxable to the husband. United States v. Robbins, 269 U. S. 315; 70 L. Ed. 285. The question for decision in this case is whether the share of petitioner’s wife in the profits of the moving picture transaction is her separate property or is community property. Section 158 of the Civil Code of California provides: “Either husband or wife may enter into any engagement or transaction with *980the other, or with any other person, respecting property, which either might if unmarried; subject, in transactions between themselves, to the general rules which control the actions of persons occupying confidential relations with each other, as defined by the title on trusts.” This section of the Code has been frequently before the courts of California and this Board and it is clear that husband and wife may freely and legally contract with each other with respect to their separate and community property. Wren v. Wren, 100 Cal. 276; Kaltschmidt v. Weber, 145 Cal. 596; 79 Pac. 272; Smith v. Smith, 47 Cal. App. 650; 191 Pac. 60; Francis Krull, 10 B. T. A. 1096. Various forms of agreement between husband and wife residing in California have been before this Board and many of them have been sustained. In Elihu Clement Wilson, 11 B. T. A. 963, three brothers took their wives in as equal partners in a partnership. The wives contributed neither services nor capital, but it was agreed that they should share equally in the profits and losses. The wives were held partners and their share of the profits was taxable to them respectively. See also Francis Krull, supra; C. R. Davis, 10 B. T. A. 1233; Allen Harris, 10 B. T. A. 1374; and F. G. Busche, 10 B. T. A. 1345. In the instant case the contract between petitioner and wife did not relate to community property, nor did it attempt to change the character of the community property. The contract was for the use of the separate property of the wife and fixed the profit or compensation therefor. She was entitled to this under the laws of California, irrespective of the contract, and its only effect was to fix the amount or rate of profit to which she was entitled. She could have made such a contract with a third person for a division of the profits and under California law could do the same with her husband. In our view of this matter it is immaterial whether we consider the arrangement one of partnership, subpartnership, or joint venture. The wife was entitled to one-half of the profits as her separate property, and the fact that the husband collected it first is not controlling for in such case he merely acted as an intermediary and held it as trustee for her. C. R. Thomas, 8 B. T. A. 118. The cases of Mitchell v. Bowers, 15 Fed. (2d) 287; Blair v. Roth, 22 Fed. (2d) 932; and United States v. Robbins, 269 U. S. 315, are not controlling, for in none of them did the question of the use of the separate property of the wife and her right to profits therefrom arise. The recent cases of H. A. Belcher, 11 B. T. A. 1294, and Guy C. Earl, 10 B. T. A. 723, are not in point, for in neither did the contract provide that the earnings of the parties should be their separate estate, and in neither was there a question of the use and investment of the wife’s separate property. The income received by the wife in 1921, resulting from the salary or profits of the moving picture venture and the interest on the *981funds derived therefrom, was her own separate income and property, and was improperly added to petitioner’s income. Judgment will be entered under Bule 50.

2020-01-17 22:01:29.456685+00

Milliken

*984OPINION. Milliken: The questions presented in these five proceedings are, (1) Were the petitioners’ wives, Bessie Brown and Frances Israel, partners in the firm of Brown-Israel Outfitting Co., and (2) if so, should their income therefrom be reported as their own separate income, or should it be included in that of their husbands as community property ? Under the decisions of the courts of California and of this Board, it has been held that husband and wife may freely contract with each other. We think that the evidence in this case, which is uncontradicted, shows that the petitioners and tlieir wives entered into an oral con*985tract of partnership in July, 1919, and they conducted business in accordance therewith through the taxable years. Their actions in filing and publishing the certificate of ownership and in making the various statements to the bank and E. G. Dun & Co. are corroborative thereof. These statements were made in the usual course of business long before these questions arose and can not be considered as mere self-serving declarations. They were acts of the parties and therefore competent, as were also the accounts and books of the firm. In the recent cases of L. S. Cobb, 9 B. T. A. 547; F. C. Busche, 10 B. T. A. 1345; and Elihu Clement Wilson, 11 B. T. A. 963, the Board reviewed the statutes and decisions of California and held that in that State husband and wife could enter into a contract of partnership and carry on business as such and that the interests of each was that one’s separate property and the income therefrom was returnable by and taxable to each individual according to his or her interest. It followed that the income of the wives could not be added to that of the husbands on the theory of community property. In none of the above cases did it appear that the wife had contributed any capital from her separate estate, and in the Busehe case alone did she appear to have rendered any services. In the instant cases the facts are much stronger, for the wives contributed both capital and services. We do not deem the cases of United States v. Robbins, 269 U. S. 315; Blair v. Roth, 22 Fed. (2d) 932; and H. A. Belcher, 11 B. T. A. 1294, applicable to the facts of the cases under consideration. In the Bobbins case there was no contract of partnership between husband and wife and there was no investment of her separate property nor services rendered by her. The income sought to be divided between husband and wife resulted from earnings of the husband and community property, and it was held that the income was clearly community property and taxable to the husband. The Roth and Belcher cases are likewise not in point for in neither was there a partnership agreement for the conduct of business and the earning of income, there was no investment of separate property by the wife, and there was no agreement that her earnings should be her separate property. The agreements were that the earnings of both husband and wife were to be pooled and that they were to be joint owners of the common fund. In those cases there was no partnership and the parties were working for others. The decisions were merely to the effect that the earnings of both husband and wife were community property and were taxed as such. The earnings were not the result of the contract, but merely became subject to it after receipt. *986In the instant cases the earnings, salaries and profits were all the result of the contract and the investment by each of his or her separate property. We are of opinion that the contract of partnership ivas entered into, that it was valid, and that the salaries and all other income derived therefrom by Bessie Brown and Frances Israel was their separate property and that it was error for respondent to have included them in the incomes of petitioners. In the recomputation of the deficiencies, if any, under Rule 50, adjustments of disallowed deductions to the partnership should conform to the decision here made concerning the income of petitioners. Judgment will be entered under Rule 50.

2020-01-17 22:01:29.588356+00

Milliken

*1021OPINION. Milliken : The facts of these proceedings were either stipulated or consist of admissions made by respondent in his pleadings. These proceedings inyolve two distinct classes of issues: those which relate to taxable income, and those which relate to invested capital. We will first dispose of the issues relating to taxable income. Issue 1. Respondent refused to permit petitioner to deduct from gross income amounts paid by it to the United States as penalties for the violation of certain Federal statutes which are referred to in the findings of fact. This question was before us in Great Northern Railway Co., 8 B. T. A. 225, and there we found adversely to petitioner’s contention. Petitioner requests us to overrule that decision and submits an elaborate argument in behalf of its contentions. We gave mature consideration to the question at the time that proceeding was decided and petitioner has not convinced us that we should now recede therefrom. Issue 2. Petitioner complains that respondent credited its operating expenses for the years 1916 and 1917 in amounts representing expenses of transportation for investment. The facts, with reference to this contention, were not stipulated. Respondent in his answer denied the allegations of the petitions and followed his denials with an admission which we have incorporated in our findings of fact. The facts as found are quite meagre and are not sufficient to bring before us the contention vigorously urged by petitioner in the brief filed in its behalf. However, the contentions urged were considered by us in Cheat Northern Railway Co., supra, where the facts appeared at length and were there decided adversely to the petitioner’s *1022contention. To the decision in that case we adhere. Respondent did not err in crediting operating expenses for the j^ears 1916 and 1917 the amounts representing expenses of transportation for investment. Issue 6. During the years 1916 and 1917, petitioner collected $4,480.33 and $8,360.22, respectively, in excess of passenger fares as fixed by its tariffs. These amounts resulted from the agent’s errors in computing the correct fares for passengers. Since the names and addresses oif the passengers so overcharged were not known, it was impossible to make refunds. The amounts received by petitioner were paid for the right to travel over its road. They were income unless the fact that the overcharges were unlawful takes these items out of that category. That such is not the case see United States v. Sullivan, 274 U. S. 259. We can perceive no difference between an undercharge and an overcharge in this respect and we know of no provision in the Revenue Acts which requires a railroad to report a whole charge where it received only a part. The record is dear that it is impossible to discover to whom refunds should be made. The obligation to repay will not in the nature of things be discharged and from a common sense viewpoint the money will remain the property of petitioner subject to its free use and enjoyment. The Interstate Commerce Commission no doubt realizing this requires “ unrefundable overcharges ” to be cleared to profit and loss. Respondent did not err in including the above amounts in gross income. Issue 7. During each of the years in question petitioner credited to profit and loss pay checks, checks or vouchers in payment of loss and damage claims, pay rolls, and for various other ordinary and necessary expenses which had in previous years been issued and had not for a period of two years been presented for payment. The checks when issued were charged out to operating expenses, deducted and allowed as a deduction by respondent in the determination of taxable income. Petitioner allowed two years to intervene and if the checks had not been presented for payment it credited the same to profit and loss. Respondent in auditing the returns added such sums to income. Petitioner does not claim that the deductions theretofore allowed by reason of these checks should be restored to taxable net income for the earlier years, but desires to retain the benefit of the same. Neither has petitioner advanced any suggestion as to when, if ever, any adjustment should be made for the checks uncashed. We assume it to be the position of petitioner that such adjustment would never be made. Section 13(d) of the Revenue Act of 1916 and section 212 of the Revenue Act of 1918 provide a latitude as to the manner in which books of account may be kept in order to reflect taxable income. The books of petitioner were kept and maintained on the accrual basis during all of the years in question and pursuant to the sections *1023of the statutes aforesaid. It was permitted to deduct expenses for which checks were issued regardless of the date of the cashing of the checks by the parties to whom issued. After two years had elapsed the checks were credited to a profit and loss account. Petitioner followed this course in order that its boobs of account might reflect a true and accurate state of affairs. The Interstate Commerce Commission authorized and required such procedure. So far as we are advised this has been the uniform and consistent practice of petitioner in treating such items. If subsequent events, due to the failure to cash the checks show such charges to have been in error, petitioner restored the same to income, thus correcting what had been theretofore eliminated therefrom. We should be very cautious in disturbing such a consistent practice pursued by petitioner and one having the sanction of the Interstate Commerce Commission. Any large business enterprise, especially a common carrier, should adjust its income accounts so as to be an accurate reflection of income. It is undisputed that in a strict legal sense, petitioner has not derived income. Eisner v. Macomber, 252 U. S. 189. As a basis, however, for the determination of taxable income and based upon the actualities of an ever recurring situation, it must be held that the treatment by petitioner in charging the amounts here in question to profit and loss has the sanction of common sense and may thus enter into the computation of taxable income for the years in question. Cf. Yale & Towne Manufacturing Co. v. United States, 269 U. S. 422, and American National Co. v. United States, 274 U. S. 99. Petitioner also submits that if, after two years, the person to whom the checks were issued submits them for payment, they are honored. The system of accounting employed by petitioner will logically take care of this situation and the resx>ondent agrees that there would thus arise a deduction from income on account thereof. It is .also significant to note that in the years before us none of the checks of the character above referred to are in question. In reaching our conclusion, we have not failed to take into consideration the fact that bookkeeping entries do not constitute income. Doyle v. Mitchell Bros. Co., 274 U. S. 179. Rather are we persuaded by a system of accounting long in use, recognized as good accounting and required by the Interstate Commerce Commission, and which, under all the facts at hand, resulted in the reflection of true income for the several years. Petitioner cites in support of its position the decision of the United States Supreme Court in Bowers v. Kerbaugh-Empire Co., 271 U. S. 170. The case at bar is distinguishable. We are not here concerned with a single isolated transaction, but with an ever recurring one in the business of petitioner, the net result of which is not a loss, but, from a practical viewpoint, is a definite gain. Respondent was not in error in adding the amounts in controversy to taxable income. *1024Issue 10. Petitioner in its amended answer filed June 12,1928, seeks to transfer from the year 1915 to the year 1917 a loss of $5,960,960.08 arising from its transactions with the Chicago, Rock Island & Pacific Railroad, an Iowa corporation. It is stipulated that in December, 1909, the Iowa corporation needed $7,314,660.83 to retire certain of its outstanding bonds, and that “To provide this amount petitioner advanced said sum to the Iowa corporation as a loan and received therefor $7,500,000 par value of the Iowa company’s 5 per cent Debenture Bonds maturing September 1, 1913.” In November, 1914, petitioner delivered back $1,388,000 par value of these debenture bonds to the Iowa company and received in lieu thereof $1,353,699.75, leaving a balance due to petitioner of $5,960,961.08. In June, 1915, the book value of the debenture bonds of the Iowa corporation owned by petitioner was written down to $1 and the balance, $5,960,960.08, was written off to Profit and Loss by petitioner’s receivers. Said debenture bonds themselves were worthless in June, 1915. It is further stipulated that petitioner’s receivers deducted said loss on their tax return on behalf of petitioner for the year 1915, but that on or about January 21, 1928, petitioner filed an amended return for 1915, in which said deduction was not taken. Section II G (b) of the Act of October 3, 1913, grants to corporations the right to deduct from gross income “ all losses actually sustained within the taxable year and not compensated by insurance or otherwise, * * The question presented is, Did petitioner actually sustain a loss in 1915 in respect to its loan to the Iowa company? In this connection it is pertinent to point out that the deduction was taken in a tax return made after the end of 1915, and that the stockholders’ proceeding against the directors and petitioner was begun in February, 1915. The receivers, with knowledge of that proceeding, deliberately charged off of petitioner’s books a debt of nearly $6,000,000, and deducted the same loss in their income-tax return. The reasons for this procedure are obvious — the Iowa company, which owed the debt, was insolvent; its bonds were worthless; the debt was worthless-. The fact that a few stockholders were pursuing some of petitioner’s directors, charging fraud, does not militate against the fact that petitioner sustained an actual loss in the year 1915. Whether such fraud would be established was entirely problematical. In fact, to this day, no such fraud has been found or decreed by any court; nor has such fraud been confessed. The directors offered to pay to petitioner or to its receivers less than one-eleventh of the principal amount involved, to say nothing of interest for over 7 years. There is nothing in the record which indicates that the directors were not financially able to pay the whole amount. It seems evident that this comparatively small amount was paid, not as a confession of wrongdoing, but to procure the dismissal of an annoy*1025ing proceeding. If the court had thought the claim valid, it certainly would not have approved the acceptance by its receivers of this offer. If the receivers had thought that there was any merit in the claim they would not have written the debt off in 1915. They were not required to be “incorrigible optimists.” United States v. White Dental Co., 274 U. S. 398. Respondent is sustained on this point. Issue 11. The sum of $68,583.27 received by the reorganization committee as interest on its daily bank balance was undoubtedly taxable income. The question is, To whom was such income taxable? We may at once eliminate the individual members of the committee and the committee as an organization. Neither was entitled to the interest. The committee received the amounts paid by the stockholders and other depositors for specified purposes. This leaves only the various depositors which included the subscribing stockholders and petitioner. Under the “Plan of Reorganization,” the stockholders were to subscribe and pay for the 7 per cent preferred stock at par, the payments to be made through the committee. Whenever a stockholder made a deposit his only specified right was to receive the stock for which he had subscribed. It seems conceded that such stockholders had no right to the interest. There is nothing either in the agreement or the plan of reorganization which makes any provision for them in this respect. No part of the interest was paid to them. This was the construction placed on the plan and the agreement by the parties themselves. Petitioner points out that it is stipulated that petitioner was not a party to the agreement. This does not conflict with the fact that the agreement was made for its benefit, that it was the sole beneficiary thereof, nor with the fact that other agreements may have been entered into between petitioner and the committee. In fact, it was first stipulated that “the railway company was not a party to the agreement in any manner” and by a subsequent stipulation the words underscored were eliminated. The record discloses that petitioner contributed to the committee $838,-194.44 from its own funds and that there was paid to the committee $5,500,000, which was received from the directors as the result of the stockholders’ suit, and which clearly belonged to petitioner. It is stipulated that the committee purchased bonds of the consolidated Indiana Coal Co. and paid therefor $2,022,011.85, and that “the funds for said purchase were furnished by petitioner.” Finally, it is stipulated that after all expenditures had been made by the committee a small sum, less than $1,000, was returned to petitioner. Since provision was not specifically made in the plan or the agreement of reorganization for any of these transactions, there must have been other agreements between the committee and petitioner or petitioner’s receivers not provided for in the plan. What these agree*1026ments were is not disclosed. It is sufficient to point out that every expenditure made by the committee redounded to the benefit of petitioner. The amounts which were paid by the committee for services and expenses were just as much for petitioner’s benefit as though expended by petitioner itself. Under all the facts of the record, we are of the opinion that since petitioner was the sole beneficiary of the funds held by the committee, the interest on these funds constituted taxable income to it. Cf. Irwin v. Gavit, 268 U. S. 161. Respondent did not err in including this interest in petitioner’s gross income. Issues 14, 15, and 16. These issues relate to interest, rentals and compensation earned by petitioner during Federal control during the years 1918 and 1919, but which were paid by the Director General in a subsequent year. Since petitioner was on an accrual basis these amounts constitute taxable income in the year earned and its contentions must be resolved in its favor on the authority of Texas & Pacific Railway Co., 9 B. T. A. 365; Cf. Illinois Terminal Co., 5 B. T. A. 15; New Orleans, Texas & Mexico Railway Co., 6 B. T. A. 436; and Great Northern Railway Co., supra. Point 17. During the period April, 1915, to June, 1917, petitioner, through the reorganization committee, purchased from the public the outstanding bonds of the Consolidated Indiana Coal Co. of the face value of $2,336,000, for which it paid the sum of $2,022,011.85. During the year 1918 petitioner acquired all the capital stock of the Coal Company and for that part of 1918 during which such ownership existed it included the Coal Company in its consolidated return. The Coal Company retired said bonds during the period of affiliation whether by cancellation or payment and, if by payment, at what amount does not appear. On these facts respondent has determined that the affiliated group was in receipt of income to the extent of $313,988.15, which was the difference between the par value of the bonds and the amount paid for them by petitioner during the period 1915-1917. It is clear petitioner made no gain at the time it purchased bonds at a discount; neither did the Coal Company lose anything by reason of the transaction. No funds of either company were used during the period of affiliation to purchase the outstanding obligations of the Coal Company. It appears that there was no affiliated group in existence at the dates of the purchases to which the purchases might be attributed. Petitioner, as a distinct taxable entity, purchased the bonds and subsequently brought them into the affiliation, at which time they became intercompany obligations, the payment or collection of which produced neither income nor loss. Cf. Gould Coupler Co., 5 B. T. A. 499; Farmers’ Deposit National Bank, 5 B. T. A. 520; H. S. Crocker Co., 5 B. T. A. 537; Buffalo Forge Co., 5 B. T. A. 947. If it be conceded that the situation is the same as though the *1027bonds had been purchased during the period of affiliation, no taxable income was derived from the transaction. See Independent Brewing Co. 4 B. T. A. 870; New Orleans, Texas & Mexico Railway Co. supra; Houston Belt & Terminal Ry. Co. 6 B. T. A. 1364; National Sugar Manufacturing Co. 7 B. T. A. 577. The amount of $313,988.15, being the difference between the par value of the Coal Company’s bonds and what was paid for them, should be excluded from petitioner’s gross income for 1918. Issues 3, 4, and 5. We have reserved the question of deduction of amortized discount and expenses for the reason that it is so intimately connected with invested capital that both issues should be discussed together and in the order in which they arise. Petitioner complains that respondent erred in refusing to permit the deduction from its gross income of any part of the discount and expense incurred in connection with the sale of its First and Refunding Bonds sold during the period 1904-1908; and further, that although respondent allowed as a deduction an amortized part of the discount on its Equipment Bonds which matured serially and on its Collateral Trust Bonds issued in 1902, which also matured serially, he erred in his method of computing such amortization. Respondent in the instance of the First and Refunding Mortgage 4% Gold Bonds which were issued and sold during the years 1904 to 1908 refused to allow any part of the discount and expenses applicable thereto for the reason that on the books of account of petitioner the discount and expenses were charged to profit and loss or surplus account prior to January 1, 1909. If, however, petitioner had charged the discount and expenses on its books to a reserve for “ unamortized discounts and expenses on bonds ” he would, pursuant to his regulations promulgated on the subject, have allowed the deductions now claimed for the years in question and also if the bonds had been issued at a discount subsequent to January 1, 1909, a deduction would have been allowed notwithstanding the manner in which it was reflected on the books of account. Apparently, therefore, the controlling factor is the manner in which the discount was reflected upon the books of account. We can see no merit in the respondent’s action in so far as it is dependent upon the manner in which the account is reflected upon the books. Bookkeeping entries can not control over the actual facts, and if necessary they should be corrected to correspond with the true facts. If the bond discount is to be disallowed as a deduction the denial must rest on more substantial grounds. Both parties refer to Old Colony Railroad Co., 6 B. T. A. 1025. Petitioner insists that our decision in that case is in conflict with respondent’s regulations and with the accepted rules of accounting *1028practice. On the other hand, respondent contends that if we follow Old Colony Railroad Co., supra, then all allowances made by him on account of deductions with respect to amortized discount and expense should now be disallowed, and that any premiums received by petitioner on the sale of any of its obligations should receive like treatment. In Old Colony Railroad Co., supra, we held that no part of premiums received on bonds sold by the railroad during the period 1895-1904 was taxable in the year 1920 for the reason that no transaction occurred in that year with reference to the sale, purchase or payment of the bonds, arid followed this with the statement that if the bonds had been sold at a discount no part of such discount would be deductible in that year. Respondent appealed from our decision to the Circuit Court of Appeals for the First Circuit. In its opinion rendered on May 31, 1928, 26 Fed. (2d) 408, the court, after quoting the Sixteenth Amendment and the applicable provisions of the Revenue Act of 1918, said: Article 544 of Regulations 45, based upon tbe Revenue Act of 1918, provides: (2) (a) If bonds are issued by a corporation at a premium, tbe net amount of sueb premium is gain or income wbicb should be prorated or amortized over tbe life of tbe bonds. (3) (a) If bonds are issued by a corporation at a discount, tbe net amount of sucb discount is deductible and should be prorated or amortized over the life of the bonds. It is to be borne in mind that the premiums here in question were received by the Old Colony not later than 1904 and during a period of time when there was no Federal statute authorizing the laying and collection of taxes on incomes, and several years prior to adoption of the 16th Amendment (February 25, 1913) authorizing Congress to lay and collect taxes on incomes without apportionment among the several states; and that these premiums when received were regarded and treated as capital and expended in the improvement of its road. The question then is whether the premiums that were received by the taxpayer not later than 1904, are income of the taxpayer that may be amortized over the life of the bonds and the sum or part of the premiums apportioned to the year 1920 be taxed in 1920 to the taxpayer as a part of its income in that year under Sec. 213 (a) and 212 (b) of the Revenue Act of 1918. If it be assumed that the premiums received in 1904 and prior thereto were income, can they be said to be taxable income “ for the taxable year in which received by the taxpayer” (Sec. 213 (a)), “which should be prorated or amortized over the life of the bonds” (Art. 544, Reg. 45, 2 (a)). It seems to us that the answer to this question disposes of the case, and that the answer must be in the negative. The premiums, when received, were treated and used as capital. They were not received in 1920, the tax year in question, but some 16 or more years prior thereto. At that time there was no Federal statute imposing a tax upon incomes and no provision of the Constitution giving Congress power to lay or collect taxes on incomes without apportionment, which the Revenue Act of 1918 unquestionably does. It is not to be presumed that Congress by the Act of 1918 intended to tax the whole or any part of the premiums on bonds received prior to February 25, 1913, whether the life of the *1029bonds extended into a taxable year subsequent to February 25, 1913, or not, as it was beyond its power to do so at the time they were received. See Lynch v. Turrich, 247 U. S. 221; Southern Pacific Co. v. Lowe, 247 U. S. 330; Doyle v. Mitchell Bros Co., 247 U. S. 179; Hays v. Cauley Mountain Coal Co., 247 U. S. 189; Merchants' Loan & Trust Co. v. Smietanka, 255 U. S. 509; Goodrich v. Edwards, 255 U. S. 527. This question, as we understand it, has not heretofore been passed upon by any court A somewhat analogous question was decided by the Court of Claims, in the case of Chicago and Alton Railroad Co. v. United States, 53 Ct. Cl. 41. There the corporation in 1906 issued and sold its bonds at a discount and the amount of the discount was entered in a “Profit and Loss” account of that year. In 1909 the Corporation Excise Tax Act was enacted. In filing its returns for 1911 and 1912 under that Act, the corporation did not claim deductions for the discount, but later filed claims for refunds for those years of a proportionate amount of the discount. The Commissioner rejected the claims for refunds and the Court of Claims approved his decision. The significant thing about the case is that the court declined to allow the taxpayer, who has sustained a loss in 1906 in the amount of discount then made in the sale of bonds extending over a period of years, to have such loss amortized and allowed as a deduction in determining the amount of the taxpayer’s tax for the years 1911 and 1912. The decision of the Board of Tax Appeals is affirmed. It will be observed that tbe court had before it for decision the sole question whether any part of premiums received prior to March 1, 1913, was taxable in the year 1920. This issue the court decided in the negative. Whether discount incurred in the sale of bonds prior to March 1, 1913, should receive like treatment was not before the court. Neither was it before us when we decided the case. What was said by the court and what was said by us in respect of this issue was merely dicta. The Circuit Court of Appeals in affirming the decision of the Board primarily based its decision on the fact that the bond premium was received prior to February 25, 1913, and that it was beyond the power of Congress to tax the whole or any part of the premiums so received, regardless of whether the life of the bonds extended into a taxable year subsequent to the enactment of the Sixteenth Amendment to the Constitution. The effective date of the latter is set up as dead line beyond which the Commissioner may not go in the collection of a tax on income received prior thereto. This reasoning does not apply, however, in the instance of bonds issued at a discount prior to February 25, 1913, and the life of the bonds extending into the years here in controversy. What is income is controlled by the Constitution, while deductions are a statutory concept. In the years before us, the petitioner was on an accrual basis for the reporting of income, not only because that was the system necessary to reflect true income, but because the Interstate Commerce Commission required such a basis. Income realized before the adoption of the Sixteenth Amendment may not thereafter be taxed, but as concerns deductions from income, the *1030same rule does not necessarily apply. In the case of a continuing transaction, even though it had its inception prior to February 25, 1918, there may arise statutory deductions from income which a taxpayer is not deprived of by reason of the date of the enactment of the Sixteenth Amendment. The basis of reporting income and the reflection of true income may control in the instance of deductions. The basis of petitioner for reporting income was the accrual basis and for the purposes of Federal taxation the year 1916 was the first year pursuant to section 13(d) of the Revenue Act of 1916, that such a change could lawfully be made, and coincident with such a change in the reporting of income there arose a right to deductions not theretofore permitted on a strict cash receipts and disbursements basis. The accrual basis may permit the taking of a loss and the spreading of the same ratably over the years, in order that true income may be reflected. Especially is this so in a business presenting the accounting perplexities of petitioner. It also is pertinent to point out that the case of Chicago & Alton Railroad Co. v. United States, 53 Ct. Cls. 41, referred to in both opinions, involved the application of the provisions of the Corporation Excise Tax Act of 1909, which, broadly speaking, taxed as net income only income actually received less expenses actually paid and losses actually sustained and which contained no provisions similar to those of the Revenue Act of 1916 and subsequent Revenue Acts permitting the return of income on an accrual or other basis. The decision of the Court of Claims as construed by the Circuit Court of Appeals held that discount incurred was a loss in the year the bonds were issued. On the other hand, the Circuit Court of Appeals for the Third Circuit, in Baldwin Locomotive Works v. McCoach, 221 Fed. 59, where the issue was whether any part of discount on bonds issued in 1910 and payable in 1940 could be deducted in the year of issuance, held that no loss was sustained until the bonds were paid. This latter case also had for application the Corporation Tax Act of 1909 and in it the issue was squarely presented and decided. The decision in the latter case lays down what we believe to be the true rule, since one on a cash basis can not be held to have made income until he is in either actual or constructive receipt thereof nor to have sustained a loss or incurred an expense until he has actually sustained the loss or paid the expense. One on a cash basis sustains no deductible loss on bonds issued at a discount in the year of issuance. The only question is can one on an accrual basis spread such discount over the life of the obligation involved and take as a deduction an aliquot part thereof each year or must he, like one on a cash basis, wait'until the obligation is paid before he is entitled to any deduction whatever. It is obvious that to hold the latter solution correct *1031is to annihilate, in this respect, the difference between these methods of accounting. Respondent’s regulations, beginning with articles 149 and 150 of Regulations 33 (Revised), (with an exception which we will refer to later) have consistently provided that discount on bonds issued by a taxpayer should be prorated over the life of the bonds and an aliquot part thereof be deducted from gross income each year. See article 544, Regulations 45, and article 545 of Regulations 62, Regulations 65 and Regulations 69. These regulations have been in effect for over 10 years and have been applied by respondent in all cases of discount on bonds so)d except as provided in article 149, Regulations 33, which will be noticed later. Under these circumstances these regulations should not be lightly disregarded unless they are in conflict with the provisions of the statute. It is significant that they are in harmony with general accounting practice, which treats discount as deferred interest to be spread over the life of the obligation. Further, they coincide with general business usage. Whenever a corporation contemplates issuing long-term securities, three methods present themselves: Shall the bonds carry the market rate of interest and be issued at par, or shall they carry a greater rate than the market rate and be sold at a premium, or shall they carry a rate less than the market rate and be so)d at a discount? Which of these methods should be pursued is determined by the present needs and the future prospects of the company, but it matters not which plan is adopted, other things being equal, the rate of interest finally paid will be the market and not the contract rate. The true income of the company can be reflected only when the discount is spread over the life of the bonds. The most material element in determining the contract rate of interest, that is, whether the bonds shall be sold at par or at a premium or discount, is time. Thus no one would consider the proposition that he pay a premium for bonds payable at once nor would one issue bonds at a discount which are due and collectible the day they are issued. Since time is such a vital element in determining premium and discount, it is difficult to perceive why this element should not be taken into consideration in determining taxable income — ■ why time should not be used as a divisor in order to allocate to each period of time that part of the discount which is greater or less by reason of time. The question remains, Is this method, which is in harmony with general accounting practice and w,ith business usage, in conflict with the Revenue Acts of 1916 and 1918? Section 13(d) of the Revenue Act of 1916 provides: (d) A corporation * * *, keeping accounts upon any basis other than that of actual receipts and disbursements, unless such other basis does not *1032clearly reflect its income, may, subject to regulations made by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury make its return upon the basis upon which its accounts are kept, in which case the tax shall be computed upon its income as so returned. Section 212(b) of the Revenue Act of 1918, which is made applicable to corporations by section 232, provides in part: (b) The net income shall be computed * * * in accordance with the method of accounting regularly employed in keeping the books of such taxpayer; but if no such method of accounting has been so employed, or if the method employed does not clearly reflect the income, the computation shall be made upon such basis and in such manner as in the opinion of the Commissioner does clearly reflect the income. * * * Section 200 of the Revenue Act provides that the term M paid ” includes “ paid or accrued.” In United States v. Anderson, 269 U. S. 422, the Supreme Court had before it for application section 13(d) of the Revenue Act of 1916. The court quoted Treasury Decision 2433, which in part provides that under this section that it— will be permissible for corporations which accrue on their books monthly or at other stated periods amounts sufficient to meet fixed annual or other charges to deduct from their gross income the amounts so accrued, provided such accruals approximate as nearly as possible the actual liabilities for which the accruals are made, and provided that in cases wherein deductions are made on the accrual basis as hereinbefore indicated, income from fixed and determinable sources accruing to the corporations must be returned, for the purpose of the tax, on the same basis. After pointing out that the Corporation Tax Act of 1909 and the Revenue Act of 1913 provided “ in terms that net income should be ascertained by deducting from gross income received, interest, expenses and taxes actually paid and losses actually sustained,” and after stating that the difficulty ,in administering these Acts resulted in the promulgation of certain regulations which permitted to a limited extent the return of income on an accrual basis and that section 13(d) went much further than these regulations, the court said: Treasury Decision 2433, to which reference has been made, was in harmony with this view of section 13(d). It recognized the right of the corporation to deduct all accruals and reserves, without distinction, made on the books to meet liabilities, provided the return included income accrued, and, as made, reflected true net income. If the return failed so to reflect income, the regulation reserved the right of the Commissioner to require the return to be made on the basis of receipts and disbursements. A consideration of the difficulties involved in the preparation of an income account on a strict basis of receipts and disbursements for a business of any complexity, which had been experienced in the application of the Acts of 1909 and 1913 and which made it necessary to authorize by departmental regulations, a method of preparing returns not in terms provided for by those statutes, indicates with no uncertainty the purpose of sections 12(a) and 13(d) of the Act of 1916. It was to enable taxpayers to keep their books and make their returns according to scientific accounting principles, by charging against income *1033earned during the taxable period, the expenses incurred in and properly attributable to the process of earning income during that period; and indeed, to require the tax return to be made on that basis, if the taxpayer failed or was unable to make the return on a strict receipts and disbursements basis. We are of opinion that in an economic and accounting sense, the discounts, herein involved, are in the nature of deferred interest, that they may be accrued and that the proper proportionate part applicable to each taxable year involved may be taken as a deduction from gross income in such year, and that this concept is not in conflict but rather in harmony with the provisions of the Revenue Acts of 1916 and 1918. This view is not in conflict with Baldwin Locomotive Works v. McCoach, supra; Chicago & Alton Railroad Co. v. United States, supra, nor New York Life Insurance Co. v. Edwards, 271 U. S. 109, since the first two cases involved, as above pointed out, the Corporation Excise Tax Act of 1909 and the last the Revenue Act of 1913, both of which recognized only the cash receipts and disbursements basis. There is another vital distinction between the New York Life Insurance Co. case and this proceeding. In that case the insurance company sought to amortize premiums paid by it on bonds of others bought by it, while in this proceeding petitioner seeks to amortize discount on its own bonds. In the New York Life Insurance Co. case, the court said: The company owned many bonds, etc., payable at future dates, purchased at prices above their par values, and to amortize these premiums a fund was set up. It claimed that an addition to this fund should be deducted from gross receipts. The District Court thought the claim well founded, but the Circuit Court of Appeals took another view. Unless the addition amounted to a loss “ actually sustained within the year ” no deduction could be made therefor. Obviously, no actual ascertainable loss occurred. All of the securities might have been sold thereafter above cost. The result of the venture could not be known until they were either sold or paid off. In that case the insurance company could shift the loss or perhaps make a profit. Here petitioner was bound to pay the discount. It is true the possibility existed that petitioner might become insolvent and obtain relief in paying its bonds at less than par, but we have no more right to anticipate such a situation here than to hold that no income or loss occurred in the taxable year because loss or income was made in the succéeding year. If we indulged in such prognostications in all cases the accrual system of accounting would be set at naught. It is pertinent at this period to state that respondent has denied petitioner'the right to deduct amortized discount on all bonds sold prior to the year 1909. This is in accord with article 149 of Regulations 33 (Revised). This regulation was based on what we con*1034ceive to be an erroneous interpretation of the decision in Chicago & Alton Railroad v. United States, supra. That decision, as we understand it, was not based so much on the fact 'that the bonds were issued prior to the effective date of the Corporation Excise Tax Act as on the fact that that Act recognized only the cash basis. However this may be, this exception is not to be found in any of respondent’s subsequent regulations, and is contrary to what we conceive to be the true rule. We hold, therefore, that petitioner is entitled to deduct in each taxable year that proportion of the discount on the bonds involved in issues 8, 4, and 5, which is obtained by dividing the total discount by the number of years the bonds are to run. This brings us to the question whether respondent used the proper method in computing the amortization of discount on petitioner’s bonds which matured serially. Respondent computed the discount on these bonds under the formula laid down by him in IT 1412, Cumulative Bulletin 1-2, p. 91, which is as follows: Where bonds mature serially a proper proportion of the total expense of floating the bonds should be allocated to each series and each series then treated as a separate unit. The deduction applicable to each series should be prorated equally over the life of the bonds constituting the series, provided, however, that if the corporation retired any of the bonds before maturity, the deduction for that year should be increased by an amount equivalent to the amount which would ordinarily be deducted during the succeeding years on account of those particular bonds if they had not been prematurely retired. Petitioner contends for the method prescribed by the Interstate Commerce Commission and which respondent has now adopted (see G. C. M. 3832, I. R. B., vol. VII, No. 22, p. 3), which is as follows: * * * # * * * The amount of each series of bonds should bo multiplied by the number of years it has to run, the product representing an amount equivalent to the series as though outstanding for one year. To any series of bonds should be allocated that proportion of the total discount (or premium) which the product for such series bears to the sum of the products for all the series. The portion of the discount (or premium) thus applicable to any series of bonds should then be prorated equally over the life of the bonds constituting such series. * * * * * * * Since we are treating discount as deferred interest, the formula contended for by petitioner and now adopted by respondent, in our opinion, coincides with such concept. The next question under these three issues is whether respondent erred in refusing to deduct an amortized part of the expense incurred in issuing its First and Refunding Bonds, the last of which were sold in 1908. Here we have no question of deferred liability, but the *1035payment of an expense made prior to March 1, 1913. Waiving for the moment the question how such expenses should be treated if made subsequent to such date, we are of opinion that since the Circuit Court of Appeals has held in the Old Colony Railroad Co. case, supra, that premiums actually received prior to March 1, 1913, are nSt taxable income, by the same token, expenses actually paid prior to said date are not deductible from gross income of taxable years. Respondent did not err in refusing this latter deduction. At this point respondent affirmatively pleads that he erred in allowing the deduction of any amortized part of the expense paid in connection with any of the issues of bonds by petitioner. With the exception of bonds issued prior to March 1, 1913, the facts as stipulated, do not show that there was any expense incurred in selling any other bonds. However, it is stated in the briefs filed in behalf of both petitioner and respondent that petitioner incurred bond expenses in 1917 and 1919 in the respective amounts of $48,260.50 and $53,610.25 and that respondent has allowed as deduction an amortized part of such expense. Since respondent has by his amended answer opened this phase of the case and since the parties are agreed upon the facts, we will now determine whether respondent’s action in this respect was proper. Respondent draws a distinction between discount and such expenses and contends that unlike discount, such expenses do not partake of the nature of interest since they were paid to persons other than the lenders of the money. We are not impressed by this contention. While such expenses do not so nearly coincide with the concept of interest, they are, nevertheless, intimately connected with the loan and in fact constitute a part of the cost of the money borrowed. We see no reason for divorcing them from the loan and holding them annual expenses. In Emerson Electric Manufacturing Co., 3 B. T. A. 932, we held that commissions paid to brokers for the sale of capital stock of a corporation were not deductible as ordinary and necessary expenses of carrying on a trade or business, and in this connection, we said: * * * Further, it is clear to us that the revenue of a day or a year should not be burdened with the cost of acquiring additional capital, the benefits from which will inure to the corporation over a long period of years. This is the doctrine generally recognized and adopted in the treatment of expenses incident to the procuring of temporary capital through the flotation of bonds and other term securities, and in such cases the expenses are written oft over the life of the indebtedness. Respondent did not err in respect of the deduction of amortized expenses in connection with the bonds sold in 1917 and 1919. Issue 9. The facts with reference to this issue are that on July 15, 1912, petitioner sold $20,000,000 par value of its Debenture Bonds for *1036the sum of $18,800,000, or at a discount of $1,200,000. On July 2, 1917, it exchanged for those debentures its second preferred stock of the same par value. On this latter date the unamortized discount on the debentures amounted to $871,921.20. Petitioner asserts that by this transaction it lost the latter amount and should be permitted to deduct it from its gross income for 1917. We are aware of the fact that, in accounting, unamortized discount appears on the asset side of the balance sheet as a deferred expense, but it does not follow that such treatment can give' value to what in fact is a liability. Without value there can be no deductible loss. Unamortized discount represents that part of the total discount for which no provision has been made in the way of reduction of surplus or otherwise. It represents not value but liability, the extinction of which, under the facts of the transaction, did not result in deductible loss. Petitioner did not sell its bonds for cash, and with this or money from any other source, pay off the bonds. It exchanged its stock for its bonded liability. This was a purely capital transaction, which did not result in deductible loss or taxable gain. Cf. Simmons & Hammond Manufacturing Co., 1 B. T. A. 803; Emerson Electric Manufacturing Co., supra; H. S. Crocker Co., 5 B. T. A. 538; and Corning Glass Works, 9 B. T. A. 771. Petitioner is entitled to no deduction by reason of this exchange. Issue 22. During the period 1904-1908, petitioner sold its First and Refunding Mortgage bonds at a total discount of $9,344,167.43 and at a total expense of $256,686.08. The unamortized amount of both discount and expense on December 31, 1916, was $6,036,171.90. The latter amount respondent excluded from invested capital for the year 1917 on the same ground that he had disallowed it as a deduction. For the reasons heretofore given, we are of opinion that respondent did not err in so far as the expenses were concerned. They were actually paid prior to March 1, 1913, and can not be carried beyond that date either for the purpose of deduction or for the purposes of invested capital. In both cases they should be treated alike. As we have pointed out, discount is in fact a deferred interest charge which is not paid by one on a cash basis until the debt is paid and which may be accrued by one on an accrual basis. Since it appears that the whole discount was charged to profit and loss, at the date of the sale of the bonds, and since this discount should not have been so charged but should have been treated as deferred interest and as such accrued over the life of the bonds, it follows that this charge should be removed with its attendant effect upon surplus. Profit and loss should then be reduced each year by the amortized part of the discount with the final result that surplus instead of being reduced at the outset is reduced in the end by precisely the same *1037amount. Since the total discount was deducted when the bonds were issued, the true surplus at the beginning of any year is computed by restoring to surplus the unamortized discount. This is the theory and this theory assumes the existence of a surplus. For the purpose of this discussion, we include undivided profits in the term “surplus.” In Willcuts v. Milton Dairy Co., 275 U. S. 215, the court approved the accounting definition of the terms “ surplus and undivided profits,” which is— Both these terms as commonly employed in corporate accounting denote an excess in the aggregate value of all the assets of a corporation over the sum of all its liabilities including capital stock. The surplus which may be included in invested capital is an actual, not a paper surplus. Until such a surplus exists, no charge against profit and loss can be reflected in surplus and since nothing is taken from surplus there is nothing to restore. This general rule is, of course, subject to exceptions, one of which is that subsequently a surplus may be paid in or earned in which might be reflected the charge against profit and loss. In the instant case we are not informed whether petitioner had a surplus, and if so, in what amount, when the bonds were sold. Neither are we informed what effect the period of financial stringency through which it had just passed and the receivership had on its surplus. For all we know, petitioner’s capital may have been impaired, in which case such impairment must have been made good before there could be a surplus. Willcuts v. Milton Dairy Co., supra. On the other hand, we are advised by the record that respondent has restored to surplus certain unamortized discounts. What we hold is that the charge of the total discount against profit and loss made at the time bonds were issued should be removed; that the discount should be amortized over the life of the bonds, with proper charges each year for such amortized part; and that petitioner’s surplus, if any, should not be reduced in this respect by any amount in excess of the amortized discount at the beginning of the taxable year. Issues 23 and 24. The first of these issues involves the reduction of petitioner’s invested capital for the year 1917 by the amount of the discount incurred in connection with the sale of its Equipment Bonds, Series “G,” issued July 1, 1912, and Series “H,” issued July 1, 1913. Respondent appears to have assumed that the discounts on these bonds had been charged to Investment Account, when in fact they were charged to Profit and Loss Account. The second of these issues involves the contention that respondent erred in computing the amortized discount on Series “ C,” “ D,” F,” “ G,” and “H” of its Equipment Bonds issued respectively on April 1, *10381909, May 1, 1910, August 1, 1911, July 1, 1912, and July 1, 1913, and on its Collateral Trust Bonds issued May 1, 1902. Irrespective of the character of entry made when Series {í G ” and “ H ” were issued but subject to the limitation laid down under issue 22, we are of opinion that the unamortized discount on all the above-mentioned bonds should be restored to surplus and that the discount on all the bonds which matured serially should be computed under the formula set forth under issues 4 and 5. Issues 26 and 29. Under the first of these issues, petitioner contends that respondent erred in reducing its invested capital by the sum of $811,921.26 “ as representing an alleged discount on $64,422,160 par value of stock issued by the taxpayer on July 2, 1917, whereas said stock was issued at par.” The issue of stock in the amount of $54,422,160 included an issue of second preferred 6 per cent stock in the amount of $20,000,000. This issue petitioner on July 2,1917, exchanged at par for $20,000,000 (the whole issue) of its Debenture Bonds issued in 1902 and for which it had received $18,800,000. On the date of the exchange, the unamortized discount on these debentures amounted to $871,921.26. This amount respondent deducted from the $20,000,000 par value of the second preferred stock and allowed the effective average of the remainder in invested capital for the remainder of the year. Petitioner contends that the effective average of the par value of the stock issued on July 2, 1917, should be included in invested capital for that year. Under issue 29 petitioner asserts, apparently as an alternative, that it is entitled to include in invested capital for 1917 the sum of $421,924.38, representing the balance (after giving effect to $30,544.49 allowed by respondent) of £f| of the total unamortized discount on said Debenture Bonds as of December 31,193 6. Invested capital consists, broadly speaking, of money or property paid in for capital stock and paid in and earned surplus. Petitioner insists that since its debentures were received in exchange for its stock, we should hold that they were paid in for capital stock and since as it asserts, there is no evidence in the record to the effect that these debentures were worth less than par, the result is that $20,000,000 in debentures was paid in for $20,000,000 stock, ,and, further, that we can not go behind the finding of the Public Utilities Commission of Illinois. The facts as stipulated show that this exchange was made just after petitioner had emerged from a receivership caused by great financial stress and that it had defaulted in the payment of interest on these very obligations. It is of interest to note that in the copy of the petition for advice with respect to the acceptance of the offer *1039of compromise made by the directors, filed with the .agreed statement of facts, it is stated that these debentures were selling on the market in June, 1916, at approximately $580 for each $1,000 debenture. Further, the “Plan of Reorganization” discloses that petitioner’s T per cent first preferred stock was to be sold at par for cash. It is reasonable to suppose that its 6 per cent second preferred stock was worth less than its 7 per cent first preferred, and therefore less was paid for the former. Aside from this, we are of opinion that all that was paid in for this stock was precisely the amount paid for the debentures, which was, $18,800,000. An illustration will suffice. If petitioner had issued its debentures on July 1,1917, instead of in 1902, could it be successfully contended that the amortized discount for the whole life of the debentures except one day was paid in for the stock ? The question answers itself. We are, therefore, of opinion that all that was paid in for the second preferred stock was $18,800,000, the amount paid in for the debentures. We have yet before us the effect of these transactions on surplus. Petitioner has the right to have restored to surplus the unamortized part of the discount, subject to the limitations set forth under issue 22. Respondent has, by affirmative plea, raised the questions of the taxation of unamortized premiums and the effect of such amortized premiums on invested capital. All bonds which were sold at a premium were issued prior to March 1,1913, and such premiums should not be amortized either for the purpose of taxation or invested capital. See Old Colony Railroad Co., sura. Reviewed by the Board. Judgment will 6e entered under Rule 60. Teammell dissents on the questions of bond discounts and penalties.

2020-11-30 19:11:19.917707+00

http://www.supremecourt.ohio.gov/rod/docs/pdf/6/2020/2020-Ohio-5477.pdf

[Cite as State v. Jones, 2020-Ohio-5477 .] IN THE COURT OF APPEALS OF OHIO SIXTH APPELLATE DISTRICT LUCAS COUNTY State of Ohio/City of Toledo Court of Appeals No. L-20-1060 Appellee Trial Court No. CRB-19-12479 v. Javon Jones aka Jovon Jones DECISION AND JUDGMENT Appellant Decided: November 30, 2020 ***** David Toska, Chief Prosecutor, and Elizabeth C. Tighe, Assistant Prosecutor, for appellee. Laurel A. Kendall, for appellant. ***** PIETRYKOWSKI, J. {¶ 1} In this accelerated appeal, appellant, Javon Jones, appeals from the March 4, 2020 judgment of the Toledo Municipal Court sentencing him, following his conviction of aggravated menacing and domestic violence, to serve 90 days of electronic monitoring regarding the first count consecutive to a term of 180 days of confinement in the Corrections Center of Northwest Ohio regarding the second count. Appellant completed his 180-day term of confinement. For the reasons which follow, we reverse. {¶ 2} On appeal, appellant asserts a single assignment of error: The trial court committed plain error when it sentenced defendant separately for the two offenses herein, when the elements of the offenses align such that commission of one offense would probably result in commission of the other, both of which were arguably committed with one animus, and which arose from one bad act which produced similar harm, and when the error was both obvious and substantial, and affected the final outcome of the proceeding. {¶ 3} Appellant asserts that the two offenses are allied offenses of similar import. Although appellee argued at trial the cases should not merge, appellee agrees with appellant’s conclusion. We find appellant is correct as well. {¶ 4} The elements of aggravated menacing, R.C. 2903.21(A), are: “knowingly cause another to believe that the offender will cause serious physical harm to the person.” {¶ 5} The elements of domestic violence, R.C. 2919.25(C) are: “by threat of force, * * * knowingly cause a family or household member to believe that the offender will cause imminent physical harm to the family or household member.” {¶ 6} R.C. 2941.25 prohibits the imposition of multiple punishments for allied offenses of similar import. The test for determining whether the defendant has been convicted of allied offenses of similar import under R.C. 2941.25 is based on the facts of 2. the case. State v. Williams, 148 Ohio St.3d 403 , 2016-Ohio-7658 , 71 N.E.3d 234 , ¶ 18, abrogated on other grounds by State v. Henderson, Slip Opinion No. 2020-Ohio-4784 . “[C]ourts must evaluate three separate factors--the conduct, the animus, and the import--” to determine if the offenses constitute a single offense or separate offenses. Separate offenses are: (1) “dissimilar in import or significance—in other words, each offense caused separate, identifiable harm” to a single victim or to multiple victims, (2) “the offenses were committed separately,” or (3) “the offenses were committed with separate animus or motivation.” Id., quoting State v. Ruff, 143 Ohio St.3d 114 , 2015-Ohio-995 , 34 N.E.3d 892 , ¶ 13, 25. On appeal, we review the issue de novo. Williams at ¶ 28. Appellant admits he did not raise this issue at trial and that he has forfeited all but plain error. Crim.R. 52(B). {¶ 7} Appellate courts may recognize plain error if appellant “demonstrate[s] plain error on the record * * * and [shows] ‘an error, i.e., a deviation from a legal rule’ that constitutes ‘an “obvious” defect in the trial proceedings.’” State v. Thomas, 152 Ohio St.3d 15 , 2017-Ohio-8011 , 92 N.E.3d 821 , ¶ 32 (citations omitted). Appellant must also show that the plain error affected his substantial rights. Id. at ¶ 33. “[A]ppellate courts [exercise] discretion to correct ‘[p]lain errors or defects affecting substantial rights.’” Id. at ¶ 32 (citation omitted). {¶ 8} In this case both charges arose out of a single event where appellant made threats to the victim, which she testified made her afraid for her safety. Therefore, there was a single harm caused to a single victim and each offense was committed 3. simultaneously with the same motivation. Therefore, we find the offenses are allied offenses and should have been merged before sentencing. Appellant’s sole assignment of error is found well-taken. {¶ 9} Having found that the trial court did commit error prejudicial to appellant and that substantial justice has not been done, the judgment of the Toledo Municipal Court is reversed. This case is remanded to the trial court for resentencing. Appellee is ordered to pay the costs of this appeal pursuant to App.R. 24. Judgment reversed and remanded. A certified copy of this entry shall constitute the mandate pursuant to App.R. 27. See also 6th Dist.Loc.App.R. 4. Mark L. Pietrykowski, J. _______________________________ JUDGE Thomas J. Osowik, J. _______________________________ Christine E. Mayle, J. JUDGE CONCUR. _______________________________ JUDGE This decision is subject to further editing by the Supreme Court of Ohio’s Reporter of Decisions. Parties interested in viewing the final reported version are advised to visit the Ohio Supreme Court’s web site at: http://www.supremecourt.ohio.gov/ROD/docs/. 4.

2020-11-20 19:32:29.03276+00

Lexmont Corporation, Petitioner, v. Commissioner of Internal Revenue, Respondent Lexmont Corp. v. Commissioner Docket No. 37759 United States Tax Court April 27, 1953, Promulgated *183 Decision will be entered under Rule 50. 1. Held, a trust is not an "individual" within the meaning of section 24 (b) and the deduction of interest accrued by petitioner corporation on sums owing to a trust that owned all the stock of the petitioner is not disallowed by section 24 (c), and is allowed by section 23 (b). 2. In 1946 the petitioner received a refund of part of the New York City real estate taxes paid for the years 1934 through 1945. Held, further, under section 22 (b) (12) this sum is includible in petitioner's 1946 income and subject to income tax to the extent of the amount of the deductions for the taxes which resulted in an income tax benefit to the petitioner in the prior years. Jesse B. Spiller (an officer), for the petitioner. Robert Margolis, Esq., for the respondent. Arundell, Judge. ARUNDELL *185 The respondent has determined the following deficiencies in the petitioner's tax liability: Declared Incomevalue Calendar yeartaxexcess-profits tax 1944$ 1,625.54$ 971.88 19451,610.99944.70 19466,950.47 The petitioner contests all deficiencies and alleges as the respondent's principal error the disallowance of deductions for interest accrued during the taxable years but never paid. Other errors relate to the disallowance of net operating loss deductions and the inclusion of real estate tax refunds in the petitioner's taxable *185 income. All facts have been stipulated and have been found as stipulated. FINDINGS OF FACT. The petitioner, a New York corporation, incorporated on November 24, 1933, filed its returns for the years in question with the collector *186 of internal revenue for the third district of New York. The petitioner at all times has kept its books of account and filed its returns on the calendar year basis and on the accrual method of accounting The petitioner was authorized to issue 200 shares of common stock without par value. Pursuant to an agreement dated November 25, 1933, between the petitioner and Jesse Isidor Straus, the petitioner had assigned to it a contract for the purchase of premises known as 1120-1130 Lexington Avenue, in New York City. The purchase price was $ 123,000 of which $ 15,000 was paid upon execution of the contract, the balance payable upon passage of title. The $ 15,000 was advanced by Jesse Isidor Straus. Also pursuant to the agreement, Jesse Isidor Straus acquired all the authorized stock, consisting of 200 shares of no par common at $ 5 per share, and he agreed to loan to the petitioner the further sum of $ 107,000, plus such additional amounts needed to*186 pay the balance of the purchase price upon delivery of the petitioner's promissory note, payable on demand, with interest at 6 per cent per annum, in an amount equal to the amount so loaned, plus the $ 15,000 advanced for the down payment. On February 1, 1934, in accordance with the agreement dated November 25, 1933, the petitioner acquired title to the premises 1120-1130 Lexington Avenue. The petitioner issued and delivered all of the authorized 200 shares of common stock without par value of the petitioner to Jesse Isidor Straus for the sum of $ 1,000. Jesse Isidor Straus loaned to the petitioner the further sum of $ 107,109.10 and the petitioner executed and delivered to Jesse Isidor Straus a promissory note of the petitioner, payable on demand, to the order of Jesse Isidor Straus, dated February 1, 1934, in the amount of $ 122,109.10, consisting of the aforementioned amounts of $ 15,000 and $ 107,109.10. On April 6, 1934, in order to provide the petitioner with funds to purchase the real property known as 615 Lexington Avenue in New York City, Jesse Isidor Straus loaned to the petitioner the further sum of $ 99,262.12 and the petitioner executed and delivered to Jesse Isidor*187 Straus a promissory note of the petitioner, payable on demand, to the order of Jesse Isidor Straus, dated April 6, 1934, in the amount of $ 99,262.12, with interest thereon at the rate of 6 per cent per annum. Jesse Isidor Straus died testate on October 4, 1936. He devised his entire residuary estate in trust to pay the net income thereof to his widow, Irma N. Straus, for life, and upon her death to distribute the principal to his then living children and the issue of any then deceased children, in equal shares, per stirpes. He was survived by his widow, his daughter, Beatrice S. Levy, his sons, Jack I. and Robert K. Straus, and several grandchildren, all of whom are still living. At the time of his death, Jesse Isidor Straus owned all of the 200 shares of the petitioner's capital stock and the two promissory notes referred to *187 above, all of which were included in his residuary estate. No payments had been made on the principal or interest of the notes. On December 27, 1943, the shares of stock and the notes were transferred to the trustees and since that date this property has been held in trust. The trustees of the trust and Irma N. Straus, the income beneficiary of*188 the trust, have at all times kept their books and filed their income tax returns on the cash receipts and disbursements method and on the calendar year basis. The petitioner has made payments on the principal of the promissory note dated February 1, 1934, on the dates and in the amounts set forth below: DateAmount Dec. 24, 1942$ 45,000 Dec. 19, 194415,000 Dec. 20, 194535,000 $ 95,000 leaving an unpaid balance of $ 27,109.10 since December 20, 1945. On November 19, 1946, the petitioner made a payment in the amount of $ 20,000 on the principal of the promissory note dated April 6, 1934, leaving an unpaid balance of $ 79,262.12 since November 19, 1946. The petitioner has accrued on its books and has deducted in its income tax returns for the calendar years 1934 to 1946, inclusive, the amounts set forth below for interest on the unpaid balances from time to time of the principal of the two promissory notes: Amount accrued and Yeardeducted for interest 1934$ 11,083.54 193513,282.28 193613,282.28 193713,282.28 193813,282.28 193913,282.28 194013,282.28 194113,282.28 194213,223.10 194310,582.28 194410,552.77 19459,618.99 19467,444.16 *189 The petitioner has not paid any part of the above-mentioned accrued interest. The petitioner's tax returns for the years 1934 to 1943, both inclusive, showed net losses in the following amounts, after deducting the aforementioned accruals of interest: Net loss shown on Yearthe return 1934$ 10,035.10 193514,067.69 193612,600.53 19378,915.40 19388,575.60 19398,287.61 194016,923.99 194125,510.56 194226,321.25 194324,495.38 The petitioner's 1944 tax return shows a net loss of $ 19,098.84 for that year. *188 The petitioner's 1945 amended tax return shows an ordinary net loss of $ 7,991.28, net capital gain of $ 39,058.07, and net income of $ 31,066.79. The petitioner's 1946 tax return shows net income of $ 1,521.85. In computing the net losses shown in the income tax returns of the petitioner for the taxable years 1934 to 1943, inclusive, in the amounts set forth above, and the net loss shown in the tax return of the petitioner for the taxable year 1944, petitioner deducted the following amounts for New York City real estate taxes which had accrued for 1934 to 1944, inclusive: New York City real Yearestate taxes deducted 1934$ 7,764.57 19358,742.00 19368,100.00 19378,142.00 19388,411.80 19398,482.50 19408,481.23 19418,464.50 19428,315.50 19438,277.50 19448,181.25 *190 In computing the ordinary net loss of $ 7,991.28 and the net income of $ 31,066.79, shown in the amended tax return of the petitioner for the taxable year 1945, the petitioner deducted $ 6,865.05 for New York City real estate taxes which had accrued for that year. The $ 6,865.05 represented $ 7,741.69 deducted in the original 1945 return, less $ 876.64, which constituted the amount of the $ 7,741.69 payment refunded to the petitioner in 1946. During the taxable year 1946, the petitioner received from the City of New York refunds in the amounts set forth below of portions of the New York City real estate taxes, theretofore paid by the petitioner which had accrued for the taxable years 1934 to 1945, inclusive, and which the petitioner had deducted in its income tax returns for those years: Amount of real estate tax Yearrefunded 1934$ 1,496.00 19351,974.00 19361,626.75 19371,642.20 19381,646.10 19391,678.37 19401,640.37 19411,785.03 19421,852.07 19431,726.88 19441,743.03 1945876.64 19,687.44 In computing the net loss of $ 19,098.84 for the year 1944, the petitioner deducted the amount of $ 15,908.81 as a net operating loss deduction, which amount*191 represented the sum of the net operating losses of $ 9,098.30 and $ 6,810.51 shown on the petitioner's tax returns for the years 1942 and 1943, respectively. In computing the ordinary net loss of $ 12,337.83 and the net income of $ 26,720.24, shown in the original *189 tax return of the petitioner for the year 1945, the petitioner deducted the amount of $ 10,000.54 as a net operating loss deduction, which amount represented the sum of the net operating losses of $ 6,810.51 and $ 3,190.03 shown in the petitioner's tax returns for the years 1943 and 1944, respectively. In computing the ordinary net loss of $ 7,991.28 and the net income of $ 31,066.79, shown in the amended tax return of the petitioner for the year 1945, the petitioner deducted $ 6,530.63 as a net operating loss deduction. OPINION. The basic question is whether the deductions claimed by the petitioner corporation, an accrual basis taxpayer, for interest accrued during the taxable years but not paid at any time on promissory notes owing to a trust are disallowed by section 24 (c), Internal Revenue Code. 1 The trust was created for legitimate testamentary purposes and no question of bona fides is raised by the *192 respondent, nor does the respondent raise any question as to whether the notes represented an equity interest rather than a loan. *193 Section 24 (c) provides that no deduction shall be allowed under section 23 (b) 2 on interest accrued if all three conditions specified in section 24 (c) are present. The parties agree that the first two conditions in section 24 (c) are present. The interest was never paid and the person to whom it is to be paid, namely, a trust, reports its income by the cash method of accounting. The parties are at issue as to the third condition which is that both the taxpayer and the person to whom the payment is to be made are persons between whom losses on sales or exchanges of property would be disallowed under section *190 24 (b). 3 Therefore, the ultimate issue is the interpretation of section 24 (b). *194 Section 24 (b) enumerates several persons between whom "losses from sales or exchanges of property, directly or indirectly," are disallowed but nowhere refers to transactions between a trust and a corporation. Nevertheless, the respondent contends that the relationship set forth in subparagraph (B) of section 24 (b) (1) is present here. Subparagraph (B) provides for a disallowance of losses where the sale or exchange is between an "individual" and a corporation more than 50 per cent in value of the outstanding stock of which is owned, directly or indirectly, by or for such "individual." The respondent contends a trust is an individual within the meaning of this provision. The trust owns all of the capital stock of the petitioner corporation. This very issue has recently been decided by this Court in John A. Snively, Sr., 20 T.C. 136">20 T. C. 136, where we held that a trust was not an individual within the meaning of section 24(b)(1)(B), and that a loss incurred by a corporation on a sale to a trust, the beneficiaries of which were the children of the owner of approximately 94 per cent of the stock of the corporation, was allowable as a loss deduction to the corporation. *195 On the authority of John A. Snively, Sr., supra, and for reasons set forth therein, we hold that the testamentary trust in question was not an individual within the meaning of section 24(b)(1)(B). Therefore, the interest accrued and unpaid on the sums due to this trust by the petitioner corporation is not disallowed by section 24(c) and is allowed by section 23(b). *191 The second issue is the extent to which the petitioner must include in its taxable income for 1946 the sum of $ 19,687.44, representing a refund received in 1946 for New York City real estate taxes paid for the years 1934 through 1945. The amount of the refund attributable to each year is set forth in our Findings of Fact. Section 22(b)(12) provides that there shall not be included in gross income and there shall be exempt from income taxation "Income attributable to the recovery during the taxable year of a * * * prior tax * * * to the extent of the amount of the recovery exclusion with respect to such * * * tax * * *." Paragraph (12) defines a "prior tax" as a "tax on account of which a deduction or credit was allowed for a prior taxable year." As set forth in our Findings of*196 Fact, these real estate taxes had accrued 4 and were deducted and allowed in full for the taxable years 1934 through 1945. In addition, paragraph (12) defines "recovery exclusion" as "the amount * * * of the deductions * * * allowed, on account of such * * * prior tax * * * which did not result in a reduction of the taxpayer's" income tax. Therefore, the sum refunded in 1946 is includible in the petitioner's 1946 income and subject to income tax to the extent of the amount of the deduction for these taxes which resulted in an income tax benefit to the petitioner in the prior years. This amount will be determined under a Rule 50 computation. We find no merit in the petitioner's contention that since the years 1944 and 1945*197 are open and in issue in this proceeding, the income for those years can be recomputed by reducing the deduction taken in those years by the amount of the refund applicable to them. It is now well settled that taxes are deductible in the year the liability accrued and events occurring in subsequent years do not permit the reopening of the prior years and the adjusting of the deductions. Security Flour Mills Co. v. Commissioner, 321 U.S. 281">321 U.S. 281, Taylor Instrument Companies, 14 T. C. 388, and cases cited therein. Finally, the issue of the deductions in the taxable years 1944 and 1945 for net operating losses is dependent on the allowance of the interest deductions as set forth above. The facts relative to the net operating loss deductions were stipulated and set forth in our Findings of Fact. The matter may be determined under a Rule 50 computation. Decision will be entered under Rule 50. Footnotes

2020-11-30 19:12:42.82263+00

http://www.tsc.state.tn.us/sites/default/files/hendry.joseph.filed_.opn_.pdf

11/30/2020 IN THE COURT OF CRIMINAL APPEALS OF TENNESSEE AT NASHVILLE July 14, 2020 Session STATE OF TENNESSEE v. JOSEPH CHRISTOPHER HENDRY II Appeal from the Criminal Court for Wilson County No. 15-CR-33 Brody N. Kane, Judge ___________________________________ No. M2019-01284-CCA-R3-CD ___________________________________ Defendant, Joseph Christopher Hendry II, was indicted for one count of felony first degree murder, one count of premeditated first degree murder, one count of criminal attempt to commit first degree murder, and four counts of aggravated assault. Pursuant to a negotiated plea agreement, Defendant pleaded guilty to second degree murder and received a sentence of 25 years to be served at 100 percent. Defendant filed a motion seeking to reduce his sentence pursuant to Rule 35 of the Tennessee Rules of Criminal Procedure. Following a hearing, the trial court denied Defendant’s motion. Defendant appeals. Following our review of the record, we affirm the judgment of the trial court. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Criminal Court Affirmed THOMAS T. WOODALL, J., delivered the opinion of the court, in which ROBERT L. HOLLOWAY, JR. and TIMOTHY L. EASTER, JJ., joined. Peter J. Strianse, Nashville, Tennessee (on appeal and at trial) and Jeff Cherry, Lebanon, Tennessee (at trial) for the appellant, Joseph Christopher Hendry II. Herbert H. Slatery III, Attorney General and Reporter; Katharine K. Decker, Assistant Attorney General; Tom P. Thompson, Jr., District Attorney General; and Justin G. Harris and Thomas Swink, Assistant District Attorneys General, for the appellee, State of Tennessee. OPINION Background On October 26, 2016, Defendant and the State entered into a “Memorandum of Understanding” whereby the parties agreed that Defendant would plead guilty to second degree murder and receive a sentence of 25 years to be served at 100 percent. The plea agreement was contingent upon Defendant making a truthful proffer that produced “sufficient corroboration to support criminal prosecutions on all persons” present during the offenses or who aided or abetted the commission of the offenses and upon Defendant testifying truthfully against those persons. On July 9, 2018, Defendant pleaded guilty to second degree murder. The trial court sentenced him to 25 years to be served at 100 percent and dismissed the remaining counts of the indictment pursuant to the plea agreement. On November 6, 2018, Defendant filed a timely motion under Rule 35 of the Tennessee Rules of Criminal Procedure, seeking a reduction in sentence. Defendant asserted that he had “cooperated extensively” with the State in the investigation and prosecution of Marvin Bryant and Timothy Wade, Jr., who “participated in the crime to an equal extent.” Defendant asserted that without his “willingness to testify, at great personal risk to himself and his family,” Mr. Bryant and Mr. Wade “would have never entered pleas of guilty and been brought to justice.” Defendant contended that he, Mr. Bryant, and Mr. Wade were “equally culpable” and that the sentences received by Mr. Bryant and Mr. Wade “represent[ed] a profound sentencing disparity among similarly situated defendants.” Rule 35 hearing At the hearing on Defendant’s motion, Lebanon Police Detective David Willmore testified that he was the lead investigator in the case. Detective Willmore participated in several “proffer sessions” with Defendant, his attorneys, and the district attorney’s office, in which Defendant explained the events leading up to the shooting on January 5, 2015. Defendant stated that he, Mr. Bryant, and Mr. Wade went to the house of Rashad Seay, where the victim, Insatiable Patton, lived. All three men were armed and shot their weapons into the house, and Defendant’s weapon fired the bullet that killed the victim. Police did not recover any of the weapons. Detective Willmore testified that “[t]here was quite a bit of circumstantial evidence that [police] had at the time,” and police were able to corroborate parts of Defendant’s proffer. Detective Willmore recalled that Mr. Bryant and Mr. Wade both had criminal histories, but he did not recall their prior convictions. Based upon Defendant’s proffer, Mr. Bryant and Mr. Wade were indicted for the same offenses as Defendant. Pursuant to plea agreements, Mr. Wade and Mr. Bryant pleaded guilty to facilitation to commit second degree murder. Mr. Wade was sentenced to serve 15 years at 35 percent, and Mr. Bryant was sentenced to serve 12 years at 30 percent. -2-  At the conclusion of the hearing, the trial court denied Defendant’s motion, noting that a modification of Defendant’s sentence is available “only in exceptional cases where unforeseen post[-]sentencing developments would permit modification of the sentence in the interest of justice.” The trial court found that the disparity in sentences was not unforeseen, noting that “[n]o two cases are exactly the same.” In a subsequent written order, the trial court concluded that “merely because [Defendant’s] [c]o-[d]efendants received lesser sentences as a result of plea negotiations is not a sufficient ‘development’ to warrant the relief sought.” Defendant filed a timely notice of appeal. Analysis Defendant contends that the trial court abused its discretion in denying his Rule 35 motion because the disparity between his sentence and his co-defendants’ sentences violates the purpose of the Sentencing Reform Act, which is to promote justice by eliminating unjustified disparity in sentencing. The State responds that the trial court properly denied Defendant’s motion. Tennessee Rule of Criminal Procedure 35 provides a mechanism by which a defendant may seek reduction of his sentence within 120 days after the date the sentence is imposed or probation is revoked. Tenn. R. Crim. P. 35(a). The trial court may only reduce a sentence to one that the court could have “originally imposed.” Id. at 35(b). The denial of a motion to modify sentence pursuant to Rule 35 of the Tennessee Rules of Criminal Procedure is subject to an abuse of discretion standard of review. State v. Patterson, 564 S.W.3d 423 , 429 (Tenn. 2018) (citing State v. Irick, 861 S.W.2d 375 , 376 (Tenn. Crim. App. 1993)). “An abuse of discretion occurs when the trial court applies incorrect legal standards, reaches an illogical conclusion, bases its decision on a clearly erroneous assessment of the evidence, or employs reasoning that causes an injustice to the complaining party.” West v. Schofield, 460 S.W.3d 113 , 120 (Tenn. 2015) (citing State v. Banks, 271 S.W.3d 90 , 116 (Tenn. 2008)). Where, as in this case, a defendant enters a plea agreement with a specific, negotiated sentence, that sentence may only be modified pursuant to Rule 35(b) “where unforeseen, post-sentencing developments would permit modification of a sentence in the interest of justice.” State v. McDonald, 893 S.W.2d 945 , 947 (Tenn. Crim. App. 1994); see State v. Patterson, 564 S.W.3d 423 , 434 (Tenn. 2018) (“[A] defendant is required to provide such information only if the defendant’s Rule 35 motion seeks reduction of a specific sentence imposed in exchange for a guilty plea. For Rule 35 motions of this type, the McDonald standard remains applicable and appropriate.”). The State argues that it was not unforeseen that Defendant’s co-defendants would receive lesser sentences. We agree. As the trial court noted, when Defendant entered -3- into the Memorandum of Understanding, he could not anticipate whether his co- defendants would be charged, convicted, or what their sentences would be. Defendant did not enter his negotiated plea agreement with the understanding that both co- defendants would receive the same sentence Defendant received. As the trial court noted, each defendant’s case is its “own little entity[,]” and “[e]ach case has strengths and weaknesses as any case does.” Defendant received the benefit of his plea agreement by having his remaining charges dismissed and by avoiding a life sentence. We conclude that the trial court did not abuse its discretion by denying Defendant’s Rule 35 motion. CONCLUSION For the foregoing reasons, the judgment of the trial court is affirmed. ____________________________________________ THOMAS T. WOODALL, JUDGE -4-

2020-11-30 20:00:23.693205+00

http://www.ca4.uscourts.gov/Opinions/194277.P.pdf

PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 19-4277 UNITED STATES OF AMERICA, Plaintiff – Appellee, v. STEPHEN V. MCGRATH, Defendant – Appellant. Appeal from the United States District Court for the District of Maryland, at Greenbelt. Paul W. Grimm, District Judge. (8:18-cr-00038-PWG-1) Argued: October 28, 2020 Decided: November 30, 2020 Before GREGORY, Chief Judge, WILKINSON, and KEENAN, Circuit Judges. Dismissed by published opinion. Chief Judge Gregory wrote the opinion, in which Judge Wilkinson and Judge Keenan joined. Justin Eisele, SEDDIQ LAW FIRM, Rockville, Maryland, for Appellant. Joseph Ronald Baldwin, OFFICE OF THE UNITED STATES ATTORNEY, Greenbelt, Maryland, for Appellee. GREGORY, Chief Judge: Stephen V. McGrath pled guilty, pursuant to a written plea agreement, to coercion and enticement of a minor in violation of 18 U.S.C. § 2422 (b) (“Count I”), and possession of child pornography in violation of 18 U.S.C. § 2252A(a)(5)(B) (“Count II”). As part of the plea agreement, McGrath agreed to waive his right to appeal “whatever sentence is imposed (including any term of imprisonment . . .) for any reason (including the establishment of the advisory sentencing guidelines range, the determination of the Defendant’s criminal history, the weighing of the sentencing factors, and any constitutional challenges to the calculation and imposition of any term of imprisonment . . .),” except that he “reserve[d] the right to appeal any term of imprisonment to the extent that it exceeds any sentence within the advisory guidelines range resulting from an offense level of 43.” J.A. 74. As to Count I, McGrath faced a mandatory minimum sentence of 10 years and a maximum of life imprisonment. Count Two had no mandatory minimum sentence but had a statutory maximum sentence of ten years. Based on McGrath’s total offense level of 43, and a criminal history category of I, his advisory Sentencing Guidelines range was life imprisonment. The court imposed a 264-month sentence as to Count I and a 120-month sentence on Count II to run concurrently, for a total of 264 months, followed by 25 years of supervised release. McGrath appeals his sentence on two grounds. First, he argues that his sentence was procedurally unreasonable because the district court failed to consider his nonfrivolous mitigation argument that based on statistical data on sex offender recidivism rates proffered 2 at sentencing, McGrath would not be a risk to others if he were afforded access to community-based treatment, and was no more likely to reoffend than other offenders. Second, he contends the district court violated his due process rights when it used “religious language” in sentencing him and equated the seriousness of his sex offenses to that of homicide. McGrath does not challenge the validity of his appeal waiver but argues that his grounds for appeal fall outside the waiver’s scope. 1 The Government seeks to enforce the appeal waiver and dismiss McGrath’s appeal. Where the Government seeks to enforce an appeal waiver and the defendant has not alleged a breach of the plea agreement, we will enforce a valid appeal waiver where the issue being appealed is within the scope of the waiver. See United States v. Dillard, 891 F.3d 151 , 156 (4th Cir. 2018) (citations omitted). Upon careful examination of the terms of the waiver, we find that McGrath’s challenges to his sentence fall squarely within the waiver’s scope. By its express terms, the appeal waiver is applicable to any sentence imposed “for any reason,” including “the weighing of the sentencing factors, and any 1 Even if McGrath had challenged the validity of the appeal waiver, the record establishes that the waiver is valid and enforceable. The validity of an appeal waiver depends on whether the defendant knowingly and intelligently agreed to waive his right to appeal. United States v. Attar, 38 F.3d 727 , 731 (4th Cir. 1994). Here, the plea colloquy confirms that McGrath understood the meaning and consequences of the waiver. He acknowledged he had reviewed the plea agreement with his counsel, understood its terms, and had sufficient time to consult with his counsel before signing it. J.A. 23-24. The court drew McGrath’s attention to the plea agreement’s waiver provision and explained its terms, including the stipulated combined offense level of 43, and that the Guidelines recommended a sentence of life imprisonment, before making a specific finding that McGrath understood that “[i]f [the court] sentence[s] him at or below the offense level 43, he has no right to appeal . . . .” J.A. 41, 49, 63. Nothing in the record suggests that McGrath understood otherwise. 3 constitutional challenges to the calculation and imposition of any term of imprisonment . . . .” J.A. 74. Thus, the appeal waiver bars any appeal of McGrath’s sentence based on an alleged failure to consider his nonfrivolous statistical argument or any purported due process violation. 2 Finding that McGrath’s grounds for appeal are barred by his appeal waiver, the only sentence for which McGrath reserved the right to appeal is “any term of imprisonment to the extent that it exceeds any sentence within the advisory guidelines range resulting from an offense level of 43.” J.A. 74. McGrath was sentenced to 264 months, far below the advisory Guidelines range of life in prison. Accordingly, we dismiss McGrath’s appeal. DISMISSED 2 In some limited circumstances claims of constitutional error may be sufficient to escape the bar of an appellate waiver. See United States v. Thornsbury, 670 F.3d 532 , 539– 40 (4th Cir. 2012); Attar, 38 F.3d at 732 n.2. But if this Court were to reach the merits of McGrath’s arguments, we find that neither presents a constitutional claim. Here, McGrath’s nonfrivolous statistical argument regarding his likelihood to reoffend presents no constitutional claim at all. And the district court’s references to “God,” “soul,” and “spirit,” in sentencing McGrath do not support a colorable claim that his sentence was based on a constitutionally impermissible factor. The court’s references did not “create a perception of the bench as pulpit” from which the court punished him for offending its “personal sense of religiosity.” See United States v. Bakker, 925 F.2d 728 , 741 (4th Cir. 1991). What McGrath characterizes as constitutional error is simply his dissatisfaction with the sentence imposed. 4

2020-11-30 20:00:24.491802+00

http://www.ca4.uscourts.gov/Opinions/197171.U.pdf

UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 19-7171 JOSHUA T. GRIFFIN, Plaintiff - Appellant, v. SHANNON MORTIER, In her official and individual capacities; VAN DUNCAN, In his official and individual capacities; GLEN MATAYABAS, In his official and individual capacities; SCOTT ALLEN, In his official and individual capacities; BUNCOMBE COUNTY SHERIFF’S DEPARTMENT; BUNCOMBE COUNTY; JOHN DOE, In his official and individual capacities; OTHER UNKNOWN DEFENDANTS, Defendants - Appellees. Appeal from the United States District Court for the Western District of North Carolina, at Asheville. Martin K. Reidinger, Chief District Judge. (1:18-cv-00098-MR-WCM) Submitted: October 23, 2020 Decided: November 30, 2020 Before WYNN and HARRIS, Circuit Judges, and TRAXLER, Senior Circuit Judge. Affirmed in part, vacated in part, and remanded by unpublished per curiam opinion. Walter E. Daniels, III, DANIELS LAW FIRM, PC, Asheville, North Carolina, for Appellant. Natalia K. Isenberg, Raleigh, North Carolina, William A. Bulfer, TEAGUE CAMPBELL DENNIS & GORHAM, LLP, Asheville, North Carolina; Adam F. Peoples, HALL BOOTH SMITH PC, Asheville, North Carolina; J. Brandon Freeman, BUNCOMBE COUNTY ATTORNEY’S OFFICE, Asheville, North Carolina, for Appellees. Unpublished opinions are not binding precedent in this circuit. 2 PER CURIAM: Joshua T. Griffin appeals from the district court’s orders accepting the recommendations of the magistrate judge, granting the defendants’ motions to dismiss, and dismissing his complaint, in which Griffin alleged claims pursuant to 42 U.S.C. § 1983 and North Carolina law. Griffin’s claims are predicated on his April 2015 incarceration at the Buncombe County Detention Center (“BCDC”) in North Carolina, during which he experienced significant health issues. The complaint named as defendants in their individual and official capacities: Shannon Mortier, a registered nurse and a medical supervisor at BCDC; Glen Matayabas, a supervisor at BCDC; Scott Allen, the Chief Deputy of BCDC; and Buncombe County Sheriff Van Duncan. 1 The district court dismissed Griffin’s complaint pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted. For the reasons that follow, we affirm the district court’s dismissal orders in substantial part. We vacate, however, the dismissal of Griffin’s claims against Nurse Mortier for deliberate indifference to his serious 1 Griffin’s complaint also alleged claims against the Buncombe County Sheriff’s Department and Buncombe County. Griffin waived appellate review of the district court’s dismissal of the claims against those entities, however, by failing to object to the magistrate judge’s recommendation to dismiss those claims. See Martin v. Duffy, 858 F.3d 239 , 245 (4th Cir. 2017). Additionally, the complaint named as defendants an unidentified BCDC guard and other unknown persons. The district court dismissed without prejudice those unidentified defendants because Griffin failed to timely effect service of process on them. See Fed. R. Civ. P. 4(m). Griffin’s opening brief does not contest that ruling. See Grayson O Co. v. Agadir Int’l LLC, 856 F.3d 307 , 316 (4th Cir. 2017) (“A party waives an argument by failing to present it in its opening brief or by failing to develop its argument—even if its brief takes a passing shot at the issue.” (alterations and internal quotation marks omitted)). Our references to “the defendants” include only Nurse Mortier, BCDC Supervisor Matayabas, BCDC Chief Deputy Allen, and Sheriff Van Duncan. 3 medical needs and intentional infliction of emotional distress (“IIED”). We remand for further proceedings on those claims. I. Because the district court dismissed Griffin’s complaint pursuant to Rule 12(b)(6), “we accept and recite the alleged facts in the light most favorable to [Griffin].” Feminist Majority Found. v. Hurley, 911 F.3d 674 , 680 (4th Cir. 2018). The complaint alleges that, on April 13, 2015, Griffin was arrested for driving while impaired and sentenced to 30 days in jail. According to the complaint, Griffin was booked into BCDC on April 14, 2015, with a plan to place him on detoxification watch. On April 16, Griffin suffered a seizure when sitting down for lunch. During the seizure, Griffin fell and hit his head on the floor; blood began flowing from Griffin’s right ear. A guard witnessed Griffin’s seizure and called for medical help. Nurse Mortier responded and observed that Griffin’s nose was bleeding and that he was acting in an unusual and confused manner. Griffin told Mortier that his right ear hurt. Without evaluating, examining, or treating Griffin, Mortier placed him in a holding cell for observation. While in the holding cell, Griffin became increasingly confused. Griffin then suffered two additional seizures, causing him to again hit his head on the floor. After these seizures, Griffin’s respirations were shallow; a deep sternal rub was initiated, and Griffin’s respirations resumed. An unidentified person visited Griffin’s cell and observed that Griffin was still seizing on the floor, was unable to communicate, and was breathing in an abnormal way. 4  The complaint alleges that someone at BCDC called for an ambulance at 12:25 p.m., and Griffin was transported to the hospital where a CT scan of his head was performed, revealing a skull fracture and bruising and bleeding around the brain. Griffin subsequently underwent a craniotomy. Griffin alleges that his head injuries have caused him permanent health problems, including seizures, loss of brain function, memory loss, loss of hearing, extreme migraines, irritability, fatigue, anxiety, depression, and post-traumatic stress disorder. Based on those allegations, the complaint alleged six claims against the defendants—in both their individual and official capacities—pursuant to § 1983 and North Carolina law. Specifically, the complaint alleged claims for (1) deliberate indifference to Griffin’s serious medical needs in violation of the Eighth Amendment; (2) respondeat superior and supervisory liability; 2 (3) failure to train and to implement proper policies under § 1983 and Monell v. Department of Social Services, 436 U.S. 658 (1978); (4) civil conspiracy under § 1983; (5) deliberate indifference to Griffin’s serious medical needs under § 27 of Article I of the North Carolina Constitution; and (6) IIED. The defendants moved to dismiss the complaint pursuant to Rule 12(b)(6). The district court, in separate orders, adopted the magistrate judge’s recommendations that the 2 Griffin’s claim for respondeat superior and supervisory liability was alleged against BCDC Chief Deputy Allen and Sheriff Van Duncan. The complaint also alleged, however, that BCDC Supervisor Matayabas was responsible for Griffin’s injuries predicated on Matayabas’s supervisory role. 5 defendants’ motions to dismiss be granted and dismissed the complaint. Griffin appealed the district court’s orders granting the defendants’ motion to dismiss. II. We review an order granting a Rule 12(b)(6) motion de novo. Feminist Majority Found., 911 F.3d at 685. “In conducting such a review, we are obliged to accept the complaint’s factual allegations as true and draw all reasonable inferences in favor of the plaintiff[].” Id. “However, legal conclusions pleaded as factual allegations, unwarranted inferences, unreasonable conclusions, and naked assertions devoid of further factual enhancement are not entitled to the presumption of truth.” Wikimedia Found. v. Nat’l Sec. Agency, 857 F.3d 193 , 208 (4th Cir. 2017) (internal quotation marks omitted). “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. III. A. Our analysis begins with the district court’s dismissal of Griffin’s deliberate indifference claims under the Eighth Amendment and § 27 of Article I of the North Carolina Constitution. We have explained that “a prison official’s deliberate indifference to an inmate’s serious medical needs constitutes cruel and unusual punishment under the 6 Eighth Amendment.” Gordon v. Schilling, 937 F.3d 348 , 356 (4th Cir. 2019). In order to state a plausible Eighth Amendment deliberate indifference claim, the plaintiff is required to allege both “an objective component and a subjective component.” Id. “That is, the plaintiff must [allege] that the defendant prison official acted with ‘deliberate indifference’ (the subjective component) to the plaintiff’s ‘serious medical needs’ (the objective component).” Id. (quoting Estelle v. Gamble, 429 U.S. 97 , 104 (1976)). We have recognized that “[t]he objective component of a deliberate indifference claim is satisfied by a serious medical condition.” Id. “And a medical condition is serious when it has been diagnosed by a physician as mandating treatment or is so obvious that even a lay person would easily recognize the necessity for a doctor’s attention.” Id. (internal quotation marks omitted). The subjective component is met by demonstrating a defendant’s deliberate indifference. Id. at 357. “The Supreme Court has explained that ‘deliberate indifference entails something more than mere negligence,’ but the standard ‘is satisfied by something less than acts or omissions for the very purpose of causing harm or with knowledge that harm will result.’” Id. (quoting Farmer v. Brennan, 511 U.S. 825 , 835 (1994)). In the context of a claim related to the denial of medical treatment or a delay in providing such treatment, “a defendant acts with deliberate indifference if he had actual knowledge of the plaintiff’s serious medical needs and the related risks, but nevertheless disregarded them.” Id. (alteration and internal quotation marks omitted). Mere disagreements between an inmate and prison medical staff over the inmate’s medical care, however, generally do not establish deliberate indifference. Scinto v. Stansberry, 841 F.3d 219 , 225 (4th Cir. 2016). 7  Like the Eighth Amendment to the United States Constitution, the North Carolina Constitution prohibits “cruel or unusual punishments.” N.C. Const. art. I, § 27. The Supreme Court of North Carolina has interpreted that constitutional provision to require the state to provide adequate medical care to inmates. Medley v. N.C. Dep’t of Corr., 412 S.E.2d 654 , 659 (N.C. 1992). The parties agree on appeal that the analysis of a deliberate indifference claim related to medical care under the North Carolina Constitution is identical to the analysis of such a claim under the Eighth Amendment. Consistent with Griffin’s opening brief, we focus on Griffin’s deliberate indifference claims against Nurse Mortier. 3 Starting with the objective components of those claims, we are satisfied that the complaint sufficiently alleges that Griffin suffered from at least two serious medical conditions: a seizure and a head injury resulting from that seizure. As for the subjective components of Griffin’s claims, we conclude that Griffin has plausibly alleged that Nurse Mortier was deliberately indifferent to those serious medical conditions. The complaint alleges that Mortier knew that Griffin suffered a seizure, fell, and hit his head. The complaint further alleges that Mortier knew that Griffin had ear pain after the fall and that Mortier observed Griffin bleeding from the nose and acting in an 3 Griffin’s opening brief does not specifically address any deliberate indifference claims under the Eighth Amendment or the North Carolina Constitution against BCDC Supervisor Matayabas, BCDC Chief Deputy Allen, or Sheriff Van Duncan. Nor does Griffin’s opening brief particularly address his claims for civil conspiracy and IIED against those defendants. Accordingly, Griffin has waived any challenge to the dismissal of those claims against those defendants. See Grayson O Co., 856 F.3d at 316. 8 unusual and confused manner. According to the complaint, rather than evaluate, examine, or treat Griffin, Mortier simply placed him in a holding cell. While in the holding cell, Griffin became even more confused, but no medical action was taken. Only after Griffin experienced a second seizure and hit his head on the floor of the holding cell did he receive any medical care. We are satisfied that these allegations, at the Rule 12(b)(6) stage, are sufficient to state the subjective components of Griffin’s deliberate indifference claims against Mortier. See Estelle, 429 U.S. at 104–05 (ruling that deliberate indifference can be shown by intentional denial of medical care or delay in providing such care). Insofar as Nurse Mortier argues against Griffin’s deliberate indifference claims by characterizing those claims as presenting mere disagreements over the proper course of treatment for his serious medical conditions, those characterizations are inaccurate because the complaint alleges that Griffin received no treatment at all until he suffered two additional seizures. See Gordon, 937 F.3d at 359 n.14 (rejecting argument that plaintiff’s deliberate indifference claim should fail because he merely disagreed with course of treatment and explaining that plaintiff’s claim was predicated on “receiv[ing] no treatment at all”). And while Mortier correctly observes that, in the Eighth Amendment context, questions of medical judgment are generally “not subject to judicial review,” Russell v. Sheffer, 528 F.2d 318 , 319 (4th Cir. 1975), Griffin’s complaint read in his favor does not indicate that Mortier exercised her medical judgment at all in these circumstances. For those reasons, we conclude that the district court erred by dismissing Griffin’s deliberate indifference claims against Mortier and vacate the dismissal of those claims. 9  B. Next, Griffin argues that that the district court erred by dismissing his supervisory liability claim. A supervisor can be held liable under § 1983 where: “(1) he knew that his subordinate was engaged in conduct that posed a pervasive and unreasonable risk of constitutional injury; (2) his response showed deliberate indifference to or tacit authorization of the alleged offensive practices; and (3) . . . there was an affirmative causal link between his inaction and the constitutional injury.” King v. Rubenstein, 825 F.3d 206 , 224 (4th Cir. 2016) (internal quotation marks omitted). Our review of the complaint leads us to conclude that Griffin failed to state a plausible supervisory liability claim against any of the purported supervisory defendants— that is, BCDC Supervisor Matayabas, BCDC Chief Deputy Allen, and Sheriff Van Duncan. Indeed, the complaint fails to sufficiently allege that the supervisory defendants knew that Nurse Mortier or any subordinate “was engaged in conduct that posed a pervasive and unreasonable risk of constitutional injury.” Id. (internal quotation marks omitted). Accordingly, we affirm the dismissal of Griffin’s supervisory liability claim. C. Griffin also contends that the district court erred by dismissing his Monell claim. The complaint’s allegations in support of that claim, however, consist of naked assertions that the Sheriff of Buncombe County failed to train and implement proper policies. Such allegations “are not entitled to the presumption of truth.” Wikimedia Found., 857 F.3d at 208 (internal quotation marks omitted). We thus affirm the dismissal of Griffin’s Monell claim. 10  D. Griffin next contests the district court’s dismissal of his § 1983 civil conspiracy claim against Nurse Mortier. To state a civil conspiracy claim, a plaintiff must plausibly allege that two persons “acted jointly in concert and that some overt act was done in furtherance of the conspiracy which resulted in the deprivation of a constitutional right.” Penley v. McDowell Cnty. Bd. of Educ., 876 F.3d 646 , 658 (4th Cir. 2017) (alterations and internal quotation marks omitted). We conclude that Griffin’s civil conspiracy claim fails because the complaint does not “plausibly suggest” that Mortier agreed with anyone to “violate [Griffin’s] civil rights.” Barrett v. Pae Gov’t Servs., Inc., 975 F.3d 416 , ___, No. 19-1394, 2020 WL 5523552 , at *14 (4th Cir. Sept. 15, 2020). We therefore affirm the dismissal of Griffin’s civil conspiracy claim. E. Finally, Griffin challenges the district court’s dismissal of his IIED claim. Under North Carolina law, the elements of an IIED claim are “(1) extreme and outrageous conduct by the defendant, (2) which is intended to cause and does cause (3) severe emotional distress to another.” Turner v. Thomas, 794 S.E.2d 439 , 446 (N.C. 2016) (alterations and internal quotation marks omitted). As to the first element, “extreme and outrageous conduct is that which exceeds all bounds of decency tolerated by society[,] and is regarded as atrocious, and utterly intolerable in a civilized community.” Id. (citations and internal quotation marks omitted). The second element requires a showing that the defendant intended to cause severe emotional distress or that the defendant acted with “reckless indifference to the likelihood” that her actions would “cause severe emotional distress.” 11 Dickens v. Puryear, 276 S.E.2d 325 , 335 (N.C. 1981). Regarding the third element, “the term severe emotional distress means any . . . type of severe and disabling emotional or mental condition which may be generally recognized and diagnosed by professionals trained to do so.” Waddle v. Sparks, 414 S.E.2d 22 , 27 (N.C. 1992) (internal quotation marks omitted). As Griffin’s challenge to the dismissal of his IIED claim focuses specifically on Nurse Mortier’s conduct, our assessment of the claim does so as well. Having reviewed the description of Mortier’s conduct alleged in the complaint, we are satisfied that Griffin states a plausible IIED claim against her. As to the first element, the complaint sufficiently alleges that Mortier acted in an “extreme and outrageous” manner when she failed to examine or treat Griffin after learning that he had suffered a seizure and struck his head. Turner, 794 S.E.2d at 446. And, providing further support on the first element, the complaint alleges that Mortier placed Griffin in a holding cell—where he could apparently further injure himself—and that no medical action was taken when Griffin became increasingly disoriented while in the holding cell. Regarding the second element, the complaint adequately alleges that Nurse Mortier exhibited “reckless indifference to the likelihood” that her conduct would cause Griffin severe emotional distress. Dickens, 276 S.E.2d at 335. Indeed, a medical professional’s placement of a person who had a seizure and suffered a head injury in a holding cell without examination or treatment can support a claim that the medical professional acted with reckless indifference to the possibility that the person may suffer further severe physical and emotional injury. 12  As to the third element, the complaint alleges that Griffin suffers from permanent health problems, including seizures, loss of brain function, memory loss, extreme migraines, anxiety, depression, and posttraumatic stress disorder. We conclude that those injuries sufficiently allege a “severe and disabling emotional or mental condition” that rises to the level of “severe emotional distress.” Waddle, 414 S.E.2d at 27 (internal quotation marks omitted). Because the complaint states a plausible IIED claim against Nurse Mortier, we vacate the district court’s dismissal of that claim. IV. Pursuant to the foregoing, we grant the motion for leave to proceed in forma pauperis, vacate the district court’s dismissal of Griffin’s claims against Nurse Mortier for deliberate indifference and IIED, and remand for further proceedings on those claims. We affirm the district court’s dismissal of all other claims. 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 IN PART, VACATED IN PART, AND REMANDED 13

2020-11-30 20:00:33.965372+00

http://media.ca11.uscourts.gov/opinions/pub/files/201910678.pdf

USCA11 Case: 19-10678 Date Filed: 11/30/2020 Page: 1 of 13 [PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ________________________ No. 19-10678 ________________________ D.C. Docket No. 0:18-CR-60072-BB-1 UNITED STATES OF AMERICA, Plaintiff-Appellee, versus PETER ROBERT BOBAL, Defendant-Appellant. ________________________ Appeal from the United States District Court for the Southern District of Florida _______________________ (November 30, 2020) Before WILLIAM PRYOR, Chief Judge, HULL and MARCUS, Circuit Judges. WILLIAM PRYOR, Chief Judge: This appeal requires us to decide whether a district court plainly erred by denying a criminal defendant’s motion for a new trial and by imposing a restriction  USCA11 Case: 19-10678 Date Filed: 11/30/2020 Page: 2 of 13 on using a computer as a special condition of a lifetime term of supervised release. After a bifurcated trial, a jury convicted Peter Bobal of attempting to persuade a minor to engage in sexual activity and committing a felony involving a minor while required to register as a sex offender. Bobal’s sentence included a lifetime term of supervised release, during which he could not use a computer except for work and with the permission of the district court. Bobal argues that the prosecutor misled the jury in her closing argument and that his computer restriction is unconstitutional in the light of Packingham v. North Carolina, 137 S. Ct. 1730 (2017). We conclude that the prosecutor’s closing argument was not improper. We also conclude that Packingham is distinguishable because Bobal’s computer restriction does not extend beyond his term of supervised release, it is tailored to his offense, and he can obtain the district court’s approval to use a computer for permissible reasons. We affirm. I. BACKGROUND In October 2017, a 62-year-old woman living with her 18-year-old daughter in Hallandale Beach, Florida, found a note on her door. The note said something like “I think you’re beautiful,” although it was unclear whether the note was addressed to the woman or her daughter. It included a phone number but no name. The woman suspected that her neighbor, Peter Bobal, had left it. She asked her friend, a 60-year-old man, to call the number. He did, and he reached Bobal’s 2  USCA11 Case: 19-10678 Date Filed: 11/30/2020 Page: 3 of 13 voicemail. The friend hung up without leaving a message, but a short time later he began receiving text messages from Bobal. Bobal wrote that he was a single male, and he asked the caller to text him back. The friend did not respond. After continuing to ignore Bobal for a couple months, the friend decided to reply and to pose as a 14-year-old girl to see how Bobal would react. Bobal responded by asking if the girl’s mother was single, and he said that he could talk with either the girl or her mother about anything. He continued texting the fictitious girl, and he eventually asked her to send him a picture. The man posing as the girl offered the excuse that he was at school, but he asked Bobal for a picture. Bobal responded by asking if he should send one of his face or of him naked. The man never answered, so Bobal sent a picture of his face. But after the man commented that Bobal had sent a picture of his face “instead of the other,” Bobal sent the fictitious girl a picture of his penis. The man posing as the girl then contacted the Federal Bureau of Investigation and turned over copies of his text messages with Bobal. A special agent of the Bureau assumed the identity of the fictitious 14-year- old girl. He exchanged numerous text messages with Bobal, many of which were sexual in nature. Eventually, Bobal and the special agent arranged to meet. When Bobal arrived at the agreed-upon meeting place, the special agent arrested him. 3  USCA11 Case: 19-10678 Date Filed: 11/30/2020 Page: 4 of 13 A federal grand jury indicted Bobal on two counts: using a facility and means of interstate commerce to knowingly attempt to persuade, induce, entice, and coerce a minor to engage in sexual activity, 18 U.S.C. § 2422 (b), and committing a felony offense involving a minor after being required to register as a sex offender, id. § 2260A. Bobal had previously been convicted in Florida for using a computer to solicit a child to engage in sexual activity. At trial, Bobal stipulated to the second element of the second count: at the time of the alleged criminal misconduct, he was a registered sex offender. The district court held a two-day, bifurcated jury trial. It did not inform the jury about the charge under section 2260A until after the jury convicted Bobal of the charge under section 2422(b). In the trial for the latter charge, neither the government nor Bobal called any witnesses or offered any evidence other than Bobal’s stipulation. The prosecutor gave a short closing argument in which she explained the two elements of section 2260A: first, the defendant committed a felony offense involving a minor, and second, the defendant was required to register as a sex offender at the time of the offense. She explained that Bobal’s stipulation about being a registered sex offender satisfied the second element: “So the Defense is telling you: ‘We stipulate that the Government proves Count 2. I was a registered sex offender. I was required to register as a sex offender.’” And the prosecutor then 4  USCA11 Case: 19-10678 Date Filed: 11/30/2020 Page: 5 of 13 asserted that the guilty verdict for section 2422(b) satisfied the first element of section 2260A. She concluded, “So the only verdict as to Count 2 is a verdict of guilty.” Bobal did not object to the prosecutor’s statements, and he waived his own closing argument. The jury then convicted him of violating section 2260A. Later that day, after the trial ended, Bobal moved the district court for a new trial on the second count. He argued that the prosecutor had misstated the law when she said that “the only verdict as to Count 2 is a verdict of guilty” because the jury was free to reevaluate the evidence as to the first count. The district court denied the motion. The district court sentenced Bobal to 240 months of imprisonment followed by a lifetime term of supervised release. As a special condition of supervised release, it ordered that Bobal “shall not possess or use a computer that contains an internal, external or wireless modem without the prior approval of the Court.” And it further ordered that Bobal “shall not possess or use any computer; except that [he] may, with the prior approval of the Court, use a computer in connection with authorized employment.” Bobal did not object to these special conditions. II. STANDARD OF REVIEW We review unpreserved issues for plain error. United States v. Moran, 573 F.3d 1132 , 1137 (11th Cir. 2009); United States v. Pendergraft, 297 F.3d 1198 , 5  USCA11 Case: 19-10678 Date Filed: 11/30/2020 Page: 6 of 13 1211 (11th Cir. 2002). We may reverse only if the error is plain, it affects substantial rights, and it “seriously affects the fairness, integrity, or public reputation of the judicial proceeding.” Pendergraft, 297 F.3d at 1211 . An error cannot be “plain” if “neither the Supreme Court nor this Court has ever resolved [the] issue, and other circuits are split on it.” United States v. Aguillard, 217 F.3d 1319 , 1321 (11th Cir. 2000). III. DISCUSSION Bobal argues that the district court erred by denying his motion for a new trial and asks that we reverse his conviction for violating section 2260A. He also contends that the computer restriction is unconstitutional in the light of Packingham. Because Bobal did not contemporaneously object either to the prosecutor’s closing argument or to his sentence, we review his arguments for plain error, and we reject them both. A. The District Court Correctly Denied Bobal’s Motion for a New Trial. Bobal argues that the district court should have granted his motion for a new trial for the charge under section 2260A because the prosecutor made two misstatements during her closing argument. First, the prosecutor said that Bobal stipulated to the second count instead of just one element of that count. Second, she told the jury that “the only verdict as to Count 2 is a verdict of guilty” when the 6  USCA11 Case: 19-10678 Date Filed: 11/30/2020 Page: 7 of 13 jury was actually free to reevaluate the evidence for the first count and to reach an inconsistent verdict. The prosecutor’s closing argument will constitute misconduct only if it was improper and prejudiced the substantial rights of the defendant. United States v. Taohim, 817 F.3d 1215 , 1224 (11th Cir. 2013). We assess the prejudicial effect of arguments by “evaluat[ing] them in the context of the trial as a whole and assess[ing] their probable impact on the jury. To warrant a new trial, there must be a reasonable probability that but for the remarks, the outcome would be different.” Id. (internal quotation marks and citation omitted). We conclude that the district court did not err in denying Bobal’s motion for a new trial because the prosecutor’s statements were not improper and did not prejudicially affect Bobal’s substantial rights. In explaining Bobal’s stipulation to the jury, the prosecutor, paraphrasing Bobal, said, “We stipulate that the Government proves Count 2,” and on appeal, the government concedes that this statement was an “isolated slip of the tongue.” But, during the trial, the prosecutor immediately followed that “slip” with, “I was a registered sex offender. I was required to register as a sex offender.” From the full context of the quote, a reasonable juror would have understood the prosecutor to contend that Bobal had stipulated to only one element of section 2260A—that he 7  USCA11 Case: 19-10678 Date Filed: 11/30/2020 Page: 8 of 13 was required to register as a sex offender at the time of the offense—not the entire count. The prosecutor’s statement that “the only verdict as to Count 2 is a verdict of guilty” was clearly an argument meant to persuade the jury, not an instruction as to how it must vote. We allow lawyers to make “colorful and perhaps flamboyant remarks if they relate to the evidence adduced at trial,” United States v. Bailey, 123 F.3d 1381 , 1400 (11th Cir. 1997) (internal quotation marks omitted), and the prosecutor’s remarks conveyed nothing more than elementary logic. Bobal’s stipulation that he was a registered sex offender satisfied one of the two elements of section 2260A. His conviction for violating section 2422(b)—delivered earlier that day by the exact same jury—satisfied the other. Because Bobal satisfied both elements, he was necessarily guilty of violating section 2260A. To be sure, the jury could have rendered an inconsistent verdict. But “[w]hile we recognize that a jury may render a verdict at odds with the evidence or the law, neither the court nor counsel should encourage jurors to violate their oath.” United States v. Trujillo, 714 F.2d 102 , 106 (11th Cir. 1983). Neither of the prosecutor’s statements was improper. But even if they were improper, “statements and arguments of counsel are not evidence, [and] improper statements can be rectified by the district court’s instruction to the jury that only the evidence in the case be considered.” United States v. Smith, 918 F.2d 1551 , 8  USCA11 Case: 19-10678 Date Filed: 11/30/2020 Page: 9 of 13 1562 (11th Cir. 1990). Here, the district court twice instructed the jury that the lawyers’ statements were not evidence. So even if there were something wrong with the prosecutor’s closing argument, the district court cured the problem, and the prosecutor’s statements do not warrant a new trial. We affirm Bobal’s conviction for violating section 2260A. B. A Restriction on Computer Usage as a Special Condition of a Lifetime Term of Supervised Release Is Not Plainly Unconstitutional. Bobal next challenges the special condition of his supervised release that prohibits him from using a computer except for work and with the prior permission of the district court. He contends that this restriction is unconstitutional. But our precedents foreclose his argument. A district court does not commit plain error by imposing a computer restriction as a special condition of supervised release, even if the term of supervised release is life. We held in United States v. Zinn that a limited restriction on a sex offender’s ability to use the internet while on a three-year period of supervised release was “a necessary and reasonable condition of supervised release” that did not burden the offender’s rights under the First Amendment. 321 F.3d 1084 , 1086, 1093 (11th Cir. 2003). Such restrictions are reasonably related to legitimate sentencing considerations, namely “the need to protect both the public and sex offenders themselves from . . . potential abuses” of the internet. Id. at 1093 . And computer restrictions are not overly broad when a sex offender on 9  USCA11 Case: 19-10678 Date Filed: 11/30/2020 Page: 10 of 13 supervised release can “still use the Internet for valid purposes by obtaining his probation officer’s prior permission.” Id. Later, in United States v. Carpenter, we held that a district court did not plainly err by imposing a computer restriction as a special condition of supervised release for a period of life. 803 F.3d 1224 , 1239–40 (11th Cir. 2015). Bobal contends that Carpenter does not help us to resolve this appeal, but we disagree. To be sure, the issue we addressed in Carpenter was whether a computer restriction as a special condition of a lifetime period of supervised release was unreasonable, not whether it violated the First Amendment. Id. at 1228 . We also reached our conclusion in Carpenter in part because, even if there was any error in the length of the restriction, Carpenter invited it by asking the district court to sentence him to a lifetime period of supervised release. Id. at 1239 . But we also stated that because “no case of the Supreme Court or this Court says that a condition like this one cannot be imposed . . . there can be no plain error.” Id. Bobal argues that the Supreme Court abrogated our precedents in Packingham v. North Carolina, when it held that a North Carolina law prohibiting registered sex offenders from accessing social networking websites that permitted children to be present violated the First Amendment, 137 S. Ct. at 1733, 1738 , but Packingham is distinguishable for at least three reasons. First, the state law in Packingham restricted sex offenders even after they had completed their sentences. 10  USCA11 Case: 19-10678 Date Filed: 11/30/2020 Page: 11 of 13 Id. at 1737 . Bobal’s computer restriction, by contrast, is a special condition of his supervised release and does not extend beyond his sentence. Second, the state law in Packingham applied to all registered sex offenders, not only those who had used a computer or some other means of electronic communication to commit their offenses. 137 S. Ct. at 1733 . The Supreme Court explained that it was not holding that the First Amendment bars the enactment of “more specific laws than the one at issue.” Id. at 1737 . Indeed, the Court “assumed that the First Amendment permits a State to enact specific, narrowly tailored laws that prohibit a sex offender from engaging in conduct that often presages a sexual crime, like contacting a minor or using a website to gather information about a minor.” Id. Bobal used an electronic device to attempt to persuade a minor with whom he had never communicated in person to have sex with him. His computer restriction prevents him from engaging in activity that could result in his repeating that offense. Third, unlike the state law in Packingham, Bobal’s computer restriction is not a “complete bar to the exercise of [his] First Amendment rights.” Id. at 1738 . Instead, it allows Bobal to obtain court permission to use a computer in connection with employment. And Bobal can also ask the district court to modify the terms of his supervised release for other reasons. See 18 U.S.C. § 3583 (e)(2); Fed. R. Crim. P. 32.1(c). The computer restriction does not leave Bobal without recourse to protect his First Amendment rights. 11  USCA11 Case: 19-10678 Date Filed: 11/30/2020 Page: 12 of 13 Bobal urges us to adopt a more sweeping interpretation of Packingham. He cites a parenthetical sentence from the opinion, where the Supreme Court said, “Of importance, the troubling fact that the law imposes severe restrictions on persons who already have served their sentence and are no longer subject to the supervision of the criminal justice system is also not an issue before the Court.” Packingham, 137 S. Ct. at 1737 . Bobal understands this language to mean that the holding of Packingham applies to all computer restrictions, regardless of whether the defendant is on supervised release or has completed his sentence. We disagree. The sentence in question clarified that the Supreme Court decided only whether the North Carolina law violated the First Amendment, not whether the law was unconstitutional for other reasons not raised in the appeal. Nothing in Packingham undermines the settled principle that a district court may “impose reasonable conditions that deprive the offender of some freedoms enjoyed by law-abiding citizens” during supervised release. United States v. Knights, 534 U.S. 112 , 119 (2001). Several of our sister circuits have likewise decided that, even after Packingham, a district court does not commit plain error by imposing a restriction on computer usage as a special condition of supervised release. See United States v. Perrin, 926 F.3d 1044 , 1049–50 (8th Cir. 2019); United States v. Halverson, 897 F.3d 645 , 658 (5th Cir. 2018); United States v. Rock, 863 F.3d 827 , 831 (D.C. Cir. 2017). 12  USCA11 Case: 19-10678 Date Filed: 11/30/2020 Page: 13 of 13 Bobal urges us to follow the Third Circuit, which reached the opposite conclusion in United States v. Holena under an abuse-of-discretion standard. 906 F.3d 288 , 290, 295 (3d Cir. 2018). The Third Circuit stated that, “[u]nder Packingham, blanket internet restrictions will rarely be tailored enough to pass constitutional muster.” Id. at 295 . And it concluded that “even under Packingham’s narrower concurrence,” a blanket computer restriction fails because it “precludes access to a large number of websites that are most unlikely to facilitate the commission of a sex crime against a child.” Id. (internal quotation marks omitted). Holena read the opinions in Packingham too broadly. Both the majority opinion and the concurring opinion in Packingham agreed that the North Carolina law infringed the First Amendment rights of registered sex offenders, who would be committing an entirely new felony if they accessed certain websites. But neither opinion addressed whether the First Amendment is violated by a special condition of supervised release for a sex offender who is serving a sentence for an offense involving electronic communications sent to a minor. IV. CONCLUSION We AFFIRM Bobal’s conviction and sentence. 13

2020-11-30 20:00:34.886367+00

http://media.ca11.uscourts.gov/opinions/pub/files/201912068.pdf

USCA11 Case: 19-12068 Date Filed: 11/30/2020 Page: 1 of 11 [PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ________________________ No. 19-12068 ________________________ Agency No. A088-920-176 JUAN CARLOS ALFARO-GARCIA, Petitioner, versus UNITED STATES ATTORNEY GENERAL, Respondent. ________________________ Petition for Review of a Decision of the Board of Immigration Appeals ________________________ (November 30, 2020) Before JORDAN, LAGOA, and BRASHER, Circuit Judges. LAGOA, Circuit Judge: This appeal requires this Court to reconcile two immigration statutes—8 U.S.C. § 1229a(c)(7) and 8 U.S.C. § 1231 (a)(5). Juan Carlos Alfaro-Garcia petitions  USCA11 Case: 19-12068 Date Filed: 11/30/2020 Page: 2 of 11 this Court for review of the Board of Immigration Appeals’ (“BIA”) final order affirming the immigration judge’s denial of his motion to reopen his removal proceedings. Alfaro-Garcia argues that the BIA’s decision conflicts with his statutory right under § 1229a(c)(7) to “file one motion to reopen proceedings.” Section 1231(a)(5), however, provides that if an alien illegally reenters the United States after having been removed, “the prior order of removal is reinstated from its original date and is not subject to being reopened or reviewed” and the alien “is not eligible and may not apply for any relief under this chapter.” Because § 1231(a)(5) unambiguously bars the reopening of a reinstated removal order where the alien has illegally reentered the United States following his removal, we deny the petition. I. FACTUAL AND PROCEDURAL BACKGROUND Alfaro-Garcia, a native and citizen of Mexico, entered the United States without inspection at an unknown place on an unknown date.1 On November 20, 2007, the State of Florida charged Alfaro-Garcia with the following three offenses: (1) committing a battery on a law enforcement officer (a felony offense); (2) driving with a suspended license; and (3) resisting an officer without violence. Alfaro- Garcia was adjudicated guilty of these offenses and sentenced to a term of imprisonment of 180 days. 1 In his motion to reopen, Alfaro-Garcia claims that he initially entered the United States in July 1996. 2  USCA11 Case: 19-12068 Date Filed: 11/30/2020 Page: 3 of 11 On March 4, 2008, the Department of Homeland Security (“DHS”) personally served Alfaro-Garcia with a Notice to Appear, charging him as removable under section 212(a)(6)(A)(i) of the Immigration and Nationality Act, as “an alien present in the United States without being admitted or paroled” and ordered him to appear before an immigration judge. On August 5, 2008, Alfaro-Garcia entered a “Stipulated Request for Order of Removal and Waiver of Hearing” (the “Stipulated Request”). In the Stipulated Request, Alfaro-Garcia agreed that: (1) he “voluntarily and knowingly” entered into the stipulation; (2) he received the Notice to Appear; (3) he was advised of his right to be represented by counsel; (4) he was not a United States citizen; (5) he understood he had a right to a hearing before an immigration judge, waived that right, and requested that his removal proceeding be conducted based on the written record without a hearing; (6) he requested removal; (7) he admitted all the factual allegations in the Notice to Appear; (8) he would not apply for any relief from removal; (9) he waived his right to appeal the written decision; and (10) he read the entire document, understood its consequences, and entered into it “voluntarily, knowingly, and intelligently.” Alfaro-Garcia also signed a copy of the document translated into Spanish. On August 8, 2008, the immigration judge ordered Alfaro-Garcia removed from the United States to Mexico based on the Stipulated Request. On August 12, 2008, DHS removed Alfaro-Garcia from the United States to Mexico. According to 3  USCA11 Case: 19-12068 Date Filed: 11/30/2020 Page: 4 of 11 Alfaro-Garcia, he illegally reentered the United States in November 2008 and has continuously resided in the country since his illegal reentry. When Alfaro-Garcia’s wife filed an I-130 Petition for Alien Relative, DHS learned that Alfaro-Garcia was living in the United States. On April 23, 2018, DHS issued a “Notice of Intent/Decision to Reinstate Prior Order,” which alleged that Alfaro-Garcia illegally reentered the United States on an unknown date. On that same day, DHS reinstated the prior 2008 order of removal. On August 9, 2018, Alfaro-Garcia filed a motion to reopen his removal proceedings. In his motion, Alfaro-Garcia argued that reopening the removal proceeding was warranted based on two grounds: (1) conditions in Mexico had changed since his order of removal to warrant reopening of the proceedings; and (2) he was eligible for cancellation of removal, and therefore the immigration judge should sua sponte reopen the proceedings. Attached to his motion was the 2017 Human Rights Report for Mexico, an application for cancellation of removal and adjustment of status for certain nonpermanent residents, and his arrest records. On August 24, 2018, the immigration judge granted the motion to reopen on the basis that DHS had not filed a response to the motion. On August 31, 2018, DHS filed a motion to reconsider the immigration judge’s order, arguing that it was not properly served with Alfaro-Garcia’s motion to reopen, that Alfaro-Garcia’s motion was not timely filed, that the immigration 4  USCA11 Case: 19-12068 Date Filed: 11/30/2020 Page: 5 of 11 judge should not exercise its sua sponte powers to reopen the case, and that Alfaro- Garcia failed to establish he was eligible for relief. On September 12, 2018, the immigration judge granted DHS’s motion to reconsider, explaining that the immigration judge was unaware that Alfaro-Garcia had reentered the United States illegally after being removed to Mexico pursuant to the stipulated order of removal and that DHS had executed a Notice of Intent/Decision to Reinstate Prior Order of Removal against Alfaro-Garcia. As the immigration judge determined that he lacked jurisdiction to reopen the proceedings, the August 24, 2018, order was rescinded. Alfaro-Garcia appealed the immigration judge’s decision to the BIA. On May 1, 2019, the BIA dismissed the appeal, concluding that “once the Immigration Judge was made aware that the DHS was reinstating the respondent’s August 8, 2008, stipulated order of removal, the Immigration Judge was statutorily precluded from exercising jurisdiction over the respondent’s motion to reopen” pursuant to 8 U.S.C. § 1231 (a)(5). The BIA also addressed Alfaro-Garcia’s claim that he feared returning to Mexico, finding that because Alfaro-Garcia had never undergone a reasonable fear interview with a DHS officer, his remedy was to request one from DHS. Additionally, the BIA found that Alfaro-Garcia did not establish a “gross miscarriage of justice,” as he failed to demonstrate that he was not removable when he waived his right to a hearing before an immigration judge and failed to timely appeal his removal order. This timely petition for review ensued. 5  USCA11 Case: 19-12068 Date Filed: 11/30/2020 Page: 6 of 11 II. STANDARD OF REVIEW “We review the [BIA’s] denial of a motion to reopen removal proceedings for abuse of discretion.” Zhang v. U.S. Att’y Gen., 572 F.3d 1316 , 1319 (11th Cir. 2009) (alteration in original) (quoting Li v. U.S. Att’y Gen., 488 F.3d 1371 , 1374 (11th Cir. 2007)). “The BIA abuses its discretion when it misapplies the law in reaching its decision . . . [or] by not following its own precedents without providing a reasoned explanation for doing so.” Ferreira v. U.S. Att’y Gen., 714 F.3d 1240 , 1243 (11th Cir. 2013). However, “[t]o the extent that the decision of the [BIA] was based on a legal determination, our review is de novo.” Li, 488 F.3d at1374. “The moving party bears a heavy burden, as motions to reopen are disfavored, especially in removal proceedings.” Zhang, 572 F.3d at 1319 (citation omitted). Additionally, our review is limited to the BIA’s decision, except to the extent that it expressly adopts the immigration judge’s opinion. See id. III. ANALYSIS In his petition, Alfaro-Garcia contends that the BIA’s decision to not reopen his removal proceedings conflicts with his statutory right, under 8 U.S.C. § 1229a(c)(7), to file at least one motion to reopen and that 8 U.S.C. § 1231 (a)(5) does not preempt that right.2 2 Alfaro-Garcia does not challenge DHS’s reinstatement of his prior order of removal. 6  USCA11 Case: 19-12068 Date Filed: 11/30/2020 Page: 7 of 11 Our analysis begins with the plain language of the two statutes. See United States v. Zuniga–Arteaga, 681 F.3d 1220 , 1223 (11th Cir. 2012). The fundamental principle governing any exercise in statutory interpretation is that “we ‘begin[] where all such inquiries must begin: with the language of the statute itself,’ and we give effect to the plain terms of the statute.” In re Valone, 784 F.3d 1398 , 1402 (11th Cir. 2015) (alteration in original) (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235 , 241 (1989)). Under § 1229a(c)(7), an alien generally “may file one motion to reopen proceedings” within ninety days of the date of entry of a final order of removal. However, § 1231(a)(5) provides that [i]f the Attorney General finds that an alien has reentered the United States illegally after having been removed or having departed voluntarily, under an order of removal, the prior order of removal is reinstated from its original date and is not subject to being reopened or reviewed, the alien is not eligible and may not apply for any relief under this chapter, and the alien shall be removed under the prior order at any time after the reentry. (emphasis added). The plain language of § 1231(a)(5) unambiguously bars the reopening or review of a reinstated removal order where an alien—like Alfaro- Garcia—has illegally reentered the United States following his removal. Alfaro-Garcia, nonetheless, argues that under § 1229a(c)(7) and this Court’s decision in Jian Le Lin v. United States Attorney General, 681 F.3d 1236 (11th Cir. 2012), he is guaranteed the right to file at least one motion to reopen. In Jian Le Lin, this Court determined that Congress, in enacting the Illegal Immigration Reform and 7  USCA11 Case: 19-12068 Date Filed: 11/30/2020 Page: 8 of 11 Immigrant Responsibility Act of 1996, “guarantee[d] an alien the right to file one motion to reopen,” and that the “departure bar” regulation, which required an alien to be physically present in the United States to file a motion to reopen, “impermissibly undercut[] that right.” Id. at 1240–41. But although an alien is afforded the right to file one motion to reopen his removal proceedings under § 1229a(c)(7), Congress unambiguously provided in § 1231(a)(5) that this right is forfeited when the alien illegally reenters the United States and his previous order of removal is reinstated. Indeed, three other circuit courts have reached this conclusion when addressing the interplay between §§ 1229a(c)(7) and 1231(a)(5) in this context. For example, in Cuenca v. Barr, 956 F.3d 1079 , 1084 (9th Cir. 2020), the Ninth Circuit determined that § 1231(a)(5) unambiguously barred the reopening of a reinstated prior removal order. The Ninth Circuit noted that this plain reading of § 1231(a)(5) “comport[ed] with the statute’s ‘clear Congressional purpose.’” Id. (quoting Rodriguez-Saragosa v. Sessions, 904 F.3d 349 , 354 (5th Cir. 2018)). The Ninth Circuit explained that, while “[r]einstatement once applied only to ‘a limited class of illegal reentrants,’ and ‘the rest got the benefit of the ordinary deportation rules,’” Congress had since enacted the Illegal Immigration Reform and Immigrant Responsibility Act, “which replaced the old reinstatement provision ‘with one that toed a harder line.’” Id. (quoting Fernandez-Vargas v. Gonzales, 548 U.S. 30 , 33– 8  USCA11 Case: 19-12068 Date Filed: 11/30/2020 Page: 9 of 11 34 (2006)). Thus, § 1231(a)(5) “establishes a process to expeditiously remove an alien who already is subject to a removal order, thereby denying the alien ‘any benefits from his latest violation of U.S. law.’” Id. at 1085 (quoting Morales- Izquierdo v. Gonzales, 486 F.3d 484 , 498 (9th Cir. 2007) (en banc)). The Ninth Circuit rejected the petitioner’s argument that its reading of § 1231(a)(5) created “a conflict with § 1229a(c)(7) by eviscerating an alien’s right to file a motion to reopen,” explaining that while § 1229a(c)(7) provides an alien the right to file one motion to reopen his or her proceedings, § 1231(a)(5) “provides that an alien forfeits that right by reentering the country illegally.” Id. at 1085 (emphasis in original) (quoting Rodriguez-Saragosa, 904 F.3d at 354). The Fifth and Seventh Circuits have similarly determined that § 1231(a)(5) institutes a permanent jurisdictional bar for reopening a reinstated prior removal order. See Rodriguez-Saragosa, 904 F.3d at 355 (“Rodriguez-Saragosa’s situation is precisely that which § 1231(a)(5) is designed to cover: where a removed alien reenters the United States illegally with full knowledge that he had been ordered removed. In such circumstances, ‘the prior order of removal . . . is not subject to being reopened.’” (alteration in original) (quoting § 1231(a)(5))); Cordova-Soto v. Holder, 732 F.3d 789 , 793 (7th Cir. 2013) (holding that “§ 1231(a)(5) bars reopening of a removal order that has been reinstated after the alien’s illegal return to the United States”). 9  USCA11 Case: 19-12068 Date Filed: 11/30/2020 Page: 10 of 11 We join the Fifth, Seventh, and Ninth Circuits in concluding that the plain language of § 1231(a)(5) bars the reopening of a reinstated removal order following an alien’s unlawful reentry into the United States. Here, Alfaro-Garcia stipulated to being removed from the United States to Mexico. The immigration judge issued an order of removal based on this stipulation, and DHS physically removed Alfaro- Garcia to Mexico. Rather than remaining in Mexico to file a motion to reopen his removal proceedings, Alfaro-Garcia illegally reentered the United States several months after his initial removal. The facts of this case place Alfaro-Garcia “squarely within the terms of § 1231(a)(5).” Cordova-Soto, 732 F.3d at 794–95. Section 1231(a)(5) bars the reopening of Alfaro-Garcia’s reinstated order of removal because Alfaro-Garcia forfeited his statutory right to file a motion to reopen his removal proceedings when he illegally reentered the United States. Indeed, “[f]orfeiture of the right to reopen under § 1229a(c)(7) is part of the less favorable regime to which [Alfaro-Garcia] is now subject by unlawfully reentering and remaining in the United States despite his prior removal order.” Cuenca, 956 F.3d at 1087–88. Therefore, the BIA did not abuse its discretion in denying Alfaro- Garcia’s motion to reopen his removal proceedings. IV. CONCLUSION Section 1231(a)(5) unambiguously bars the reopening of a reinstated removal order where the alien has illegally reentered the United States following his or her 10  USCA11 Case: 19-12068 Date Filed: 11/30/2020 Page: 11 of 11 initial removal. Because Alfaro-Garcia illegally reentered the United States from Mexico following his removal, the BIA correctly determined that it could not reopen the removal proceedings. Accordingly, we deny Alfaro-Garcia’s petition for review. PETITION DENIED. 11

2020-11-30 20:00:41.501796+00

http://media.ca11.uscourts.gov/opinions/unpub/files/201812845.pdf

USCA11 Case: 18-12845 Date Filed: 11/30/2020 Page: 1 of 3 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ________________________ Nos. 18-12845, 19-10960 Non-Argument Calendar ________________________ D.C. Docket Nos. 6:18-cv-00316-JA-KRS; 6:08-cr-00176-JA-KRS-1 FRANK L. AMODEO, Petitioner-Appellant, versus UNITED STATES OF AMERICA, Respondent-Appellee. ________________________ Appeals from the United States District Court for the Middle District of Florida ________________________ (November 30, 2020) Before WILLIAM PRYOR, Chief Judge, NEWSOM and ANDERSON, Circuit Judges. PER CURIAM:  USCA11 Case: 18-12845 Date Filed: 11/30/2020 Page: 2 of 3 Frank Amodeo, a federal prisoner, appeals the denial of his motions to appoint counsel and for relief from the judgment. Amodeo sought the assistance of counsel to litigate a petition for writ of error coram nobis in which he challenged an order of forfeiture entered more than eight years earlier in a criminal proceeding. The district court dismissed Amodeo’s petition as barred by laches and then denied his related motion to appoint counsel as moot. Later, the district court ruled that Amodeo failed to present an adequate reason to justify relief from the judgment. See Fed. R. Civ. P. 60(b). Amodeo has abandoned any challenge that he could have made to the dismissal of his petition by raising in his initial brief only arguments about the denial of appointed counsel. See Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d 678 , 680 (11th Cir. 2014). We affirm. We review the denial of appointed counsel and relief from a judgment for abuse of discretion. See United States v. Webb, 565 F.3d 789 , 793 (11th Cir. 2009) (counsel); Lugo v. Sec’y, Fla. Dep’t of Corr., 750 F.3d 1198 , 1207 (11th Cir. 2014) (relief from judgment). Under that standard, “we affirm unless we determine that the district court applied an incorrect legal standard, failed to follow proper procedures in making the relevant determination, or made findings of fact that are clearly erroneous.” Lugo, 750 F.3d at 1207. We can affirm for any reason supported by the record. United States v. Al-Arian, 514 F.3d 1184 , 1189 (11th Cir. 2008). 2  USCA11 Case: 18-12845 Date Filed: 11/30/2020 Page: 3 of 3 The district court did not abuse its discretion by denying Amodeo’s motions for appointed counsel and for relief from that judgment. Amodeo had “no constitutional right to coram nobis counsel,” Toles v. Jones, 888 F.2d 95 , 99 (11th Cir. 1989), nor did “the interests of justice or due process” require the district court to appoint him counsel, Schultz v. Wainwright, 701 F.2d 900 , 901 (11th Cir. 1983); 18 U.S.C. § 3006A(a)(1). The Rules of Civil Procedure provide only for the appointment of a legal guardian, which Amodeo has already. See Fed. R. Civ. P. 17(c). Amodeo also was not entitled to the appointment of counsel by statute because he did not “seek[] relief under section 2241, 2254, or 2255 of title 28.” 18 U.S.C. § 3006A(a)(2). It would have been futile to appoint counsel to pursue a petition that Amodeo does not dispute is barred by laches. And Amodeo identified no extraordinary circumstance that merited relief from an order denying him appointed counsel more than eight months earlier. See Lugo, 750 F.3d at 1210; see also Fed. R. Civ. P. 60(c)(1) (requiring a Rule 60 motion be “made within a reasonable time”). We AFFIRM the denial of Amodeo’s motions for counsel and for postjudgment relief. 3

2020-11-30 20:01:02.864214+00

https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2019cv3304-38

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) HENOK A. MENGESHA ) ) Plaintiff, ) ) v. ) Civil Action No. 19-3304 (ABJ) ) BENIDIA RICE ) In her official and ) individual capacity, et al., ) ) Defendants. ) ____________________________________) MEMORANDUM OPINION Plaintiff Henok Araya Mengesha, proceeding pro se, filed this complaint on November 1, 2019, against the District of Columbia (“the District”) and Benidia Rice, Magda Benfield, Jame Kevin McIntyre, Nicole Reece, and Yajaira Briganty, in their official and individual capacities as employees of Child Support Services Division (“CSSD”) of the D.C. Office of the Attorney General. Compl. [Dkt. # 1]. The complaint relates to the enforcement of a child support order issued by the Superior Court of the District of Columbia in 2009. Id. Plaintiff seeks compensatory and punitive damages and injunctive relief pursuant to 42 U.S.C. § 1983 , and he has brought common law claims alleging negligence and malicious prosecution. Id. On December 6, 2019, plaintiff amended his complaint to add a ninth claim seeking additional compensatory damages for early withdrawals made from his retirement account. Pl.’s First Amended Compl. [Dkt. # 12] (“First Am. Compl.”) at 20–21. On May 15, 2020, plaintiff filed a motion for a preliminary injunction against the District, [Dkt. # 24] (“Pl.’s Mot. for Prelim. Inj.”), and on May 22, 2020, the Court consolidated that motion with consideration of the merits of the case pursuant to Federal Rule of Civil Procedure 65(a)(2). Min. Order of May 22, 2020. The District moved to dismiss plaintiff’s claims under Federal Rule of Civil Procedure 12(b)(5) for failure to effect timely service in accordance with the federal and local civil rules, Def.’s Mot. to Dismiss by the District [Dkt. # 6] (“District Mot.”), and all of the defendants have moved to dismiss plaintiff’s claims for failure to state a claim upon which relief may be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6). See District Mot. at 1; Def.’s Mem. of P. & A. in Supp. of Mot. to Dismiss by District [Dkt. # 6] (“District Mem.”); Defs.’ Mot. to Dismiss Am. Compl. by Benfield, McIntyre, & Rice [Dkt. # 28] (“Benfield et al. Mot.”); Def.’s Mot. to Dismiss Am. Compl. by Briganty [Dkt. # 32] (“Briganty Mot.”). 1 1 Benfield et al. Mot. [Dkt. # 28] and Briganty Mot. [Dkt. # 32] adopt and incorporate in full the arguments in District Mot. [Dkt. # 6] and District Reply [Dkt. # 22]. Benfield et al. Mot. at 7; Briganty Mot. at 3. 2  The Court finds that plaintiff rectified his service deficiencies, and therefore, the District’s motion to dismiss for insufficient service will be denied as moot. 2 But after consideration of all of the parties’ submissions and the entire record in this case, 3 the Court will grant defendants’ motions to dismiss for failure to state a claim under Rule 12(b)(6). BACKGROUND Plaintiff and his wife separated in 2009, and they have since been embroiled in litigation in D.C. Superior Court that included not only the divorce, but claims of domestic violence, and proceedings seeking child support. See June 17, 2019 Final Order from the Office of Administrative Hearings, Case No. 2018 OAG 00038 [Dkt. # 6-1] (“2019 OAH Final Order”) at 3– 5. 4 On November 6, 2009, the court consolidated six of the related cases, including 2009-SUP-1273 (“2009 SUP 1273”), a child support case being prosecuted by the Office of the Attorney General for the District of Columbia. See 2019 OAH Final Order at 5. 2 See District Mot. at 1 n.1; District Mem. at 6–8. Plaintiff filed proof of service for all defendants on May 4, 2020. See generally Return of Service Affs. [Dkt. # 16], [Dkt. # 17], [Dkt. # 18], [Dkt. # 19], [Dkt. # 20], and [Dkt. # 21]. 3 See Def.’s Reply in Supp. of Mot. to Dismiss by the District [Dkt. # 22] (“District Reply”); Defs.’ Reply in Supp. of Mot. to Dismiss by Benfield, McIntyre, & Rice [Dkt. # 31] (“Defs.’ Reply by Benfield et al.”); Def.’s Reply to Pl.’s Mem. in Opp. by Briganty [Dkt. # 36] (“Def.’s Reply by Briganty”); Pl.’s Mem. in Opp. to District’s Mot. to Dismiss [Dkt. # 14] (“Pl.’s First Opp. to District”); Pl.’s Mem. in Opp. to District’s Mot. to Dismiss [Dkt. # 23] (“Pl.’s Second Opp. to District”); Def.’s Opp. to Mot. for Prelim. Inj. [Dkt. # 25] (“District Opp. to Prelim. Inj.”); Pl.’s Reply to Opp. to Mot. for Prelim. Inj. [Dkt. # 26] (“Pl.’s Reply to District Opp. to Prelim. Inj.”); Pl.’s Mem. in Opp. to Mot. to Dismiss by Benfield, McIntyre, & Rice [Dkt. # 30] (“Pl.’s Opp. to Benfield et al. Mot.”); and Pl.’s Mem. in Opp. to Mot. to Dismiss by Briganty [Dkt. # 35] (“Pl.’s Opp. to Briganty Mot.”). 4 Related cases resolved before the D.C. Superior Court, listed in Table 2 of 2018-OAG- 00038, include: 2009-CPO-1579; 2009-CPO-1789; 2009-CPO-2447; 2009-CPO-2448; 2009- DRB 1388; 2009-DRB-3351; 2009-INT-261; and 2009-SUP-1273. See 2019 OAH Final Order at 4. 3 On April 20, 2010, the court issued an order which, among other things, dismissed 2009 SUP 1273 because of its redundancy with another support case before the D.C. Superior Court, 2009-DRB-1388. See April 20, 2010 DCSC Order (“2010 Order and Vacatur”), cited in 2019 OAH Final Order at 5. In July 2015, CSSD mistakenly filed a motion to intervene in 2009 SUP 1273, 5 and there were a number of motions and hearings before the D.C. Superior Court on the matter through November 2016. See Table 4, 2019 OAH Final Order at 6–7. On October 18, 2016, plaintiff filed two motions to address the mistaken re-opening of the administratively-closed 2009 SUP 1273, 6 and a November 17, 2016 order of the D.C. Superior Court denied both of them. Id. at 8 . As part of the 2009 divorce and related proceedings, plaintiff was ordered to make child support payments in the amount of $3,128 per month. See 2011 Divorce Decree, cited in 2019 OAH Final Order at 9 n.40. But plaintiff failed to make many payments, in full or in part, through the required clearinghouse, and between 2010 and 2016, plaintiff appeared to be more than $165,000 in arrears on his child support obligations. Id. at 9– 11. In a November 2016 hearing, the Superior Court found that payments made by plaintiff towards his ex-wife’s mortgage were not a permissible method for satisfying the shortfall, and that even if the mortgage payments were counted, plaintiff was still at least $35,000 in arrears. Id. at 12 . 5 The 2019 Final OAH Order notes the 2010 Order and Vacatur “mention[ed] that CSSD was a party to [the] 2009 SUP 1273” support case, but no notice of its administrative closure was issued to CSSD. Id. at 5 . 6 Plaintiff’s motions filed in D.C. Superior Court were titled “Motion to Direct CSSD to Correct its Records” and “Motion for Emergency Preliminary Injunction Against D.C. Gov-Office of Attorney General Child Support Services Division.” See OAH 2019 Final Order at 7. 4  In August 2016, CSSD sought a writ attaching plaintiff’s funds in an investment account (“E*Trade account”) to satisfy his outstanding child support obligations, and in February 2018, the agency conducted an administrative review to confirm its calculation of the amount he was in arrears. 2019 OAH Final Order at 14. The Office of Administrative Hearings (“OAH”) found no error in the 2016 and 2018 calculations, and it concluded that the total amount owed was $165,613.34. Id. at 16, 22 . The instant lawsuit is based on an alleged administrative error. Plaintiff complains that CSSD incorrectly continued to use case number 2009 SUP 1273 as the basis for the writ of attachment that froze plaintiff’s accounts, despite the fact that the case bearing that number had previously been administratively closed. See 2019 OAH Final Order at 17; First Am. Compl. at 19. In a proceeding before the OAH on this issue, an administrative law judge concluded that CSSD’s “Administrative Judgment of Condemnation” should be reversed for this reason, and that the funds in plaintiff’s E*Trade account linked to 2009 SUP 1273 should be returned to him. 2019 OAH Final Order at 22. 7 The District has appealed the decision within the OAH, and the 7 Nevertheless, the 2019 OAH Final Order also determined that the garnishment was improper only because it should have been attached to plaintiff’s 2009 DRB 1388 case, rather than the 2009 SUP 1273 case, and plaintiff still owed more than $165,000 in child support payments, ten times the amount attached to the E*Trade account. See District Mem. at 3. 5 appeal remains pending. District Mem. at 3. 8 Plaintiff first brought this complaint against the District of Columbia and the CSSD employees in their official and individual capacities in November 2019, Compl., and he amended his complaint in April 2020. First Am. Compl. The amended complaint consists of nine counts, including a section 1983 claim based on an alleged violation of plaintiff’s due process rights under the Constitution and a series of common law claims: negligence, negligence per se, negligent supervision, negligent infliction of emotional distress and malicious prosecution. First Am. Compl. at 10–20. Plaintiff seeks more than $13 million in compensatory and punitive damages in addition to equitable relief: (i) a preliminary and permanent injunction preventing CSSD from reporting child support arrearages to the federal offset program or credit reporting agencies in the absence of a valid Superior Court order and (ii) the appointment of a conservator to oversee the hiring, training, and management of CSSD employees. Id. at 19 . 8 The Court notes that to the extent the plaintiff is seeking to re-litigate previous rulings issued by the Superior Court, or he is hoping to forestall the ongoing appeal of the decision in his favor, the district court is without authority to review or reverse a Superior Court judge’s ruling, and ordinarily, it does not interfere with pending Superior Court matters. See Richardson v. Dist. of Columbia Court of Appeals, 83 F.3d 1513 , 1514 (D.C. Cir. 1996) (“[F]ederal district courts lack jurisdiction to review judicial decisions by state and District of Columbia courts.”), citing Dist. of Columbia v. Feldman, 460 U.S. 462 , 476 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413 , 415 (1923); Moorman v. U.S. Bank, NA, No. 10-CV-1219, 2010 WL 2884661 , at *1 (D.D.C. July 10, 2010) (“This court does not have jurisdiction to review . . . orders issued by the Superior Court of the District of Columbia, and, in the interests of comity, will not intervene in a case pending before the Superior Court.”). The D.C. Superior Court denied a motion filed by plaintiff four years ago to correct the CSSD record and issue a preliminary injunction, and plaintiff may not use these proceedings to re-adjudicate these claims. See Lance v. Dennis, 546 U.S. 459 , 463 (2006) (“[L]ower federal courts are precluded from exercising appellate jurisdiction over final state-court judgments.”); see also Johnson v. Director, Court Servs. & Offender Super. Agency, 767 Fed. App’x 10 (D.C. Cir. 2019) (upholding district court’s dismissal of challenge to a D.C. Superior Court decision). 6  Defendants argue that plaintiff’s only federal claim, which seeks to hold the District and its employees liable for an alleged violation of his due process rights, fails because plaintiff had and continues to have an opportunity to pursue relief in the ongoing administrative action before the OAH and in the D.C. Superior Court. District Mem. at 8. Defendants urge the Court to then decline to exercise supplemental jurisdiction over plaintiff’s non-federal claims in its discretion under 28 U.S.C. § 1367 (c)(3), District Mem. at 10–11, or in the alternative, to dismiss them for failure to state a claim. Id at 11. LEGAL STANDARD To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662 , 678 (2009), quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544 , 570 (2007). When considering a motion to dismiss under Rule 12(b)(6), the Court must construe a complaint liberally in the plaintiff's favor, and it should grant the plaintiff “the benefit of all inferences that can be derived from the facts alleged.” Kowal v. MCI Commc’ns Corp., 16 F.3d 1271 , 1276 (D.C. Cir. 1994), citing Schuler v. United States, 617 F.2d 605 , 608 (D.C. Cir. 1979). Where the action is brought by a pro se plaintiff, a district court has an obligation “to consider his filings as a whole before dismissing a complaint,” Schnitzler v. United States, 761 F.3d 33 , 38 (D.C. Cir. 2014), citing Richardson v. United States, 193 F.3d 545 , 548 (D.C. Cir. 1999), because such complaints are held “to less stringent standards than formal pleadings drafted by lawyers.” Haines v. Kerner, 404 U.S. 519 , 520 (1972). That said, the Court is not required to accept inferences drawn by the plaintiff if those inferences are unsupported by facts alleged in the complaint, nor must the Court accept plaintiff’s legal conclusions. See Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a cause of action, supported by mere 7 conclusory statements, do not suffice.”); Kowal, 16 F.3d at 1276 ; see also Browning v. Clinton, 292 F.3d 235 , 242 (D.C. Cir. 2002). In ruling upon a motion to dismiss for failure to state a claim, a court may ordinarily consider only “the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint, and matters about which the Court may take judicial notice.” Gustave-Schmidt v. Chao, 226 F. Supp. 2d 191 , 196 (D.D.C. 2002), citing EEOC v. St. Francis Xavier Parochial Sch., 117 F.3d 621 , 624–25 (D.C. Cir. 1997). ANALYSIS I. Plaintiff’s Section 1983 Claim Plaintiff contends that defendants’ actions deprived him of his constitutional rights, and that he is entitled to relief under the Civil Rights Act of 1871, 42 U.S.C. § 1983 . First Am. Compl. at 3, 16–17. The statute provides: Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, 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 in an action at law, suit in equity, or other proper proceeding for redress . . . . 42 U.S.C. § 1983 . The term “person” in section 1983 includes municipalities, such as the District of Columbia, but a municipality cannot be held liable under section 1983 “solely because it employs a tortfeasor—or, in other words, a municipality cannot be held liable under [section] 1983 on a respondeat superior theory.” Monell v. Dep’t of Soc. Servs., 436 U.S. 658 , 691 (1978) (emphasis in original). To maintain a section 1983 action against the District of Columbia, the Court must first “determine whether the complaint states a claim for a predicate constitutional violation,” and “then the court must determine whether the complaint states a claim that a custom or policy of the 8 municipality caused the violation.” Baker v. District of Columbia, 326 F.3d 1302 , 1306 (D.C. Cir. 2003), citing Collins v. City of Harker Heights, 503 U.S. 115 , 120 (1992). In assessing the first prong, the Court addresses whether plaintiff has stated a claim for a constitutional violation. “In order to establish this predicate violation, neither District of Columbia policy makers nor employees need be implicated. All that is being established at this stage is that there is some constitutional harm suffered by the plaintiff, not whether the municipality is liable for that harm.” Baker, 326 F.3d at 1306 . Plaintiff alleges that CSSD and its employees infringed his due process rights because they took steps to withhold his personal funds without a court order and reported him to a federal offset program “without probable cause.” First Am Compl. at 16. Plaintiff does not specify the provision of the Constitution under which his cause of action arises, so the Court will construe his claims under the Fifth Amendment, which protects against the deprivation of property without due process. 9 U.S. Const. amend. V. a. Plaintiff has failed to state a claim that he has been deprived of due process. To determine whether plaintiff has stated an actionable claim, the Court must assess (1) whether plaintiff has plausibly alleged that he was deprived of a protected interest, and, if so, (2) whether the complaint indicates that he has not received the process due. See UDC Chairs Chapter, Am. Ass’n of Univ. Professors v. Bd. of Trs. of UDC, 56 F.3d 1469 , 1471 (D.C. Cir. 1995). Plaintiff must allege that he has been deprived of a life, liberty, or property interest protected by the due process clause to survive a motion to dismiss, see Mathews v. Eldridge, 424 U.S. 319 , 333 9 “Because [the District of Columbia] is a political entity created by the federal government, it is subject to the restrictions of the Fifth Amendment, not the Fourteenth.” Propert v. District of Columbia, 948 F.2d 1327 , 1330 n.5 (D.C. Cir. 1991), citing Bolling v. Sharpe, 347 U.S. 497 , 499 (1954). 9 (1976); Bd. of Regents of State Colleges v. Roth, 408 U.S. 564 , 570–72 (1972), and if the Court finds the deprivation of a protected interest, it then assesses whether the defendant complied with due process requirements. Gen. Elec. Co. v. Jackson, 610 F.3d 110 , 117 (D.C. Cir. 2010) (citation omitted). Plaintiff plainly alleges that he was wrongly deprived of property – $140,000 of his general investment and retirement funds, see First Am. Compl. at 19–21 – so the question is whether the complaint also alleges that he was denied the minimum requirements of due process. “An essential principle of due process is that a deprivation of life, liberty, or property ‘be preceded by notice and opportunity for hearing appropriate to the nature of the case.’” Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532 , 542 (1985), quoting Mullane v. Central Hanover Bank & Tr. Co., 339 U.S. 306 , 313 (1950). The government must provide “the opportunity to be heard ‘at a meaningful time and in a meaningful manner.’” Mathews, 424 U.S. at 333, quoting Armstrong v. Manzo, 380 U.S. 545 , 552 (1965). The nature and extent of procedural protections mandated by the Constitution vary with the particular situation and the interest at stake, see Zinermon v. Burch, 494 U.S. 113 , 127 (1990); courts determine the adequacy of the process that was afforded by weighing three factors: “[f]irst, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.” Mathews, 424 U.S. at 335. Here, the private interest affected by the writ of attachment is purely economic. So while plaintiff may have an important protected property interest in his savings, it is an interest that can 10 be fully refunded if it was taken in error. As for the process that was afforded, plaintiff was given notice of OAH’s calculations of the amounts he owed in child support, and a review of the complaint shows that he not only had the opportunity to challenge the resulting writ of attachment, but he did so robustly. 10 Indeed, OAH rendered a decision in plaintiff’s favor in 2019 and ordered the funds released to him. 11 2019 OAH Final Order at 23. The mere fact that CSSD has exercised its right to appeal the decision ordering that the funds be returned does not support a claim that due process has been or will be denied; plaintiff has provided no evidence that he will be unable to participate fully in that proceeding. Moreover, there are other procedural safeguards which plaintiff may invoke; he may seek judicial review of his common law claims against CSSD in D.C. Superior Court. 12 And he may seek review of his child support order at any time. See 45 C.F.R. § 303.8 (b)(1); D.C. Code § 46-204 (a). Therefore, the Court concludes that plaintiff has failed to state a claim for a deprivation of his property without due process because it is plain from the face of the complaint and the public records of the proceedings he describes in the complaint that plaintiff has had and 10 For example: “Although Dr. Araya raised[,] testified[,] and argued that he should not be required to pay any of the DCSC ordered child support payments, he did not specify which of OAH’s actual authorized reviews he requested.” 2019 Final OAH Order at 13. See also First Am. Compl. at 16–17 (“[Defendants] failed to attend scheduled court hearings. [Defendants] refused to follow court orders that benefited me by stating that they do not follow some judge’s [sic] orders . . . [I] spent so much time defending baseless allegations . . . [I] spent 3 years and 1200 hours litigating a dismissed and closed case.”). 11 The 2019 decision gives rise to serious questions about whether plaintiff’s allegations here are moot. But the Court will not dismiss the case sua sponte for lack of subject matter jurisdiction in the event the pending appeal means that the matter is still unresolved to some extent. 12 Plaintiff also could have sought review before the D.C. Court of Appeals regarding his 2011 Divorce Decree, which included resolution of child support issues. See D.C. Code § 11-721 (a)(1); D.C. Ct. App. Rule 4(a). 11 will continue to have multiple opportunities to challenge the District’s efforts to enforce his child support obligations. b. Plaintiff has failed to state claims against the named defendants in their individual capacities. Plaintiff’s section 1983 claim against the CSSD employees is also flawed for another reason. Although plaintiff stated that the employees were being sued in their official and individual capacities, a close reading of the complaint reveals it solely recounts actions taken by the defendants in their official capacities as agency employees. 13 Since plaintiff failed to allege any wrongdoing by the named defendants in their individual capacities, he has failed to state a claim for relief against them under section 1983. See Iqbal, 556 U.S. at 676 (“Because vicarious liability is inapplicable to . . . [section] 1983 suits, a plaintiff must plead that each [g]overnment-official defendant, through the official’s own individual actions, has violated the Constitution.”); see also Cameron v. Thornburgh, 983 F.2d 253 , 257–58 (D.C. Cir. 1993) (dismissing claims against government officials “[i]n the absence of any allegations specifying the[ir] involvement”). In his opposition, plaintiff merely repeats conclusory allegations from the complaint, see, e.g., Pl.’s Opp. to Benfield et al. Mot. at 1 (asserting that he “properly alleged that the defendants in their individual capacities have ‘[m]isused the power, possessed by virtue of state law’”), and his chief objection to the motion to dismiss is that defendants have not answered his “50 allegations.” Id. But a motion to dismiss is a proper responsive pleading under the Federal 13 “Defendants were at all times relevant to this proceeding OAG attorneys acting within the course and scope of their employment and employees of office child support agency or IVD agency or office of attorney general [sic]. The defendants are being sued in both their official and individual capacities[.]” First Am. Compl. ¶ 4. 12 Rules, and defendants were not required to respond to the allegations at this stage of the proceedings. See Fed. R. Civ. P. 12(b). c. Plaintiff has not stated a claim for municipal liability. Even if plaintiff had alleged a violation of his due process rights, he has failed to plead facts sufficient to state a claim for municipal liability under the Supreme Court’s decision in Monell, 436 U.S. at 658 , and its progeny. To proceed against a municipality, a plaintiff must allege that the “execution of a government’s policy or custom, whether made by its lawmakers or by those whose edicts or acts may fairly be said to represent official policy, inflicts the injury that the government as an entity is responsible under [section] 1983.” Monell, 436 U.S. at 694 . In other words, “a municipality cannot be held liable under [section] 1983 on a respondeat superior theory,” id. at 691 , because “[t]he ‘official policy’ requirement was intended to distinguish acts of the municipality from acts of employees of the municipality, and thereby make clear that municipal liability is limited to action for which the municipality is actually responsible.” Pembaur v. City of Cincinnati, 475 U.S. 469 , 479 (1986) (emphasis in original). Thus, if the complaint states a claim for a predicate constitutional violation, the court must then determine whether the complaint states a claim that a custom or policy of the municipality caused the violation. 13  The D.C. Circuit has explained that there are several ways in which the requirement may be satisfied: [T]he explicit setting of a policy by the government that violates the Constitution; the action of a policy maker within the government; the adoption through a knowing failure to act by a policy maker of actions by his subordinates that are so consistent that they have become ‘custom’; or the failure of the government to respond to a need (for example, training of employees) in such a manner as to show ‘deliberate indifference’ to the risk that not addressing the need will result in constitutional violations. Baker, 326 F.3d at 1306 (internal citations omitted). The complaint alleges that plaintiff’s E*Trade account was seized pursuant to the incorrect Superior Court order, 14 but it does not set forth any facts that would support any of the four means by which a municipality can be shown to be liable under Baker, and the element of causation is missing entirely. While plaintiff alleges that there were missteps or shortcomings in the process used by CSSD to attach his accounts, 15 he does not allege facts that would satisfy Monell. Since the complaint fails to allege a due process violation, it fails to allege individual wrongdoing, and it fails to allege that a custom or policy of the municipality caused the claimed constitutional violation, the Court will dismiss Count Three of the complaint. II. Plaintiff’s Common Law Claims Count Three, the section 1983 claim, was the sole basis for the court’s exercise of federal subject matter jurisdiction over the complaint. Counts One, Two, Four, and Five are all brought 14 See, e.g., First Am. Complaint at 4 (“On 10/2016, Defendants issued a notice of attachment to my E-trade investment account for a total of $16,500 stating that I owed child support arrears for 6 years on the order of 09-sup-1273 order [sic].”); id. at 17 (“Had they reached out to me in 2009, any alleged arrears would have been rectified.”). 15 See, e.g., First Am. Compl. at 16 (“[D]efendants were required to contact me within 30-60 [days] of an alleged default/violation; they did not.”); id. at 10 (“Defendants did not have any legal authority to have taken the actions that they have taken.”). 14 under state common law for negligence and malicious prosecution, and none present a federal question. See First Am. Compl. at 10–19; 28 U.S.C. § 1331 . Given the dismissal of the federal cause of action, and the sound general principles of comity that caution against intervening in ongoing state court proceedings, see n.8 supra, the Court will decline to exercise supplemental jurisdiction over these claims. See 28 U.S.C. § 1367 (c)(3). III. Plaintiff’s Claims for Compensatory and Injunctive Relief The four remaining counts in the amended complaint call for remedies such as the repayment of funds or injunctive relief. Since they specify no independent basis for granting the relief, the Court will assume they were predicated on the claims that have already been addressed and dismissed. If they were meant to advance some other legal theory, they will be dismissed for failure to comport with Federal Rule of Civil Procedure 8(a). Rule 8(a) requires that complaints contain “(1) a short and plain statement of the grounds for the court’s jurisdiction [and] (2) a short and plain statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a), and even pro se litigants are bound by this requirement. Jarrell v. Tisch, 656 F. Supp. 237 , 239 (D.D.C. 1987). Counts Six and Nine seek forms of repayment for what plaintiff’s stock “would have been worth,” First Am. Compl. at 19–21, and plaintiff’s “tax liability” for early withdrawal from his retirement account. Id. at 20–21. Once again, the fact that plaintiff has obtained a reversal of the order that prompted this lawsuit suggests that such claims may be moot, but in any event, these free-standing claims for relief fail in the absence of any valid underlying claim. The sole federal claim for damages has been dismissed, and to the extent the request to be repaid for tax liability incurred was intended to be an element of plaintiff’s damages for his common law claims, the Court will decline to exercise jurisdiction over it along with the other state claims. 15  The final two counts seek equitable relief: Count Seven asks the Court to prevent the agency from making any reports to the federal clearinghouse for child support payments, First Am. Compl. at 19–20, and Count Eight seeks the appointment of a conservator to “investigate the 60,000 children that have not received child support while the defendants are prosecuting plaintiff.” Id. at 20. Since plaintiff’s federal claims against the District have failed, and plaintiff has failed to point to any other legal basis for the proposed orders, there is no predicate for such broad relief, and the counts will be dismissed. With respect to Count Eight, the Court adds that it is generally outside the authority of the district court to inform a law enforcement agency how best to expend its limited resources or how to order its prosecutorial priorities. See Heckler v. Chaney, 470 U.S. 821 , 831–32 (1985). 16  CONCLUSION The Court finds that plaintiff has failed to state a claim that he has been denied due process because plaintiff has had, and still has, opportunities to be heard in administrative or Superior Court proceedings, and therefore his sole federal claim against defendants fails. The Court declines to exercise its supplemental jurisdiction over plaintiff’s remaining common law claims pursuant to 28 U.S.C. § 1367 (c)(3). For these reasons, the Court will GRANT defendants’ motions to dismiss, [Dkts. ## 6, 28, & 32], for failure to state a claim under Federal Rule 12(b)(6). Plaintiff’s motion for preliminary injunction [Dkt. # 24], consolidated with the merits under Federal Rule 65(a)(2), will be DENIED. A separate order will issue. _______________________ AMY BERMAN JACKSON United States District Judge DATE: November 30, 2020 17

2020-11-30 20:02:15.169013+00

http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/CR%2019-0601%20PRPC%20-%20Torres.pdf

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. IN THE ARIZONA COURT OF APPEALS DIVISION ONE STATE OF ARIZONA, Petitioner, v. JOSE L. TORRES, Respondent. No. 1 CA-CR 19-0601 PRPC FILED 11-24-2020 Petition for Review from the Superior Court in Yuma County No. S1400CR201201045 The Honorable Lawrence C. Kenworthy, Judge REVIEW GRANTED; RELIEF DENIED; REMANDED COUNSEL Yuma County Attorney’s Office, Yuma By Charles V. S. Platt Counsel for Respondent Yuma County Public Defender’s Office, Yuma By Robert J. Trebilcock Counsel for Petitioner  STATE v. TORRES Decision of the Court MEMORANDUM DECISION Presiding Judge Samuel A. Thumma delivered the decision of the Court, in which Judge D. Steven Williams and Judge David D. Weinzweig joined. T H U M M A, Judge: ¶1 The State seeks review of an order granting Jose L. Torres post-conviction relief (PCR) under Arizona Rule of Criminal Procedure 33.1 Accepting review, because the superior court properly concluded Torres’ appointed counsel provided ineffective assistance, relief is denied. However, this matter is remanded to resolve issues that pertain to Torres’ remaining obligation, if any, to pay a statutory fee. ¶2 Torres pled guilty to sexual conduct with a minor, a class 2 felony, and luring a minor for sexual exploitation, a class 3 felony, both dangerous crimes against children (DCAC). The court imposed a 13-year prison term followed by ten years’ probation. For restitution, the State requested Torres reimburse the Yuma County Attorney’s Office (YCAO) $2,200, the amount the YCAO paid a private third-party to conduct a forensic medical examination of the victim. Defense counsel initially objected to the request but, upon further investigation, agreed it was reasonable. Accordingly, in an October 2013 order, the court ordered Torres to pay $2,200 in restitution for the benefit of YCAO (Restitution Award). ¶3 Torres timely filed PCR proceedings. He primarily challenged both the amount of the Restitution Award and plea counsel’s failure to challenge the propriety of the award itself. After the parties stipulated to the facts relevant to the amount of the Restitution Award, the court denied relief. In doing so, the court determined $2,200 was an economic loss suffered by YCAO, making the Restitution Award proper. The court did not address Torres’ ineffective assistance of counsel (IAC) claim. Torres petitioned for review. 1 Effective January 1, 2020, the Arizona Supreme Court amended the post-conviction relief rules. State v. Botello-Rangel, 248 Ariz. 429 , 430 ¶ 1 n.1 (App. 2020). Because there were no substantive changes related to this decision, this court applies and cites the current rules. 2  STATE v. TORRES Decision of the Court ¶4 In 2018, Torres obtained partial relief based on the Restitution Award not being authorized by law. State v. Torres, 2 CA-CR 2018-0061 PR, 2018 WL 2435390 at *2 ¶ 6 (App. May 30, 2018) (mem. dec.). Relief was warranted pursuant to State v. Linares, 241 Ariz. 416 (App. 2017), which held that restitution to reimburse a county for the costs of a sex offense victim’s forensic medical examination was improper. The matter was then remanded for consideration of Torres’ IAC claim. Id. ¶ 8. ¶5 On remand, Torres filed an amended PCR petition, arguing his plea counsel’s failure to challenge the propriety of the Restitution Award was, as a matter of law, objectively unreasonable under prevailing professional norms. See Strickland v. Washington, 466 U.S. 668 , 687–88 (1984). The court found Torres’s plea counsel provided constitutionally deficient assistance and granted relief as to the Restitution Award. The State unsuccessfully sought a rehearing before timely petitioning for review. ¶6 According to the State’s petition for review, the superior court abused its discretion by granting Torres relief on his IAC claim. The State contends plea counsel’s failure to challenge the Restitution Award could not be deemed constitutionally deficient because the restitution hearing occurred before Linares was published. ¶7 The State is correct, as a general matter, that “[f]ailure to predict future changes in the law is not ineffective assistance because clairvoyance is not a required attribute of effective representation.” State v. Febles, 210 Ariz. 589 , 597 ¶ 24 (App. 2005) (internal quotation marks and citation omitted). However, this court will affirm a superior court’s ruling “on any basis supported by the record.” State v. Wassenaar, 215 Ariz. 565 , 577 ¶ 50 (App. 2007). ¶8 Along with the Restitution Award, the superior court also imposed the statutorily required $500 DCAC Assessment. See A.R.S. § 12- 116.07 (requiring courts to impose a non-waivable $500 assessment on defendants who are convicted of DCAC offenses and to “transmit the monies collected pursuant to this section to the county treasurer for the purpose of defraying the cost of investigations pursuant to § 13-1414”). Because the DCAC Assessment was mandated by statute to cover the same investigative costs as those contemplated by the Restitution Award, this court gave the parties an opportunity to file supplemental briefs addressing whether Torres’ plea counsel provided ineffective assistance for failing to challenge the Restitution Award on that basis. 3  STATE v. TORRES Decision of the Court ¶9 In its supplemental brief, the State concedes Torres’ plea counsel provided ineffective assistance in this respect. This court accepts the State’s concession of error. The State also argues, however, that Torres’ relief is limited to a $500 reduction in the amount of the Restitution Award. That argument fails because, in resolving Torres’ prior petition for appellate review in 2018, the Restitution Award was found to be improper as a matter of law. See generally State v. Torres, 2 CA-CR 2018-0061 PR, 2018 WL 2434390 at *2 ¶ 6 (App. May 30, 2018) (mem. dec.). ¶10 According to the parties, Torres has paid $1,204.28 in restitution. It is not clear, however, whether that amount, or a portion of that amount, was paid as reimbursement to YCAO for the costs associated with the victim’s forensic medical examination. Accordingly, this matter is remanded to the superior court to address that issue and, ultimately, to determine whether Torres has satisfied his obligation under the DCAC Assessment. Any amount Torres has paid for the benefit of the YCAO more than the $500 authorized by § 12-116.07 for reimbursement of costs associated with the victim’s forensic medical examination shall be refunded to him. ¶11 The court grants review, but because the State properly concedes Torres’ counsel provided ineffective assistance, denies relief. This matter is remanded for further proceedings consistent with this decision. AMY M. WOOD • Clerk of the Court FILED: AA 4

2020-11-30 20:02:16.206427+00

http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/CV%2019-0699%20-%20Opuroku.pdf

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. IN THE ARIZONA COURT OF APPEALS DIVISION ONE EZEKIEL OPUROKU, Plaintiff/Appellant, v. ARIZONA STATE BOARD OF NURSING, Defendant/Appellee. No. 1 CA-CV 19-0699 FILED 11-24-2020 Appeal from the Superior Court in Maricopa County No. LC2018-000301-001 The Honorable Patricia A. Starr, Judge AFFIRMED COUNSEL Ezekiel Opuroku, Phoenix Plaintiff/Appellant Arizona Attorney General’s Office, Phoenix By Michael Raine Counsel for Defendant/Appellee MEMORANDUM DECISION Presiding Judge Samuel A. Thumma delivered the decision of the Court, in which Judge D. Steven Williams and Judge David D. Weinzweig joined.  OPUROKU v. ASBN Decision of the Court T H U M M A, Judge: ¶1 Ezekiel Opuroku appeals the superior court’s order affirming the decision of the Arizona State Board of Nursing (Board) revoking his nursing license. Because Opuroku has shown no error, the order is affirmed. FACTS AND PROCEDURAL HISTORY ¶2 In 2001, Opuroku was licensed by the Board as a practical nurse. In 2006, he entered a consent agreement with the Board that placed his license on probation and required him to abstain from drugs and alcohol and participate in substance abuse treatment. Opuroku did not comply with those requirements. Opuroku then agreed, in a second consent agreement, to a suspension of his license. When Opuroku did not comply with the second consent agreement, the Board revoked his license. ¶3 In 2010, Opuroku was licensed by the Board as a registered nurse pursuant to another consent agreement that imposed employment restrictions and required him to abstain from drugs and alcohol and submit to drug testing. Over the next seven years, Opuroku continued using drugs and alcohol and repeatedly failed to submit to required drug testing. He did not disclose to the Board that he was convicted of two counts of driving under the influence and failed to comply with provisions of the consent agreement that required his supervisor to acknowledge receipt of the consent agreement and submit written, quarterly evaluations to the Board. He also failed to appear for a required 2017 Board interview. ¶4 In February 2018, the Board issued a complaint and notice of hearing requesting that the Office of Administrative Hearings (OAH) conduct a formal hearing to determine whether grounds existed for the Board to discipline Opuroku based on his failure to comply with the 2010 consent agreement. Opuroku did not appear at the hearing. The Administrative Law Judge (ALJ) determined the Board’s mailing of the complaint and notice of hearing to Opuroku’s address of record was reasonable and that Opuroku was deemed to have received notice. After considering the Board’s evidence, the ALJ issued a recommended decision that the Board revoke Opuroku’s license. The Board adopted the ALJ’s recommended decision and revoked Opuroku’s license, later denying his motion for rehearing. ¶5 Opuroku appealed to the superior court for review of the Board’s decision, arguing (1) he was denied due process because the 2  OPUROKU v. ASBN Decision of the Court Board’s method of serving the complaint and notice of hearing did not comply with the law, (2) the OAH and the Board lacked jurisdiction to revoke his license, (3) the complaint and notice of hearing were defective because they were unsigned and unverified and (4) the Board refused to poll its members before they voted on his motion for rehearing. The court affirmed the Board’s decision, concluding that Opuroku had actual notice of the hearing, the Board had jurisdiction over his license, the complaint and notice of hearing were not required to be signed, and the Board was not required to poll its members. ¶6 This court has jurisdiction over Opuroku’s timely appeal pursuant to Arizona Revised Statutes (A.R.S.) section 12-913 (2020)1 and Arizona Rules of Procedure for Judicial Review of Administrative Decisions 13. See also Svendsen v. Ariz. Dep’t of Transp., 234 Ariz. 528 , 533 ¶ 13 (App. 2014) (interpreting A.R.S. § 12-913 as permitting an appeal to this court). DISCUSSION ¶7 In reviewing an administrative decision, the superior court examines whether the challenged action was illegal, arbitrary, capricious or involved an abuse of discretion. Comm. for Justice & Fairness v. Ariz. Sec’y of State’s Office, 235 Ariz. 347 , 351 ¶ 16 (App. 2014). This court will uphold the superior court’s decision if the record contains evidence to support it, but reviews questions of law de novo. Id. at 351 ¶ 17. I. The Board Did Not Deny Opuroku His Due Process Rights. ¶8 Opuroku asserts the Board denied him due process by failing to give him proper notice of the administrative hearing. A professional licensee maintains a property interest in his or her license, and the Board must afford due process before curtailing that right. Comeau v. Ariz. State Bd. of Dental Exam’rs, 196 Ariz. 102 , 106 ¶¶ 18–19 (App. 1999). Due process generally requires “notice and an opportunity to be heard” in a meaningful manner and at a meaningful time. Id. at 106–07¶ 20 (citation omitted). The party asserting a denial of due process must show prejudice to demonstrate reversible error. See Cty. of La Paz v. Yakima Compost Co., 224 Ariz. 590 , 598, ¶ 12 (App. 2010). 1Absent material revisions after the relevant dates, statutes and rules cited refer to the current version unless otherwise indicated. 3  OPUROKU v. ASBN Decision of the Court ¶9 Notice of an administrative hearing must be “served by personal delivery or certified mail, return receipt requested, or by any other method reasonably calculated to effect actual notice on the agency and every other party to the action to the party’s last address of record with the agency.” A.R.S. § 41-1092.04 (emphasis added). Opuroku argues the Board did not satisfy this obligation because it sent the complaint and notice of hearing to him via certified mail and it was returned unclaimed. ¶10 Due process required the Board to “do more” when its attempted notice is returned and “there was more that reasonably could be done.” Jones v. Flowers, 547 U.S. 220 , 238 (2006); cf. In re $46,523 in U.S. Currency, 244 Ariz. 351 , 354–55 ¶¶ 13, 18 (App. 2018) (determining that state’s failure to attempt other means of service — including first class mail — after a certified mailing was returned deprived claimants of due process in forfeiture proceeding). The Board’s legal assistant testified that in addition to sending the complaint and notice of hearing via certified mail, she also mailed the documents to Opuroku via first class mail and they were not returned. Further, there was evidence that the Board communicated the date and time of the administrative hearing to Opuroku via email, and Opuroku conceded at the superior court hearing that he was aware of the administrative proceeding and the hearing date. ¶11 The superior court found the Board had communicated the date and time of the hearing to Opuroku by other means reasonably calculated to give him actual notice and found his assertion that he was unaware of the complaint and notice of hearing not credible. The court also determined Opuroku received actual notice of the hearing and therefore suffered no prejudice from the Board’s method of service. These findings are supported by the evidence, and Opuroku has shown no abuse of discretion in the court’s determination. See Hurd v. Hurd, 223 Ariz. 48 , 52, ¶ 16 (App. 2009) (stating appellate court “must give due regard to the trial court’s opportunity to judge the credibility of the witnesses” and will not re-weigh conflicting evidence). ¶12 The court similarly did not err in ruling that the Board was not obliged to comply with the service requirements of the Arizona Rules of Civil Procedure in the administrative proceeding. In Arizona, service of documents related to administrative hearings is governed by statute and administrative rules, not the rules of court. See A.R.S. § 41-1092.02(B) (stating ALJ shall conduct an administrative hearing under statutory procedural rules and rules made by the director of the OAH); A.R.S. § 41- 1092.04 (setting forth the service requirements for administrative 4  OPUROKU v. ASBN Decision of the Court proceedings); Ariz. Admin. Code (A.A.C.) R2-19-108(E), (F) (providing rules for serving documents filed with the OAH). II. Opuroku Has Not Shown the Board Lacked Jurisdiction. ¶13 Opuroku next contends the Board’s complaint was invalid because it was not signed, and the Board therefore lacked jurisdiction to revoke his license. The superior court ruled that Opuroku waived this issue by failing to raise it in the administrative proceeding, but nevertheless found Opuroku had failed to establish that the Board lacked jurisdiction, noting that Arizona law does not require an administrative complaint and notice of hearing to be signed. ¶14 The administrative complaint and notice of hearing were not invalid because they were not signed; a signature is not required under Arizona law. See A.R.S. §§ 41-1092.03(A) and -1092.05(D). Although filed documents are expected to be signed, see A.A.C. R2-19-108(D), the OAH does not declare unsigned documents invalid or insufficient to establish jurisdiction. The case law Opuroku relies on, Safeway Stores, Inc. v. Maricopa County Superior Court, 19 Ariz. App. 210 , 212–13 (1973), does not apply because it concerned a judicial, not administrative, proceeding. ¶15 The Board also had jurisdiction over Opuroku because it may investigate regulated parties and “limit, revoke or suspend the privilege of a nurse to practice in this state.” A.R.S. § 32-1606(C)–(D); see also A.R.S. § 32- 1606(B)(10) (nursing board may “[d]etermine and administer appropriate disciplinary action against all regulated parties who are found guilty of violating” applicable statutes or rules). Finally, Opuroku agreed in the 2010 consent agreement that the Board would have continuing jurisdiction if it filed a complaint against him. III. Opuroku Has Shown No Error Regarding Polling of the Board ¶16 Opuroku contends that the Board improperly failed to poll its members before voting on his motion for rehearing, raising the specter of potential bias among the Board members. The superior court rejected this argument, noting Opuroku presented neither evidence nor legal arguments to support his position. ¶17 The Board considered Opuroku’s motion for rehearing and review of the order revoking his license at a special Board meeting. Opuroku’s counsel was present at that special Board meeting and asked the Board members to “conduct a separate vote regarding whether they had received 92 pages of legal materials.” The Board President stated they had 5  OPUROKU v. ASBN Decision of the Court received the materials and declined to conduct a separate vote on that issue. The Board voted unanimously to deny the request for rehearing and review. ¶18 Opuroku admits that no statute or administrative rule requires the Board to poll its members before voting on a motion for rehearing. Opuroku’s request that the Board poll its members addressed whether they had received certain materials, and therefore would not have revealed any potential biases. Nevertheless, he speculates that the Board members did not receive certain materials, which might indicate undisclosed biases. Opuroku has shown no error in the court rejecting this argument. Board members are presumed to be fair and impartial and Opuroku did not offer any evidence of bias or prejudice. Emmett McLoughlin Realty, Inc. v. Pima Cty., 212 Ariz. 351 , 357 ¶ 24 (App. 2006) (“All decision makers, judges and administrative tribunals alike, are entitled to a presumption of ‘honesty and integrity,’” and the party asserting bias bears the burden of rebutting the presumption of fairness and showing actual bias; “mere speculation regarding bias will not suffice”) (citing Pavlik v. Chinle Unified Sch. Dist. No. 24, 195 Ariz. 148 , 154 ¶ 24 (App. 1999)). IV. Other Issues Opuroku Seeks to Raise Do Not Show Reversible Error. ¶19 Opuroku seeks to assert several other issues, none of which constitute reversible error. He suggests the Board violated his due process rights by revising its complaint after the hearing and insists the decision to revoke his license was excessive, but he waived these issues by failing to develop them in his briefs on appeal. See Bennett v. Baxter Grp., Inc., 223 Ariz. 414 , 418 ¶ 11 (App. 2010) (ruling that issue was waived because it was “wholly without supporting argument or citation to authority”). Opuroku also argues his counsel was ineffective and did not properly represent him or keep him informed about the case. However, the remedy for ineffective assistance of counsel in a civil matter does not include post-judgment relief. Glaze v. Larsen, 207 Ariz. 26 , 32 ¶ 20 (2004). This court will not consider Opuroku’s argument — first raised in his reply brief on appeal — that the Board’s decision was not supported by substantial evidence. Dawson v. Withycombe, 216 Ariz. 84 , 111 ¶ 91 (App. 2007) (holding that appellate court will not consider arguments made for the first time in a reply brief on appeal). Finally, Opuroku presents no authority for his request that this court search the record for fundamental error. 6  OPUROKU v. ASBN Decision of the Court CONCLUSION ¶20 The superior court’s order affirming the decision of the Arizona State Board of Nursing to revoke Ezekiel Opuroku’s nursing license is affirmed. AMY M. WOOD • Clerk of the Court FILED: AA 7

2020-11-30 20:02:29.310673+00

http://www.courts.ca.gov/opinions/documents/B294632.PDF

Filed 11/30/20 CERTIFIED FOR PARTIAL PUBLICATION * IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION THREE THE PEOPLE, B294632 Plaintiff and Respondent, (Los Angeles County Super. Ct. No. KA117445) v. RENE AVILA, Defendant and Appellant. APPEAL from a judgment of the Superior Court of Los Angeles County, Steven D. Blades, Judge. Remanded for resentencing. Tracy L. Emblem, under appointment by the Court of Appeal, for Defendant and Appellant. Xavier Becerra, Attorney General, Lance E. Winters, Chief Assistant Attorney General, Susan Sullivan Pithey, Assistant Attorney General, Noah Hill, Michael C. Keller and Charles J. Sarosy, Deputy Attorneys General, for Plaintiff and Respondent. * Discussion sections I and II are not certified for publication. (See Cal. Rules of Court, rules 8.1105, 8.1110.)  A jury found Rene Avila guilty of attempted robbery and of attempted extortion. On appeal, he contends that reversal of the judgment is required because gang evidence was erroneously admitted against him and there is insufficient evidence to support attempted extortion. In the unpublished portion of this opinion, we reject these contentions. However, in the published portion of this opinion, we find that the trial court abused its discretion by denying Avila’s Romero 1 motion and, moreover, the sentence imposed on Avila is cruel or unusual punishment under our California Constitution. We therefore remand for resentencing. BACKGROUND On February 19, 2018, Bernardino Castro was selling oranges and flowers at a freeway off-ramp. Castro speaks Spanish and understands some English. Using a Spanish speaking companion to speak to Castro, Avila told Castro to pay him $100 in rent in order to sell at the location, claiming that it was his “barrio,” which Castro understood as a reference to gangs. When Avila said “money,” Castro understood that Avila was asking for $100. Avila left but returned the next day and asked for the money. When Castro said he didn’t have the money, Avila squashed two bags of oranges and left. Castro testified that the interaction with Avila made him “nervous” and that he thereafter sold his oranges at a different location because he was afraid Avila would do something to him. The next day, February 21, 2018, Pedro Blanco-Quiahua was selling oranges near the same freeway off-ramp. Avila 1 People v. Superior Court (Romero) (1996) 13 Cal.4th 497 (Romero). 2 approached and threw a bag of oranges on the ground, stomped on them, and said, “money, money, money.” Avila then stomped on another bag of oranges. Scared, Blanco-Quiahua backed away. Avila left. A witness who worked nearby had noticed Avila sitting for more than 20 minutes in front of a shop. The witness saw Avila tossing bags of oranges into the dirt and heard Avila say, “[m]oney, give me money.” Based on this evidence, a jury found Avila guilty of the attempted second degree robbery of Blanco-Quiahua (Pen. Code, 2 §§ 664, 211; count 1) and of the attempted extortion of Castro (§§ 664, 518; count 2). On November 30, 2018, the trial court denied Avila’s Romero motion to strike a prior conviction and sentenced him to 25 years to life plus 14 years. DISCUSSION I. Admission of gang evidence Although the trial court excluded gang evidence, a prosecution witness referred to gangs. Avila now contends that this reference to gangs violated his due process right to a fair trial; hence, his motion for a mistrial should have been granted. A. Additional background Avila was not charged with a gang allegation, and there was no evidence the crimes were gang-related. The trial court therefore excluded evidence a witness thought Avila was a gang member, finding the evidence to be more prejudicial than 2 Allfurther statutory references are to the Penal Code unless otherwise indicated. 3 probative. Accordingly, the trial court directed the prosecutor to remind her witnesses not to mention gangs. Notwithstanding the trial court’s order, the prosecutor asked Castro, when Avila “said to you that this was his barrio, what did that mean to you?” The witness responded, “That he is a gang member or something like that.” The prosecutor asked if Castro was in fear for his safety, and the trial court then sustained defense counsel’s leading objection to that question. Out of the jury’s presence, the prosecutor explained that she had told witnesses not to mention gangs but had failed to have a specific conversation with Castro. The defense moved for a mistrial. In response, the prosecutor asserted that she did not know the witness would say “barrio” meant gang to him. 3 The trial court denied the mistrial motion but offered to give a curative instruction upon request. Defense counsel did not ask for a curative instruction, and none was given. B. Avila’s right to a fair trial not irreparably damaged Avila moved for a mistrial based on Castro’s statement he thought Avila was referring to gangs when Avila used the word “barrio.” Such a motion should be granted only when a party’s chances of receiving a fair trial have been irreparably damaged. (People v. Clark (2011) 52 Cal.4th 856 , 990.) Whether a particular incident is incurably prejudicial requires a nuanced, fact-based analysis which the trial court is in the best position to conduct. (People v. Chatman (2006) 38 Cal.4th 344 , 369–370.) 3 The prosecutor later recollected that “maybe” she did tell Castro not to use the word gang and confirmed with her investigating officer that she had. 4 Hence, we review an order denying a motion for mistrial under the deferential abuse of discretion standard. (Clark, at p. 990.) Given the potentially prejudicial effect of gang membership evidence, it should be excluded in cases not involving a gang enhancement, where its probative value is minimal. (People v. Albarran (2007) 149 Cal.App.4th 214 , 223; accord, People v. Avitia (2005) 127 Cal.App.4th 185 , 192.) Gang evidence is inadmissible to show a defendant’s criminal disposition or bad character as a vehicle to create an inference the defendant committed the crime. (Avitia, at p. 192.) Here, there was no evidence the crimes were gang-related, and there was no gang allegation. The trial court therefore properly excluded gang evidence. Castro’s testimony that he understood Avila’s reference to “barrio” to mean that Avila was a gang member should not have come in. Even so, when a witness’s volunteered statement is not attributable to either party, a mistrial is called for only if the misconduct is so inherently prejudicial as to threaten the defendant’s right to a fair trial despite admonitions from the court. (People v. Molano (2019) 7 Cal.5th 620 , 675–676.) Although the trial court indicated it would give a curative instruction at the request of the defense, the defense did not request one, presumably as a matter of strategy as defense counsel had expressed concerns about highlighting the issue for the jury. Notwithstanding the inflammatory nature of gang evidence, the lone and fleeting reference to gang evidence did not deprive Avila of a fair trial. Castro merely testified that when Avila said “barrio,” Castro thought he was a gang member. 5 Beyond Castro’s speculation, there was no other evidence Avila was a gang member. 4 Avila, however, argues that the comment was highly prejudicial because it went to the use of a threat, fear, or force element of attempted extortion in CALCRIM No. 1830. He suggests the gang evidence was the only evidence that Avila threatened Castro. That is incorrect. When Castro refused to give Avila money, Avila crushed a bag of oranges. This act satisfied the element, especially when considered in the context of Avila’s demand. (See People v. Bollaert (2016) 248 Cal.App.4th 699 , 725 [threat implied from all circumstances].) Thus, there was other compelling evidence that Avila threatened Castro or used force or fear in his attempt to extort money, apart from the lone reference to gangs. People v. Avitia, supra, 127 Cal.App.4th 185 is distinguishable. The defendant in that case was charged with grossly negligent discharge of a firearm. (Id. at p. 191.) The trial court admitted evidence that there was gang graffiti in Avitia’s bedroom. Avitia found that the gang evidence was irrelevant to any issue at trial, as there was no allegation the crime was gang- related, and the evidence did not link Avitia to the guns. The evidence was particularly irrelevant given that it was undisputed Avitia possessed the guns. Further, the Court of Appeal found that the gang evidence severely undercut Avitia’s defense and credibility. That is, Avitia contended he was a former military small arms repairman and gun hobbyist who was conducting target practice with a pellet gun, which is a lawful activity. But 4 Avila has a teardrop tattoo on his face, but no evidence or mention was made about it at trial. 6 evidence he was a gang member suggested he had a criminal disposition; hence, his story was false, and his arsenal of guns presented a danger to the community. (Id. at p. 195.) Avitia thus concluded that the gang evidence prejudiced Avitia. We do not perceive any similar prejudice here. The gang evidence did not undercut any defense or suggest that the witness’s version of events was false, i.e., that Avila did not demand money or crush the oranges. Rather, as we have said, to the extent the gang evidence went to the force or fear element of the crimes, there was other compelling evidence of that element. Avila also points out that CALCRIM No. 1830 states the “threat may involve harm to be inflicted by the defendant or someone else.” (Italics added.) He argues that the jury would have understood the “someone else” to be a gang member based on Castro’s stray remarks and comments the prosecutor made in closing argument that Avila was “terrorizing” the victims. However, “terrorizing” was not the prosecutor’s word. A witness used that word to describe what Avila did to Blanco-Quiahua. In repeating that word in her closing argument, the prosecutor drew no connection to gangs. II. Sufficiency of the evidence Avila next contends there is insufficient evidence of attempted extortion, specifically, that he accomplished the crime by threat or force. 5 We disagree. “ ‘When considering a challenge to the sufficiency of the evidence to support a conviction, we review the entire record in the light most favorable to the judgment to determine whether it 5 The trial court denied Avila’s section 1118.1 motion as to this count. 7 contains substantial evidence—that is, evidence that is reasonable, credible, and of solid value—from which a reasonable trier of fact could find the defendant guilty beyond a reasonable doubt. [Citation.] We presume in support of the judgment the existence of every fact the trier of fact reasonably could infer from the evidence. [Citation.] If the circumstances reasonably justify the trier of fact’s findings, reversal of the judgment is not warranted simply because the circumstances might also reasonably be reconciled with a contrary finding.’ ” (People v. Covarrubias (2016) 1 Cal.5th 838 , 890.) Extortion is obtaining another’s property or other consideration, with the person’s consent but induced by the wrongful use of force or fear. (§ 518.) The elements of attempted extortion are a specific intent to commit extortion and a direct but ineffectual act done toward its commission. (People v. Ochoa (2016) 2 Cal.App.5th 1227 , 1230.) A defendant may induce fear by a threat to do an unlawful injury to the person or property. (§ 519.) Likening this case to People v. Ochoa, supra, 2 Cal.App.5th 1227 , Avila contends there was no evidence he attempted to use a threat or force to induce Castro to give him money. Ochoa is not on point because the person or entity from whom the defendant in that case tried to extort money was not the victim identified in the information. Since there was no evidence the defendant tried to extort money from the person named in the information, Ochoa is more about the procedural due process requirement of giving a defendant notice of the specific charge than it is about sufficiency of the evidence. As to the sufficiency of the evidence here, Avila makes much of his use of a translator to convey his threat to Castro. In 8 doing so, Avila misstates the record when he asserts that Castro did not understand what Avila and the translator were saying. To the contrary, Castro’s limited English did not prevent him from concluding that Avila wanted money. Moreover, when Avila returned the next day without a translator and demanded “the money,” Castro understood. Avila then crushed Castro’s oranges, driving home his point so clearly that Castro was afraid to sell at the location for several days. Avila argues he did not attempt to use force or a threat because he crushed the oranges after Castro refused to give him money. However, Castro—and the jury—could have reasonably understood that Avila crushed the oranges to force Castro into relenting. In any event, attempted extortion does not contain a timing requirement regarding when the force or threat must be applied, especially where, as here, the entire event occurs in a short period of time. Rather, as we have said, the threat may be implied from all the circumstances. (People v. Bollaert, supra, 248 Cal.App.4th at p. 725.) III. Romero Avila admitted having three prior strikes within the meaning of the “Three Strikes” law. The trial court denied Avila’s Romero motion to strike any of them. Avila now contends that the trial court abused its discretion by denying his motion. We agree. While the purpose of the Three Strikes law is to punish recidivists more harshly (People v. Davis (1997) 15 Cal.4th 1096 , 1099), not all recidivists fall within the spirit of that law. A trial court therefore may strike or dismiss a prior conviction in the furtherance of justice. (§ 1385, subd. (a); Romero, supra, 13 Cal.4th at p. 504.) When considering whether to strike a prior 9 conviction, the factors a court considers are whether, in light of the nature and circumstances of the defendant’s present felonies and prior serious and/or violent felony convictions, and the particulars of the defendant’s background, character, and prospects, the defendant may be deemed outside the scheme’s spirit, in whole or in part, and hence should be treated as though the defendant had not previously been convicted of one or more serious and/or violent felonies. (People v. Williams (1998) 17 Cal.4th 148 , 161.) We review a trial court’s ruling on a Romero motion under the deferential abuse of discretion standard, which requires the defendant to show that the sentencing decision was irrational or arbitrary. (People v. Carmony (2004) 33 Cal.4th 367 , 375, 378.) It is not enough that reasonable people disagree about whether to strike a prior conviction. (Id. at p. 378.) The Three Strikes law “not only establishes a sentencing norm, it carefully circumscribes the trial court’s power to depart from this norm . . . [T]he law creates a strong presumption that any sentence that conforms to these sentencing norms is both rational and proper.” (Ibid.) Only extraordinary circumstances justify finding that a career criminal is outside the Three Strikes law. (Ibid.) Therefore, “the circumstances where no reasonable people could disagree that the criminal falls outside the spirit of the three strikes scheme must be even more extraordinary.” (Ibid.) That only extraordinary circumstances justify deviating from the three strikes sentencing scheme does not mean such cases do not exist. (People v. Vargas (2014) 59 Cal.4th 635 , 641.) And the abuse of discretion standard is neither “empty” (People v. Williams, supra, 17 Cal.4th at p. 162) nor are all recidivists the kind of career criminals appropriately considered under that 10 scheme. Cumulative circumstances, including that a defendant’s crimes were related to drug addiction and the defendant’s criminal history did not include actual violence, may show that the defendant is outside the spirit of the Three Strikes law. (People v. Garcia (1999) 20 Cal.4th 490 , 503.) Also, an abuse of discretion may be found where a trial court considers impermissible factors, and, conversely, does not consider relevant ones. (People v. Carmony, supra, 33 Cal.4th at p. 378.) That is precisely what occurred here. The trial court did not consider factors relevant to the nature and circumstances of Avila’s prior strikes. Avila committed his first strike offenses (a second degree robbery and an assault with a knife) on the same occasion 6 in 1990 when he was 18 years old. 7 According to the preliminary hearing transcript in that case, Avila and two accomplices robbed a man who was filling newspaper vending machines. The man testified that Avila held a knife to his throat, and the man’s arm was cut when the man threw his arm up. Avila was paroled in 1991. Then, in 1992, when Avila was 20 years old, he committed his last and most recent strike offense, a 6 Multiple convictions arising from a single act against a single victim count as one strike. (People v. Vargas, supra, 59 Cal.4th at p. 637.) Avila’s robbery and assault with a deadly weapon were not a single act, and therefore Vargas does not apply. Nonetheless, Vargas does not preclude a trial court from considering that strikes were committed on the same occasion as relevant to the nature and circumstances of those crimes, even if that fact does not compel striking a prior. 7 As a juvenile, Avila had six sustained petitions primarily for being under the influence of drugs or possessing them, although he also had a sustained petition for burglary and for resisting arrest. 11 second degree robbery, as well as possession of a firearm by a felon. He was sentenced to 10 years in prison. 8 In evaluating these prior strikes, the trial court appeared to agree they were remote in time but then noted that section 667, subdivision (c)(3) provides that the time between a strike and the current felony does not affect the imposition of sentence. The trial court said it was “not quite sure how that coincides with this [case], but so be it.” However, all that section suggests is that the remoteness of prior strikes alone is not sufficient to take a defendant out of the spirit of the Three Strikes law. Still, remoteness remains a factor in mitigation. (See People v. Strong (2001) 87 Cal.App.4th 328 , 342; People v. Bishop (1997) 56 Cal.App.4th 1245 , 1250–1251.) Avila’s prior strikes were from 1990 and 1992, so they were 28 and 26 years old, respectively, when he committed the current offenses in 2018. That is a significant lapse of time to say the least. It is also significant that Avila committed his prior strikes when he was under the age of 21. Had he committed those crimes now while that age, he would be considered a youth offender entitled to expanded parole consideration. (See, e.g., § 3051, subd. (a)(1) [youth offender is a person 25 years old or younger].) The trial court noted that Avila’s age when he committed the strikes does not preclude a sentence, though it comes into play when he is eligible for parole. That much is true. But it is not the salient point for the purposes of Romero. Avila’s age when he committed his strikes, even if not dispositive, is 8 Avila was paroled in November 1997, but parole was revoked five months later. In August 1998, he was released on parole, which was again revoked two months later. 12 plainly relevant to the nature and circumstances of the strikes and could be a mitigating factor. This is in line with the increasing recognition that young adults are constitutionally different from adults for sentencing purposes because of their diminished culpability and greater prospects for reform. (See, e.g., In re Jenson (2018) 24 Cal.App.5th 266 , 276 & cases cited therein.) That we are considering what sentence to impose on the middle-aged Avila does not preclude consideration that it was a youthful Avila who committed the prior strikes, for the purposes of Romero. The trial court, however, mistakenly believed that it could not consider this mitigating factor at sentencing. Instead, the trial court’s decision that Avila fell within the spirit of the Three Strikes law hinged primarily on the nature and circumstances of his current offenses. The trial court noted that Avila had victimized vulnerable people eking out a living by selling fruit. What right, the trial court questioned, did Avila have to charge rent to people selling things on the street? The trial court added that Avila committed his current crimes in a “violent” and “brutal” way by intimidating victims making just $300 a week. “His acts really amounted to thuggery.” The trial court then speculated that had someone not called the police, “who knows what would have happened.” Without a doubt, Avila’s conduct was offensive. Preying on some of the most vulnerable people in society is contemptible. The prosecutor’s own opening statement aptly characterized Avila as a “bully.” However, the trial court speculated about what might have happened had the police not been called, implying the infliction of physical harm to the victims that never appeared in the evidence at trial. Sentencing is not the proper venue for the trial court’s imagination. Ruling on a Romero 13 motion requires consideration of the nature and circumstance of the crime actually committed, not a crime that might have occurred. Moreover, the record does not support the trial court’s speculation. When the victims refused to give Avila money, he destroyed several bags of oranges and left. While we do not make light of this intimidating behavior, it was not violent or brutal by any stretch. Avila did not use a weapon or otherwise use physical violence against the victims, nor did he make any specific threats. He squashed oranges. In characterizing Avila’s current crimes as violent, the trial court misapprehended their nature. Attempted robbery is a serious crime but not a violent one. (§ 1192.7, subd. (c)(19), (39).) Attempted extortion is neither a violent nor serious crime. (§§ 667.5, subd. (c), 1192.7, subd. (c).) Nor was the trial court merely hyperbolically describing Avila’s crimes as violent. The trial court erroneously sentenced Avila as a violent offender by limiting his conduct credits to a maximum of 15 percent of actual time served under section 2933.1, subdivisions (a) and (c). The fact is that Avila has not committed a violent felony since his strike offenses, showing that the severity of his record is decreasing. The trial court took note of this circumstance but otherwise noted that Avila “still ha[d] been to prison a couple of times since.” But for what did Avila go to prison we ask? In 1999, Avila was convicted of unlawful sexual intercourse with a minor under the age of 16 (§ 261.5, subd. (d)) and sentenced to four years in prison. He later married her, and they had a child together. 9 Avila was convicted in 2005 of misdemeanor drug 9 Avila’s victim/wife stated that her mother allowed the relationship. 14 possession. His last felony offense was in 2008 for drug possession in violation of Health and Safety Code section 11350, subdivision (a), a crime which has since been reclassified as a misdemeanor under Proposition 47 (see People v. Valencia (2017) 3 Cal.5th 347 , 355). Thus, Avila’s poststrike criminal history is not characterized by serious or violent crimes. Also, after being incarcerated for the 2008 drug possession, Avila was released from prison in 2011. The record does not show that Avila committed any crimes while incarcerated from 2008 to 2011. Upon his release in 2011, he incurred misdemeanors for possessing a controlled substance, being an unlicensed driver, and driving on a suspended license. Otherwise, he remained crime free until committing the current offenses in 2018. Given Avila’s decade long period of committing no felonies and the minor nature of the offenses he did commit during that period, it is inaccurate to characterize him as a career or habitual criminal or, in the prosecutor’s words, as having a “continuous criminal history” from 1989 to the present. Avila is not comparable to the defendant who has led a continuous life of crime so as to counteract the extreme remoteness of his priors. (See, e.g., People v. Humphrey (1997) 58 Cal.App.4th 809 , 813.) With respect to Avila’s background, character and prospects, the trial court referred to Avila’s drug addiction but did not reach a conclusion whether it was a mitigating or aggravating factor, instead noting that it could be a mitigating factor unless Avila failed to address the problem, in which case it could be an aggravating factor. (See generally People v. Gaston (1999) 74 Cal.App.4th 310 , 322.) While we do not disagree with the general notion that a defendant’s drug problem may have 15 little mitigating value where the problem is longstanding (see, e.g., People v. Regalado (1980) 108 Cal.App.3d 531 , 539–540), we disagree that is always necessarily the case (see Cal. Rules of Court, rule 4.423(b)(2) [defendant’s mental or physical condition is mitigating factor in sentencing]). Just as the law is evolving in its understanding and treatment of juvenile offenders, it is evolving in how it treats drug users. Since the passage of Proposition 47, for example, nonserious, nonviolent drug possession offenses are misdemeanors rather than felonies. (People v. DeHoyos (2018) 4 Cal.5th 594 , 597.) According to Avila’s Romero motion, which included a mitigation report, Avila began using drugs when he was 12 years old. His father, who also abused drugs and alcohol, gave him PCP and cocaine as a child. As a juvenile, Avila received treatment for his drug addiction, which helped. After being released from prison in 2004, he continued to struggle with drug addiction (as evidenced by his 2005 and 2008 misdemeanor drug possession convictions) but he tried to become sober and was able to get a job as a trailer driver, which required him to obtain a class A driver’s license. However, in 2016, he was injured in a car accident, which left him with neck and back pain. He began drinking and using drugs again. Just one month after the car accident, he was in a second car accident, after which his driver’s license was suspended, so he was laid off from work. 10 Thus, Avila has clearly struggled with drug addiction since he was a 10 Avilaalso has been shot three times: when he was 16 years old a bullet grazed him while he was at a party; when he was 26 years old he was shot and, as a result, hospitalized for two weeks; and in 2017, he was shot in the elbow, which required surgery. 16 child. But it cannot be said he has never addressed it. He had treatment for it when he was a juvenile. After Avila was released from prison in 2004, he tried to become sober and obtained and maintained gainful employment. Further, Avila’s wife spoke well of his character, reporting he was a good father to their daughter and supported their child when he had a job. Avila’s age, 47 when sentenced, is also relevant to his background, character, and prospects. Although Avila’s middle age status alone does not remove him from the spirit of the Three Strikes law (see People v. Strong, supra, 87 Cal.App.4th at pp. 332, 345), given his age, his three strikes sentence coupled with the determinate term means he will likely die in prison. Avila indeed may be deserving of a lengthy sentence. But even under the defense’s proposed 12 years four months sentence, 11 Avila would have been imprisoned and not eligible for parole until approaching 60 years of age. The length of a sentence is the “overarching consideration” in deciding whether to strike a prior conviction because the underlying purpose of striking a prior conviction is the avoidance of unjust sentences. (People v. Garcia, supra, 20 Cal.4th at p. 500.) For these reasons, no reasonable person could agree that the sentence imposed on Avila was just. Avila’s prior strikes were remote and committed when he was of diminished culpability based on his age, a factor the trial court erroneously concluded was inapplicable to the formulation of his sentence. Despite the trial court’s characterization of the facts, Avila’s 11 The proposed 12 years four months sentence was composed of the high term of three years doubled to six years and five years for the prior on count 1 plus eight months doubled to 16 months on count 2. 17 current offenses were not violent and, on the spectrum of criminal behavior, fall closer to the end of less reprehensible conduct. Much of his criminal conduct appears to be related to his drug addiction rather than to sinister motives and falls well outside the realm of what could be considered the work of a career criminal. We therefore conclude that the trial court abused its discretion by denying Avila’s Romero motion. IV. Cruel or unusual punishment Worse, Avila’s sentence is cruel or unusual punishment under the California Constitution, article I, section 17. 12 A punishment is cruel or unusual in violation of the California Constitution if “it is so disproportionate to the crime for which it is inflicted that it shocks the conscience and offends fundamental notions of human dignity.” (In re Lynch (1972) 8 Cal.3d 410 , 424 (Lynch).) 13 Three techniques are employed to make this determination: first, we examine the nature of the offense and/or the offender with particular regard to the degree of danger both present to society; second, compare the challenged penalty with 12 Avila’s counsel did not object that the sentence was cruel and/or unusual punishment, thereby forfeiting the claim on appeal. However, we have the discretion to address the merits. (See, e.g., People v. Reyes (2016) 246 Cal.App.4th 62 , 86; In re Sheena K. (2007) 40 Cal.4th 875 , 887, fn. 7.) 13 The Eighth Amendment of the United States Constitution prohibits cruel and unusual punishment. The distinction in wording between the federal and state constitutions is substantive and not merely semantic. (People v. Baker (2018) 20 Cal.App.5th 711 , 723.) We decide Avila’s case only under the California Constitution. 18 the punishments for more serious offenses in California; and third, compare the challenged penalty with the punishments prescribed for the same offense in other states. (Id. at pp. 425– 427.) Disproportionality need not be established in all three areas. (People v. Dillon (1983) 34 Cal.3d 441 , 487, fn. 38.) In our tripartite system of government, the legislative branch defines crimes and prescribes punishment. (Lynch, supra, 8 Cal.3d at p. 414.) It is therefore the rare case where a court could declare the length of a sentence mandated by the Legislature unconstitutionally excessive. (People v. Martinez (1999) 76 Cal.App.4th 489 , 494.) Even so, it is the judiciary’s responsibility to condemn any punishment that is cruel or unusual. (Lynch, at p. 414.) We independently review whether a punishment is cruel or unusual, considering any underlying disputed facts in the light most favorable to the judgment. (People v. Edwards (2019) 34 Cal.App.5th 183 , 190.) A. The nature of the offense and of the offender The first Lynch technique requires considering the nature of the offense in the abstract as well as the facts of the crime in question, “i.e., the totality of the circumstances surrounding the commission of the offense . . . , including such factors as its motive, the way it was committed, the extent of the defendant’s involvement, and the consequences of his acts.” (People v. Dillon, supra, 34 Cal.3d at p. 479.) Courts must view the nature of the offender in the concrete rather than the abstract, considering the defendant’s age, prior criminality, personal characteristics, and state of mind. (Ibid.) Stated simply, the punishment must fit the individual criminal. (Lynch, supra, 8 Cal.3d at p. 437.) Where, as here, the defendant is a recidivist, it is not as a general rule cruel or unusual to enhance a sentence based on the 19 defendant’s status as a recidivist; still, “the ultimate punishment, all facts considered,” must not be disproportionate to the crime. (People v. Mantanez (2002) 98 Cal.App.4th 354 , 359; see Solem v. Helm (1983) 463 U.S. 277 , 284–288.) “Accordingly, the current offense must bear the weight of the recidivist penalty imposed.” (People v. Carmony (2005) 127 Cal.App.4th 1066 , 1072.) Because the penalty is imposed for the current offense, the focus must be on the seriousness of that offense: past offenses alone will not justify imposing an enhanced sentence. (Id. at pp. 1079–1080.) Avila’s current offenses are attempted robbery and attempted extortion. Neither are violent crimes, and extortion is neither serious nor violent. (§§ 667.5, subd. (c), 1192.7, subd. (c).) Although both require the attempt to use force or fear (§§ 211, 518), Avila did not use violence against either of his victims. He did not verbally or physically threaten them. Rather, when the victims refused to give Avila money, he crushed their oranges and left. Avila’s motive for his crimes is unclear, though it is reasonable to infer it was financial, given that he demanded money. Also, the total amount of property damage was about $20 worth of citrus, a point we make because it is relevant to the minor nature of the offenses and not to trivialize the worth of the property to the victims. The unsophisticated nature of the attempted robbery and attempted extortion committed by Avila are thus not comparable to armed robberies, which have been described as most heinous in nature (People v. Sullivan (2007) 151 Cal.App.4th 524 , 570). As to the consequences of Avila’s actions, he frightened the victims, so much so that Castro sold his fruit at a different location for several days. However, there are “rational gradations of culpability that can be made on the basis of the 20 injury to the victim or to society in general.” (In re Foss (1974) 10 Cal.3d 910 , 919.) Here, the victims were physically uninjured even if emotionally traumatized. Although trying to force vendors to pay rent is an affront to society, the harm the victims suffered is arguably less than that caused by the crime of indecent exposure, which our California Supreme Court described as “minimal at most” and not a “sufficiently grave danger to society to warrant the heavy punishment of a life-maximum sentence.” (Lynch, supra, 8 Cal.3d at p. 431.) A punishment passes constitutional muster only if the totality of the circumstances surrounding the current offenses can bear the weight of the sentence imposed. (See People v. Carmony, supra, 127 Cal.App.4th at p. 1072.) Avila’s current offenses alone cannot justify the sentence imposed. It bears repeating: he squashed oranges and was sentenced to life. Clearly, Avila’s sentence is primarily attributable to his recidivist status. But the life sentence required by the Three Strikes law must consider “variations in individual culpability.” (People v. Carmony, supra, 127 Cal.App.4th at p. 1087.) A “one- size-fits-all” sentence is disproportionate to a current offense where the current offense is “minor and the prior convictions are remote and irrelevant to the offense.” (Id. at p. 1088.) An example of a minor offense is failing to update sex offender registration. (People v. Carmony, supra, 127 Cal.App.4th at p. 1071; but see People v. Meeks (2004) 123 Cal.App.4th 695 .) The defendant in Carmony, at page 1071, had three prior serious or violent felonies and was sentenced to 25 years to life under the Three Strikes law. Given the minimal and harmless nature of the defendant’s current offense and the relatively light penalty for a simple violation of registration 21 requirements, his prior offenses almost wholly accounted for the extreme penalty imposed. (Carmony, at p. 1080.) After considering the Lynch techniques, the court acknowledged that the three strikes sentence was cruel or unusual punishment. (Carmony, at pp. 1086–1089.) In so doing, the court noted it is the rare case that violates the prohibition against cruel or unusual punishment. (Id. at p. 1072.) Still, there is a “bottom to that well.” (Ibid.) A passive, nonviolent, regulatory offense that poses no direct or immediate danger to society is the bottom of that well. (Id. at p. 1078.) In contrast, a 25-years-to-life sentence imposed on a recidivist whose current offenses were for heroin possession and receiving stolen property was not found by another court to be cruel or unusual. (People v. Mantanez, supra, 98 Cal.App.4th at pp. 356, 366–367.) The defendant in Mantanez, at page 366, had an extensive criminal history spanning 17 years and including 10 felony convictions and four separate prison terms. His felonies included forcible entries into occupied homes, and he repeatedly violated parole and probation. (Ibid.) This “long criminal career” brought the defendant squarely within the Three Strikes law. (Ibid.; see, e.g., People v. Bernal (2019) 42 Cal.App.5th 1160 , 1172–1173 [defendant had 10 current offenses and lengthy criminal record]; People v. Haller (2009) 174 Cal.App.4th 1080 , 1088 [current offense involved threats of violence]; People v. Martinez (1999) 71 Cal.App.4th 1502 , 1507–1508 [current offense involved gun; priors included violent felonies and 50 misdemeanors]; People v. Cline (1998) 60 Cal.App.4th 1327 , 1337–1338 [current offense for grand theft and priors included 12 residential burglaries].) 22  If Avila’s current offenses are not at the bottom of the well like the one in People v. Carmony, supra, 127 Cal.App.4th 1066 , they are certainly in that neighborhood. Neither do they place him alongside recidivists for whom a three strikes sentence is constitutional. Rather, given the relatively minor nature of Avila’s current conduct, his sentence rests on his prior offenses. There are, however, discernable gradations of culpability among prior offenses that must be accounted for when imposing sentence. (In re Grant (1976) 18 Cal.3d 1 , 10, 13.) His criminal record is worthy of exploration. Avila’s prior strikes occurred almost 30 years before his current crimes. The only crimes he committed involving actual violence were his first two, the second degree robbery and assault with a knife, which he committed on the same occasion in 1990 when he was 18 years old. He committed his third strike for second degree robbery in 1992, when he was 20 years old. His 1999 conviction of unlawful sexual intercourse with a minor involved a victim whom he married and with whom he had a child. 14 And his last felony conviction in 2008 was for drug possession, which would now be a misdemeanor. Avila’s drug addiction provides a backdrop to this criminal history. His status as a drug addict cannot itself be punished. (See U.S. Const., 14th Amend.; Robinson v. California (1962) 370 U.S. 660 , 667; In re Foss, supra, 10 Cal.3d at p. 921.) Conduct that drug addiction causes (e.g., use, possession, or sale) can be punished. (Foss, at p. 921.) These two truisms often intersect when it comes to punishment. 14 It is unclear whether they remain married. 23  The petitioner in In re Foss, supra, 10 Cal.3d at page 916, for example, was convicted of five counts of furnishing heroin in violation of the Health and Safety Code. He had a prior for possessing heroin that caused him to be sentenced to prison for 10 years to life without the possibility of parole for a period of not less than 10 years. (Ibid.) In considering the constitutionality of that recidivist provision precluding parole consideration for a mandatory minimum term, the court found that drug addiction was a “compelling consideration” in determining whether the punishment was cruel or unusual. (Id. at p. 923.) “Measured from the evolving standards of decency that mark the progress of a maturing society,” the court found that the mandatory minimum term was “cruel in its failure to consider the extent to which the addict’s repetition of proscribed behavior is attributable to his addiction.” (Ibid.; see In re Rodriguez (1975) 14 Cal.3d 639 , 655 [limited intelligence and inability to cope with inadequacies partly explained criminal conduct].) Foss thus supports the simple proposition that drug addiction is a factor to consider in relation to the nature of the offender. 15 In sum, the first Lynch technique shows that Avila’s sentence lacks proportionality to his crimes. B. Comparing punishments intrastate and interstate Lynch’s second and third techniques to determine disproportionality require comparing Avila’s punishment with those imposed for more serious offenses in California and in other jurisdictions. Avila thus argues that his third strike sentence 15To be clear, we do not cite Foss for the proposition that Avila cannot or should not be punished for his current crimes because he is a drug addict. 24 plus the determinate term is disproportionate to the sentence for attempted robbery, which carries a 16 months two- or three-year term (§ 213, subd. (b)). He also compares it to the nine-year maximum sentence for first degree robbery (§ 213, subd. (a)(1)(A)) and for carjacking (§ 215, subd. (b)). However, Avila was not sentenced just for his current offenses. He was sentenced as a habitual offender. As such, any comparison would be to sentences given to other recidivists, a comparison Avila has not undertaken. 16 As to national recidivist statutes, versions of California’s Three Strikes law are common, but California’s law has been among the “ ‘most extreme.’ ” 17 (People v. Sullivan, supra, 151 Cal.App.4th at p. 572.) For this reason, Avila acknowledges the difficulty in comparing three strikes schemes among states. It is unnecessary to establish disproportionality using all three Lynch techniques. (People v. Dillon, supra, 34 Cal.3d at p. 487, fn. 38.) Nonetheless, the evolving state of California’s criminal jurisprudence is relevant to an analysis of disproportionality and, hence, to what is cruel or unusual 16 Some courts have found the second Lynch technique inapplicable to three strikes cases because the defendant is being punished for the current offense and his recidivism. (See, e.g., People v. Sullivan, supra, 151 Cal.App.4th at pp. 571–572; People v. Cline, supra, 60 Cal.App.4th at p. 1338.) 17 The People point out that California’s Three Strikes law is not even the most extreme. Louisiana imposes life without the possibility of parole (LWOP) for a third felony when all three felonies are violent or a sex offense. (La. Rev. Stat. Ann. § 15– 529.1.) Mississippi imposes LWOP for a third felony if any of three felonies was violent. ( Miss. Code Ann. § 99 –19–83.) 25 punishment under our state constitution. Our Three Strikes law has undergone significant change. As originally enacted in 1994, “the Three Strikes law required that a defendant who had two or more prior convictions of violent or serious felonies receive a third strike sentence of a minimum of 25 years to life for any current felony conviction, even if the current offense was neither serious nor violent.” (People v. Johnson (2015) 61 Cal.4th 674 , 680.) Then, voters recognized that the Three Strikes law had strayed from their intent in passing it. Voters therefore passed Proposition 36, the Three Strikes Reform Act of 2012 “to restore the original intent of California’s Three Strikes law—imposing life sentences for dangerous criminals like rapists, murderers, and child molesters.” (Voter Information Guide, Gen. Elec. (Nov. 6, 2012) Prop. 36, § 1, p. 105.) To that end, a defendant now may be sentenced as a third striker only if the new felony is serious or violent. Additional changes to recidivist laws are afoot. Courts now have discretion to strike section 12022.5 and 12022.53 firearm enhancements (Sen. Bill No. 620 (2017–2018 Reg. Sess.) §§ 1, 2) and five-year enhancements under 667, subdivision (a) (Sen. Bill No. 1393 (2017–2018 Reg. Sess.) §§ 1, 2). One-year prison priors under section 667.5 are now limited to sexually violent offenses (Sen. Bill No. 136 (2019–2020 Reg. Sess.) § 1). Health and Safety Code section 11370.2 enhancements are now limited to prior convictions for sales of narcotics involving a minor in violation of Health and Safety Code section 11380 (Sen. Bill No. 180 (2017– 2018 Reg. Sess.) § 1). Other changes implicate California’s cruel or unusual jurisprudence. We have already observed the law’s fairly recent evolution in how we treat juvenile offenders. Thus, the Eighth 26 Amendment prohibits imposing the death penalty on juveniles (Roper v. Simmons (2005) 543 U.S. 551 ), LWOP on juveniles who commit nonhomicide offenses (Graham v. Florida (2010) 560 U.S. 48 ), and mandatory LWOP for juveniles (Miller v. Alabama (2012) 567 U.S. 460 ). Following that authority, our California Supreme Court has held that a de facto LWOP sentence for juvenile nonhomicide offenders violates the federal constitution (People v. Caballero (2012) 55 Cal.4th 262 ), as does a 50-years-to- life sentence for juvenile nonhomicide offenders (People v. Contreras (2018) 4 Cal.5th 349 , 356). Youth-related mitigating factors must be considered before imposing LWOP on a juvenile homicide offender. (§ 190.5; see generally People v. Gutierrez (2014) 58 Cal.4th 1354 .) In line with this evolution, our Legislature established a parole eligibility mechanism that provides a person serving a sentence for a crime committed as a youth a meaningful opportunity for release upon a showing of rehabilitation. (§ 3051.) Legislators are redefining culpability for various crimes. Senate Bill No. 1437 (Reg. Sess. 2017–2018) §§ 1–5) amended the mens rea requirement for murder, restricted the circumstances under which a person is liable for felony murder, and eliminated the natural and probable consequences doctrine as it relates to murder. A person convicted of murder under a felony murder or natural and probable consequences theory may petition for vacation of the conviction and resentencing if certain conditions are met. (§ 1170.95.) Senate Bill No. 1437 is part of a broad penal reform effort to ensure our murder laws fairly address a person’s individual culpability and to reduce prison overcrowding that partially resulted from lengthy sentences incommensurate to the individual’s culpability. Senate Bill No. 1437 thus effects a 27 sea change in sentences that have been and will be imposed on various offenders. The sum of these changes show that legislators and courts are reconsidering the length of sentences in different contexts to decrease their severity. Insofar as these changes speak to the second and third Lynch techniques, the changes suggest disproportionality in Avila’s sentence, one that even as a recidivist exceeds the punishment in California for second degree murder, attempted premeditated murder, manslaughter, forcible rape, and child molestation. We are aware that lengthy sentences like the one imposed on Avila have been common, especially when the Three Strikes law was at play. However, common is not synonymous with constitutional. What has become routine should not blunt our constitutional senses to what shocks the conscience and offends fundamental notions of human dignity. Crushing oranges, even for the purpose of trying to steal or to extort money, is not constitutionally worthy of the sentence imposed where, as here, the defendant’s criminal history on close examination cannot bear its share of such a sentence. Life in prison for destroying fruit, even when done by someone with a criminal record in the course of an attempted robbery, robs recidivist sentencing of its moral foundation and renders the solemn exercise of judicial authority devoid of meaning. There comes a time when the people who populate the justice system must take a fresh look at old habits and the profound consequences they have in undermining our 28 institutional credibility and public confidence. In Avila’s case, the time is now. 18 DISPOSITION The sentence is vacated, and the matter is remanded for resentencing with the direction to the trial court to strike two of Rene Avila’s prior strike convictions and to reconsider his sentence in light of the views expressed in this opinion. In all other respects, the judgment is affirmed. CERTIFIED FOR PARTIAL PUBLICATION. DHANIDINA, J. We concur: EDMON, P. J. EGERTON, J. 18 Because we remand for resentencing, we need not address Avila’s contention that fines and assessments the trial court imposed must be stricken under People v. Dueñas (2019) 30 Cal.App.5th 1157 . Further, on remand Avila may raise Senate Bill No. 1393, which allows a court to exercise its discretion to strike or to dismiss a serious felony prior for sentencing purposes. (Stats. 2018, ch. 1013, §§ 1, 2.) 29

2020-11-30 20:02:31.199565+00

http://www.courts.ca.gov/opinions/documents/D076513.PDF

Filed 11/30/20 CERTIFIED FOR PUBLICATION COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA CENTER FOR HEALTHCARE D076513 EDUCATION AND RESEARCH, INC., Plaintiff, Cross-defendant and Respondent, (Super. Ct. No. 37-2017- 00004475-CU-BC-CTL) v. INTERNATIONAL CONGRESS FOR JOINT RECONSTRUCTION, INC., Defendant, Cross-complainant and Appellant; MARK SACARIS, Cross-defendant and Respondent. APPEAL from a judgment of the Superior Court of San Diego County, Kenneth J. Medel, Judge. Reversed. Duckor Spradling Metzger & Wynne, Scott L. Metzger and William P. Keith for Defendant, Cross-complainant and Appellant International Congress for Joint Reconstruction, Inc.  Law Offices of Stephen B. Morris and Stephen B. Morris for Plaintiff and Respondent Center for Healthcare Education and Research, Inc., and Cross-defendant and Respondent Mark Sacaris. In 2009, the president of the International Congress for Joint Reconstruction, Inc. (ICJR) retained Mark Sacaris, part owner of the Center for Healthcare Education and Research, Inc. (CHE), to assist ICJR in producing medical education conferences on the subject of joint- reconstruction surgery. Their agreement was unwritten, and there was no discussion of the rates ICJR would be charged. Sacaris was given full control over ICJR’s money accounts as part of the arrangement. He was later made a chief operating officer (COO) and nonvoting director of ICJR. Sacaris provided all of the services ICJR required through CHE. He unilaterally set rates for these services, adding a markup on labor costs to create a profit for CHE and, indirectly, for himself. He used ICJR’s money accounts to pay CHE’s invoices without notifying ICJR’s board members of the amounts ICJR was being charged. Over time, and also without informing the board of ICJR, he increased the scope of CHE’s services to include developing ICJR’s websites and broadcasting live surgeries to ICJR conferences (despite CHE employees’ lack of necessary experience in these areas), and he arranged for CHE to manage symposia for pharmaceutical companies during ICJR conferences. Sacaris thereby created additional sources of profit for CHE, and indirectly for himself, but he did not disclose his interest in these arrangements to ICJR. In 2016, the board of ICJR was informed by Sacaris that ICJR had amassed a $2 million debt to CHE. ICJR terminated its relationship with Sacaris and CHE. CHE filed suit to recover amounts it claimed it was owed by ICJR under the agreement. ICJR filed a cross-action against Sacaris and 2 CHE in which it asserted they had secretly profited from their relationship with ICJR. ICJR sought, among other remedies, disgorgement of the profits CHE and Sacaris recovered in breach of their fiduciary duties, namely (1) their undisclosed charges for management services; (2) amounts by which they overcharged for web development services; (3) undisclosed profits from running symposia for pharmaceutical companies; and (4) undisclosed profits from broadcasting live surgeries. After a bench trial, the court issued a statement of decision in which it found ICJR liable to CHE for breach of contract. Although the court also found that CHE and Sacaris breached their fiduciary duties to ICJR in earning all four categories of the profits ICJR sought to disgorge, the court awarded ICJR recovery only as to categories two and four. The court denied ICJR disgorgement of the first category of profits because it found ICJR had failed to prove it suffered monetary damages from CHE and Sacaris’s undisclosed charges for management services. The court denied ICJR disgorgement of the third category of profits because it found ICJR failed to establish that running pharmaceutical symposia was an ICJR corporate opportunity CHE and Sacaris wrongfully usurped. On appeal, ICJR contends the trial court erred in determining that ICJR could not recover disgorgement of CHE and Sacaris’s profits from their undisclosed charges for management services without proof their breach of fiduciary duties caused ICJR to suffer monetary damages. ICJR also challenges the court’s determination that the symposia were not an ICJR corporate opportunity. We agree ICJR was not required to show it suffered monetary harm to establish a right to disgorgement of CHE and Sacaris’s profits from their undisclosed charges for event management services, and that the trial court 3 erred when it held otherwise. Because ICJR met its burden to establish a reasonable approximation of the amount by which CHE and Sacaris profited through their misconduct, the court was required to exercise its discretion to fashion a remedy. We will reverse the portion of the judgment affected by the error and remand so the trial court can determine the appropriate amount of the award of disgorgement. However, we reject ICJR’s claim that the court erred in determining that running symposia for pharmaceutical companies was not a corporate opportunity of ICJR. FACTUAL AND PROCEDURAL BACKGROUND A. Factual Summary 1 In 2008, a small number of nationally prominent orthopedic surgeons formed ICJR 2 for the purpose of presenting accredited continuing medical education conferences on the subject of joint-reconstruction surgery. It had become common in the years before ICJR’s formation for prosthetic device manufacturers to sponsor conferences, a practice that led to concerns over the conferences’ educational value and attracted the scrutiny of the United States Department of Justice under the Physician Payments Sunshine Act (42 U.S.C. § 1320a-7h), a reporting statute that requires medical device manufacturers to report transfers of value to physicians. The orthopedic 1 “We recite the facts in the manner most favorable to the judgment and resolve all conflicts and draw all inferences in favor of respondents. [Citation.] Conflicts in the evidence are noted only where pertinent to the issues on appeal.” (Meister v. Mensinger (2014) 230 Cal.App.4th 381 , 387 (Meister).) Because trial court’s factual findings are for the most part unchallenged, we derive our factual summary in large part from the court’s final statement of decision. 2 ICJR was originally organized under Illinois law but was subsequently reorganized as a California nonprofit corporation. 4 surgeons who established ICJR believed the quality and stature of medical education conferences about joint reconstruction surgery would be improved if the conferences were overseen by medical experts. The board members of ICJR were volunteers with active medical practices who lacked the time and business expertise to produce medical conferences. Shortly after ICJR was formed, its president, Dr. William Norman Scott, met Sacaris, whose employment history included organizing educational conferences and providing management support for pharmaceutical companies. Sacaris and his business partner, Steve Coley, provided these services through two companies, Tier One Corporation (Tier One) and CHE. Sacaris and Coley each owned half of the shares of Tier One. Tier One, in turn, owned CHE. Both Tier One and CHE were for-profit enterprises; Sacaris and Coley profited directly from the earnings of Tier One and indirectly from the income of CHE. Sacaris was the president of CHE and managed its day-to-day operations. He was also responsible for setting the billable hourly rates CHE charged its clients. Scott hired Sacaris in June of 2009 to coordinate and manage conferences for ICJR and ensure all logistical details necessary for a successful conference took place. Both men described this as a “handshake” agreement; there was never a written contract between Sacaris and ICJR. Moreover, Sacaris never provided, and Scott never requested, any information about the rates ICJR would be charged for his services. 3 3 The record contains very little information about the composition of ICJR’s board, its corporate bylaws or adherence to corporate formalities. ICJR’s board members would convene each year while attending another annual medical event. Sacaris claimed he provided financial updates during these meetings, although the record before us contains only two such updates, one relating to a single conference in Australia in 2014 and another covering the first eight months of 2013; neither mentions CHE. Sacaris also 5  From the beginning, Sacaris provided all of ICJR’s management service needs through CHE. At trial, the parties disputed whether ICJR had agreed to or was even aware of CHE’s participation. Sacaris testified that he viewed himself as an agent of CHE, and that in his mind, by retaining him, ICJR had also retained CHE. While he claimed to have disclosed CHE’s existence during conversations with Scott, his communications with the board were less than transparent. In two written updates sent to the full board in October 2013 and April 2014, he characterized CHE employees as being part of ICJR’s organizational structure. It was not until July 2014 that he first notified the full board of CHE’s existence. Scott testified he was aware of CHE from the start and associated it with Sacaris, but at trial he could not recall what he had understood about CHE’s role in the arrangement with ICJR at the time he retained Sacaris’s services. He also testified that he was not made aware that certain individuals Sacaris had hired to work for ICJR were actually employees of CHE. The trial court found, “based on [] Scott’s awareness of CHE, coupled with his failure to recall what he was told about CHE’s involvement,” that “ICJR did not prove that Dr. Scott was ignorant or unaware of CHE’s role in the management of ICJR throughout the chronology.” The parties do not challenge this finding. As part of the arrangement with ICJR, Sacaris was given full control over ICJR’s money accounts, including its checking account, for payment of testified that he spoke to Scott every month, to ICJR’s treasurer two or three times per year, to ICJR’s secretary once a year, and to another ICJR board member two or three times per year. The record is silent with regard to the authority each of these individuals possessed on behalf of ICJR. However, Scott appears to have exercised the greatest degree of oversight and control over Sacaris’s activities. 6 all invoices and expenses associated with ICJR’s conferences. As a result, Sacaris had the ability to prepare and adjust his own bill as manager of CHE, and then approve payment of CHE’s bill on behalf of ICJR, without the knowledge or approval of ICJR’s board of directors, a circumstance the court found “created an obvious conflict of interest.” Sacaris and CHE organized and ran conferences for ICJR from 2009 until 2016. As ICJR proposed conferences to Sacaris, Sacaris dispatched up to 11 CHE employees to do the work necessary to arrange them. Sacaris profited by funneling the services provided to ICJR through CHE. CHE employees, including Sacaris, billed for their services by the hour. As conferences were completed, Yana Drozdova, CHE’s accountant, would prepare internal worksheets for Sacaris that summarized the hourly rates, and number of hours billed, for every CHE employee. Sacaris, on behalf of CHE, would then increase the employees’ hourly rates by between 17 percent and 20 percent to reimburse CHE for its overhead expenses, and he would add an additional markup of up to 80 percent of the employees’ hourly rates to create a profit for CHE, and indirectly, for himself. 4 Sacaris did not disclose to ICJR that he was profiting by marking up its labor costs. 4 In 2013, this markup process raised CHE employees’ bottom-line hourly rates by 20 percent for CHE’s overhead, and an additional 80 percent for CHE’s profit margin. In 2014, the markups raised employees’ hourly rates by 17 percent for CHE’s overhead, and 70 percent for its profit margin. In 2015, Sacaris marked up employees’ hourly rates (including his own) by 17 percent for overhead, and between 30 percent and 55 percent for CHE’s profit margin; and in 2016, the rates were marked up by 17 percent for overhead and 55 percent for profit margin. In 2013, CHE billed over 9,000 hours to ICJR; in 2014, CHE’s hours for ICJR exceeded 6,800; in 2015, CHE billed over 17,000 hours to ICJR; and in 2016, CHE billed over 6,300 hours for services provided to ICJR. 7  Once Sacaris determined the amounts to be billed to ICJR, Drozdova would create an invoice. The resulting invoices were transmitted to no one other than Sacaris. Sacaris would then approve payment on behalf of ICJR and would direct Drozdova to issue payment to CHE out of ICJR’s checking account. In the trial court’s words, ICJR was thus kept “completely blind to the amounts billed by CHE for services and expenses as no invoice or billing information was ever submitted to any of the ICJR Board of Directors, including its president and treasurer.” Over time, Sacaris and CHE expanded the scope of the services they were providing to ICJR. Sacaris assigned CHE the work of developing and maintaining ICJR’s websites, even though CHE employees had little or no experience in website development, a fact Sacaris did not disclose to ICJR. As a result, ICJR was overbilled for website development services and was left without a working website. One feature of ICJR conferences was the live broadcast of joint replacement surgeries performed offsite at remote locations. Sacaris initially hired outside professionals to produce these broadcasts. Later, Sacaris convinced his business partner, Coley, to secretly form a new company called Live Surgery to perform the professional audio-visual work Sacaris had previously outsourced. Live Surgery was owned by Tier One, which meant Live Surgery’s profits were divided by Sacaris and Coley. After Live Surgery’s formation, Sacaris began assigning all of ICJR’s broadcasting needs to Live Surgery, never informing ICJR of his interest in the company. The quality of Live Surgery’s broadcasts was poor, which led conference attendees to complain and harmed ICJR’s reputation. Pharmaceutical companies approached Sacaris about the possibility of conducting brief symposia to promote their medications at opportune times 8 during ICJR conferences. Sacaris, on behalf of ICJR, granted permission for the symposia conditioned on the companies paying substantial honoraria to ICJR. However, without informing ICJR, Sacaris also arranged to have CHE run the symposia for the pharmaceutical companies, creating an additional source of profit for himself. In 2013, Sacaris was made a chief operating officer of ICJR and a nonvoting member of its board of directors. The change in Sacaris’s official role at ICJR had no corresponding effect on his billing practices. He continued to invoice ICJR, and pay CHE, without notifying anyone at ICJR other than himself. At times, there were insufficient funds in ICJR’s account to pay CHE’s invoices. When this occurred, CHE would advance the invoiced amounts with the expectation of being reimbursed by ICJR when its account was replenished. As time passed, ICJR’s debt to CHE grew. Despite grossing $20 million over the course of its relationship with Sacaris, ICJR began to operate at a loss. In February of 2016, Sacaris informed the board that ICJR had amassed a debt to CHE of $2 million and demanded payment. Not long after, a CHE employee shared concerns about CHE’s billing practices with members of the board. 5 In the trial court’s words, both pieces of information came as “a shock to Dr. Scott and the Board and led ICJR to . . . discover: (1) the details of Mr. Sacaris’s and CHE’s billing practices vis-[a]-vis ICJR, (2) that pharmaceutical companies had hired Mr. Sacaris and CHE to conduct and manage symposia held at ICJR conferences, and (3) that 5 The employee’s concerns included that he and other CHE employees were required to bill ICJR when they took time off, meaning ICJR was billed for hours that CHE employees did not actually work. 9 Mr. Sacaris and Mr. Cole[y,] through their company[,] Tier One[,] had formed a new company called Live Surgery to replace previous companies that had broadcast orthopedic surgeries from a remote location to ICJR conferences.” ICJR investigated CHE’s billing practices and terminated its relationship with Sacaris and CHE in January 2017 without paying the demand. It retained a new firm, a nonprofit entity called the Foundation for Orthopedic Research and Education (FORE), to replace CHE. B. Procedural Background On February 3, 2017, CHE filed a form complaint against ICJR that stated a single cause of action for breach of contract and sought $2,400,000 in damages. ICJR, in turn, filed a cross-complaint against both CHE and Sacaris, alleging that Sacaris, through CHE, had secretly profited from Sacaris’s relationship with ICJR. ICJR asserted causes of action against Sacaris and CHE for breach of fiduciary duty, fraud, negligence, conversion, violation of Business and Professions Code section 17200, constructive trust, and accounting. In its prayer for relief, ICJR sought to recover damages as well as “disgorgement and restitution of all profits and gains obtained by [CHE and Sacaris’s] illegal and improper acts and omissions,” among other remedies. 1. Trial The action and cross-action were tried in a four-day bench trial in January 2019. At trial, ICJR offered little opposition to CHE’s breach of contract claim apart from noting that CHE appeared to have duplicated an item of its alleged damages (hotel costs of $133,799). Instead, ICJR focused on offsetting CHE’s damages by recovering under its cross-claims. ICJR identified four ways in which CHE and Sacaris had allegedly breached their duties to ICJR under the cross-claims and 10 sought disgorgement of the undisclosed profits recovered through each form of misconduct. These four categories of wrongdoing and associated relief were: (1) the profits CHE and Sacaris earned from the management services provided to ICJR, on the theory that their failure to disclose the amounts they were charging or compensating themselves for their services breached their fiduciary duties to ICJR; (2) the amount by which CHE and Sacaris overbilled ICJR for managing and developing ICJR’s websites, without disclosing their fees or their employees’ lack of necessary website development experience; (3) the amount by which CHE and Sacaris profited by assisting pharmaceutical companies with mid-conference symposia, without disclosing this arrangement to ICJR; and (4) the amount by which Sacaris profited by running ICJR’s live surgery broadcasts through Live Surgery, while actively concealing his interest in Live Surgery from ICJR. ICJR designated Robert Taylor, a certified public accountant and business valuation expert, to review CHE’s financial records and opine as to the dollar value of each of these four categories of recovery. Taylor testified that between 2013 and 2016, 6 CHE (and indirectly, Sacaris) had (1) created profits of $1,430,260 for the event management services CHE provided to ICJR by marking up their hourly labor rates; (2) overbilled ICJR by $800,000 for managing and developing ICJR’s websites (a calculation also supported by the opinion of a website development expert); (3) earned net profits of 6 ICJR sought to recover amounts CHE and Sacaris earned during the four-year period preceding the filing of its cross-complaint, which corresponds to the four-year statute of limitations that applies to a cause of action for breach of fiduciary duty. (Code of Civ. Proc., § 343; Manok v. Fishman (1973) 31 Cal.App.3d 208 , 213.) 11 $608,027 for assisting pharmaceutical companies with symposia during ICJR conferences; and (4) profited by $73,310 from the operations of Live Surgery. CHE and Sacaris did not dispute the accuracy of these figures. However, Sacaris testified that CHE’s rates were reasonable, and Sacaris and Drozdova each testified that the rates CHE charged ICJR were lower than the rates it charged other clients. These assertions were unaccompanied by supporting documents or other corroborating evidence. The parties filed requests for a statement of decision. On May 9, 2019, the court issued a tentative statement of decision to which ICJR objected, including on the grounds it now asserts on appeal. On May 31, 2019, the court held a hearing on ICJR’s objections. 2. Statement of Decision On June 21, 2019, the trial court issued its final statement of decision, which was substantially unchanged from its tentative statement of decision. The court found in favor of CHE on its breach of contract claim and awarded $2,299,259.42 in damages, representing the amount requested by CHE minus the duplicative item contested by ICJR. The court then considered whether ICJR had proven its cross-claims by separately analyzing the factual and legal merits of each of its four theories of wrongdoing and associated remedies. (i) Income Received Directly by CHE and Indirectly by Sacaris for Management Services Provided to ICJR The trial court denied ICJR recovery under its first theory of wrongdoing. Although it found that CHE and Sacaris were managers, and thus fiduciaries, of ICJR throughout their relationship with ICJR, that Sacaris’s fiduciary duties were heightened once he became a COO and director of ICJR, and that CHE and Sacaris breached their fiduciary duties throughout their relationship by failing to disclose any information about the 12 amounts they were charging ICJR, and compensating themselves, for their services, it also found that ICJR failed to prove it was overcharged and thus suffered economic damages from the breach. (ii) Web Development The court found CHE and Sacaris breached their fiduciary duties by failing to disclose the amounts they were charging ICJR for website work and their lack of necessary experience in web development. The court awarded ICJR $800,000 on this claim, finding ICJR succeeded in proving it was overbilled by this amount for website development work. (iii) Pharmaceutical Symposia The court denied ICJR recovery based on CHE’s and Sacaris’s failure to disclose that they were managing, and profiting from, the pharmaceutical company symposia. The court found that while Sacaris and CHE breached their fiduciary duties by failing to disclose to ICJR that they had agreed to manage the symposia, that ICJR suffered no harm from the nondisclosures since organizing symposia for pharmaceutical companies was not an opportunity ICJR would have considered for itself. (iv) Live Surgery The court found Sacaris and CHE breached their fiduciary duties and defrauded ICJR by actively concealing Sacaris’s interest in Live Surgery, of which he was a de facto owner through his half ownership of Tier One. It awarded ICJR $73,310 for this misconduct, finding this was the amount by which Sacaris had profited through Live Surgery. 3. Judgment On August 29, 2019, the court entered judgment (1) in favor of CHE on CHE’s cause of action for breach of contract in the amount of $2,299,259.42; (2) in favor of ICJR and against Sacaris and CHE as to ICJR’s cross-claim for 13 breach of fiduciary duty (first cause of action) relating to website overbilling, in the amount of $800,000; (3) in favor of ICJR and against Sacaris and CHE as to ICJR’s cross-claims for breach of fiduciary duty and fraud (first through third causes of action), pertaining to amounts billed through Live Surgery, in the amount of $73,310.00; (4) in favor of CHE and Sacaris and against ICJR as to ICJR’s cross-claims for breach of fiduciary duty and fraud (first through third causes of action) based on ICJR’s remaining theories of recovery; (5) dismissing ICJR’s fourth cause of action for negligence; and (6) in favor of CHE and Sacaris and against ICJR on the remainder of the causes of action asserted in ICJR’s cross-complaint. The court awarded prejudgment interest in amounts stipulated by the parties and declared that neither side was the prevailing party as it pertained to costs. DISCUSSION A. The Trial Court Erred in Finding ICJR Failed to Establish a Right to Disgorgement of the Profits CHE and Sacaris Recovered in Breach of Their Duties as Fiduciaries of ICJR 1. Additional Background The trial court’s statement of decision thoroughly details its factual and legal findings relating to ICJR’s cross-claim for disgorgement of the profits CHE and Sacaris recovered through their practice of charging and compensating themselves for management services without full disclosure to ICJR. Rather than summarize the court’s comprehensive findings, we set forth in full the relevant portions of the court’s decision. “The Court finds that Mr. Sacaris and CHE had fiduciary duties to ICJR from the outset, both as the manager of ICJR’s business and later in Mr. Sacaris’[s] role as both ICJR’s [COO] and [director]. [Citations.] Both Mr. Sacaris and CHE breached their fiduciary duties from the beginning and throughout the chronology by never disclosing to the Board of Directors, 14 including President[] Dr. Scott, the fundamental, bottom-line, hourly billing rates CHE would and did charge ICJR for its services. Such information should have included Mr. Sacaris’s billing rate, the billing rate of any other CHE employees who might work on these conferences, the periodicity of billing, a bottom line charge for overhead, and perhaps a rough calculation of anticipated expenses for conferences in general. “CHE (Sacaris) was not a common independent contractor detached from ICJR with no fiduciary responsibilities. Quite the contrary, Mr. Sacaris had exclusive control of ICJR’s finances, exclusive even to ICJR. [Citations.] Mr. Sacaris should have recognized the obvious conflict of interest of both billing for CHE and approving and paying his own bill [on] behalf of ICJR. CHE (Sacaris) should have promptly and regularly provided the ICJR Board with a summary of all CHE invoices and expenses, including the hourly charges of all CHE employees and overhead charges. ICJR should also have received more frequent, perhaps quarterly reports on its financial status. This fiduciary duty was heightened, not abrogated, when Mr. Sacaris became the [COO] and a Non-Voting member of the Board of Directors because in his role as COO the conflict of interest persisted. [¶] . . . [¶] “Nonetheless, the [c]ourt finds that Mr. Sacaris and CHE as fiduciaries were not required to disclose to ICJR exactly how CHE computed or arrived at the bottom line hourly rate of either Mr. Sacaris or CHE employees. CHE was not required to tell ICJR about the 40 [percent] to 80 [percent] mark-up on CHE’s employee hours and the 17-20 [percent] ‘overhead’ mark-up applied to employee hours billed. Employing common sense and experience, the Court believes that few, if any, service providers provide their clients or customers precise information on how exactly they profit by disclosing details about worker salary, overhead, or product mark-up. Even [fiduciaries] with 15 heightened duties of care, such as investment advisors, and at times, accountants and attorneys do not commonly reveal to their clients exactly how they arrived at their fee structure, their measure of profits, or how overhead charges are calculated. “Even absent those details, had CHE provided the bottom line employee hourly billing rate, plus any other incidental charges (such as the amount charged for overhead) that augmented the bottom line, as well as an estimate of conference expenses, and thereafter provided routine invoices to ICJR, those measures would have triggered ICJR’s obligation to scrutinize and investigate any irregularity in the billing and take . . . appropriate action. Yes, ICJR behaved throughout the chronology as if unconcerned about these details, but that did not obviate CHE’s (Sacaris’s) fundamental fiduciary duty of disclosure. “As to damages, the [c]ourt heard no evidence that the management services (other than web development) provided by CHE or ICJR and the expenses charged, exceeded what other like service providers would have charged ICJR. Mr. Jason Heath, a former CHE employee[,] testified as to his concerns about the hourly employee mark-ups, concerns that motivated him to warn ICJR of possible overbilling. But Ms. Drozdova, CHE’s accountant, testified that all other CHE clients were charged a higher billing rate. Mr. Sacaris testified that his services overall were provided at or below market rate. ICJR presented no expert testimony that would suggest that CHE’s billing was extraordinary, except for the web development. Consequently, ICJR did not prove that it suffered any harm or loss. [¶] . . . [¶] “Without harm or loss, ascertainable or incalculable, without secret profit or tortious gain, no remedy is available for the breach of fiduciary duty. 16 [Citation.] Neither damages for unjust enrichment nor disgorgement are appropriate to this claimed breach of fiduciary duty. There is no proof . . . that the failure to disclose caused harm, an element of . . . breach of fiduciary duty . . . .” 2. Contentions on Appeal ICJR contends that once the trial court found CHE and Sacaris breached their fiduciary duties to ICJR, it erred as a matter of law when it held ICJR was required to present evidence it suffered monetary harm or loss from the breach in order to recover. 7 ICJR argues that when a principal seeks disgorgement of a fiduciary’s secret profits, the appropriate measure of the damages resulting from the breach of fiduciary duties is the amount of the fiduciary’s wrongfully-acquired profits. ICJR maintains that once it established that CHE and Sacaris breached their fiduciary duties, and the amount by which CHE and Sacaris directly and indirectly profited from the breach, under Meister, supra, 230 Cal.App.4th 381 , the court was required to fashion a remedy. CHE and Sacaris argue the court’s decision should be reviewed for an abuse of discretion. They also argue the court correctly determined their profits were not “secret” and therefore not subject to disgorgement. 7 As we have noted, ICJR only challenges the trial court’s finding that it failed to establish a right to recovery under its cross-claim for breach of fiduciary duties. ICJR does not dispute the court’s determination that CHE and Sacaris were not liable under the other causes of action in the cross- complaint. We limit our review accordingly. (See Tiernan v. Trustees of Cal. State University & Colleges (1982) 33 Cal.3d 211 , 216, fn. 4 [party deemed to have abandoned a position asserted in the trial court but not renewed on appeal]; accord Eck v. City of Los Angeles (2019) 41 Cal.App.5th 141 , 146. 17  3. Standard of Review The trial court’s selection of the rule governing ICJR’s cross-claim for breach of fiduciary duties raises a question of law that we review independently. (Kellogg v. Garcia (2002) 102 Cal.App.4th 796 , 802.) ICJR’s appeal additionally challenges the court’s determination that it failed to sustain its burden of proof on an element of its cross-claim. “ ‘When the trier of fact has expressly or implicitly concluded that the party with the burden of proof failed to carry that burden and that party appeals, it is somewhat misleading to characterize the failure-of-proof issue as whether substantial evidence supports the judgment . . . . Thus, where the issue on appeal turns on a failure of proof at trial, the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law. [Citations.] Specifically, the question becomes whether the appellant’s evidence was (1) “uncontradicted and unimpeached” and (2) “of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.” ’ ” (Meister, supra, 230 Cal.App.4th at p. 395, quoting Shaw v. County of Santa Cruz (2008) 170 Cal.App.4th 229 , 279.) 4. Analysis We conclude that the trial court erred when it held ICJR could not recover on its cross-claim for breach of fiduciary duties in the absence of evidence it suffered economic harm from the breach. Because ICJR was seeking the equitable remedy of disgorgement of secret profits, not the legal remedy of compensatory damages, ICJR was not required to show it suffered pecuniary harm to establish a right to disgorgement of the profits CHE and Sacaris earned from their misconduct. 18  A claimant pursuing a cause of action for breach of fiduciary duties “ha[s] the right to elect the kind of relief they seek.” (Hicks v. Clayton (1977) 67 Cal.App.3d 251 , 265 (Hicks).) The available relief includes damages or any of a “variety of equitable remedies,” including disgorgement of profits. (Meister, supra, 230 Cal.App.4th at p. 396; Hicks, at pp. 264-265; Haurat v. Superior Court (1966) 241 Cal.App.2d 330 , 334 [“The principal has a cause of action either for a breach of contract or for a tort as a remedy for damage caused by the violation of any duty of loyalty on the part of an agent. He may also charge the agent with anything the agent receives as the result of a violation of duty.”].) The aim of these equitable remedies is to enforce the high standards of conduct to which a fiduciary must be held. “The animating principle of a fiduciary’s duties to his charges is unfaltering loyalty and honesty. ‘Many forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the “disintegrating erosion” of particular exceptions [citation]. Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd.’ ” (Feresi v. The Livery, LLC (2014) 232 Cal.App.4th 419 , 425- 426 (Feresi), quoting Meinhard v. Salmon (1928) 249 N.Y. 458 , 464.) “ ‘When agents and others, acting in a fiduciary capacity, understand that these rules will be rigidly enforced, even without proof of actual fraud, the honest will keep clear of all dealings falling within their prohibition, and those 19 dishonestly inclined will conclude that it is useless to exercise their wits in contrivances to evade it.’ ” (Farmers’ & Merchants’ Bank of Los Angeles v. Downey (1879) 53 Cal. 466 , 468-469, quoting Bain v. Brown (1874) 56 N.Y. 285 , 288-289.) Notably, “[d]isgorgement as a remedy is broader than restitution or restoration of what the plaintiff lost.” (Meister, supra, 230 Cal.App.4th at p. 398.) “ ‘The emphasis is on the wrongdoer’s enrichment, not the victim’s loss. In particular, a person acting in conscious disregard of the rights of another should be required to disgorge all profit because disgorgement both benefits the injured parties and deters the perpetrator from committing the same unlawful actions again. [Citations.]’ ” (Id. at pp. 398-399, quoting County of San Bernardino v. Walsh (2007) 158 Cal.App.4th 533 , 542-543 (County of San Bernardino).) Thus, while “[t]he elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach” (Meister, supra, 230 Cal.App.4th at p. 395), a principal seeking disgorgement of a fiduciary’s wrongful gains is not required to prove it suffered economic damage from the breach in order to recover. “Where a person profits from transactions conducted by him as a fiduciary, the proper measure of damages is full disgorgement of any secret profit made by the fiduciary regardless of whether the principal suffers any damage.” (County of San Bernardino, supra, 158 Cal.App.4th at p. 543.) “ ‘[W]here an agent is guilty of concealment or nondisclosure of material facts relating to the subject matter of the agency, he forfeits his right to compensation. It is not necessary that actual injury to the principal be shown’ 20 (emphasis added). [Citation.]” (J.C. Peacock, Inc. v. Hasko (1961) 196 Cal.App.2d 353 , 358 (J.C. Peacock, Inc.).) 8 Instead, where an aggrieved principal seeks disgorgement as a remedy for a breach of fiduciary duties, “ ‘[t]he party seeking disgorgement “has the burden of producing evidence permitting at least a reasonable approximation of the amount of the wrongful gain. . . .” ’ ” (Meister, supra, 230 Cal.App.4th at p. 399, quoting Uzyel v. Kadisha (2010) 188 Cal.App.4th 866 , 894 (Uzyel).) “ ‘[P]rofit includes any form of use value, proceeds, or consequential gains [citation] that is identifiable and measurable and not unduly remote.’ ” (Meister, at p. 399, quoting Rest.3d Restitution and Unjust Enrichment, § 51, subd. (5)(a).) The burden then shifts to the fiduciary to “present evidence of costs, expenses, and other deductions to show the actual or net benefit the [fiduciary] received.” (Meister, at p. 399.) “[T]he ‘ “residual risk of uncertainty in calculating net profit is assigned to the wrongdoer.” ’ ” (Ibid., quoting Uzyel, at p. 894.) An action for disgorgement of a fiduciary’s wrongful gains is sometimes referred to as seeking recovery of “secret profits.” “Secret profits” consist of all benefits an agent acquires from the agency in excess of the agent’s agreed compensation. (Savage v. Mayer (1949) 33 Cal.2d 548 , 551; see Bardis v. Oates (2004) 119 Cal.App.4th 1 , 11, 13 (Bardis) [partner violated partnership 8 The Restatement Third of Agency further explains that “[t]he requirement that a principal establish damage is inconsistent with a basic premise of remedies available for breach of fiduciary duty, which is that a principal need not establish harm resulting from an agent’s breach to require the agent to account. The requirement may also tempt an agent to undertake conduct that breaches the agent’s fiduciary duty in the hope that no harm will befall the principal or that, if it does, the principal will be unable to establish it or unable or unwilling to expend the necessary resources required to litigate the question.” (Rest.3d Agency, § 8.01, com. d(2).) 21 agreement and fiduciary duties by using a “dummy middleman” company to secretly mark up partnership invoices and collect the resulting profits].) Breach of the duties of loyalty and full disclosure may justify forfeiture of all income. (J.C. Peacock, Inc., supra, 196 Cal.App.2d at p. 358.) “An agent’s breach of fiduciary duty is a basis on which the agent may be required to forfeit commissions and other compensation paid or payable to the agent during the period of the agent’s disloyalty.” (Rest.3d Agency § 8.01, subd. (d)(2).) Here, there was no agreement as to the amount of Sacaris’s (or CHE’s) compensation. Sacaris, on behalf of CHE, nevertheless proceeded to set CHE’s rates, and compensate CHE, without adequate disclosure to the board of ICJR. This course of conduct breached the duties of loyalty and full disclosure. As the Restatement Third of Agency explains, “[a]n agent . . . is not free to exploit gaps or arguable ambiguities in the principal’s instructions to further the agent’s self-interest, or the interest of another, when the agent’s interpretation does not serve the principal’s purposes or interests known to the agent. This rule for interpretation by agents facilitates and simplifies principals’ exercise of the right of control because a principal, in granting authority or issuing instructions to an agent, does not bear the risk that the agent will exploit gaps or ambiguities in the principal’s instructions.” (Rest.3d Agency, § 1.01, com. e.) Moreover, “[i]f an agent acts on behalf of the principal in a transaction with the agent, the agent’s duty to act loyally in the principal’s interest conflicts with the agent’s self-interest. Even if the agent’s divided loyalty does not result in demonstrable harm to the principal, the agent has breached the agent’s duty of undivided loyalty.” (Id., § 8.03, com. b; see Trafton v. Youngblood (1968) 69 Cal.2d 17 , 26-28 (Trafton) [attorney breached fiduciary duties and gained advantage over client by unilaterally 22 determining his fee and withdrawing funds held in trust to satisfy fee without first notifying client].) By breaching their fiduciary duties and compensating themselves from ICJR’s accounts without adequate disclosure or board approval, Sacaris, and thus CHE, risked that some or all of their compensation would be disgorged. In concluding that ICJR failed to establish a right to recovery, the trial court thus erred in two respects. First, having found that CHE and Sacaris were fiduciaries of ICJR and that they breached their fiduciary duties throughout their relationship with ICJR, the court erred when it held ICJR could not recover for the breach without evidence CHE’s and Sacaris’s misconduct resulted in it being overcharged for their services. Because ICJR was pursuing the equitable remedy of disgorgement and not the legal remedy of damages, it was not required to prove it suffered such pecuniary damage or loss in order to recover. (Meister, supra, 230 Cal.App.4th at p. 396 [damages are “the quantification of detriment suffered by a party”].) Instead, ICJR had the burden to prove a “reasonable approximation” of the benefit CHE and Sacaris gained from the breach of their fiduciary duties, a burden which, as we discuss post, it sustained. Second, in concluding that CHE and Sacaris did not recover “secret profits” through the breach of their fiduciary duties, the trial court misperceived the concept of “secret profits.” The “secret profits” subject to disgorgement are simply the fiduciary’s undisclosed earnings. “There can be no secret profits allowed to the trustee, inasmuch as it owes to the beneficiary the duty of fullest disclosure of all material facts.” (Van de Kamp v. Bank of America (1988) 204 Cal.App.3d 819 , 835; see Roberts v. Lomanto (2003) 112 Cal.App.4th 1553 , 1570 [broker’s $1.2 million assignment fee was “a form of compensation to her that was not disclosed to [her client] until after the sale” 23 and thus was “by definition a secret profit”]; Crogan v. Metz (1956) 47 Cal.2d 398 , 405 [holding that where “the whole transaction was tainted by a breach of duty” the entirety of the resulting profits “may be recovered as secret profits from those who jointly received it while acting in concert in a fiduciary relationship”].) The court’s conclusion that CHE and Sacaris recovered no “secret profits” from the breach of their fiduciary duties appeared to be derived from its earlier determination that since professionals generally do not share the calculations underlying their hourly rates, CHE and Sacaris were likewise not required to inform ICJR that the rates they charged ICJR for their labor included profit markups of 40 percent to 80 percent and overhead markups of 17 percent to 20 percent. Although on appeal ICJR challenges the court’s analogy to the billing practices of other professionals, this misses the point. Whether or not CHE and Sacaris were required to disclose their profit markups directly by openly sharing the calculations underlying their hourly rates, the court’s findings of breach reflected a determination that they were nevertheless required to disclose the markups indirectly by disclosing their hourly rates to ICJR as well as the overall amounts they were charging, and compensating themselves, for their services. It was the failure to disclose any of this bottom-line information that made their resulting profits “secret” for purposes of the rules governing disgorgement. CHE and Sacaris characterize certain comments made by the trial court during a posttrial hearing as reflecting a finding that Scott, and thus ICJR, were generally aware Sacaris and CHE were profiting from their services. However, the findings subject to appellate review are those set forth in court’s statement of decision (Thompson v. Asimos (2016) 6 Cal.App.5th 970 , 981-982), and the trial court’s statement of decision contains no such 24 finding. Instead, the court expressly found in its statement of decision that CHE and Sacaris breached their duties by failing to disclose any information about the amount of their charges, which encompassed their profits. Moreover, even if the court had made such a finding, ICJR’s assumption that CHE and Sacaris were working for a profit did not excuse their failure to disclose their actual fees and charges before compensating themselves from ICJR’s accounts. (Trafton, supra, 69 Cal.2d at pp. 26-28.) 9 5. Conclusion Once ICJR demonstrated that CHE and Sacaris breached their fiduciary duties, to establish a right to recover in disgorgement, ICJR had the burden of producing evidence “ ‘permitting at least a reasonable approximation’ ” of their wrongful gain. (Meister, supra, 230 Cal.App.4th at p. 399.) “[T]he unjust enrichment . . . of a defaulting fiduciary without regard to notice or fault, is the net profit attributable to the underlying wrong.” (Rest.3d Restitution and Unjust Enrichment, supra, § 51, subd. (4), italics added.) “This profit-based measure of unjust enrichment determines 9 Several days before oral argument, counsel for CHE and Sacaris submitted a letter under California Rules of Court, rule 8.254(a) and (b), notifying this court of counsel’s intention to cite to DeGarmo v. Goldman (1942) 19 Cal.2d 755 , 764 (DeGarmo) during his oral presentation. We reject counsel’s request to rely on DeGarmo because as a case published in 1942, it falls outside the scope of rule 8.254, which only allows for citations to “new authority.” And even if we were to consider DeGarmo, it would not alter our decision. The cited portion of the DeGarmo opinion relates to the equitable defense of unclean hands, yet there is no indication CHE or Sacaris pursued an unclean hands defense at trial or sought a ruling on the defense in the trial court’s statement of decision. Accordingly, the defense is not available to them on appeal. (Bardis, supra, 119 Cal.App.4th at p. 13, fn. 6 [“New theories of defense, just like new theories of liability, may not be asserted for the first time on appeal.”]; Moriarty v. Carlson (1960) 184 Cal.App.2d 51 , 57- 58.) 25 recoveries against conscious wrongdoers and defaulting fiduciaries. Recovery so measured may potentially exceed any loss to the claimant.” (Id., com. a.) Moreover, “ ‘[p]rofit includes any form of use value, proceeds, or consequential gains [citation] that is identifiable and measurable and not unduly remote.’ ” (Meister, supra, 230 Cal.App.4th at p. 399, quoting Rest.3d Restitution and Unjust Enrichment, § 51, subd. (5)(a).) ICJR submitted uncontradicted evidence in form of its expert accountant’s testimony establishing that CHE’s and Sacaris’s undisclosed charges for management services earned them $1,430,260 in profits from ICJR between 2013 and 2016. 10 Under the foregoing rules, this evidence was sufficient to meet ICJR’s burden of proof and establish a right to a recovery. “ ‘Judicial discretion to grant relief becomes judicial duty to grant it under some circumstances, and the grace which equity should bestow then becomes a matter of right . . . .’ ” (Meister, supra, 230 Cal.App.4th at p. 396, quoting Hicks, supra, 67 Cal.App.3d at p. 265.) Having met its burden of proof, ICJR was entitled to have the trial court fashion a remedy. The court never reached this point because it erroneously concluded ICJR had failed to establish a right to recovery. ICJR requests that rather than remand to the trial court for further proceedings, that we modify the judgment to award ICJR $1,430,260 on this claim and affirm the modified judgment. “Whenever an appellate court may make a final determination of the rights of the parties from the record on appeal, it may, in order to avoid subjecting the parties to any further delay or expense, modify the judgment and affirm it, rather than remand for a new determination.” (Sagadin v. Ripper (1985) 175 Cal.App.3d 1141 , 1170.) Although ICJR correctly asserts that its profit figure of $1,430,260 was 10 See footnote 6, ante. 26 uncontroverted, it does not necessarily follow that we can make a final determination that ICJR is entitled to recover this amount. The trial court possesses substantial discretion to balance the equities and fashion the award it deems appropriate. We will therefore remand so the court can conduct such further proceedings as it deems necessary to enable it to exercise its discretion in the first instance and determine the amount of profits to be disgorged from CHE and Sacaris. To guide the trial court upon remand, we note the following. First, while the court retains considerable discretion to determine the appropriate amount of an award of disgorgement, its discretion is not unfettered. “ ‘ “[T]he public policy of this state does not permit one to ‘take advantage of his own wrong’ ” regardless of whether the other party suffers actual damage.’ ” (Meister, supra, 230 Cal.App.4th at p. 398, quoting County of San Bernardino, supra, 158 Cal.App.4th at p. 542.) Disgorgement is meant, in part, to have a deterrent effect and ensure fiduciaries are held to a standard “ ‘stricter than the morals of the market place.’ ” (Feresi, supra, 232 Cal.App.4th at p. 426.) The court’s statement of decision is a scathing indictment of years of misconduct by Sacaris and CHE. On this record, denying ICJR a recovery altogether would fail to recognize the seriousness of their wrongdoing and would fall short of achieving the goal of deterring future misconduct. Second, if the court, in the exercise of its discretion, wishes to consider reducing ICJR’s recovery by amounts it finds CHE and Sacaris can retain without being unjustly enriched, it is CHE and Sacaris, and not ICJR, who bear the burden to present evidence demonstrating the reasonableness of the amounts they charged ICJR for their management services. (Meister, supra, 230 Cal.App.4th at p. 399.) The testimonial assertions of Sacaris and 27 Drozdova offered at trial regarding the reasonableness of CHE’s hourly rates failed to fully address this issue. The reasonableness of professional charges is more than a matter of hourly rates. Professional invoices can also be inflated by overstaffing and by billing an unreasonable number of hours, among other practices. (See generally State Bar of Cal., Com. on Mandatory Fee Arbitration, Arbitration Advisory 2016-02, Analysis of Potential Bill Padding and Other Billing Issues (Mar. 25, 2016).) Furthermore, because CHE and Sacaris are assigned the “residual risk of uncertainty” in the determination of profits subject to disgorgement (Uzyel, supra, 188 Cal.App.4th at p. 894), any doubts as to the reasonableness of their charges must be resolved in favor of ICJR. B. Pharmaceutical Symposia The trial court found CHE and Sacaris breached their fiduciary duties by failing to disclose to the board of ICJR that they were managing the pharmaceutical company symposia that took place during ICJR conferences and profiting by doing so, and by failing to obtain board approval for their engagement. However, the court concluded that running the symposia was not a corporate opportunity ICJR would have taken for itself, and that ICJR was therefore not harmed by, and could not recover for, the nondisclosures. On appeal, ICJR focuses on its purported right to recovery under the corporate opportunity doctrine. 11 ICJR disputes the court’s determination 11 The fiduciary duty of full disclosure and fiduciary duty to avoid usurpation of corporate opportunities are distinct obligations. (See 3 Fletcher Cyc. Corp. (Sept. 2019) §§ 861.10 [Corporate opportunity doctrine], 837.70 [Duty of full disclosure].) ICJR does not challenge whether, having found Sacaris and CHE responsible for breach of the fiduciary duty of disclosure, the court’s harm analysis should have focused on the harm that flowed from the nondisclosure, which is not necessarily identical to the harm created by ICJR’s loss of a corporate opportunity. (See Meister, supra, 230 Cal.App.4th 28 that the symposia were not within ICJR’s line of business and argues the court ignored evidence that CHE used ICJR’s resources (including hotel conference rooms booked by ICJR and medical faculty enlisted by ICJR to lead conference seminars) to put on the symposia. Citing several out-of-state cases, ICJR contends this evidence compelled the conclusion that the symposia were an ICJR corporate opportunity that CHE and Sacaris wrongfully usurped. The corporate opportunity doctrine “prohibits one who occupies a fiduciary relationship to a corporation from acquiring, in opposition to the corporation, property in which the corporation has an interest or tangible expectancy or that is essential to its existence.” (3 Fletcher Cyc. Corp. (Sept. 2019) Corporate Opportunity Doctrine, § 861.10.) Whether or not a given corporate opportunity was wrongfully usurped is a question of fact to be determined from the facts and surrounding circumstances existing at the time the opportunity arises. (Kelegian v. Mgrdichian (1995) 33 Cal.App.4th 982 , 989 [“California recognizes this [corporate opportunity] doctrine and also recognizes that whether or not a corporate opportunity exists is primarily a factual question”].) “ ‘Three tests have been recognized as standards for identifying a corporate opportunity: the “line of business” test, the “interest or expectancy” test, and the “fairness” test. Under any test, a corporate opportunity exists when a proposed activity is reasonably incident to the corporation’s present or prospective business and is one in which the corporation has the capacity to engage . . . . [Citation.]’ ” (Id. at p. 988.) at p. 401 [“[T]he remedy chosen by the trial court must be linked to a particular breach of fiduciary duty . . . .”].) Accordingly, we do not address this issue. 29  Substantial evidence supported the trial court’s determination that managing the pharmaceutical company symposia was not an ICJR corporate opportunity. The court reasoned there was no indication ICJR “would have been remotely interested” in producing the symposia and would have had to outsource management of the symposia to another event planning organization if not CHE. This reasoning was grounded in the trial evidence, including the testimony of Dr. Scott, who testified ICJR did not have the necessary personnel or expertise to plan or produce educational conferences without outside help. ICJR concedes as much, arguing it “was capable of engaging vendors to run its other symposia” and had “the capacity to do the same here.” Contrary to ICJR’s assertions, CHE’s use of ICJR resources to run the symposia did not, on its own, compel the conclusion the symposia were an ICJR business opportunity. The out-of-state cases on which ICJR relies stand for the proposition that a corporate fiduciary who uses corporate funds or other assets to develop a corporate opportunity will be estopped from arguing the corporation lacked sufficient money or resources to develop the opportunity. (Guth v. Loft (1939) 23 Del.Ch. 255 ; Graham v. Mimms (1982) 111 Ill.App.3d 751 ; In re Trim-Lean Meat Products, Inc. (Bankr. Del. 1980) 4 B.R. 243 , 247 (Trim-Lean).) These cases nevertheless adhere to the rule that “[t]he basic question in all cases is whether the director has appropriated something for himself that, in all fairness, should belong to the corporation.” (Trim-Lean, at p. 247.) ICJR’s argument and cited authorities fail to establish that the trial court erred. The court’s determination that the symposia did not present a business opportunity for ICJR was not based on its lack of available resources so much as its lack of demonstrated corporate ability or interest in planning 30 educational conferences for any companies, including itself. Estopping CHE and Sacaris from disputing whether ICJR had sufficient resources to run the symposia would not change the conclusion that the symposia were not a venture that “in all fairness, should belong to” ICJR. (Trim-Lean, supra, 4 B.R. at p. 247.) 12 Accordingly, the trial court did not err in determining that producing symposia for pharmaceutical companies was not an ICJR corporate opportunity. DISPOSITION The portion of the judgment finding in favor of CHE and Sacaris and against ICJR on ICJR’s cross-claim for breach of fiduciary duty (first cause of action), pertaining to amounts CHE and Sacaris billed for management services, is reversed. The matter is remanded to the trial court for further proceedings to determine the amount to be awarded to ICJR on this claim. In 12 CHE’s unapproved use of ICJR’s assets was nevertheless potentially actionable. (See, e.g., 3 Fletcher Cyc. Corp. (Sept. 2019) § 1102 [“[D]irectors and other corporate officers are liable for misappropriation, diversion or conversion of corporate assets.”].) Here, however, the record does not reflect that ICJR pursued recovery of the purportedly misappropriated assets, except insofar as it claimed CHE’s use of such assets demonstrated the symposia were a corporate opportunity. 31 all other respects, the judgment is affirmed. Each side is to bear its own costs on appeal. McCONNELL, P. J. WE CONCUR: BENKE, J. IRION, J. 32

2020-11-30 20:02:35.069937+00

https://www.courts.ca.gov/opinions/nonpub/B295498.PDF

Filed 11/30/20 Termain v. R.E.A Advisors CA2/5 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FIVE MELVIN TERMAIN et al., B295498 Plaintiffs and Respondents, (Los Angeles County Super. Ct. No. BC722291) v. R.E.A. ADVISORS, INC. et al., Defendants and Appellants. APPEAL from an order of the Superior Court of Los Angeles County, Barbara A. Meiers, Judge. Affirmed in part, reversed in part, and remanded. Alpert, Barr & Grant, Adam D.H. Grant, Alexander S. Kasendorf, and Ryan T. Koczara, for Defendants and Appellants. Leonard, Dicker & Schreiber, Kevin S. Dicker, for Plaintiffs and Respondents.  We have here an appeal from the denial of a Code of Civil Procedure section 425.16 special motion to strike certain causes of action or allegations in a complaint filed as the result of an acrimonious breakup of a property management business. The key issues we are asked decide are whether certain letters sent to the business’s former clients and their insurers are protected communications under Code of Civil Procedure section 425.16,1 the anti-SLAPP statute, and if so, whether those communications are necessarily covered by the Civil Code’s litigation privilege. I. BACKGROUND A. Termain Sues Outerbridge After She Threatens Legal Action Plaintiff Melvin Termain (Termain) and defendant Sarah Outerbridge (Outerbridge) were the officers of, and fifty-percent shareholders in, defendant R.E.A. Advisors, Inc. (REA), a corporation providing management services to property owners’ associations. Termain resigned from REA in late July 2018, and when he did, a number of REA’s clients (the Former Clients) terminated their contracts with the company and entered into contracts for management services with 4AIIQ, LLC, a new company Termain had formed. This caused a rift between Termain and Outerbridge. Termain and 4AIIQ, LLC (collectively, Termain & Co) later filed a verified complaint against Outerbridge and REA (collectively, Outerbridge & Co). An amended complaint (the operative complaint) followed two months later. The operative 1 Undesignated statutory references that follow are to the Code of Civil Procedure. 2 complaint alleges five causes of action: (1) a Corporations Code cause of action by Termain against Outerbridge & Co for involuntary dissolution of REA, (2) an accounting cause of action by Termain against REA, (3) a breach of fiduciary duty cause of action by Termain against Outerbridge, (4) an intentional interference with contract cause of action by 4AIIQ, LLC against Outerbridge & Co, and (5) an intentional interference with prospective economic advantage cause of action by Termain against Outerbridge & Co. The fourth and fifth intentional interference causes of action are the only ones of interest in this appeal because Outerbridge & Co’s anti-SLAPP motion was directed solely at those claims.2 The intentional interference causes of action allege Outerbridge & Co were aware of 4AIIQ, LLC and Termain’s respective contracts and relationships with the Former Clients. The allegations that comprise the two causes of action also summarize, in substantively identical terms, the acts by Outerbridge that are alleged as a basis for liability. The operative complaint states Outerbridge “(i) improperly retained over $496,000 of funds belonging to [the Former Clients] as purported ‘liquidated damages’; (ii) wrote to the Former Clients’ insurance carriers asserting meritless claims for breach of contract; (iii) threatened litigation against the Former Clients for 2 Termain & Co assert in their Respondents’ Brief that 4AIIQ, LLC dismissed its intentional interference cause of action against Outerbridge & Co without prejudice. No such dismissal appears in the record on appeal, however, and Outerbridge & Co do not address the issue. Regardless, any dismissal was not before the trial court when it ruled on the anti-SLAPP motion. 3 the proper exercise of their contractual rights to terminate their relationships with [REA]; and (iv) sought indemnification from the Former Clients.” B. Outerbridge & Co File a Special Motion to Strike the Intentional Interference Causes of Action, or Certain of Their Allegations Outerbridge & Co responded to the operative complaint by filing a special motion to strike the intentional interference causes of action or, in the alternative, at least some of the allegations included in those causes of action. Outerbridge & Co contended each of the four bases summarized as the factual predicate for those causes of action (retaining “liquidated damages,” advising insurance carriers of breach of contract, threatening litigation, and seeking indemnification) were activities undertaken in anticipation of litigation, and thus, protected activity under the anti-SLAPP statute. Outerbridge & Co contended Outerbridge decided to sue Termain & Co and the Former Clients in August 2018 (almost immediately after Termain resigned) and Termain & Co had simply beaten them to the punch with their own lawsuit. In addition to arguing the intentional interference acts complained of constituted anti- SLAPP statute protected activity, Outerbridge & Co also argued Termain & Co could not show a probability of prevailing on the intentional interference claims for three reasons: (1) the specified acts were covered by the litigation privilege, (2) Outerbridge & Co had not committed an independently wrongful act, which is necessary to assert an intentional interference with prospective economic advantage claim, and (3) Termain himself suffered no damages. 4  Outerbridge submitted a declaration in support of the anti- SLAPP motion. In broad strokes, this is what it avers: Outerbridge learned about Termain’s resignation and the Former Clients’ decisions to terminate their contracts with REA on August 1, 2018. She contacted and retained attorneys that same day. After reviewing various REA records and systems, she “began seriously contemplating initiating litigation against [Termain & Co] and the Former Clients” and “then decided that REA would pursue litigation against the Former Clients and [Termain & Co], and began exercising rights REA had under the contracts with the Former Clients.”3 According to Outerbridge, her “primary reason for contacting attorneys was to evaluate a litigation plan related to Termain’s resignation and his and 4AIIQ’s actions. . . , the available legal options, and to prepare Litigation Letters [i.e., the letters to the Former Clients and their insurers] . . . .” A sample of these “Litigation Letters,” two that were addressed to Rye Canyon Industrial Center OA (Rye Canyon) and its insurer, are attached to Outerbridge’s declaration. The attached letter addressed to Rye Canyon’s insurance carrier states its purpose is to place the insurer on notice for claims of damage arising out of contractual breaches by its insured. The letter states Rye Canyon was obligated to pay liquidated damages pursuant to its contract with REA and was also required to indemnify, defend, and hold REA and interested parties harmless against any losses and expenses. The letter additionally states it is intended to “serve as a demand” for 3 Outerbridge’s initial declaration mistakenly refers to Termain and 4AIIQ, LLC as “Defendants.” 5 payment of any unpaid liquidated damages and any financial loss incurred, and to tender the defense to any claims arising out of the actions of the insured and its new managing agent.” The letter further advises the insurer that “there are multiple avenues of litigation being pursued” and asked the insurer to contact Outerbridge prior to a certain date “to prevent further legal fees.” The attached letter to former client Rye Canyon itself states the client’s funds previously held in trust—with deductions for known liabilities, including liquidated damages—were being sent to the client’s new managing agent (i.e., Termain & Co). The letter represents its purpose is to notify Rye Canyon that it had breached its contract with REA, the letter claims Rye Canyon had conspired with Termain, and the letter asserts Rye Canyon had been an accomplice to the damage and harm REA had suffered. The letter additionally claims Rye Canyon was required to “indemnify, defend and hold [REA and various affiliated individuals] harmless” from losses, costs, and attorney fees “in connection with your intentional gross misconduct and that misconduct of your new managing agent.” The letter closes by notifying Rye Canyon that its insurance company had been provided with a copy of the letter, along with a demand to address REA’s damages. In addition to the sample letters, Outerbridge’s declaration attached redacted billing statements from her attorneys. The bills reflect entries as early as August 1, 2018. Though the redactions hide the vast majority of the descriptions of the legal work performed, the non-redacted portion of the bills do indicate, among other things, that the lawyers reviewed emails regarding 6 Termain’s actions and reviewed and revised a letter regarding a partnership dispute. Termain & Co filed an opposition to the anti-SLAPP motion that argued Outerbridge & Co’s failure to return the Former Clients’ money was illegal because the liquidated damages contractual provision was unenforceable. The opposition also argued Outerbridge & Co had not engaged in protected pre- litigation activity because the letters in question had not been sent in connection with litigation that was contemplated in good faith and under serious consideration. Termain & Co additionally argued that the fourth and fifth intentional interference causes of action had the requisite minimal merit to proceed. Termain & Co asked the court to order Outerbridge & Co to pay attorney fees in the amount of $7,225 for filing a frivolous anti-SLAPP motion. With their opposition, Termain & Co. submitted declarations from Craig Eichman (Craig), the president of Rye Canyon; Lisa Eichman (Lisa), Rye Canyon’s secretary; and Termain himself. According to Craig’s declaration, Rye Canyon notified REA that it intended to terminate its contract in late July 2018. The following month, Rye Canyon received a letter from Outerbridge and learned REA was refusing to return $60,000 of the funds REA was holding in trust for Rye Canyon. Craig also learned Rye Canyon’s insurance carrier had received a claim stating Rye Canyon owed REA unpaid liquidated damages. Rye Canyon demanded Outerbridge return the $60,000 and she agreed to do so only if Rye Canyon terminated its business relationship with Termain & Co—which Rye Canyon agreed to do. Lisa’s declaration was similar to Craig’s in substance, including an assertion that Outerbridge refused to return Rye 7 Canyon’s $60,000 until Rye Canyon ceased working with Termain & Co. Termain’s declaration attested, among other things, that the letters to each of the Former Clients and their insurance carriers were substantially similar. He maintained Outerbridge & Co’s actions were a proper basis for civil liability and resulted, in Rye Canyon’s case, in the loss of a client and the $18,864 annual fee Rye Canyon paid to 4AIIQ, LLC. Termain also noted Outerbridge & Co had not (at least by the time of the declaration’s signing) filed suit against Termain, 4AIIQ, LLC, or any of the Former Clients. Along with a reply to Termain & Co’s opposition, Outerbridge filed her own supplemental declaration. In pertinent part, it reads as follows: “When I sent the letters to the Former Clients and insurers, I did so with a good faith belief that REA had legally viable claims for breach of contract. The communications were sent after I retained counsel and while I was seriously contemplating filing a lawsuit against [Termain & Co] and the Former Clients. In fact, as the Litigation Letters state, multiple avenues of litigation were ‘being pursued.’ The intent of the Litigation Letters was to (1) provide confirmation of the receipt of termination [of the contracts]; (2) inform the Former Clients that their debts to REA were paid and any remaining funds, after an amount was held for outstanding checks, would be sent to [Termain & Co] with a full accounting; (3) put the Former Clients on notice of their breach of contract and explain why they were in breach; (4) inform the Former Clients that REA was enforcing the terms of the agreement; and (5) demand that the insurance carriers indemnify REA for [Termain & Co’s] breaches.” Outerbridge acknowledged Termain & Co did sue before REA filed suit, but she maintained REA 8 would file a cross-complaint against Termain & Co and some of the Former Clients when it was time to answer the complaint. C. The Trial Court’s Ruling The trial court heard argument from the parties at a hearing on the anti-SLAPP motion and took the matter under submission. In a subsequent order, the court denied the motion. The trial court found Outerbridge & Co had not made a prima facie showing that the challenged intentional interference causes of action (or any claims stated in those causes of action) arose from activity protected by the anti-SLAPP statute. Specifically, the court believed Outerbridge’s letters were not protected pre-litigation communications—“other than the 1st paragraph,” the court said—because there was no basis to believe the statements in the letters were made in connection with litigation contemplated in good faith and under serious consideration and there was “no evidence” a lawyer had approved or suggested the contents of the letter. The trial court also found it significant that there was no evidence of any lawsuit contemplated against the Former Clients to whom Outerbridge sent the letters, there were no justifiable grounds for any such lawsuit in the court’s view, and there were no justifiable grounds in the court’s view for suits or claims against the Former Clients’ insurers. While the court’s protected activity determination was alone dispositive, the court further found Termain & Co had in any event shown a probability of prevailing on their intentional interference claims. The trial court granted Termain & Co’s request for attorney fees (in the full amount requested), believing the award was “required by the Code.” 9  II. DISCUSSION The trial court was wrong to conclude the intentional interference causes of action, or at least the claims premised on the communications sent to the Former Clients and their insurers, did not arise from protected activity. Outerbridge’s declaration, including the sample letters and the attorney fee statements, suffice to make a prima facie showing (Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871 , 888 (Wilson); City of Montebello v. Vasquez (2016) 1 Cal.5th 409 , 420 (Montebello)) that Outerbridge & Co were contemplating litigation seriously and in good faith. But a prima facie showing is not a legally dispositive showing, and the difference matters at the second step of anti-SLAPP analysis. The question of whether litigation was seriously under good faith consideration by Outerbridge & Co— which is the same test for deciding whether the Civil Code’s litigation privilege applies to a pre-litigation communication (Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232 , 1251 (Action Apartment))—is a factual issue that cannot be resolved at this stage of the litigation. Because it is not clear whether the litigation privilege applies, and because the declarations submitted by Termain and the Eichmans (taken as true for present purposes) establish the intentional interference claims have minimal merit, Outerbridge & Co’s anti-SLAPP motion fails at the second step of anti-SLAPP analysis. Though we accordingly affirm the denial of the special motion to strike, we shall reverse the trial court’s award of attorney fees to Termain & Co, the non-moving party. There was no basis for that. 10  A. The Anti-SLAPP Statute The anti-SLAPP statute authorizes a defendant (or cross- defendant) to file a special motion to strike “in order to expedite the early dismissal of unmeritorious claims” arising from protected activity. (Montebello, supra, 1 Cal.5th at 416, 420.) Our analysis under the anti-SLAPP statute proceeds in two steps. “First, the moving defendant must make a prima facie showing ‘that the act or acts of which the plaintiff complains were taken “in furtherance of the [defendant]’s right of petition or free speech under the United States or California Constitution in connection with a public issue,” as defined in the statute.’ [Citation.] If the defendant makes this initial showing of protected activity, the burden shifts to the plaintiff at the second step to establish a probability it will prevail on the claim. [Citation.] The plaintiff need only state and substantiate a legally sufficient claim. [Citation.] The plaintiff’s evidence is accepted as true; the defendant’s evidence is evaluated to determine if it defeats the plaintiff’s showing as a matter of law. [Citation.] The procedure is meant to prevent abusive SLAPP suits, while allowing ‘claims with the requisite minimal merit [to] proceed.’ (Navellier v. Sletten (2002) 29 Cal.4th 82 , 94[ ].)” (Montebello, supra, 1 Cal.5th at 420.) Our review of the trial court’s order denying Outerbridge & Co’s anti-SLAPP motion is de novo. (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057 , 1067 (Park).) 11  B. Outerbridge & Co Made a Prima Facie Showing That the Intentional Interference Causes of Action Arise Out of Protected Activity A party filing an anti-SLAPP motion satisfies the first prong of the anti-SLAPP statute if he or she makes a prima facie showing that the plaintiff’s cause of action “arises from” an act the defendant performed in furtherance of the defendant’s right of petition or free speech. (City of Cotati v. Cashman (2002) 29 Cal.4th 69 , 78 (Cotati); see also Park, supra, 2 Cal.5th at 1062 [“A claim arises from protected activity when that activity underlies or forms the basis for the claim”].) The moving party does not have to prove that its actions are constitutionally protected as a matter of law. (Flatley v. Mauro (2006) 39 Cal.4th 299 , 319 (Flatley).) Rather, “the question is only whether a defendant has made out a prima facie case that activity underlying [the moving party’s] claims is statutorily protected.” (Wilson, supra, 7 Cal.5th at 888.) There are four categories of “protected activity” under the anti-SLAPP statute. The pertinent category in this case covers “any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law.” (§ 425.16, subd. (e)(2).) This category of protected activity includes not just statements made during the course of pending litigation, but also certain prelitigation statements—that is, “‘communications preparatory to or in anticipation of the bringing of an action. . . .’” (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106 , 1115, citations omitted; Digerati Holdings, LLC v. Young Money 12 Entertainment, LLC (2011) 194 Cal.App.4th 873 , 886-887 (Digerati). A prelitigation statement constitutes protected activity for anti-SLAPP purposes if it “‘concern[s] the subject of the dispute’ and is made ‘in anticipation of litigation “contemplated in good faith and under serious consideration.”’” (Neville v. Chudacoff (2008) 160 Cal.App.4th 1255 , 1268 (Neville), quoting Action Apartment, supra, 41 Cal.4th at 1251 .) The “‘good faith [and under] serious consideration’ requirement . . . . focuses on whether the litigation was genuinely contemplated . . . . [and] guarantees that hollow threats of litigation are not protected.”4 (People ex rel. Fire Ins. Exchange v. Anapol (2012) 211 Cal.App.4th 809 , 824 (Anapol).) “Thus, for example, when a cause of action arises from conduct that is a ‘necessary prerequisite’ to litigation, but will lead to litigation only if negotiations fail or contractual commitments are not honored, future litigation is merely theoretical rather than anticipated and the conduct is therefore not protected prelitigation activity.” (Bel Air Internet, LLC v. Morales (2018) 20 Cal.App.5th 924 , 941.) 4 Contrary to what the trial court believed, the “good faith” requirement does not require a lawyer to have approved or suggested the language used in a prelitigation communication. A lawyer’s involvement in the creation or delivery of a communication may of course be probative of whether it was a protected prelitigation communication, but such involvement is not determinative. (See Anapol, supra, 211 Cal.App.4th at 830- 831 [litigation was not under serious consideration even though the statements at issue were made by attorneys].) If the rule were otherwise, self-represented litigants could not claim the protections of subdivision (e)(2) of the anti-SLAPP statute. 13  To reiterate, the fourth and fifth intentional interference causes of action arise from the four actions by Outerbridge & Co described therein: (1) retaining over $496,000 of the Former Clients’ funds as liquidated damages; (2) sending letters to the Former Clients’ insurance companies asserting the clients breached their contracts with REA; (3) threatening litigation against the Former Clients for terminating their relationship with REA; and (4) seeking indemnification from the Former Clients. The evidence in support of Outerbridge & Co’s contention that they were seriously and in good faith contemplating litigation when they sent the letters consisted of the letters themselves, redacted attorney fee statements from Outerbridge & Co’s attorneys, and the declarations from Outerbridge. (See generally Cotati, supra, 29 Cal.4th at 79 [“In deciding whether the ‘arising from’ requirement is met, a court considers ‘the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.’ (§ 425.16, subd. (b))”].) Neither the letters nor the attorney fee statements alone make the requisite showing. Focusing first on the letters to the Former Clients, they make various allegations regarding the nature and consequences of the Former Clients’ actions, including an assertion they conspired with Termain, but they stop short of expressly mentioning or threatening potential litigation. They do, however, suggest the possibility of litigation in that they assert the Former Clients had a duty to defend and indemnify REA from and against a variety of ills, including claims, attorneys’ fees, and damages related to their actions. Considering next the letters to the insurers, they similarly demand a defense against any claims arising out of the actions of 14 the Former Clients and those of their new managing agent (4AIIQ, LLC) and demanded payment of damages. Unlike the client letters, the insurer letters do reference, albeit briefly, “multiple avenues of litigation being pursued, which you [the insurers] will be required to reimburse.” As to the attorney fee statements submitted with Outerbridge’s declaration, they are heavily redacted but they do indicate Outerbridge communicated with attorneys the same day Termain resigned and the attorneys, at the very least, reviewed emails regarding actions taken by Termain. They also reflect, among other things, that the attorneys considered a settlement offer at the end of August, but they do not identify the other party to the potential settlement. While the letters and attorney billing statements would not alone be enough to satisfy Outerbridge & Co’s step one anti- SLAPP burden, when considered alongside Outerbridge’s declarations we believe the threshold prima facie protected activity showing was met. Outerbridge attests she “began seriously contemplating initiating litigation” based on research she began the day she learned Termain resigned from REA and the Former Clients were terminating their relationships with the company. Outerbridge further declares her “primary reason” for contacting attorneys was to “evaluate a litigation plan related to Termain’s resignation and his and 4AIIQ’s actions . . . .” She avers the letters sent to the Former Clients and their insurers were “part of REA’s litigation plan,” and while Termain & Co were first to the courthouse, she maintains REA still intended to file a cross-complaint against Termain & Co and some Former 15 Clients when it is time to answer the complaint.5 These declaration statements, combined with the other evidence, suffice to make a prima facie showing that the intentional interference claims arose, at least in part, from protected petitioning activity. The small number of points Termain & Co advance to argue there was no prima facie showing of protected activity are not persuasive. Termain & Co contend the content of the letters sent by Outerbridge do not sufficiently threaten litigation and were sent for the sole purpose of intimidating and harassing the Former Clients. This, however, too strongly downplays what the letters do say. They include one express reference to litigation and they broadly relate to the subject of the dispute between Outerbridge & Co and Termain & Co over the nature of Termain’s departure and REA’s loss of the Former Clients (as well as a dispute between Outerbridge & Co and the Former Clients regarding the clients’ actions). More importantly, Termain & Co’s argument essentially ignores the statements in Outerbridge’s declaration.6 While Termain & Co may discover 5 Termain & Co’s brief on appeal asserts, without citation to the appellate record, that Outerbridge filed a cross-complaint in November 2019. Since that fact (if it is a fact) was not before the trial court and is not in the record before us, we do not consider it. 6 Termain & Co acknowledge Outerbridge’s declaration only briefly, and when they do, they argue that the question of a prima facie showing of protected activity is “at best a disputed issue on which Outerbridge’s mere say-so regarding her intent does not meet her SLAPP burden.” The only case cited in connection with this argument is a federal case declining to make a ruling on an anti-SLAPP issue until the plaintiff in the case 16 grounds to dispute the veracity of her statements as the case unfolds, there is nothing now that wholly negates Outerbridge’s factually uncontradicted statement, under penalty of perjury, that she was seriously contemplating litigation against Termain & Co and the Former Clients and the letters were sent as part of Outerbridge & Co’s litigation strategy. Nor is there anything now that defeats Outerbridge’s assertion, in her supplemental declaration, that REA still intended to file a cross-complaint against Termain & Co and some of the Former Clients.7 was permitted to conduct discovery, a decision permitted by federal case law and the federal rules of civil procedure. (Shropshire v. Fred Rappoport Co. (N.D.Cal. 2003) 294 F.Supp.2d 1085 , 1100.) The case has no bearing here. 7 Termain & Co also argue there has been no prima facie showing that the fourth and fifth causes of action arise at least partly from protected prelitigation communications because the communications do not satisfy the “good faith” portion of the “good faith and under serious consideration” requirement. The substance of Termain & Co’s argument, however, relates not to the requirements for anti-SLAPP protection, but to the requirements for the application of the litigation privilege. Although we may look to litigation privilege jurisprudence when considering whether a party has engaged in activity protected by the anti-SLAPP statute, the doctrines are not coextensive, and we need not determine whether a communication is protected by the litigation privilege during a prong-one anti-SLAPP analysis. (See Navellier, supra, 106 Cal.App.4th at 770 [“privilege informs interpretation of the ‘arising from’ prong of the anti-SLAPP statute [citation], but protections afforded by the statute and the privilege are not entirely coextensive [citations]”].) 17  C. Termain & Co Demonstrated the Intentional Interference Claims Have Minimal Merit Having concluded Outerbridge & Co clear the prima facie bar for establishing Termain & Co’s intentional interference claims arise from protected activity, we move to the second stage of anti-SLAPP analysis. To defeat the anti-SLAPP motion, Termain & Co bears the burden of demonstrating a probability of prevailing on the challenged claims. (Baral v. Schnitt, 1 Cal.5th 376 , 384; see also Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811 , 820.) In evaluating whether a plaintiff has made that showing, a “court does not weigh evidence or resolve conflicting factual claims. Its inquiry is limited to whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment. It accepts the plaintiff’s evidence as true, and evaluates the defendant’s showing only to determine if it defeats the plaintiff’s claim as a matter of law.” (Baral, supra, at 384-385.) A plaintiff opposing an anti-SLAPP motion thus need only show the cause of action or claim at issue has “minimal merit.” (Baral, supra, at 385, 391; Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53 , 63 [plaintiff need only state and substantiate a legally sufficient claim].) 1. There is a probability Termain & Co will be able to show the intentional interference claims are not barred by the litigation privilege Before we assess the factual showing made in support of the viability of the intentional interference claims on the merits, we must decide whether the claims are dead on arrival because they are predicated on prelitigation conduct covered by the 18 litigation privilege codified at Civil Code section 47, subdivision (b). The litigation privilege “‘applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action. [Citations.]’ [Citation.]” (Edwards v. Centex Real Estate Corp. (1997) 53 Cal.App.4th 15 , 29.) “The litigation privilege is . . . relevant to the second step in the anti- SLAPP analysis in that it may present a substantive defense a plaintiff must overcome to demonstrate a probability of prevailing.” (Flatley, supra, 39 Cal.4th at 323 .) The privilege is also “absolute; it applies, if at all, regardless whether the communication was made with malice or the intent to harm. [Citation.]” (Kashian v. Harriman (2002) 98 Cal.App.4th 892 , 913.) Like subdivision (e)(2) of section 425.16, which we have already discussed at length, the litigation privilege can apply to prelitigation communications, including demand letters. (Lerette v. Dean Witter Organization, Inc. (1976) 60 Cal.App.3d 573 , 577.) The test as to whether the privilege applies is also nominally the same as the subdivision (e)(2) determination: we consider whether the prelitigation communication in question “relates to litigation that is contemplated in good faith and under serious consideration.” (Action Apartment, supra, 41 Cal.4th at 1251 ; see also ibid. [“Whether a prelitigation communication relates to litigation that is contemplated in good faith and under serious consideration is an issue of fact. For example, in [a 1999 case], the Court of Appeal held that the trial court erred in granting summary judgment on the basis of the litigation privilege because ‘[i]t remain[ed] a triable issue of fact 19 whether . . . imminent litigation was seriously proposed and actually contemplated in good faith as a means of resolving the dispute between [the parties]’”].) Though the test is the same, the standard of proof at step two of the anti-SLAPP inquiry is reversed. Rather than considering, as we did at step one, whether Outerbridge & Co have made a prima facie showing that the actions challenged as intentional interference with contract or prospective economic advantage arise from communications made in preparation for litigation under serious, good faith consideration, we consider whether Termain & Co have shown the opposite under the low probability of prevailing standard that applies. In other words we determine whether the evidence submitted in connection with the anti-SLAPP motion indicates Termain & Co may be able to prove Outerbridge’s letters to the Former Clients and their insurers were not sent in furtherance of “‘imminent litigation’” that was “‘seriously proposed and actually contemplated in good faith as a means of resolving the dispute . . . .’” (Action Apartment, supra, 41 Cal.4th at 1251 .) Termain & Co has made the required showing and the applicability of the litigation privilege is subject to genuine dispute at this stage. Although Outerbridge declared she was seriously contemplating litigation and had retained counsel prior to writing the letters, there is no good evidence Outerbridge’s counsel was in fact preparing to sue at the time. The letters themselves were signed by Outerbridge, not counsel, and the heavily redacted attorney billing statements do not clearly show counsel performed any work in connection with the letters. The letter to the insurers made only an oblique reference to civil litigation, and the letters to the Former Clients made no direct 20 reference to litigation at all. Further, it was Termain & Co, not Outerbridge & Co who sued, and as of the time the anti-SLAPP motion was filed, Outerbridge & Co had neither filed suit against defendant or the Former Clients nor filed a cross-complaint. There is therefore a realistic probability that Termain & Co will be able to show Outerbridge & Co were not seriously considering litigation at the time Outerbridge wrote the letters and the letters were instead attempts to harass the Former Clients, interfere with Termain & Co’s relationships with them, or induce a monetary concession without the serious contemplation of actual litigation. 2. The factual predicate for Termain’s intentional interference with prospective economic advantage cause of action has the requisite minimal merit Apart from the claim that the litigation privilege bars any prospect of prevailing, which we have rejected, Outerbridge & Co maintain Termain & Co have no probability of establishing, factually, the elements of an intentional interference with prospective economic advantage cause of action. The elements of the tort of interference with prospective economic advantage are “(1) an economic relationship between the plaintiff and a third party, with a probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of this relationship; (3) intentional and wrongful conduct on the part of the defendant, designed to interfere with or disrupt the relationship; (4) actual disruption or interference; and (5) economic harm to the plaintiff as a proximate result of the defendant’s wrongful conduct. [Citation.] A plaintiff’s burden includes pleading and proving 21 ‘that the defendant not only knowingly interfered with the plaintiff’s expectancy, but engaged in conduct that was wrongful by some legal measure other than the fact of interference itself.’ [Citation.] We consider an act independently wrongful ‘if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.’ [Citation.]” (Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688 , 713.) In our view, the declarations submitted with Termain & Co’s opposition to the anti-SLAPP motion suffice to meet the minimal merit threshold (Baral, supra, 1 Cal.5th at 385, 391) for establishing these elements. Termain declares he had a relationship with Rye Canyon, a former client of REA, as well as the Eichmans; the relationship was disrupted by Outerbridge & Co’s actions; and Termain & Co suffered monetary harm as a result. Craig Eichman declared REA failed to return $60,000 of funds to Rye Canyon that REA had held in trust for Rye Canyon (an independently wrongful act). Craig’s declaration also avers neither he nor anyone else associated with Rye Canyon possessed or duplicated any trade secret or confidential information belonging to REA. Lisa Eichman’s declaration made similar assertions. Craig also declared that, had it not been for Outerbridge’s actions, there is no reason Rye Canyon would not have stayed in business with Termain & Co. It makes no difference, as Outerbridge & Co argue, whether the liquidated damages clause in REA’s contracts with the Former Clients is presumptively valid. Even if we assume for the sake of argument that the liquidated damages clause was valid, the evidence presented indicates Outerbridge & Co seized money to cover the purported liquidated damages without 22 permission from the Former Clients, without any sort of court order, and without contractual authorization (the pertinent clause of the contract provides the client “shall pay” certain amounts as liquidated damages under specified circumstances but it does not authorize simply seizing such damages from client funds held in trust8). This is sufficient to make a prima facie factual showing of an independently wrongful act. We are also unconvinced by Outerbridge & Co’s argument that Termain lacks standing to assert an intentional interference with prospective economic advantage claims. The statements in Termain’s declaration suffice to show that he personally suffered harm, not just 4AIIQ, LLC. D. Attorney Fees The anti-SLAPP statute directs a trial court to award reasonable attorneys’ fees to a non-moving party when the court determines the defendant’s anti-SLAPP motion was “frivolous or . . . solely intended to cause unnecessary delay.” (§ 425.16, subd. (c)(1).) “Frivolous in this context means that any reasonable attorney would agree the motion was totally devoid of merit.” (Gerbosi v. Gaims, Weil, West & Epstein, LLP (2011) 193 Cal.App.4th 435 , 450 (Gerbosi).) In order to award attorneys’ fees against a losing defendant on an anti-SLAPP motion, “the trial court must make a finding the SLAPP motion was frivolous or brought solely to delay the 8 This is in contrast to the section of the contract pertaining to the agent’s regular compensation, which expressly entitles the agent “to deduct such compensation when due from the funds therein its possession.” 23 proceedings[, and . . . .] must follow the procedural requirements for a sanction order set out in section 128.5 which requires, among other things, the order ‘shall recite in detail the conduct or circumstances justifying the order.’ . . . Failure to satisfy both these elements renders the order invalid.” (Morin v. Rosenthal (2004) 122 Cal.App.4th 673 , 682 (Morin).) We review an order awarding attorneys’ fees for abuse of discretion. (Gerbosi, supra, 193 Cal.App.4th at 450.) Here, the trial court’s order neither found Outerbridge & Co’s motion frivolous nor recited the conduct or circumstances justifying the order; in fact, if anything, the little the trial court’s ruling says about the award of fees suggests the trial court erroneously believed Termain & Co were entitled to fees simply because the trial court denied Outerbridge & Co’s motion. While this alone requires reversal of the attorney fees award, we are additionally of the view that there was nothing frivolous about Outerbridge & Co’s motion and, accordingly, there can be no basis for an award of attorney fees to the non-moving party. We shall accordingly reverse the award of attorney fees. 24  DISPOSITION The trial court’s award of attorney fees to Melvin Termain and 4AIIQ, LLC is reversed. In all other respects, the trial court’s order is affirmed. Both sides are to bear their own costs on appeal. NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS BAKER, Acting P. J. We concur: MOOR, J. KIM, J. 25

2020-11-30 20:02:35.538972+00

https://www.courts.ca.gov/opinions/nonpub/B298372.PDF

Filed 11/30/20 P. v. Tolbert CA2/5 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FIVE THE PEOPLE, B298372 Plaintiff and (Los Angeles County Respondent, Super. Ct. No. YA097555) v. WILLIE L. TOLBERT, Defendant and Appellant. APPEAL from a judgment of the Superior Court of Los Angeles County, Laura C. Ellison, Judge. Reversed in part and remanded. Jason Szydlik, under appointment by the Court of Appeal, for Defendant and Appellant. Xavier Becerra, Attorney General, Lance E. Winters, Chief Assistant Attorney General, Julie L. Garland, Senior Assistant Attorney General, Steve Oetting, Supervising Deputy Attorney General, Paige B. Hazard, Deputy Attorney General, for Plaintiff and Respondent. __________________________ Defendant and appellant Willie L. Tolbert appeals from a judgment after a jury trial, in which he was convicted of first degree burglary and found to have suffered a prior felony conviction in Texas for first degree arson, and a court trial, in which the Texas conviction was found to be a prior serious felony conviction. Defendant contends: (1) his trial counsel rendered ineffective assistance by failing to object to documents outside the record of conviction in his Texas case; (2) there is no substantial evidence that his arson conviction in Texas constituted a serious felony under California law, because the record of conviction does not show the crime involved great bodily injury, arson, or exploding a destructive device or an explosive; (3) the trial court erred by failing to strike his prior serious felony conviction; and (4) the trial court should have held a hearing on his ability to pay restitution and fees assessed. We conclude there is insufficient evidence to establish defendant’s Texas conviction contained all of the elements of a serious felony under Penal Code section 1192.7, subdivision (c),1 and therefore, we must remand for retrial of whether defendant was subject to a serious-felony sentence enhancement (§ 667, 1 All further statutory references are to the Penal Code unless otherwise indicated. 2 subd. (a)) or eligible to be sentenced under the three strikes law (§§ 667, subds. (b)–(i), 1170.12). Accordingly, we reverse the judgment in part. FACTUAL AND PROCEDURAL BACKGROUND Burglary Around midnight on January 18, 2018, defendant entered the home of 92-year-old Claire Jeffrey while she was present. He took Jeffrey’s driver’s license, AARP card, library card, and cash, before climbing out a bathroom window. A police officer detained him on the sidewalk about 100 feet from the home and found the items in the front pocket of his pants. Information and Trial Defendant was charged by amended information with first degree burglary of an inhabited dwelling (§ 459). The amended information alleged the crime was a serious felony (§ 1192.7, subd. (c)) and a violent felony, in that another person, other than an accomplice, was present during the burglary (§ 667.5, subd. (c)). The information further alleged that defendant suffered a conviction in Texas for arson in 2007, which qualified as a prior serious felony (§ 667, subd. (a)(1)) and a strike (§§ 667, subds. (b)–(j), 1170.12). 3  After a trial, the jury found defendant guilty of first degree burglary and the jury found true that another person was present during the offense. Before the next phase of the trial to determine whether defendant had a prior conviction, defense counsel asked, “My understanding is that the -- whether or not this would qualify as a strike prior under the current California law is a question of law that is to be decided by the court, and usually that decision would decide whether or not we would even get to the step of even having the jury decide the question of whether or not the strike prior is actually that of Mr. Tolbert. [¶] My position is that this does not qualify under the California three strikes law, that the least adjudicated element does not meet the requirement to rise to the level of a strike in California. So if the court were to decide that, in fact, it did not meet the level to be a strike in California, then this wouldn’t even go to the jury.” The trial court stated that the court would decide whether the conviction constituted a strike at the time of sentencing, but the jury would determine whether the defendant had the conviction. In the bifurcated proceeding, the jury found true that defendant was previously convicted in 2007 in Texas for first degree felony arson. Sentencing The prosecution argued in a sentencing memorandum that defendant’s Texas conviction for first degree felony arson constituted a “serious felony” under section 1192.7, 4 subdivision (c)(8), which applies to felonies in which the defendant inflicts great bodily injury on any person, and section 1192.7, subdivision (c)(14), which applies to arson. The memorandum explained the definition of “arson” for purposes of Texas Penal Code section 28.02 applied if the person started a fire or caused an explosion with intent to destroy or damage enumerated types of property. Furthermore, under Texas law, the offense was considered to be a felony of the first degree if bodily injury or death was suffered by any person as a result of the commission of the offense. The prosecution asserted that the record of conviction included the judgment and the defendant’s rap sheet, which showed defendant was convicted of first degree felony arson causing bodily injury or death.2 Defendant filed a sentencing memorandum and motion to strike the prior serious felony conviction under People v. Superior Court (Romero) (1996) 13 Cal.4th 497 . The memorandum argued the merits of dismissing a strike under Romero, but did not mention the Texas conviction or whether it constituted a serious felony under California law. A sentencing hearing was held on May 8, 2019. The trial court noted that the defendant’s sentencing memorandum did not address whether the prior conviction qualified as a serious felony. Defense counsel responded, “I was remiss because I was -- since we were -- since I had 2 The sentencing memorandum referred to the “complaint” in the Texas conviction, but the parties agree on appeal that the text referred to the judgment. 5 remembered that we had done the jury trial I did not even remember that the issue of whether or not it would qualify as a strike would be on for today, so I did not. That wasn’t on my radar.” She later stated, “Your Honor, when I did try and see if I could find the elements for arson for Texas, and tried to do a comparison to California[,] I was not able to find any definitive statute with respect to the arson, but from my reading of it[,] it appears as though it looks more like a reckless burning than an arson. [¶] So I would argue that it does not qualify as a strike under California law, but I was not able to find any authority just based on what -- just the reading of the complaint.” The trial court noted that the prosecution had cited the applicable Texas Penal Code section defining arson in her sentencing memorandum. Defense counsel stated that she could not agree with any representations made about Texas law, because she was not familiar with Texas law. The trial court found defendant’s prior conviction was a serious felony and a strike. The court denied defendant’s motion to strike the prior serious felony conviction under Romero. Defense counsel discussed that defendant suffered from early Parkinson’s disease. The court weighed the factors in aggravation against the factors in mitigation. The only mitigating factor was defendant’s prior history of mental illness, but the trial court noted that he was found to be competent. The factors in aggravation were that the victim was clearly elderly and vulnerable, the crime involved some level of planning and sophistication, and defendant’s 6 priors were numerous and increasing in seriousness. The factors in aggravation far outweighed the factors in mitigation. The trial court sentenced defendant to an aggregate term of 17 years in prison, which consisted of the upper term of six years for burglary, doubled to 12 years as a result of the strike, plus five years for the prior serious felony. In addition, the trial court ordered a restitution fine of $300, criminal conviction assessment of $30, and a court operations assessment of $40, and noted they could be taken from his prison wages, if any. Defense counsel argued that due to defendant’s age and his Parkinson’s condition, he might not be eligible for a job that would earn the money necessary. She asked that the court delete the fines and fees, but did not request a separate hearing on defendant’s ability to pay to fines and fees imposed. The trial court stated, “I’m not going to, because he’s got [a lot] of years to pay them. If he has any money, and if he’s earning any money, they can address that. If he’s not, then obviously they won’t be taking it from him.” Appellant filed a timely notice of appeal. 7  DISCUSSION Texas Conviction On appeal, the Attorney General concedes that section 1192.7, subdivision (c)(8),3 one of the sections relied on in the sentencing memorandum, does not apply in this case. In addition, the Attorney General concedes that the Texas conviction cannot constitute a serious felony under the other section cited by the prosecution at the time of sentencing, section 1192.7, subdivision (c)(14) [covering “arson”], standing alone. Instead, in the respondent’s brief on appeal, the People contend for the first time that the Texas conviction qualifies as a serious felony under section 1192.7, subdivision (c)(14) and (c)(16),4 collectively, because the elements of the Texas law necessarily satisfied one or the other of these two California subsections. Specifically, the Attorney General contends that defendant’s conviction for first degree arson under Texas law was either for starting a fire or causing an explosion with intent to destroy or damage, thereby satisfying the elements either of section 3 Section 1192.7, subdivision (c)(8) provides, “any felony in which the defendant personally inflicts great bodily injury on any person, other than an accomplice, or any felony in which the defendant personally uses a firearm.” 4 Section 1192.7, subdivision (c)(16) provides, “exploding a destructive device or any explosive causing bodily injury, great bodily injury, or mayhem.” 8 1192.7, subdivision (c)(14), for setting fire to or causing the burning of a structure, forest land, or property, or section 1192.7, subdivision (c)(16), for exploding a destructive device or any explosive causing bodily injury. Therefore, the Attorney General reasons, the Texas conviction qualified as a serious felony under section 1192.7, subdivision (c)(14) and (c)(16), when read together. Defendant contends in his reply brief, however, that a person may be guilty of first degree arson under Texas law for causing an explosion, other than from an explosive device, and therefore, the conviction does not qualify as a serious felony under California law. We agree with defendant. A. Procedure for Determination of Serious Felony “For criminal sentencing purposes in this state, the term ‘serious felony’ is a term of art. Severe consequences can follow if a criminal offender, presently convicted of a felony, is found to have suffered a prior conviction for a serious felony. If the present conviction is also for a serious felony, the offender is subject to a five-year enhancement term to be served consecutively to the regular sentence. (§ 667, subd. (a).) Even if an offender’s present conviction is not for a serious felony, a prior conviction for a serious felony renders the offender subject to the more severe sentencing provisions of the three strikes law. (§§ 667, subds.(b)–(i), 9 1170.12.)” (People v. Warner (2006) 39 Cal.4th 548 , 552 (Warner).) Whether a crime constitutes a serious felony is determined by reference to section 1192, subdivision (c), which enumerates qualifying crimes. (Warner, supra, 39 Cal.4th at p. 552.) “Under our sentencing laws, foreign convictions may qualify as serious felonies, with all the attendant consequences for sentencing, if they satisfy certain conditions. For a prior felony conviction from another jurisdiction to support a serious-felony sentence enhancement, the out-of-state crime must ‘include[] all of the elements of any serious felony’ in California. (§ 667, subd. (a)(1).) For an out-of-state conviction to render a criminal offender eligible for sentencing under the three strikes law (§§ 667, subds. (b)–(i), 1170.12), the foreign crime (1) must be such that, ‘if committed in California, [it would be] punishable by imprisonment in the state prison’ (§§ 667, subd. (d)(2), 1170.12, subd. (b)(2)), and (2) must ‘include[] all of the elements of the particular felony as defined in’ section 1192.7(c) (§§ 667, subd. (d)(2), 1170.12, subd. (b)(2)).” (Warner, supra, 39 Cal.4th at pp. 552–553, fn. omitted.) We next consider whether defendant’s prior conviction in Texas qualifies as a “serious felony” under California law. B. Elements of Texas Conviction At the time of defendant’s 2007 offense and conviction, Texas Penal Code section 28.02, subsection (a), defined arson 10 as relevant here as follows: “A person commits an offense if the person starts a fire, regardless of whether the fire continues after ignition, or causes an explosion with intent to destroy or damage: [¶] (1) any vegetation, fence, or structure on open-space land; or [¶] (2) any building, habitation, or vehicle [knowing it is within an incorporated city or town, insured, subject to a security interest, located on property that belongs to another or contains property belonging to another, or the person is reckless about whether the burning or explosion will endanger a life or the property of another].” (Tex. Pen. Code, § 28.02(a).)5 An offense under subsection (a) of Texas Penal Code section 28.02 is a felony of the second degree, “except that the offense is a felony of the first degree if it is shown on the trial of the offense that: [¶] (1) bodily injury or death was suffered by any person by reason of the commission of the offense; or [¶] (2) the property intended to be damaged or destroyed by the actor was a habitation or a place of assembly or worship.” (Tex. Pen. Code, § 28.02(d).) C. Section 1192.7, Subdivisions (c)(14) and (c)(16) The Attorney General contends defendant’s Texas conviction for first degree arson qualified as a felony under section 1192.7, subdivisions (c)(14) and (c)(16), which state 5 All citations to Texas Penal Code section 28.02 in this opinion refer to the version of that statute effective from September 1, 2005, to August 31, 2009. 11 the following crimes are serious felonies: “(14) arson; . . . (16) exploding a destructive device or any explosive causing bodily injury, great bodily injury, or mayhem.” (§ 1192.7.) Arson is defined in section 451 as follows: “A person is guilty of arson when he or she willfully and maliciously sets fire to or burns or causes to be burned or who aids, counsels, or procures the burning of, any structure, forest land, or property.” (§ 451.) An “explosive,” as defined in both Health and Safety Code section 12000 and Penal Code section 16510, is “any substance, or combination of substances, the primary or common purpose of which is detonation or rapid combustion, and which is capable of a relatively instantaneous or rapid release of gas and heat, or any substance, the primary purpose of which, when combined with others, is to form a substance capable of a relatively instantaneous or rapid release of gas and heat.” (Health & Saf. Code, § 12000; see People v. Clark (1990) 50 Cal.3d 583 , 602 (Clark) [definition of “explosive” in Health and Safety Code section 12000 applied to section 190.2 in absence of specific definition].)6 6 Health and Safety Code section 12000 and Penal Code section 16510 contain the same extensive list of substances that qualify as explosives: “‘Explosives’ includes, but is not limited to, any explosives as defined in Section 841 of Title 18 of the United States Code and published pursuant to Section 555.23 of Title 27 of the Code of Federal Regulations, and any of the following: [¶] (a) Dynamite, nitroglycerine, picric acid, lead azide, fulminate of mercury, black powder, smokeless powder, propellant explosives, 12  The California Supreme Court noted expert witnesses in Clark agreed “explosions are not all caused by ‘explosives’ as that term is understood in the scientific community and used in the relevant statutes. Not every substance or object that is capable of exploding is an ‘explosive.’ The expert testimony in this case established that neither gasoline nor gasoline vapor is an explosive.” (Clark, supra, 50 Cal.3d at pp. 599–600, fn. omitted.) “When the combination of air and vapor ignites, a relatively instantaneous ‘flash burn occurs,’ a sudden oxidation or burning of the flammable gasoline vapor. That flash burn stops as soon as the flammable mixture is consumed, and does not cause any further fire unless other combustible material is ignited during this process.” (Id. at p. 600.) “Whether a flash burn, such as that occurring when a combination of gasoline vapor and air is detonating primers, blasting caps, or commercial boosters. [¶] (b) Substances determined to be division 1.1, 1.2, 1.3, or 1.6 explosives as classified by the United States Department of Transportation. [¶] (c) Nitro carbo nitrate substances (blasting agent) classified as division 1.5 explosives by the United States Department of Transportation. [¶] (d) Any material designated as an explosive by the State Fire Marshal. . . . [¶] (e) Certain division 1.4 explosives as designated by the United States Department of Transportation when listed in regulations adopted by the State Fire Marshal. [¶] (f) For the purposes of this part, ‘explosives’ does not include any destructive device, . . . nor does it include ammunition or small arms primers manufactured for use in shotguns, rifles, and pistols.” (Health & Saf. Code, § 12000; Pen. Code, § 16510.) 13 ignited, will cause this type of explosion depends primarily on (1) the amount of flammable vapor-air mixture present at the moment of ignition, and (2) the size of the container.” (Ibid.) “The source of a ‘concentrated’ explosion, one caused by a true explosive, is typically a small quantity of an explosive solid material such as a stick of dynamite. A concentrated explosion is self-contained—independent of ambient conditions, and not dependent on a supply of oxygen. When detonated the explosive material undergoes a chemical reaction that abruptly generates a large quantity of gas, mainly nitrogen, that was not present before the detonation. . . . [¶] By contrast, an explosion caused by a flash burn of gasoline vapor and air is ‘diffuse.’ Its source is not a single piece of explosive solid material, but the entire flammable mixture of gases in the air. Such an explosion is entirely dependent on the ambient conditions.” (Clark, supra, 50 Cal.3d at pp. 600–601.) “Other exploding substances or objects that are not deemed ‘explosives’ have received judicial attention in Gordon v. Aztec Brewing Co. (1949) 33 Cal.2d 514 (beer); Zentz v. Coca Cola Bottling Co. (1952) 39 Cal.2d 436 (Coca- Cola); Myers v. Industrial Acc. Comm. (1923) 191 Cal. 673 (sherry); Saporito v. Purex Corp., Ltd. (1953) 40 Cal.2d 608 (bleach); Park v. Standard Chem Way Co. (1976) 60 Cal.App.3d 47 (cleanser); Woolen v. Aerojet General Corp. (1962) 57 Cal.2d 407 (paint); Millers’ Nat. Ins. Co., Chicago, Ill. v. Wichita Flour M. Co. (10th Cir. 1958) 257 F.2d 93 14 (dust); Dalehite v. United States (1953) 346 U.S. 15 (fertilizer); Kotiadis v. Gristede Bros., Inc. (1964) 20 A.D.2d 689 (grapefruit sections); Shields v. County of San Diego (1984) 155 Cal.App.3d 103 (tuna waste); Van Zee v. Bayview Hardware Store (1968) 268 Cal.App.2d 351 (aerosol can).” (Clark, supra, 50 Cal.3d at p. 600, fn. 6.)7 7 We note that a “destructive device,” as defined in Penal Code section 16460, subdivision (a), includes any of the following weapons: “(1) Any projectile containing any explosive or incendiary material or any other chemical substance, including, but not limited to, that which is commonly known as tracer or incendiary ammunition, except tracer ammunition manufactured for use in shotguns. [¶] (2) Any bomb, grenade, explosive missile, or similar device or any launching device therefor. [¶] (3) Any weapon of a caliber greater than 0.60 caliber which fires fixed ammunition, or any ammunition therefor, other than a shotgun (smooth or rifled bore) conforming to the definition of a ‘destructive device’ found in subsection (b) of Section 479.11 of Title 27 of the Code of Federal Regulations, shotgun ammunition (single projectile or shot), antique rifle, or an antique cannon. [¶] (4) Any rocket, rocket-propelled projectile, or similar device of a diameter greater than 0.60 inch, or any launching device therefor, and any rocket, rocket-propelled projectile, or similar device containing any explosive or incendiary material or any other chemical substance, other than the propellant for that device, except those devices as are designed primarily for emergency or distress signaling purposes. [¶] (5) Any breakable container that contains a flammable liquid with a flashpoint of 150 degrees Fahrenheit or less and has a wick or similar device capable of being ignited, other than a device which is 15  D. Analysis We conclude that the elements of the Texas offense are broader than the elements of the California law relied on by the Attorney General. It is realistically possible for defendant to have caused an explosion under Texas law without starting a fire or exploding an explosive, as defined under California law. Therefore, the Texas conviction could have been based on conduct that would not constitute a serious felony under California law. For example, in Wheeler v. State (Tex.Ct.App. 2000) 35 S.W.3d 126 , a defendant argued there was no substantial evidence to support the finding that he caused an explosion. The Texas appellate court noted that under Texas case law, there is no fixed definition of the term “explosion”; it is construed in its popular sense. “In United States v. Ryan, 153 F.3d 708 (8th Cir.1998), cert. denied, 526 U.S. 1064 , 119 S.Ct. 1454 , 143 L.Ed.2d 541 (1999), the court stated that ‘[a] flashover occurs when a fire in an area produces sufficient heat to explosively ignite all of the combustible material within the area.’ Id. at 710 (emphasis added). We find that commercially manufactured primarily for the purpose of illumination. [¶] (6) Any sealed device containing dry ice (CO2) or other chemically reactive substances assembled for the purpose of causing an explosion by a chemical reaction.” (Pen. Code, § 16460, subd. (a).) “A bullet containing or carrying an explosive agent is not a destructive device as that term is used in subdivision (a).” (Pen. Code, § 16460, subd. (b).) 16 the jury, applying the common and ordinary meaning of an undefined word, could have reasonably found that an ‘explosion’ occurred.” (Wheeler v. State (Tex.Ct.App. 2000) 35 S.W.3d 126 , 134.) The Texas appellate court examined the definition of “explosion” in the context of an insurance claim in Millers Mutual Fire Insurance Co. v. Schwartz (Tex.Ct.App. 1958) 312 S.W.2d 313 , 314 (Miller). In Miller, the trial court found a hose disconnected from a pipe as the result of an explosion, resulting in water flooding a store. The appellate court found that a boiler or pipe bursting was commonly considered to be an explosion and had to be read into the policy. In this case, defendant’s Texas conviction could have been based on conduct that caused an explosion but does not qualify as arson or exploding a destructive device or explosive under California law. For example, if a person uses an oxygen tank for target practice with a small caliber pistol, the pressurized oxygen tank can explode from the impact, spraying shrapnel that endangers the life or property of another, without causing any fire. Causing an explosion in this way could violate the Texas arson statute. This conduct would not constitute arson under California law, however, because no fire was set, and neither the oxygen tank, nor the small caliber pistol would be considered an explosive or destructive device under the California statute. 17  We must remand the matter for retrial and resentencing, to permit the People to demonstrate based on the record of conviction that defendant’s guilty plea encompassed an admission about the nature of his crime. (See People v. Barragan (2004) 32 Cal.4th 236 , 241 [the reversal of a true finding on a prior conviction for insufficient evidence does not forestall a retrial on that enhancement].) In light of this ruling, we need not further address defendant’s contentions regarding sentencing. When a case is remanded for resentencing, the trial court is entitled to consider the totality of the sentencing scheme. (People v. Burbine (2003) 106 Cal.App.4th 1250 , 1256, 1258 [“subject only to the limitation that the aggregate prison term [cannot] be increased”].) 18  DISPOSITION The portion of the judgment in which the trial court found that the Texas conviction constituted a prior serious felony and a strike is reversed in accordance with this opinion. Upon retrial of the issue and/or resentencing, the trial court may fully exercise its sentencing discretion. MOOR, J. We concur: RUBIN, P. J. BAKER, J. 19

2020-11-30 20:02:35.743614+00

https://www.courts.ca.gov/opinions/nonpub/F077598A.PDF

Filed 11/30/20 P. v. Thompson CA5 Opinion following transfer from Supreme Court NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIFTH APPELLATE DISTRICT THE PEOPLE, F077598 Plaintiff and Respondent, (Super. Ct. Nos. F17900396, v. M17911630) RICHARD JAMES THOMPSON, OPINION Defendant and Appellant. THE COURT* APPEAL from a judgment of the Superior Court of Fresno County. James Petrucelli, Judge. John L. Staley, under appointment by the Court of Appeal, for Defendant and Appellant. Xavier Becerra, Attorney General, Gerald A. Engler and Lance E. Winters, Chief Assistant Attorneys General, Michael P. Farrell, Assistant Attorney General, Daniel B. Bernstein and Jennifer M. Poe, Deputy Attorneys General, for Plaintiff and Respondent. -ooOoo- * Before Peña, Acting P.J., Smith, J. and DeSantos, J.  Defendant Richard James Thompson was convicted of offenses arising from two incidents of driving under the influence. On appeal, he contended the newly enacted Penal Code section 1001.361 applied to him retroactively and we should remand for the trial court to consider whether he should be granted pretrial mental health diversion. On June 28, 2019, in an unpublished opinion, we affirmed, concluding that section 1001.36 did not retroactively apply to defendant’s case, which had been “adjudicated” before the statute’s enactment. (See People v. Thompson (June 28, 2019, F077598) [nonpub. opn.], review granted Sept. 11, 2019, review dism. and remanded Aug. 19, 2020, S256911.) Our Supreme Court granted review, pending its decision in People v. Frahs (2020) 9 Cal.5th 618 (Frahs). In Frahs, the court held that section 1001.36 applies retroactively to defendants whose cases were not yet final when the Legislature enacted section 1001.36. The court transferred the matter back to us with directions to vacate our decision and reconsider it in light of Frahs. With the parties’ agreement, we vacate our prior decision, conditionally reverse the judgment, and remand for the trial court to determine defendant’s eligibility for mental health diversion under section 1001.36. PROCEDURAL BACKGROUND Case No. F17900396 involved events occurring on January 18, 2017. As the case proceeded, the trial court suspended proceedings because of a doubt as to defendant’s competence to stand trial (§ 1368). A jury thereafter found defendant competent to stand trial. On December 22, 2017, a jury convicted defendant of driving under the influence while possessing a blood-alcohol concentration of 0.08 percent or more and causing 1 All statutory references are to the Penal Code unless otherwise noted. 2 bodily injury (Veh. Code, § 23153, subd. (b); count 1) and driving under the influence and causing bodily injury (Veh. Code, § 23153, subd. (a); count 2). As to both counts, the jury found true allegations that defendant caused injury to more than one victim (Veh. Code, § 23558) and possessed a blood-alcohol concentration of 0.15 percent or more (Veh. Code, § 23578). Defendant admitted having suffered two prior felony convictions within the meaning of the “Three Strikes” law (§§ 667, subds. (b)–(i), 1170.12, subds. (a)–(d)). Case No. M17911630 involved events occurring on January 10, 2017. On April 26, 2018, defendant pled no contest to driving under the influence while possessing 0.08 percent or more of blood alcohol (Veh. Code, § 23152, subd. (b); count 1) and admitted having suffered two prior felony convictions within the meaning of the Three Strikes law (§§ 667, subds. (b)–(i), 1170.12, subds. (a)–(d)). On May 31, 2018, the trial court sentenced defendant in both cases to a total of six years four months. In case No. F17900396, the court imposed the midterm of four years on count 1 (two years, doubled pursuant to the Three Strikes law), plus a one- year enhancement pursuant to Vehicle Code sections 23558 and 23578. On count 2, the court imposed four years (two years, doubled), then stayed the term pursuant to section 654. In case No. M17911630, the court imposed one year four months (one-third the two-year midterm, doubled), to be served consecutively to the term in case No. F17900396. On June 4 and 7, 2018, defendant filed a notice of appeal in both cases. On June 27, 2018, the Legislature enacted section 1001.36, which created a pretrial diversion program for certain defendants with qualifying mental disorders. (§ 1001.36, subd. (a); Stats. 2018, ch. 34, § 24.) On appeal, defendant contended his conviction should be conditionally reversed and the matter remanded for the trial court to determine, retroactively, whether he qualified for a pretrial diversion program under section 1001.36. Defendant argued 3 section 1001.36 should apply retroactively because it confers an ameliorative benefit to defendants whose judgments are not yet final. The People argued section 1001.36 was not retroactive because the statute provides that pretrial mental health diversion is only available until adjudication. According to the People, defendant’s claim had already been adjudicated by the time of the statute’s enactment. In our unpublished opinion, we agreed with the People and affirmed the judgment. (See People v. Thompson, supra, F077598.) The Supreme Court granted review, and transferred the matter back to us with directions to vacate our prior decision and reconsider the matter in light of Frahs. DISCUSSION Effective June 27, 2018, section 1001.36 authorizes pretrial diversion in lieu of criminal prosecution for defendants with qualifying mental disorders, “including, but not limited to, bipolar disorder, schizophrenia, schizoaffective disorder, or post-traumatic stress disorder ….” (§ 1001.36, subd. (b)(1)(A).) “ ‘[P]retrial diversion’ means the postponement of prosecution, either temporarily or permanently, at any point in the judicial process from the point at which the accused is charged until adjudication, to allow the defendant to undergo mental health treatment ….” (§ 1001.36, subd. (c).) A trial court may grant pretrial diversion under section 1001.36 if it finds: (1) the defendant suffers from an identified mental disorder;2 (2) the mental disorder was a significant factor in the commission of the charged offense; (3) the defendant’s symptoms will respond to treatment; (4) the defendant consents to diversion and waives his or her 2 A “qualifying disorder” is any “mental disorder … identified in the most recent edition of the Diagnostic and Statistical Manual of Mental Disorders, including, but not limited to, bipolar disorder, schizophrenia, schizoaffective disorder, or post-traumatic stress disorder, but excluding antisocial personality disorder, borderline personality disorder, and pedophilia. Evidence of the defendant’s mental disorder shall be provided by the defense and shall include a recent diagnosis by a qualified mental health expert.” (§ 1001.36, subd. (b)(1)(A).) 4 speedy trial rights; (5) the defendant agrees to comply with the treatment; and (6) the defendant will not pose an unreasonable risk of danger to public safety if treated in the community. (§ 1001.36, subd. (b).) If the trial court grants diversion, the defendant will undergo mental health treatment by an approved mental health program that will provide regular reports of the defendant’s progress. Criminal proceedings may be diverted for “no longer than two years.” (§ 1001.36, subds. (c)(1)(B), (c)(2), (c)(3).) If the defendant performs satisfactorily in diversion, “the court shall dismiss the defendant’s criminal charges that were the subject of the criminal proceedings at the time of the initial diversion” and “the arrest upon which the diversion was based shall be deemed never to have occurred.” (§ 1001.36, subd. (e).) Under certain circumstances, if the defendant commits additional crimes or performs unsatisfactorily in diversion, the court may reinstate criminal proceedings. (§ 1001.36, subd. (d).) Before Frahs, the Courts of Appeal were divided on the question of whether section 1001.36 applies retroactively to persons who were tried, convicted, and sentenced before section 1001.36 went into effect, but as to whom judgment is not yet final. In June 2020, the Supreme Court resolved the issue in Frahs. The court held that because section 1001.36 provides a possible ameliorating benefit for a class of persons, namely, certain defendants with qualifying mental disorders, and neither the statute’s text nor its legislative history clearly signals the Legislature’s intent to overcome the inference of retroactivity created by In re Estrada (1965) 63 Cal.2d 740 , section 1001.36 applies retroactively to cases where the judgment is not yet final. (Frahs, supra, 9 Cal.5th at p. 624.) The court concluded “a conditional limited remand for the trial court to conduct a mental health diversion eligibility hearing is warranted when, as here, the record affirmatively discloses that the defendant appears to meet at least the first threshold 5 eligibility requirement for mental health diversion—the defendant suffers from a qualifying mental disorder.” (Frahs, at p. 640.) In light of Frahs, the People concede and we now conclude defendant is entitled to conditional reversal of judgment and remand to the trial court for a determination of his eligibility for mental health diversion under section 1001.36. (See Frahs, supra, 9 Cal.5th at pp. 639–641.) The parties agree defendant was diagnosed with a qualifying mental disorder, schizophrenia. Accordingly, he “appears to meet at least the first threshold eligibility requirement for mental health diversion.” (Frahs, at p. 640.) Pursuant to Frahs, we conclude a conditional reversal of judgment and remand is appropriate for the trial court to conduct a mental health diversion eligibility hearing. (See id. at p. 640; § 1001.36, subd. (b)(3).) We express no opinion on whether defendant will be able to demonstrate eligibility for mental health diversion under section 1001.36, or whether the trial court should exercise its discretion to grant diversion if it finds defendant eligible. DISPOSITION Our previous opinion is vacated. The judgment is conditionally reversed and the matter remanded to the trial court for an eligibility determination under section 1001.36. “ ‘If the trial court finds that [defendant] suffers from a mental disorder, does not pose an unreasonable risk of danger to public safety, and otherwise meets the six statutory criteria (as nearly as possible given the postconviction procedural posture of this case), then the court may grant diversion. If [defendant] successfully completes diversion, then the court shall dismiss the charges. However, if the court determines that [defendant] does not meet the criteria under section 1001.36, or if [defendant] does not successfully complete diversion, then his convictions and sentence shall be reinstated.’ ” (Frahs, supra, 9 Cal.5th at p. 641.) 6

2020-11-30 20:02:36.65228+00

https://www.courts.ca.gov/opinions/nonpub/B300650.PDF

Filed 11/30/20 P. v. Gonzalez CA2/5 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FIVE THE PEOPLE, B300650 Plaintiff and Respondent, (Los Angeles County Super. Ct. No. NA072648) v. BENJAMIN GONZALEZ et al., Defendants and Appellants. APPEALS from orders of the Superior Court of Los Angeles County, Tomson T. Ong, Judge. Reversed and remanded with directions. Joanna McKim, under appointment by the Court of Appeal, for Defendant and Appellant Benjamin Gonzalez. Jonathan E. Demson, under appointment by the Court of Appeal, for Defendant and Appellant Gilbert Gomez. Vanessa Place, under appointment by the Court of Appeal, for Defendant and Appellant Gerson Bazan.  Xavier Becerra, Attorney General, Lance E. Winters, Chief Assistant Attorney General, Susan Sullivan Pithey, Senior Assistant Attorney General, Charles S. Lee and Stephanie C. Santoro, Deputy Attorneys General, for Plaintiff and Respondent. _________________________________ I. INTRODUCTION Defendants and appellants Benjamin Gonzalez, Gilbert Gomez, and Gerson Bazan appeal from the trial court’s denial of their Penal Code section 1170.951 petitions for resentencing. We reverse and remand for further proceedings as set forth below. II. PROCEDURAL BACKGROUND A jury convicted defendants of first degree murder (§ 187, subd. (a)) and found true the allegation that the murder was committed for the benefit of a criminal street gang (§ 186.22, subd. (b)).2 The trial court sentenced Gomez and Bazan to 25 years to life in state prison and Gonzalez to 50 years to life in state prison under the Three Strikes law (§§ 667, 1170.12). With modifications not relevant to this appeal, a prior panel of this 1 All further statutory references are to the Penal Code. 2 The jury also convicted Spencer Bazan, Gerson Bazan’s brother, of first degree murder and found true the gang allegation and the allegation that he personally used a knife in the commission of the crime (§ 12022, subd. (b)(1)). Spencer Bazan is not a party to this appeal. All further references to “Bazan” are to Gerson Bazan. 2 court affirmed defendants’ convictions. (People v. Gonzalez (Feb. 10, 2010, B211559) [nonpub. opn.].) In January 2019, defendants filed petitions for resentencing pursuant to section 1170.95.3 The trial court appointed counsel for defendants and ordered the District Attorney to file responses to the petitions.4 The District Attorney filed an opposition to the petitions, arguing that Senate Bill No. 1437 (Senate Bill 1437) impermissibly amended two California voter initiatives (Propositions 7 and 115); violated the California Constitution insofar as it purported to vacate final judgments in criminal cases; and violated the separation of powers doctrine by commanding courts to reopen final judgments and by infringing upon the Governor’s pardon and commutation power. Gomez and Bazan filed replies. Counsel for Gonzalez elected not to file a reply. The trial court agreed with the District Attorney’s arguments and denied the petitions. 3 Bazan filed a form petition for a writ of habeas corpus. Finding that the crux of that petition concerned “‘Senate Bill 1437, Petition for Resentencing, P.C. 1170.95,’” the trial court treated the petition as a petition for resentencing. 4 The record contains prepared orders for Gomez and Bazan. A minute order suggests the trial court prepared an order concerning Gonzalez’s petition that appointed counsel for Gonzalez and ordered the District Attorney to file a response to Gonzalez’s petition. That order is not a part of the record on appeal. 3  III. DISCUSSION “Through section 1170.95, Senate Bill 1437 created a petitioning process by which a defendant convicted of murder under a felony murder theory of liability [or the natural and probable consequences doctrine] could petition to have his conviction vacated and be resentenced. Section 1170.95 initially requires a court to determine whether a petitioner has made a prima facie showing that he or she falls within the provisions of the statute as set forth in subdivision (a), including that ‘(1) [a] complaint, information, or indictment was filed against the petitioner that allowed the prosecution to proceed under a theory of felony murder or murder under the natural and probable consequences doctrine[,] [¶] (2) [t]he petitioner was convicted of first degree or second degree murder following a trial or accepted a plea offer in lieu of a trial at which the petitioner could be convicted for first degree or second degree murder[, and] [¶] (3) [t]he petitioner could not be convicted of first or second degree murder because of changes to [s]ection[s] 188 or 189 made effective January 1, 2019.’ (See § 1170.95, subd. (c); People v. Verdugo (2020) 44 Cal.App.5th 320 , 327 . . ., review granted Mar. 18, 2020, [S260493] (Verdugo).) If it is clear from the record of conviction that the petitioner cannot establish eligibility as a matter of law, the trial court may deny the petition. (Verdugo, [supra, 44 Cal.App.5th] at p. 330.) If, however, a determination of eligibility requires an assessment of the evidence concerning the commission of the petitioner’s offense, the trial court must appoint counsel and permit the filing of the submissions contemplated by section 1170.95. ([Id.] at p. 332; [People v.] Lewis [(2020)] 43 Cal.App.5th [1128,] 1140, rev[iew] granted 4 [Mar. 18, 2020, S260598].)” (People v. Smith (2020) 49 Cal.App.5th 85 , 92, review granted (July 22, 2020, S262835), fn. omitted.) Defendants argue the trial court erred in ruling that Senate Bill 1437 impermissibly amended Propositions 7 and 115 and that section 1170.95 violates the California Constitution.5 The Attorney General concedes the trial court erred. We agree with the parties and our sister courts that Senate Bill 1437 did not directly modify or amend the statutory changes effected by Propositions 7 and 115 and that section 1170.95 does not violate the California Constitution. (People v. Bucio (2020) 48 Cal.App.5th 300 , 307–312; People v. Solis (2020) 46 Cal.App.5th 762 , 774–780; People v. Cruz (2020) 46 Cal.App.5th 740 , 753–759; People v. Superior Court (Gooden) (2019) 42 Cal.App.5th 270 , 280–284; People v. Lamoureux (2019) 42 Cal.App.5th 241 , 250– 251.) 5 Bazan limits his arguments to section 1170.95’s constitutionality. 5  IV. DISPOSITION The orders are reversed. The matter is remanded to the trial court for further proceedings consistent with this opinion and section 1170.95. NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS. KIM, J. We concur: RUBIN, P. J. MOOR, J. 6

2020-11-30 20:02:36.86353+00

https://www.courts.ca.gov/opinions/nonpub/C091002.PDF

Filed 11/30/20 P. v. Gallagher CA3 NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Butte) ---- THE PEOPLE, C091002 Plaintiff and Respondent, (Super. Ct. Nos. 18CF02493, 18CF07133, & 19CF03390) v. JUSTIS MICHAEL GALLAGHER, Defendant and Appellant. Appointed counsel for defendant Justis Michael Gallagher has filed an opening brief that sets forth the facts of the case and asks this court to review the record and determine whether there are any arguable issues on appeal. (People v. Wende (1979) 25 Cal.3d 436 (Wende).) Finding no arguable error that would result in a disposition more favorable to defendant, we affirm the judgment. BACKGROUND On September 12, 2018, defendant pleaded guilty to possession of a controlled substance, Xanax (Health & Saf. Code, § 11375, subd. (b)(1)). On March 20, 2019, he 1 pleaded guilty in another case to residential burglary (Pen. Code, § 459).1 On May 30, 2019, defendant was charged in a third case with assault by means of force likely to produce great bodily injury (§ 245, subd. (a)(4)). It was also alleged in this case defendant had a prior strike (§§ 667, 1170.12). In a global plea agreement, defendant pleaded no contest to assault likely to cause great bodily injury and settled all three cases. The trial court sentenced defendant to six years for burglary and one year for assault for a total term of seven years. The court also imposed three years concurrent for possession of a controlled substance. Defendant timely appealed in all three cases. The trial court denied defendant’s request for a certificate of probable cause. DISCUSSION Appointed counsel filed an opening brief that sets forth the facts and procedural history of the case and requests this court to review the record and determine whether there are any arguable issues on appeal. (Wende, supra, 25 Cal.3d 436 .) Defendant was advised by counsel of the right to file a supplemental brief within 30 days of the date of filing of the opening brief. More than 30 days elapsed, and we received no communication from defendant. Having undertaken an examination of the entire record, we find no arguable error that would result in a disposition more favorable to defendant. 1 Undesignated statutory references are to the Penal Code. 2  DISPOSITION The judgment is affirmed. /s/ HOCH, J. We concur: /s/ ROBIE, Acting P. J. /s/ MURRAY, J. 3

2020-11-30 20:01:01.55313+00

https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2016cv0665-89

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA DAOUD RASHEED, Plaintiff v. Civil Action No. 16-665 (CKK) DISTRICT OF COLUMBIA, Defendant MEMORANDUM OPINION (November 30, 2020) This is a religious discrimination case brought by a former employee of the District of Columbia Public Schools (“DCPS”). Plaintiff Daoud Rasheed alleges that he was denied leave to attend his ex-wife’s funeral and grieve her death in June 2015, and he was wrongfully terminated, in August 2015.1 Plaintiff brings this lawsuit against the District of Columbia under Title VII of the Civil Rights Act (“Title VII”) and the District of Columbia Human Rights Act (“DCHRA”). Before the Court is Defendant District of Columbia’s [84] Motion for Summary Judgment. Defendant District of Columbia (“Defendant” or “the District”) claims entitlement to summary judgment on Plaintiff’s discrimination claim relating to his termination because the District alleges that it terminated Plaintiff’s employment for a legitimate non-discriminatory reason. Furthermore, Defendant asserts that Plaintiff’s evidence does not show that the District’s explanation for its employment decision is pretext for religious discrimination. With regard to Plaintiff’s discrimination claim relating to denial of leave, Defendant claims entitlement to summary judgment on grounds that Plaintiff has failed to establish a prima facie case of religious 1 In his Second Amended Complaint, Plaintiff Rasheed alleges denial of “fair and unbiased performance evaluations” and “equal employment benefits including his pay, work assignments, schedule and leave time.” Plaintiff’s Opposition, ECF No. 85, at 1. As explained herein, only Plaintiff’s allegations concerning denial of leave in June 2015 and termination of employment in August 2015 are before this Court. 1 discrimination or to even create a material factual dispute about the alleged denial of leave. Plaintiff alleges that he has demonstrated the existence of issues of material fact regarding whether he suffered discrimination, and further, that the District’s asserted reason for his termination is pre- textural. Upon consideration of the pleadings,2 the relevant legal authorities, and the record as a whole, the Court GRANTS Defendant’s motion. As to Plaintiff’s claim involving his termination, the Court concludes that the District has proffered a legitimate non-discriminatory reason for the termination decision, and Plaintiff has produced no other evidence showing Defendant’s proffered, non-discriminatory reasons for its action to be pretextural. Next, considering Plaintiff’s claim that he was denied leave on the basis of religious discrimination, the Court concludes that Plaintiff has proffered no evidence connecting Defendant’s actions surrounding the leave decision to any religious discrimination. Before analyzing the substance of the pleadings filed by the parties, the Court notes that Defendant District of Columbia (“Defendant” or “the District”) asserts that Plaintiff failed to follow Local Rule 7(h)(1), which provides in part that: Each motion for summary judgment shall be accompanied by a statement of material facts as to which the moving party contends there is no genuine issue, which shall include references to the parts of the record relied on to support the statement. An opposition to such a motion shall be accompanied by a separate concise statement of genuine issues setting forth all material facts as to which it is contended there exists a genuine issue necessary to be litigated, which shall include references to the parts of the record relied on to support the statement. 2 The Court’s consideration has focused on the following documents and their attachments and/or exhibits: Def. District of Columbia’s Motion for Summary Judgment, ECF No. 84 (“Def.’s Mot.”); Plaintiff’s Opposition to Defendant’s Motion for Summary Judgment, ECF No. 85 (“Pl.’s Opp’n”); Reply to Plaintiff’s Opposition to the District of Columbia’s Motion for Summary Judgment, ECF No. 86 (“Def.’s Reply”). In an exercise of its discretion, the Court finds that holding oral argument in this action would not be of assistance in rendering a decision. See LCvR 7(f). 2 LCvR 7(h)(1). In this case, Plaintiff’s response to Defendant’s Statement of Material Facts Not in Genuine Dispute is not set forth in a separate document; instead, it is found within Plaintiff’s Opposition, although it is clearly designated as such, and it contains references to the record. For purposes of judicial efficiency and economy, the Court shall consider Plaintiff’s response to Defendant’s Statement of Material Facts. Prior to beginning its analysis, this Court notes that Defendant’s Material Facts Not in Dispute are not controverted by Plaintiff, although Plaintiff does proffer additional factual information regarding some of Defendant’s Material Facts Not in Genuine Dispute. Some of this additional information is noted as background in the section below, while other information has been purposefully omitted. None of the additional factual information proffered by Plaintiff controverts the Defendant’s Statement of Material Facts Not in Genuine Dispute by raising a genuine issue of material fact. I. BACKGROUND Plaintiff Daoud Rasheed (“Plaintiff” or “Mr. Rasheed”) began his employment [as a custodian] at Abram Simon Elementary School (“Simon”) in July of 2014. Defendant’s Statement of Material Facts Not in Genuine Dispute, ECF No. 84-1 (“Def.’s Stmt.”), at ¶ 1. Plaintiff previously held a custodian position at Ballou High School (“Ballou”) until July 30, 2014, when he was transferred to Simon. Plaintiff’s Response to Defendant’s Statement of Material Facts Not in Genuine Dispute (“Pl.’s Resp.”), at ¶ 1.3 3 Prior to working at Ballou, Plaintiff worked as a custodian at Wheatley Educational Campus (“Wheatley”) beginning in December 2009, until September 23, 2011, when he transferred to Ballou. Second Am. Compl., ECF No. 15, at ¶¶ 10-11. 3  Custodians are evaluated twice each school year using the District of Columbia Public School’s (DCPS’s) IMPACT Assessment System. Def.’s Stmt., at ¶ 5. In January of 2015, Simon’s principal, Kim Spence, evaluated Mr. Rasheed’s overall performance as ineffective. Def.’s Stmt., at ¶¶ 6-7. In May of 2015, Simon’s acting principal, Dr. Sharon Holmes, also rated Mr. Rasheed’s overall performance as ineffective. Def.’s Stmt., at ¶¶ 8-9. Defendant’s Statement at ¶ 10 indicates that “employees who rate minimally effective in both cycles are terminated.” The Court notes that, in this Statement, Defendant appears to use the terms minimally effective and ineffective interchangeably, while there is a distinction made in the Custodial IMPACT Assessment Instructions. As previously indicated, Mr. Rasheed received two “ineffective” ratings. The language of the Impact Assessment cited in support of Defendant’s Statement at ¶ 10 indicates that, with regard to an “Ineffective” rating, individuals receiving this rating “will be subject to separation from the school system.” With regard to a “Minimally Effective” rating, it is stated that: “If, after two years of support, an [employee] is unable to move beyond the Minimally Effective level, she or he will be subject to separation.” See Custodial IMPACT Assessment Instructions 2014-2015, Def.’s Ex. E, at 28. Plaintiff acknowledges that employees “who rate minimally” may be but are not required to be terminated.4 Pl.’s Resp., at ¶ 9; citing Donielle Powe Deposition, ECF No. 85-2, at 5 (referencing page 169) (“If [an employee’s] performance is not meeting expectations and specifically for impact, if it is ineffective, they could be separated through that way.”).5 This Court notes that Plaintiff’s Response ¶ 9 to Defendant’s Statement ¶ 10 does not create a genuine issue 4 Plaintiff also appears to fail to distinguish between minimally effective and ineffective. 5 Mr. Powe was the District’s Rule 30(b)(6) witness. 4 of material fact, as there is agreement that a negative performance evaluation may result in termination. Plaintiff claims that, in June 2015, he was denied three days of leave to attend his ex-wife’s June 3, 2015 funeral and grieve her death. Def.’s Stmt., at ¶2. On June 8, 2015, Plaintiff submitted a leave slip for sick leave taken from June 1, 2015 through June 5, 2015. Def.’s Stmt., at ¶ 4. Plaintiff was rated ineffective by two principals, and terminated, effective August 7, 2015, based upon his performance ratings. Def.’s Stmt., at ¶ 11.6 On December 31, 2015, Plaintiff filed a EEOC Charge of Discrimination. Def.’s Stmt., at ¶ 13. In that December 31, 2015 Charge of Discrimination, Plaintiff did not reference any claim of religious discrimination relating to being denied a request for three days leave to attend his ex-wife’s funeral in June 2015 and to grieve her death. Def.’s Stmt., at ¶ 14. Plaintiff’s Charge did reference his termination, Def.’s Mot., Ex. H (EEOC Charge of Discrimination), ECF No. 84-9; it noted that he had filed a prior EEOC charge of discrimination on or about November 2012, which was open until on or about February 2015 (and which therefore pre-dates his June 2015 request for leave). Pl.’s Resp., at ¶ 13; see also Def.’s Stmt., at ¶ 12 (“Rasheed filed an EEOC Charge on November 13, 2012, for discrimination beginning in September 2011.”). Plaintiff received a right to sue letter with a date of January 8, 2016 from the EEOC, and he filed this lawsuit on April 8, 2016. On August 15, 2016, Plaintiff filed his Second Amended Complaint, in which he asserted two counts of discrimination under Title VII and the DCHRA for: 6 Again, Defendant appears to use these terms minimally effective and ineffective interchangeably. Defendant states that Plaintiff was terminated “because of his minimally effective rating,” after indicating that Plaintiff was rated ineffective by two principals. Def.’s Stmt. at ¶ 11. The references cited by Defendant in support of this Statement, at ¶ 11, discuss Plaintiff’s “ineffective” ratings, and they are consistent with the rating documentation, which was also submitted as an exhibit. 5 (1) disparate treatment (Count I); and (2) hostile work environment (Count II). During the course of discovery, the District moved for judgment on the pleadings, arguing that Plaintiff failed to exhaust his administrative remedies for his Title VII claims. In resolving Defendant’s motion for judgment on the pleadings, the Court took judicial notice of Plaintiff’s December 31, 2015 Charge of Discrimination and found that the Charge was sufficient to exhaust Plaintiff’s administrative remedies on his religious discrimination claim, but not on his claim for hostile work environment. See Memorandum Opinion and Order, ECF Nos. 72, 71. This Court declined further to take supplemental jurisdiction over the hostile work environment claim under the DCHRA, with the effect that the Court dismissed Count II of the Plaintiff’s Second Amended Complaint. Defendant now seeks summary judgment on Count I of Plaintiff’s Second Amended Complaint. II. LEGAL STANDARD Summary judgment is appropriate where “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). The mere existence of some factual dispute is insufficient on its own to bar summary judgment; the dispute must pertain to a “material” fact. Id. Accordingly, “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242 , 248 (1986). Nor may summary judgment be avoided based on just any disagreement as to the relevant facts; the dispute must be “genuine,” meaning that there must be sufficient admissible evidence for a reasonable trier of fact to find for the non-movant. Id. In order to establish that a fact is or cannot be genuinely disputed, a party must (a) cite to specific parts of the record—including deposition testimony, documentary evidence, affidavits or declarations, or other competent evidence—in support of its position, or (b) demonstrate that the 6 materials relied upon by the opposing party do not actually establish the absence or presence of a genuine dispute. Fed. R. Civ. P. 56(c)(1). Conclusory assertions offered without any factual basis in the record cannot create a genuine dispute sufficient to survive summary judgment. See Association of Flight Attendants-CWA, AFL-CIO v. Dep’t of Transp., 564 F.3d 462 , 465-66 (D.C. Cir. 2009). Moreover, where “a party fails to properly support an assertion of fact or fails to properly address another party’s assertion of fact,” the district court may “consider the fact undisputed for purposes of the motion.” Fed. R. Civ. P. 56(e). When faced with a motion for summary judgment, the district court may not make credibility determinations or weigh the evidence; instead, the evidence must be analyzed in the light most favorable to the non-movant, with all justifiable inferences drawn in her favor. Liberty Lobby, 477 U.S. at 255 . If material facts are genuinely in dispute, or undisputed facts are susceptible to divergent yet justifiable inferences, summary judgment is inappropriate. Moore v. Hartman, 571 F.3d 62 , 66 (D.C. Cir. 2009). In the end, the district court’s task is to determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Liberty Lobby, 477 U.S. at 251- 52. In this regard, the non-movant must “do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 , 586 (1986). “If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Liberty Lobby, 477 U.S. at 249-50 (internal citations omitted). In recognition of the difficulty in uncovering clear evidence of discriminatory or retaliatory intent, the district court should approach summary judgment in an action for employment discrimination or retaliation with “special caution.” Aka v. Wash. Hosp. Ctr., 116 F.3d 876 , 879- 7 80 (D.C. Cir. 1997), vacated on other grounds, 124 F.3d 1302 (D.C. Cir. 1997) (en banc). However, the plaintiff is not relieved of his burden to support his allegations with competent evidence. Brown v. Mills, 674 F. Supp. 2d 182 , 188 (D.D.C. 2009). As in any context, where the plaintiff would bear the burden of proof on a dispositive issue at trial, at the summary judgment stage he bears the burden of production to designate specific facts showing that there exists a genuine dispute requiring trial. Ricci v. DeStefano, 557 U.S. 557 , 586 (2009). Otherwise, the plaintiff could effectively defeat the “central purpose” of the summary judgment device—namely, “to weed out those cases insufficiently meritorious to warrant . . . trial”—simply by way of offering conclusory allegations, speculation, and argument. Greene v. Dalton, 164 F.3d 671 , 675 (D.C. Cir. 1999). III. DISCUSSION Defendant has moved for summary judgment on Plaintiff’s religious discrimination claims; i.e., those specifically based on his alleged denial of leave in June 2015 to attend his ex-wife’s funeral and grieve her death and his August 2015 termination. First, Defendant contends that Mr. Rasheed “only exhausted his administrative remedies under Title VII for the termination claim.” Def.’s Mot., ECF No. 84, at 3. Second, Defendant argues that the District “had a legitimate and nondiscriminatory reason for [Plaintiff’s] termination” based on his performance assessment. Id. at 4. Third, Defendant asserts that “[Mr.] Rasheed’s termination and his claim that he was denied leave in June 2015 are his only timely claims under the DCHRA.” Id. at 3. Fourth, Defendant argues that Plaintiff has not established a prima facie case of religious discrimination regarding his denial of leave claim. Id. at 4. The Court will address each argument in turn. 8  A. Plaintiff’s Claim under Title VII 1. Exhaustion of Administrative Remedies Title VII requires that a plaintiff exhaust his administrative remedies before filing a lawsuit. See Park v. Howard University, 71 F.3d 904 , 907 (D.C. Cir. 1995), cert. den., 519 U.S. 811 (1996); Raines v. U.S. Dept. of Justice, 424 F. Supp. 2d 60 , 65 (D.D.C. 2006). “Before filing a lawsuit under the ADA, Title VII, or ADEA, a plaintiff must exhaust her administrative remedies by filing a charge of discrimination with the EEOC.” Cooper v. Henderson, 174 F. Supp. 3d 193 , 202 (D.D.C. 2016) (citing 29 U.S.C. § 626 (d)(1) and 42 U.S.C. § 2000e–5(e)(1)). While the exhaustion of administrative remedies “should not be construed to place a heavy technical burden” on the Title VII plaintiff, it is not “a mere technicality.” Park v. Howard Univ., 71 F.3d at 907 (internal quotation marks omitted). The exhaustion requirement serves the purposes of (1) providing an opportunity for the administrative investigation of the claimant’s allegations; (2) affording the charged party prompt notice of those allegations; (3) promoting the informal resolution of claims; and (4) ensuring the preservation of evidence relating to the claimant’s allegations. Schuler v. PrincewaterhouseCoopers, LLP, 514 F.3d 1365 , 1376 (D.C. Cir. 2008); Ndondji v. InterPark Inc., 768 F. Supp. 2d 263 , 276 (D.D.C. 2011). A plaintiff who files a timely administrative charge may proceed with a subsequent civil suit in federal court that is “limited in scope to claims that are like or reasonably related to the allegations of the charge and growing out of such allegations.” Park, 71 F.3d at 907 (internal quotation marks and citations omitted). This standard “serves the important purpose[] of giving the charged party notice of the claim and narrow[ing] the issues for prompt adjudication and decision.” Latson v. Holder, 82 F. Supp. 3d 377 , 384 (D.D.C. 2015) (quoting Park, 71 F.3d at 907) (internal quotation marks omitted). “Because untimely exhaustion of administrative remedies 9 is an affirmative defense, the defendant bears the responsibility of pleading and proving it.” Bowden v. United States, 106 F.3d 433 , 437 (D.C. Cir. 1997) (citing Brown v. Marsh, 777 F.2d 8 , 13 (D.C. Cir. 1985)). In a Title VII case, “[i]t is appropriate to grant a defendant’s motion for summary judgment when a plaintiff fails to demonstrate exhaustion of administrative remedies.” Greer v. O’Neill, No. Civ. A. 01-1398, 2003 WL 25653036 , at *2 (D.D.C. Sept. 25, 2003) (citing Siegel v. Kreps, 654 F.3d 773 (D.C. Cir. 1981)). Plaintiff’s Count One is for religious discrimination under Title VII and the DCHRA. Second Am. Compl., ECF No. 15, at ¶¶ 63-73. Plaintiff enumerates six alleged adverse actions supporting his Title VII claim: (1) denial of equal employment opportunities for fair and unbiased performance evaluations (shortly after arriving at Ballou), at ¶¶ 37, 65; (2) a decreased pay grade when he transferred from Wheatley to Ballou, and being coerced to accept this transfer/pay decrease, at ¶¶ 19-21, 31, 64, 66, 68; (3) disproportionately large work assignments (while Plaintiff was a custodian at Ballou), at ¶¶ 34-36, 64, 69; (4) being deprived of a schedule to accommodate his educational aspirations and Friday prayers, while working at Ballou, at ¶¶ 23, 26, 29, 30, 64, 71; (5) denial of equal opportunities for leave (for a pilgrimage to Hajj in February 2012 and to grieve his ex-wife’s death in June 2015), at ¶¶ 42, 59, 64, 72; and (6) the termination of his employment in August 2015, at ¶ 62. In its Motion for Summary Judgment, Defendant contends that – under Title VII – Plaintiff only exhausted his administrative remedies with regard to his claim relating to his termination. See Def.’s Mot., ECF No. 84, at 7-8. Mr. Rasheed acknowledges that plaintiffs must first exhaust their claims through the administrative process, Pl.’s Opp’n, ECF No. 85, at 9, and he alleges generally that he has exhausted his administrative remedies. 10  a. Statute of Limitations When the EEOC has a cross filing agreement with a state or local agency, as in the District of Columbia, a plaintiff must file a charge of discrimination within 300 days of the alleged discriminatory action. See 42 U.S.C. § 2000e-5(e)(1); Tucker v. Howard Univ. Hosp., 764 F. Supp. 2d 1 , 6 (D.D.C. 2011). “A discrete or retaliatory or discriminatory act ‘occurred’ on the day that it happened . . ., therefore [a party] must file a charge within . . . 300 days of the date of the act or lose the ability to recover for it.” Natl. Railroad Passenger Corp. v. Morgan, 536 U.S. 101 , 110 (2002). Untimely discrete acts are not actionable, even if they relate to acts in a timely charge. Id. at 113 . Then, “[a]fter an employee files a charge with EEOC and receives notice of final agency action, the employee must file suit within ninety (90) days.” Oviedo v. Wash. Metropolitan Area Transit Auth., 948 F.3d 386 , 394 (D.C. Cir. 2020) (citing § 2000(e)-5(f)(1)). In this case, it is undisputed that Plaintiff’s EEOC Charge is dated December 31, 2015, see EEOC Charge, ECF No. 84-9, and this Court has previously determined that this lawsuit was “timely filed within 90 days after the EEOC’s right to sue notice.” See August 6, 2019 Memorandum Opinion, ECF No. 72, at 6. Under these aforementioned limitations periods, the Court finds that any Title VII claim deriving from Plaintiff’s first four alleged adverse actions, and the fifth alleged adverse action – as it pertains to the February 2012 denial of leave – is time-barred. These alleged adverse actions occurred during Plaintiff’s employment at Ballou, which was during the period September 2011 through July 2014, when the EEOC Charge was filed on December 31, 2015. This leaves Plaintiff’s denial of leave in June 2015 (noted in the fifth adverse action) and his August 2015 termination of employment as the only possible timely adverse actions under Title VII. But, Mr. Rasheed’s December 31, 2015 EEOC Charge asserted only two discrete claims: (1) that he was 11 unfairly evaluated sometime “on or about September 2012” (noted above as time-barred); and (2) his employment was terminated [on August 7, 2015] in retaliation for filing EEOC charges. See EEOC Charge, ECF 84-9. There is no mention of his alleged denial of three days leave in June 2015, which is a discrete action. Mr. Rasheed’s response to this argument about exhaustion of remedies consists of: (1) a discussion of the time frames for filing suit in district court; (2) a citation to a case that has no bearing on this case; and (3) a misstatement of Defendant’s argument. Pl.’s Opp’n, ECF No. 85, at 8. Plaintiff asserts that “it is not true that the description in the charge Rasheed filed with the EEOC makes no reference to religious discrimination,” id. at 9-10, but that misconstrues what this Court has already found – Plaintiff’s EEOC Charge gave rise to a claim for religious discrimination, but not for hostile work environment. Memorandum Opinion, ECF No. 72, at 8- 12. Plaintiff contends that “the discriminatory acts charged are actionable in this lawsuit under the doctrine of continuing-violations[,]” Pl.’s Opp’n, ECF No. 85, at 10, but this assertion relies on a hostile work environment claim. See Keohane v. United States, 669 F. 3d 325 , 329 (D.C. Cir. 2012) (“[A] continuing violation is one that could not reasonably have been expected to be made the subject of a lawsuit when it first occurred because its character as a violation did not become clear until it was repeated during the limitations period, typically because it is only its cumulative impact (as in the case of a hostile work environment) that reveals its illegality.”) (citation and internal quotation marks omitted). The argument Defendant asserts is that the only timely claim for Title VII purposes is based upon Plaintiff’s termination of employment, which is a discrete action. See Ahuja v. Detica, Inc., 742 F. Supp. 2d 96 , 111 (D.C. 2010) (ruling that plaintiff only had claims based on discrete acts of discrimination once the Court had dismissed a hostile work environment claim, and 12 accordingly, plaintiff could not rely upon the continuing violation doctrine). Plaintiff seems to acknowledge this principle regarding discrete claims, as he asserts that “employees [are not barred] from filing charges about related discrete acts so long as the acts are independently discriminatory and charges addressing those acts are themselves timely filed.” Pl’s Opp’n, ECF No. 85, at 10-11. “Each discrete discriminatory act starts a new clock for filing charges,” and a plaintiff’s failure to comply with applicable filing deadlines will cause claims to be time barred “even when they are related to acts alleged in timely filed charges.” National Passenger Railroad Corp. v. Morgan, 536 U.S. 101 , 113 (2002). In the National Passenger Railroad case, the Supreme Court opined that where a plaintiff alleges a number of separate acts that together make a single hostile work environment claim, “the employer may be liable for all acts that are part of this single claim” so long as the employee files her charge “within 180 or 300 days of any act that is part of the hostile work environment.” Id. at 118 . But, as previously stated, in this case, there is no claim for hostile work environment, and accordingly, any claims relating to alleged adverse actions that occurred while Plaintiff worked at Ballou (September 2011 to July 2014) are untimely. Furthermore, Plaintiff did not reference the June 2015 alleged denial of leave (or make any allegations regarding denial of leave) in his EEOC Charge, and therefore, he cannot pursue that claim under Title VII. If discriminatory acts alleged by a plaintiff in the complaint “are not articulated in the administrative charge, are not reasonably related to the allegations in the charge, and do not fall within the scope of any administrative investigation that can reasonably be expected to follow, [the plaintiff] may not proceed with these additional claims without first exhausting the administrative process.” Shipman v. Nat’l R.R. Passenger Corp. (AMTRAK), 241 F. Supp. 3d 114 , 123 (D.D.C. 2017) (Kollar-Kotelly, J.), aff’d sub nom. Shipman v. Nat’l R.R. Passenger Corp., No. 17-5066, 2017 WL 4217244 (D.C. Cir. Aug. 1, 2017). Accordingly, having again examined 13 the December 31, 2015 EEOC Charge, in the context of the timing of the adverse actions alleged in Plaintiff’s Second Amended Complaint, this Court concludes that Plaintiff has exhausted his administrative remedies under Title VII only with regard to his claim that his termination was based on religious discrimination. 2. Legitimate, Nondiscriminatory Reason for the Termination As a preliminary matter, Defendant notes that both Title VII and the DCHRA forbid employers from discriminating against employees on the basis of religion. See 42 U.S.C. § 2000e- 2(a)(1); D.C. Code §§ 2-1401.01-1403 .17. Under Title VII, “two essential elements of a discrimination claim are that (i) the plaintiff suffered an adverse employment action (ii) because of the plaintiff’s race, color, religion, sex, national origin, age, or disability.” Baloch v. Kempthorne, 550 F.3d 1191 , 1196 (D.C. Cir. 2008). For a plaintiff to succeed on a claim for discrimination, he “must demonstrate that [religion] was a “motivating factor” for the termination” or another prohibited personnel action. DeJesus v. WP Co. LLC, 841 F.3d 527 , 532 (D.C. Cir. 2016). A plaintiff bears the ultimate burden of persuading the trier of fact that intentional discrimination or retaliation occurred. Tex. Dep’t of Cmty. Affairs v. Burdine, 450 U.S. 248 , 252- 53 (1981). At summary judgment, Title VII discrimination claims are assessed pursuant to the burden- shifting framework originally set forth by the Supreme Court in McDonnell Douglas Corp. v. Green, 411 U.S. 792 , 802-03 (1973); see also MacFarland v. George Washington Univ., 935 A.2d 337 , 346 (D.C. 2007) (applying McDonell Douglas to DCHRA claims). “Under this formula, an employee must first make out a prima facie case of retaliation or discrimination.” Morris v. McCarthy, 825 F.3d 658 , 668 (D.C. Cir. 2016) (citations omitted). “The employer must then come forward with a legitimate, nondiscriminatory or nonretaliatory reason for the challenged action.” 14  Id. After the employer has proffered a nondiscriminatory reason, the McDonnell Douglas burden- shifting framework disappears, and the court is left to determine whether the plaintiff has put forth enough evidence to defeat the defendant's proffer and support a finding of discrimination. Brady v. Office of the Sergeant at Arms, 520 F.3d 490 , 493-94 (D.C. Cir. 2008). When a district court undertakes an evaluation of an employer’s motion for summary judgment in an employment discrimination case where the validity of the employer’s proffered reasons for the challenged action is at issue, the district court “must resolve one central question: Has the employee produced sufficient evidence for a reasonable jury to find that the employer’s asserted non-discriminatory reason was not the actual reason and that the employer intentionally discriminated against the employee on the basis of race, color, religion, sex, or national origin?” Brady, id. at 494 . In resolving this question, the Court considers the evidence that both sides have presented regarding the factual circumstances surrounding the challenged conduct. See St. Mary’s Honor Ctr. v. Hicks, 509 U.S. 502 , 507-508 (1993). In this case, Defendant is entitled to summary judgment on Plaintiff’s Title VII discrimination claim based on the termination of his employment. Defendant has introduced evidence that the termination decision was based on legitimate business reasons, insofar as Plaintiff received two ineffective ratings for his work performance under the District’s IMPACT Assessment System for the 2014-2015 school year. The evidence shows that the District used this Assessment System to evaluate its employees. See Powe Dep. at 174:12-20, Def’s Mot. Ex. D; Custodial IMPACT Assessment Instructions 2014-2015 at 8, Def.’s Mot. Ex. E; see also Rasheed Dep. at 92:1-10, Def.’s Mot. Ex. A. Furthermore, both Kim Spence, who served as principal of Simon, and Dr. Sharon Holmes, who served as Simon’s acting principal, evaluated Mr. Rasheed’s performance using DCPS’s IMPACT Assessment System and rated him ineffective. See DCPS 15 2014/2015 Impact Assessment Package for Rasheed Daoud, Def.’s Mot. Ex. F. Plaintiff was rated on several factors, each on a scale of 4.0 highest to 1.0 lowest, under the categories “Custodian Standards” and “Commitment to the School Community,” with the total scores under each category then multiplied by a factor (90 for Custodian Standards and 10 for School Commitment) to obtain a total weighted score ranging from 100-400 under the IMPACT Assessment System. See Def.’s Mot. Ex. E, at 29. The total score is tabulated and adjusted based on the employee’s rating for “Core Professionalism.” Id. When rated by Principal Spence, Plaintiff’s total adjusted score was 179.7, and when rated by Acting Principal Holmes, Plaintiff’s total adjusted score was 125.0. See Def.’s Mot. Ex. F.7 On the overall Impact Scale, a rating of 100-200 points is classified as Ineffective, with a rating of 200-250 points classified as Minimally Effective. See Def.’s Mot. Ex. E, at 30. Under the IMPACT Assessment System, employees who are rated ineffective “will be subject to separation from the school system.” See Id. at 28. As a result of his IMPACT Assessment scores, Mr. Rasheed’s employment was terminated. See Def.’s Mot. Ex. D, at 248:16- 18 (where Mr. Powe testifies that “Mr. Rasheed was separated from DCPS as a consequence to being rated ineffective on his impact, on his final impact evaluation.”) Defendant asserts that “[t]he criteria used to rate and terminate Rasheed are specific and provide a basis for Rasheed to challenge the District’s reasons given for his termination.” Def.’s Mot., ECF No. 84, at 11. Accordingly, the burden shifts to Plaintiff to show that the reason given for his termination – an ineffective performance rating – is a pretext for religious discrimination. In arguing pretext, Plaintiff alleges two theories, neither of which is linked to any discrimination based on religion: (1) that Mr. Rasheed’s termination was predetermined; and (2) that it related to his accrual of leave. Plaintiff alleges first that “multiple supervisory personnel 7 The Court calculated the total scores based on the information provided by Defendant. 16 collaborated with Principal Holmes far in advance of Rasheed’s IMPACT evaluation,” which demonstrates that “Rasheed’s termination was predetermined prior to his IMPACT evaluation[.]” Pl.’s Opp’n, ECF No. 85, at 7 (referencing Powe Dep. at 166-167, attached to Opposition as ECF No. 85-2). The pages of the Powe Deposition referenced by Plaintiff indicate that Ms. Ellis sent an email (on April 9, 2015) to some DCPS employees indicating that Mr. Rasheed had a “proven track record of not reporting to work,” and “his constant absences from work [were] creating a hardship on the building foreman in which he has to work double shifts,” and “the cleanliness of the building [was] an issue as a result of his absences.” Pl.’s Opp’n Ex. 2 [Powe Dep.], at 166:15- 22; 167:1-4.8 The Ellis email provides no indication of inappropriate collusion and makes no mention of Plaintiff’s religion; rather, it indicates that there were concerns with Plaintiff’s attendance and the effects on other custodial staff and the resultant cleanliness of the school. See Ellis email, attached to Opposition at ECF No. 85-5 (asking for the next steps to replace or dismiss Mr. Rasheed). Plaintiff points next to the fact that he had 278 hours of “use it or lose it annual leave” time, see pay records, attached to Opposition at ECF No. 85-3, and he notes that on April 15, 2015, Principal Holmes wrote to him about “the numerous times he rightfully exercised annual leave.” Pl.’s Opp’n, ECF No. 85, at 7; see Holmes Letter dated April 15, 2015, attached to Opposition at ECF No. 85-4. In that letter, Principal Holmes explains that she is placing a leave restriction on Plaintiff because he had “taken leave, called in sick or [had] been tardy for a total of fifty five days” during the period September 12, 2014 - April 10, 2015, and as a result, the school was “not as clean as it should be,” the “building was not clean and sanitary,” and she noted further that his 8 Ms. Ellis is identified by Defendant as the Instructional Superintendent of Cluster IV, a supervisor of principals. Def.’s Reply, ECF No. 86, at 7. 17 absences “put a strain on the custodial team.” Id. The letter makes no reference to Plaintiff’s religion, and it notes only one instance of unauthorized leave on April 3, 2015, which is consistent with Principal Holmes’ performance assessment of Mr. Rasheed. See Def.’s Mot. Ex. F (indicating that Plaintiff received a rating of “significantly below standard” on “attendance” and policies and procedures” due to an unexcused absence on April 3, 2015, and his failure to use the correct protocol for leave.) Plaintiff makes no connection between alleged complaints about him exercising annual leave and any religious discrimination. Even considering Plaintiff’s attempts to establish that Defendant’s proffered reason for his termination was pretextual, the Court concludes that summary judgment in favor of Defendant on Plaintiff’s Title VII claim based on his termination is appropriate. The Court notes that the Ellis email and the Holmes letter proffered by Plaintiff both indicate concerns about the cleanliness of the school and excessive absences by Plaintiff, and this is consistent with Principal Holmes giving Plaintiff a low score for performance of his job functions. See Def.’s Mot. Ex. F (where Defendant evaluates the manner in which Plaintiff performed the core functions of his job). Plaintiff’s evidence fails to establish a material dispute of fact as to Defendant’s proffered reasons for Plaintiff’s termination. First, the Holmes letter referenced by Plaintiff identifies dates in September, 2014 through April 2015, when Mr. Rasheed repeatedly either called out sick or took annual leave. See Holmes Letter, attached to Opposition at ECF No. 85-4. Second, Plaintiff’s pay records show that he had more than 200 hours of annual leave at least as of April 2015, but it is unclear how much of that leave was “use it or lose it,” and Plaintiff fails to address Defendant’s assertion that the manner in which he took his leave disrupted custodial operations, except to assert that Principal Holmes should have arranged for additional staff coverage. Pl.’s Opp’n, ECF No. 85, at 7. Third, nothing in the Powe deposition relied upon by Plaintiff supports his contention 18 that the reasons for his termination were pretext. Fourth, Plaintiff fails to establish any connection whatsoever between his religion and any alleged discrimination. He has not pointed to one shred of evidence in the record indicating that his religion was considered by anyone or had any bearing on his two performance evaluations, which ultimately led to his termination. The Court concludes that Plaintiff has not produced evidence showing that Defendant’s stated reasons for Plaintiff’s termination were pretext for discrimination. In analyzing this evidence, the Court makes no judgment as to whether or not Plaintiff was actually “ineffective” at his job because that is not the relevant question. “Ultimately, the question before the Court is not whether the negative [action] was justified or fair, but whether the employer honestly believed” its proffered reasons for taking the action. Mentzer v. Lanier, 677 F. Supp. 2d 242 , 258 (D.D.C. 2010), aff’d, 408 F. App’x 379 (D.C. Cir. 2010). And Plaintiff has presented no evidence supporting an inference that Defendant did not consider its given reasons to be accurate. Considering the parties’ arguments as well as the record before the Court, the Court concludes that summary judgment on Plaintiff’s Title VII claim is appropriate. Plaintiff has failed to “‘produce[] sufficient evidence for a reasonable jury to find that the employer’s asserted non- discriminatory reason was not the actual reason and that the employer intentionally discriminated against the employee’ on the basis of” a protected trait or activity.” Davis v. George Washington Univ., 26 F. Supp. 3d 103 , 118-19 (D.D.C. 2014) (quoting Brady, 520 F.3d at 494 ). Accordingly, the Court GRANTS Defendant’s Motion for Summary Judgment on Plaintiff’s Title VII discrimination claim in Count I of his Second Amended Complaint. B. Plaintiff’s Claims Under the DCHRA Turning now to Plaintiff’s DCHRA claims, Defendant asserts that Mr. Rasheed’s DCHRA claim is limited to events that occurred after December 31, 2014 (one year prior to the EEOC 19 Charge date). Def.’s Mot., ECF No. 84, at 11-12; Def.’s Reply, ECF No. 86, at 5-6. Pursuant to D.C. Code § 2-1403.16 , DCHRA claims must be filed within one year of an allegedly unlawful incident’s occurrence or discovery. Because there is a work-sharing agreement between the EEOC and D.C.’s analogous agency, when a charge is timely filed with the EEOC, it tolls the limitations for DCHRA claims in the charge. Craig v. District of Columbia, 74 F. Supp. 3d 349 , 366-67 (D.D.C. 2014). Pursuant to the DCHRA, “[t]he timely filing of a complaint [with the D.C. Office of Human Rights] or under the administrative procedures established by the Mayor pursuant to D.C. Code § 2-1403.16 (a), shall toll the running of the statute of limitations while the complaint is pending.” D.C. Code § 2-1403.16 (a); see Miller v. Gray, 52 F. Supp. 3d 62 , 69 (D.D.C. 2014) (“[O]nce the EEOC charge was filed, the DCHRA’s one year statute of limitations was tolled until the plaintiff received a notice from the EEOC of his right to sue[.]”) . In the instant case, as previously noted, in his Second Amended Complaint, Mr. Rasheed alleged various adverse actions that occurred in 2011 and 2012, while he was employed at Ballou, beginning with his September 2011 transfer to Ballou. Plaintiff indicates further that he filed EEOC Charges on November 13, 2012 (alleging discrimination starting in September 2011) and on December 31, 2015 (generally alleging religious discrimination and specifically, the termination of employment).9 Second Am. Comp., ECF No. 15, at ¶¶ 48, 4. Defendant asserts that because the November 13, 2012 EEOC Charge “was filed after the one-year statute of limitations had expired under the DCHRA for any alleged September 2011 claimed incidents, [therefore,] the[se] [incidents] are not tolled but time-barred[,]” both for purposes of the November 2012 9 In his December 31, 2015 EEOC Charge, Plaintiff two prior EEOC Charges being filed, the first in November 2012, and the second in November 2014, but only the November 2012 Charge is referenced in his Second Amended Complaint. The Court has not seen a copy of any EEOC Charge other than the one filed on December 31, 2015. 20 Charge and the December 31, 2015 EEOC Charge (which mentions the prior charge). Def.’s Mot., ECF No. 84, at 12. Plaintiff does not respond to this assertion about tolling and time bars. Plaintiff relies on the fact that because his December 2015 EEOC Charge mentioned religious discrimination beginning on or about September 2012, this was enough to “sufficiently place the agency on notice of his . . . religious discrimination claims.” Pl.’s Opp’n, ECF No. 85, at 10. The case cited by Plaintiff to support this statement is factually inapposite. See Crawford v. Duke, 867 F 3d 103, 109-110 (D.C. Cir. 2017) (finding that plaintiff had exhausted two of three claims of adverse employment actions where he attached supplemental documentation to his EEOC complaint that was directly relevant to those claims). The claims before this Court are derived from the Plaintiff’s December 31, 2015 EEOC Charge. The December 31, 2015 Charge states (by way of background) that “on or about September 2012,” Plaintiff “started being subjected to discrimination based on [his] religion. .. through unfair rating evaluations,” and he filed an EEOC Charge “[o]n or about November 2012,” which “remained open until February 2015.” EEOC Charge, ECF No. 84-9. This Court is unaware of the substance of that November 2012 EEOC Charge, and whether it refers to any specific allegations of religious discrimination from 2011-2012. In his December 2015 Charge, Mr. Rasheed points to no discrete acts of discriminatory conduct (as asserted in his Second Amended Complaint) except to indicate that his employment was terminated. He does not mention any denial of leave to attend his ex-wife’s funeral and grieve her death, or even any discrimination based on denial of leave in general. In the context of the DCHRA, the D.C. Court of Appeals has held that “[i]t is only logical to limit the permissible scope of the civil action to the scope of the EEOC investigation which can reasonably be expected to grow out of the charge of discrimination.” Ivey v. District of Columbia, 949 A.2d 607 , 615 (D.C. 2008) (quoting Sanchez v. Standard Brands, Inc., 21 431 F,2d 455, 466 (5th Cir. 1970)). Applying the same “like or reasonably related” test articulated by the D.C. Circuit Court in Title VII cases, the D.C. Court of Appeals determined that “[i]t is sufficient that the EEOC be apprised, in general terms of the alleged discriminatory acts.” Id. In this case, the incidents of alleged discriminatory conduct by Defendant while Plaintiff was at Ballou from September 2011 through July 2014, which are alleged in Plaintiff’s Second Amended Complaint, were not mentioned in his December 31, 2015 EEOC Charge, although that Charge notes (without providing specifics) that Plaintiff had filed a prior November 2012 EEOC Charge. With regard to any claims made in that November 13, 2012 EEOC charge, whether they were tolled or not, Plaintiff was issued a right to sue letter on February 23, 2015, see Second Am. Compl., ECF No. 15, at ¶ 48, and this was ten months before Plaintiff filed the EEOC Charge that is at issue in this case. Accordingly, the claims in that EEOC Charge from November 2012 are not before this Court, and that leaves Plaintiff’s 2015 claims on denial of leave and termination of employment.10 Applying the “like or reasonably related” standard discussed above, Plaintiff’s DCHRA claim would be limited to his allegation of discrimination relating to his August 2015 termination of employment, as his alleged denial of leave from June 2015 was not mentioned in his December 31, 2015 EEOC Charge. Defendant indicates however that it is willing to allow Mr. Rasheed to “proceed against the District under the DCHRA for his claim that DCPS refused to give him three days of leave to attend his ex-wife’s funeral and to grieve her death in June 2015 and for his August 8, 2015 termination,” because those two claims would not be time-barred. Def.’s Mot., ECF No. 84, at 12. Accordingly, the Court will analyze those two claims. 10 There is no evidence in the record before this Court that Plaintiff pursued any legal action based on that February 23, 2015 right to sue letter. 22  1. Termination of Employment In its analysis of Plaintiff’s Title VII claim for termination of employment, this Court has determined that Plaintiff failed to demonstrate that the reason for his termination was pre-textural. Given the similarities between the statutes, it is no surprise that the Court of Appeals in this Circuit has “made clear that federal case law addressing questions arising in Title VII cases is applicable to resolution of analogous issues raised regarding DCHRA claims.” Ali v. District of Columbia Government, 697 F. Supp. 2d 88 , 92 n. 6 (D.D.C. 2010) (citing Howard Univ. v. Green, 652 A.2d 41 , 45 n.3 (D.C. 1994)); see also, e.g., Regan v. Grill Concepts-D.C., Inc., 338 F. Supp. 2d 131 , 134 (D.D.C. 2004) (“This Court, too, will consider [p]laintiff’s claims under [the] DCHRA utilizing the case law developed for suits brought under Title VII.”) Accordingly, Plaintiff’s claim for employment discrimination based on his alleged unlawful termination fails under both Title VII and the DCHRA. In addition to failing to produce any evidence creating an inference of discrimination, Plaintiff has not introduced any evidence showing that Defendant’s proffered reasons for its actions were pretextual. As the Court has already engaged in a full discussion of the issues, a repetition of that discussion is not necessary here. See supra Section III. A. 2. With regard to Plaintiff’s claim of religious discrimination based on denial of leave in June 2015, Defendant contends that Plaintiff has not made out a prima facie case of discrimination, which requires plaintiff to demonstrate that “(1)[he] is a member of a protected class; (2) [he] suffered an adverse employment action; and (3) the unfavorable action gives rise to an inference of discrimination.” Turner v. District of Columbia, 383 F. Supp. 2d 157 , 167 (D.D.C. 2005) (citation omitted). Religious discrimination claims apply the McDonnell Douglas framework to evaluate Title VII and DCHRA claims. See Johnson v. Dong Moon Joo, No. 01-0004, 2006 WL 23 627154, at *19 (D.D.C. Mar. 12, 2006) (applying the McDonell Douglas standard to a claim of religious discrimination under Title VII, Section 1981, and the DCHRA). To establish a prima facie case of denial of leave, Mr. Rasheed must not only show that leave was denied, but he must also show that the denial was based on his religion. Plaintiff demonstrates neither. Without evidentiary support, Mr. Rasheed claims that he was denied leave in June 2015 based on religious discrimination. Plaintiff contends that “[i]n 2015, plaintiff was denied a leave of absence, which he had previously requested in order to attend the funeral service of his ex-wife, . . .” and “[o]n June 5, 2015, despite plaintiff [‘s] FMLA request for three (3) days of grievance leave, Principal Holmes requested plaintiff to report to work.” Pl.’s Opp’n, ECF No. 85, at 6. Plaintiff proffers no other argument or evidence relating to his denial of leave claim. Mr. Rasheed’s ex-wife’s funeral was held on June 3, 2015, see Def.’s Mot. Ex. B (notice of memorial service), ECF No. 84-3, and it is undisputed that, on June 8, 2015, Plaintiff submitted a leave slip for sick leave taken from June 1, 2015 through June 5, 2015. See Def.’s Mot. Ex. C [Handwritten leave slip signed by Mr. Rasheed], ECF No. 84-4. Consequently, the evidence indicates that Mr. Rasheed took leave time, and no reasonable jury could conclude that Plaintiff was denied leave or that any such alleged denial was tied to religious discrimination. Accordingly, Plaintiff’s DCHRA claim relating to any alleged denial of leave fails, and summary judgment in favor of Defendant is appropriate. Considering the parties’ arguments as well as the record before the Court, the Court concludes that summary judgment on all claims in Plaintiff’s Count I of his Second Amended Complaint is appropriate. Plaintiff has failed to “‘produce[] sufficient evidence for a reasonable jury to find that [Defendant’s] asserted non-discriminatory reason [for his termination] was not the actual reason and that [Defendant] intentionally discriminated against [Plaintiff]’ on the basis of” 24 her religion in the context of any denial of leave in June 2015, or that Plaintiff was denied leave. Davis v. George Washington Univ., 26 F. Supp. 3d 103 , 118-19 (D.D.C. 2014) (quoting Brady, 520 F.3d at 494 ). Accordingly, the Court GRANTS Defendant’s Motion for Summary Judgment on Plaintiff’s religious discrimination claim in Count I of his Second Amended Complaint. IV. CONCLUSION In sum, the Court GRANTS Defendant’s motion for summary judgment on both Plaintiff’s Title VII and DCHRA claims in Count I of his Second Amended Complaint. As to Plaintiff’s claim of religious discrimination under both Title VII and the DCHRA relating to his termination of employment, this Court finds that no reasonable jury could find that Defendant’s asserted non- retaliatory reasons for its termination decision were pretextual and that Defendant intentionally discriminated against Plaintiff based on his religion. As to Plaintiff’s claim of religious discrimination under the DCHRA relating to his claimed denial of leave Plaintiff has failed to present any evidence that leave was denied or that any alleged denial of leave was based on discrimination because of his religion. An appropriate Order accompanies this Memorandum Opinion. DATED: November 30, 2020 ______________/s/_______________ COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE 25

2020-03-05 18:06:28.723558+00

http://caseinfo.nvsupremecourt.us/document/view.do?csNameID=46072&csIID=46072&deLinkID=760247&onBaseDocumentNumber=20-08769

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2020-11-30 20:02:37.062424+00

https://www.courts.ca.gov/opinions/nonpub/A153133A.PDF

Filed 11/30/20 P. v. Fox CA1/1 Opinion following transfer from Supreme Court NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION ONE THE PEOPLE, Plaintiff and Respondent, A153133 v. BRIAN K. FOX, (San Francisco City and County Super. Ct. No. SCN225583-02) Defendant and Appellant. MEMORANDUM OPINION1 After his co-defendant stole a camera from two tourists in San Francisco, defendant Brian K. Fox shot at the tourists as he and the co- defendant fled. Fox was charged with eight felony counts, including two counts of attempted murder, and several firearm enhancements. To resolve his case, he pleaded guilty to a single count of robbery, admitted to personally using a firearm during the offense, and agreed to be sentenced to 15 years in prison, including 10 years for the firearm enhancement.2 In October 2017, the trial court accepted the plea and sentenced Fox in accordance with it. We resolve this case by a memorandum opinion pursuant to 1 California Standards of Judicial Administration, section 8.1(2). Fox was convicted of robbery under Penal Code section 211, and the 2 firearm enhancement was found true under Penal Code section 12022.5, 1  On appeal, Fox originally contended that under Senate Bill No. 620 (2017–2018 Reg. Sess.) (Senate Bill No. 620), which took effect a few months after he was sentenced, he was entitled to a remand not for the purpose of seeking to withdraw his plea but for the purpose of asking the trial court to exercise its discretion under the new legislation to strike the firearm enhancement, potentially reducing his negotiated sentence by 10 years. Perceiving no legislative intent to authorize trial courts to reduce agreed- upon sentences while otherwise permitting defendants to retain the benefits of their plea agreements, we concluded that he could obtain relief under the new legislation only if he first sought to withdraw his plea. We considered the appellate claim to be in effect a challenge to the validity of his plea, and since Fox had not obtained a certificate of probable cause to file the appeal, we dismissed it on May 3, 2019. (People v. Fox (2019) 34 Cal.App.5th 1124 ; see also California Rules of Court, rule 8.304.) The following month, Fox filed a petition for review in the California Supreme Court. The Supreme Court granted the petition and deferred further action pending its decision in People v. Stamps, S255843. Stamps, which was decided in June 2020, involved Senate Bill No. 1393 (2017–2018 Reg. Sess.), legislation that gave trial courts discretion to strike serious- felony enhancements. (People v. Stamps (2020) 9 Cal.5th 685 , 692–693 (Stamps).) Stamps held that the defendant did not need a certificate of probable cause to obtain a remand for the trial court to exercise its discretion under the new law, which took effect after he entered a plea agreement for a specified term. (Id. at p. 692.) Stamps reasoned that such an appellate claim subdivision (a), which provides for a three-, four-, or ten-year sentence for the personal use of a firearm during a felony or attempted felony. All further statutory references are to the Penal Code. 2 “does not constitute an attack on the validity of [the] plea because the claim does not challenge [the] plea as defective when made.” (Id. at p. 696.) Stamps agreed with us, however, that a defendant is not entitled to have the trial court “exercise its discretion to strike [an] enhancement but otherwise maintain [a] plea bargain” for a specified term. (Stamps, supra, 9 Cal.5th at p. 692.) Rather, if a trial court exercises its discretion to strike an enhancement on remand, the prosecution is entitled to withdraw from the plea agreement, and the court is entitled to withdraw its approval of the agreement. (Id. at pp. 707–708.) Recognizing that its holding might change the defendant’s “calculus in seeking relief under Senate Bill 1393,” the Supreme Court emphasized that “it is ultimately [a] defendant’s choice” whether to ask a trial court to exercise its new discretion on remand. (Id. at p. 708.) On October 14, 2020, the Supreme Court remanded Fox’s case to us with directions to vacate our prior decision and reconsider the matter in light of Stamps. Fox submitted supplemental briefing in which he argued that he is entitled to a limited remand, as set forth in Stamps, for the opportunity to seek relief under Senate Bill No. 620. The Attorney General did not submit supplemental briefing, and we agree with Fox’s proposed disposition. Accordingly, we vacate our decision of May 3, 2019, remand the matter for the limited purpose of allowing Fox to request relief under Senate Bill No. 620, and otherwise affirm the judgment. If Fox chooses not to request relief, or the trial court “declines to exercise its discretion under section 1385, that ends the matter and [Fox’s] sentence stands.” (Stamps, supra, 9 Cal.5th at p. 707.) But “if the court is inclined to exercise its discretion” in Fox’s favor, the prosecution will be entitled to withdraw from the plea agreement, 3 and the court will be entitled to withdraw its approval of the plea agreement. (Id. at pp. 707–708.) 4  _________________________ Humes, P.J. We concur: _________________________ Banke, J. _________________________ Sanchez, J. People v. Fox A153133 5

2020-11-30 20:02:37.982868+00

https://www.courts.ca.gov/opinions/nonpub/D076922.PDF

Filed 11/30/20 Marriage of Tetzlaff CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA In re the Marriage of KATHLEEN I. and ROBERT J. TETZLAFF. D076922 KATHLEEN I. TETZLAFF, Appellant, (Super. Ct. No. DS20219) v. ROBERT J. TETZLAFF, Respondent. APPEAL from an order of the Superior Court of San Diego County, Maryann D’Addezio Kotler, Judge. Affirmed. Law Office of Patrick L. McCrary and Patrick L. McCrary for Appellant. Stephen Temko and Dennis G. Temko for Respondent.  Kathleen I. Tetzlaff (Kathy1) appeals from findings and an order after a post-judgment hearing at which, based on a request for an order by her former spouse, Robert J. Tetzlaff (Robert), the family court found changed circumstances, terminated child support for the parties’ adult child, J., set Kathy’s spousal support at $0, and terminated jurisdiction. As we explain, because Kathy has not established that the court’s findings of fact are unsupported by substantial evidence, the legal conclusions are erroneous, or the rulings are beyond the bounds of reason, Kathy has not met her burden of establishing that the family court abused its discretion. Accordingly, we affirm. I. COMBINED FACTUAL AND PROCEDURAL BACKGROUND2 Kathy and Robert married in 1981 and separated more than 20 years later in 2001. Their daughter, J., was 20 years old at the time of separation and 38 years old at the time of the filing of the order on appeal. In 2005, the parties entered into a marital settlement agreement and, in uncontested proceedings, obtained a judgment of dissolution of their marriage; the judgment incorporated the settlement agreement. In part, the agreement provided: Robert must pay Kathy monthly spousal support of $3,000; and Robert must pay Kathy monthly support of $1,734 for J., “pursuant to Family Code § 3910(a)[,] which provides for the payment of 1 For clarity and ease of reading, both parties have used first names in their appellate briefs. In doing the same in this opinion, we intend no disrespect. 2 Given the deferential standard of review (see pt. II., post) and no statement of decision, we recite the facts, especially those where the evidence conflicts, in a light most favorable to Robert, as the prevailing party. (In re Marriage of Brooks (2019) 33 Cal.App.5th 576 , 589.) 2 support for a child of whatever age who is incapacitated from earning a living and without sufficient means.”3 In 2014, the family court granted Robert’s request to modify Kathy’s spousal support and lowered the monthly amount to $1,700. In addition, the court also denied Robert’s request to terminate adult child support for J., then almost 33 years old, and set the monthly amount at $2,002. In 2018, more than 16 years after the parties separated and more than 12 years after the parties divorced, Robert filed a request for orders to terminate spousal support for Kathy and to modify adult child support for J., who was then almost 37 years old (RFO). In support, he submitted a memorandum of points and authorities, a declaration, and an income and expense declaration. With regard to changed circumstances, Robert testified that, in February 2018 at a time when he was at least 66 years old, he was “forced into retirement” after having been laid off from his employment; and J. had become “fully capable of working.” As to the merits of the spousal support issue, Robert first emphasized that, at the time of the parties’ divorce in 2005, “and at all subsequent hearings,” the family court had given Kathy at least six “Gavron warnings . . . to become self-supporting.”4 As to the merits 3 Family Code section 3910, subdivision (a) (section 3910(a)) provides in full: “The father and mother have an equal responsibility to maintain, to the extent of their ability, a child of whatever age who is incapacitated from earning a living and without sufficient means.” (Further undesignated statutory references are the Family Code.) 4 Named after the rule announced in In re Marriage of Gavron (1988) 203 Cal.App.3d 705 , a “Gavron warning” requires that, before a spousal support order may be terminated or reduced, the supported party must be given fair notice of the expectation that the supported party become self-sufficient and a reasonable opportunity to achieve that goal. (Id. at pp. 711-712.) In 3 of the adult child support issue, Robert emphasized that, because J. is capable of working, she is no longer “incapacitated from earning a living” (§ 3910(a)); and because she is able to earn a living, he no longer has the section 3910(a) “responsibility to maintain” her. He then argued that, given his new monthly income of $4,677 and his ongoing monthly expenses of $6,454,5 he could no longer afford to pay spousal support or adult child support. Kathy opposed the RFO. In her responsive declaration, she set forth her reasons for maintaining the current spousal and adult child support and requested orders that Robert continue providing health insurance for J., reimburse Kathy for half of J.’s uninsured medical expenses, and award Kathy reasonable attorney fees. She filed a declaration from counsel in support of the attorney fees request and an income and expense declaration. At a hearing on September 17, 2018, the court issued the following “interim orders” on Robert’s RFO, pending a continued hearing in December 2018: On a monthly basis, Robert was to pay “Interim Spousal Support” of $1,000 and “Interim Child Support” of $1,800; Kathy was to establish a special needs trust for J.; and Kathy was to apply for Social Security benefits for both herself and J. application, where a supported spouse has received a Gavron warning and “has unreasonably delayed or refused to seek employment consistent with his/her ability,” that factor may be considered in modification proceedings. (In re Marriage of Heistermann (1991) 234 Cal.App.3d 1195 , 1204.) 5 At the time Robert filed the RFO, his income and expense declaration established monthly income of $1,588 from “Pension/retirement fund payments” and $3,089 from “Social security retirement (not SSI)” and monthly expenses of $6,454. 4  In preparation for the continued hearing in December 2018, Kathy filed a memorandum of points and authorities and additional declarations from her and her attorney. Likewise, Robert filed two declarations, one updating his income and expenses and another replying to the facts in Kathy’s recent declaration. The December 2018 hearing was continued until August 6, 2019, at which time the family court presided over a half-day evidentiary hearing. In preparation for this hearing, Robert filed an updated income and expense declaration.6 In January 2020, the family court filed findings and an order after the hearing on Robert’s RFO (FOAH). In the FOAH, the court first found that Robert’s forced retirement constituted a material change in circumstances. The court then acknowledged that, for purposes of determining whether modification of spousal support was justified, “it must consider the criteria set forth in Family Code section 4320”;7 and we have no reason to believe this was not done. After analyzing some, but not all, of the section 4320 factors, the court set spousal support at $0 and terminated jurisdiction to order spousal 6 By the time of the evidentiary hearing on the RFO almost a year after the interim awards, Robert’s current income and expense declaration disclosed total monthly income of $4,752 (comprised of $1,500 from “Pension/retirement fund payments” and $3,252 from “Social security retirement (not SSI)”) and total monthly expenses of $8,677. 7 Section 4320 provides in part: “In ordering spousal support under this part, the court shall consider all of the following circumstances: [¶] (a) The extent to which the earning capacity of each party is sufficient to maintain the standard of living established during the marriage, taking into account all of the following: [¶] . . . [¶] . . . [¶] (n) Any other factors the court determines are just and equitable.” 5 support. In doing so, the court found in part as follows: “[Robert] paid for [Kathy’s] education enabling her to find employment as a beauty technician”; however, “[s]he has never worked outside the home”; although the parties “separated in 2001 and have been divorced since 2005” and Kathy “has received approximately six Gavron warnings,” Kathy “chose not to seek employment for the last 18 years”; during this time, Kathy “has had ample time and the ability to become self-supporting.” The court further found that, although Kathy “does need financial support,” she received “approximately $200,000” at the time of the dissolution of marriage8 and “spousal support for 18 years”; and the court concluded that Kathy “failed to manage her finances in such a manner to enable her to become self-supporting” (citing In re Marriage of McElwee (1988) 197 Cal.App.3d 902 , 909-910 [“just as lack of diligence in seeking employment may lead to a refusal to award spousal support [citation], so too may improvident management of assets, which were sufficient to provide self-sufficiency in the accustomed lifestyle, justify termination of support and jurisdiction even though such an order may result in an alteration in the supported spouse’s lifestyle”]). Finally, consistent with the evidence in his income and expense declaration, the court also ruled that Robert “does not have the ability to pay spousal support.” With regard to adult child support, the family court granted Robert’s request and terminated Robert’s then-current obligations to provide section 3910(a) support for J. In principal part, the court relied on Robert’s testimony that J. was able to earn a living, on the additional evidence that J. had been denied Social Security benefits on several occasions, and on the 8 At the time of the parties’ divorce, Robert paid Kathy the cash equivalent of half of his retirement accounts. We do not know whether those funds are part of the $200,000 payment. 6 record which lacked any expert evidence that J. was disabled or otherwise incapacitated from earning a living. Kathy appealed from the FOAH.9 II. DISCUSSION10 On appeal Kathy argues that the family court erred: (1) in imputing to Kathy the ability to become self-supporting; (2) in not making specific findings as to the standard of living during the parties’ marriage; (3) in terminating jurisdiction to order spousal support; and (4) in placing on Kathy, the non-moving party, the burden of proving that circumstances had not changed for purposes of determining whether adult child support could be modified. As we explain, because Kathy has not met her burden of establishing reversible error, we will affirm the FOAH. We review an order modifying spousal support for an abuse of discretion. (In re Marriage of T.C. & D.C. (2018) 30 Cal.App.5th 419 , 423.) 9 Robert suggests that this court lacks jurisdiction because Kathy appealed from the non-appealable August 2019 minute order. (See Schneer v. Llaurado (2015) 242 Cal.App.4th 1276 , 1283 [where the court directs the preparation of a written order, “an appeal may not lie from the minute order”].) The argument is frivolous, since Robert was served with both (1) this court’s letter that, upon the submission of a formal order, we would construe Kathy’s notice of appeal as being from the formal order, and (2) Kathy’s submission of a formal order—i.e., the FOAH—10 days later. 10 Kathy has not provided a reporter’s transcript (or agreed or settled statement) from the August 2019 half-day evidentiary hearing. Thus, as Kathy acknowledges in her opening brief, for any issue that depends on the adequacy of the evidence presented, her “ ‘[f]ailure to provide an adequate record . . . requires that the issue be resolved against [her].’ ” (Jameson v. Desta (2018) 5 Cal.5th 594 , 609 (Jameson), italics added.) That is because the appellant has the burden of establishing reversible error on appeal (ibid.), and “it is presumed that the unreported . . . testimony would demonstrate the absence of error” (Estate of Fain (1999) 75 Cal.App.4th 973 , 992 (Fain)). 7 We review an order terminating spousal support for an abuse of discretion. (In re Marriage of Pasco (2019) 42 Cal.App.5th 585 , 590.) We review an order modifying adult child support for an abuse of discretion. (In re Marriage of Drake (2015) 241 Cal.App.4th 934 , 939 (Drake).) “In exercising its discretion the trial court must follow established legal principles and base its findings on substantial evidence.” (In re Marriage of Schmir (2005) 134 Cal.App.4th 43 , 47, fn. omitted [modification of spousal support].) Because a “proper exercise of judicial discretion requires the exercise of discriminating judgment within the bounds of reason, and an absence of arbitrary determination, capricious disposition, or whimsical thinking” (In re Marriage of Rosevear (1998) 65 Cal.App.4th 673 , 682-683 [set aside judgment]), the family court abuses its discretion when, after considering all of the circumstances, its decision “ ‘has “exceeded the bounds of reason” or it can “fairly be said” that no judge would reasonably make the same order under the same circumstances’ ” (In re Marriage of Smith (1990) 225 Cal.App.3d 469 , 480 (Smith) [modification of spousal support]). A. Imputing to Kathy the Ability to Become Self-Supporting Suggesting that “[t]he normal . . . retirement age here is 66” (citing In re Marriage of Shimkus (2016) 244 Cal.App.4th 1262 , 1276), Kathy argues that the family court erred in imputing to her the ability to be self- supporting, essentially requiring her to become employed. According to Kathy, she is 68 years old and “[n]o one should be compelled to work after their normal retirement age” (citing In re Marriage of McLain (2017) 7 Cal.App.5th 262 (McLain)).11 11 In passing, Kathy suggests that the FOAH denies her equal protection of the law, in that the effect of the FOAH allows 68-year-old Robert to retire whereas 68-year-old Kathy must now become employed. Preliminarily, neither the evidence from the hearing nor anything in the FOAH requires 8  Initially, Kathy’s reliance on McLain is misplaced. In McLain, the court relied on In re Marriage of Reynolds (1998) 63 Cal.App.4th 1373 (Reynolds), and the issue in both McLain and Reynolds was whether the supporting spouse can be compelled to work past retirement age in order to maintain the same level of spousal support as when the supporting spouse was fully employed. (McLain, supra, 7 Cal.App.5th at p. 268, quoting Reynolds, at p. 1378 [“ ‘we hold that no one may be compelled to work after the usual retirement age of 65 in order to pay the same level of spousal support as when he was employed’ ”].) Here, of course, Kathy is the supported spouse, and the authorities she cites do not speak to the work obligations of the supported spouse.12 Moreover, and determinative of the issue, the FOAH neither “imput[es to Kathy] the ability to be self-supporting” nor “requires Kathy Kathy to work or precludes her from retiring. In any event, Kathy forfeited appellate review of this constitutional issue on at least two grounds: (1) Kathy did not raise an equal protection argument in the family court (In re Marriage of Minkin (2017) 11 Cal.App.5th 939 , 958 [“A party typically forfeits constitutional issues not raised in earlier civil proceedings”]; In re Marriage of Brewster & Clevenger (2020) 45 Cal.App.5th 481 , 510 (Brewster & Clevenger) [on appeal, “ ‘new arguments may be deemed waived, based on common notions of fairness’ ”]); and (2) in a two-sentence explanation of her equal protection argument, Kathy presents insufficient legal authorities or analyses (In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814 , 830 [“The absence of cogent legal argument or citation to authority allows this court to treat the contentions as waived”]; see Cal. Rules of Court, rule 8.204(a)(1)(B)). We thus express no opinion on her constitutional argument. 12 Thus, to the extent McLain and Reynolds are applicable here, they support only a ruling that Robert, as the supporting spouse, cannot be compelled to work past normal retirement age. (McLain, supra, 7 Cal.App.5th at p. 268; Reynolds, supra, 63 Cal.App.4th at p. 1378.) 9 to become employed,” as she tells us. (Some capitalization and bolding omitted.) In attempting to convince us otherwise, Kathy argues that, “[a]bsent support[,] [she] lives on $1,001 per month,” citing the FOAH. However, that is not what the FOAH says. The court found only that Kathy “receives [S]ocial [S]ecurity benefits in the amount of approximately $1001/month.”13 (Italics added.) In any event, the court made other findings that fully support the rulings in the FOAH, regardless whether Kathy believes she must now seek employment. For example, despite having “received approximately $200,000 and . . . spousal support for 18 years,” Kathy “failed to manage her finances in such a manner to enable her to become self-supporting.”14 Also, 13 Although Kathy’s statement about “liv[ing] on $1,001 per month” may be supported by evidence or inferences from evidence in the record, we do not consider it here for at least three independent reasons: (1) Kathy has not cited us to the evidence on which she might be relying; (2) the issue is not whether the record contains evidence in support of findings the losing party wishes the court had made, but “ ‘whether there is some evidence that, if believed, would support the findings’ ” actually made (In re Marriage of Fregoso & Hernandez (2016) 5 Cal.App.5th 698 , 703 (Fregoso & Hernandez)); and (3) as the losing party, Kathy is not entitled to the benefit of inferences from evidence (In re Marriage of Bonds (2000) 24 Cal.4th 1 , 35 [“the reviewing court should draw all reasonable inferences in favor of the judgment below,” reversing the intermediate appellate court decision that “incorrectly chose to draw those inferences least in favor of the judgment below”]). 14 We are aware of, and sympathetic to, Kathy’s explanation of what she characterizes in her appellate briefing as “her financial woes.” In addition, we have reviewed the detailed evidence she submitted to the family court in opposition to the RFO, in which she explains the many causes (mostly out of her control) that she attributes to her financial situation. However, we do not consider that evidence for purposes of accepting the family court’s finding that Kathy mismanaged her finances (or any other finding); we consider only 10 in violation of at least six Gavron warnings (that the court expected her to become self-sufficient), Kathy “chose not to seek employment for the last 18 years”—even though she “had ample time and the ability to become self- supporting.” (Italics added.) Finally, due to the change in circumstances related to his (involuntary) loss of employment, Robert “does not have the ability to pay spousal support.” B. Findings Regarding the Marital Standard of Living Kathy argues that the family court erred when, in ruling on Robert’s request to modify and terminate spousal support, the court failed to make a factual finding as to the marital standard of living.15 In support of her argument, Kathy relies on section 4332, which provides in part: “In a proceeding for dissolution of marriage . . . of the parties, the court shall make specific factual findings with respect to the standard of living during the marriage[.]” Here, the FOAH makes no mention of the marital standard of living, and on that basis Kathy contends the FOAH must be reversed and the matter remanded for a new trial on spousal support. However, not all error is reversible error. As we explain, even if we assume without deciding that the family court erred, because Kathy has not established that she suffered prejudice as a result of the lack of section 4332 the evidence in support of the finding actually made, and if it is substantial, we must accept the finding, regardless whether there is other evidence, even weightier evidence, that is contrary to the court’s finding. (Fregoso & Hernandez, supra, 5 Cal.App.5th at p. 703.) 15 “The marital standard of living is ‘a general description of the station in life the parties had achieved by the date of separation,’ rather than a ‘mathematical standard.’ ” (In re Marriage of Grimes & Mou (2020) 45 Cal.App.5th 406 , 424.) It is not “ ‘the absolute measure of reasonable need,’ ” but “ ‘merely a threshold or reference point against which all of the statutory factors may be weighed.’ ” (Id. at pp. 424-425.) 11 findings, she has not met her burden of establishing that the FOAH be reversed. “We begin with the understanding that a procedural error by itself is generally insufficient to set aside a judgment or order.” (In re Marriage of Kent (2019) 35 Cal.App.5th 487 , 496.) That is because “the presumption in the California Constitution is that . . . ‘. . . any error as to any matter of procedure,’ is subject to harmless error analysis and must have resulted in a ‘miscarriage of justice’ in order for the judgment to be set aside.” (In re Marriage of Goddard (2004) 33 Cal.4th 49 , 56 (Goddard); see Cal. Const., art. VI, § 13; Code Civ. Proc., § 475.16) In this regard, the burden is on the party challenging the order, here Kathy, to “demonstrate the error was prejudicial, that is, that it is reasonably probable a result more favorable to that party would have been reached in the absence of the error.” (In re Marriage of Jackson (2006) 136 Cal.App.4th 980 , 997 (Jackson).) Because Kathy does not mention, let alone attempt to establish, prejudice, she necessarily failed to demonstrate reversible error. (Goddard, supra, 33 Cal.4th at p. 56; Jackson, supra, 136 Cal.App.4th at p. 997.) In any event, because “the marital standard of living takes on less significance with the postseparation passage of time” (Hogoboom & King, Cal. 16 Article VI, section 13 of the California Constitution provides in part: “No judgment shall be set aside . . . for any error as to any matter of procedure, unless, after an examination of the entire cause, including the evidence, the court shall be of the opinion that the error complained of has resulted in a miscarriage of justice.” Code of Civil Procedure section 475 provides in part: “No judgment . . . shall be reversed . . . , unless it shall appear from the record that such error . . . was prejudicial, and also that by reason of such error, . . . the said party complaining or appealing sustained and suffered substantial injury, and that a different result would have been probable if such error . . . had not occurred or existed.” 12 Practice Guide: Family Law (The Rutter Group 2020) ¶ 17:156.2, p. 17-66), we have no difficulty concluding that the record on appeal establishes a lack of prejudice in the family court’s failure to make a finding as to the marital standard of living. The parties in this appeal separated in 2001, more than 18 years prior to the FOAH. During those 18 years, Robert began paying Kathy temporary spousal support in 2001; and as of and after the judgment in this action, the court ordered permanent spousal support (of $3,000/mo. in 2005) and twice modified it downward (to $1,700/mo. in 2014 and to $1,000/mo. in 2018) without any section 4322 findings regarding the marital standard of living. Very simply, if findings regarding the marital standard of living were not at issue over the course of 18 years and at least four rulings awarding spousal support, Kathy is not prejudiced by the failure to find the standard in this fifth ruling. Finally, we find further support for our ruling that Kathy suffered no prejudice, because regardless of the marital standard of living almost 20 years ago, today Robert “does not have the ability to pay spousal support.” C. Terminating Jurisdiction to Order Spousal Support Kathy argues that the family court erred in terminating jurisdiction to order spousal support. Emphasizing that the parties here had a long-term marriage,17 Kathy relies on the following language from our Supreme Court regarding the retention of jurisdiction: 17 Section 4336 provides that, for purposes of retaining jurisdiction to order spousal support, “the court retains jurisdiction indefinitely in a proceeding for dissolution of marriage . . . where the marriage is of long duration,” and “there is a presumption . . . that a marriage of 10 years or more, from the date of marriage to the date of separation, is a marriage of long duration.” (§ 4336, subds. (a), (b).) That said, subdivision (c) directs that nothing in this statute “limits the court’s discretion to terminate spousal support in later proceedings on a showing of changed circumstances.” 13  “A trial court should not terminate jurisdiction to extend a future support order after a lengthy marriage, unless the record clearly indicates that the supported spouse will be able to adequately meet his or her financial needs at the time selected for termination of jurisdiction. . . . If the record does not contain evidence of the supported spouse’s ability to meet his or her future needs, the court should not ‘burn its bridges’ and fail to retain jurisdiction.” (In re Marriage of Morrison (1978) 20 Cal.3d 437 , 453 (Morrison), italics added.) According to Kathy, because the record does not contain evidence that she, the supported spouse, “will be able to adequately meet . . . her financial needs at the time selected for termination of jurisdiction” (ibid.), the FOAH must be reversed.18 We disagree. After the statement from Morrison on which Kathy relies, the Supreme Court continues, explaining that the above-quoted ruling “will not require a trial court to retain jurisdiction in every case involving a lengthy marriage.” (Morrison, supra, 20 Cal.3d at p. 453.) To the contrary, the family court continues to maintain the discretion to award—as the court did here—“no support . . . without a retention of jurisdiction.” (Ibid., italics added.) “Where jurisdiction has been retained in the original order, future modification hearings may well reveal that the supported spouse . . . has delayed seeking employment, or has refused available employment. At that time, the court may appropriately consider such factors in deciding whether or not to modify its original order.” (Ibid., citing In re Marriage of Rosan (1972) 24 Cal.App.3d 18 Because Kathy did not provide a reporter’s transcript, we normally presume that the unreported testimony from the evidentiary hearing contains evidence that Kathy is able to meet her financial needs. (Jameson, supra, 5 Cal.5th at p. 609; Fain, supra, 75 Cal.App.4th at p. 992.) However, since the court expressly found that Kathy “does need financial support,” we will not base our decision on the presumption. 14 885, 896 [in modification proceedings, the family court may consider evidence that the supported party “has unreasonably delayed or refused to seek employment consistent with his or her ability”].) Very simply, the general rule disfavoring termination of jurisdiction on which Kathy relies (i.e., after a lengthy marriage, a family court should not terminate spousal support unless the supported spouse is able to meet his or her financial needs) is subject to an exception, in the court’s discretion, where the supported spouse has refused to seek employment. (Morrison, supra, 20 Cal.3d at p. 453.) Here, the court applied this exception after finding that Kathy “chose not to seek employment for the last 18 years,” despite the fact that “[Robert] paid for [Kathy’s] education enabling her to find employment as a beauty technician.” D. Burden of Proving Changed Circumstances to Modify Adult Child Support As part of its ruling terminating adult child support for J., the family court stated: “Insufficient evidence was presented for the court to find that [J.] is a disabled adult child per Family Code section 3910(a).”19 Based on this statement, Kathy contends that the court erred in placing the burden on her to establish whether J. qualified as “a child . . . who is incapacitated from earning a living and without sufficient means” for purposes of section 3910(a). As we explain, we reject this contention, because that is not what the family court did. As we explain first, we also reject Kathy’s argument that the court’s earlier awards of section 3910(a) support precluded the court from revisiting the issue of whether J. currently qualified for support under section 3910(a). 19 Under section 3910(a), the family court considers two factors: “is the adult child incapacitated from earning a living”?; and “does the adult child have sufficient means”? (Drake, supra, 241 Cal.App.4th at p. 940.) 15  As part of their 2005 marital settlement agreement, which is attached to and incorporated into the judgment, the parties agreed (and the court ordered) that Robert pay Kathy monthly support of $1,734 for J., “pursuant to Family Code § 3910(a)[,] which provides for the payment of support for a child of whatever age who is incapacitated from earning a living and without sufficient means.” In 2014, the court denied Robert’s request to terminate section 3910(a) support for J. From these two rulings, Kathy argues that the family court erred in terminating support, because “the issue [whether J. is an adult dependent child for purposes of section 3910(a)] is ‘res judicata.’ ” Once again, however, for at least two reasons, Kathy has forfeited appellate review of this res judicata argument: (1) Kathy did not raise this argument in the family court (Brewster & Clevenger, supra, 45 Cal.App.5th at p. 510; and (2) the above-quoted statement is Kathy’s entire presentation—i.e., one without legal authorities or analyses (Falcone & Fyke, supra, 164 Cal.App.4th at p. 830; see Cal. Rules of Court, rule 8.204(a)(1)(B)). Even if we were to consider the argument, however, the result would be no different. That is because “[t]he court retains the power to modify its award [of adult child support] if circumstances change.” (Rebensdorf v. Rebensdorf (1985) 169 Cal.App.3d 138 , 143 [under statutory scheme prior to § 3910(a)].) This is not a new concept. (See Paxton v. Paxton (1907) 150 Cal. 667 , 672 [under statutory scheme prior to § 3910(a), “changed conditions in the future should justly demand a modification”].) Indeed, the doctrine of res judicata is the reason for requiring a showing of changed circumstances before modifying a final support order. (In re Marriage of Cohen (2016) 3 Cal.App.5th 1014 , 1025 [child support].) That is because without a change of circumstances, a modification motion would be “ ‘ “ ‘ “nothing more than an 16 impermissible collateral attack on a prior final order.” ’ ” ’ ” (In re Marriage of Usher (2016) 6 Cal.App.5th 347 , 357 [child support].) Initially, with regard to the change of circumstances, we reject Kathy’s argument that a reversal is necessary, because “there has been no evidence to show that there was a change in circumstances concerning the dependency of the adult child.” (Italics added.) As Kathy acknowledges, because she did not provide a reporter’s transcript, we must presume that the unreported proceedings contain substantial evidence to support all findings expressly or impliedly made. (Jameson, supra, 5 Cal.5th at p. 609; Fain, supra, 75 Cal.App.4th at p. 992.) In any event, Kathy concedes: “It is not contested that there has been a ‘change in circumstances’ as Robert has retired.” In addition, and not acknowledged by Kathy, is the following testimony from Robert: “[J.] is capable of working and has done so throughout the years. She is capable of taking care of herself. . . . She is . . . being treated for her schizophrenia and bi-polar [disorder]. These do not preclude her from working and being self- supporting.” Together, this constitutes substantial evidence of both a material change in circumstances and a basis on which to conclude that J. was no longer “incapacitated from earning a living” for purposes of awarding adult child support. Kathy suggests that, because the FOAH provides that “ ‘[i]nsufficient evidence was presented for the court to find that [J.] is a disabled adult child per Family Code section 3910(a),’ ” the court (improperly) placed the burden on Kathy to prove no change in circumstances. We disagree. In the FOAH, the court identified the issue as “[Robert’s request] to find [J.] is not disabled pursuant to Family Code section 3910(a)”; and from the evidence set forth in the preceding paragraph and the presumptions from the unreported 17 proceedings, the record contains substantial evidence in support of Robert’s request. There is no indication that the court placed any burden on Kathy other than providing responsive evidence to rebut Robert’s prima facie showing that J. was no longer disabled for purposes of section 3910(a). In context, the court’s statement is easily understood to mean that, in attempting to meet her burden in response to Robert’s showing that J. no longer qualifies for section 3910(a) support, Kathy did not persuade the court to the contrary. III. DISPOSITION The January 27, 2020 findings and order after hearing is affirmed. Robert is entitled to his costs on appeal. (Cal. Rules of Court, rule 8.278(a)(2).) IRION, J. WE CONCUR: McCONNELL, P. J. BENKE, J. 18

2020-11-20 19:32:29.402004+00

ROBERT L. ANTHONY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Anthony v. Commissioner Docket No. 9401-75. United States Tax Court T.C. Memo 1976-302; 1976 Tax Ct. Memo LEXIS 99; 35 T.C.M. (CCH) 1357; T.C.M. (RIA) 760302; September 27, 1976, Filed Robert L. Anthony, pro se. Lowell F. Raeder, for the respondent. FAY FAY, Judge: Respondent determined deficiencies in petitioner's Federal income tax and additions to tax as follows: Additions underAdditions under YearDeficiencySec. 6651(a) 1Sec. 6653(a) 1969$1,025.00$115.00$51.00 19701,050.00114.0053.00 1971971.00114.0049.00 1972962.00203.0048.00 We are to decide whether petitioner is entitled to certain "war crimes deductions" for the years in issue and whether the additions to tax determined by respondent under section 6651(a) and section 6653(a) are proper. Respondent has moved for partial Summary Judgment under*100 Rule 121, Tax Court Rules of Practice and Procedure solely with respect to the propriety of petitioner's "war crimes deductions" for the years in issue. The motion was argued by the parties at a hearing held in Philadelphia, Pennsylvania on June 14, 1976, and petitioner filed a brief in support of his position. Petitioner, Robert L. Anthony, resided in Moylan, Pennsylvania, at the time of filing the petition herein. He filed Federal income tax returns for each of the years in issue with the District Director of Internal Revenue in Chester, Pennsylvania, on March 26, 1974. Briefly stated, petitioner maintains that payment of the amount in issue abridges his religious freedom under the First Amendment of the Constitution and would amount to complicity in alleged violations of international law committed by the United States in Southeast Asia during the years in issue. While we do not question petitioner's sincerity, we have previously considered and rejected his First Amendment argument in Robert L. Anthony,66 T.C. 367">66 T.C. 367 (1976). 2 Questions of standing aside, we find petitioner's argument based on Nuremberg Principles or international law equally unpersuasive. *101 Autenrieth v. Cullen,418 F.2d 586">418 F.2d 586 (9th Cir. 1969), cert. denied 397 U.S. 1036">397 U.S. 1036 (1970); Abraham J. Muste,35 T.C. 913">35 T.C. 913 (1961); Lorna H. Scheide,65 T.C. 455">65 T.C. 455 (1975); John David Egnal,65 T.C. 255">65 T.C. 255 (1975); cf. United States v. Malinowski,472 F.2d 850">472 F.2d 850 (3d Cir. 1973), cert. denied 411 U.S. 970">411 U.S. 970 (1973). Since no issue of material fact has been presented, respondent's motion for partial summary judgment will be granted. Next, we must decide whether to sustain the additions to tax determined by respondent under section 6651(a) and section 6653(a) and contested by petitioner at a trial conducted on June 23, 1976. Petitioner, through his oral testimony at trial and presentation on brief, represents that both additions to tax were erroneously determined by respondent for the following reasons: (1) *102 his religious tenets and international law constitute reasonable cause under section 6651(a) for his failure to timely file returns for the years in issue; (2) neither petitioner's untimely filing of his returns nor the deductions contained therein justify imposition of the negligence penalty under section 6653(a); (3) in any event, it is improper to impose both penalties upon petitioner for the untimely filing of his returns. Section 6651(a) imposes an addition to tax for failure to timely file a return unless such failure is due to reasonable cause and not due to willful neglect. Section 6653(a) imposes an addition to tax, "if any part of any underpayment * * * is due to negligence or intentional disregard of rules and regulations * * *." We believe that petitioner has failed to carry his burden of proof on both counts. Petitioner's uninformed but good faith belief that his religious convictions or international law relieved him of his duty to timely file returns for the years in issue is insufficient to constitute reasonable cause. Abraham J. Muste,supra;Robert A. Henningsen,26 T.C. 528">26 T.C. 528, 536 (1956), affd. 243 F.2d 954">243 F.2d 954 (4th Cir. 1957).*103 As such belief constitutes petitioner's only justification for untimely filing his returns, we conclude that such failure was due to willful neglect and that petitioner is liable for the addition to tax under section 6651(a). Welch v. Helvering,290 U.S. 111">290 U.S. 111 (1933); Carroll F. Schroeder,40 T.C. 30">40 T.C. 30 (1963). With respect to respondent's determination under section 6653(a), petitioner's good faith alone is likewise insufficient to rebut respondent's determination of negligence or intentional disregard of rules and regulations. American Properties, Inc.,28 T.C. 1100">28 T.C. 1100, 1116 (1957), affd. per curiam 262 F.2d 150">262 F.2d 150 (9th Cir. 1958); see United States v. Malinowski,supra.3 Accordingly, we conclude that petitioner has failed to carry his burden of proof on this issue and is liable for the addition to tax under section 6653(a). Finally, we consider petitioner's argument against the concurrent imposition of both penalties. 4 This Court has previously held*104 that in appropriate cases, imposition of the addition to tax under section 6651(a) does not preclude the concurrent imposition of the negligence penalty under section 6653(a). Robinson's Dairy, Inc.,35 T.C. 601">35 T.C. 601 (1961), affd. 302 F.2d 42">302 F.2d 42 (10th Cir. 1962); Vahram Chimchirian,42 B.T.A. 1437">42 B.T.A. 1437, 1442 (1940), affd. per curiam 125 F.2d 746">125 F.2d 746 (D.C. Cir. 1942). Due to concessions by respondent, Decision will be entered under Rule 155. Footnotes

2020-11-30 21:00:17.777722+00

http://media.ca1.uscourts.gov/pdf.opinions/20-1157P-01A.pdf

United States Court of Appeals For the First Circuit No. 20-1157 NATIONAL LABOR RELATIONS BOARD, Petitioner, v. WANG THEATRE, INC., Respondent. APPLICATION FOR ENFORCEMENT OF ORDERS OF THE NATIONAL LABOR RELATIONS BOARD Before* Lynch, Circuit Judge, and Saris**, District Judge. Jared D. Cantor, with whom Usha Dheenan was on brief, for Petitioner. Arthur Gershon Telegen, with whom Seyfarth Shaw LLP was on brief, for Respondent. * Judge Torruella heard oral argument in this matter and participated in the semble, but he did not participate in the issuance of the panel's decision. The remaining two panelists therefore issued the opinion pursuant to 28 U.S.C. § 46 (d). ** Of the District of Massachusetts, sitting by designation. November 30, 2020  LYNCH, Circuit Judge. The NLRB petitions for enforcement of its October 30, 2019 order reinstating its November 10, 2016 decision, which found that respondent Wang Theatre, Inc. (WTI) committed labor relations violations by failing to bargain with the Boston Musicians' Association (BMA). We agree with WTI that the Board made errors of law and fact in certifying a bargaining unit which had no employees and deny enforcement of the petition. Because we see no point in remanding, we vacate the Board's October 30, 2019 and November 16, 2016 orders. I. Background On January 5, 2016, BMA petitioned the Board to become the union representative for musicians employed by WTI.1 WTI operates the Wang Theatre, part of the Citi Performing Arts Center (or Boch Center) in Boston. BMA petitioned to represent local Boston-area musicians "sourced" by WTI to perform in shows brought to the Wang Theater by independent producers. On January 12, 2016, WTI submitted a letter to the Regional Director, arguing BMA's petition should be dismissed. It 1 Section 9 of the NLRA permits the Board to conduct elections and certify a union representative for a "bargaining unit" of employees. See 29 U.S.C. § 159 . Once a unit is certified and a union representative is elected the employer must bargain with the union in good faith. Id. § 158. If the employer fails to do so, the Board may find the employer has committed an unfair labor violation and petition this court for an enforcement order. Id. § 160. - 3 - stated, "WTI has not employed any musicians since 2014." WTI also argued that in any event the producers, not WTI, controlled the musicians' terms of employment, and WTI had no control over the topics over which BMA wished to negotiate. The NLRB Acting Regional Director held a representation hearing on January 13, 2016. WTI's general manager, Michael Szcepkowski, and BMA's Secretary-Treasurer, Mark Pinto, testified at the hearing and the parties submitted a number of exhibits. The exhibits included a list of the performances at WTI in the two years before the hearing, the number of hours worked by musicians in the past two years, wage scales for sourced musicians, examples of contracts between WTI and show producers, WTI and BMA's collective bargaining agreement which expired in 2007, examples of collective bargaining agreements between other venues and BMA, and a work history report of the work certain musicians performed at WTI. Both parties also submitted post-hearing briefing. At the hearing, WTI argued again that there were no current employees in the proposed bargaining unit. Szcepkowski stated that in 2014 producers for two travelling Broadway musicals, Annie and White Christmas, asked WTI to source local musicians. WTI recruited eight musicians for the production of Annie and thirteen for White Christmas. In 2015 WTI hosted the traveling Broadway musical Elf, but did not source any musicians. The producers of Elf contracted directly with the American Federation - 4 - of Musicians to hire local musicians for that production, and WTI had no involvement in that process. Szcepkowski also stated WTI had agreed to host another traveling Broadway musical, The Wizard of Oz, in 2016. The contract was not yet finalized at the time of the hearing, but WTI had as yet received no request to source local musicians for that production either. WTI now informs us that Annie and White Christmas were the last productions to ask it to source musicians. It has not done so in over six years and has no plans to do so in the future. Szcepkowski also testified about a bargaining agreement between BMA and WTI that was in place between 2004 and 2007. He stated the agreement lapsed because "[WTI] reached a point where . . . [it] felt that [it] could not bargain over things that [it] didn't control." WTI reiterated its arguments in its post-hearing briefing, stating, among other things, "no musicians would be eligible [to vote in a union election] . . . under any prior- applied [eligibility] formula." The Acting Regional Director rejected WTI's objections and ordered a union election. She first found that WTI was the sole employer of the sourced musicians. She accepted that WTI had not sourced local musicians in over a year and found "[WTI] could not predict when local musicians would be hired for a performance at the Wang." In light of these findings, it is uncontested that - 5 - under the Board's standard Davison-Paxon test for membership in a bargaining unit, WTI is correct that there were no voting-eligible employees in the proposed unit. 185 N.L.R.B. 21 (1978). But the Regional Director instead applied the more expansive Julliard School test. 205 N.L.R.B. 153 (1974). She stated, "the facts of this case show a 'special circumstance' aligned with that of Julliard School . . . . [because] [t]he petitioned-for musicians work irregular employment patterns." Under the Julliard School test, musicians who performed in the 2014 production of Annie and White Christmas were eligible to vote in the union election for the bargaining unit. Finding that WTI employed the sourced musicians -- and that there were current employees in the unit under the expansive Julliard School standard -- the Board ordered a union election. Any musician "in the unit who worked for [WTI] on two productions for a total of five working days over a one-year period preceding January 22, 2016, or a total of fifteen days over a two-year period preceding January 22, 2016" was eligible to vote. WTI timely filed a request for review of the Acting Regional Director's decision with the Board. WTI argued again that the she erred by certifying a bargaining unit that had no employees. It also challenged her finding that WTI employed the sourced musicians, and stated "there has been no work in the - 6 - putative unit in over a year." The Board denied WTI's request for review in a one-line order. While WTI's request for review was pending, BMA was elected union representative for the sourced musicians who worked in the 2014 productions of Annie and White Christmas. After the election it attempted to bargain with WTI. WTI responded that it was "at a total loss as to what we could possibly bargain over at this time. As you know, there has not been a single employee in the unit since 2014. As you also know, the producers have been hiring their own musicians. . . . There does not appear to be anything for the BMA and WTI to negotiate about." BMA then filed a charge with the Board, alleging WTI committed an unfair labor practice under Section 8(a)(1) and (5) by refusing to bargain.2 The Board's general counsel issued a complaint. WTI timely responded, raising the same arguments it presented to the Acting Regional Director at the representation hearing, along with additional arguments that its refusal to bargain was reasonable even if the unit was properly certified. The general counsel then moved for summary judgment because WTI "admit[ted] its refusal to bargain with [BMA]." The Board granted the general counsel's motion, rejecting WTI's 2 Section 8(a)(5) makes it "an unfair labor practice for an employer . . . to refuse to bargain collectively with the representatives of his employees, subject to the provisions of section 159(a) of this title." 29 U.S.C. § 158 . - 7 - arguments on the grounds that they had been raised and rejected at the representation hearing. Because WTI's refusal was not in dispute, the Board granted the general counsel's motion for summary judgment and ordered WTI to "cease and desist, to bargain on request with the Union, and, if an understanding is reached, to embody the understanding in a signed agreement." WTI moved for reconsideration. The Board denied this motion because WTI had not shown that one of the limited circumstances where reconsideration is permissible under the NRLB's procedural rules was present. Acting Chairman Miscimarra wrote separately to emphasize the narrow grounds on which the Board's decision rested. He agreed with WTI that there was a "reasonable question regarding whether the Theatre currently employs any musicians." And he stated, "[o]n the one hand . . . I agree that the project-by-project employment that often occurs among musicians and other employees in the performing arts warrants specialized evaluation of questions regarding appropriate bargaining units and voter eligibility. Conversely, the Board cannot appropriately conduct an election when the bargaining unit consists of no employees." But because the issues could only be raised at the representation hearing, he concluded, "[a]t this juncture, [WTI's] arguments challenging 'employer' status can only legitimately be raised before a court of appeals if [WTI] decides to appeal the Board's test-of-certification order." - 8 -  In 2017, the Board first petitioned this court for an enforcement order. Before we heard argument, however, the Board moved to remand for consideration of whether its then-recent decision in Hy-Brand Industrial Contractors, Ltd., 365 N.L.R.B. No. 156 (2017) changed the standard for determining whether a joint employment relationship existed in this case. We remanded the case. On October 30, 2019, the Board affirmed its original decision and reissued its original cease and desist order. In this second order the Board gave several reasons why the joint employer issue did not change its original analysis and reinstated its original November 10, 2016 order. The Board now petitions a second time for an enforcement order. II. Discussion We review both the enforcement orders and the underlying representation proceeding for the purpose of "enforcing, modifying or setting aside in whole or in part the order of the Board." 29 U.S.C. § 159 (d). "The Board must prove that the employer refused to bargain with the representative of a unit of 'employees' . . . that was properly certified." N.L.R.B. v. Ky. River Cmty. Care, Inc., 532 U.S. 706 , 712 (2001) (citations omitted). Because "the Board is primarily responsible for developing and applying a coherent national labor policy," N.L.R.B. v. Ne. Land Servs., Ltd., 645 F.3d 475 , 478 (1st Cir. 2011) (quoting N.L.R.B. v. Bos. Dist. Council of Carpenters, 80 - 9 - F.3d 662, 665 (1st Cir. 1996)), "[a] Board order must be enforced if the Board correctly applied the law and if its factual findings are supported by substantial evidence on the record." Id. (citing 29 U.S.C. § 160 (e),(f); Yesterday's Children, Inc. v. N.L.R.B., 115 F.3d 36 , 44 (1st Cir. 1997)). We consider the record as it was before the Board at the time of the hearing. Telemundo de P.R., Inc., v. N.L.R.B., 113 F.3d 270 , 277 (1st Cir. 1997). But this court does not "simply 'rubber stamp' the decisions of the Board." Yesterday's Children, Inc., 115 F.3d at 44 . "We review the Board's conclusion[s] of law de novo." Posadas de P.R. Associates, Inc. v. N.L.R.B., 243 F.3d 87 , 90 (1st Cir. 2001) (citing N.L.R.B. v. Beverly Enters.-Mass., Inc., 174 F.3d 13 , 22 (1st Cir. 1999)); see also N.L.R.B. v. Int'l Broth. Of Teamsters, Local 251, 691 F.3d 49 , 55 (1st Cir. 2012) (quoting same). Importantly, "[t]he Board is not free to ignore its own precedent." Yesterday's Children, Inc., 115 F.3d at 45 n.15. "[T]he NLRB cannot depart from its own precedent unless it articulates reasons for the departure." Good Samaritan Medical Center v. N.L.R.B., 858 F.3d 617 , 640 (1st Cir. 2017) (citation omitted). WTI argues the Board erred as a matter of law and fact in certifying a bargaining unit of sourced musicians at WTI for a - 10 - number of reasons.3 We address only its first argument that there were no employees in the bargaining unit because WTI had not sourced musicians since 2014 and had no plans to and had not been requested to do so for any future production. We agree the Board misapplied the law and its own case law in certifying a no-employee bargaining unit.4 The Board has not adequately explained this departure from its own case law. Prior precedent of the Board has set out the fundamental requirements for certifying a collective bargaining unit. A collective bargaining unit must consist of at least two employees. 3 WTI also argues that (1) when WTI did source musicians, they were employed by the producers, or at least jointly employed by both the producers and WTI, so it was inappropriate to certify a unit with WTI as the sole employer; (2) WTI has no control over the topics over which BMA wishes to negotiate; and (3) BMA is attempting to use the bargaining process for an unlawful purpose. 4 The Board argues that our decision in Massachusetts Society For Prevention of Cruelty to Children v. N.L.R.B., 297 F.3d 41 , 45 (1st Cir. 2002), requires us to give considerable deference to the Board's "selection of an appropriate bargaining unit." But Massachusetts Society does not require us to defer to the Board's legal conclusions or permit it to disregard its own precedents. Posadas de P.R. Associates, Inc., 243 F.3d at 90 ; Yesterday's Children, Inc., 115 F.3d at 45 n.15. Moreover, the issue WTI raises in this appeal regarding whether there were any members of the proposed bargaining unit was not raised in Massachusetts Society. There, we deferred to the Board's judgment as to whether each facility that the employer operated should be a separate bargaining unit or whether the bargaining unit should encompass similar employees at different facilities. 297 F.3d at 46 . We did not reach the question of the deference we give to the Board's formula for calculating the number of eligible employees in the units it has selected. - 11 - Foreign Car Center, Inc., 129 N.L.R.B. 319 , 320 (1960). "[T]he principle of collective bargaining presupposes that there is more than one eligible person who desires to bargain." Id. An employer need not bargain with a single- or no-employee bargaining unit if it "does not need or intend to hire . . . [additional workers]." Westinghouse Electric Corp., 179 N.L.R.B. 289 , 289 (1969). The Board's "longstanding and most widely used test" to determine the membership of a bargaining unit at any given time is the Davison-Paxon formula. Trump Taj Mahal Assocs., 306 N.L.R.B. 294 , 295 (1992) (citing Davison-Paxon Co., 185 N.L.R.B. at 23-24). The Board has repeatedly endorsed the Davison-Paxon test. See Columbus Symphony Orchestra, Inc., 350 N.L.R.B. 523 , 524 (2007) ("The Board has made it clear that the Davison-Paxon formula should be followed absent a showing of special circumstances." (citations omitted)); Trump Taj Mahal Assocs., 306 N.L.R.B. at 295 ("[N]o single eligibility formula must be used in all cases, [but] the Davison-Paxon formula . . . is the one most frequently used, absent a showing of special circumstances."). Under this test, any employee who "regularly averages 4 hours [of work] or more per week for the last quarter prior to the eligibility date [in a particular bargaining unit]" is a member of that unit. Davison- Paxon Co., 185 N.L.R.B. at 24. It is undisputed that none of the musicians met this eligibility test. - 12 -  In "special circumstances" the Board has applied a more expansive standard. The Julliard School formula is one such special test. In Julliard School the Board certified a bargaining unit of stage hands and other theater staff who worked at the Julliard School theater. The Board certified a bargaining unit comprising of "all employees of who have been employed by . . . [the Julliard School] during two productions for a total of 5 working days over a 1-year period, or who have been employed by . . . [Julliard] for at least 15 days over a 2-year period" -- the same criteria the Board applied in this case. 208 N.L.R.B. at 155. In Julliard School the Board stated it used this more expansive test because "the record show[ed] that many of the[] [Julliard] employees work for periods of time which indicate repetitive employment and which permit them reasonably to anticipate reemployment in the near or foreseeable future." Id. at 154. The Julliard School relied on up to 155 stage hands, including dozens of employees in its props, costume, and makeup departments. Id. at 153-54. But because it staged fewer productions than commercial theaters and generally had lower production values than commercial productions, all stage hands (including carpenters, painters, and electricians), maintenance staff, and employees in the costume, makeup, and props departments, were employed on a per diem basis. Id. at 153. The total number - 13 - of per diem employees ranged from 0 to 155 depending on the time of year. Id. But many stage hands were nonetheless longstanding employees of the Julliard School. Julliard "ma[de] a practice of hiring employees who [were] experienced with the facilities at Julliard and ha[d] proven through past performance their capacity to perform their job functions." Id. at 154. These stage hands were essential to Julliard's core function as a teaching theater. Id. at 155. The Board stated Julliard's unique situation as a training theater made it "not comparable" to the commercial New York City theater industry. Id. at 154. "Julliard's theatrical productions [were] not extravagant commercial undertakings which may run for many weeks and which employ large, highly experienced casts." Id. "[U]nder the circumstances" of that case the Board found that a permissive unit eligibility standard was appropriate. Id. at 155. The key consideration was that Julliard employed a large, stable number of "per diem" workers who reasonably expected to work in the future. In Kansas City Repertory the Board upheld the Regional Director's use of the Julliard School formula to certify a unit of musicians who performed at the Kansas City Repertory.5 356 5 In reviewing the Regional Director's decision, the Board never reached the issue of whether the Davison-Paxon formula would have been more appropriate, because the Repertory argued only that - 14 - N.L.R.B. 147, 147 (2010). The Repertory produced and staged approximately seven or eight productions a year. Id. at 149. The performance season ranged from nine and a half to ten months each year. Id. The Repertory hired musicians "as needed" for the subset of productions that required live music. Id. The Repertory regularly staged musical productions each season, although the type of music and the musicians it employed might vary. Id. But for some employees there was a foreseeable expectation of future employment. Notably, in Kansas City Repertory all of the employees petitioning for union representation would have been eligible under the Davison-Paxon test. Id. at 150. Indeed, the musicians seeking union representation in Kansas City Repertory argued in favor of applying the Davison-Paxon formula. Id. The Board found that the Regional Director "properly processed" the petition. Id. at 147. The Regional Director applied the Julliard School standard to avoid the risk that Davison-Paxon would exclude other eligible employees who worked at the Repertory less frequently because of the seasonal nature of the work, and the fact that the types of musicians who were employed might vary somewhat based on the artistic decisions the Repertory made for a given year. Id. at 150-51. As in Julliard School, at the representation hearing the Regional Director recognized "[a] critical consideration in such no formula was appropriate when all of the employees in a proposed bargaining unit are part-time or temporary. 356 N.L.R.B. at 147. - 15 - an analysis is the employment pattern that is the result of the length and number of relevant productions put on by the employer as well as the extent that the employer relies on on-call or per diem employees to perform its work." Id. at 150. In other cases, the Board has declined to extend the Julliard School formula. In Columbus Symphony Orchestra the Board reversed a representation hearing decision applying the Julliard School formula to part-time stage-hands who assisted with seasonal productions at a professional theater. 350 N.L.R.B. at 523. The Board noted that "in recent years . . . it has consistently applied the standard Davison-Paxon formula to entertainment industry employers that operate on a year-round basis." Id. at 524. In Columbus Symphony Orchestra, the fact that per diem workers worked at sporadic events, like summer outdoor venue performances, and supplemented a large permanent workforce year-round, was not a special circumstance justifying departure from the Davison-Paxon formula. Id. at 525. Of particular importance to the Board, "the employment pattern over the past several years d[id] not establish that stagehands who worked during the summer of 2006 could reasonably expect they would be employed in the summer of 2007." Id. The Board also reversed the Regional Director's decision to apply the Julliard School formula in Steppenwolf Theatre Co., 342 N.L.R.B. 69 , 71 (2004). In Steppenwolf the Board stated - 16 - "[b]ecause [Steppenwolf] is a professional theater company and not an educational institution, its production schedule is much more regular and constant than was the Julliard School's." Id. According to the Board, "[b]ecause the Regional Director considered the Employer's industry to be the most significant factor in applying the Julliard formula, she failed to consider the Employer's substantially greater size and the regularity of its operations, the use of full-time staff to perform the vast majority of work, and the much higher number of hours worked by many individuals in its part time staff." Id. at 72 . In Wadsworth Theatre Mgmt., 349 N.L.R.B. 122 , 123 (2007) the Board again held that the Julliard School formula should not be applied to a professional theater that used part-time or per diem workers for only a small portion of its operations. The Acting Regional Director's decision to use the Julliard School formula here is contrary to each of these precedents.6 The NLRB decisions since Julliard School make clear that the Board's decision in that case rested on the particular facts of that case. See, e.g., Columbus Symphony Orchestra, 350 N.L.R.B. at 324-25. WTI is not factually similar to Julliard. 6 In its brief, WTI further argues "Congress has rejected" the approach the Board took at the representation hearing. Because we find that the Board failed to adequately justify its approach under its own precedents, we do not reach the statutory question WTI raises. - 17 - WTI is a professional theater that does not produce its own shows, and it exercises no artistic control over the performances at the theater. Julliard was a non-profit teaching theater, producing and staging student-run performances. Importantly, Julliard employed a stable group of per diem workers who were critical to Julliard's mission. Julliard School, 208 N.L.R.B. at 154. It could not function as a teaching theater without regular, experienced stagehands and costume, props, and makeup departments. Id. at 153. In contrast, to the extent WTI employed musicians at all, it did so as an added service for producers who brought shows to the Wang. Sourced musicians were not central to WTI's operations -- and, in fact, it has continued to operate for over six years without them. Nor could sourced musicians reasonably expect future employment with WTI. At the time of the representation hearing WTI had not sourced musicians in over a year and had no specific plans to do so in the future. The Acting Regional Director did not address any of these factual differences when deciding to apply the Julliard School formula. Further, the Acting Regional Director did not conduct any analysis of the "critical consideration . . . of the length and number of relevant productions put on by the employer as well as the extent that the employer relies on on-call or per diem employees to perform its work." See Kansas City Repertory, 356 N.L.R.B. at 150. Sourced musicians played only a tangential role - 18 - in WTI's overall operations, and WTI employed them, if at all, only sporadically. An analysis of this "critical" issue would have weighed strongly against applying the Julliard standard to WTI. Instead, the Acting Regional Director focused on a consideration that is not a "special circumstances" warranting departure from the Davison-Paxon formula under the Board's existing case law. The Acting Regional Director stated "[t]he Board has found that 'special circumstances' include irregular employment patterns within the entertainment industry." Yet in Steppenwolf Theatre and Columbus Symphony Orchestra the Board reached the opposite conclusion -- stating that Davison-Paxon remained the usual test for part-time employment in entertainment industry. 342 N.L.R.B. at 72; 350 N.L.R.B. at 524. The Acting Regional Director also appeared to give great weight to the fact that WTI and BMA had reached a bargaining agreement in 2004, even though that agreement expired nearly ten years prior to the representation hearing. She relied on Szcepkowski's testimony that the division of authority between producers and WTI had not changed since 2007, when the prior bargaining agreement lapsed. Yet Szcepkowski stated at the hearing that agreement lapsed because WTI felt that it no longer controlled the topics over which BMA wished to negotiate. Nothing in the record indicates that the business had not changed between 2004, - 19 - when WTI entered into the bargaining agreement, and 2016, when the representation hearing occurred. By applying the Julliard School formula in this case, the Board disregarded its precedents. It did not consider the factual differences between Julliard School and this case, or the "critical consideration" identified in Kansas City Repertory, or its decisions in Steppenwolf Theatre and Columbus Symphony Orchestra, which found that the Davison-Paxon formula should ordinarily apply to part-time workers in the music industry. And it gave no reasons for departing from its own well-established law in this area. See Good Samaritan Medical Center, 858 F.3d at 640. We conclude it was a legal error, and contrary to the Board's own precedents, not to apply the Davison-Paxon formula in this case. Under the appropriate formula, certifying the bargaining unit clearly violated the prohibition against empty bargaining units set out in Foreign Car Center, Inc., 129 N.L.R.B. at 320. It is uncontested that no one would have been eligible to vote in the union election under the Davison-Paxon formula, so the bargaining unit -- properly defined -- did not contain a single member.7 For that reason, the Board has not met its burden to 7 The Board claims that by stating that it has not sourced musicians in over six years "[WTI] . . . seeks to draw the Court's attention to alleged factual developments outside the hearing record, which impermissibly shifts the focus from the record evidence as it existed before the Board." See Telemundo de P.R., Inc., 113 F.3d at 277 (court of appeals may not consider evidence - 20 - "prove that the employer refused to bargain with the representative of a unit of 'employees' . . . that was properly certified." Ky. River Cmty. Care, Inc., 532 U.S. at 712 . Accordingly, we deny the Board's petition for enforcement. Because there is no dispute that there were no employees at the time of certification in the BMA bargaining unit under the appropriate formula, we see no point in remand. See N.L.R.B. v. Wyman-Gordon Co., 394 U.S. 759 , 766-67 n.6 (1969). We vacate the Board's October 30, 2019 and November 10, 2016 orders without further proceedings. Costs are awarded to Respondent Wang Theatre, Inc. not in the record before the Board at the time of the hearing). Our decision does not rest on the fact that no musicians have worked in the BMA bargaining unit in over six years. At the time of the hearing it was apparent that there were no employees currently working and no employees with a reasonable expectation of future employment. - 21 -

2020-11-30 21:00:20.890248+00

http://media.ca1.uscourts.gov/pdf.opinions/19-1636P-01A.pdf

United States Court of Appeals For the First Circuit No. 19-1636 PATRICK DOUGHTY; RANDY SEVERANCE, Plaintiffs, Appellants, v. STATE EMPLOYEES' ASSOCIATION OF NEW HAMPSHIRE, SEIU LOCAL 1984, CTW, CLC, Defendant, Appellee. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE [Hon. Paul J. Barbadoro, U.S. District Judge] Before Howard, Chief Judge, Thompson and Barron, Circuit Judges. Frank D. Garrison, with whom Milton L. Chappell, National Right to Work Legal Defense Foundation, Inc., Bryan K. Gould, Cooley Ann Arroyo, and Cleveland, Waters & Bass, P.A., were on brief, for appellants. Leon Dayan, with whom Ramya Ravindran was on brief, for appellee. November 30, 2020  BARRON, Circuit Judge. This appeal concerns a suit by two New Hampshire state employees, Patrick Doughty and Randy Severance, against the State Employees' Association of New Hampshire ("the Union") pursuant to 42 U.S.C. § 1983 . They seek retrospective relief for themselves and other state employees who were not members of the Union but were forced to pay so-called "agency fees" to it prior to the United States Supreme Court's decision in Janus v. American Federation of State, County & Municipal Employees, Council 31, 138 S. Ct. 2448 (2018). There, the Court overruled its decades-old decision in Abood v. Detroit Board of Education, 431 U.S. 209 (1977), and held that such "agency fee" arrangements violate the First Amendment of the United States Constitution by compelling the speech and association of non-union governmental employees. The District Court granted the Union's motion to dismiss Doughty and Severance's complaint, and we affirm, aligning ourselves with every circuit to have addressed whether such a backward-looking, Janus-based claim is cognizable under § 1983.1 1 See generally Wholean v. CSEA SEIU Loc. 2001, 955 F.3d 332 (2d Cir. 2020); Diamond v. Pa. State Educ. Ass'n, 972 F.3d 262 (3d Cir. 2020); Ogle v. Ohio Civ. Serv. Emps. Ass'n, 951 F.3d 794 (6th Cir. 2020); Lee v. Ohio Educ. Ass'n, 951 F.3d 386 (6th Cir. 2020); Janus v. Am. Fed'n of State, Cnty. & Mun. Emps., Council 31, 942 F.3d 352 (7th Cir. 2019); Danielson v. Inslee, 945 F.3d 1096 (9th Cir. 2019). - 2 -  I. A. New Hampshire state law imposes on unions that serve as the exclusive representative of a bargaining unit for state or local government employees a duty of fair representation to the unit's non-union employees during the collective bargaining process. See Nashua Tchrs. Union v. Nashua Sch. Dist., 707 A.2d 448 , 451 (N.H. 1998) (citing N.H. Rev. Stat. Ann. § 273 -A:3). Prior to Janus's overruling of Abood, the New Hampshire Supreme Court held that the State's "overall legislative scheme to promote labor peace" impliedly permitted the negotiation of collective bargaining agreements between unions and governmental employers that called for the payment of agency fees. See id. at 450 . In addition, the New Hampshire Supreme Court held that, under Abood, the First Amendment was not violated if a state or local governmental employer made the payment of these fees in connection with such agreements a condition of employment for their employees. Id. The New Hampshire Supreme Court explained that collective bargaining agreements are contracts forged between the employer and the union that serves as the exclusive bargaining representative for the relevant bargaining unit. Id. at 451 . It further explained that agency fees compensate for the fact that, although such a union secures benefits through the collective - 3 - bargaining process for the bargaining unit's union and non-union employees alike, only the union employees pay dues to the union. Id. Thus, until Janus, New Hampshire permitted "agency fees" to "defray the costs associated with [the union's] exclusive representation and collective bargaining," and such fees were regularly a subject of collective bargaining agreements between unions and public employers in the state. Id. at 449 . B. On January 14, 2019, following Janus, Doughty and Severance filed suit in the United States District Court for the District of New Hampshire against the Union under § 1983. Their complaint alleged that the Union was the exclusive representative for their respective bargaining units and that they were not themselves members of the Union. The complaint further alleged that, at the time relevant to this suit, they were "forced" to pay agency fees to the Union "as a condition of employment" in connection with the Union's collective bargaining agreements with their respective state employers. Finally, their complaint claimed that "the State" deducted the agency fees from their paychecks and remitted them to the Union, although the record offers no further details about the mechanics of the payment process. By the time that Doughty and Severance filed their suit, the Union had ceased collecting agency fees, as deductions from - 4 - the employees' paychecks to pay those fees ended in Janus's wake. Their complaint nevertheless requested, based on Janus's retroactive application, that the District Court certify a class of "all individuals employed by the State, and other public employers, who, as a condition of employment, were forced to pay union fees to [the Union], which distributed some of the fees to its affiliates, any time during the limitations period." Doughty and Severance further claimed that the members of this class were entitled, pursuant to § 1983, to "compensatory damages, refunds, or restitution in the amount of compulsory union fees paid to the Union from their wages without their written consent, and other amounts as principles of justice and equity require." C. On March 18, 2019, the Union moved to dismiss the plaintiffs' complaint for failure to state a claim on which relief could be granted under Federal Rule of Civil Procedure 12(b)(6). The District Court held a hearing on that motion on May 30, 2019 and granted it that same day. The District Court proceeded on the understanding -- which the Union did not contest -- that, due to Janus's retroactive application, the state employers' requirement that the agency fees be paid as a condition of Doughty's and Severance's employment violated the First Amendment. The District Court also assumed -- and, again, without dispute -- that the Union, although a private - 5 - entity, was a proper defendant under § 1983 for this Janus-based suit, despite the fact that the requirement to pay the agency fees had been imposed on them by their employer as a condition of their employment and not by the Union itself.2 Finally, the District Court implicitly recognized that the doctrine of qualified immunity, which protects governmental officials from damages liability when sued in their individual capacities under § 1983 in the absence of their having violated "clearly established" law, see District of Columbia v. Wesby, 138 S. Ct. 577 , 589 (2018), does not protect private defendants, see Wyatt v. Cole, 504 U.S. 158 , 168-69 (1992), and so provided no such immunity to the Union here. Nevertheless, the District Court expressed skepticism that § 1983 permitted Doughty and Severance's claim against the 2 In Lugar v. Edmondson Oil Co., 457 U.S. 922 (1982), the Court held that a private party who attached the assets of a debtor under a state attachment statute could be a proper defendant under § 1983 for a claim brought by a property owner based on a violation of the property owner's right to procedural due process on the ground that the defendant was acting under color of law in bringing about the attachment pursuant to that statute's summary attachment process. Id. at 924, 933-34; see also Wyatt v. Cole, 504 U.S. 158 , 159-60 (1992) (same). Here, of course, the Union merely received the agency fees pursuant to a freely negotiated contractual provision with the plaintiffs' employer and those fees were made available to it, in turn, based on the plaintiffs' contract with their employer. Nevertheless, as we have noted, there is no dispute on appeal as to whether, on these facts, the Union is a proper § 1983 defendant for the claimed First Amendment violation. Thus, like the District Court, we assume that the Union is, despite the possible reasons to question that assumption. - 6 - Union to go forward, given their claim's exclusive focus on agency- fee payments made prior to Janus. In that connection, the District Court asked the plaintiffs' counsel at the hearing on the motion to dismiss to "step back for a second" and explain "how in any version of the world" it would be "right to require [the Union] to pay damages for acting consistent with the requirements of state law and . . . [S]upreme [C]ourt precedent." The District Court emphasized that the Union's "behavior was entirely constitutional at the time they engaged in it," and that it is an unusual situation where the Supreme Court "decides to flatly overturn its prior precedent." Because, as a general matter, "[o]ne of the reasons that judges express their views in written opinions is so that people can rely on" them, the District Court explained, it would be "arrogant in the extreme" to allow individuals who had so relied to be "subjected to suits for damages" in the rare cases where "judges flip 180 degrees on the law." The District Court added that it was "incomprehensible" that "damage[s] actions [could] be maintained under" the "unique circumstances" of this case. The District Court then granted the Union's motion to dismiss Doughty and Severance's complaint based on two independent grounds. First, the District Court ruled that "a good faith defense must be available to protect defendants under these kinds of circumstances" (emphasis added), and that Doughty and Severance could not overcome that defense. Second, the District Court held - 7 - that Doughty and Severance's § 1983 claim was analogous to the common-law tort of abuse of process, for which a "good faith defense has traditionally been recognized."3 For this reason, too, the District Court held, Doughty and Severance would have to overcome a "good faith defense" to succeed in obtaining their requested relief, which they could not do, given that the Union collected the fees at issue before Janus overruled Abood. The District Court emphasized that it did not find the plaintiffs' claim for retrospective relief -- whether for damages or restitution -- to be "frivolous," but it closed by stating that it did not "see how it [could] possibly proceed." Instead, the District Court suggested that the plaintiffs appeal the case because it "would need guidance from the First Circuit explaining . . . why the claim is potentially viable" to recognize it. D. Following the District Court's ruling, Doughty and Severance timely filed this appeal on June 21, 2019, in which they challenge the District Court's grant of the Union's 12(b)(6) 3Although the District Court referred to the plaintiffs' § 1983 claim as being subject to a "good faith defense," it is clear that it was merely holding that an element of their § 1983 claim was proof of "malice," such that their claim must be dismissed if they failed to show that the Union had not acted in "good faith" in collecting the agency fees at issue. See Wyatt, 504 U.S. at 172 (Kennedy, J., concurring). - 8 - motion. We have jurisdiction under 28 U.S.C. § 1291 . We review the District Court's dismissal of a case under Federal Rule of Civil Procedure 12(b)(6) de novo. See Reisman v. Associated Faculties of Univ. of Me., 939 F.3d 409 , 411 (1st Cir. 2019). II. As to the claim for damages, Doughty and Severance ask us to focus on § 1983's text, which expressly provides that "[e]very person" responsible for depriving another of their constitutional rights "shall be liable to the party injured in an action at law," 42 U.S.C. § 1983 . They then proceed to argue that, because Janus applies retroactively and the Union is a proper defendant for the First Amendment violation resulting from its collection of agency fees, there is no basis for denying them a damages remedy against the Union for the federal constitutional violation that they suffered. For, Doughty and Severance point out, on its face, § 1983 "is absolute and unqualified; no mention is made of any privileges, immunities, or defenses that may be asserted," Owen v. City of Independence, 445 U.S. 622 , 635 (1980). The District Court rightly emphasized, however, that the plaintiffs are seeking damages for a private party's role in imposing a payment requirement on them during a period of time in which the nation's highest court had expressly held that the requirement did not give rise to the First Amendment violation on which their damages claim under § 1983 now depends. We thus must - 9 - attend to the District Court's concern that the recognition of such a damages claim under § 1983 would unduly upset the justifiable reliance interests of the private defendant. In attending to that concern, we do not embark on a free- wheeling assessment of whether to import into § 1983 a policy based on protection of reliance interests. See Malley v. Briggs, 475 U.S. 335 , 342 (1986). Rather, we follow the Supreme Court in recognizing that the text of § 1983 should be read with some consideration of the background against which the statute was enacted and thus with an understanding that the common law's rules "defining the elements of damages and the prerequisites for their recovery[] provide the appropriate starting point for the inquiry under § 1983." Carey v. Piphus, 435 U.S. 247 , 257-58 (1978); see also Monroe v. Pape, 365 U.S. 167 , 187 (1961) (noting that § 1983 "should be read against the background of tort liability that makes a man responsible for the natural consequences of his actions"); cf. Heck v. Humphrey, 512 U.S. 477 , 483 (1994) (explaining that "to determine whether there is any bar to the present [§ 1983] suit, we look first to the common law of torts"). Moreover, in undertaking that review of the common law to assess the scope of relief available for a claim for a constitutional violation under § 1983, we must keep in mind the Court's observation that if "the interests protected by a particular branch of the common law of torts . . . parallel closely the interests protected by a - 10 - particular constitutional right," then it may be "appropriate to apply the tort rules of damages directly," Carey, 435 U.S. at 258 , even if that rule is not favorable to the plaintiff, see, e.g., id. at 254-57, 260-62 (relying on principles of common-law damages to conclude substantial nonpunitive damages were unavailable in the absence of proof of real injury). A number of our sister circuits have followed this approach to assessing the viability of similar retroactive Janus- based damages claims under § 1983, and they have found that such claims closely parallel common-law torts that provide relief for a defendant's misuse of official governmental processes. See Diamond v. Pa. State Educ. Ass'n, 972 F.3d 262 , 280 (3d Cir. 2020) (Fisher, J., concurring in the judgment) (collecting cases). They have also recognized that those common-law torts -- abuse of process and malicious prosecution -- require a plaintiff to show malicious or improper use of the process by the defendant. See, e.g., Janus v. Am. Fed. of State, Cnty. & Mun. Emps., 942 F.3d 352 , 365 (7th Cir. 2019); see also 54 C.J.S. Malicious Prosecution § 2 (2020) ("The wrongful use of a civil proceeding is a tort which arises when a party institutes a lawsuit with a malicious motive and lacking probable cause."); Pinsky v. Duncan, 79 F.3d 306 , 312 (2d Cir. 1996) ("[A]buse of process tort has but two elements: 'first, an ulterior purpose, and second, a willful act in the use of the process not proper in the regular conduct of the - 11 - proceeding.'" (quoting W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 121, at 898 (5th ed. 1984))). Accordingly, they have rejected retroactive Janus-based claims for damages under § 1983, precisely because Janus had not overruled Abood at the time that the agency fees at issue in them were collected and thus the malicious- or improper-use-of-process element, which the analogy to those common-law torts suggests that Congress intended to be imported into those plaintiffs' § 1983 claims, could not be satisfied. See Diamond, 972 F.3d at 280 (Fisher, J., concurring in the judgment) (collecting cases); see also Wyatt, 504 U.S. at 174 (Kennedy, J., concurring) ("[T]here is support in the common law for the proposition that a private individual's reliance on a statute, prior to a judicial determination of unconstitutionality, is considered reasonable as a matter of law . . . ."); San Antonio Indep. Sch. Dist. v. Rodriguez, 411 U.S. 1 , 60 (1973) (Stewart, J., concurring) (noting that "one of the first principles of constitutional adjudication" is "the basic presumption of the constitutional validity of a duly enacted state or federal law" (citing James B. Thayer, The Origin and Scope of the American Doctrine of Constitutional Law, 7 Harv. L. Rev. 129 (1893))). The Union urges us to follow that same logic here, and thus to find that the District Court correctly held that Doughty and Severance's damages claim fails. In support of our doing so, moreover, the Union points to a substantial body of § 1983 - 12 - precedent that they contend is directly analogous here. In it, circuits have consistently treated the common-law torts concerning misuse of state processes -- whether the tort of abuse of process or malicious prosecution -- as closely analogous to § 1983 claims for violations of procedural due process that have been brought against private defendants who have availed themselves of state summary process statutes for effecting the seizure of property, whether through attachment or replevin or the like. See, e.g., Pinsky, 79 F.3d at 312 ; Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250 , 1276 & n.31 (3d Cir. 1994); Wyatt v. Cole, 994 F.2d 1113 , 1119 (5th Cir. 1993); see also Duncan v. Peck, 844 F.2d 1261 , 1267-68 (6th Cir. 1988). To be sure, the constitutional violation that grounds those § 1983 claims is a product of the flawed design of the state-backed summary process that the private defendant relied upon to acquire the plaintiff's property, Wyatt, 504 U.S. at 161-62 , and not of the defendant's use of that process for other than its intended purpose. And, in that respect, there is not a perfect match between the interests protected by those common-law torts and the interests protected by the constitutional right to procedural due process that underlies the § 1983 claim in those cases. Nonetheless, that line of authority still holds that such § 1983 claims are properly analogized to these common-law torts, and thus courts consistently have held those claims to be unavailing when they seek damages for a defendant's use of a - 13 - summary process statute that was entirely lawful when invoked but that was then retroactively held to violate procedural due process only due to a subsequent change in the law. See, e.g., Wyatt, 994 F.2d at 1120-21 . Notably, Doughty and Severance do not argue that we must reject this line of § 1983 authority concerning challenges to summary process statutes to rule for them in this case. They contend only that this substantial body of § 1983 precedent is distinguishable due to the type of claim that they are bringing under § 1983, such that this line of precedent that is seemingly problematic for them in fact provides no support for the Union's position. That is so, Doughty and Severance contend, both because their § 1983 claim seeks to vindicate a violation of the First Amendment, not the right to procedural due process, and because the Union did not invoke any court-like process in collecting the agency fees, as the plaintiffs in the summary-process-focused § 1983 cases did in acquiring the property at issue in them. Additionally, Doughty and Severance assert that, given the nature of their § 1983 claim, the common-law backdrop of § 1983 in fact cuts in their favor, because if any common-law tort is analogous to the one that they are bringing under that statute, it is the common-law tort of conversion, which permits a plaintiff to recover damages without showing the defendant's malicious or improper use - 14 - of any legal process. But, we are not persuaded by these arguments. We do not dispute that Doughty and Severance are right that their claim under § 1983 protects against the harm caused by governmentally forced speech and association. In that respect, it does protect interests quite different from those protected by the common-law torts of malicious prosecution and abuse of process. But, as we have just explained, the constitutional right to procedural due process that underlies the § 1983 claims targeting summary process statutes discussed above protects against a failure of the state to provide enough process, not against the misuse of a process that the state has otherwise properly provided. Yet, it is that latter type of misuse that constitutes the harm against which the common-law torts of abuse of process and malicious prosecution provide protection. So, there is little force to this asserted point of distinction between Doughty and Severance's § 1983 claim and the body of § 1983 case law concerning summary process statutes. Rather, their § 1983 claim, like the plaintiffs' § 1983 claims in those cases, is similar to claims for those common-law torts in that it seeks to compensate them for a private party having used a lawful-when-invoked, state-backed process to acquire their property, even though that process was subsequently held to be unlawful due to a change in the law. See Ogle v. Ohio Civ. Serv. Emps. Ass'n, 951 F.3d 794 , 797 (6th Cir. - 15 - 2020) ("Think about the problem this way. Public-sector unions may enlist the State's help (and its ability to coerce unwilling employees) to carry out everyday functions. But a union that misuses this help, say because the state-assisted action would violate the U.S. Constitution, may face liability under § 1983."). Finally, while Doughty and Severance are right that their Janus-based § 1983 claim seeks recompense for the invocation of a state-backed process for collecting payments that is distinct from the use of a court process to effect a seizure, we do not see why that distinction is a salient one. Some divergence is to be expected even between a § 1983 claim and a common-law tort that it closely parallels. See Rehberg v. Paulk, 566 U.S. 356 , 366 (2012) (explaining that § 1983 is not "simply a federalized amalgamation of pre-existing common-law claims, an all-in-one federal claim encompassing the torts of assault, trespass, false arrest, defamation, malicious prosecution, and more"). Doughty and Severance, however, do not explain -- nor does any explanation occur to us -- why the distinction between the use of an adjudicative process and an administrative one supports the conclusion that the Union should receive less protection for its good-faith reliance on the lawful-when-invoked, state-backed process than the defendants in the summary-process § 1983 cases received for theirs. - 16 -  We suppose the distinctions that Doughty and Severance point to between their § 1983 claim and the common-law torts of abuse of process and malicious prosecution might have force if there were any indication that the common law was as indifferent to reliance interests in a circumstance like the one at issue here as they impliedly suggest is the case. For, in that event, there would be no reason to be concerned that, in permitting their damages claim to lie, we would be anachronistically reading § 1983 without regard for the common-law understandings that the Supreme Court has made clear informed Congress in enacting that measure. But, Doughty and Severance's attempt to make that case with reference to the common-law tort of conversion -- which does not require a showing of malice and which they contend supplies a more apt analogy to their Janus-based claim -- is not convincing. As an initial matter, Doughty and Severance provide no support for their implicit premise that a claim for conversion could have been brought at common law for the recovery of a plaintiff's payment of a required fee when the funds used to pay it were comingled with the defendant's other funds following its collection. See 7 Am. Law of Torts § 24:7 (explaining that "before there can be a conversion" of money, there is a "requirement that there be 'ear-marked money or specific money capable of identification'"); 44 A.L.R.2d 927 (1955) ("Money can be the subject of conversion and a conversion action only when it can be - 17 - described, identified, or segregated in the manner that a specific chattel can be . . . ."). Nor do they identify a single case in which a claim for conversion was successfully brought at common law for damages arising from the defendant's collection of money payments revealed to have been made pursuant to an illegal requirement only in retrospect, and then only due to the subsequent overruling of a prior Supreme Court precedent under which the requirement was lawful at the time that it was imposed. Their failure on that score is especially conspicuous given how common- law claims for recovering licensing fees and taxes based on the retroactive application of such a sharp change in the law fared. Cf. Diamond, 972 F.3d at 281 (Fisher, J., concurring in the judgment) (describing the "contemporaneous" rule that "a judicial decision either voiding a statute or overruling a prior decision does not generate retroactive civil liability with regard to financial transactions or agreements conducted, without duress or fraud, in reliance on the invalidated statute or overruled decision"); Note, The Effect of Overruled and Overruling Decisions on Intervening Transactions, 47 Harv. L. Rev. 1403 , 1404 (1934). From this review, then, we see no support for concluding that the common law was as indifferent as Doughty and Severance impliedly suggest that it was to the threat to reliance interests posed by affording a damages remedy for a private defendant's acquisition of payments via the invocation of then-lawful state - 18 - processes that -- due only to a subsequent change in the law -- retroactively are revealed to have been unlawful. And, because the Court has reminded us in connection with § 1983 that "[r]ights, constitutional and otherwise, do not exist in a vacuum," Carey, 435 U.S. at 254 , we are wary of attributing to the Congress that enacted § 1983 an intent to permit a damages claim to go forward in these most unusual circumstances, just because § 1983 provides that a remedy "at law" "shall be" available for a constitutional violation. That said, we do recognize that "[t]he purpose of § 1983 would be defeated if injuries caused by the deprivation of constitutional rights went uncompensated simply because the common law does not recognize an analogous cause of action." See Carey, 435 U.S. at 258 . For that reason, we are mindful that "[i]n applying, selecting among, or adjusting common-law approaches" to the new setting of § 1983, we "must closely attend to the values and purposes of the constitutional right at issue." Manuel v. City of Joliet, 137 S. Ct. 911 , 921 (2017). But, although Doughty and Severance assert that their claim for damages seeks to vindicate their First Amendment right against compelled speech and association and that this right provides protection from harm that the common law itself did not, they ignore the unusual nature of their attempt to secure relief for the violation of that constitutional right. They thus develop - 19 - no argument -- nor does any occur to us -- why close attention to the values and purposes of the First Amendment right against compelled speech and association supports the conclusion that the Congress that enacted § 1983 must have meant to create a claim for damages for its retroactive violation when the violation results in payments made pursuant to a lawful-when-invoked, state-backed process. Nor are we persuaded by Doughty and Severance's contention that we must rule in their favor based on Harper v. Virginia Department of Taxation, 509 U.S. 86 (1993), in which the Court held that when it applies a rule of federal law to the parties before it that rule "must be given full retroactive effect in all cases still . . . on direct review." Id. at 97 . Insofar as the agency fees at issue here may be analogized to the taxes collected in Harper -- itself a debatable proposition -- Doughty and Severance make no argument that they were precluded from bringing a pre-collection claim challenging the lawfulness of the required payment of agency fees on the ground that Abood should be overruled. As a result, they do not explain how the Supreme Court's retroactivity jurisprudence provides any support for the conclusion that § 1983 provides a remedy for the First Amendment violation that grounds their claim under that statute. See McKesson Corp. v. Div. of Alcoholic Beverages & Tobacco, 496 U.S. 18 , 38 n.21 (1990) (explaining that the "availability of a - 20 - predeprivation hearing" can also "constitute[] a procedural safeguard . . . sufficient by itself to satisfy the Due Process Clause, and taxpayers cannot complain if they fail to avail themselves of this procedure"); see also Nat'l Private Truck Council, Inc. v. Okla. Tax. Comm'n, 515 U.S. 582 , 587 (1995) ("As long as state law provides a 'clear and certain remedy,' the States may determine whether to provide predeprivation process (e.g., an injunction) or instead to afford postdeprivation relief (e.g., a refund)." (internal citations omitted) (quoting McKesson Corp., 496 U.S. at 51 )). III. Doughty and Severance do separately make a demand for restitution, which is an equitable rather than a legal remedy. And it is true that § 1983 empowers courts to hold a party that violated another's federal rights "liable" in a "suit in equity." 42 U.S.C. § 1983 . But, as Doughty and Severance do not plead that the specific agency fees they paid can "clearly be traced to particular funds or property in the [Union's] possession," see Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 , 213 (2002), their claim is necessarily "one against the union's treasury generally, not one against an identifiable fund or asset," which makes it inherently legal in nature, Mooney v. Ill. Educ. Ass'n, 942 F.3d 368 , 371 (7th Cir. 2019). Accordingly, their restitution claim fails, too. - 21 -  IV. The judgment of the District Court is affirmed. - 22 -

2020-11-30 21:00:22.00276+00

http://media.ca1.uscourts.gov/pdf.opinions/19-1306P-01A.pdf

United States Court of Appeals For the First Circuit Nos. 19-1306, 19-1347 58 SWANSEA MALL DRIVE, LLC, Plaintiff, Appellee/Cross-Appellant, v. GATOR SWANSEA PROPERTY, LLC, Defendant, Appellant/Cross-Appellee. APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Richard G. Stearns, U.S. District Judge] Before Kayatta and Boudin, Circuit Judges.* Robert J. Shapiro, with whom Sanford F. Remz and John M. Owen were on brief, for appellant/cross-appellee. Barry S. Pollack, with whom Joshua L. Solomon, Lauren Riddle, and Pollack Solomon Duffy LLP were on brief, for appellee/cross- appellant. * Judge Torruella heard oral argument in this matter and participated in the semble, but he did not participate in the issuance of the panel's opinion in this case. The remaining two panelists therefore issued the opinion pursuant to 28 U.S.C. § 46 (d). November 30, 2020  BOUDIN, Circuit Judge. This case concerns a contract dispute between landlord Gator Swansea Property, LLC ("Gator") and tenant 58 Swansea Mall Drive, LLC ("Swansea") that arose under their lease (the "Ground Lease") to a shopping center premises in Swansea, Massachusetts. Swansea subleased a portion of the premises to various retailers. The Ground Lease was originally executed in 1984 by the parties' predecessors-in-interest. In 2013, the present parties acquired their respective interests in the premises by way of assignment of the Ground Lease. Soon after, a dispute arose over Swansea's maintenance obligations under Article 10 of the Ground Lease, which requires that Swansea maintain the premises in "good order and condition." From May 2014 to February 2015, Gator issued a series of demand letters to Swansea concerning the condition of the parking lot, the sidewalks, and the roof and facade of the shopping center. Although many of the letters indicated that Gator would make repairs at Swansea's expense if the issues described were not addressed, none of the letters indicated that Swansea was in "breach" or "default" of its maintenance obligations. In March 2015, Swansea sought a mortgage loan from United Bank and offered its leasehold interest in the premises as collateral. Article 6, Section 3 of the Ground Lease permitted Swansea to mortgage its leasehold interest if it was not "in - 3 - default . . . beyond the applicable grace periods." Article 14, Section 4 required Gator, within ten days of receiving a request, to deliver an "estoppel certificate" verifying that Swansea was not in default and that the lease remained "in full force and effect." Gator eventually did so. In response, United Bank requested that Gator execute a "Section 3(n) Agreement," pursuant to Article 6, Section 3(n), of the Ground Lease. Later, United Bank sent Gator a signed copy of the Leasehold Mortgage and a draft Section 3(n) Agreement for Gator to sign. On October 2, 2015, Swansea filed a lawsuit in Massachusetts state court seeking an injunction requiring Gator to execute the Section 3(n) Agreement and asserting various damages claims. Gator removed the case to the District of Massachusetts, and the district court denied Swansea's request for injunctive relief. On October 28, 2015, United Bank notified Swansea that the proposed mortgage loan had been terminated because Swansea had not met the deadline for delivery of the Section 3(n) Agreement. In response, Swansea charged Gator with breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of Mass. Gen. Laws ch. 93A. Gator countersued, charging that Swansea had violated the Ground Lease through its subtenant's use of a pylon sign on - 4 - the premises ("the Mall Pylon"). The district court granted summary judgment to Swansea on the Mall Pylon claim. After a nine-day bench trial, the court found that Gator had not breached its duty under Section 3(n) by refusing to sign a Section 3(n) Agreement: it had no obligation to execute an agreement, said the judge, where, as here, it had a reasonable belief that the terms of the Leasehold Mortgage could lead to future litigation over its rights to insurance proceeds. Gator's request for attorney's fees under the Ground Lease was denied. Gator appealed, and Swansea cross-appealed. The parties agree that the appeals are timely, and we agree with the result although not with the parties' explanations for it; as the circumstances are complex and involve nothing likely to recur, there is no reason to pursue the competing rationales here. We first address Gator's Section 3(n) obligations. Article 6, Section 3(n), of the Ground Lease provides that if Swansea seeks to mortgage its interest: Landlord shall, upon request, execute, acknowledge, and deliver to each Leasehold Mortgagee making such a request an agreement prepared at the sole cost and expense of the Tenant, in form reasonably satisfactory to such Leasehold Mortgagee, between Landlord, Tenant and such Leasehold Mortgagee, agreeing to all of the provisions in this Section. Swansea argues that this section imposed on Gator a mandatory duty to execute a Section 3(n) Agreement regardless of any substantive objections to the mortgage terms. The district court ruled that - 5 - Gator had no obligation to sign the proffered Section 3(n) Agreement because it reasonably believed that the terms of the mortgage could lead to future litigation over the distribution of insurance proceeds. The "reasonable belief" touchstone appeared for the first time in the district court's Findings of Fact, Rulings of Law, and Order After Jury-Waived Trial, with the court writing: 3. While the court previously observed in its Order on Plaintiff's Motion for Summary Judgment, that "Gator's duty was to execute an agreement acknowledging the provisions of Section 3 after being presented with the mortgage and recording information," see Dkt. #195 at 11, Gator was not under an obligation to do so if it reasonably believed that the terms of the mortgage could lead to future litigation over the distribution of insurance proceeds. 4. The court ultimately concludes that even though the mortgage contained qualifying language, that "[u]nless otherwise required by the Ground Lease," Gator reasonably believed that the terms of the mortgage conflicted with its insurance rights under the Ground Lease. Consequently, it had a good faith basis for hesitating to go forward, particularly when it learned that . . . Swansea had yet to cause it to be added as an additional named insured as required by Article 4 of the Ground Lease. But in the present context, Gator's reasonable belief has no proper role. Rather, Section 3(n) required United Bank to be reasonable in insisting on what form of letter would be satisfactory to it. The only requirement that Section 3(n) places on Gator is to sign an agreement "agreeing to all of the provisions - 6 - in this Section [3]." Subsection (i) of Section 3 permitted Swansea to name its mortgagee as an insured party for its lease interest subject to the insurance proceeds being applied "in the manner specified in [the] Lease." Article 5, Section 1 of the Lease specified that in the event of a casualty, Gator would either receive the casualty insurance proceeds directly (if the tenant elected to terminate the lease) or the insurance proceeds would go toward rebuilding the premises. Article 14 additionally permitted Gator to pledge its right to receive the insurance proceeds as collateral but did not expressly permit Swansea to do the same. Thus, Gator was only obligated to sign a Section 3(n) Agreement that preserved its priority rights to insurance proceeds. None of the agreements proposed by United Bank would have unambiguously preserved Gator's status. The Leasehold Mortgage with United Bank provided that "[u]nless otherwise required by the Ground Lease and except as hereinafter provided, the proceeds of any insurance resulting from any loss with respect to the Property shall be paid to [United] Bank." As Gator points out, the "and except as hereafter provided" clause in the mortgage document could be interpreted to mean that "United Bank . . . recognized that a conflict might exist with the Ground Lease and intended any conflict would be resolved in United Bank's favor 'as hereinafter provided' in the document." So, to adequately preserve - 7 - its status Gator could only sign a Section 3(n) Agreement clearly establishing that the terms of the Lease would govern in case of any conflict with the terms of the mortgage. Yet, United Bank repeatedly deleted language from Gator's proposed Section 3(n) Agreements designed to do just that. For example, in its October 21st draft, United Bank deleted the following language from Gator's previous proposal: "If any conflict or ambiguity is created between the Loan Documents and the Ground Lease, the terms of the Ground Lease shall prevail." That deletion, and its indication that United Bank's draft did not adequately protect Gator's rights, is bolstered by trial testimony from United Bank's attorney that United Bank would not have funded the loan without ensuring it had first priority to any insurance proceeds. And while Swansea argues that the bank simultaneously added language to the same effect, Swansea offers no explanation for the change other than to preserve the aim of United Bank's attorney. Accordingly, the district court did not clearly err in finding that Gator was not required to sign any of the Section 3(n) Agreements proposed by United Bank and did not breach the lease. As for Gator's request for attorney's fees, Article 13 of the Ground Lease says that "[i]f Landlord or Tenant shall incur any expense, including reasonable attorney's fees, in instituting, prosecuting or defending any action or proceedings instituted by - 8 - reason of default by the other, the defaulting party shall reimburse the other for the amount of such expense." After trial, the district court declined to award Gator its attorneys' fees, reasoning that Swansea was not in material default of its maintenance obligations since Gator failed to: (1) prove that any potential default was "beyond the applicable grace period," or (2) properly give notice of any default under Article 12, Section 1(b)(ii) of the Ground Lease. The district court also concluded that Swansea was not in default of its insurance obligations because it was unaware of any lapse in insurance coverage whereby Gator had not been listed as a named insured on the casualty insurance policy for the leased premises. The district court's decision not to grant fees is reviewed for abuse of discretion, although its interpretation of Article 13 is reviewed de novo. Deutsche Bank Nat'l Tr. Co., Tr. for FFMLT Tr. 2005-FF2 v. Pike, 916 F.3d 60 , 73 (1st Cir. 2019). Gator argues that Article 13 is best read as a general fee-shifting provision, entitling the prevailing party in any dispute under the Ground Lease to costs and fees. But the drafters failed to include traditional "prevailing party" language. Cf., e.g., 42 U.S.C. § 1988 (b). Instead, under the terms of Article 13, a party to the Ground Lease is entitled to fees in an action instituted "by reason of default by the other" -- not where a party successfully defends against an allegation of its own default. - 9 -  Gator argues that the Ground Lease is a "bond lease," meaning that "the tenant is responsible for all operating costs including insurance and repairs and replacements, so long as the landlord is not in breach." Gator cites various cases not on point: here, the Ground Lease contains a limited definition of default and lacks general prevailing party language. Finally, Gator argues that the definition of "default" in Article 12 of the Ground Lease, which includes a provision for notice and the opportunity to cure before the tenant is considered "in default," does not define "default" for the purposes of Article 13's fee-shifting provisions. This argument, even if successful, would give us a "default by" Swansea but not a lawsuit "instituted by reason of default by the other." Last, we address the parties' dispute over the Mall Pylon. The original landlord to the premises constructed the Mall Pylon in 1989 after receiving a permit from the Town of Swansea. When Gator's predecessor-in-interest, Carlyle Swansea Partners, LLC, was landlord from 2001 to 2013, the Mall Pylon was used to advertise an adjacent mall and its tenants; none of the tenants or subtenants of the shopping center were featured on the sign. Carlyle recorded an easement granting Wal-Mart, a tenant of the adjacent mall, the right to place signage on the Mall Pylon. The assignment of the Ground Lease to Swansea identified the leasehold as subject to two exceptions: (1) the 1989 sign permit - 10 - and (2) the 2012 easement granted to Wal-Mart. No tenant or subtenant of the shopping center used the Mall Pylon until August 2016, when PriceRite, one of Swansea's subtenants, installed a sign. After Gator sent Swansea a notice of default, claiming that use of the pylon breached the lease, Swansea filed for declaratory and injunctive relief. Gator filed a counterclaim, asserting that Swansea had breached the lease by encroaching on the Mall Pylon. The district court ruled on summary judgment that Swansea's subtenant's use of the Mall Pylon did not breach the Ground Lease. On appeal, Gator claims that the district court erred in concluding that the Ground Lease must contain an express reference to the Mall Pylon or a blanket prohibition on that pylon's use. We disagree for the reasons stated by the district court. While other claims are made on this set of appeals, any purported errors would be harmless and need no further discussion. Affirmed. - 11 -

2020-11-30 21:00:32.683396+00

https://cdn.ca9.uscourts.gov/datastore/memoranda/2020/11/30/19-16217.pdf

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS NOV 30 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT UNITED STATES OF AMERICA, No. 19-16217 Plaintiff-Appellee, D.C. No. 3:18-cv-00063-MMD-WGC v. SPENCER J. STEELE, MEMORANDUM* Defendant-Appellant, and JAY SORDEAN, as the successor trustee of the Desert Lake Trust created on 10/1/2005; STEWART TITLE COMPANY, as the successor in interest to Stewart Title of Douglas County, Defendants. Appeal from the United States District Court for the District of Nevada Miranda M. Du, Chief District Judge, Presiding Submitted November 25, 2020** San Francisco, California * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Before: O’SCANNLAIN, TROTT, and N.R. SMITH, Circuit Judges. Dissent by Judge N.R. SMITH Spencer Steele appeals from the district court’s grant of summary judgment in favor of the United States in this tax-enforcement action. Because the facts are known to the parties, we repeat them only as necessary to explain our decision. The district court correctly found that the government may impose tax liens against the Genoa Street property because the record demonstrates that the Desert Lake Trust held bare title to the property as Steele’s nominee. See Fourth Inv. LP v. United States, 720 F.3d 1058 , 1066–67 (9th Cir. 2013). It is undisputed that: Steele’s attorney drafted the documents to create the trust, which Steele hoped would protect his assets from debt collectors; Steele paid for the trust’s purchase of the home, yet then paid the trust monthly rent to live in the home under a 99-year lease agreement; the trust had no income other than Steele’s rent payments and thus “repaid” Steele for the purchase loan by re-routing his own money back to him; the trust did nothing with its income other than make monthly loan repayments to Steele, pay for the home’s taxes, insurance, and maintenance, and cover the trust’s own administrative expenses; and Steele used the home as his personal residence. On this record, there is no reasonable dispute that the trust held title to the home only nominally and that Steele “exercised active [and] 2 substantial control over the property.” Id. at 1070 (internal quotation marks omitted). 1 Because the Desert Lake Trust acted as Steele’s nominee, we do not consider whether, for tax purposes, the trust itself may be set aside as a sham. AFFIRMED. 1 Contrary to the suggestion of the dissent, it appears that the district court did not fail to look to Nevada law on this question. Rather, the district court looked to Nevada’s law and found that it does not provide clear guidance on how a court should evaluate whether a nominee relationship exists. Accordingly, the court could infer that “if the [Nevada] Supreme Court had occasion to evaluate the factors relevant to determining nominee ownership under [Nevada] law, it would adopt the uniform set of factors generally recognized by federal courts.” Fourth Inv. LP, 720 F.3d at 1069; see also id.(“[F]ederal courts evaluating ill-defined nominee doctrines in Alabama, Maine, Montana, Nebraska, New Jersey, and Virginia, have looked to federal law to supply standards for evaluating that state’s nominee doctrine.” (internal quotation marks omitted)). 3  FILED United States v. Steele, Case No. 19-16217 NOV 30 2020 N.R. SMITH, Circuit Judge, dissenting: MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS Because I believe the district court should have looked to Nevada law to determine whether a nominee relationship (or a substantively similar agency relationship, see Edelstein v. Bank of N.Y. Mellon, 286 P.3d 249 , 258–59 (Nev. 2012)) existed between Steele and the Desert Lake Trust, I would remand to the district court to address this question in the first instance, see United States v. Sellers, 906 F.3d 848 , 855 (9th Cir. 2018). Moreover, even if the district court applied the correct legal test, I question whether it viewed all facts and drew all inferences in the light most favorable to Steele, the nonmoving party, as is required on summary judgment. See Tolan v. Cotton, 572 U.S. 650 , 651 (2014) (per curiam). Indeed, the evidence Steele highlights in his briefing seems to create a genuine issue of material fact as to “whether the taxpayer exercised active or substantial control over the property.” Fourth Inv. LP v. United States, 720 F.3d 1058 , 1070 (9th Cir. 2013) (quoting In re Richards, 231 B.R. 571 , 579 (E.D. Pa. 1999)). Finally, addressing the district court’s alternative finding that the Desert Lake Trust can be set aside as a sham, I am not convinced, given the standard of review on a motion for summary judgment, see Tolan, 572 U.S. at 651, that the evidence supports such a finding. 1

2020-11-30 21:00:32.811693+00

https://cdn.ca9.uscourts.gov/datastore/memoranda/2020/11/30/19-60066.pdf

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS NOV 30 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT In re: QDOS, INC., No. 19-60066 Debtor, BAP No. 18-1301 ------------------------------ MEMORANDUM* QDOS, INC., Appellant, v. MATTHEW HAYDEN; et al., Appellees. Appeal from the Ninth Circuit Bankruptcy Appellate Panel Taylor, Faris, and Spraker, Bankruptcy Judges, Presiding Submitted November 18, 2020** Pasadena, California Before: RAWLINSON and HUNSAKER, Circuit Judges, and ENGLAND,*** * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable Morrison C. England, Jr., United States District Judge for the Eastern District of California, sitting by designation. District Judge. QDOS, Inc. (QDOS) appeals an order of the Bankruptcy Appellate Panel (BAP) reversing the bankruptcy court’s dismissal of the involuntary bankruptcy petition filed against QDOS and remanding for further proceedings.1 QDOS asserts that the BAP’s order is a final, appealable order because it alters the status quo and the rights of the parties. We determine de novo whether we have jurisdiction to consider an appeal from the BAP and conclude that we lack jurisdiction in this case. Gugliuzza v. FTC (In re Gugliuzza), 852 F.3d 884 , 889 (9th Cir. 2017). Only BAP orders that alter the status quo and fix the “rights and obligations of the parties” are final, appealable orders. Ritzen Grp., Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582 , 588 (2020) (internal quotation and citation omitted). Orders remanding a case for additional substantive proceedings or “for further fact-finding will rarely have this degree of finality, unless the remand order is limited to ministerial tasks.” In re Gugliuzza, 852 F.3d at 897. The BAP remanded this matter for the bankruptcy court to conduct further proceedings on key issues, including: (1) determining whether QDOS can establish that 11 U.S.C. § 303 (b)(1)’s numerosity requirement applied: (2) allowing the petitioning creditors to conduct discovery; and (3) affording other creditors the 1 We grant appellees’ request to take judicial notice of the bankruptcy court’s tentative ruling dismissing the involuntary petition. 2 opportunity to join the involuntary petition. The BAP’s decision may have altered the existing state of affairs by reversing the bankruptcy court’s dismissal of the involuntary petition and remanding for further proceedings, but it did not “fix[] the rights and obligations of the parties” as is required for an order to be final under § 158(a). Ritzen Grp., Inc., 140 S. Ct. at 588 (internal quotation and citation omitted). Therefore, we lack jurisdiction, and this appeal is DISMISSED. 3

2020-11-30 21:00:32.933691+00

https://cdn.ca9.uscourts.gov/datastore/memoranda/2020/11/30/18-17284.pdf

NOT FOR PUBLICATION FILED NOV 30 2020 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT PATRICK DINGMAN, No. 18-17284 Plaintiff-Appellant, D.C. No. 2:17-cv-02167-JZB v. MEMORANDUM* ANDREW M. SAUL, Commissioner of Social Security, Defendant-Appellee. Appeal from the United States District Court for the District of Arizona John Zachary Boyle, Magistrate Judge, Presiding Submitted November 23, 2020** Before: GOODWIN, SCHROEDER, and SILVERMAN, Circuit Judges. Patrick Dingman appeals the district court’s judgment affirming the Commissioner of Social Security’s denial of Dingman’s application for disability insurance benefits under Title II of the Social Security Act. We have jurisdiction under 28 U.S.C. § 1291 and 42 U.S.C. § 405 (g). We review de novo, Molina v. * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Astrue, 674 F.3d 1104 , 1110 (9th Cir. 2012), and we affirm. The administrative law judge (“ALJ”) provided specific, clear, and convincing reasons to discount Dingman’s symptom testimony. See Orn v. Astrue, 495 F.3d 625 , 635 (9th Cir. 2007) (standard for rejecting claimant’s testimony about the severity of symptoms). The ALJ properly discounted Dingman’s testimony as inconsistent with his daily activities and because the evidence showed his symptoms improved with treatment. See id. at 639 (ALJ may discount claimant’s testimony if the claimant’s daily activities contradict the testimony); Warre v. Comm’r of Soc. Sec. Admin., 439 F.3d 1001 , 1006 (9th Cir. 2006) (“Impairments that can be controlled effectively with medication are not disabling for the purpose of determining eligibility for [disability insurance] benefits”). Any error in the ALJ’s additional reasons for discounting Dingman’s symptom testimony was harmless. See Molina, 674 F.3d at 1115 (error is harmless where it is “inconsequential to the ultimate nondisability determination” (citation and internal quotation marks omitted)). The ALJ provided specific and legitimate reasons for assigning little weight to the controverted opinion of treating physician Dr. Anderson. See Batson v. Comm’r of Soc. Sec. Admin., 359 F.3d 1190 , 1195 (9th Cir. 2004) (standard for rejecting the controverted opinion of a treating physician). The ALJ properly found Dr. Anderson’s opinion inconsistent with the medical evidence of record, 2 including records indicating that Dingman was cleared to return to work, and Dingman’s significant activities of daily living, including evidence that he was the primary care provider for his young son. See id. (“an ALJ may discredit treating physicians’ opinions that are . . . unsupported by the record as a whole, or by objective medical findings” (citation omitted)); Morgan v. Comm'r of Soc. Sec. Admin., 169 F.3d 595 , 601-02 (9th Cir. 1999) (inconsistency between medical opinion and reported daily activities was a specific and legitimate reason to reject opinion). While the ALJ may have erred in failing to expressly address Dr. Anderson’s August 2014 and October 2016 opinions, see Tommasetti v. Astrue, 533 F.3d 1035 , 1041 (9th Cir. 2008) (“The ALJ must consider all medical opinion evidence.”), any error was harmless in light of the ALJ’s other specific and legitimate reasons for discounting Dr. Anderson’s similar assessments. See Molina, 674 F.3d at 1115 . Substantial evidence supports the ALJ’s decision to credit the opinions of the state agency medical consultants. See Tonapetyan v. Halter, 242 F.3d 1144 , 1149 (9th Cir. 2001) (contrary opinion of a non-examining medical expert may constitute substantial evidence when it is consistent with other independent evidence in the record). AFFIRMED. 3

2020-11-30 21:00:33.027784+00

https://cdn.ca9.uscourts.gov/datastore/memoranda/2020/11/30/17-72012.pdf

FILED NOT FOR PUBLICATION NOV 30 2020 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT MIRIAM BERENICE ROJAS No. 17-72012 ALVARADO, Agency No. A203-010-803 Petitioner, v. MEMORANDUM* WILLIAM P. BARR, Attorney General, Respondent. On Petition for Review of an Order of the Board of Immigration Appeals Argued and Submitted November 19, 2020 Phoenix, Arizona Before: TALLMAN, BYBEE, and BADE, Circuit Judges. Petitioner Miriam Berenice Rojas Alvarado (Miriam), a native and citizen of Mexico, petitions for review of the Board of Immigration Appeals’ (BIA) decision affirming the Immigration Judge’s (IJ) denial of her application for cancellation of removal under 8 U.S.C. § 1229b(a). Because the parties are familiar with the facts, * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. we will not recite them here. We lack jurisdiction to review the BIA’s decision insofar as it affirms the denial of discretionary relief. 8 U.S.C. § 1252 (a)(2)(B). We retain jurisdiction, however, to decide “constitutional claims or questions of law.” 8 U.S.C. § 1252 (a)(2)(D). We deny the petition for review. “Where, as here, the BIA adopts the IJ’s decision while adding its own reasons, this court reviews both decisions.” Vahora v. Holder, 641 F.3d 1038 , 1042 (9th Cir. 2011). We review adverse credibility determinations for substantial evidence. Shrestha v. Holder, 590 F.3d 1034 , 1039 (9th Cir. 2010). We will uphold the Agency’s credibility finding “unless any reasonable adjudicator would be compelled to conclude to the contrary.” Garcia v. Holder, 749 F.3d 785 , 789 (9th Cir. 2014) (quoting 8 U.S.C. § 1252 (b)(4)(B)). Substantial evidence supports the IJ’s adverse credibility determination. Under the REAL ID Act, which applies here, “there is no presumption that an applicant for relief is credible, and the IJ is authorized to base an adverse credibility determination on ‘the totality of the circumstances’ and ‘all relevant factors.’” Ling Huang v. Holder, 744 F.3d 1149 , 1152–53 (9th Cir. 2014) (quoting 8 U.S.C. § 1158 (b)(1)(B)(iii)). Such factors include “demeanor, candor, or responsiveness,” as well as inconsistencies between the petitioner’s oral statements and other evidence of record. 8 U.S.C. § 1158 (b)(1)(B)(iii). “[I]n evaluating 2 inconsistencies, the relevant circumstances that an IJ should consider include the petitioner’s explanation for a perceived inconsistency . . . and other record evidence that sheds light on whether there is in fact an inconsistency at all.” Shrestha, 590 F.3d at 1044 (citation omitted). Here, the IJ based his conclusion on a number of inconsistencies between Miriam’s testimony at her individual hearing and other record evidence. Of note, Miriam testified that she did not know there was marijuana in her vehicle notwithstanding her earlier guilty plea that she “knew that hidden in the vehicle there was a quantity of marijuana.” Far from ignoring the record evidence, then, the IJ reasonably concluded that the inconsistency between Miriam’s guilty plea and her testimony undermined her credibility. The record thus does not compel a contrary conclusion with respect to the adverse credibility determination. PETITION DENIED. 3

2020-11-30 21:00:33.161274+00

https://cdn.ca9.uscourts.gov/datastore/memoranda/2020/11/30/20-35070.pdf

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS NOV 30 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT MARK PETERSON, No. 20-35070 Plaintiff-Appellee, D.C. No. 1:18-cv-03136-RMP v. MEMORANDUM* CITY OF YAKIMA, a local governmental entity; TONY O’ROURKE, Defendants, and MARK SOPTICH; ANTHONY DOAN, Defendants-Appellants. Appeal from the United States District Court for the Eastern District of Washington Rosanna Malouf Peterson, District Judge, Presiding Submitted November 18, 2020** Seattle, Washington Before: GOULD and FRIEDLAND, Circuit Judges, and CHEN,*** District Judge. * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable Edward M. Chen, United States District Judge for the  In this interlocutory appeal, Defendants/Appellants Anthony Doan and Mark Soptich challenge the district court’s denial of qualified immunity in a First Amendment retaliation case. We dismiss for lack of jurisdiction. Any “portion of a district court’s summary judgment order that, though entered in a ‘qualified immunity’ case, determines only a question of ‘evidence sufficiency,’ i.e., which facts a party may, or may not, be able to prove at trial . . . is not appealable.” Johnson v. Jones, 515 U.S. 304 , 313 (1995). Under Johnson, “[a]ny decision by the district court ‘that the parties’ evidence presents genuine issues of material fact is categorically unreviewable on interlocutory appeal.’” George v. Morris, 736 F.3d 829 , 834 (9th Cir. 2013) (quoting Eng v. Cooley, 552 F.3d 1062 , 1067 (9th Cir. 2009)). Interlocutory review jurisdiction, instead, is “confined to the question of ‘whether the defendant[] would be entitled to qualified immunity as a matter of law, assuming all factual disputes are resolved, and all reasonable inferences are drawn, in plaintiff’s favor.’” Id. at 836 (quoting Karl v. City of Mountlake Terrace, 678 F.3d 1062 , 1068 (9th Cir. 2012)). Appellants contend that they cannot be liable for retaliation because there is no evidence that either of them had any knowledge of Plaintiff/Appellee Mark Peterson’s protected First Amendment activities. The record in this case, however, certainly contains evidence that could support a fact-finder’s determination that Northern District of California, sitting by designation. 2 both Appellants did in fact have knowledge of Peterson’s protected activities. Appellants thus mischaracterize an issue of fact (namely, whether the evidence is sufficient to find that they had knowledge of Peterson’s protected activities) as an issue of law that is premised on a lack of evidence of such knowledge. Appellants’ true dispute concerns sufficiency of the evidence. We have no jurisdiction over it. DISMISSED. 3

2020-11-30 21:00:33.302991+00

https://cdn.ca9.uscourts.gov/datastore/memoranda/2020/11/30/19-17390.pdf

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS NOV 30 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT LAURA LESKINEN, No. 19-17390 Plaintiff-Appellant, D.C. No. 2:18-cv-00453-TLN-KJN v. SONNY PERDUE, in his official capacity MEMORANDUM* as the Secretary of the USDA, Defendant-Appellee, and UNITED STATES DEPARTMENT OF AGRICULTURE; CHRISTINE MESSER; CURT STOCK, Defendants. Appeal from the United States District Court for the Eastern District of California Troy L. Nunley, District Judge, Presiding Submitted November 25, 2020** San Francisco, California * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Before: O’SCANNLAIN, TROTT, and N.R. SMITH, Circuit Judges. Laura Leskinen appeals from the district court’s grant of summary judgment in favor of the Secretary of Agriculture. Because the facts are known to the parties, we repeat them only as necessary to explain our decision. I The district court correctly granted summary judgment against Leskinen’s sexual harassment claims. A Leskinen cannot prevail on her claim for quid pro quo sexual harassment because she has not identified any tangible employment action that Stock allegedly took against her as a result of her rejection of his alleged sexual advances. See Craig v. M&O Agencies, Inc., 496 F.3d 1047 , 1054 (9th Cir. 2007); Holly D. v. Cal. Inst. of Tech., 339 F.3d 1158 , 1169–71 (9th Cir. 2003). B Leskinen cannot prevail on her hostile work environment claim because she has not alleged instances of “conduct that [were] sufficiently severe or pervasive to alter the conditions of her employment and create an abusive working environment.” Campbell v. Haw. Dep’t of Educ., 892 F.3d 1005 , 1016 (9th Cir. 2018) (internal quotation marks and alteration omitted); see also Faragher v. City of Boca Raton, 524 U.S. 775 , 788 (1998) (holding that, to be actionable, the 2 alleged conduct “must be extreme” and “the sporadic use of abusive language, gender-related jokes, and occasional teasing” are not enough (internal quotation marks omitted)). C To the extent that Leskinen challenges the denial of a supposed “disparate treatment” claim on its merits, any such claim fails because she does not allege that “similarly situated individuals outside her protected class were treated more favorably,” Campbell, 892 F.3d at 1012, apart from her other harassment claims discussed above. II The district court also correctly granted summary judgment on Leskinen’s retaliation claim. Even assuming that Leskinen has established a prima facie claim of retaliation, the Secretary has produced evidence of a legitimate, non-retaliatory reason for her termination: by failing to remain at least a half-time student at her college, Leskinen was simply ineligible to continue participating in the Pathways program. See 5 C.F.R. §§ 362.202 , 362.203(b). The record evidence supports the conclusion that Messer had begun to consider whether Leskinen needed to be terminated for this reason before she received Leskinen’s “No Fear Letter.” 3  The burden thus shifts to Leskinen to show that the stated justification is pretextual. See Campbell, 892 F.3d at 1022. Summary judgment was appropriate because Leskinen failed to identify evidence in the record that could reasonably do so. See id. at 1022–23. Contrary to Leskinen’s assertions, the record does not reasonably support the conclusion that her supervisors had given their approval for her to drop below half-time status at her college or that they had promised to promote her out of the internship program once she completed 640 hours of work.1 Further, Leskinen’s mere “den[ial of] the credibility of the employer’s proffered reasons is insufficient to withstand summary judgment.” Munoz v. Mabus, 630 F.3d 856 , 865 (9th Cir. 2010). III None of Leskinen’s procedural or evidentiary objections merits reversal. A Leskinen’s argument that the practice of assigning pro se cases to magistrate judges violates the Equal Protection Clause fails because she does has not identified any authority to suggest that pro se plaintiffs are a suspect class, and the decision to refer such matters to magistrate judges is rationally related to the 1 We also note that, contrary to the suggestion in her briefing on appeal, Leskinen has not pled a claim for a breach of contract based on this supposed “pre- employment agreement” to promote her. 4 court’s legitimate interest in efficient docket management. See, e.g., Pena v. Lindley, 898 F.3d 969 , 986 (9th Cir. 2018). B Leskinen’s argument that the magistrate judge should have been disqualified for bias fails because she has not identified a pattern of conduct during the litigation that would “reveal such a high degree of favoritism or antagonism as to make fair judgment [by the magistrate judge] impossible.” Liteky v. United States, 510 U.S. 540 , 555 (1994); see also id. (“[J]udicial rulings alone almost never constitute a valid basis for a bias or partiality motion.”). C The district court did not abuse its discretion in denying Leskinen’s request for discovery because the court accepted Leskinen’s factual allegations as true— including those where she disputed the claims of key witnesses—and thus Leskinen’s hope generally to corroborate such allegations would not have affected the court’s analysis of the merits of her claims. See, e.g., Sec. & Exch. Comm’n v. Stein, 906 F.3d, 833 (9th Cir. 2018) (affirming denial of continuance to pursue discovery where movant “did not explain how additional facts would preclude summary judgment”); Maljack Prods., Inc. v. GoodTimes Home Video Corp., 81 F.3d 881 , 888 (9th Cir. 1996) (affirming denial of additional discovery where plaintiff “listed a number of facts that, even if established, would not have 5 precluded summary judgment”). Further, Leskinen’s hope to depose witnesses so that they might contradict their own declarations is not enough to demonstrate that summary judgment was premature. See Cont’l Mar. of S.F., Inc. v. Pac. Coast Metal Trades Dist. Council, 817 F.2d 1391 , 1395 (9th Cir. 1987). D To the extent Leskinen means to challenge the district court’s decision overruling several evidentiary objections she raised to the magistrate judge’s report and recommendation, such challenge fails. First, Leskinen’s reference to evidence regarding the timing of her termination does not alter the court’s conclusion on her retaliation claim, because such evidence simply supports her prima facie case for retaliation but does not reasonably show that the Department’s stated rationale for her termination was pretextual. Second, the magistrate judge’s supposed failure to strike the declaration of attorney Joseph Frueh is immaterial because both the magistrate judge and the district court afforded the declaration no weight. Finally, Leskinen’s reference to evidence relating to the administrative investigation or other actions that occurred after she was terminated are irrelevant to her claims regarding her treatment during her time with the Department, and Leskinen has not alleged a cause of action based on the supposed inadequacy of 6 the investigation itself—nor could she under Title VII, see Ward v. Equal Emp’t Opportunity Comm’n, 719 F.2d 311 , 313 (9th Cir. 1983). AFFIRMED. 7

2020-11-30 21:00:33.444823+00

https://cdn.ca9.uscourts.gov/datastore/memoranda/2020/11/30/20-55040.pdf

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS NOV 30 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT JUSTINE TANJAYA, DDS, an individual, No. 20-55040 Plaintiff-Appellant, D.C. No. 2:19-cv-02956-GW-FFM v. REGENTS OF THE UNIVERSITY OF MEMORANDUM* CALIFORNIA, an entity; et al., Defendants-Appellees. Appeal from the United States District Court for the Central District of California George H. Wu, District Judge, Presiding Submitted November 20, 2020** Pasadena, California Before: LINN,*** RAWLINSON, and HUNSAKER, Circuit Judges. Justine Tanjaya, DDS, appeals the district court’s dismissal of her Title IX retaliation and sex discrimination/hostile environment claims. Tanjaya argues that * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable Richard Linn, United States Circuit Judge for the U.S. Court of Appeals for the Federal Circuit, sitting by designation. she sufficiently alleged Title IX claims and that the district court abused its discretion by considering the Regents of the University of California’s (University) Title IX investigation report on a motion to dismiss. We have jurisdiction under 28 U.S.C. § 1291 , and we affirm. 1. Title IX Claims: The factual allegations of the complaint, taken as true and construed in the light most favorable to Tanjaya, are insufficient to support her contention that the University’s response to her Title IX claim was “deliberately indifferent to sexual harassment . . . that is so severe, pervasive, and objectively offensive that it can be said to [have] deprive[d] [Tanjaya] of access to the educational opportunities or benefits provided by the [University],” Davis ex. rel. LaShonda D. v. Monroe Cty. Bd. of Educ., 526 U.S. 629 , 650 (1999), or that the University retaliated against her because of her claim, see, e.g., Jackson v. Birmingham Bd. of Educ., 544 U.S. 167 , 174 (2005). The factual allegations in the complaint also fail to show that the University’s handling of her Title IX claim was unreasonable. Karasek v. Regents of Univ. of Cal., 956 F.3d 1093 , 1108–09 (9th Cir. 2020). Tanjaya does not allege that any sexual harassment occurred after she reported her sexual harassment claim to the University’s Title IX office.1 See Stanley v. Trs. of Cal. State Univ., 433 F.3d 1129 , 1137 (9th Cir. 2006). Nor does 1 We grant Tanjaya’s request to take judicial notice of the University’s Sexual Violence and Sexual Harassment Policy. 2 she allege sufficient facts to establish that the University itself retaliated against her or had notice of the alleged retaliation after she filed her Title IX claim. Jackson, 544 U.S. at 174 ; Gebser v. Lago Vista Indep. Sch. Dist., 524 U.S. 274 , 285 (1998); Reese v. Jefferson Sch. Dist. No. 14J, 208 F.3d 736 , 739 (9th Cir. 2000). 2. Investigation Report: Even if the district court erred by considering the investigation report, reversal on that ground is unwarranted. The Second Amended Complaint’s failure to allege facts sufficient to support Tanjaya’s three Title IX causes of action independently supports the district court’s dismissal. Therefore, the district court’s review of the report did not prejudice Tanjaya. Estate of Barabin v. AstenJohnson, Inc., 740 F.3d 457 , 462 (9th Cir. 2014) (en banc) (quoting Grand Canyon Skywalk Dev., LLC v. 'Sa' Nyu Wa Inc., 715 F.3d 1196 , 1202 (9th Cir.2013)) (stating “[a] district court’s evidentiary rulings should not be reversed absent clear abuse of discretion and some prejudice”) overruled on other grounds in United States v. Bacon, No. 18-50120, ___ F.3d ___, 2020 WL 6498258 (9th Cir. Nov. 5, 2020) (en banc). AFFIRMED. 3

2020-11-30 21:00:33.737365+00

https://cdn.ca9.uscourts.gov/datastore/memoranda/2020/11/30/20-55143.pdf

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS NOV 30 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT DWAYNE RUSSELL CONYERS, No. 20-55143 Plaintiff-Appellant, D.C. No. 3:17-cv-00127-LAB-AHG v. MICHAEL RODDY, Corporal, Deputy MEMORANDUM* Sheriff (#0904); DOES, 1-10, Defendants-Appellees, and RODRIGUEZ, Corporal, San Diego Sheriff's Dept.; et al., Defendants. Appeal from the United States District Court for the Southern District of California Larry A. Burns, Chief District Judge, Presiding Submitted November 25, 2020** San Francisco, California Before: O’SCANNLAIN, TROTT, and N.R. SMITH, Circuit Judges. * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2).  Conyers appeals from the district court’s grant of summary judgment in favor of Corporal Michael Roddy on Conyers’s 42 U.S.C. § 1983 claims. Because the facts are known to the parties, we repeat them only as necessary to explain our decision. I Conyers’s attorney’s failure to call attention to the alleged mishandling of the hospital bed sheets evidencing the alleged sexual assault does not suggest an error by the district court in granting summary judgment. “Ineffective assistance of counsel” is not a cognizable basis for appeal in a civil case. See Nicholson v. Rushen, 767 F.2d 1426 , 1427 (9th Cir. 1985) (per curiam). In any event, the district court considered Conyers’s arguments that the hospital bed sheets were somehow spoliated, and that one of the sheets was never sent for testing, and properly concluded that they were meritless. The record confirms that both sheets were seized at the hospital, stored by a detective, photographed and processed, and then transferred to the Sherriff’s Department’s evidence unit, where they were kept until they were sent for forensic testing. The record further confirms that the testing company received both sheets and that the sheets tested negative for semen. Accordingly, the district court properly considered Corporal Roddy’s forensic evidence at summary judgment. 2  II The district court did not err in concluding that Conyers’s declaration failed to create a genuine factual issue for trial on his sexual assault allegations. “The general rule in the Ninth Circuit is that a party cannot create an issue of fact by an affidavit contradicting his prior deposition testimony.” Yeager v. Bowlin, 693 F.3d 1076 , 1080 (9th Cir. 2012). At his deposition, Conyers admitted that he may have reported to others at the hospital that he had been raped. Indeed, there is an audio recording in the record of him making such an accusation. In his declaration, however, Conyers denies making any accusations of rape and states that any witness who says otherwise is lying. On this record, the district court did not err in concluding that Conyers’s declaration was a sham, and that it was unavailable to contest the extensive evidence placed in the record by Corporal Roddy indicating that Conyers’s allegations of assault were the product of drug-induced hallucination. III Conyers’s assertion that his attorney failed to obtain a video recording from the hospital that showed the alleged sexual assault does not suggest an error by the district court. As mentioned above, “ineffective assistance of counsel” is not a cognizable basis for appeal in a civil case. See Nicholson, 767 F.2d at 1427 . 3  Moreover, Conyers did not present his argument regarding the availability of purported video recordings of the alleged sexual assault to the district court in the summary judgment briefing. Accordingly, he cannot present it for the first time on appeal. See Scott v. Ross, 140 F.3d 1275 , 1283 (9th Cir. 1998). Even if Conyers did not forfeit this argument, there is evidence in the record that no such video recording exists. The declaration of the Clinical Nurse Manager at Tri-City Medical Center indicates that the hospital monitors patient rooms via live video feed, but the footage is never recorded. Accordingly, Conyers’s argument on this point is meritless and does not suffice to create a genuine factual issue for trial.1 AFFIRMED. 1 Because Conyers’s appeal raises no issues that warrant further briefing or oral argument, his motion for appointment of counsel is DENIED. 4

2020-11-30 21:00:33.853166+00

https://cdn.ca9.uscourts.gov/datastore/memoranda/2020/11/30/18-56680.pdf

FILED NOT FOR PUBLICATION NOV 30 2020 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT DAVID GONZALES LARA, No. 18-56680 Petitioner-Appellant, D.C. No. 5:17-cv-01286-AG-RAO v. CHARLES CALLAHAN, MEMORANDUM* Respondent-Appellee. Appeal from the United States District Court for the Central District of California Andrew J. Guilford, District Judge, Presiding Submitted November 16, 2020** Pasadena, California Before: RAWLINSON and HUNSAKER, Circuit Judges, and ENGLAND,*** District Judge. * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable Morrison C. England, Jr., United States District Judge for the Eastern District of California, sitting by designation.  David Gonzales Lara (Lara) appeals the denial of his habeas petition, in which he argued that the California appellate court1 erred in holding that the admission at trial of two jailhouse calls made by his brother James Lara (James), a non-testifying co-defendant, did not violate the Confrontation Clause. We affirm. Our review of a district court’s order denying an application for habeas relief is de novo. See Castellanos v. Small, 766 F.3d 1137 , 1145 (9th Cir. 2014). The deference required by the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), however, limits this Court’s review. See id. Under the AEDPA, habeas relief is warranted only if the state court adjudication: (1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States; or (2) resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding. 28 U.S.C. § 2254 (d). The Sixth Amendment Confrontation Clause covers only “testimonial 1 When, as here, a state supreme court summarily denies discretionary review, we “‘look through’ that unexplained decision to the last state court to have provided a ‘reasoned’ decision.” Castellanos v. Small, 766 F.3d 1137 , 1145 (9th Cir. 2014). In this case, the parties agree that the California appellate court provided the last reasoned decision. 2 codefendant statements.” Lucero v. Holland, 902 F.3d 979 , 988 (9th Cir. 2018). In Crawford v. Washington, 541 U.S. 36 (2004), the United States Supreme Court did not define “testimonial,” but outlined a “core class of testimonial statements.” Lucero, 902 F.3d at 988–89. Pertinent here are those “statements that were made under circumstances which would lead an objective witness reasonably to believe that the statement would be available for use at a later trial.” Id. at 989 (citation omitted). The Supreme Court further elucidated the borders of testimonial evidence through application of the “primary purpose” test. Id. (citing Ohio v. Clark, 576 U.S. 237 , 244 (2015)). Specifically, “a statement cannot fall within the Confrontation Clause unless its primary purpose was testimonial.” Ohio, 576 U.S. at 245. The central question under that test “is whether, in light of all the circumstances, viewed objectively, the ‘primary purpose’ of the conversation was to ‘create an out-of-court substitute for trial testimony.’” Id. (citation and alteration omitted). The California appellate court’s conclusion that James’s statements were not testimonial was not “objectively unreasonable.” Cook v. Kernan, 948 F.3d 952 , 965 (9th Cir. 2020) (citation omitted). Crawford drew a distinction between “[a]n accuser who makes a formal statement to government officers” and “a person who 3 makes a casual remark to an acquaintance.” Delgadillo v. Woodford, 527 F.3d 919 , 927 (9th Cir. 2008) (quoting Crawford, 541 U.S. at 51 ). The former bears testimony; the latter does not. See id. James’ statements were made during telephone conversations with his mother and with an acquaintance, unprompted by police. The conversations were casual and for purposes other than providing testimony. More specifically, the call between James and his mother was primarily to discuss Lara’s mental health and address the mother’s accusations that James was leading Lara down the wrong path. James openly implicated himself as a participant in the event at issue, making it unlikely that he anticipated the statements would be introduced at trial. Similarly, the conversation with the friend was primarily about summarizing the charges against both brothers, and James again incriminated himself in the process. Finally, any error by the California appellate court was harmless. See United States v. Allen, 425 F.3d 1231 , 1235 (9th Cir. 2005) (citation omitted) (“Confrontation Clause violations are also subject to harmless error analysis.”). As the California appellate court explained, the victim identified Lara at trial and testified that James was Lara’s aider and abettor, which James admitted in both calls. See People v. Lara, No. G048951, 2016 WL 7439031 , at *4 (Cal. Ct. App. 4 Dec. 27, 2016). This overwhelming evidence of guilt negated any prejudice to Lara from admission of the challenged evidence. See Allen, 425 F.3d at 1235 . AFFIRMED. 5

2020-11-30 21:00:40.950908+00

http://media.ca11.uscourts.gov/opinions/unpub/files/201714101.pdf

USCA11 Case: 17-14101 Date Filed: 11/30/2020 Page: 1 of 7 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ________________________ No. 17-14101 ________________________ D.C. Docket Nos. 3:16-cv-00823-HES-JBT; 3:02-cr-00058-HES-JBT-1 ELLIOT KEITH ANDERSON, Petitioner – Appellant, versus UNITED STATES OF AMERICA, Respondent – Appellee. ________________________ Appeal from the United States District Court for the Middle District of Florida ________________________ (November 30, 2020) Before MARTIN, LUCK, and BRASHER, Circuit Judges. MARTIN, Circuit Judge: Elliot Keith Anderson appeals from a final district court order denying his 28 U.S.C. § 2255 motion. He was sentenced in 2003 under the terms of the Armed  USCA11 Case: 17-14101 Date Filed: 11/30/2020 Page: 2 of 7 Career Criminal Act (“ACCA”), 18 U.S.C. § 924 (e), resulting in a lengthier term of imprisonment and supervised release. The sentencing court determined that Mr. Anderson had three convictions that qualified him for the longer ACCA sentence. In this § 2255 motion, Mr. Anderson argues that the application of the ACCA in arriving at his sentence was unlawful in light of the Supreme Court’s invalidation of the residual clause in Johnson v. United States, 576 U.S. 591 , 135 S. Ct. 2551 (2015). He argues that the sentencing court relied on the now-invalid residual clause in determining that he had three qualifying predicate offenses. After careful consideration, and with the benefit of oral argument, we vacate and remand to the District Court for further consideration of the § 2255 motion in light of this circuit’s decisions in Beeman v. United States, 871 F.3d 1215 (11th Cir. 2017), and Tribue v. United States, 929 F.3d 1326 (11th Cir. 2019). I. Mr. Anderson was charged in 2002 with being a felon in possession of a firearm. The indictment listed three prior Florida convictions for aggravated battery, strong arm robbery, and battery on commitment facility staff. Citing those three prior convictions, the government filed a notice of intent to seek a longer sentence under the ACCA. A jury convicted Mr. Anderson of being a felon in possession of a firearm. Thus, in 2003, Mr. Anderson was given a longer sentence 2  USCA11 Case: 17-14101 Date Filed: 11/30/2020 Page: 3 of 7 under the ACCA. He was sentenced to 210 months’ imprisonment and 5 years’ supervised release. After filing a § 2255 motion in 2005 on issues not relevant to this appeal, Mr. Anderson received leave from a panel of this Court to file a second or successive § 2255 motion based on the new substantive rule announced in Johnson, 576 U.S. at 597, 135 S. Ct. at 2557 . In this second § 2255 motion, Mr. Anderson argued that, after Johnson’s invalidation of the ACCA’s residual clause, he no longer had the three violent felonies required for an enhanced sentence under the ACCA. Specifically, he argued that the battery-on-commitment-facility-staff conviction was no longer a qualifying predicate offense. He also asserted his disagreement with circuit precedent as to the two other violent felonies identified in the indictment, robbery and aggravated battery. The government did not argue below that the battery-on-commitment- facility-staff conviction qualifies as an ACCA predicate. Instead, the government argued that a different offense not identified in the indictment could serve as the third violent felony: Mr. Anderson’s juvenile delinquency for aggravated assault. In denying the § 2255 motion, the District Court found that Mr. Anderson had three qualifying ACCA violent felonies: the robbery and aggravated battery convictions and juvenile delinquency for aggravated assault. In keeping with the 3  USCA11 Case: 17-14101 Date Filed: 11/30/2020 Page: 4 of 7 government’s approach, the court did not address whether the battery-on- commitment-facility-staff conviction qualified. Mr. Anderson appealed. The District Court granted a certificate of appealability, recognizing that the juvenile delinquency it relied on may no longer be a valid ACCA predicate due to the Supreme Court’s ruling in Descamps v. United States, 570 U.S. 254 , 133 S. Ct. 2276 (2013), which was decided after it had imposed sentence on Mr. Anderson. II. In a proceeding on a § 2255 motion, this Court reviews the district court’s factual findings for clear error and the legal issues de novo, see Lynn v. United States, 365 F.3d 1225 , 1232 (11th Cir. 2004) (per curiam), including the legal question of whether a conviction constitutes an ACCA violent felony, see United States v. Braun, 801 F.3d 1301 , 1303 (11th Cir. 2015). III. The ACCA requires a 15-year mandatory minimum sentence for defendants convicted under § 922(g) who have three prior convictions for a violent felony or serious drug offense or both. 18 U.S.C. § 924 (e)(l). A “violent felony” is: any crime punishable by imprisonment for a term exceeding one year, or any act of juvenile delinquency involving the use or carrying of a firearm, knife, or destructive device that would be punishable by imprisonment for such term if committed by an adult, that— 4  USCA11 Case: 17-14101 Date Filed: 11/30/2020 Page: 5 of 7 (i) has as an element the use, attempted use, or threatened use of physical force against the person of another; or (ii) is burglary, arson, or extortion, involves use of explosives, or otherwise involves conduct that presents a serious potential risk of physical injury to another. Id. § 924(e)(2)(B). “[T]he term ‘conviction’ includes a finding that a person has committed an act of juvenile delinquency involving a violent felony.” Id. § 924(e)(2)(C). The first prong of the violent felony definition is sometimes referred to as the “elements clause,” while the second prong contains both the “enumerated crimes” clause (“is burglary, arson, or extortion, involves use of explosives”) and what is commonly called the “residual clause” (“or otherwise involves conduct that presents a serious potential risk of physical injury to another”). United States v. Owens, 672 F.3d 966 , 968 (11th Cir. 2012). The Supreme Court held in Johnson that the residual clause was unconstitutionally vague. 576 U.S. at 597, 135 S. Ct. at 2557 . In Welch v. United States, 578 U.S. ___, 136 S. Ct. 1257 (2016), the Supreme Court made this substantive rule retroactively applicable to cases on collateral review. Id. at 1268 . A year later, this circuit ruled that “[o]nly if the movant would not have been sentenced as an armed career criminal absent the existence of the residual clause is there a Johnson violation.” Beeman, 871 F.3d at 1221. “[L]ike any other § 2255 5  USCA11 Case: 17-14101 Date Filed: 11/30/2020 Page: 6 of 7 movant, a Johnson § 2255 claimant must prove his claim.” Id. In order to carry this burden, the “movant must prove two things: (1) that ‘the sentencing court relied solely on the residual clause, as opposed to also or solely relying on either the enumerated offenses clause or elements clause,’ and (2) that ‘there were not at least three other prior convictions that could have qualified under either of those two clauses as a violent felony, or as a serious drug offense.’” Tribue, 929 F.3d at 1331. Beyond this, as to the first requirement, Beeman instructs that the inquiry must focus not on whether the prior convictions would qualify as ACCA predicates today, but rather whether, as a matter of “historical fact,” the movant was “sentenced solely per the residual clause.” Beeman, 871 F.3d at 1224 n.5. The movant carries the burden of showing that it was “more likely than not” that the sentencing court actually relied on the now-invalidated residual clause. Id. at 1221–22. Here, the District Court decided Mr. Anderson’s § 2255 motion without the benefit of this Court’s decision in Beeman, 871 F.3d at 1221–22, and Tribue, 929 F.3d at 1332 (holding that the government does not waive reliance on use of convictions outside of those identified in the presentence investigation report as ACCA predicates). Thus we remand this case so that the District Court may do the Beeman and Tribue analyses in the first instance. See United States v. Pickett, 916 6  USCA11 Case: 17-14101 Date Filed: 11/30/2020 Page: 7 of 7 F.3d 960 , 967 (11th Cir. 2019) (remanding in light of Beeman); Schumann v. Collier Anesthesia, P.A., 803 F.3d 1199 , 1203 (11th Cir. 2015) (remanding after this Court adopted a new legal test “[t]o allow the district court to apply this test in the first instance and, if the district court desires, to give the parties an opportunity to further develop the record to address the components of the test”). Because we remand the case to the judge who sentenced Mr. Anderson, the District Court is in a better position to evaluate what likely happened at the sentencing in 2003. We vacate and remand for further proceedings consistent with this opinion. VACATED AND REMANDED. 7

2020-11-30 21:02:40.318559+00

https://www.courts.ca.gov/opinions/nonpub/B302774.PDF

Filed 11/30/20 P. ex rel. Tonti v. Living Rebos CA2/1 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION ONE THE PEOPLE ex rel. ALISON B302774 TONTI, (Los Angeles County Plaintiff and Appellant, Super. Ct. No. BC674091) v. LIVING REBOS, LLC, et al., Defendants and Respondents. APPEAL from orders of the Superior Court of Los Angeles County, Michael P. Linfield, Judge. Affirmed in part, reversed in part with instructions. Medvei Law Group and Sebastian M. Medvei for Plaintiff and Appellant People ex rel. Alison Tonti. Kirkland & Ellis, Sierra Elizabeth and James R.P. Hileman for Defendant and Respondent Avee Laboratories, Inc. No appearance for Defendants and Respondents Living Rebos, LLC, M-Brace Treatment, Inc., Millennium Health, LLC, Sobertec, LLC, and Upfront Labs, LLC.  Plaintiff and appellant Alison Tonti appeals the awards of costs to defendants. Two of the defendants prevailed on summary judgment motions; the remainder were abruptly dismissed with prejudice by Tonti days before their motions were set to be heard. The court awarded costs to all defendants. We conclude that Government Code section 69950 limits the recoverable transcription fees charged by the pro tempore court reporter retained by defendant Millenium Health, LLC to transcribe its summary judgment hearing, and that the court erred in awarding costs above that statutory amount. In all other respects, we affirm. BACKGROUND The underlying facts and procedural history of this qui tam lawsuit are described in detail in our earlier opinion, People ex rel. Tonti v. Living Rebos, LLC et al. (Aug. 12, 2020, B295815) [nonpub. opn.] (Tonti I). While the Tonti I appeal was pending, the two defendants whose summary judgments had been granted—namely, Millenium Health, LLC and Avee Laboratories, Inc.—submitted cost bills to the trial court. The remaining defendants with summary judgment motions pending at the time of the dismissal of the entire case—namely, Living Rebos, LLC, M-Brace Treatment, Inc., Sobertec, LLC, and Upfront Labs, LLC—also submitted cost bills to the trial court. Plaintiff filed motions to tax costs addressed to all four of the cost bills. All defendants filed written oppositions to the motions to tax costs, and plaintiff filed written replies. 2  The court awarded costs as follows: Defendant(s) Request Amt. Taxed Net Award Millenium $4,298.53 $66.50 $4,232.03 Health Living Rebos/ $8,923.82 $1,516.31 $7,407.51 M Brace Sobertec/Upfront $3,474.80 $0.00 $3,474.80 Avee Labs $10,878.64 $4,819.15 $6,059.49 Plaintiff timely appealed these orders. DISCUSSION I. Standard of Review Pursuant to Code of Civil Procedure1 section 1032, subdivision (b), “a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.” Plaintiff has not challenged the status of the above defendants as prevailing parties for purposes of the cost awards at issue.2 “ ‘[S]ection 1033.5 sets forth the items that are and are not allowable as the costs recoverable by a prevailing party under section 1032[.]’ (Chaaban v. Wet Seal, Inc. (2012) 1 Unless otherwise noted, all statutory references are to the Code of Civil Procedure. 2 On August 12, 2020, plaintiff filed a motion for summary reversal based on this court’s decision setting aside plaintiff ’s unauthorized dismissal in Tonti I. This motion was denied on September 24, 2020. Plaintiff renewed the same arguments in a request for judicial notice filed on October 22, 2020. This request is likewise denied. All parties to whom costs were awarded were prevailing parties as of the time of the awards. 3  203 Cal.App.4th 49 , 52 . . . .) Specifically, section 1033.5, subdivision (a) enumerates the items that are allowable as costs, while subdivision (b) lists the items for which costs may not be recovered. (§ 1033.5, subds. (a) & (b).) Under section 1033.5, subdivision (c)(4), however, cost items that are neither permitted under subdivision (a) nor prohibited under subdivision (b) may nevertheless be ‘allowed or denied in the court’s discretion.’ (§ 1033.5, subd. (c)(4); see also Applegate v. St. Francis Lutheran Church (1994) 23 Cal.App.4th 361 , 363–364 . . . .) All costs awarded, whether expressly permitted under subdivision (a) or awardable in the trial court’s discretion under subdivision (c), must be ‘reasonably necessary to the conduct of the litigation’ and be ‘reasonable in amount.’ (§ 1033.5, subds. (c)(2) & (3).) “ ‘Generally, the standard of review of an award of costs is whether the trial court abused its discretion in making the award. [Citation.] However, when the issue to be determined is whether the criteria for an award of costs have been satisfied, and that issue requires statutory construction, it presents a question of law requiring de novo review. [Citation.]’ (Berkeley Cement, Inc. v. Regents of University of California (2019) 30 Cal.App.5th 1133 , 1139 . . . .) ‘ “ ‘The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason.’ . . .’ ” [Citations.]’ (Brawley v. J.C. Interiors, Inc. (2008) 161 Cal.App.4th 1126 , 1137–1138 . . . .)” (Segal v. Asics America Corp. (2020) 50 Cal.App.5th 659 , 664-665, italics added.) Verification of the memorandum of costs by the prevailing party’s attorney establishes a prima facie showing that the claimed costs are proper. (Jones v. Dumrichob (1998) 63 Cal.App.4th 1258 , 1267.) “There is no requirement that copies of bills, invoices, statements, or any other such documents 4 be attached to the memorandum.” (Ibid.) To overcome this prima facie showing, the objecting party must introduce evidence to support his claim that the costs are not reasonably necessary or are not reasonable in amount. Mere conclusory assertions are insufficient to rebut a prima facie showing by the prevailing party. (Rappenecker v. Sea-Land Service, Inc. (1979) 93 Cal.App.3d 256 , 266.) Although all defendants filed written oppositions to plaintiff ’s motions to tax costs, only defendant Avee Laboratories, Inc. has filed a respondent’s brief in this appeal. “[F]ailure to file a respondent’s brief does not mandate automatic reversal, however. Instead, we examine the record and reverse only if prejudicial error is found. (Cal. Rules of Court, rule 8.220(a), (b); Estate of Supeck (1990) 225 Cal.App.3d 360 , 365 . . . .)” (Petrosyan v. Prince Corp. (2013) 223 Cal.App.4th 587 , 593, fn. 2.) II. The Costs at Issue A. Deposition Costs Plaintiff has challenged the trial court’s award of deposition costs as to all defendants. Below is a summary of the trial court’s awards in this category: Defendant(s) Request Amt. Taxed Net Award Millenium $2,143.74 $0.00 $2,143.74 Health Living Rebos/ $2,320.00 $0.00 $2,320.00 M-Brace Sobertec/Upfront $1,006.30 $0.00 $1,006.30 Avee Labs $4,493.95 $1,853.20 $2,640.75 5  Section 1033.5, subdivision (a)(3)(A) provides that costs for “[t]aking, video recording, and transcribing necessary depositions” are allowable, as are travel expenses to attend depositions. These costs all relate to the cost of transcripts of plaintiff ’s deposition, which each of the four defendant groups ordered. Plaintiff contends that once a single defendant has paid for the cost of reporting the deposition, the remaining defendants have no obligation to pay for their own certified copies of the transcripts or recordings. We disagree. Plaintiff cites no authority for this proposition, and plaintiff ’s contention is contrary to the regulations under which deposition reporters operate.3 The record indicates that each defendant group ordered copies of the deposition to support their motions for summary judgment. Thus, they were reasonably necessary for the conduct of the defense. Nor do the costs appear to be excessive. Plaintiff further argues that the reporting of this deposition should have been subject to the limited transcription fees for official court reporters set forth in Government Code section 69950. But “[s]ections 69950 and 69954 regulate only transcription fees for proceedings in the superior court. The statutes do not prevent a private reporter from charging contract rates for court appearances and costs incurred while serving as an official reporter pro tempore or for producing deposition 3 California Code of Regulations, title 16, section 2403, subdivision (b)(9) and (10) provide that the deposition reporter must “promptly transmit[ ] [the deposition transcript] to the attorney for the party who noticed the deposition” and “mak[e] a transcript of [the] deposition testimony available to any party requesting a copy, on payment of a reasonable charge.” 6 transcripts.” (Burd v. Barkley Court Reporters, Inc. (2017) 17 Cal.App.5th 1037 , 1050 (Burd), italics added.) B. Filing and Motion Fees Plaintiff has challenged the trial court’s award of filing and motion fees as to all defendants. Below is a summary of the trial court’s awards in this category: Defendant(s) Request Amt. Taxed Net Award Millenium $1,520.14 $0.00 $1,520.14 Health Living Rebos/ $4,913.16 $61.65 $4,851.51 M-Brace Sobertec/Upfront $2,170.00 $0.00 $2,170.00 Avee Labs $4,605.84 $1,224.20 $3,381.64 Pursuant to section 1033.5, subdivision (a)(l), filing and motion fees are allowable costs, and under section 1033.5, subdivision (c), related expenses that are “reasonably necessary” to the conduct of the litigation are allowable in the court’s discretion. Plaintiff’s principal objection to all the costs claimed by the various defendant groups is that, except for Avee Laboratories, these defendants did not submit detailed invoices or other records showing that these amounts were actually incurred. But such an objection, essentially stating that the opposing party does not believe that the costs were actually incurred, is not sufficient to shift such burden to the parties claiming costs. “[T]he mere filing of a motion to tax costs may be a ‘proper objection’ to an item, the necessity of which appears doubtful, or which does not appear to be proper on its face. (See Oak Grove School Dist. v. City Title 7 Ins. Co. (1963) 217 Cal.App.2d 678 , 698–699 . . . .) However, ‘[i]f the items appear to be proper charges, the verified memorandum is prima facie evidence that the costs, expenses and services therein listed were necessarily incurred by the defendant [citations], and the burden of showing that an item is not properly chargeable or is unreasonable is upon the [objecting party].’ (Id. at p. 699 . . . .)” (Nelson v. Anderson (1999) 72 Cal.App.4th 111 , 131.) Here, all the categories of charges were properly recoverable under section 1033.5 and supported by declarations of the respective attorneys. Thus, defendants met their burden to support recovery of their costs. The plaintiff ’s mere objection that the costs were not actually incurred or were excessive was insufficient to meet her burden or to shift the burden to the defendants to further support their requests.4 C. Reporter Pro Tempore Cost Millenium Health arranged for a private reporter to report the court hearing on its summary judgment motion. The reporter was appointed as an official court reporter pro tempore pursuant to Government Code sections 68086 and 70044 and rule 2.956 of the California Rules of Court. The trial court approved reimbursement to Millenium Health of $568.15 for this privately retained reporter. Plaintiff asserts that the trial court should not have awarded more than the statutory rate for official court reporters set forth in Government Code section 69950, and that $568.15 is in excess of 4 Avee has agreed on appeal to reduce its claim in this category by $66.60 to account for possible duplication of charges. 8 the amount authorized by that section.5 Plaintiff is correct as to the law. As noted above, Government Code section 69950 regulates costs for the transcription of superior court proceedings, a category into which a summary judgment hearing falls. In Burd, supra, 17 Cal.App.5th 1037 , the court concluded that “[t]he plain language of [Government Code] sections 69950 and 69954 apply the statutory transcription rates to reporters serving as official reporters or as official reporters pro tempore in the superior courts, regardless of whether they are employed by the court or privately retained by a party.” (Id. at pp. 1050–1051, italics added; see id. at p. 1047 [the Legislature intended “to apply statutory transcription rates to official reporters pro tempore generally, whether employed by the court or privately retained by a party”].) Thus, plaintiff is correct that the reporter pro tempore allowable cost is limited by the fee schedule set forth in Government Code section 69950.6 5 Government Code section 69950, subdivision (a), provides: “The fee for transcription for original ribbon or printed copy is eighty-five cents ($0.85) for each 100 words, and for each copy purchased at the same time by the court, party, or other person purchasing the original, fifteen cents ($0.15) for each 100 words.” 6 Dicta in a case predating Burd—Urban Pacific Equities Corp. v. Superior Court (1997) 59 Cal.App.4th 688 (Urban Pacific)—notes that “[a]lthough the fees charged by court-retained reporters are fixed by statute (Gov. Code, §§ 69947, 69948, 69950), there is no statute regulating the fees charged by private reporting firms, and deposition reporters are free to charge all the market will bear.” (Urban Pacific, supra, at pp. 691–692.) But Urban Pacific dealt with deposition transcription services, to which, as noted, Government Code section 69950 does not apply. 9  Accordingly, the costs for this transcript should have been taxed to the amount computed under Government Code section 69950, subdivision (a). DISPOSITION The award for the pro tempore court reporter costs to Millenium Health is reversed and the trial court is instructed to tax those costs in accordance with the applicable rates set forth in Government Code section 69950, subdivision (a). In all other respects the awards are affirmed. All parties shall bear their own costs on appeal. NOT TO BE PUBLISHED. ROTHSCHILD, P. J. We concur: CHANEY J. BENDIX, J. 10

2020-11-30 21:02:41.313257+00

https://www.courts.ca.gov/opinions/nonpub/B305504.PDF

Filed 11/30/20 In re Z.R. CA2/3 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION THREE In re Z.R., a Person Coming B305504 Under the Juvenile Court Law. LOS ANGELES COUNTY (Los Angeles County DEPARTMENT OF Super. Ct. CHILDREN AND FAMILY No. 19CCJP020307A) SERVICES, Plaintiff and Respondent, v. ANITA H., Defendant and Appellant. APPEAL from an order of the Superior Court of Los Angeles County, Kim L. Nguyen, Judge. Affirmed. Amy Z. Tobin, under appointment by the Court of Appeal, for Defendant and Appellant.  Mary C. Wickham, County Counsel, Kim Nemoy, Assistant County Counsel, and Brian Mahler, Deputy County Counsel, for Plaintiff and Respondent. _________________________ Anita H. (mother) appeals from the order of the juvenile court terminating its jurisdiction over her son Z.R. pursuant to Welfare and Institutions Code1 section 364. She contends that the court proceeded under the incorrect statute at the six-month review hearing and that in any event the evidence does not support the findings. We affirm. BACKGROUND Z.H. was age 10 and living with his mother at the time they came to the attention of the Department of Children and Family Services (DCFS) because of unsafe and unsanitary living conditions. The two lived in a trash-filled hotel room and shared a bed. During its investigation, DCFS discovered that the child was malnourished. He was extremely underweight and had very little body mass. Z.H. was not receiving medical care at the time, but once doctors examined him, they suspected that malnutrition had affected the child’s growth. Z.H. was isolated because, although he claimed he was home schooled, he was actually spending most of his day “looking at memes online.” Further, mother tried to interfere with the child’s contact with father. Mother appeared to be trying to fulfill her unmet emotional needs through the child by confiding in, and seeking validation from, him. Z.H. wore a diaper, displayed severe anxiety and withdrawal, and feared father. DCFS filed a section 300 petition. 1 All further statutory references are to the Welfare and Institutions Code. 2  The juvenile court detained Z.H. from mother and released him to father. On July 19, 2019, mother pleaded no contest to two counts in the first amended petition alleging Z.H.’s malnutrition, medical neglect (§ 300, subd. (b)(1)), mother’s interference with the child’s relationship with father, and her emotional manipulation of Z.H., causing the child to suffer serious emotional damage (§ 300, subd. (c)). Father was nonoffending because the court dismissed the petition’s counts naming him. The court removed the child from mother’s custody (§ 361, subd. (c)), and ordered him placed with father. The court ordered enhancement services for mother, involving parenting classes and conjoint and individual counseling, and family maintenance services for father. At the close of the contested six-month review hearing held in March 2020, the juvenile court found “that those conditions which would justify the initial assumption of jurisdiction under . . . Section 300 no longer exist and are not likely to exist if supervision is withdrawn and the Court terminates jurisdiction with a juvenile custody order awarding joint legal custody of minor to parents and sole physical custody of minor to father.” Mother received monitored visitation for two hours twice weekly and monitored telephone calls twice weekly. The court stayed termination pending receipt of the custody order. The ensuing exit order filed with the termination order on March 20, 2020 specified that mother’s “monitor shall be mutually agreed upon, monitor selected by the father or the mother to incur the cost of paid professional monitor.” Mother appealed. 3  DISCUSSION I. The statutory framework Mother first contends that the juvenile court erred by proceeding under section 364 rather than under section 366.21. A. The custody and disposition orders When the juvenile court removes a dependent child from the custody of the parent with whom the child is living, the court determines “whether there is a parent of the child, with whom the child was not residing at the time that the events or conditions arose that brought the child within the provisions of Section 300, who desires to assume custody of the child. If that parent requests custody, the court shall place the child with the parent” unless it finds that such a placement would be detrimental to the child. (§ 361.2, subd. (a).) If the court places the child with the noncustodial parent, it “may terminate its jurisdiction over the child (§ 361.2, subd. (b)(1)), maintain jurisdiction pending a home visit (§ 361.2, subd. (b)(2)), or maintain jurisdiction with court supervision (§ 361.2, subd. (b)(3)). ‘In enacting subdivisions (a) and (b) of section 361.2, the Legislature envisioned a two-step process: under subdivision (a), the court examines whether it would be detrimental to temporarily place a child with the nonoffending noncustodial parent; under subdivision (b), the court decides whether that placement should become permanent and whether the court’s jurisdiction should be terminated.’ ” (In re Liam L. (2015) 240 Cal.App.4th 1068 , 1081.) If the juvenile court places a dependent child with the previously noncustodial parent and opts to maintain jurisdiction with court supervision under section 361.2, subdivision (b)(3), it 4 has three choices regarding services. First, it “may order that reunification services be provided to the parent or guardian from whom the child is being removed.” (§ 361.2, subd. (b)(3).) Second, “the court may order that services be provided solely to the parent who is assuming physical custody in order to allow that parent to retain later custody without court supervision.” (§ 361.2, subd. (b)(3), italics added.) Third, the court may order “that services be provided to both parents, in which case the court shall determine, at review hearings held pursuant to Section 366, which parent, if either, shall have custody of the child.” (§ 361.2, subd. (b)(3).) “The decision whether to provide services and to which parent is discretionary to the court because the child is not out of the home, but in placement with a parent.” (In re Gabriel L. (2009) 172 Cal.App.4th 644 , 651.) Mother’s brief is centered on her belief that, because the court awarded her enhancement services, it was proceeding under the third service-related choice, namely that if services are provided to both parents, the court must assess at the section 366 hearing which parent will have custody. (§ 361.2, subd. (b)(3).) For example, mother argues that a “parent’s level of participation in services are valid and relevant considerations when the juvenile court is reviewing a section 361.2 placement to consider which parent should have custody and whether further court supervision is warranted.” However, we conclude that the court opted for the second service-related choice. The reason is that the juvenile court removed Z.H. from the custody of mother, with whom he had been living, and placed him with father under its supervision and so the child was not placed out of the home. As the disposition plan shows, the court ordered 5 enhancement services for mother.2 However, unlike reunification services, which are designed to “ ‘facilitate the return of a dependent child to parental custody’ ” (In re Jaden E. (2014) 229 Cal.App.4th 1277 , 1281) or maintenance services, whose purpose is to “maintain the child in his or her own home” (§ 16506), enhancement services are “not designed to reunify the child with the parent, but instead to enhance the child’s relationship with that parent by requiring the parent to address the issues that brought the child before the court” (1 Seiser & Kumli, Cal. Juvenile Courts Practice and Procedure (2020) § 2.129, italics added; see Earl L. v. Superior Court (2011) 199 Cal.App.4th 1490 , 1497, fn. 1; In re A.C. (2008) 169 Cal.App.4th 636 , 642, fn. 5). Mother did not challenge any part of the disposition order and so it is final. It follows from the disposition order that awarded services designed to enable father only to maintain custody while arranging for mother simply to enhance her relationship with Z.H. (see § 361.2, subds. (a) & (b)(3)), that the court proceeded under the second service-related choice and assessed whether father could retain later custody without court supervision (see § 361.2, subd. (b)(3)). The court never intended to consider whether to give mother custody pursuant to the third service- 2 Although the disposition minute order directed DCFS to “Provide Family Maintenance Services to the minor and parents,” the order also stated that the “disposition case plan is . . . incorporated herein.” On the incorporated case plan, the juvenile court specifically inked in the word, enhancement before court ordered case plan, demonstrating that with specific reference to mother, the court intended that the services she receive be for enhancement and not reunification or maintenance. 6 related choice or it would have awarded mother reunification services. B. The six-month review and order terminating jurisdiction “ ‘If a child has been declared a dependent of the juvenile court and placed under court supervision, the status of the child must be reviewed every six months.’ [Citation.] The applicable standards at the six-month review hearing differ depending on the child’s placement.” (In re Maya L. (2014) 232 Cal.App.4th 81 , 98.) Generally, however, the custodial parent has the opportunity to regain physical custody of the child at each review hearing. (In re Liam L., supra, 240 Cal.App.4th at p. 1081.) Section 366.21, subdivision (e)(6) governs instances where the child has been “placed under court supervision with a previously noncustodial parent pursuant to Section 361.2.” In contrast, section 364, subdivision (a) applies when “the child is not removed from the physical custody of his or her parent or guardian.” (Italics added.) As the juvenile court placed Z.H. with the previously noncustodial parent under section 361.2, subdivision (a), and neither returned the child to mother’s custody nor awarded the parents shared custody, the governing statute at the six-month review hearing was section 366.21, subdivision (e)(6) and not section 364. Therefore, mother is correct that the court committed legal error in proceeding under section 364. Nonetheless, we conclude that the error was harmless. The reason is that the standards applicable to a six-month review hearing for a child placed with a noncustodial parent under section 366.21, subdivision (e)(6) “are similar to the standards applicable to a section 364 six-month review hearing for a child 7 who was not removed from a custodial parent.” (In re Maya L., supra, 232 Cal.App.4th at p. 99.) Section 366.21, subdivision (e)(6) provides that “the court shall determine whether supervision is still necessary. The court may terminate supervision and transfer permanent custody to [the previously noncustodial] parent, as provided for by paragraph (1) of subdivision (b) of Section 361.2.” (Italics added.) Section 361.2, subdivision (b)(1) authorizes the court to order that “the parent become legal and physical custodian of the child. The court may also provide reasonable visitation by the noncustodial parent. The court shall then terminate its jurisdiction over the child.” Likewise, the test under section 364, subdivision (c), is to “determine whether continued supervision is necessary. The court shall terminate its jurisdiction unless the social worker . . . establishes by a preponderance of evidence that the conditions still exist which would justify initial assumption of jurisdiction under Section 300, or that those conditions are likely to exist if supervision is withdrawn.” (Italics added.) Accordingly, both sections 366.21, subdivision (e)(6) and 364, subdivision (c) require the juvenile court to determine whether supervision remains necessary. The only difference is that for a child placed with a noncustodial parent under section 361.2, subdivision (a), such as here, the court need not also “consider whether ‘ “the conditions still exist which would justify initial assumption of jurisdiction under Section 300” ’ ” (In re Maya L., supra, 232 Cal.App.4th at p. 99) as would be required under section 364. The juvenile court here made the expanded finding under section 364, subdivision (c), both that the conditions causing the 8 initial assumption of jurisdiction no longer existed and that those conditions were not likely to exist if supervision were withdrawn. Regardless of whether the court made the findings under section 364 or section 366.21, subdivision (e), the result is the same: the court found that its supervision over Z.H. was not still necessary. (See In re Maya L., supra, 232 Cal.App.4th at p. 101; In re Janee W. (2006) 140 Cal.App.4th 1444 , 1452 [we may affirm if substantial evidence supports finding even if juvenile court used language of § 364 not § 366.21].) Therefore, the error was harmless. II. Substantial evidence supports the finding. Mother next contends that the evidence does not support the finding that continued supervision was unnecessary. Although we generally review orders terminating juvenile court jurisdiction under an abuse of discretion standard, we review the court’s factual findings for substantial evidence. (In re A.J. (2013) 214 Cal.App.4th 525 , 535, fn. 7; In re Janee W., supra, 140 Cal.App.4th at p. 1452.) “Substantial evidence is evidence that is reasonable, credible, and of solid value.” (Los Angeles County Dept. of Children & Family Services v. Superior Court (2012) 211 Cal.App.4th 13 , 20.) When assessing whether continued juvenile court supervision is necessary, courts focus on the dependent children and determine whether in the custody of the nonoffending parent they are still at risk of harm and remain in need of the protection of the juvenile court. For example, in In re Janee W., at page 1452, the appellate court cited the agency’s reports that unambiguously praised how well the children were doing, and how safe, clean, and happy they were. The appellate court in In re Sarah M. (1991) 233 Cal.App.3d 1486 at pages 1499 to 1500, observed that the child was no longer at risk at the final 9 hearing and no longer needed the court’s protection. (See In re A.J., at p. 535 [evidence supported termination order because there was no “ ‘protective issue’ ”].) Z.H. was a dependent of the juvenile court because with mother, he was malnourished, medically neglected, emotionally manipulated, and suffered severe anxiety, withdrawal, and fear of father. By the time of the final hearing, DCFS reported that Z.H. had adjusted “very well” to father’s custody where he was both physically and emotionally thriving. Z.H. had developed a “special bond” and a close relationship with father and stepmother, who he sought out for comfort, assistance, and validation. He had gained weight and was sleeping through the night. The child was enrolled in school where he was “content” and doing very well academically and socially. He helped father with the family business and was looking forward to the family vacation and to starting summer camp. He was comfortable with social interaction. Z.H.’s personal hygiene had improved, he was no longer wearing a diaper, he had received physical and dental exams and was doing very well in therapy. DCFS recommended to the juvenile court that it terminate jurisdiction as Z.H. did “not display any emotional, behavior or developmental concerns that were present at the beginning of the case.” This evidence more than amply supports the finding that continued court supervision of Z.H. was not still necessary. Mother argues for continued supervision reasoning that the juvenile court had not received the results of her psychological evaluation or allowed a reasonable period for conjoint therapy with Z.H., and she was close to completing counseling and a parenting class. She notes that DCFS reported that she continued to struggle with the issues that brought the family into 10 the juvenile court. But, as noted, under sections 361.2, subdivision (b)(3) and 366.21, subdivision (e)(6), the court assesses whether the child requires continuing court supervision in the custody of the nonoffending parent. Effectively mother is contending that the juvenile court should have continued its jurisdiction because mother could not pay for conjoint therapy or a monitor. She argues that without the juvenile court’s “ongoing supervision, conjoint counseling was virtually an impossibility. [Mother] testified she would not be able to afford it.” However, the court in In re Sarah M., supra, 233 Cal.App.3d at pages 1499 to 1500 rejected the noncustodial parent’s contention that continued supervision was necessary because visitation problems caused the child emotional distress and there were concerns about who would pay for conjoint therapy. The Sarah M. court reasoned that such arguments were “not a cry for continued supervision, but rather a plea for financial aid.” (Id. at p. 1500.) Finally, mother argues that withdrawing supervision will render visitation meaningless because of difficulties in agreeing on a monitor. Exit orders are not the same thing as permanent family law custody and visitation orders. “Juvenile court exit orders . . . are in the nature of pendente lite orders in family law.” (In re John W. (1996) 41 Cal.App.4th 961 , 973, fn. omitted.) Such exit orders are modifiable. Section 362.4, subdivision (b) provides that any “order issued pursuant to this section shall continue until modified or terminated by a subsequent order of the superior court.” Mother may always seek modification of the exit order in the family court. However, a problem between the parents about scheduling visitation is not a reason to retain 11 juvenile court jurisdiction under section 366.21, subdivision (e)(6). DISPOSITION The order is affirmed. NOT TO BE PUBLISHED. DHANIDINA, J. We concur: EDMON, P. J. LAVIN, J. 12

2020-11-30 21:02:41.667916+00

https://www.courts.ca.gov/opinions/nonpub/G057267.PDF

Filed 11/30/20 In re Marriage of Kindschi CA4/3 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 THREE In re Marriage of JOYCE M. and RONALD O. KINDSCHI. JOYCE M. KINDSCHI, G057267 Respondent, (Super. Ct. No. 14D001905) v. OPINION RONALD O. KINDSCHI, Appellant. Appeal from a judgment of the Superior Court of Orange County, Franz E. Miller, Judge. Affirmed. Request for Judicial Notice. Granted. Motion to Augment. Granted. Merritt McKeon for Appellant. Law Offices of Margorie G. Fuller and Marjorie G. Fuller; Law Offices of Rosen & Rosen and Bonnie Zeldin Rosen for Respondent. * * *  Ronald Kindschi (Ronald)1 appeals from trial court orders in the dissolution of his 39-year marriage to Joyce Kindschi (Joyce). Ronald challenges the court’s spousal support award and its denial of Ronald’s requests for attorney fees to be paid from the partial release of uncharacterized funds held in trust pending final judgment. Ronald also contests the court’s finding at trial that those trust funds were Joyce’s separate property. Ronald further faults the court for failing to assist him in the pro per presentation of his case and for failing to refer him to the self-help department of the family court. None of Ronald’s arguments has merit. Accordingly, we affirm. I BACKGROUND Joyce and Ronald were married in June 1975 and separated in March 2014 with no minor children. At separation, Joyce was 63 years old and a retired schoolteacher; Ronald was 68 years old and a self-employed, certified financial advisor. We summarize here the facts relevant to the main issues on appeal.2 A. Characterizing the Proceeds from the Sale of the Marital Residence The couple had purchased the marital residence jointly as community property. At some point during the marriage, Ronald alone declared bankruptcy. Joyce bought the residence out of the bankruptcy estate with a loan she obtained in her name from Ronald’s parents, and she held title to the residence as her sole and separate property. Later, she deeded the property to Ronald and herself as community property. After the couple separated, they sold the residence to a third party, generating net proceeds of $1,378,542. 1 As is customary in marriage cases involving parties with the same surname, we use each party’s first name for clarity. We intend no disrespect. 2 Ronald filed a motion to augment the record on appeal with a volume of trial exhibits submitted along with the motion. The motion to augment is granted. 2  The characterization of those net proceeds was a key disputed issue in the marital dissolution. Ronald claimed the proceeds were community property in which he owned a 50 percent interest; Joyce claimed she was entitled to reimbursement of her separate property contribution to the community’s acquisition of the property under Family Code section 2640. The trial court ordered the sale proceeds of $1,378,542 held in trust pending final judgment, with half of the proceeds placed in the trust account of each side’s counsel, and no distributions made except by mutual agreement or court order. B. Spousal Support Orders and Ronald’s Requests for Attorney Fees In early March 2014, Joyce filed a request for pendente lite support and propounded to Ronald interrogatories and a request for documents. In the ensuing months, Ronald failed to provide any of the requested discovery, leading the court in July 2014 to grant Joyce’s motion to compel responses without objection and for sanctions and in February 2015 to impose additional monetary sanctions when Ronald still had not complied with the discovery orders. In July 2014, the parties stipulated to a pendente lite support order of $2,000 per month for Joyce, with Ronald also paying the mortgage and insurance on the marital residence and $6,000 for Joyce to hire a forensic accountant. In October 2014, the parties stipulated to a new temporary support payment of $1,500 per week occasioned by the sale of the marital residence, ending Ronald’s mortgage payments. In June 2015, Ronald moved to modify the temporary support order and for an order releasing part of the sale proceeds in the trust account to pay his attorney fees. Ronald specifically requested “a downward modification in spousal support” and “a pre- distribution” from the trust funds of $50,000 each to him and Joyce. Under penalty of perjury, Ronald stated: “I cannot afford to pay $1,500 [per week] as I am only earning $8,815 [per month] gross in Social Security . . . and self-employment income as a financial advisor.” 3  Ronald described the extent of his “self-employment income” as follows: “In 2014, I earned gross income each month of $6,317[.] . . . . In 2015, I have not received any pay whatsoever.” He said he had “no money” to pay and “rehire” his former attorney, who had withdrawn from the case two months earlier,3 or to retain new counsel. Joyce opposed Ronald’s request to decrease spousal support and release $50,000 to him from trust funds for attorney fees. She contended “all of the funds must be held until there is a final adjudication” because Ronald “is not trustworthy” and “has not been forthright with me, nor the Court, during this entire process and . . . there will be no way for [] Ron to pay me what he owes . . . .” Joyce accused Ronald of misrepresenting his income; she cited the attached report of her forensic accountant, Dennis Sperry, which concluded Ronald’s “income for 2014 was $24,111 per month” and his income for the first seven months of 2015 was $20,290 per month. Joyce asserted, “Ron has the money to pay for his attorney and mine from his cash flow.” In December 2015, the trial court entered a stipulated order to continue the hearing on Ronald’s request to modify the support order, with Ronald ordered to provide Joyce’s accountant Sperry backup documentation supporting Ronald’s contentions about his income. The documents were due by January 29, 2016. The stipulation also provided for a release of $20,000 to each party. By mid-March 2016, Ronald still had not provided Sperry with the ordered documentation. Before the hearing on Ronald’s motion, Joyce filed a motion in limine to prevent Ronald from presenting any evidence––testimony, arguments, or reports–– 3 After substituting out of the case, Ronald’s attorney David Sandor agreed to “limited scope” representation of Ronald at several hearings through late June 2016, when his firm withdrew from all representation of Ronald. For the next five months Ronald represented himself in propria persona until retaining new counsel, Mark Curtis, in early December 2016. 4 ”regarding his cash flow.” The court granted Joyce’s motion in limine and ordered Ronald “will be precluded [from] produc[ing] documents not provided to [Joyce].” Over several partial days, the trial court heard testimony from Sperry, Joyce, and Ronald on the issue of spousal support. Sperry testified about the report he prepared on Ronald’s cash flow and the court admitted the report into evidence. At the conclusion of the hearing, the court found Sperry “to be credible and his calculations to be accurate.” “Based on the testimony heard and the evidence presented,” the court found Ronald’s “monthly income to be $24,000.00 per month” and Joyce’s income “to be $1,017.00 per month from Social Security.” The court ordered Ronald to pay Joyce pendente lite support of $7500 per month “retroactive to 10/1/2015.” The court also authorized the release of $10,000 to Ronald for a forensic accountant and the same amount to Joyce for attorney fees. The court “reserve[d] jurisdiction over the issues of attorney’s fees and [sanctions] to the time of trial.” By early November 2016, Ronald had “accumulated substantial support arrears” and Joyce was “in a financially desperate position,” unable to pay rent or necessary living expenses, with “less than $900 in my checking account.” Joyce made an ex parte application to the trial court for an emergency release of $45,000 from trust funds. She asked the court not to make any disbursement of trust funds to Ronald, however, because of the “substantial monies” he owed her “for support arrears of over $115,000” and “his misappropriation” of the community’s retirement funds and Joyce’s separate property. The court denied Joyce relief pending a hearing. From this point through commencement of trial in December 2017, the parties each filed requests for the release of trust funds: Joyce asked for funds for living expenses; both parties asked for funds to pay attorney and expert fees. Joyce opposed all of Ronald’s requests, arguing the trust funds were entirely her separate property and she would not recover any money advanced to Ronald. 5  Despite Joyce’s objection, the trial court released additional trust funds to Ronald for attorney and expert fees in the amounts of $35,000 in December 2016 and $20,000 in April 2017. After the last disbursement of funds to Ronald in April 2017, however, the court declined Ronald’s four additional requests for attorney fees. By then, Ronald had received a total of $115,000 from the trust funds for attorney fees. Here are the four orders denying Ronald’s fees requests at issue in this appeal: In July 2017, the trial court denied Ronald’s request for $50,000 for attorney fees. In late December 2017, after seven partial days of trial and an order trailing the remainder of trial to August 2018, the court denied an oral request from Ronald’s counsel, Mark Curtis, for a release of trust funds for attorney fees. (Soon afterward, Curtis substituted out of the case and Ronald began representing himself.)4 On August 13, 2018, the first day of trial, Ronald orally asked the court twice to release trust funds for attorney and expert fees, and the court denied both requests. Trial went forward with Ronald representing himself. C. Statement of Decision and Judgment At the conclusion of the trial, the court granted a judgment of dissolution of the marriage and announced its tentative decision from the bench. Joyce’s counsel prepared a proposed statement of decision as ordered by the court and Ronald filed objections to the proposed statement of decision, which the court overruled. On November 26, 2018, the court entered the judgment, incorporating by reference the statement of decision. 4 On August 10, 2018, on the eve of the continued trial set to begin August 13, Ronald’s new “limited scope” attorney, Elizabeth Nigro, filed an ex parte application to continue the trial so Ronald could file “a second motion for release of [trust] funds . . . for the purpose of retaining new counsel for trial and paying his forensic accountant.” The trial court denied the ex parte application. Nigro thereafter withdrew from the representation. 6  Among the detailed findings in the statement of decision are the following relevant to this appeal: 1. Credibility Determinations The trial court found Ronald “was not credible”; Joyce’s testimony was “much more believable and credible than that of [Ronald]” and Joyce “provid[ed] substantial documentary evidence to support her claims.” As for the parties’ respective expert witnesses, the court compared the “testimony and documentary evidence of the forensic accountants, Dennis Sperry and Andrew Hunt,” and “accepts the testimony of Mr. Sperry over Mr. Hunt where they differ.” The court explained it credited Sperry’s opinion over Hunt’s “due, in part, to the unreliability” of the information Hunt relied on and his use of what the court viewed as a disfavored “‘projected income’” approach to determining Ronald’s income available for support. 2. Ownership of the Sales Proceeds Held in Trust The court determined the parties originally bought the marital residence jointly as community property; Ronald’s individual bankruptcy put the residence in the hands of the bankruptcy trustee who “awarded the [residence to Joyce] as her sole and separate property”; when Joyce later “deeded” the property to Joyce and Ronald jointly “pursuant to a refinance,” it had a fair market value of “$2,000,000 with encumbrances totaling $445,052, leaving [Joyce with] a net separate property equity of . . . $1,554,948[.]” Crucially, the trial court found Joyce’s transfer of the residence to the community “triggered Family Code § 2640 [sic],” entitling her to reimbursement for her 7 separate property contribution to the community’s acquisition of the property.5 Because Joyce’s separate property contribution of over $1.5 million exceeded the $1,378,542 net proceeds from the property’s sale, the court ruled the balance of the sales proceeds still held in the trust account “shall be released to [Joyce] as the remaining amount is her separate property.” The court charged Ronald with reimbursing Joyce for the $205,000 he received from the sales proceeds, plus additional funds he received, “[f]or a total reimbursement to [Joyce] from [Ronald], related to the [marital residence] in the amount of $482,866.” 3. Spousal Support The trial court found the marital standard of living was upper middle class; the “marriage [is] of long duration, 39 years and 9 months”; Joyce “gave up her teaching career to take care of” Ronald and their children, and to support Ronald’s “business activities”; Ronald obtained advanced degrees and licenses during the marriage; and both parties “are in their 70’s and are in good health for his/her age. Both parties are currently employed.” The court found Ronald “has the ability to contribute to the support of [Joyce], earning approximately $9,500/Month [based on the testimony of] both accountants.” The court also “considered the other factors that are just and equitable, including [Joyce’s] ability or inability to earn sufficient monies to support herself” and “the loss of her separate property.” The court ordered Ronald to pay spousal support to Joyce “in the amount of $3,900 per month retroactive to January 1, 2017.” The court also found Ronald owed Joyce “spousal support arrears . . . in the amount of $195,421.” 5 Family Code section 2640, subdivision (b), provides in pertinent part as follows: “In the division of the community estate under this division, unless a party has made a written waiver of the right to reimbursement or has signed a writing that has the effect of a waiver, the party shall be reimbursed for the party’s contributions to the acquisition of property of the community property estate to the extent the party traces the contributions to a separate property source.” (All further statutory references are to the Family Code.) 8  4. Breach of Fiduciary Duty and Attorney Fees The trial court found Ronald breached his fiduciary duty to Joyce by, among other things, “not disclosing substantial tax refunds received by him post- separation, which belonged to the community; invading Individual Retirement Accounts without disclosure; fail[ing] to provide documentation regarding [Joyce’s] separate and community investments; misrepresenting material facts to induce [Joyce] to provide [him] with her separate property funds; [and] misappropriating [Joyce’s] separate property[.]” The trial court concluded Ronald’s breach of fiduciary duties warranted sanctions and, accordingly, ordered Ronald to pay 40 percent of Joyce’s attorney fees and expert fees, for a total sanctions award of $77,796. The court explained it based the sanctions order on its “own observations and experience,” and on Ronald’s many “failures” in the martial dissolution, recounted as follows: “[Ronald’s] failure to comply with his fiduciary duties . . . , [Ronald’s] failure to comply with discovery and [c]ourt [o]rders unreasonably increasing fees[,] and his ability to pay over the course of litigation and thereafter, [Ronald’s] taking legal positions that were unsupportable by law or the evidence, [Ronald’s] frustrating the policy of the law to promote settlement of litigation and failure to cooperate when appropriate, thereby increasing the costs of litigation for [Joyce].” II DISCUSSION A. The Spousal Support Award Was Within the Trial Court’s Discretion Ronald argues the trial court abused its discretion in awarding Joyce spousal support of $3,900 per month based on the finding Ronald has a monthly income of approximately $9,500. Ronald challenges that finding as unsupported by the evidence, contending at the time of trial he had no income other than $2,602 per month from Social Security. Consequently, he asserts, the court improperly “impute[d] income to a retired 9 person” in determining spousal support, which is an abuse of discretion under In re Marriage of Reynolds (1998) 63 Cal.App.4th 1373 (Reynolds). Though the argument is couched in terms of abuse of discretion, its essence is a challenge to the factual finding Ronald has a monthly income of $9,500. Ronald states: “There is no evidence to support the court imputing any income at all [to] Ronald[.]” “On appeal, we presume the judgment is correct. . . . ‘[I]n reviewing a judgment based upon a statement of decision following a bench trial, “any conflict in the evidence or reasonable inferences to be drawn from the facts will be resolved in support of the determination of the trial court decision. [Citations.]” [Citation.] In a substantial evidence challenge to a judgment, [we] “consider all of the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference, and resolving conflicts in support of the [findings]. [Citations.]” [Citation.] We may not reweigh the evidence and are bound by the trial court’s credibility determinations. [Citations.] Moreover, findings of fact are liberally construed to support the judgment.’ [Citation.]” (In re Marriage of Ciprari (2019) 32 Cal.App.5th 83 , 93-94.) There is an important corollary to the above-cited rule: “An appellant . . . who cites and discusses only evidence in her favor fails to demonstrate any error and waives the contention that the evidence is insufficient to support the judgment. [Citations.]” (Rayii v. Gatica (2013) 218 Cal.App.4th 1402 , 1408 (Rayii); accord, Toigo v. Town of Ross (1998) 70 Cal.App.4th 309 , 317 [in challenge to sufficiency of evidence, failure to set forth “‘all material evidence on the point’” waives alleged error].) In his opening brief, Ronald utterly failed to discuss the evidence supporting the trial court’s finding Ronald has a monthly income of approximately $9,500. The trial court’s statement of decision noted “both accountants” agreed Ronald earns approximately $9,500 per month. Ronald’s brief, however, does not acknowledge the experts’ shared opinion about his income, much less discuss the substance of either 10 expert’s testimony or report. Instead, the brief merely states Joyce’s expert Sperry “testified as a witness” and Sperry’s report “was received into evidence.” Likewise, the brief states Ronald’s own expert, Andrew Hunt, “testified” and his report “was admitted into evidence.” Nor does Ronald provide pinpoint citations to where the reports can be found in the clerk’s transcript; instead, he merely cites the minute order entries noting each report’s admission into evidence. By failing to cite and discuss the expert opinion evidence the trial court relied on in determining Ronald earns $9,500 per month, Ronald forfeited his challenge to the sufficiency of the evidence supporting that finding. (Rayii, supra, 218 Cal.App.4th at p. 1408.) Given the court’s finding Ronald is “currently working” and earning $9,500 per month, Ronald’s claim the court abused its discretion by “imput[ing] income to a retired person” (Reynolds, supra, 63 Cal.App.4th 1373 ) also fails as a matter of law.6 B. The Trial Court Acted Within its Discretion in Denying Ronald’s Requests for Attorney Fees Ronald contends the trial court abused its discretion in denying certain of his requests for attorney fees. The contention lacks merit. 1. Applicable Legal Principles “Under section 2030, subdivision (a), ‘the court may, upon (1) determining an ability to pay and (2) consideration of the respective incomes and needs of the parties in order to ensure that each party has access to legal representation to preserve all of the party’s rights, order any party . . . to pay the amount reasonably necessary for attorney’s 6 In Reynolds, the court reversed for abuse of discretion an order modifying postjudgment a spousal support order, concluding the trial court failed to “base the [modified] spousal support order on an examination of the material change in circumstances caused by Husband’s timely retirement. Instead, the court refused to recognize the effect of Husband’s retirement and incorrectly applied a ‘capacity to earn’ standard.” (Reynolds, supra, 63 Cal.App.4th at p. 1379.) The Reynolds court recognized “no one may be compelled to work after the usual retirement age of 65 in order to pay the same level of spousal support as when he was employed.” (Id. at p. 1378.) 11 fees and for the cost of maintaining or defending the proceeding.’ The purpose of such an award is to provide one of the parties, if necessary, with an amount adequate to properly litigate the controversy. (In re Marriage of Sullivan (1984) 37 Cal.3d 762 , 768; In re Marriage of Ward (1992) 3 Cal.App.4th 618 , 627.) [¶] The court may award attorney fees under section 2030 ‘where the making of the award, and the amount of the award, are just and reasonable under the relative circumstances of the respective parties.’ (§ 2032, subd. (a).)” (In re Marriage of Duncan (2001) 90 Cal.App.4th 617 , 629 (Duncan).) A prerequisite of an award of attorney fees to a party in a marital dissolution case is a showing of that party’s need for money to maintain the proceedings. (In re Marriage of Gonzales (1975) 51 Cal.App.3d 340 , 344.) The trial court must therefore consider the respective incomes of the spouses. (In re Marriage of Janssen (1975) 48 Cal.App.3d 425 , 428 [applying former § 4370, precursor to § 2030].) “‘[A] motion for attorney fees and costs in a dissolution proceeding is left to the sound discretion of the trial court. [Citations.] In the absence of a clear showing of abuse, its determination will not be disturbed on appeal.’ [Citation.] Thus, we affirm the court’s order unless ‘“no judge could reasonably make the order made. [Citations.]”’ [Citations.]” (Duncan, supra, 90 Cal.App.4th at p. 630; see Mooney v. Superior Court (2016) 245 Cal.App.4th 523 , 536.) 2. Analysis Between December 2015 and April 2017, the trial court gave Ronald $115,000 for attorney fees from the house sale proceeds held in the trust accounts. After the April 2017 disbursement to Ronald, however, the court denied his further requests for fees. Specifically, the court denied four requests, one in July 2017, a few months before trial began, and then three more during trial. Ronald contends each of those denials was an abuse of discretion, leaving him unable to hire an attorney to represent him in a dissolution with complicated financial issues and where his spouse was represented by 12 counsel. In fact, Ronald was represented by counsel during most of the litigation; he represented himself in propria persona during the second phase of trial in August 2018. Ronald’s challenge to the orders denying these late fee requests fails because in his opening brief he provides no record references demonstrating he made the requisite evidentiary showing of need for an award of attorney fees. Nor did he present the trial court with the required evidence of “‘the respective incomes and needs of the parties[.]’” (Duncan, supra, 90 Cal.App.4th at p. 629.) The lack of record references is not surprising, however, given that none of these four fees requests was a formal motion for fees, with supporting declarations or other documentary evidence relative to the attorney fees issue. Instead, Ronald’s counsel or, later, Ronald himself, simply made oral requests for attorney fees while appearing in court on other matters, such as a trial setting conference (July 2017 request) or during the last day of the first phase of trial (December 2017) or the first day of the continued trial (August 2018). These oral fee requests lacked the proof to justify an award of fees under section 2030. As Joyce argues in her brief: “When [Ronald] claimed he had no funds to obtain counsel, he provided no evidence of that claim, nor of justification for the court to release to him funds that were presumptively Joyce’s. He did not present evidence of his or Joyce’s finances, a statutory requirement where fees are sought. (Fam. Code, § 2030, [subd.] (a)(2).)” “Ronald claimed poverty, but was unwilling or unable to present proof of his need.” Ronald blames the trial court for “never properly determin[ing] Ronald’s actual income” during the trial and for failing to “assure both parties have access to funds to pay for a lawyer.” But it was Ronald’s burden to prove his need for attorney fees. (In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814 , 824 (Falcone) [burden of establishing necessity for fees is upon applicant].) Moreover, at the conclusion of trial, the court found Ronald had a steady income before and during the trial. The court also 13 found Ronald had withheld over $195,000 due Joyce in spousal support, money which the court could have impliedly found was available to Ronald to pay his attorney fees. We conclude the trial court acted within its discretion in impliedly finding Ronald did not need an award of attorney fees to continue litigating the case. (Duncan, supra, 90 Cal.App.4th at p. 630.) We note Ronald also lodges procedural objections, protesting “no hearing was ever truly held” on these four requests for attorney fees, his requests were “summarily denied,” and the court did not make the specific findings required by section 2030, subdivision (a)(2). Ronald can hardly be heard to complain about the trial court’s request that he should file a formal motion. Procedurally, the court could hear an oral motion for attorney fees, but Ronald offered no evidence to support his claim of “need” under section 2030 and therefore no basis exists to overturn the judgment. Indeed, the court’s request for a formal motion signaled its willingness to decide the issue based on evidence and not Ronald’s unsupported claim he lacked the means to pay his attorney. Finally, Ronald argues the trial court abused its discretion in denying his “limited scope” attorney Elizabeth Nigro’s ex parte application on August 10, 2018, to continue the trial just three days before the long-trailing second phase of trial was set to begin. Ronald asserts his prior attorney’s substitution out of the case in early January 2018––eight months before his continuance motion––was “good cause” for a continuance under rule 3.1332, subsection (c)(4) of the Rules of Court. Whether to grant a request for trial continuance is a matter of trial court discretion; “[c]ontinuances are granted only on an affirmative showing of good cause requiring a continuance.” (Falcone, supra, 164 Cal.App.4th at p. 823.) Given the circumstances presented to the trial court here, we find the court acted within its discretion in denying Ronald’s last minute request to continue the second phase of the trial. 14 C. Ronald Forfeits His Challenge to the Separate Property Characterization of the Sales Proceeds Held in Trust Ronald makes an abbreviated, highly confusing argument challenging the trial court’s characterization of the proceeds from the house sale as entirely Joyce’s separate property. Ronald’s argument begins as follows: “Both parties testified that the funds for the buy back of the home from the bankruptcy estate came from [Ronald’s parents], into the revocable living trust of the parties, and then were given to the bankruptcy trustee . . . .” Ronald then makes the mystifying assertion he “was due half of the house proceeds at a minimum” because the funds were “borrowed from the Orson Kindschi Trust, . . . leaving a debt to the Trust rather than receiving any benefit from the Trust.” Ronald does not explain his connection to the “Orson Kindschi Trust” or the significance of the “debt to the Trust” he alleges. Moreover, he fails to discuss any of the evidence the court relied on in finding Joyce had over $1.5 million of separate property equity in the property which she contributed to the community’s acquisition of the house. Consequently, by failing to cite and discuss all the material evidence on the issue, Ronald forfeits his challenge to the trial court’s finding the sale proceeds were Joyce’s separate property. (Rayii, supra, 218 Cal.App.4th at p. 1408.) D. The Trial Court Did Not Violate Any Duties Owed to Ronald as a Pro Se Litigant Finally, Ronald contends the trial court abused its discretion by failing to perform duties the court owed him as a pro se litigant.7 Specifically, Ronald complains 7 In relation to this argument, Ronald filed a request for judicial notice of three publications: “Handling Cases Involving Self-Represented Litigants,” a 2019 bench guide for judicial officers published by the Judicial Council, available at https://www.courts.ca.gov/documents/benchguide_self_rep_litigants.pdf; “The Aging Population of Orange County, California and its Impact on Court Services,” a 2012 publication of the Institute for Court Management, available at https://cdm16501.contentdm.oclc.org/digital/collection/famct/id/838; and Antecedents of Gray Divorce: A Life Course Perspective published in The Journals of 15 the court failed to refer him to the self-help department of the family court, refused to help him lay a foundation for admission of his expert’s report,8 and generally denied him the assistance he needed “to put on his case.” A judge cannot tell a self-represented litigant what tactic to use, what witness to call, or what motion to file. The court is not the self-represented litigant’s lawyer and cannot tell the self-represented litigant what to do next. “In other words, when a litigant accepts the risks of proceeding without counsel, he or she is stuck with the outcome, and has no greater opportunity to cast off an unfavorable judgment than he or she would if represented by counsel.” (Burnete v. La Casa Dana Apartments (2007) 148 Cal.App.4th 1262 , 1267; In re Kobayashi v. Superior Court (2009) 175 Cal.App.4th 536 , 543 [pro per litigants held to same standards as attorneys].) The trial court owed Ronald none of the duties he claims the court breached. We find the court did not abuse its discretion in its treatment of Ronald as a pro se litigant. Gerontology: Series B, Volume 73, Issue 6, September 2018, Pages 1022–1031, available at https://academic.oup.com/psychsocgerontology/article/73/6/1022/2698907. The request for judicial notice is granted. 8 Ronald fails to mention the trial court ultimately admitted the report into evidence at trial. 16  III DISPOSITION The judgment is affirmed. Respondent is entitled to her costs on appeal. ARONSON, J. WE CONCUR: BEDSWORTH, ACTING P. J. IKOLA, J. 17

2020-11-30 21:02:42.564947+00

https://www.courts.ca.gov/opinions/nonpub/B302134.PDF

Filed 11/30/20 In re C.F. CA2/1 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION ONE In re C.F., Jr. et al., Persons B302134 Coming Under the Juvenile (Los Angeles County Court Law. Super. Ct. No. CK58890) LOS ANGELES COUNTY DEPARTMENT OF CHILDREN AND FAMILY SERVICES, Plaintiff and Respondent, v. JENNIFER A., Defendant and Appellant. APPEAL from an order of the Superior Court of Los Angeles County, Steff R. Padilla, Commissioner. Dismissed in part and affirmed in part.  John L. Dodd, under appointment by the Court of Appeal, for Defendant and Appellant. Tarkian & Associates and Arezoo Pichvai for Plaintiff and Respondent. ____________________ On December 13, 2016, the Los Angeles County Department of Children and Family Services (DCFS) initiated juvenile dependency proceedings concerning 14-year-old C.F., Jr.; 13-year-old M.A.; 7-year-old A.A.; 7-year-old N.A.; and 6-year-old J.A. The juvenile court later declared the case was governed by the Indian Child Welfare Act of 1978 (ICWA) ( 25 U.S.C. § 1901 et seq.), and sustained an amended petition, which alleged that A.A.’s, N.A.’s, and J.A.’s presumed father (C.A.) had physically abused the five children and their mother (mother) and used narcotics, and that mother failed to protect the children from C.A. At the disposition hearing held on July 5, 2017, all five children were released to mother’s custody. On June 1, 2018, the juvenile court sustained a supplemental petition alleging that mother and C.A. failed to comply with court orders, removed the children from her custody, instructed DCFS to provide mother with family reunification services, and ordered mother, inter alia, to participate in individual counseling to address case issues. At a 12-month review hearing held on October 29, 2019 pursuant to Welfare and Institutions Code1 section 366.21, subdivision (f), the juvenile court found that mother did not participate in individual counseling as required by the case plan, 1 Undesignated statutory citations are to the Welfare and Institutions Code. 2 DCFS had made “active efforts” to prevent the breakup of the Indian family for the purposes of ICWA and its parallel state law provisions, and returning the children to mother’s physical custody would create a substantial risk of detriment to them. The juvenile court ordered DCFS to continue to provide family reunification services to mother and scheduled an 18-month review hearing pursuant to section 366.22. On appeal, mother challenges the active efforts and detriment findings made at the October 29, 2019 hearing. After mother filed her notice of appeal, the juvenile court held the 18-month review hearing on August 28, 2020. At that hearing, the court terminated mother’s family reunification services relating to C.F., Jr. because he reached the age of majority, found that DCFS had made active efforts with respect to the other four children and that returning them to mother’s custody would pose a substantial risk of detriment to them, terminated reunification services for C.F., Jr.’s four siblings, and scheduled a section 366.26 permanency planning hearing for those four children. We conclude that mother’s appeal is moot insofar as it concerns (a) C.F., Jr. and (b) the October 29, 2019 detriment finding applicable to his four siblings because, in light of the rulings and findings made at the August 28, 2020 hearing, we would be unable to provide mother effective relief as to those appellate claims. On the merits, we reject mother’s challenge to the October 29, 2019 active efforts finding concerning C.F., Jr.’s four siblings because, contrary to mother’s arguments, the juvenile court was not required to support that conclusion with specific and detailed findings, and mother has failed to demonstrate that substantial evidence—the applicable standard 3 of review—did not support the court’s active efforts finding. Thus, we dismiss as moot part of mother’s appeal and affirm the active efforts finding made as to all children except C.F., Jr. FACTUAL AND PROCEDURAL BACKGROUND Although we acknowledge that this matter has a lengthy factual and procedural history, we summarize only those facts that are relevant to this appeal. On December 13, 2016, DCFS filed a juvenile dependency petition. The petition alleged in pertinent part that jurisdiction was proper under section 300, subdivisions (a), (b)(1), and (j) on the grounds that C.A. used narcotics and physically abused mother and the five children, and that mother failed to protect the children from C.A. At the December 13, 2016 detention hearing, the juvenile court declared that C.F., Sr. was the presumed father of C.F., Jr. and M.A., and that C.A. was the presumed father of A.A., N.A., and J.A. The juvenile court detained C.F., Jr. and M.A., and released A.A., N.A., and J.A. to mother and C.A. On the date of the detention hearing, mother completed a form indicating she may have Indian ancestry. After DCFS gave notice of the proceedings to the Sault Ste. Marie Tribe of Chippewa Indians (Tribe), the Tribe intervened on March 14, 2017, and the juvenile court later declared that the case fell within the scope of ICWA. On May 10, 2017, DCFS filed a first amended petition that added new allegations not pertinent to this appeal. At the detention hearing held the following day, the court released C.F., Jr. and M.A. to mother. On July 5, 2017, the juvenile court held an adjudication and disposition hearing at which it found jurisdiction was proper 4 and declared the children to be dependents of the court, pursuant to section 300, subdivisions (a), (b), and (j). The court placed C.F., Jr. and M.A. in mother’s custody, and placed A.A., N.A., and J.A. with mother and C.A. On December 14, 2017, DCFS filed a supplemental petition pursuant to section 387, alleging that mother failed to comply with court orders requiring her to participate in parenting and counseling programs, and that C.A. violated court orders by continuing to abuse alcohol and failing to participate in a substance abuse program and submit to drug and alcohol testing. On December 15, 2017, the court detained the children, placed them with relatives, and authorized mother to have monitored visits with them. On June 1, 2018, the juvenile court held an adjudication and disposition hearing on the supplemental petition. The juvenile court struck a portion of the supplemental petition alleging that mother violated court orders by failing to participate in a parenting course. The juvenile court thereafter sustained the amended supplemental petition. The juvenile court removed the children from the custody of their respective parents and ordered DCFS to provide family reunification services and monitored visits to mother. On June 1, 2018, the court approved case plans for each of the five children that varied from one another. The case plans for C.F., Jr.; M.A.; and A.A. required mother to participate in drug and alcohol services, whereas N.A.’s and J.A.’s case plans did not. While M.A.’s case plan did not state that mother needed to complete a parenting program, C.F., Jr.’s; AA.’s; and N.A.’s case plans imposed that requirement. Only the case plans for A.A., N.A., and J.A. provided that mother had to attend individual 5 counseling sessions, and, unlike N.A.’s and J.A.’s case plans, A.A.’s case plan does not specify that these sessions are intended to address “case issues.” In a status report filed on December 3, 2018, DCFS stated that on October 3, 2018, the agency had provided mother with contact information for an organization called United American Indian Involvement in order to allow her to enroll in individual counseling sessions. DCFS also reported that on November 21, 2018, it had referred mother to the American Indian Counseling Center for individual counseling sessions. On December 21, 2018, the juvenile court held a review hearing pursuant to section 366.21, subdivision (e) at which it ordered DCFS to continue providing family reunification services to mother. On April 8, 2019, a DCFS social worker visited mother and asked her why she had not contacted any of the programs for which the agency had given her referrals.2 The social worker told mother that DCFS already referred her to the American Indian Counseling Center and United American Indian Involvement, stated that both programs offered individual counseling, and provided mother with contact information for both programs. 2 Mother’s reply brief does not dispute any of the facts that are discussed in the textual paragraph accompanying this footnote, which facts are derived from DCFS’s appellate brief. She thus impliedly concedes these facts. (See Rudick v. State Bd. of Optometry (2019) 41 Cal.App.5th 77 , 89–90 (Rudick) [concluding that the appellants made an implicit concession by “failing to respond in their reply brief to the [respondent’s] argument on th[at] point”].) 6 On May 14, 2019, the social worker again provided mother with the contact information for the two programs. On September 18, 2019, the juvenile court held a hearing at which the court clarified that mother’s case plan required her to participate in individual counseling, and continued the section 366.21, subdivision (f) review hearing initially scheduled for that date because the court needed additional time to review certain relevant evidence. At the hearing, the court observed that it had reviewed the reporter’s transcript to determine “what the case plans were,” and “it look[ed] like there was an error possibly.” Specifically, the court noted the transcript showed that although it initially ordered “mother into a drug counseling and testing program,” the court “later rescinded [its] orders and ordered mother to be in individual counseling.” The court then admonished mother that if she did not participate in counseling, then it would “be a very difficult time for” her. On October 7, 2019, DCFS filed a last minute information report. In the report, DCFS stated that on September 18, 2019, a certified addiction specialist for mother’s substance abuse program confirmed that the specialist was not providing mother with mental health services to address case-related issues. DCFS further claimed that the court had ordered mother to participate in individual counseling with a “licensed mental health provider,” and that the certified addiction specialist was not a licensed therapist. Furthermore, a DCFS social worker reported that on September 23, 2019, he “re-referred the mother to American Indian Counseling Center to address the Court-ordered individual counseling,” and told mother via e-mail that “the substance abuse counseling in which she [was] . . . participating [was] not approved by DCFS to address the Court’s order.” 7  On October 29, 2019, the juvenile court held a review hearing pursuant to section 366.21, subdivision (f).3 The court reiterated that “mother d[id] not need to do a full drug and alcohol program” because she had not been ordered to do so. On the other hand, the court did find DCFS had made “active efforts” in connection with mother’s obligation to participate in individual counseling.4 The court stated that “mother knew she needed a licensed therapist, and [this requirement] was not new to her,” and expressed its frustration that mother had been “voluntarily absenting herself from visits” with the children5 and was “not 3 The remainder of this paragraph and the following paragraph discuss findings and rulings made at the October 29, 2019 hearing. 4 Under ICWA and related state law provisions, before placing Indian children in foster care or seeking the termination of their parents’ rights, child welfare agencies must make active efforts to provide remedial services and rehabilitative programs designed to prevent the breakup of the Indian family. (See In re A.L. (2015) 243 Cal.App.4th 628 , 637–638 (A.L.).) Additionally, although the case plans for C.F., Jr.; A.A.; N.A.; and J.A. stated that mother was required to take part in a parenting program, that aspect of the case plans was not discussed at the October 29, 2019 hearing. Because the parties’ briefing does not challenge that omission, we do not address it in this appeal. 5 Mother concedes in her opening brief that during the review period that was the subject of the October 29, 2019 hearing, she missed or was late to multiple scheduled visits with the children. For instance, mother admits she attended only two of five scheduled visits between September 18 and October 4, 2019. (See Artal v. Allen (2003) 111 Cal.App.4th 273 , 275, fn. 2 (Artal) [“ ‘[B]riefs and argument . . . are reliable 8 doing the things [she] need[ed] to do to ensure if the children were returned home it would be safe.” Mother’s reply brief does not dispute, and thus tacitly agrees with, DCFS’s contention that “by the October 29, 2019, court hearing, the mother still had not participated in individual counseling to address the case issues.” (See Rudick, supra, 41 Cal.App.5th at pp. 88–90.) The juvenile court found by clear and convincing evidence that returning the children to mother’s custody would “create a substantial risk of detriment to” them. It ordered DCFS to continue to provide family reunification services to mother and scheduled a review hearing pursuant to section 366.22. On November 7, 2019, mother appealed the findings and rulings made at the October 29, 2019 hearing. The juvenile court ultimately held the section 366.22 review hearing on August 28, 2020.6 The court terminated mother’s family reunification services, and, with respect to all children except C.F., Jr., found: (1) DCFS had made active efforts; (2) mother had not made substantial progress toward alleviating or mitigating the causes necessitating placement; and (3) there was clear and convincing evidence that returning the four children to mother would create a substantial risk of detriment to them. The juvenile court scheduled a December 2, 2020 permanency planning hearing pursuant to section 366.26 for M.A., A.A., N.A., and J.A. As discussed further indications of a party’s position on the facts as well as the law, and a reviewing court may make use of statements therein as admissions against the party. [Citations.]’ ”].) 6 We previously granted DCFS’s request for judicial notice of the minute orders relating to the August 28, 2020 hearing. (Evid. Code, §§ 452, subd. (d), 459.) 9 in Discussion part A, the parties dispute whether the findings and rulings made at the August 28, 2020 hearing moot all or part of the instant appeal. DISCUSSION On appeal, mother challenges the juvenile court’s findings at the October 29, 2019 hearing that DCFS made active efforts and that returning the children to mother’s custody would create a substantial risk of detriment to them. In particular, mother argues that the juvenile court was required to make specific and detailed factual findings regarding DCFS’s active efforts and that the evidence does not support the lower court’s active efforts finding. Additionally, she contends the juvenile court erred in finding that returning the children to her custody would create a substantial risk of detriment to them because a qualified expert witness did not testify at the October 29, 2019 hearing and there was no stipulation to allow expert testimony by declaration. As a threshold matter, DCFS argues that “mother’s failure to specify she was challenging the court’s finding that returning the children to her custody would create a substantial risk of detriment to them in her notice of appeal renders the notice of appeal insufficient to raise that challenge on appeal.” Mother’s notice of appeal provides in pertinent part: “I appeal from the findings and orders of the court (specify date of order or describe order): On 10-29-19, the Court found active efforts by the Department and set the matter for a 22 hearing.” (Italics added.) Because the juvenile court could not have set the matter for a hearing pursuant to section 366.22 unless it rendered the detriment finding, we conclude that mother’s notice of appeal encompasses her challenge to the detriment finding. (See § 366.21, subds. (f)(1) & (g)(1) [“After considering the relevant 10 and admissible evidence, the court shall order the return of the child to the physical custody of his or her parent or legal guardian unless the court finds, by a preponderance of the evidence, that the return of the child to his or her parent or legal guardian would create a substantial risk of detriment to the safety, protection, or physical or emotional well-being of the child. . . . [¶] . . . [¶] If . . . a child is not returned to the custody of a parent or legal guardian at the permanency hearing held pursuant to subdivision (f), the court shall . . . [¶] . . . [c]ontinue the case for up to six months for a permanency review hearing . . . .”]; § 366.22, subd. (a)(1) [“When a case has been continued pursuant to paragraph (1) . . . of subdivision (g) of Section 366.21, the permanency review hearing shall occur within 18 months after the date the child was originally removed from the physical custody of his or her parent or legal guardian.”]; In re J.F. (2019) 39 Cal.App.5th 70 , 75 (J.F.) [“A notice of appeal shall be ‘ “liberally construed so as to protect the right of appeal if it is reasonably clear what [the] appellant was trying to appeal from, and where the respondent could not possibly have been misled or prejudiced.” ’ ”].) Although DCFS insists “[i]t was . . . not reasonably clear from her trial counsel’s argument before the juvenile court that the mother would challenge the juvenile court’s finding of detriment on appeal,” this argument conflates the sufficiency of mother’s notice of appeal with the forfeiture doctrine. (See In re Anthony Q. (2016) 5 Cal.App.5th 336 , 345 [“[T]he forfeiture doctrine applies in dependency cases and the failure to object . . . on a specific ground generally forfeits a parent’s right to pursue that issue on appeal [citations] . . . .”].) 11  Next, we must determine whether the rulings and findings made at the August 28, 2020 hearing render any portion of mother’s appeal moot. For the reasons discussed below, we conclude that mother’s appeal is moot insofar as it concerns (a) C.F., Jr. and (b) the October 29, 2019 finding that mother poses a substantial risk of detriment to the other four children. Furthermore, as explained in greater detail below, we affirm the juvenile court’s October 29, 2019 finding of active efforts because that court was not required to render specific and detailed findings on that question, the substantial evidence standard governs, and mother fails to establish that the juvenile court’s active efforts finding does not meet that standard. A. Mother’s Appellate Challenges Relating to C.F., Jr. and the Detriment Finding Are Moot, Whereas Her Challenge to the Active Efforts Finding Is Not “As a general rule, it is a court’s duty to decide ‘ “ ‘actual controversies by a judgment which can be carried into effect, and not to give opinions upon moot questions or abstract propositions, or to declare principles or rules of law which cannot affect the matter in issue in the case before it. ’ ” ’ [Citation.] An appellate court will dismiss an appeal when an event occurs that renders it impossible for the court to grant effective relief. [Citation.]” (In re N.S. (2016) 245 Cal.App.4th 53 , 58–59 (N.S.).) “ ‘ “An issue is not moot if the purported error infects the outcome of subsequent proceedings.” ’ ” (In re E.T. (2013) 217 Cal.App.4th 426 , 436.) DCFS contends that the juvenile court’s August 28, 2020 active efforts finding and its decision to terminate reunification services moots mother’s challenge to the October 29, 2019 active 12 efforts finding.7 After briefing closed, we requested supplemental briefing on whether the juvenile court’s August 28, 2020 findings and orders mooted her appeal concerning (a) C.F., Jr. and (b) the detriment finding made at the October 29, 2019 hearing. At the August 28, 2020 hearing, the juvenile court made no active efforts finding with respect to C.F., Jr., and the court terminated mother’s reunification services relating to C.F., Jr. “as a matter of law because [C.F., Jr.] is 18 years old.” The court retained jurisdiction over C.F., Jr. after classifying him as a nonminor dependent. Mother maintains that her appeal concerning C.F., Jr. is not moot because “[t]he juvenile court did not terminate jurisdiction and may retain jurisdiction until C.F., Jr.[ ] is 21.” (Citing § 303, subd. (a).) The dispositive issue is not, however, whether the juvenile court still has jurisdiction over C.F., Jr. Rather, it is whether we can offer “effective relief” to mother. (See N.S., supra, 245 Cal.App.4th at pp. 58–59.) As it is undisputed that C.F., Jr. has reached the age of majority, he is no longer an “Indian child” subject to the protections of ICWA and its related state law provisions. (See In re Elizabeth M. (2018) 19 Cal.App.5th 768 , 784 [“For purposes of ICWA, an ‘Indian child’ is an unmarried individual under age 18 7 DCFS moved to dismiss the entirety of mother’s appeal on this ground. We elected to rule on DCFS’s motion together with the merits of mother’s appeal. For the reasons discussed in this section, although we deny DCFS’s motion, we dismiss aspects of mother’s appeal as moot for reasons not raised in DCFS’s motion but briefed in response to our requests for supplemental briefing pursuant to Government Code section 68081. 13 who is either a member of a federally recognized Indian tribe or is eligible for membership in a federally recognized tribe and is the biological child of a member of a federally recognized tribe.”]; In re Melissa R. (2009) 177 Cal.App.4th 24 , 34 (Melissa R.) [“ICWA applies only when an ‘Indian child’ is the subject of a ‘child custody proceeding,’ as those terms are defined by the Act.”].) In particular, DCFS may continue C.F., Jr.’s placement in foster care without first showing that it made active efforts to prevent the breakup of the Indian family or that returning him to mother’s care would likely result in serious emotional or physical damage to him. (See A.L., supra, 243 Cal.App.4th at pp. 638, 645, citing 25 U.S.C. § 1912 (d) & Welf. & Inst. Code, § 361.7, subds. (a) & (c).) In fact, now that C.F., Jr. has been declared a nonminor dependent and the juvenile court has terminated mother’s reunification services, the lower court will instead “focus[ ] on the goals and services described in the youth’s transitional independent living case plan . . . .” (See § 366.31, subd. (c).) Additionally, although a detriment finding made at a section 366.21, subdivision (f) review hearing could result in the termination of parental rights, the juvenile court chose not to schedule a hearing under section 366.26 for C.F., Jr. (See § 366.26, subds. (c)(1) & (c)(2)(B)(ii) [providing that a juvenile court’s detriment findings are relevant to its decision whether to terminate the rights of a parent of an Indian child]; see also § 361.6, subd. (a) [“The nonminor dependent’s legal status as an adult is, in and of itself, a compelling reason not to hold a hearing pursuant to Section 366.26.”].) In short, the juvenile court’s prior findings that DCFS engaged in active efforts to prevent the breakup of C.F., Jr.’s 14 Indian family and that returning him to mother would create a substantial risk of detriment to him have no apparent impact on C.F., Jr.’s future dependency proceedings. It follows that mother’s appeal regarding C.F., Jr. is moot. (Cf. Melissa R., supra, 177 Cal.App.4th at pp. 33–34 [holding that a mother’s appellate claim that a child welfare agency failed to comply with ICWA’s notice requirements was moot because the child later reached age 20 and thus was “no longer . . . an ‘Indian child’ who could be subject to ICWA proceedings if the orders . . . challenge[d] in this appeal were reversed”].) Mother’s challenge to the October 29, 2019 detriment finding regarding the other four children is moot as well. At the August 28, 2020 hearing, the juvenile court once again found clear and convincing evidence that returning M.A., A.A., N.A., and J.A. would create a substantial risk of detriment to them, and scheduled a section 366.26 hearing for these four children. “[O]rdinarily ‘[an] order [setting a section 366.26 hearing] is not appealable; direct appellate consideration of the propriety of the setting order may be had only by petition for extraordinary writ review of the order.’ ” (See In re S.S. (2020) 55 Cal.App.5th 355 , 370; § 366.26, subd. (l)(1) [“An order by the court that a hearing pursuant to this section be held is not appealable at any time unless all of the following apply: [¶] . . . [(inter alia) a] petition for extraordinary writ review was filed in a timely manner.”].) This limitation applies to “ ‘[a]ll court orders, regardless of their nature, [that are] made at a hearing in which a section 366.26 permanency planning hearing is set,” along with “findings made at the time reunification services are terminated . . . .” (See A.L., supra, 243 Cal.App.4th at pp. 639–640.) “However, the court must give the parent notice 15 of the writ requirement and a failure to do so provides good cause for allowing [an] appeal [of the order].” (See S.S., supra, at p. 370.) We take judicial notice of the juvenile court’s records, which reveal that mother has not filed a notice of her intent to file a writ petition challenging the August 28, 2020 orders concerning the four children. (Evid. Code, §§ 452, subd. (d), 459.) Indeed, mother concedes that she did not seek appellate review of the August 28, 2020 orders. Furthermore, each of the four August 28, 2020 minute orders includes a clerk’s certificate of mailing indicating that on the date of the hearing, the following materials were mailed to mother: “Notice of entry of the above minute order of August 28, 2020 and appeal rights, notice of intent to file writ, [and] petition for extraordinary writ form(s).” (Boldface & capitalization omitted.) Mother does not claim the juvenile court failed to provide adequate notice of the writ requirement. Thus, the deadline for mother to seek writ relief has expired, and she will be unable to seek appellate review of the August 28, 2020 detriment finding in the future.8 (See A.L., supra, 8 Mother suggests in her supplemental briefing that a reversal of the October 29, 2019 detriment finding would automatically invalidate the August 28, 2020 orders and findings. Yet, mother does not cite any authority establishing she may circumvent the statutory requirement to seek writ relief to be able to challenge an order setting a section 366.26 hearing. (See also A.L., supra, 243 Cal.App.4th at p. 639 [emphasizing the importance of section 366.26, subdivision (l)(1)’s limitation on appellate relief as it “ensures that challenges to findings made at the time reunification services are terminated are resolved expeditiously, and do not interfere with later proceedings”].) 16 243 Cal.App.4th at pp. 639–640 [holding that a mother was barred from challenging an active efforts finding made in an order setting a section 366.26 hearing because she did not contest it via a writ petition and she did “not allege defective notice of her right to obtain review” of that order]; Cal. Rules of Court, rule 8.450(e)(4)(B) [“[T]he notice of intent must be filed within 12 days after the date the clerk mailed the notification.”].) Furthermore, even if we reversed the finding made at the October 29, 2019 hearing that returning the four children to mother’s custody would create a substantial risk of detriment to them, the August 28, 2020 detriment finding alone would “constitute a sufficient basis for termination of parental rights” if “it is likely the child[ren] will be adopted,” unless a specific statutory exception applies (e.g., the court finds a “compelling reason” for determining that termination would be detrimental to the children). (See § 366.26, subd. (c)(1).) In light of that fact, and the fact that mother fails to explain how she could nonetheless obtain effective relief on her challenge to the October 29, 2019 detriment finding, we conclude that appellate claim is moot. Next, DCFS argues that the August 28, 2020 active efforts finding and the order terminating reunification services moot mother’s appeal of the October 29, 2019 active efforts finding concerning M.A., A.A., N.A., and J.A. This argument is unavailing. Section 366.26, subdivision (c)(2)(B)(i) provides in pertinent part: “The court shall not terminate parental rights if: [¶] . . . [¶] [i]n the case of an Indian child: [¶] . . . [a]t the hearing terminating parental rights, the court has found that active 17 efforts were not made as required in Section 361.7.”9 (§ 366.26, subd. (c)(2)(B)(i).) This provision “explicitly allows the issue [of whether the agency made active efforts] to be addressed at the permanency planning hearing” held under section 366.26, even though the juvenile court would have already addressed the issue at prior review hearings. (See A.L., supra, 243 Cal.App.4th at pp. 640–641.) Further, section 361.7 does not place any temporal limitation on the juvenile court’s active efforts analysis at the section 366.26 hearing, meaning that it can include time periods preceding the one covered by the August 28, 2020 review hearing. (See § 361.7, subd. (a); see also A.L., supra, 243 Cal.App.4th 628 , 642–645 [considering the child welfare agency’s conduct “throughout the proceedings” to determine whether it made “active efforts” for the purposes of sections 361.7 and 366.26, subdivision (c)(2)(B)(i)].) As a consequence, the juvenile court’s prior active efforts finding is relevant to the analysis required by section 366.26, subdivision (c)(2)(B)(i). 9 Section 361.7, subdivision (a) requires that “a party seeking an involuntary foster care placement of, or termination of parental rights over, an Indian child . . . provide evidence to the court that active efforts have been made to provide remedial services and rehabilitative programs designed to prevent the breakup of the Indian family and that these efforts have proved unsuccessful.” (§ 361.7, subd. (a).) Subdivision (b) in turn provides: “What constitutes active efforts shall be assessed on a case-by-case basis. The active efforts shall be made in a manner that takes into account the prevailing social and cultural values, conditions, and way of life of the Indian child’s tribe. Active efforts shall utilize the available resources of the Indian child’s extended family, tribe, tribal and other Indian social service agencies, and individual Indian caregiver service providers.” (Id., subd. (b).) 18 Because reversal of the October 29, 2019 active efforts finding may affect whether the juvenile court decides to terminate mother’s parental rights over M.A., A.A., N.A., and J.A., that aspect of her appeal is not moot. For these reasons, we dismiss as moot mother’s challenges concerning (a) C.F., Jr. and (b) the October 29, 2019 detriment finding relating to C.F., Jr.’s four siblings. We thus next reach the merits of mother’s claim that the juvenile court erred in finding at the October 29, 2019 hearing that DCFS made active efforts to reunite her with M.A., A.A., N.A., and J.A. B. The Juvenile Court Did Not Err in Failing to Make Specific and Detailed Findings Regarding DCFS’s Active Efforts Mother argues that the juvenile court erred in failing to make “specific” findings regarding DCFS’s active efforts, and that the court instead “merely recited ‘active efforts’ had been made, without detail” and “did not make the second half of the finding that they were unsuccessful.”10 Mother claims that Title 25 United States Code section 1912(d); 25 Code of Federal 10 Although the juvenile court did not explicitly find that DCFS’s active efforts were unsuccessful, that finding is implicit in the court’s conclusion that returning the children to mother’s custody “would create a substantial risk of detriment to the child[ren], creating a continued necessity for and appropriateness of the current placement.” (See Discussion part C, post [holding that the substantial evidence standard applies to the active efforts finding]; In re S.R. (2020) 48 Cal.App.5th 204 , 219 [“ ‘ “ ‘[Under the substantial evidence standard,] we draw all reasonable inferences from the evidence to support the findings and orders of the dependency court[.]’ ” ’ ”].) 19 Regulations part 23.120(a) and (b); Welfare and Institutions Code section 361.7, subdivision (a); and California Rules of Court, rule 5.485(c) obligated the juvenile court to make specific and detailed findings. Thus, mother raises a legal question that is subject to de novo review. (See In re R.C. (2011) 196 Cal.App.4th 741 , 748 [“[T]he proper interpretation of a statute and the application of the statute to undisputed facts are questions of law, which we review de novo.”]; Hoitt v. Department of Rehabilitation (2012) 207 Cal.App.4th 513 , 522 (Hoitt) [“Issues of law[,] . . . including the interpretation of applicable statutes or regulations, are for the courts to resolve de novo.”]; In re William M.W. (2019) 43 Cal.App.5th 573 , 583 (William M.W.) [“We independently review interpretations of California Rules of Court, applying the usual rules of statutory construction.”].) None of the aforementioned provisions explicitly states that the juvenile court shall make specific and detailed findings regarding the active efforts undertaken by a child welfare agency. Title 25 United States Code section 1912(d) simply provides that “[a]ny party seeking to effect a foster care placement of, or termination of parental rights” bears the burden of showing that “active efforts have been made to provide remedial services and rehabilitative programs designed to prevent the breakup of the Indian family” and that those efforts proved to be unsuccessful. (See 25 U.S.C. § 1912 (d).) In turn, 25 Code of Federal Regulations part 23.120(a) requires the juvenile court to find that active efforts have been made but proved to be unsuccessful at preventing the breakup of the Indian family before it may order an involuntary foster care placement or the termination of parental rights, and subdivision (b) provides that “[a]ctive efforts must be documented in detail in the record.” (See 25 C.F.R. part 20 23.120(a) & (b) (2019), italics added.) Section 361.7, subdivision (a) essentially restates Title 25 United States Code section 1912(d)’s and 25 Code of Federal Regulations part 23.120’s requirements. (§ 361.7, subd. (a).) Additionally, although California Rules of Court, rule 5.485(c) further expounds on the meaning of “active efforts” and reiterates that “[t]he active efforts must be documented in detail in the record,” it does not state that a juvenile court must make specific and detailed findings concerning an agency’s active efforts. (See Cal. Rules of Court, rule 5.485(c) [“These active efforts must include affirmative, active, thorough, and timely efforts intended primarily to maintain or reunite the child with his or her family, must be tailored to the facts and circumstances of the case, and must be consistent with the requirements of Welfare and Institutions Code section 224.1(f).”].) We cannot “rewrite” these provisions “to conform to an assumed intention which does not appear from [their] language.” (See People v. Haney (1984) 156 Cal.App.3d 109 , 115 [construing a statute]; see also Hoitt, supra, 207 Cal.App.4th at p. 523 [“Rules of statutory construction govern our interpretation of regulations promulgated by administrative agencies.”]; William M.W., supra, 43 Cal.App.5th at p. 583 [holding that “the usual rules of statutory construction” apply to the California Rules of Court].) Mother argues that we should impose specific and detailed findings requirement because an appellate court could not otherwise conduct a “meaningful” review of an active efforts finding. This assertion is without merit, given that the Court of Appeal has had no difficulty reviewing the record evidence to determine whether to uphold active effort findings. (See, e.g., A.L., supra, 243 Cal.App.4th at pp. 636–637, 642–645 [concluding 21 that “[i]t [was] clear from the record that the services provided to [the mother] constituted active efforts,” even though the juvenile court did not even make an active efforts finding at the hearing in question]; C.F. v. Superior Court (2014) 230 Cal.App.4th 227 , 237, 239–242 (C.F.) [affirming an active efforts finding that lacked detail and specificity].) Mother’s reliance on a Montana Supreme Court decision is not well-founded. (See In re B.Y. (2018) 393 Mont. 530 , 534–535.) First, it is not authoritative precedent as to the interpretation of federal or California law. (See Wang v. Nibbelink (2016) 4 Cal.App.5th 1 , 19 [“While cases from other states are not binding on us [citation], California courts may adopt other states’ construction of uniform laws to promote consistency.”]; People v. Mays (2009) 174 Cal.App.4th 156 , 164–167 [stating, in the course of addressing a federal and state due process claim, that “we are not bound by cases from other states”].) Second, it rests on the unexplained assumption that ICWA obligates juvenile courts to make specific and detailed active efforts findings, a premise we have already rejected.11 Additionally, the other decisions she cites for this specific and detailed findings requirement are wholly inapposite. (Citing Oakland Raiders v. National Football League (2007) 41 Cal.4th 624 , 634 [interpreting a statute that 11 Mother also cites an unpublished decision from the Supreme Court of Alaska. We decline to consider this case because it is not citable authority. (See Hawran v. Hixson (2012) 209 Cal.App.4th 256 , 287 [“While citing unpublished federal opinions does not violate the California Rules of Court [citation], there is no such allowance for unpublished opinions of other state courts. We decline to consider [an unpublished opinion from a Delaware State Court of Chancery].”].) 22 explicitly requires a trial court to issue a “ ‘specification of reasons’ ” if it decides to grant a new trial motion]; C.S. v. Superior Court (2018) 29 Cal.App.5th 1009 , 1028–1029 [holding that “[p]rinciples of due process” required the juvenile court to include a statement of reasons with an order to transfer the matter to “adult/criminal court”].) For these reasons, we hold that the juvenile court did not err in failing to make specific and detailed findings supporting its conclusion that DCFS made active efforts to prevent the breakup of the Indian family. C. The Substantial Evidence Standard of Review Applies to Mother’s Challenge to the Evidentiary Sufficiency of the Juvenile Court’s Active Efforts Finding Before reaching the merits of mother’s challenge to the sufficiency of the evidence supporting the juvenile court’s October 29, 2019 active efforts finding, we must determine the applicable standard of review. Mother relies upon a Fourth District decision holding that this issue is a question of law that we decide independently, (citing A.L., supra, 243 Cal.App.4th at p. 639), whereas DCFS contends the First District correctly adopted the substantial evidence standard. (Citing C.F., supra, 230 Cal.App.4th at pp. 238–239.) A.L.’s holding rests on the premise that de novo review is appropriate because “ ‘[w]hether active efforts were made is a mixed question of law and fact.’ ” (See A.L., supra, 243 Cal.App.4th at pp. 638–639.) Conversely, C.F. reasoned that the juvenile court’s active efforts inquiry is analogous to its decision regarding whether the child welfare agency provided reasonable reunification services, and that a reasonable services 23 finding is subject to substantial evidence review on appeal. (See C.F., supra, 230 Cal.App.4th at p. 239.) We find C.F.’s reasoning persuasive. We acknowledge there is an ongoing dispute as to whether a child welfare agency’s duty to make active efforts is more rigorous than its generally applicable duty to offer reasonable reunification services. (See A.L., supra, 243 Cal.App.4th at p. 643 [noting that the Bureau of Indian Affairs has issued guidance arguably suggesting that the active efforts standard is higher than the standard applicable to reunification services, but declining to take a position on this issue].) Regardless of whether that is the case, we conclude that the juvenile court’s active efforts analysis is sufficiently akin to the reasonable reunification services inquiry that the two should be reviewed under the same appellate standard. Specifically, in order to determine whether the child welfare agency made active efforts or offered reasonable services, the juvenile court must conduct a fact-intensive assessment of the circumstances of the case.12 Because the juvenile court is in the best position to undertake that assessment, the deferential substantial evidence standard is appropriate. (Cf. 27A Cal.Jur.3d (2019) Delinquent and Dependent Children, § 491 [“[In a juvenile criminal adjudication 12 (See A.L., supra, 243 Cal.App.4th at p. 643 [noting that “ ‘ “[t]he adequacy of reunification plans and the reasonableness of [the Agency’s] efforts [in an ICWA case] are judged according to the circumstances of each case,” ’ ” third bracketed insertion added]; In re D.N. (Oct. 27, 2020, B302910) ___ Cal.App.5th ___, ___ [2020 Cal.App.Lexis 1016, at p. *40, & fn. 19] [observing that reasonable services have been offered if they “ ‘were reasonable under the circumstances’ ”].) 24 proceeding], as in any other criminal appeal, a reviewing court is in no position to weigh any conflicts or disputes in the evidence.”].) D. Substantial Evidence Supports the Juvenile Court’s Finding that DCFS Made Active Efforts To satisfy its obligation to make active efforts, “ ‘[t]he [child welfare a]gency “must make a good faith effort to develop and implement a family reunification plan. [Citation.] ‘[T]he record should show that the supervising agency identified the problems leading to the loss of custody, offered services designed to remedy those problems, maintained reasonable contact with the parents during the course of the service plan, and made reasonable efforts to assist the parents in areas where compliance proved difficult . . . .’ ” ’ ” (A.L., supra, 243 Cal.App.4th at p. 638.) “These active efforts must include affirmative, active, thorough, and timely efforts, intended primarily to maintain or reunite the child with his or her family . . .” (Cal. Rules of Court, rule 5.485(c)), including the identification of “appropriate services” and “community resources” for the Indian family. (See § 224.1, subds. (f)(2) & (f)(8).) Under the substantial evidence standard applicable to an appellate challenge to an active efforts finding, “ ‘ “ ‘we review the record in a light most favorable to the judgment and must uphold the trial court’s findings unless it can be said that no rational factfinder could reach the same conclusion.’ ” ’ ” (C.F., supra, 230 Cal.App.4th at p. 239.) Mother claims the juvenile court’s active efforts finding is not supported by substantial evidence because: (1) DCFS “did not engage in any effort at all to clarify the [case] plan[s],” which “were confusing and internally inconsistent”; (2) DCFS 25 rejected mother’s certified addiction specialist because the agency erroneously believed the court had ordered mother to participate in individual counseling with a licensed mental health provider; and (3) “DCFS continued to oppose and not approve mother’s participation in the methadone program,” and “did not determine if there was another program which would incorporate the physician-approved methadone treatment mother had been receiving for years.” None of these arguments is persuasive. We acknowledge that the case plans for M.A., A.A., N.A., and J.A. could have been better written. Mother correctly observes that “[n]o two case plans were identical” and they contained numerous inconsistencies and vague and ambiguous instructions, including the fact that only A.A.’s, N.A.’s, and J.A.’s case plans had an individual counseling requirement, and that only N.A.’s and J.A.’s case plans stated that the individual counseling was intended to address case issues. Nonetheless, if mother believed that any aspect of these case plans required clarification and/or modification, then it was incumbent on mother’s counsel to seek relief from the juvenile court.13 (See Cal. Rules of Court, rule 5.660(d) [“Every party in a dependency proceeding who is represented by an attorney is entitled to competent counsel. [¶] . . . [¶] Attorneys or their agents are expected to meet regularly with clients, . . . to contact social workers and other professionals associated with the client’s case, 13 It appears that prior to the October 29, 2019 hearing, mother’s counsel did not discharge that obligation. Rather, the juvenile court intimated at the September 18, 2019 hearing that it discovered “there was an issue as to . . . what the case plans were” when it “read the transcript” of the hearing at which it had imposed the case plans. 26 [and] to work with other counsel and the court to resolve disputed aspects of a case without contested hearing.”].) Mother does not cite any authority establishing that ICWA and/or its related state law provisions shift this duty from her counsel to DCFS. (See J.F., supra, 39 Cal.App.5th at p. 79 [“The juvenile court’s orders are ‘presumed to be correct, and it is appellant’s burden to affirmatively show error.’ [Citations.] ‘ “Appellate briefs must provide argument and legal authority for the positions taken.” [Citation.]’ ”].) Second, although we agree with mother that the case plans did not require that her individual counseling sessions be conducted by a licensed mental health provider,14 we nonetheless uphold the juvenile court’s active efforts finding. The active efforts standard does not require perfection on the part of the child welfare agency; rather, it requires “ ‘ “a good faith effort to develop and implement a family reunification plan.” ’ ” (See A.L., supra, 243 Cal.App.4th at p. 638; see id. at p. 645 [affirming an active efforts finding even though “the Agency might have done more to assist” the mother].) While “ ‘merely draw[ing] up a reunification plan and leav[ing] the mother to use her own resources to bring it to fruition’ ” would fall short of that standard, “ ‘provid[ing] the mother with the resources necessary to achieve the goals of her case plan’ ” is sufficient. (See C.F., supra, 230 Cal.App.4th at p. 240.) The December 3, 2018 status report shows that between October and November 2018, DCFS provided mother with the 14 Mother maintains “[t]his case arose because of domestic violence and substance abuse [citation], not mental health issues,” but does not claim the juvenile court erred in ordering her to participate in individual counseling. 27 contact information for United American Indian Involvement to allow her to enroll in its counseling sessions, and referred her to the American Indian Counseling Center. Furthermore, it is undisputed that on April 8, 2019, the agency told mother that she had already been referred to these programs, informed her that they offered individual counseling, and provided her with contact information for them. (See fn. 2 and its accompanying paragraph, ante.) There is also no dispute that DCFS provided her with the programs’ contact information once again on May 14, 2019. (See id.) In addition, the October 7, 2019 last minute information report indicates that DCFS re-referred mother to the American Indian Counseling Center on September 23, 2019. Applying the deferential substantial evidence standard, we conclude that DCFS provided mother with the resources necessary to satisfy the individual counseling requirement, and thus discharged its obligation to make active efforts to prevent the breakup of the Indian family. That mother failed to utilize these resources does not negate the adequacy of the agency’s efforts. (See C.F., supra, 230 Cal.App.4th at p. 242 [upholding an active efforts finding because, “despite the impediments caused by Mother’s continued failure to comply with her case plan, the Agency made some affirmative efforts to assist Mother” in doing so].) Mother’s failure to participate in the individual counseling programs is thus consistent with her lack of response to DCFS’s efforts to reunify her family and her apparent lack of interest in this case. Mother did not attend the October 29, 2019 and August 28, 2020 review hearings, even though the custody of her 28 children and her parental rights were at stake.15 Furthermore, evidence in the record shows that shortly before the children were detained on December 15, 2017, the children were hungry and lived in an unclean home, the children had failed to attend school for months, and, after the family was evicted from their home, mother failed to attend meetings with the wraparound team and refused a hotel voucher because she wanted to stay at a better hotel.16 Mother also missed at least five scheduled drug tests during the pendency of this case. In addition, during the review period covered by the October 29, 2019 hearing, she repeatedly missed or was late to scheduled visits with the children, and on the few occasions when mother did visit the children during that period, she often did not stay for the time allotted for these visits. Third, although mother also complains that “DCFS penalized [her] [by] requiring her to participate in an unrequired, 15 (See § 366.21, subds. (f)(1) & (g)(4) [providing that at the 12-month review hearing, “the court shall order the return of the child to the physical custody of his or her parent or legal guardian unless the court finds, by a preponderance of the evidence, that the return of the child to his or her parent or legal guardian would create a substantial risk of detriment” to the children, and that if the child is not returned at the hearing, the court may schedule a hearing under section 366.26]; § 366.22, subds. (a)(1) & (a)(3) [provisions governing 18-month review hearings, which are similar to section 366.21, subdivisions (f)(1) and (g)(4)].) 16 We derive the facts included in the textual sentence accompanying this footnote and in the following two sentences from admissions made in mother’s opening brief. (See Artal, supra, 111 Cal.App.4th at p. 275, fn. 2.) 29 full drug and alcohol program,” this purported misconduct on the part of DCFS has no bearing on the propriety of the juvenile court’s active efforts finding. Given that the juvenile court clarified at the October 29, 2019 hearing that it had not ordered mother to participate in a full drug and alcohol program, the agency’s efforts relating thereto could not have formed the basis of the active efforts finding. Furthermore, although mother’s briefing on this point is not altogether clear, she seems to argue that DCFS should have determined whether her therapy sessions with a certified addiction specialist satisfied the case plans’ individual counseling requirement. We reject that contention because as discussed earlier in this section, DCFS did not have to explore every conceivable means by which she could achieve the goals set forth in the case plan, but was simply required to provide her with the resources necessary to do so. (See C.F., supra, 230 Cal.App.4th at p. 240.) Accordingly, mother has failed to overcome the presumption of correctness afforded to the juvenile court’s October 29, 2019 active efforts finding with regard to M.A., A.A., N.A., and J.A. (See J.F., supra, 39 Cal.App.5th at p. 79 [“The juvenile court’s orders are ‘presumed to be correct, and it is appellant’s burden to affirmatively show error.’ [Citations.”].) 30  DISPOSITION For the foregoing reasons, we deny the Los Angeles County Department of Children and Family Services’s motion to dismiss as to mother’s challenge to the juvenile court’s active efforts findings made at the October 29, 2019 hearing; affirm the juvenile court’s active efforts findings made at the October 29, 2019 hearing in case Nos. CK58890D, CK58890G, CK58890H, and CK58890I; and dismiss the remainder of mother’s appeal as moot. NOT TO BE PUBLISHED. BENDIX, J. We concur: ROTHSCHILD, P. J. CHANEY, J. 31

2020-11-30 21:02:43.045002+00

https://www.courts.ca.gov/opinions/nonpub/F081747.PDF

Filed 11/30/20 E.W. v. Superior Court CA5 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIFTH APPELLATE DISTRICT E.W., F081747 Petitioner, (Super. Ct. No. 19JP-00049-A) v. THE SUPERIOR COURT OF MERCED OPINION COUNTY, Respondent; MERCED COUNTY HUMAN SERVICES AGENCY, Real Party in Interest. THE COURT* ORIGINAL PROCEEDINGS; petition for extraordinary writ review. Donald J. Proietti, Judge. E.W., pro. per., for Petitioner. No appearance for Respondent. Forrest W. Hansen, County Counsel, and Maile C. Dunlap, Deputy County Counsel, for Real Party in Interest. -ooOoo- * Before Smith, Acting P.J., Snauffer, J. and DeSantos, J.  Petitioner E.W. (father), in propria persona, seeks extraordinary writ review (Cal. Rules of Court, rule 8.452) of the juvenile court’s orders terminating his reunification services at a 12-month review hearing (Welf. & Inst. Code, § 366.21, subd. (f)(1))1 in September 2020 and setting a section 366.26 hearing on January 6, 2021, as to his now seven-year-old son by the same name (E.W.). Father contends the juvenile court failed to consider the restrictions imposed by COVID-19 in finding he was provided reasonable reunification services by the Merced County Human Services Agency (agency). Therefore, its findings and orders are error. We deny the petition. PROCEDURAL AND FACTUAL SUMMARY Dependency proceedings were initiated in April 2019 after E.W.’s former foster mother, S.R., petitioned for probate guardianship of then five-year-old E.W. In her moving papers, she alleged father had a problem with alcohol and drugs and was homeless and unemployed. The probate court asked the agency to investigate. On April 12, 2019, an agency social worker went to the home of Robert G. and Margie G., the paternal grandparents, where father and E.W. resided. Several days before her visit, the agency received a report that Robert struck E.W. and his half sibling. Margie said father was no longer living in her home, explaining he was an alcoholic and damaged their property. She suspected he was also using drugs. Robert said father slept all day while living with them and came home drunk. Margie said father was verbally abusive to E.W., referring to E.W. as “ ‘bit** and f*****,’ ” and hit and pushed him. Margie denied E.W. was physically abused but said he did not follow the house rules and his behavior was challenging. She and Robert were not physically and financially able to care for him. Father did not want to address the allegations in a telephone conversation with the social worker. Although he was difficult to understand and his speech was slurred, he 1 Statutory references are to the Welfare and Institutions Code. 2. denied being under the influence of drugs or alcohol. He was not able to provide an address where he was residing or make arrangements for E.W.’s care. According to a court order, he had sole legal and physical custody of E.W. E.W.’s mother said father had custody of E.W. because he “ ‘won the case.’ ” E.W. was removed from her in 2014 and father was granted sole custody after she failed to reunify. Father recently informed her he had been kicked out of his parents’ home and she may be able to take custody of E.W. Although she was more than willing to care for E.W., she was not employed and did not have the financial means to support him. E.W. did not want to return to Margie’s home because she was “ ‘mean’ ” and spanked him on the face with a belt. He wanted to live with his “ ‘babysitter forever.’ ” Father drank beer and alcohol “ ‘every day’ ” and broke things like a lamp, the front door and the bedroom door. Father fought with E.W.’s sister, Christina, and they punched and kicked each other. He remembered father pointing a knife at him, which father denied. Father said he used the knife as a “ ‘scaring tactic’ ” to show E.W. what a “ ‘bad guy looks like.’ ” E.W. had not seen his mother. The social worker took E.W. into protective custody and placed him with S.R. The agency filed a dependency petition seeking his removal under section 300. The parents appeared at the detention hearing and denied the allegations in the petition but submitted the matter for detention. The juvenile court found prima facie evidence to detain E.W. In May 2019, a social worker interviewed father by telephone. He said he was in San Jose and on his way to work. The social worker reported difficulty following his thought process and conversation. His speech was rapid, he had difficulty focusing on the topic and he expressed a flight of ideas. He denied any criminal history. He drank alcohol and smoked marijuana but denied abusing substances. He claimed people exaggerated his alcohol consumption and he smoked marijuana to relieve pain caused by arthritis, nerve damage and sciatica. Twelve years before, he was diagnosed with adult 3. attention deficit hyperactivity disorder (ADHD) and prescribed medication. He received disability for ADHD, posttraumatic stress disorder (PTSD) and a learning disability and had been treated by three or four psychiatrists. He lost his disability status, however, after failing to provide proof. The agency recommended the juvenile court sustain the petition and offer father reunification services to treat his substance abuse, mental health issues and instability but deny mother services because of her untreated substance abuse and mental illness. (§ 361.5, subd. (b)(10) & (11).) In July 2019, the juvenile court convened a contested jurisdictional/dispositional hearing. Mother requested the hearing but did not appear and the court denied her attorney’s request to continue it. The court sustained the petition and adopted the agency’s recommendations regarding reunification services. Father’s services plan required him to demonstrate sobriety, provide E.W. a safe and secure home and stabilize his ADHD and PTSD symptoms. Specifically, he was required to participate in mental health counseling, complete a drug and alcohol assessment and participate in random substance abuse testing. At the six-month review hearing, father was homeless and staying with friends in Merced. He was employed part time at a liquor store and as security for an event planning company. He completed a drug and alcohol assessment in October 2019 and did not meet the criteria for treatment. He failed to test several times and tested positive for methamphetamine and amphetamine in July and amphetamine in October 2019. He attributed the positive test results to medication he was taking, which was prescribed in March 2018. The agency asked him to provide a current prescription, which he had not done. Father did not complete a mental health assessment and missed seven visits with E.W., which was upsetting for E.W. However, when father did visit, he was encouraging and attentive. Father was hoping to get a better paying job so he could get a home for himself and E.W. E.W. said he missed father and wanted to go home. 4.  The juvenile court continued reunification services for father at the six-month review hearing in December 2019. The agency recommended the juvenile court terminate reunification services at the 12-month review hearing. Father reported in March 2020 he was still homeless, renting rooms when he could. He had not been able to work since everything shut down for COVID-19. He was inconsistent with visiting and calling E.W. On March 12, 2020, during a meeting with the social worker, he agreed to one monthly in-person visit and weekly video chat visits. However, on March 18, he was notified that all face-to-face contact was suspended due to COVID-19. He was encouraged to increase contact with E.W. by telephone or video chat. However, he did not have any contact with E.W. until June 2020. He also failed to test on several occasions in January and February 2020 and was not participating in mental health counseling. He explained he no longer had Medi- Cal and was unable to get a new prescription. The social worker gave him a telephone number and information to apply for Medi-Cal online. Father said he was not having any major issues with PTSD or ADHD and was using marijuana to treat his mental and physical health. He said he wanted E.W. in his custody but was struggling to find a home and work while reunifying. He was considering giving custody to S.R. Father requested a contested 12-month review hearing, which the juvenile court conducted on September 15, 2020. Father testified he was living in a sober living home in Merced and working. He obtained health insurance three months before, was attending Alcoholics Anonymous (AA) meetings and had been seeing a psychiatrist for approximately a month. He missed drug tests in January and February 2020 because he was traveling between Merced and San Jose and was homeless. He tested as soon as he established an address and the social worker was able to locate a testing facility near him. On March 8, he tested positive for marijuana and failed to test on March 26. He did not submit to hair follicle testing in Merced County on March 26 because he was in San Jose working and “San Jose only did urine.” He moved back to Merced in May. Since 5. March 26, he submitted to two hair follicle and urine tests. He did not know the test results and denied using drugs. He was unable to obtain mental health treatment sooner because he was homeless and trying to find employment. He found three jobs in San Jose but was only working at one of them because of COVID-19. Additionally, he did not have insurance for mental health services. Even after he obtained health insurance, there was a delay in scheduling an appointment. Visits were going “great.” However, during a recent visit, E.W. was “depressed” and “sad.” He cried and did not want to play. He kept asking father to “hurry up and get a place.” Father stayed involved with E.W.’s activities and only missed visits because of work conflicts or issues related to S.R. On cross-examination, father testified he had been taking medication for 12 years. He was unable to get a doctor to give him a prescription in February 2020 because there were changes in psychiatric staffing. Father started drinking alcohol when he was 12 and considered himself an alcoholic. Any missed tests were because he was out of town trying to find work not because he was under the influence. The social worker was unable to reach him in February 2020 because he lost his phone. He recalled the social worker attempting to set up an in-person visit with him in mid-June and telling her he was having phone problems. He did not recall drinking and calling E.W. during the Fourth of July weekend and telling him the social worker was “messed up” and responsible for E.W.’s inability to return to his custody. He told E.W. that it was not his (father’s) fault, the social worker made reports that she gave to the court. Asked whether he remembered rescheduling a visit in July at the park, he said he remembered rescheduling a visit. He did not remember it was in July. The social worker attempted instead to arrange a telephone call, but father did not answer the phone. He explained he was working moving furniture and trying to keep his phone charged. He regretted missing the call and tried to call back 10 minutes later but no one answered. He did not remember a phone call on August 10 that had to be ended because he was using foul language or calling on August 18 to cancel a visit and using foul language with the social 6. worker. He admitted calling E.W. after having a few drinks but denied yelling at E.W. during a conversation in late August. Social worker Heather Rosa testified there were no documented video chats or telephone calls between father and E.W. during the month of April 2020. His first telephone call occurred on May 30. She confirmed the reports that father sounded drunk, used foul language and yelled during telephone conversations. After the conversation on August 26, E.W. commented to the social worker that father sounded drunk. County counsel argued for the termination of father’s reunification services. He received 17 months of services but had not changed. His alcohol abuse continued, and he minimized and excused his behavior. He did not maintain regular contact with E.W. and only recently engaged in mental health treatment. There was not a substantial probability E.W. could be returned to father’s custody within the next month if the court continued services. Minor’s attorney joined in the recommendation of county counsel. Father’s attorney argued father had made changes. He was residing in a sober-living environment, attending AA meetings and receiving psychiatric treatment. He accomplished these changes while struggling to find housing and maintain employment, which she argued demonstrated his commitment to E.W. She argued there was a substantial probability he would be in a better position to reunify with E.W. even within a month. The juvenile court found it would be detrimental to return E.W. to father’s custody, the department provided him reasonable reunification services but he failed to participate regularly and make substantive progress and there was not a substantial probability he could be safely returned to father’s custody by the 18-month review hearing. The court addressed COVID-19, stating: “… I was looking through [father’s] statements and testimony, … whether or not there have been significant changes that would be worthy of continuing services, even for a short period of time, on the prospect that reunification could occur. [¶] And, frankly, over the last 17 months, the only real change is this recent development where [father] has located 7.  housing in a sober-living group. [¶] I’m not convinced he is going to AA on a regular basis. By his own testimony, it was a bit unclear and convoluted, but he did say that it’s part of the program but that they weren’t actually doing it or encouraged not to do it during the COVID-19. “ … [Father] was very quick to offer throughout his testimony many excuses, including COVID-19. But that doesn’t answer all of the concerns that were raised, including all of the requests to test for alcohol or drugs that were either refused, denied, or just not responded to. Did not answer the periods of time where there was no visitation or even contact of a telephone nature over a significant period of time between mid-March until May the 30th. “It doesn’t answer the opportunities that were given to him to have in-person contacts in June and July. It doesn’t answer the concerns about his conduct in talking to his son, who is of an age that can’t possibly understand at age seven all of the concerns that exist, other than his father wanting to reunify with him. “But to disparage the social worker, to tell his son that whatever somebody else puts in a report nobody else is going to believe him, to create that kind of anxiety and concern and worry about what’s in the child’s best interests, is simply a situation where [father], himself, is expressing his lack of commitment, his lack of belief that he can truly change. “I’m glad he’s getting psychiatric help, but it just started. And so he’s at the very beginning again of something that it sounds like he desperately needs. [¶] … [¶] “I do understand [father] trying to work, trying to get back on his feet, trying to get insurance, which he did get in May, but didn’t actually get the mental health care and medication for a few more months, even though he apparently had the Medi-Cal insurance to do so as early as May.” This petition ensued. DISCUSSION Father contends “COVID[-]19 interfered with my ability to participate in the ordered services, but the court declined to consider the impact the pandemic had[.]” The record does not support his claim. 8.  At the 12-month review hearing, if the child is not returned to his or her parent’s custody, the juvenile court must determine whether the services offered were designed to aid the parent in overcoming the problems that led to the initial removal of the child. (§ 366.21, subd. (f)(1)(A).) There is no one-size fits all solution. “[T]he record should show [the department] identified the problems leading to the loss of custody, offered services designed to remedy those problems, maintained reasonable contact with the parents during the course of the service plan, and made reasonable efforts to assist the parents in areas where compliance proved difficult.” (In re Riva M. (1991) 235 Cal.App.3d 403 , 414.) “The court shall not order that a hearing pursuant to [s]ection 366.26 be held unless there is clear and convincing evidence that reasonable services have been provided or offered to the parent or legal guardian.” (§ 366.21, subd. (g)(1)(C)(ii).) “When a finding that reunification services were adequate is challenged on appeal, we review it for substantial evidence.” (In re Alvin R. (2003) 108 Cal.App.4th 962 , 971.) “[A]n appellate court must account for the clear and convincing standard of proof when addressing a claim that the evidence does not support a finding made under this standard. When reviewing a finding that a fact has been proved by clear and convincing evidence, the question before the appellate court is whether the record as a whole contains substantial evidence from which a reasonable fact finder could have found it highly probable that the fact was true. In conducting its review, the court must view the record in the light most favorable to the prevailing party below and give appropriate deference to how the trier of fact may have evaluated the credibility of witnesses, resolved conflicts in the evidence, and drawn reasonable inferences from the evidence.” (Conservatorship of O.B. (2020) 9 Cal.5th 989 , 1011.) We conclude substantial evidence supports the court’s finding. Notably, father does not fault the department for failing to help him access services. He simply claims the limitations imposed by the statewide shutdown caused by 9. the pandemic prevented him from participating in services. However, as the juvenile court explained, the evidence does not bear that out. E.W. was removed from father’s custody because he was struggling with alcohol addiction. After nearly a year and a half of services, very little had changed. He was still drinking to inebriation, as evidenced by his slurred speech during telephone conversations, and was doing little to nothing to help himself. He testified he was attending AA meetings, but the court did not find him credible, and he was not testing for drugs and alcohol. His excuse, however, was not that COVID-19 prevented him from testing but that he was unsettled and moving between Merced and San Jose. Father also always had the ability despite COVID-19 to maintain contact with his son but did not take the opportunity. He could have, for example, increased telephone contact when he could not have in-person visitation but did not. Nor did he take full advantage of in-person visitation when it became available again. There is simply no support for father’s contention COVID-19 prevented him from meaningfully participating in his reunification services. We conclude the juvenile court properly found father was provided reasonable reunification services and affirm its orders terminating services and setting a section 366.26 hearing. DISPOSITION The petition for extraordinary writ is denied. This court’s opinion is final forthwith as to this court pursuant to rule 8.490(b)(2)(A) of the California Rules of Court. 10.

2020-11-30 21:03:02.809447+00

http://courts.delaware.gov/Opinions/Download.aspx?id=313600

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE AB STABLE VIII LLC, ) ) Plaintiff/Counterclaim-Defendant, ) ) v. ) C.A. No. 2020-0310-JTL ) MAPS HOTELS AND RESORTS ONE LLC, MIRAE ) ASSET CAPITAL CO., LTD., MIRAE ASSET ) DAEWOO CO., LTD., MIRAE ASSET GLOBAL ) INVESTMENTS, CO., LTD., and MIRAE ASSET ) LIFE INSURANCE CO., LTD., ) ) Defendants/Counterclaim-Plaintiffs. ) MEMORANDUM OPINION Date Submitted: October 28, 2020 Date Decided: November 30, 2020 Raymond J. DiCamillo, Kevin M. Gallagher, Sara A. Clark, John M. O’Toole, RICHARDS LAYTON & FINGER, P.A., Wilmington, Delaware; Adam H. Offenhartz, Marshall R. King, Shireen A. Barday, Nathan C. Strauss, GIBSON, DUNN & CRUTCHER LLP, New York, New York; Tyler A. Amass, GIBSON, DUNN & CRUTCHER LLP, Denver, Colorado; Attorneys for Plaintiff and Counterclaim Defendant AB Stable VIII LLC. A. Thompson Bayliss, Michael A. Barlow, Stephen C. Childs, ABRAMS & BAYLISS LLP, Wilmington, Delaware; Michael B. Carlinsky, Andrew J. Rossman, Christopher D. Kercher, Rollo C. Baker IV, QUINN EMANUEL URQUHART & SULLIVAN, LLP, New York, New York; Kap-You Kim, PETER & KIM ATTORNEYS AT LAW, Seoul, South Korea; Attorneys for Defendants and Counterclaim Plaintiffs Maps Hotels and Resorts One LLC, Mirae Asset Capital Co., Ltd., Mirae Asset Daewoo Co., Ltd., Mirae Asset Global Investments, Co., Ltd., and Mirae Asset Life Insurance Co., Ltd. LASTER, V.C.  AB Stable VIII LLC (“Seller”) is an indirect subsidiary of Dajia Insurance Group, Ltd. (“Dajia”), a corporation organized under the law of the People’s Republic of China. Dajia is the successor to Anbang Insurance Group., Ltd. (“Anbang”), which was also a corporation organized under the law of the People’s Republic of China. For simplicity, and because Anbang was the pertinent entity for much of the relevant period, this decision refers to both companies as “Anbang.” Through Seller, Anbang owns all of the member interests in Strategic Hotels & Resorts LLC (“Strategic,” “SHR,” or the “Company”), a Delaware limited liability company. Strategic in turn owns all of the member interests in fifteen limited liability companies, each of which owns a luxury hotel. Under a Sale and Purchase Agreement dated September 10, 2019 (the “Sale Agreement” or “SA”), Seller agreed to sell all of the member interests in Strategic to MAPS Hotel and Resorts One LLC (“Buyer”) for a total purchase price of $5.8 billion (the “Transaction”). Buyer is a special purpose vehicle formed to acquire Strategic. Buyer’s ultimate parent company is Mirae Asset Financial Group (“Mirae”), a financial services conglomerate based in Korea with assets under management of over $400 billion. Three of Mirae’s affiliates executed equity commitment letters that bound them to contribute a total of $2.2 billion to Buyer at closing. The balance of the purchase price would be funded with debt. Due to a combination of factors, Buyer was not able to obtain debt financing. On April 17, 2020, the scheduled closing date, Buyer asserted that a number of Seller’s representations and warranties were inaccurate and that Seller had failed to comply with its covenants under the Sale Agreement. Buyer contended that as a result, Seller had 1 failed to satisfy all of the conditions to closing, and Buyer was not obligated to close. Buyer informed Seller that if the breaches were not cured on or before May 2, 2020, then Buyer would be entitled to terminate the Sale Agreement. On April 27, 2020, Seller filed this action seeking a decree of specific performance (i) compelling Buyer to perform its obligations under the Sale Agreement and (ii) directing Buyer’s three affiliates to contribute $2.2 billion under the equity commitment letters. After Seller filed suit, Buyer purported to terminate the Sale Agreement. Buyer then filed counterclaims seeking determinations that Seller failed to satisfy conditions to closing, breached its express contractual obligations, breached implicit obligations supplied by the implied covenant of good faith and fair dealing, and committed fraud. The initial set of issues involves Buyer’s obligation to close. The factual underpinnings of those issues fall into two largely distinct categories: the “COVID Issues” and the “DRAA Issues.” The COVID Issues are factually straightforward and result from the COVID-19 pandemic. First, Buyer was not obligated to close if Seller’s representations were inaccurate and the degree of the inaccuracy was sufficient to result in a contractually defined Material Adverse Effect (the “Bring Down Condition”). Seller represented that since July 31, 2019, there had not been any changes, events, states of facts, or developments, whether or not in the ordinary course of business that, individually or in the aggregate, have had or would reasonably be expected to have a Material Adverse Effect. (the “No-MAE Representation”). 2  According to Buyer, the business of Strategic and its subsidiaries suffered a Material Adverse Effect due to the onset of the COVID-19 pandemic, rendering the No-MAE Representation inaccurate, causing the Bring-Down Condition to fail, and relieving Buyer of its obligation to close. Assuming for purposes of analysis that Strategic suffered an effect that was both material and adverse, Seller nevertheless proved that the consequences of the COVID-19 pandemic fell within an exception to the definition for effects resulting from “natural disasters and calamities.” Consequently, the business of Strategic and its subsidiaries did not suffer a Material Adverse Effect as defined in the Sale Agreement. Second, Buyer was not obligated to close if Seller failed to comply with its covenants between signing and closing (the “Covenant Compliance Condition”). Seller’s covenants included a commitment that the business of Strategic and its subsidiaries would be conducted only in the ordinary course of business, consistent with past practice in all material respects (the “Ordinary Course Covenant”). Buyer proved that due to the COVID-19 pandemic, Strategic made extensive changes to its business. Because of those changes, its business was not conducted only in the ordinary course of business, consistent with past practice in all material respects. The Covenant Compliance Condition therefore failed, relieving Buyer of its obligation to close. Unlike the COVID Issues, the DRAA Issues are factually complex. They relate to a fraudulent scheme whose origins date back to 2008, when Anbang began a series of 3 disputes with a shadowy and elusive figure named Hai Bin Zhou.1 At least one of Hai Bin Zhou’s business strategies involves using otherwise passive entities to register trademarks associated with established businesses, with the expectation that companies will settle to secure their marks. Hai Bin Zhou pursued this strategy against Anbang. Anbang fought back until 2018, when the insurance regulator in the People’s Republic of China took over Anbang’s operations and placed the company in receivership. The regulatory team decided to stop asserting Anbang’s rights to its trademarks in the United States. As a result, Anbang defaulted in litigation with Hai Bin Zhou before the United States Patent and Trademark Office (the “USPTO”). For Hai Bin Zhou, the default judgment was a near-term tactical victory but a long-term strategic defeat, because it undermined his ability to extract consideration from Anbang through trademark litigation in the United States 1 Hai Bin Zhou appears to work with a number of other individuals in the United States and in the People’s Republic of China. It is therefore more precise to refer to Hai Bin Zhou and his associates. For simplicity, this decision refers to Hai Bin Zhou. Hai Bin Zhou and his associates are not parties to this action. Although both sides served subpoenas on Hai Bin Zhou and many of his entities, no one produced discovery or appeared for deposition. Anbang likely could have filled some of the gaps in the record, because Anbang has repeatedly investigated Hai Bin Zhou in connection with their long- running disputes. During this litigation, however, Anbang maintained that counsel conducted the investigations and invoked the attorney-client privilege to shield them from discovery. The record for purposes of this litigation is therefore thinner than it might have been. The record is nevertheless sufficient for the court to make findings with a high degree of confidence regarding Hai Bin Zhou and the fraudulent nature of his activities. 4  To create a new source of leverage, Hai Bin Zhou turned to fraud. He interwove the history of trademark disputes with the events that led to Anbang’s regulatory takeover in what might be regarded begrudgingly as an inspired work of fiction. But instead of producing a captivating novella or screenplay, he generated a spurious agreement, purportedly between Anbang and five of his affiliates. The ersatz contract ostensibly bound Anbang to pay billions of dollars, with the obligation secured by Anbang’s ownership interests in its subsidiaries and other assets. The apocryphal agreement also contained a durable power of attorney that supposedly gave Hai Bin Zhou’s affiliates the authority to transfer Anbang’s assets to satisfy its liabilities. Ingeniously, Hai Bin Zhou recognized that the Delaware Rapid Arbitration Act (the “DRAA”) contained few procedural protections against the confirmation and enforcement of fake arbitral awards. Perceiving that the DRAA could be used to facilitate fraud, Hai Bin Zhou styled the counterfeit agreement as providing for arbitration under the DRAA and labeled it the “DRAA Blanket Agreement.” This decision shortens that term to the “DRAA Agreement.” Beginning in summer 2018, Hai Bin Zhou filed a series of grant deeds in the county record offices in California where Strategic owned hotels (the “Fraudulent Deeds”). The Fraudulent Deeds purportedly transferred ownership of the hotels from Strategic’s subsidiaries to Hai Bin Zhou’s affiliates. In August 2019, Hai Bin Zhou caused four of his affiliates to sue Anbang and the fifth affiliate in this court, ostensibly to appoint arbitrators to resolve a dispute under the DRAA Agreement. World Award Found. v. Anbang Ins. Gp. Co., Ltd, C.A. No. 2019- 0606-JTL (the “DRAA Chancery Action”). In September 2019, a California lawyer sent 5 the court a package of documents. To establish a public record of the ex parte submission, the court docketed the documents under a notice stating that “[t]he filing of these materials by the court does not have any implications under Delaware Rapid Arbitration Act.” The submission contained a series of spurious arbitral awards. Despite facially apparent problems with the awards, Hai Bin Zhou convinced a Delaware lawyer to file actions in the Delaware Superior Court to enforce the awards as judgments. The same Delaware lawyer obtained an exemplified copy of one of the judgments, which Hai Bin Zhou used to bring an enforcement action against Anbang in California. Anbang discovered the Fraudulent Deeds in December 2018, but chose not to disclose them to any potential buyers. Anbang did not disclose the Fraudulent Deeds to Mirae until August 2019, just before signing the Sale Agreement. When disclosing the Fraudulent Deeds, Anbang did not reveal what it knew about Hai Bin Zhou or their history of trademark disputes. Anbang misled Mirae into thinking that the Fraudulent Deeds were the work of a twenty-something Uber-driver with a felony conviction. By the time it disclosed the existence of the Fraudulent Deeds, Anbang had learned about the DRAA Chancery Action and understood the connection to Hai Bin Zhou, but Anbang did not disclose the existence of the litigation. After Hai Bin Zhou brought the enforcement action in California, Anbang engaged in extensive litigation efforts in this court, the Delaware Superior Court, and the California court to address the threat that these actions posed to the Transaction. During those litigation efforts, Anbang provided the courts with partial and misleading accounts of what it knew about Hai Bin Zhou and his activities. 6  Despite seeking emergency relief from three courts because of the threat that Hai Bin Zhou’s activities posed to the Transaction, Anbang did not disclose anything to Mirae. Instead, the lawyers for Mirae’s financing syndicate discovered the proceedings just as Mirae was attempting to secure financing. After the lawsuits were revealed, Anbang again failed to provide the full story about its history of disputes with Hai Bin Zhou. For a time, Anbang managed to reassure Mirae, but the threat posed by Hai Bin Zhou and his activities resurfaced when a major law firm disclosed that it was evaluating whether to represent Hai Bin Zhou. The law firm provided information about the history of trademark disputes between Anbang and Hai Bin Zhou that conflicted with Anbang’s longstanding claims. That was the third strike against Anbang’s credibility. The Sale Agreement conditioned Buyer’s obligation to close on Seller obtaining documentation (i) expunging the Fraudulent Deeds from the public record (the “Expungement Condition”) and (ii) enabling Buyer to obtain title insurance that either did not contain an exception from coverage for the Fraudulent Deeds or which included an exception and then affirmatively provided coverage through an endorsement (the “Title Insurance Condition”). Seller obtained documentation that satisfied the Expungement Condition, but the title insurers refused to issue title commitments that satisfied the Title Insurance Condition. Although the commitments did not contain a specific exception for the Fraudulent Deeds, the commitments included a broad exception for any matter arising out of or disclosed in the DRAA Agreement, the DRAA Chancery Action, the Delaware Superior Court enforcement actions, or the California enforcement action (the “DRAA Exception”). 7  As framed, the DRAA Exception encompassed the Fraudulent Deeds, causing the Title Insurance Condition to fail. Seller sought to prove that Buyer caused the title insurers to include the DRAA Exception, thereby breaching its obligation to use reasonable efforts to complete the Transaction and excusing the failure of the Title Insurance Condition. There is evidence to support Seller’s theory. On balance, however, a combination of the factual evidence and expert testimony demonstrates that Buyer did not breach its contractual obligation and did not cause the title insurers to include the DRAA Exception. Buyer thus proved that it was not obligated to perform at closing because the Covenant Compliance Condition and the Title Insurance Condition failed. Seller did not cure its breach of the Ordinary Course Covenant, resulting in Buyer gaining the right to terminate the Sale Agreement. Buyer validly exercised that right. Since then, the outside date for completing the Transaction has passed, giving Buyer a second basis to terminate the Sale Agreement. Under the terms of the Sale Agreement, Buyer is entitled to the return of its deposit plus associated interest. In addition, Buyer is entitled to transaction-related expenses (effectively reliance damages) in the amount of $3.685 million, plus its attorneys’ fees and expenses as the prevailing party. Seller is not entitled to any relief. I. FACTUAL BACKGROUND The factual record is immense. During a five-day trial conducted using the Zoom videoconferencing system, the court heard testimony from six fact witnesses and eight expert witnesses. The parties introduced 5,277 exhibits into evidence and lodged forty-six deposition transcripts, with twenty-nine from fact witnesses and seventeen from experts. 8 Reflecting the zeal with which the lawyers represented their clients, the parties reached agreement on only sixty-three stipulations of fact in the pre-trial order.2 The parties assembled this record during a four-month period from April until August 2020. The principal litigants were based in China and Korea, and many of the documents had to be translated, as did the testimony of certain witnesses. Under any circumstances, that feat would be impressive. In this case, the parties engaged in expedited litigation during the COVID-19 pandemic, making their achievement extraordinary. Sifting through the immense record to make factual findings was a challenging task. Because fact finding inherently involves uncertainty, courts evaluate evidence using a standard of proof. For the court to find that an alleged fact is true, the evidence must be sufficient to surpass a standard of proof. The burden of clearing that hurdle (and the consequence of losing if the burden is not met) is typically assigned to the party that seeks to establish the fact in question. 2 Citations in the form “PTO ¶” refer to stipulated facts in the pre-trial order. JX 5171. Citations in the form “[Name] Tr.” refer to witness testimony from the trial transcript. Citations in the form “[Name] Dep.” refer to witness testimony from a deposition transcript. Citations in the form “JX –– at ––” refer to trial exhibits using the internal page number of the exhibit, or if not internally paginated, the last three digits of the control number. If a trial exhibit used paragraph numbers or sections, then references are by paragraph or section. To constrain the proliferation of footnotes, citations to single authorities generally appear in the text. In some instances, typically involving short paragraphs or background information, the supporting citations for a paragraph are collected in a single footnote. 9  The standard of proof was a preponderance of the evidence. See Estate of Osborn ex rel. Osborn v. Kemp, 2009 WL 2586783 , at *4 (Del. Ch. Aug. 20, 2009), aff’d, 991 A.2d 1153 (Del. 2010). The allocation of the burden of proof varied by issue. Ultimately, the burden of proof did not play a role in the case. The Delaware Supreme Court has explained that the real-world effect of the burden of proof is “modest” and only outcome- determinative in “very few cases” where the “evidence is in equipoise.” Ams. Mining Corp. v. Theriault, 51 A.3d 1213 , 1242 (Del. 2012) (internal quotation marks omitted). In this case, the evidence was not in equipoise. The factual findings would be the same regardless of the assignment of the burden of proof. A. Wu Xiaohui, Anbang, And Strategic In 2004, Wu Xiaohui founded Anbang, which started life as a regional car insurance company. Anbang quickly received licenses from the Chinese government to conduct nearly every type of financial service, and it expanded rapidly. At its height, Anbang claimed to be an insurance and financial services conglomerate with over $300 billion in assets. In 2014, Anbang made headlines in the United States by acquiring the Waldorf Astoria Hotel for $1.95 billion.3 News accounts described Anbang’s purchase as part of a larger international buying spree that saw Anbang invest billions of dollars overseas. 4 In 3 See JX 52; JX 54; see also JX 77. 4 See JX 58; JX 80; JX 84; JX 86; JX 112; JX 113. 10 addition to making acquisitions worldwide, Anbang reportedly acquired stakes in major Chinese banks.5 During its meteoric rise, Anbang reportedly benefitted from connections to China’s political elite. Wu Xiaohui married a granddaughter of Deng Xiaoping, the Premier of the People’s Republic of China from 1978 until 1989. Another early backer was the son of Chen Yi, a marshal in the People’s Liberation Army and ally of Zhou Enlai, the first Premier of the People’s Republic of China. Another notable figures associated with Anbang was the son of Zhu Rongji, Premier of the People’s Republic of China from 1998 to 2003. Particularly after Anbang’s international buying spree, media accounts frequently described Anbang’s connections to these and other luminaries.6 Adding to its mystique, Anbang was a privately held company. Many of its approximately forty stockholders were shell companies or nominees. The opaque ownership structure concealed who really owned Anbang. Press accounts focused on the mystery, implying that China’s political elite were its real owners. In 2016, Anbang acquired Strategic.7 Until 2015, Strategic had been a publicly traded real estate investment trust. See JX 26. In December 2015, a private equity fund 5 See, e.g., JX 111; JX 113. 6 See JX 54; JX 59; JX 80; JX 83; JX 84; JX 111; JX 166; JX 186. 7 See JX 77; JX 78; JX 79. 11 managed by Blackstone acquired Strategic for approximately $6 billion. Three months later, Anbang agreed to buy Strategic from Blackstone for approximately $6.5 billion. After the acquisition, Anbang owned Strategic indirectly through two subsidiaries. The first-tier subsidiary was Anbang Life Insurance Co., Ltd., a wholly owned subsidiary of Anbang. The second-tier subsidiary was Seller. During 2016, Wu Xiaohui reportedly courted Jared Kushner regarding an investment in the redevelopment of 666 Fifth Avenue, the centerpiece of the Kushner family’s real estate empire. Press accounts covered these developments as well.8 B. Hai Bin Zhou And His Affiliates Since 2008, Anbang has engaged in trademark disputes with a shadowy and elusive group of individuals and entities. The principal antagonist has been Hai Bin Zhou, an individual who operates under multiple aliases and through an assortment of shell companies. Anbang’s lead representative for purposes of the Transaction, Zhongyuan Li, described Hai Bin Zhou as a “trademark troll.” Li Tr. 493. That characterization aptly describes at least one of Hai Bin Zhou’s business strategies, which involves using passive entities to register trademarks associated with established businesses. The USPTO’s records show that between 2012 and 2019, entities affiliated with Hai Bin Zhou have been 8 See JX 93; JX 109. 12 involved in twenty-five trademark disputes with companies like WhatsApp Inc., Apple Inc., GoPro, Inc., and Alibaba Group Holding Limited.9 In 2008, Anbang petitioned China’s Trademark Review and Adjudication Board (the “Trademark Board”) to recognize Anbang’s exclusive rights to use its trademarks in China and to deny trademark rights to Beijing Great Hua Bang Investment Group Company Limited (“Great Hua Bang”), a company formed under Chinese law in 2002.10 Anbang’s petition asserted that, in 2004, after the China Insurance Regulatory Commission announced a plan to grant insurance license to eighteen new insurance companies, Great Hua Bang registered the names of Anbang and two other companies as its trademarks. Great Hua Bang never obtained an insurance license and never conducted any operations under the “Anbang” name.11 Filings in other trademark disputes establish that Great Hua Bang is affiliated with Hai Bin Zhou. In January 2013, the Trademark Board denied Anbang’s petition and awarded trademark rights to Great Hua Bang. See JX 4482 at 7. Anbang responded by challenging the Trademark Board’s ruling in the Beijing No. 1 Intermediate People’s Court.12 In February 2014, the Intermediate People’s Court vacated the Trademark Board’s ruling and 9 See JX 4402 at 25–26; JX 4877 at 79–84. 10 See JX 4482 at 7; JX 38 at 7–9, JX 45 at 12–21. 11 JX 45 at 12, 17–20. 12 See JX 45 at 12; JX 65 at 5. 13  13 remanded with instructions to the Trademark Board to issue a new decision. In April 2015, the Trademark Board ruled in favor of Anbang. JX 65 at 6. Meanwhile, with Anbang expanding overseas, Hai Bin Zhou repeated his trademark-registration strategy in other countries. Between 2008 and 2019, Anbang litigated against Hai Bin Zhou and his affiliates in a total of sixteen cases brought in five different countries. See JX 4482 at 5–9. One of the many entities that Hai Bin Zhou controls is Amer Group Inc. (“Amer”).14 In 2015, Hai Bin Zhou caused Amer to register “An Bang Group” and related marks with the USPTO. When Anbang applied to use its marks in the United States, Amer asserted its rights, and the USPTO rejected Anbang’s application. The USPTO ruling was a major success for Hai Bin Zhou and became the centerpiece of his campaign against Anbang.15 In 2016, Anbang applied to use its marks in Hong Kong. Amer and Great Hua Bang opposed the application. To bolster their claims, Hai Bin Zhou changed the name of another of his entities to An Bang Group LLC (“An Bang Delaware”).16 Relying heavily on the 13 See JX 4482 at 8; JX 65 at 56; JX 4971. 14 Amer Group Inc. was formed on January 26, 2011. On May 18, 2018, it was converted into a limited liability company and changed its name to Amer Group LLC. JX 5221. 15 See JX 88; JX 90; JX 94; JX 95; JX 100; JX 105; see also JX 119. 16 JX 106 at ‘428; See JX 819 at 9; JX 1385. An Bang Delaware started its corporate existence in December 2005 as LMK Management, Inc. In 2007, Hai Bin Zhou changed its name to Showsum, Inc. See JX 1385 at 3. On January 9, 2017, Hai Bin Zhou converted Showsum into An Bang Delaware. JX 106 at ‘428. 14 USPTO ruling, An Bang Delaware, Amer, and Great Hua Bang argued that Anbang should not be permitted to register its marks in Hong Kong. See JX 99. These events caused a stir at Anbang, and one of Anbang’s representatives in the United States secured the corporate filings for Amer and An Bang Delaware. 17 Anbang also hired investigators to gather information about these entities.18 C. The Arrest Of Wu Xiaohui And The Arrival Of The Regulatory Team During the first half of 2017, significant events involving Anbang unfolded in China. Chinese authorizes conducted an investigation of Wu Xiaohui, culminating in his arrest on June 8, 2017, at Anbang’s offices on charges of embezzlement and manipulating Anbang’s financial statements.19 On June 14, 2017, Anbang issued a press release stating, “Chairman Wu Xiaohui is temporarily unable to fulfil [sic] his role for personal reasons. He has authorized relevant senior executives to continue running the business, which is operating as normal.” JX 124. Within days of Wu Xiaohui’s arrest, the China Banking and Insurance Regulatory Commission (the “CBIRC”)20 dispatched a regulatory team to supervise Anbang’s 17 See JX 98; JX 101. 18 See JX 116; JX 117. 19 See JX 125; JX 127; JX 183; He Dep. 38. 20 The CBIRC was formed in April 2018 through a merger of the China Banking Regulatory Commission and the China Insurance Regulatory Commission, which were previously separate regulatory agencies. Before April 2018, Anbang’s was overseen by the China Insurance Regulatory Commission. See Luo Dep. 31–34. 15 operations.21 Except for Wu Xiaohui, Anbang’s existing managers remained in place and continued to run the company, subject to the oversight of the regulatory team. 22 Before the regulatory team arrived, Anbang’s management team had decided to file an action with the USPTO challenging Amer’s rights to use the “Anbang” marks. The petition was based in part on earlier trademark registrations that Anbang had filed in 2008, which Anbang sought to renew.23 Anbang formally filed its petition on June 8, 2017, coincidentally one day before Wu Xiaohui’s arrest.24 The petition reflected the fruits of Anbang’s investigation into Hai Bin Zhou and his affiliates. It noted that although Amer claimed to have offices at “One Blackfield, Suite 416, Tiburon, California,” that address was the site of a UPS Store, and “Suite 416” did not exist. Amer simply rented mailbox number 416. Anbang also reported that Amer’s status with the Delaware Secretary of State was “delinquent.” JX 119 ¶ 4. Hai Bin Zhou retained Venable LLP to represent Amer. Venable countered Anbang’s petition by filing a petition to cancel Anbang’s earlier registrations.25 After some 21 Luo Dep. 45–48; He Dep. 23–25, 32–33. 22 Luo Dep. 48; He Dep. 25, 28–30. 23 See JX 15; JX 16; JX 17; JX 146; JX 152; JX 155. 24 See JX 119; see also JX 120; JX 121. 25 See JX 139 at 4–6; JX 144; JX 145; JX 156; JX 157; JX 160. 16 procedural jockeying, the USPTO consolidated the cases and entered a schedule.26 D. The Sentencing Of Wu Xiaohui And The Arrival Of The Takeover Team In March 2018, Wu Xiaohui pled guilty to “fraudulent fundraising” and “work- related embezzlement.”27 In June 2018, he was sentenced to eighteen years in prison.28 After the sentencing, the CBIRC replaced the regulatory team at Anbang with a “Takeover Team.” Unlike the regulatory team, the Takeover Team had full authority to manage Anbang, displacing its board of directors and managers.29 Xiafeng He (“Chairman He”) led the Takeover Team. Sheng Luo (“Vice Chairman Luo”) was the second in command.30 The Takeover Team reviewed the various proceedings involving Anbang’s trademarks and made the following decisions: 1. In the United States and Canada, we shall discontinue the trademark application because there will be no business demand in these markets in the foreseeable future. When there is business demand in the future, the trademark application should be restarted as appropriate; 2. In Europe, since our trademark applications have met the business needs in the future, and from the comprehensive consideration of costs 26 See JX 153; JX 158; JX 162; JX 165; JX 170. Litigation between Anbang, Amer, Great Hua Bang, and Anbang Delaware also continued in Hong Kong. See JX 154. 27 See JX 173; JX 175; JX 188. 28 JX 183; JX 184; see JX 164. 29 Luo Dep. 47; JX 169. 30 See Luo Dep. 47; He Dep. 33, 66–67. 17  and business needs, we shall suspend the opposition proceeding regarding the similar trademarks with AMER GROUP; 3. In Hong Kong, the trademark application shall be prosecuted according to the actual business needs. See the attachment for the detailed budget involved in the relevant legal process.31 In the near-term, the Takeover Team’s decision to abandon Anbang’s marks in the United States, Canada, and Europe proved to be a gift to Hai Bin Zhou. After the Takeover Team’s decision, Anbang stopped participating in the trademark dispute before the USPTO. In August 2018, Venable moved for a default judgment. The USPTO ordered Anbang to show cause why judgment should not be entered. Anbang did not respond and defaulted.32 The resulting default judgment canceled Anbang’s rights to its marks and established Amer’s rights.33 As with the USPTO’s earlier ruling, the default judgment became a cornerstone of Hai Bin Zhou’s campaign against Anbang. Meanwhile, Hai Bin Zhou had reactivated his challenge to Anbang’s trademarks in China. In July 2018, Great Hua Bang filed a petition against Anbang in the Beijing Intellectual Property Court (the “Beijing IP Court”). The petition sought to vacate the Trademark Board’s ruling, issued after the remand from the Intermediate People’s Court, 31 JX 178; see JX 180. Hai Bin Zhou continued to find new ways to assert rights to Anbang trademarks. For example, in December 2017, he caused another one of his entities, World Award LLC, to register “AnbangGroup.com” as a service mark in the United States. JX 181. 32 See JX 209; JX 211; JX 299. 33 JX 305; JX 306; see JX 415; JX 602. 18 that had awarded trademark rights to Anbang. Great Hua Bang claimed that it had not received notice of the proceedings and that its affiliates—An Bang Delaware and World Award Foundation—had used the Anbang marks in the United States since 2001. To support its claims, Great Hua Bang relied heavily on the USPTO’s ruling. See JX 205. E. The Fraudulent Deeds Anbang’s default in the USPTO proceedings gave Hai Bin Zhou a tactical victory. But it was a strategic defeat for his efforts to extract consideration from Anbang, because Anbang was no longer seeking to control its marks in the United States. Anbang was still litigating in Hong Kong, and Hai Bin Zhou had renewed his challenge in China, but in those jurisdictions Anbang was on its home turf, and Hai Bin Zhou was unlikely to prevail. Hai Bin Zhou needed a new source of leverage. Drawing on the news stories that described Anbang’s origins, its acquisition spree, and Wu Xiaohui’s downfall, Hai Bin Zhou imagined an account in which Wu Xiaohui, shortly before his arrest, caused Anbang to enter into the DRAA Agreement with Amer, Great Hua Bang, An Bang Delaware, an entity named AME Group, Inc.,34 and an entity named World Award Foundation, Inc.35 34 AME Group was formed it in 2002. On May 15, 2018, Hai Bin Zhou would convert it into an LLC named AB Stable Group LLC, adopting a name that closely resembled Seller’s. See JX 819 at 10–14; JX 1421 at 3; JX 1422. 35 World Award Foundation, Inc. was formed in 2000 under the name SHR Acquisition, Inc. In 2007, its name was amended to Iamel Foundation Inc. In February 2014, its name was changed to World Award Foundation Inc. under a filing signed by Hai Bin Zhou. JX 4372; see JX 1393 at 3–4. 19 Supposedly dated May 15, 2017, the fictitious agreement purportedly bound Anbang to pay billions of dollars to Hai Bin Zhou’s entities, secured by Anbang’s ownership interests in its subsidiaries and other assets.36 Shrewdly fitting his account to events that had already occurred, Hai Bin Zhou made Anbang’s default in the trademark proceedings before the USPTO the triggering event for Anbang’s liability, and he drafted the DRAA Agreement to grant his entities a durable power of attorney that supposedly gave them authority to transfer the assets of Anbang and its subsidiaries to satisfy Anbang’s liabilities.37 To make the DRAA Agreement look authentic, Hai Bin Zhou copied the seals that Anbang’s representatives had placed on documents in the various trademark proceedings and used their images to create purported seals on the agreement.38 He also fabricated the seal of Chen Xiaolu, one of the famous individuals who reportedly was an early backer of Anbang.39 Ingeniously perceiving that the widely publicized Delaware Rapid Arbitration 36 JX 115; see JX 3847. As discussed below, the parties did not obtain a copy of the DRAA Agreement until April 2020. Because the DRAA Agreement is fraudulent, it is not clear precisely when it was created. 37 Even though the DRAA Agreement supposedly addressed the trademark disputes between Anbang and the other parties to the agreement, Anbang’s trademark counsel from the proceedings before the USPTO had never heard of it. See Harrison Dep. 155–164, 166, 170–71. 38 At trial, Seller introduced persuasive testimony from an expert who demonstrated that the signatures and stamps on the DRAA Agreement were copied electronically from elsewhere, manipulated, and then pasted into the document. See Mohammed Tr. 944–61. Chen Xiaolu’s signature is also one of the many indications that the DRAA 39 Agreement is fraudulent, as he resigned more than a year before the purported signing of the DRAA Agreement. See JX 4808 at 28; Li Tr. 202–03. There are no references to the 20 Act contained few procedural protections against the confirmation of fabricated arbitral awards, he styled the DRAA Agreement as providing for arbitration under the DRAA. Notwithstanding the elaborate scheme and far-fetched account, the basic strategy was the same. Hai Bin Zhou would assert rights to Anbang’s property, anticipating that Anbang would settle to end the harassment. Between September and December 2018, Hai Bin Zhou caused the Fraudulent Deeds to be filed on the six hotels that Strategic owned in California (the “California Hotels”). The first was recorded on September 17, 2018, for the Westin St. Francis in San Francisco, California. JX 213. Dated September 5, 2018, it contained the following recitation: FOR GROUP IP, WITH NO PAYMENT CONSIDERATION, receipts of which are hereby acknowledged, SHC GROUP LLC (SHC St Francis 2017051POA), a Delaware Limited Liability company [sic] hereby GRANT(S) to SHC Group LLC, a Delaware Limited Liability company. The following described real property . . . . Id. at 2. The deed thus cleverly linked the transfer to “GROUP IP,” ostensibly grounding the deed in the trademark rights that Amer held. The deed also cited a “2017051POA,” referencing the power of attorney in the manufactured DRAA Agreement. DRAA Agreement in the minutes of any board or shareholder meetings of Anbang, no references to it in Anbang’s electronic database of material contracts, and no copies in Anbang’s archives. See Li Tr. 204–18, 225–30. 21  The deed was signed by Daniil Belitskiy, who listed his title as “vice president [sic].” Id. The representation that zero transfer tax was owed was signed by “Andy Bang Zhou,” a pseudonym of Hai Bin Zhou. Id. The transferee was an affiliate of Hai Bin Zhou that he had caused to be formed on May 25, 2018.40 The second deed was recorded on September 19, 2018, for the Ritz-Carlton Half Moon Bay in San Mateo County, California. JX 212. Also dated September 5, 2018, it contained a similar recitation: FOR GROUP IP, WITH NO PAYMENT CONSIDERATION, receipts and sufficiency are hereby acknowledged, SHC GROUP LLC (SHC Half Moon bay [sic] 2017051POA), a Delaware Limited Liability company [sic], described in Exhibit “A” hereto (the “Land”), that certain real property located in the County of San Mateo, State of California, hereby grants to 1. SHC GROUP LLC, a Delaware Limited Liability company. 2. AB Stable Group LLC, a Delaware Limited Liability company. JX 212. The deed was signed by Belitskiy, who listed his title as “Vice President” Id. The new entity, AB Stable Group LLC, was the new incarnation of AME Group, Inc., an entity Hai Bin Zhou formed in 2002, then converted into an LLC on May 15, 2018, using a new name that closely resembled the formal name of Seller.41 In October 2018, Hai Bin Zhou caused three more grant deeds to be filed. On October 12, 2018, a deed was filed for the Four Seasons Palo Alto in San Mateo County. 40 See JX 641 at 25; JX 945 at 26–27; JX 1389 at 3. 41 See JX 819 at 10–14; JX 1421 at 3; JX 1422. 22 Dated October 10, 2018, it contained similar recitations, referenced a “2017015 DPOA,” and purported to transfer ownership to AB Stable Group LLC and SHRC Group LLC. JX 233. SHRC Group LLC was an affiliate of Hai Bin Zhou, who caused it to be formed on May 25, 2018.42 The deed was again signed by Belitskiy as “Vice President” JX 233 at 1. On October 30, 2018, a deed was filed for the Montage Laguna Beach in Orange County. JX 245. Dated October 26, 2018, it contained similar recitations, referenced a “2017 DPOA,” and purported to transfer ownership to SHRC Holding Group LLC. JX 245. The deed was signed by Belitskiy, who listed his title as “Vice President” Id. On October 31, 2018, a deed was filed for the Ritz-Carlton Laguna Niguel in Orange County. JX 246. Dated October 26, 2018, it contained similar recitations, referenced a “2017 DPOA,” and purported to transfer ownership to SHC Holdings Group LLC. Id. That was another affiliate of Hai Bin Zhou, who caused it to be formed on August 24, 2018. See JX 1390. Belitskiy signed the deed, listing his title as “Vice President.” JX 246. From October 29 until November 4, 2018, Hai Bin Zhou stayed at the Montage Laguna Beach under the alias “Andy Zhou.” See JX 1260. He informed the general manager that he was affiliated with Wu Xiaohui and might be involved in a change of ownership with the hotel.43 I suspect he was trying to get Anbang’s attention to open settlement talks. His presence was sufficiently concerning that the information was relayed 42 See JX 945 at 28–29; JX 1391 at 3. 43 JX 1449 at 1, 13; JX 1466 at 1; Hart Dep. 81–84; Hogin Dep. 124. 23 up the chain of command to Xu (Leo) Liu, a representative of Anbang who served on Strategic’s board of directors and was a principal point of contact with Anbang.44 The last three grant deeds were filed in December 2018. Two were for properties where Hai Bin Zhou had already recorded deeds. On December 20, 2018, a second deed was recorded for the Montage. Dated December 12, 2018, it purported to transfer the hotel to Andy Bang LLC. JX 291 at 1. That entity was another affiliate of Hai Bin Zhou that he caused to be formed on November 20, 2018.45 The same day, a second deed was filed for the Ritz Carlton Laguna Niguel. Also dated December 12, 2018, it purported to transfer the hotel to World Award Group LLC. JX 292 at 1. That entity was another affiliate of Hai Bin Zhou that he caused to be formed on November 27, 2018. See JX 945 at 30–31. The eighth and final grant deed was filed on December 28, 2018. It purported to transfer the Lowes Hotel in Santa Monica to SHC Holdings Group LLC. JX 290 at 2. It too was signed by Belitskiy. Id. at 3. During the same period that Hai Bin Zhou and Belitskiy were filing the Fraudulent Deeds, Hai Bin Zhou continued to challenge Anbang’s trademarks in Hong Kong. In October and November 2018, Amer, An Bang Delaware, and Great Hua Bang (the “Amer Parties”) submitted declarations in which Belitskiy averred that he was “a Vice President” of each entity, had served in that position since 2010, and had “free access to the records 44 Hart Dep. 82, 104–05; JX 1449 at 5–6; Liu Dep. 170–72. 45 See JX 945 at 24–25; JX 1387. 24 of [Amer] relating to their trademarks and their use.” JX 436 at 27. The declarations claimed that  Amer’s marks had been used in the United States since 2001. Id. at 28, 30.  Great Hua Bang had obtained a decision in China in 2011 in favor of its marks. Id. at 31.  The USPTO had rejected Anbang’s applications for its marks. Id. at 32.  The USPTO had canceled Anbang’s earlier registration of its marks. Id. at 32–33. The declarations also introduced a story line about Wu Xiaohui and his conviction, asserting that “[Anbang’s] founder Wu Xiaohui was sentenced to 18 years in prison . . . . It is apparent that fraud was involved in the operation of [Anbang’s] business when the subject application was filed in 2016. . . . [Anbang] must have copied the [Amer Parties’] Marks in order to ride on the reputation build up by the [Amer Parties].” Id. at 33. F. The Takeover Team Decides To Sell Strategic. Meanwhile, the Takeover Team was deciding what to do with Anbang’s far-flung real estate empire. In August 2018, the Chinese government imposed limitations on the ability of Chinese companies to own overseas investments. Deciding to sell Anbang’s overseas assets was an easy call.46 Through Strategic and its subsidiaries, Anbang owned fifteen luxury hotels in the United States. In addition to the six California Hotels, Strategic owned the Fairmont Chicago, the Fairmont Scottsdale Princess, the Four Seasons Hotel Austin, the Four 46 See JX 208; JX 533 at 16, 19. 25 Seasons Jackson Hole, the Four Seasons Resort Scottsdale at Troon North, the Four Seasons Washington, D.C., the InterContinental Chicago, the InterContinental Miami, and the JW Marriott Essex House Hotel (collectively, the “Hotels”). After some initial one-off discussions with potential buyers, the Takeover Team decided to sell Strategic through a fully marketed process. In November 2018, Anbang hired Bank of America Merrill Lynch (“BAML”) as its financial advisor and Gibson Dunn & Crutcher LLP as its legal counsel. Stephen Glover was the lead M&A attorney. Andrew Lance was the lead real estate attorney. Working together, the Anbang team began planning a sale process, although third-party outreach would not begin until April 2019. G. Early Indications Of A Fraudulent Scheme While preparing for the sale process, Gibson Dunn and Anbang received early indications that someone was engaged in a fraudulent scheme. On December 21, 2018, Lance received title reports on the Hotels from Fidelity National Title Insurance Company. JX 302 (the “December 2018 Title Reports”). The reports identified the grant deeds that had been filed on the St. Francis Hotel, the Ritz-Carlton Half Moon Bay, the Four Seasons Palo Alto, and the Ritz-Carlton Laguna Niguel. Lance printed out a copy of the December 2018 Title Reports and reviewed them. See JX 304 at 1. He also forwarded the December 2018 Title Reports to Stephen Chan, Anbang’s senior in-house counsel, with an email that was redacted for privilege. JX 302 at 1. The description of the document on Anbang’s privilege log stated, “Email reflecting legal advice and request for information to facilitate legal advice from A. Lance* regarding updates to title commitments in connection with sale process.” JX 5036 No. 1,514AA. 26  In this litigation, Anbang has tried to downplay the December 2018 Title Reports, but when making a formal report to Chinese law enforcement in March 2020, Anbang represented that it discovered four of the Fraudulent Deeds “in December 2018.” JX 3160 at 6. Lance and a team of real estate lawyers from Gibson Dunn were conducting due diligence in advance of a sale process for a major hotel owner and operator. It is therefore more likely than not that Gibson Dunn and Anbang learned about four of the Fraudulent Deeds in December 2018 and investigated them, just as they told Chinese law enforcement.47 It is equally likely that, in light of Anbang’s extensive experience with Hai Bin Zhou and his entities in various trademark proceedings, as well as the relatively recent declarations that Belitskiy had filed in the Hong Kong trademark proceeding, Anbang identified the connection between the Fraudulent Deeds and Hai Bin Zhou. In January 2019, one month after Lance received the December 2018 Title Reports and forwarded them to Anbang’s in-house counsel, Anbang received another indication that a fraudulent scheme was afoot. In January 2019, the CBIRC sent the Takeover Team a document dated December 28, 2018, and titled “Proof of [An Bang Delaware], World Award Foundation, etc. Entrusting Beijing Great Hua Bang Investment Group Co., Ltd. to Apply for the Registration of the Anbang Trademark and DRAA Agreement.” JX 340 (the “DRAA Summary”).48 47 See, e.g., JX 355; JX 356; JX 357; JX 358; JX 359. 48 Id. at 9. The original DRAA Summary is written in Chinese. Competing translations appear in the record at JX 4411 and JX 4748. The translations read differently, 27  Four entities signed DRAA Summary: Amer, An Bang Delaware, AB Stable Group LLC, and World Award Foundation. Amer and An Bang Delaware were players in the long-running trademark disputes with Anbang, and Anbang Delaware and AB Stable Group LLC appeared on two of the Fraudulent Deeds. World Award Foundation, Inc. had not previously made its appearance, but Great Hua Bang had referred to a “World Award Foundation” in the trademark litigation before the Beijing IP Court, and another “World Award” entity (World Award Group LLC) appeared on one of the Fraudulent Deeds.49 The DRAA Summary was signed by Hai Bin Zhou using the alias “Andy Bang.”50 The DRAA Summary set out the basic account that Hai Bin Zhou invented to justify the filing of the Fraudulent Deeds. According to DRAA Summary, the signatories “invested and participated in the . . . establishment of three insurance companies, including [Anbang] led by Mr. CHEN Xiaolu.” JX 340 at 9. They claimed that in return, Anbang had entrusted Great Hua Bang with the rights to the Anbang trademarks, and they noted that the Trademark Board had ruled in favor of Great Hua Bang’s marks. That was a reference to the Trademark Board’s original decision in 2013 that the Intermediate People’s Court later vacated, after which the Trademark Board ruled in favor of Anbang. The signatories with certain translations offering more fluid phrasings for different parts of the document. It is worth reading each of them to get a sense of the possible interpretations. 49 See JX 205 at 5; JX 292 at 1. 50 See JX 4411 at 4; JX 4748 at 7. 28 claimed not to have received notice of the subsequent decision by the Trademark Board, and they pinned the blame on Wu Xiaohui: We believe none of the people reading this certificate is as powerful as [Wu Xiaohui], who kidnapped [a] hostage, caused a default judgment at [a] hearing by [withholding] notice from the [Beijing People’s Court], and played tricks in collusion with the Trademark Office. He defrauded [us] of hundreds of billions of yuan by taking advantage of [our capital] and our trademark without investing a single penny, but he could escape the punishment [of law] ultimately. Why don't we join hands to uphold the rule of law? Id. The signatories to the DRAA Summary next claimed that they had been using Anbang’s marks in the United States since January 2001. The DRAA Summary described the proceedings before the USPTO and claimed that the USPTO had “officially certified that we had been using the ‘Anbang Group’ and ‘AB’ figurative trademarks in classes of investment insurance and investment since January 2001.” JX 4748 at 4. According to the DRAA Summary, Such revocation put to an end the 15 years of malicious embezzlement and robbery of trademarks [by Anbang] in the United States, but the malicious plagiarism and infringement of intellectual property rights also constituted one of the causes to trigger the trade war between China and the United States. If [Anbang] continues to violate the laws and regulations . . . or even deliberately undermines the consensus between the heads of state of China and the United States on ceasing the trade war, it will definitely be recorded in the history as a notorious disgusting figure. JX 340 at 9. The signatories to the DRAA Summary then signaled their interest in reaching a settlement, which seems to have been the goal all along. To that end, they asked the Beijing IP Court and Chairman He whether Anbang would engage in mediation. Id. 29  At the time, Great Hua Bang had filed a petition against Anbang in the Beijing IP Court, in which Great Hua Bang sought to vacate the Trademark Board ruling that had granted trademark rights to Anbang. See JX 205. The signatories to the DRAA Summary contended that under a purported DRAA Agreement, all litigation “should be ceased for one year.” JX 4411 ¶ 8. They further asserted that “no party can change or sell its shares, equity, assets, and any rights and interests without paying the full penalty for breach of contract, which is common sense; otherwise, shall bear the penalty of one hundred eighty billion US dollars ($180 billion).” Id. ¶ 9. The signatories maintained that if Anbang’s assets were not sufficient to pay the contractual damages, then the CBIRC or the Chinese government should pay the difference. Id. ¶ 10. The DRAA Summary concluded with additional aggrandized claims: The heads of the two countries of China and the United States reached the consensus to purchase 1,200 billion worth of products from the United States within two years. We propose that [Chairman He] follow the DRAA agreement, let us achieve the consensus between the heads of the two countries of China and the United States. First of all, make the payment of $90 billion of the penalty for breach of contract. Second, at the same time we can make the arrangement as part of compensation for the trade deficit. At the same time, third, we will provide the compensation of sixty-one billion Yuan (61 billion) and the interest[] to the Insurance Fund so that the State will not lose a single penny. At the same time, fourth, terminate all the lawsuits immediately. Also, fifth, make our own contribution to the early termination of the trade war between China and the United States. Sixth, assist the China Communist Party Central Authority and the country to restore the peaceful order of normal trade and intellectual properties. As such, not just one stone for two birds, but one stone for six birds. Why not do it? JX 4411 ¶ 12. 30  The DRAA Summary was sent to (i) Shuqing Guo, the Chairman of the CBIRC, (ii) the judges of the Beijing IP Court, and (iii) Chairman He, as head of the Takeover Team. See JX 340 at 7. In its letter conveying the DRAA Summary to Anbang, the CBIRC noted that the Takeover Team was charged with accepting or rejecting the request within ten days. Id. at 8. In this litigation, Anbang has claimed that it “had no communications with” the CBIRC about the request. JX 4482 at 23. That is not credible. It would mean that Anbang failed to notice or respond to a communication from its primary regulator. During his deposition, Chairman He recalled receiving and reviewing the DRAA Summary as part of his role on the Takeover Team, explaining that he thought the document was ridiculous. He Dep. 106–109, 135–38. Two months later, Anbang received another copy of the DRAA Summary. On March 5, 2019, during the trial in the Beijing IP Court between Great Hua Bang and Anbang, Great Hua Bang introduced the DRAA Summary into evidence. See JX 4414 at 4–6. YuLin Song and TianZhen Fan, both in-house attorneys for Anbang, appeared in the litigation, received a copy of the DRAA Summary, and, while still in the courtroom, signed and verified the accuracy of the trial transcript that identified the DRAA Summary. Id. at 7–8. A record of the proceeding documents the introduction of the DRAA Summary and includes handwritten notes stating: Plaintiff: Nine. All of [the exhibits] are new ones, and the ninth one is a photo copy of the “Proof of An Bang Group LLC, World Award Foundation, et al.’s Entrustment of Great Hua Bang Investment Group Co Ltd.’s Registration of the ‘An Bang’ Trademark and the DRAA Agreement.” [HAND WRITTEN NOTES: Such evidence proves that the US entities 31  registered and used the “Anbang” trademark in 2001 in the United States for insurance services and investment services; prior to the incorporation of [Anbang], and authorized [Great Hua Bang] to register the trademark involved in this case in 2004; the US entities together with World Award Foundation, funded and participated in the preparation for the establishment of [Anbang], led by Mr. Chen Xiaolu; [Anbang] breached the DRAA Agreement, for which it shall bear the liability of $180 billion USD. [Anbang] obtained the two trademarks of “Anbang” through fraud and perjury, both of which were revoked by the US Patent and Trademark Office on December 26, 2018; the four US entities [the DRAA Counterparties] are willing to settle under the supervision of the [Beijing IP Court] so as not to damage the trade negotiation between the two heads of states [sic] of the United States and China on the protection of intellectual property, agreed to raise 61 billion Yuan to reimburse the Insurance Fund's contribution. If [Anbang’s] assets were not sufficient to compensate for the damage, the [CBIRC] shall contribute, or the State will do so. Otherwise, the legal representative of [Anbang] and other related personnel shall face criminal responsibility of 25-35 years.] JX 382 at 3–4. After the trial, TianZhen Fan gathered all the materials Anbang had relating to the case. She then reported on the trial to the director of Anbang’s legal department, Hunan Hou (“Director Hou”), whose position is analogous to the role of general counsel. Between Chairman He and Director Hou, Anbang knew at the highest levels about the DRAA Summary.51 Shortly after making her report, TianZhen Fan received an email from a colleague that attached Belitskiy’s declaration from the Hong Kong trademark litigation. See JX 436 at 13, 35–43. 51 See JX 374; JX 375; Fan Dep. 33–34. 32 H. The Sale Process Begins In April 2019, Anbang launched its formal sale process for Strategic. BAML emailed a “teaser” to a large number of potentially interested parties. One of the recipients was Mirae.52 Mirae retained Jones Lang Lasalle Americas, Inc. (“Jones Lang”) as its financial advisor and Greenberg Traurig, LLP as its legal advisor for purposes of the potential transaction. PTO ¶ 17. Robert Ivanhoe was the lead attorney from Greenberg Traurig. In early May 2019, BAML received first round bids from seventeen potential bidders, including Mirae. After receiving the bids, Anbang appointed Li to oversee the sale of Strategic, and he acted as the lead decision maker for Anbang on business matters. See JX 5058. BAML invited Mirae and six other bidders to participate in the second round of the sale process. See JX 527 at 2. I. Strategic Learns Independently About The Fraudulent Deeds. Anbang and Gibson Dunn had not shared their knowledge of the Fraudulent Deeds with Strategic. During May 2019, Strategic’s general counsel, Patricia Needham, learned independently about two of the Fraudulent Deeds. County officials working on real estate tax issues in the office of the recorder of deeds for San Mateo County were confused about whether the deeds reflected a change of ownership. They contacted one of Strategic’s advisors, who contacted Needham. She spoke with the officials, who provided her with 52 See PTO ¶ 14; JX 402; JX 404. 33 information about the deeds for the Ritz-Carlton Half Moon Bay and the Four Seasons Palo Alto.53 Needham told the officials that ownership had not changed, that the deeds were likely fraudulent, and that representatives of Strategic could provide affidavits confirming those facts. See JX 462. In an internal email with her colleagues, Needham stressed language from one of the county official’s emails, in which the official expressed frustration about being unable to “get any supporting documentation from either Mr. Danil Belitskiy, who signed all the paperwork, or anyone else at the email address provided on the document [email protected].” JX 466 at 1 (emphasis omitted). According to the official, “The last I heard from them, they said they are having DRAA lawsuits and ownership may change again soon and that ‘the guy in charge’ is in the EU and they forwarded him my emails.” Id. (emphasis omitted). On May 14, 2019, Needham informed David Hogin about the two Fraudulent Deeds that she knew about.54 Hogin holds the title of Chief Operating Officer at Strategic, but he is the senior-most officer and functions as its CEO. See Hogin Tr. 774–75. Needham also informed Xu (Leo) Liu, one of Anbang’s representatives on Strategic’s board.55 Needham also contacted Gibson Dunn. JX 461 at 2. Although the contents of her email were withheld 53 See JX 466 at 1–4; see also JX 457 at 1; JX 651 at 1–2; JX 794 at 5. 54 Hogin Tr. 863; JX 480 at 1. 55 JX 480; JX 481; Liu Dep. 122–23. 34 as privileged, Lance immediately responded by sending Needham the December 2018 Title Reports.56 Needham also obtained copies of the two Fraudulent Deeds from San Mateo County, and she obtained documents from the Delaware Secretary of State for the entities on the deeds.57 Seller withheld as privileged a number of emails from this period that were exchanged among Needham, Glover, and Lance addressing topics related to the Fraudulent Deeds.58 These emails indicate that information about the Fraudulent Deeds flowed upward to Chan, Anbang’s senior in-house counsel for the Transaction, who knew about Hai Bin Zhou and the years of trademark litigation.59 Seller claimed privilege for fifty-eight different email conversations involving Needham, Gibson Dunn, or Anbang during May 2019 that mentioned deed or title issued. See JX 5036. Anbang, Strategic, and Gibson Dunn did not provide potential bidders with any information about the Fraudulent Deeds. Anbang and Gibson Dunn recognized that the deeds were a material issue that would need to be disclosed. Glover Tr. 63–64. They nevertheless made a “deliberate choice” not to disclose the Fraudulent Deeds. Glover Tr. 64. Based on this decision, they did not include any information about the Fraudulent 56 Lance Dep. 87–89; JX 460; JX 462; see JX 484. 57 See, e.g., JX 463; JX 472; JX 651 at 25–26. 58 See JX 474; JX 475; JX 516; JX 517; JX 525; JX 4969. 59 See JX 475; JX 4969 at 1; JX 4893 at 5–6. 35 Deeds in the data room. They did not even put the December 2018 Title Reports in the data room, even though Anbang and Gibson Dunn were using those reports for their own analyses. See Glover Tr. 60–62. Instead, Anbang and Gibson Dunn populated the data room with outdated title commitments from 2015, 2016, and earlier.60 Mirae was told that updated title commitments would be provided only to “the final buyer in confirmatory diligence.”61 Anbang, Strategic, and Gibson Dunn also did not take any action to quiet title to the California Hotels. Needham filed fraud complaints with the Office of the District Attorney for San Mateo County,62 and she also reached out to a law firm about quieting title. 63 But Gibson Dunn specifically told Needham not to engage counsel to quiet title at that time.64 Seller has claimed in this proceeding that it had no reason to hide the Fraudulent Deeds because a buyer would find out about them eventually, either through its own due diligence or because Anbang and Gibson Dunn eventually disclosed the issue. That is a 60 PTO ¶ 25; see JX 60; JX 494; JX 496; JX 497; JX 500; JX 501; JX 509; JX 732; JX 4740; JX 4741; JX 4742; JX 4743; JX 4744; see also JX 732 (Glover asking on August 9, 2019, to confirm “what we’ve provided in the data room regarding title”; receiving confirmation). Gibson Dunn also did not list the deeds on the draft disclosure schedules. See JX 499; JX 688 at 151–52. 61 Hogin Dep. 100–101; accord JX 791 at 3. 62 See JX 477; JX 478; JX 486; JX 498; JX 507; JX 603; JX 642; Needham Dep. 159; see also JX 641 at 1. 63 See, e.g., JX 641; JX 644; JX 653. 64 Glover Tr. 84–88; see Needham Dep. 215. 36 misleading assertion. Anbang and Gibson Dunn withheld information about the Fraudulent Deeds so that they could choose the manner and timing of the disclosure. It is apparent based on how events transpired that they planned to reveal the information to the final bidders at the eleventh hour, when deal momentum would be at its peak and the finalists would not be inclined to ask too many questions lest they lose the deal. With the benefit of hindsight, the ultimate failure of the Transaction can be traced to Anbang and Gibson Dunn’s decisions to withhold information about the Fraudulent Deeds and to delay taking action to remedy the problem.65 J. Mirae’s Final Bid In July 2019, at the end of the second phase of the process, Mirae and two other bidders submitted second round bids. Mirae offered to purchase Strategic at an enterprise value of $5.8 billion. BAML invited Mirae and one other bidder to participate in a final round of bidding. Anbang and BAML pressed the bidders to forego any confirmatory due diligence, contrary to their earlier representations that confirmatory due diligence would be provided. See JX 677 at 3–4. On August 5, 2019, Mirae offered to pay $5.8 billion to acquire a 100% interest in Strategic. JX 698 at 2–3. The term sheet noted that Mirae had formed Buyer “exclusively for the purpose of acquiring the Company.” Id. at 4. It also noted that Mirae had selected 65 It was during this timeframe that the CBIRC formed Dajia to serve as the successor to Anbang. As part of the reorganization, Dajia acquired all of Anbang’s assets below the holding-company level, including Seller. See JX 570; JX 613. 37 “a total of four (4) leading U.S. lenders, each and all of whom have completed their initial due diligence on this transaction” and had agreed to finance 70% of the purchase price. Id. The term sheet stated that affiliates of Mirae would contribute “100% of the equity required for completion of the transaction.” Id. It was thus clear that Mirae’s bid would be made through a special purpose vehicle, supported by equity commitments for 30% of the purchase price and with the balance financed by debt. Consistent with the term sheet, Mirae had engaged in discussions during summer 2019 with potential lenders about financial arrangements. After receiving bids, Mirae selected Goldman Sachs as its lead lender, with additional banks in the syndicate (together, the “Lenders”).66 When Mirae submitted its offer on August 5, Mirae had lined up over $4 billion in financing that would take the form of commercial mortgage-backed securities (“CMBS”).67 Mirae attached as Exhibit A to its bid letter a copy of the proposed financing commitment, along with emails evidencing internal credit committee approval from each of the Lenders. JX 688 at 3, 54–57. The proposed commitment stated that the financing would be subject to “[s]atisfactory review of title matters and acceptable lender’s title insurance.” Id. at 14; see Glover Tr. 101–02. Mirae expected that the transaction would 66 See JX 632; JX 633; JX 652. 67 Ivanhoe Tr. 514–16, 519–20; Wheeler Dep. 118, 134. 38 close within sixty to ninety days after signing and intended to enter into a rate lock for that period.68 During August 2019, Anbang and Gibson Dunn made several attempts to convince Mirae to provide equity commitments for the full amount of the purchase price or a parent- level guarantee. Ivanhoe Tr. 556–57. Mirae rejected those requests.69 On August 19, Glover reported to Anbang that the “equity backstop has been reduced from full purchase price to approx 1.6 B.”70 K. Anbang Discloses The Fraudulent Deeds Beginning on August 6, 2019, the day after receiving Mirae’s final bid, Needham, Lance, Glover, and Hogin exchanged a series of emails about the Fraudulent Deeds.71 A flurry of additional communications took place over the following days that included Needham, lawyers at Gibson Dunn, and Anbang representatives.72 Anbang asserted privilege over the substance of these communications. Separately, Needham learned about additional Fraudulent Deeds from the same representative who brought the first two to her attention. This time, she learned about deeds 68 Ivanhoe Tr. 520–21; see JX 675; JX 680. 69 Glover Tr. 102, 105–06; Ivanhoe Tr. 557. 70 JX 798 at 1; see Glover Tr. 106 (agreeing that Mirae rejected a full equity commitment). 71 See JX 701; JX 702; JX 703; JX 709; JX 710; JX 718. 72 See JX 712; JX 731; JX 735; JX 739. 39 filed in December 2018 on the Montage Laguna Beach and Ritz Carlton Laguna Niguel, as well as a deed filed in September 2018 on the Westin St. Francis. A flurry of emails followed.73 Anbang asserted privilege over the substance of the communications. While these events were occurring, the Anbang deal team invited their Mirae counterparts to Beijing to finalize the business issues. See JX 764 at 1–2, 4. The evidence indicates that Anbang and Gibson Dunn decided to disclose the existence of the deeds in conjunction with this meeting, when the deal momentum would crest. 1. Blame It On The Uber Driver. On August 16, 2019, Lance called Ivanhoe. Both were prominent real estate lawyers, and they had known each other professionally for years. Lance said that he had recently learned that a twenty-something-year-old Uber driver with a criminal record had recorded deeds against the California Hotels.74 When Ivanhoe asked for more information, Lance claimed that he had told Ivanhoe everything that they knew. Ivanhoe Tr. 521–22. Lance described the issue as “a nuisance, but one that his title company should be able to get comfortable with once they know the facts.”75 Based on what he knew at the time, Ivanhoe agreed. JX 786 at 2 (“[Ivanhoe] said that sounds right.”). 73 See JX 747; JX 748; JX 749; JX 750; JX 751; JX 752; JX 753; JX 755; JX 757; JX 758; JX 759; JX 760; JX 768; JX 769. 74 Ivanhoe Tr. 521–22, 536; see JX 786; JX 1672 at 4–5. 75 JX 786 at 2; see Lance Dep. 156–57. 40  Lance’s claim that he had only recently learned about the deeds was not true. Lance had received the December 2018 Title Reports nine months earlier, and the evidence indicates that Anbang and Gibson Dunn identified the issue then. Regardless, in May 2019, Needham learned about the deeds. Since then, Anbang, Gibson Dunn, and Needham had discussed the deeds extensively. Lance’s representation about a one-time fraud by an unsophisticated Uber driver was not true. Anbang was familiar with entities and names on the deeds—including Hai Bin Zhou and Belitskiy—from years of trademark disputes in multiple jurisdictions. Anbang had received multiple indications that the deeds were part of a larger fraudulent scheme. Lance’s statements about the nature of the fraudulent scheme and the extent of Anbang and Gibson Dunn’s knowledge established the pattern that Anbang and Gibson Dunn would follow throughout their dealings with Mirae and Greenberg Traurig. Put bluntly, they committed fraud about fraud. Technically, Greenberg Traurig already knew about the deeds. Greenberg Traurig had identified them in July 2019, when reviewing title commitments obtained from Chicago Title Insurance Company (“Chicago Title”), which was expected to provide title insurance for the deal.76 But Greenberg Traurig did not know that the deeds were fraudulent. As Ivanhoe explained at trial, the information on the title insurance 76 See e.g., JX 614 at 1; JX 674; JX 1672 at 4. 41 commitments led Greenberg Traurig to believe that the deeds were transfers between affiliates. Ivanhoe Tr. 523–24. Their fraudulent nature was “not readily discoverable” from the title commitments alone. JX 786 at 2. On August 18, 2019, Seller posted to the data room the deeds for the Ritz Carlton Half Moon Bay, the Four Seasons Palo Alto, the Montage Laguna Beach, and the Westin St. Francis. Seller also uploaded a document relating to the deed for the Ritz Carlton Laguna Niguel and the two real estate fraud complaints Strategic had filed. See JX 788. 2. Anbang And Gibson Dunn Learn About The DRAA Chancery Action. On August 20, 2019, Mirae and Seller executed an exclusivity agreement. 77 That same day, Gibson Dunn learned about the DRAA Chancery Action, which the four signatories to the DRAA Summary—World Award Foundation, Amer, An Bang Delaware, and AB Stable Group LLC (together, the “DRAA Petitioners”)—had filed in this court.78 JX 806. The complaint was titled “Petition for Proceeding under Delaware Rapid Arbitration Act.” JX 687. It named as respondents Anbang, Great Hua Bang, and the CBIRC. Hai Bin Zhou thus deceptively caused four of his entities (the DRAA Petitioners) to sue one of his entities (Great Hua Bang), creating the impression that the entities were unrelated. 77 JX 805; see JX 810. 78 JX 806. Coincidentally, the action was filed on August 5, 2019, the same day that Mirae and the competing bidder submitted their final bids. See JX 687; JX 698. 42  The petition claimed that the parties had entered into “a written agreement to arbitrate under the Delaware Rapid Arbitration Act.” Id. ¶ 1. The petition alleged that the parties had “a dispute that they have agreed must be arbitrated under the DRAA.” Id. ¶ 5. The petition asked the court to “[a]llow and order the agreed-upon arbitration to proceed under its auspices.” Id. The verification was signed by an individual claiming to be “Andy Bang.” JX 686. Gibson Dunn immediately understood the connection between the DRAA Chancery Action and the Fraudulent Deeds.79 The two principals on the Anbang deal team, Li and Chan, discussed the petition and recognized the connection to the longstanding trademark disputes with Hai Bin Zhou and his affiliates. See Li Tr. 303–04. Gibson Dunn hired a former FBI agent to conduct an investigation,80 and the investigation quickly began generating results.81 Between August 16 and September 10, 2019, when Buyer and Seller signed the Sale Agreement, Gibson Dunn and Greenberg Traurig had at least eight conversations about the Fraudulent Deeds. Greenberg Traurig consistently asked for any information about who was behind the deeds and their motives. Ivanhoe Tr. 524–26. Gibson Dunn stuck to the story about a “twenty-something Uber driver,” never mentioning Hai Bin Zhou, the years 79 See Glover Tr. 68, 71, 77, 92; Lance Dep. 187–88; JX 819. 80 See JX 831; JX 940; JX 945; Douglas Tr. 9–10. 81 See, e.g., JX 969; JX 1095; JX 1096; JX 1289. 43 of trademark litigation, or the DRAA Chancery Action.82 Glover, the lead deal lawyer at Gibson Dunn, admitted that Anbang and Gibson Dunn made a conscious “decision not to disclose” the DRAA Chancery Action. Glover Tr. 75, 78, 82, 94. Anbang’s and Gibson Dunn’s communications during this period were misleadingly incomplete. Demonstrating its true assessment of the situation, Gibson Dunn described the fraud in far more serious terms to law enforcement. In a letter dated August 23, 2019, a Gibson Dunn partner asked the Deputy District Attorney for San Francisco to investigate “an apparently sophisticated fraud scheme” that involved “multiple high-value hotel properties that my client owns, including one in San Francisco.” JX 873 at 2. 3. The Lenders And Title Insurer Balk. Based on Anbang and Gibson Dunn’s misleading description of the scope of the problem, Greenberg Traurig began working with Gibson Dunn on a potential solution. Lance had contacted Chicago Title on August 16, 2019, and gave them the same story about the deeds being “a nuisance.” See JX 786 at 2. Over the next several days, Gibson Dunn and Greenberg Traurig tried to convince Chicago Title to provide insurance.83 The 82 Glover Tr. 81–82; see Ivanhoe Tr. 525–28. Even as Gibson Dunn attorneys gathered more information about Hai Bin Zhou, they did not share it with Greenberg Traurig. Compare JX 5143, with Ivanhoe Tr. 525–28. On August 21, 2019, Lance represented explicitly to Greenberg Traurig that his side had “posted everything we have, which is a single fraudulent deed at each affected property other than the one property where we have a cover sheet but no deed.” JX 848 at 3. That was not true. 83 See JX 864; JX 906. 44 Chicago Title team elevated the issue to their chief underwriting counsel, who deemed the risk uninsurable.84 Based on what he knew at the time, Ivanhoe thought that Chicago Title was being too conservative. He asked Marty Kravet, a leading title insurance agent, to find replacement title insurance.85 Kravet sought information from Gibson Dunn about the situation, and Lance gave him the same story about a lone twenty-something Uber drive.86 Kravet succeeded in brokering an arrangement with a group of title insurers (the “Title Insurers”) led by First American Financial Corporation, who indicated that they would provide insurance if Anbang obtained judgments expunging the Fraudulent Deeds and quieting title to the California Hotels.87 Greenberg Traurig made the Lenders aware of the situation, and they asked for all available information about the Fraudulent Deeds.88 Greenberg Traurig relayed what Gibson Dunn had represented, namely that the “perpetrator is a 26 year old Uber driver from California with a criminal record” and that Anbang and Gibson Dunn had no other 84 See Ivanhoe Tr. 530–31; JX 902 at 1; JX 924; JX 932. 85 See JX 907; JX 913; JX 921. 86 See JX 958; JX 975; JX 1092. 87 See Ivanhoe Tr. 541–42, 545; see also JX 984; JX 1014; JX 2488 at 2. 88 Wheeler Dep. 33–34; Towbin Dep. 43–48. 45 information.89 The Lenders suspected “that Anbang knew about the deeds and deliberately concealed them,” but Gibson Dunn represented that they had brought the issue to Mirae’s attention “as soon as they learned about it.” JX 1048. That was not true.90 After investigating the issue, the Lenders refused to provide financing, taking “a very hardline position that they cannot fund into a deal with a cloud on title.” JX 1017. Greenberg Traurig and Gibson Dunn proposed having the Title Insurers insure the risk with Anbang providing additional indemnification. The Lenders made clear that even with title insurance, they would not provide financing, because the title insurance industry as a whole did not have sufficient net worth or liquidity to pay the claim. They also were not willing to rely on Anbang for indemnification, given Anbang’s status as a Chinese entity. The Lenders proposed that Anbang solve the problem through a cash holdback, by pledging additional assets in the United States as collateral, or by providing a letter of credit from a bank domiciled in the United States.91 Anbang rejected the cash holdback because it wanted to repatriate the sale proceeds.92 Anbang also would not post additional collateral; 89 JX 1979; JX 1085 at 1–2; see Wheeler Dep. 33–34, 151–52; Li Tr. 298–99; Ivanhoe Tr. 533. 90 The Lenders believed that Anbang had learned about the Fraudulent Deeds by running a title report before starting the sale process. Gibson Dunn claimed that it had not run a title report. See JX 1048. That was technically true but affirmatively misleading. Gibson Dunn received the December 2018 Title Commitments from a title insurer who ran them on its own initiative. See Part I.G, supra. 91 JX 1017; see JX 1048; Li Tr. 286; Ivanhoe Tr. 537–38; Glover Tr. 111. 92 See JX 1051; Li Tr. 287–89; Ivanhoe Tr. 538. 46 it would only offer a guarantee from a sister entity.93 Anbang also would not provide a letter of credit from a domestic bank.94 The parties tried various other permutations, but they could not find an acceptable arrangement.95 The only remaining solution was to quiet title to the California Hotels, but that process could not be completed under the existing timetable for closing. JX 842. Because of the belated disclosure of the Fraudulent Deeds, committed financing for the deal was not available. Ivanhoe Tr. 587–88. 4. The Restructured Sale Agreement Due to the absence of committed debt financing, the parties restructured the Sale Agreement:  They pushed out the closing to provide the time needed to quiet title. Ivanhoe Tr. 538–39.  They eliminated Buyer’s representation that it already had obtained financing.96  They made Seller’s representation that it had sufficient financing to close “subject to obtaining financing from third party lenders at the Closing . . . in amounts sufficient to pay the Purchase Price at Closing when combined with the proceeds of the [equity commitment letters].”97  Both sides committed to use commercially reasonable efforts to take any actions required to “satisfy the contingencies and conditions established by any Lender in 93 See JX 1053 at 1–2; JX 1058 at 1–2. 94 See Li Tr. 289–90; Glover Tr. 111; JX 1079 at 1. 95 See, e.g., JX 1100; JX 1102; 1103; JX 1157. 96 Compare JX 808 at 93–94, with JX 1126 § 4.4. 97 JX 1126 § 4.4; see Li Tr. 293–94; Glover Tr. 114–16. 47  connection with the Buyer’s financing of the transactions contemplated hereby.” JX 1126 § 5.5(i).  They added the Title Insurance Condition, which made it a condition to Buyer’s obligation to close that the title insurer issue owner’s and lender’s policies that did not contain an exception to coverage for the Fraudulent Deeds. Id. § 7.3(c). Buyer made clear that “Mirae MUST have . . . . [i]nsurance from the Title Insurance Companies” and that “[a]nything less . . . is not acceptable.” JX 1155 at 2 (emphasis omitted). Buyer consistently maintained that it would not take any risk on the title issue.98 One feature of the restructured Sale Agreement was a “Litigation Plan” to address the issues posed by the Fraudulent Deeds. Gibson Dunn proposed the Litigation Plan on August 31, 2020, as part of the discussions with First American and the Lenders. See JX 1031. When proposing the plan, Gibson Dunn again represented that “the individual who signed the deeds is a 20-something year old who has a record of criminal behavior” and that “the fraudulent deeds are the unfortunate, unauthorized and criminal act of a malfeasor rather than a legitimate issue affecting title.” JX 1031 at 2. Gibson Dunn did not mention Hai Bin Zhou, the years of trademark litigation with Hai Bin Zhou and his affiliates, the fact that Belitskiy had filed declarations in the trademark litigation in Hong Kong, the DRAA Chancery Action, or the overlap between the DRAA Counterparties and the entities named in the Fraudulent Deeds. 98 See JX 1088 at 2 (“We just need clean title as any prudent investor would require.”); id. at 3 (“we just want clean title before closing”); JX 1155 at 2 (“the record must be cleared”); JX 1173 at 1–2 (“Mirae was very clear with [Anbang] last week . . . . They want the deeds cleared. . . . They are not willing to take any risk on this issue.”). 48  The Litigation Plan was a straw man that only addressed the narrow version of the problem as Gibson Dunn had described it. Glover Tr. 87–88. It was carefully tailored to address the Fraudulent Deeds. Id. at 91. It did not anticipate or address problems that might arise from the DRAA Chancery Action or the broader disputes with Hai Bin Zhou. Based on their understanding of the scope of the problem, Greenberg Traurig and the Title Insurers signed off on the Litigation Plan. On September 5, 2019, Li emailed Needham and told her that Anbang wanted Strategic to “jointly engage Gibson as our legal adviser in clearing title for the six hotels asap.” JX 1229 at 5. Li explained that “clearing these deeds is extremely vital to our transaction.” Id. On September 10, 2019, Buyer executed the Sale Agreement. PTO ¶ 31. As contemplated by the Sale Agreement, Buyer placed a deposit of $581,728,733 in escrow to secure the purchase of Strategic and the Hotels. PTO ¶¶ 31–32. 5. The Quiet Title Actions Between September 6 and 11, 2019, Gibson Dunn filed actions seeking to quiet title to the six California Hotels (the “Quiet Title Actions”).99 From that point on, Gibson Dunn and Greenberg Traurig held calls roughly every two weeks in which Gibson Dunn provided 99 See JX 1158; JX 1159; JX 1160; JX 1161; JX 1171; JX 1221. 49 updates about the Quiet Title Actions and the Fraudulent Deeds.100 Gibson Dunn never mentioned the years of trademark litigation. See Li Tr. 364–66. In each of the Quiet Title Actions, Gibson Dunn filed an application for a temporary restraining order (“TRO”). In support of each application, Gibson Dunn filed a declaration from Needham in which she averred that she first learned of the pertinent deeds in August 2019, three months later than she actually did. She averred that “[n]either I nor, to my knowledge, anyone else at Strategic had ever heard of Daniil Belitskiy.”101 That statement was narrowly true but in a misleading way, because Anbang knew about Belitskiy from the affidavits he filed in the trademark litigation in Hong Kong, and Anbang signed off on the filings.102 While pursuing the Quiet Title Actions, Gibson Dunn attorneys exchanged emails internally about the DRAA Chancery Action. Anbang withheld the substance of those emails on grounds of privilege. The Gibson Dunn attorneys working on the Quiet Title Actions also looked into Hai Bin Zhou’s stay at the Montage Laguna Beach in November 2018.103 100 Ivanhoe Tr. 566–67, 578; see JX 1445; JX 1506. 101 JX 5040 at 3, 50, 63, 92. 102 See JX 1309; JX 1310. 103 See JX 1449; JX 1466; JX 1507; see also JX 1458; JX 5042. 50  While pursuing the Quiet Title Actions, Gibson Dunn continued to receive and discuss reports from the investigators, who explained that the situation “looks like it is more complicated than at first.”104 Summarizing the results, a Gibson Dunn attorney wrote, The investigators have been busy, and have learned quite a bit about Haibin Zhou aka Andy Bang. He has many aliases, and is associated with many different entities, some associated with these false deeds, many not. I have a large number of reports on the various entities associated with the false deeds, the Delaware court filing, and some similar-sounding entities. JX 1463 at 1. Gibson Dunn shared and discussed the reports with Anbang.105 Gibson Dunn also obtained the reports on the investigations that Anbang previously had conducted into Hai Bin Zhou and his affiliates in connection with the trademark litigation.106 Gibson Dunn did not share any of this information with Mirae, Greenberg Traurig, the Title Insurers, or the Lenders. Gibson Dunn only provided anodyne reports about the Quiet Title Actions.107 Given what Gibson Dunn knew, those reports were materially incomplete and misleading. 104 JX 1098 at 1; see, e.g., JX 1095; JX 1096; JX 1450; JX 1460; JX 1474; JX 1475. The investigators looked into Hai Bin Zhou and his network. See, e.g., JX 1388; JX 1395; JX 1423; JX 1424; JX 1425; JX 1448; JX 1465; JX 1503; JX 5143. They also looked into the DRAA Counterparties, the entities associated with the Fraudulent Deeds, and other entities associated with Hai Bin Zhou. See, e.g., JX 1385; JX 1386; JX 1387; JX 1389; JX 1390; JX 1391; JX 1392; JX 1393; JX 1394; JX 1421; JX 1422; JX 5143; see also JX 1464; JX 1818. 105 See JX 1461; JX 1462; JX 4766. 106 See JX 1484; JX 1499; JX 1500; JX 1501. 107 See, e.g., JX 1468; JX 1541; JX 1639; JX 1668. 51 L. The Unfolding Of The DRAA Chancery Action Hai Bin Zhou’s efforts to extract consideration from Anbang started with its trademarks. They progressed to the DRAA Agreement and the Fraudulent Deeds. The next step was to use the DRAA Chancery Action to manufacture fraudulent judgments. 1. The Origins Of The DRAA Chancery Action Delaware attorney Evan Williford filed the petition in the DRAA Chancery Action. Stephen Nielsen, a California attorney, informed Williford on July 31, 2019, that the client “MUST file August 1, 2019” because the client had received “respondent’s service of the answer on July 30, 2019, and we must file notice of arbitrators [sic] within three days.”108 Those statements were false. Later that day, Nielsen followed up with a call and then a text message stating, “[T]he client insists that I ask you the following question. Is there an amount of money that the client could pay to get a case number tomorrow?” Id. at 1533. To his credit, Williford would not be rushed. He insisted on receiving information that would give him a good faith basis to file the petition, a signed engagement letter, and a retainer. Id. at 1535–41. During his discussions about these matters, he engaged with Nielsen, an individual claiming to be “Andy Bang Zhou,” an individual claiming to be 108 JX 5181 at 1530–31. Nielsen previously tried to file an action in Delaware by himself. On July 19, 2019, he attempted to file a “Verified Petition for Appointment of Arbitrator” in the Delaware Court of Common Pleas. Id. at 1524–26. The petition bore a Chancery caption, referenced an arbitration agreement “dated March 5, 2019,” and was signed by Nielsen as “Attorney for Petitioners.” Id. at 1525–26. After the filing was rejected, Nielsen contacted Williford on July 26, 2019, stating that he was “interested in hiring local counsel in a DRAA filing” and that he had “docs ready to file.” Id. at 1528. 52 “Mike Martin,” and an individual claiming to be “David Traub.” Id. Andy Bang tried to excite Williford with the prospect of additional work, saying in one email that “[w]e may have another two big cases for you in near future.’ Id. at 1537. Martin tried the same gambit, telling Williford “[w]e have three big cases for you in these three months.” Id. at 1535. Before filing the DRAA Chancery Action, Williford met with Traub and an individual claiming to be “Joe Martin.” See id. at 1535–39. The pair flew to Delaware to hand-deliver to Williford “notarized copies of the 8 documents that comprise[d] [Andy Bang’s] case.” Id. at 1538–39. The documents included what appeared to be three arbitration awards—denominated Awards I, II, and III. Id. at 1445–50. They also included what appeared to be a single page excerpt from the DRAA Agreement.109 Williford’s clients told him not to serve the complaint. See id. at 1563. Instead, the DRAA Petitioners pushed Williford to obtain “court stamps” on the three purported 109 See id. at 1546. The excerpt is not the same as the equivalent pages in the DRAA Agreement later produced to Anbang. The differences include the following: (i) the top of the excerpt starts on the third line of paragraph 85, whereas the corresponding page in the DRAA Agreement (page 15) starts at the top line of that paragraph, (ii) in the excerpt the paragraphs within paragraph 87 are not separated by hard returns, (iii) paragraph 89 of the excerpt refers to “DPOA” in English but there is no such reference on the corresponding page in the DRAA Agreement, (iv) punctuation appears in different places, (v) the last line of paragraph 87 of the excerpt contains five Chinese characters (“存款以及其执照等其它 所有权益”) that are not present on the corresponding line in the DRAA Agreement, and (vi) the bottom of the excerpt has a stamp from California notary Spencer John Chase. These differences provide yet more reasons to conclude that the DRAA Agreement is fraudulent. 53 arbitration awards. Id. at 1535. On August 9, 2019, Williford pointed out an obvious issue with the arbitral awards. He had filed a petition to appoint arbitrators, and yet supposedly the arbitrations had already taken place. Id. at 1566 (“There is an obvious issue with proceedings happening before arbitrators that have not even been appointed.”). He believed that as a result, “[a]ny supposed prior ‘proceedings’ under the DRAA . . . are likely or certainly invalid.” Id. In response, his clients sent him practitioner materials discussing the DRAA and explained that the court did not need to appoint arbitrators. See id. at 1579–80. That begged the question about why the petition had been filed in the first place. Williford agreed that the DRAA did not require the court to appoint arbitrators, but he “remain[ed] concerned as to the validity of the awards.” Id. at 1578. He observed that “they have not yet been confirmed by any court,” that they did not include a form of judgment, and that there was “much that [he did] not understand about the awards and other aspects of these proceedings (like the Beijing IP court ruling).” Id. He recommended further analysis of the validity of the awards and asked for a fully translated copy of the DRAA Agreement. Id. By August 29, 2019, Williford had not heard back from his clients. He reiterated his recommendation that he be authorized to analyze the validity of the wards. Id. at 1577. Mike Martin emailed back on September 3, 2019, telling Williford that they “need court stamps first” and suggesting, “How about you get another 20k right way after got [sic] court stamps?” Id. at 1561. Mike Martin also tried to entice Williford with future business: “[G]ood news, we talked about DRAA with Alibaba in DC already, you’ll get another one, please get this done ASAP.” Id. Williford also met with Joe Martin in person, who made 54 the same offer to pay Williford $20,000 just to obtain court stamps on the awards. See id. at 1560. By this point, Williford was suspicious. In a lengthy email dated September 3, 2019, he pointed out obvious problems with the awards: The awards are oddly worded in many respects, create issues with how they will be interpreted, and may give rise to unknown issues. For example (there are other issues): 1. Each award’s award of assets (particularly [Awards] II-III) is vague, such that it could be argued that they only recognize that claimant wanted it, not that it is actually awarded. a. For example, Award II – “Claimant requests court enforcement of following . . . .” 2. Each of the awards can be interpreted as being for a sum of money or certain assets or properties, some of which may already have been transferred. How is it to be determined how transfer of the assets or properties reduces the money damages? For example, if half the properties are transferred does the respondent owe half the damages? 3. Award I awards income from certain properties but does not say whether that is separate from the $9B or in the alternative. 4. The provision that certain companies be transferred “minus their debt” could trigger challenges from creditors, who for obvious reasons . . . might be very angry, and argue that that is unenforceable against them, a third party. 5. The awards can be interpreted as requiring the transfers of certain assets/companies/banks. This may result in a lot of issues that a lawyers [sic] specializing in M&A work, that negotiate sales and transfers of companies, would be better equipped to recognize. There is thus the possibility that the Awards might generate a great deal of unanticipated litigation, and/or be not as helpful to you as you wanted. This concern is reinforced by the facts, among other things, that they are for billions of dollars and reference high-profile properties such as the New York Waldorf Astoria. 55 Id. at 1560. Williford “strongly recommended” that the DRAA Petitioners get a second opinion on the awards. Id. Mike Martin told Williford to “just file two sets of final awards and get court stamps. You’ll get another 20 k right away.” Id. Williford reiterated his advice to get a second opinion, and Mike Martin again stressed that they needed “COURT STAMPS.” Id. at 1559. The next day, September 4, 2019, Williford proposed to review “the translated DRAA Agreement” and “redraft the awards.” Id. at 1558. He asked for a $10,000 retainer to begin the analysis. Id. Mike Martin wired the money, but labeled it “DRAA AWARDS FILING RETAINER.” Id. at 1572. Williford wrote back saying that he was not filing the awards, only analyzing them. When Williford would not budge, Mike Martin again offered Williford $20,000 just to obtain court stamps, telling him “Money is not a problem at all.” Id. at 1571. Williford responded bluntly: “I cannot, and should not, petition the Court to enter the DRAA awards until I have more information, including translations of the DRAA Agreement.” Id. By this time, Williford had “many questions.” Id. Mike Martin refused to provide a translated copy, claiming that “[w]e can not [sic] translate the stuff, otherwise we’ll pay $180 billion.” Id. 2. The Notice Of Documents By September 11, 2019, the DRAA Petitioners had talked with Williford about using the purported arbitration awards to hold up the Transaction. Id. at 1583–85. Williford pointed out numerous problems with this strategy and recommended that the DRAA Petitioners take their case to a larger firm. Id. Mike Martin pushed him to simply file the awards, and Williford responded with additional concerns. Id. 1582. He told Mike Martin: 56  I am not willing to simply submit the awards to the Court without a complaint holding that a court clerk will stamp them. The Court would likely rule that this is incorrect procedure under the DRAA 10 Del. C. § 5810(b) and Court of Chancery Rule 97(d). It may well also think of this action as an attempt to trick the court. Id. at 1582. Having failed to convince Williford to docket the awards, Nielsen took matters into his own hands. Without Williford’s knowledge, Nielsen mailed a set of documents to the court (the “Nielsen Documents”) and asked that they be “stamped.” JX 1345 at 13. The Nielsen Documents included a “Default Judgment,” purportedly signed by six arbitrators, that granted relief in favor of the DRAA Petitioners and against Anbang, Great Hua Bang, and the CBIRC. Id. at 1–3. The “Default Judgment” indicated that service of the arbitral awards had been completed on August 2, 2019, three days before the filing of the DRAA Chancery Action, which ostensibly sought to appoint arbitrators. Id. at 1. After receiving the Nielsen Documents, the court called Williford to ask what they were. See JX 1868 at 26–27. It was readily apparent that Williford knew nothing about them, and he asked for a copy. See id. The court informed Williford that it would docket the materials to avoid problems associated with an ex parte filing, but would do so under a notice making clear that the docketing had no legal effect. See id. On September 26, 2019, Williford reported to Nielsen and the DRAA Petitioners on the call from the court. He stressed that the court “did not want the docketing of the filing to be interpreted as a docketing of a final award.” JX 4205 at 17. He noted that he previously told Nielsen that he “did not think [submitting the Nielsen Documents] was a good idea and/or permissible” and that he “certainly (as you know) did not review, sign off 57 on, have filed, or know such was being filed.” Id. In a second email that day, he reiterated that he had told Nielsen that submitting the documents was “not a good idea” and stated that he was inclined “to file a motion to withdraw immediately.” Id. at 15. He warned the DRAA Petitioners that [t]here is a significant danger that the Court will view the filing as an attempt to trick it into doing something (or make it look like it had done something) that either could not be done or, at best, could only be done after significant further proceedings and proof that has not been presented. Id. at 16. That is precisely how the court views the matter. On October 1, 2019, the court docketed the Nielsen Documents under a cover page titled “Notice of Documents.” JX 1505. The notice stated: PLEASE TAKE NOTICE that the court has received the following documents. This copy is being filed for informational purposes only. The filing of these materials by the court does not have any implications under Delaware Rapid Arbitration Act. Id. Later that day, Williford emailed the DRAA Petitioners and Nielsen, noting that the court had stated during the teleconference on September 26 and again in the notice that “the filing has no effect under the DRAA.” JX 5181 at 1609–10. He told the DRAA Petitioners that he had decided to withdraw, provided a draft motion to withdraw, and asked for any comments. Id. 3. The Delaware Judgments With Williford planning to withdraw, Nielsen and the DRAA Petitioners looked for another Delaware attorney. On October 17, 2019, they hired Stamatios Stamoulis. Id. at 1617–18. They did not have the courtesy to tell Williford. As with Williford, the DRAA Petitioners promised Stamoulis money and future business to induce him to act quickly. In 58 one email, Mike Martin told Stamoulis, “Please try your best FILE NOW TODAY[.] Youll [sic] get a bid [sic] bonus.” Id. at 1623. In another email, Martin wrote, “PLEASE RUSH TO FILE NOW, just as you did last Friday . . . .” Id. In another, he wrote, “PLEASE FILE NOW TODAY[.] WE PREPARED BIG BONUS for u.” Id. Stamoulis answered, “Working on this now.” Id. On October 24, 2019, without seeing the DRAA Agreement, Stamoulis commenced an enforcement action in the Delaware Superior Court. See JX 1559. In support of the action, Stamoulis filed an affidavit in which he averred that the “Default Judgment” docketed as part of the Nielsen Documents was “a judgment deemed confirmed by the Court of Chancery” and an “October 1, 2019 confirmed final judgment.” JX 1560. The affidavit did not disclose the “Notice of Documents” or the disclaimer that the docketing had no effect under the DRAA. The affidavit referenced the date of October 1, 2019, the date this court docketed the “Default Judgment,” rather than the date it was purportedly signed by the arbitrators, implying that the court entered the “confirmed final judgment” on that date. The affidavit attached a copy of Award III, which purported to grant the DRAA Petitioners “compensatory damages in the amount of $9,000,000,000.00 in cash, or twenty properties, including hotels and their full ownerships [sic], and to date, six properties [sic] deeds have already been transferred to claimant.” JX 1559 at 3. It purported to grant the DRAA Petitioners “[f]ull ownership of the following 25 companies and 20 properties, including hotels, minus their debt,” followed by a list that included the six California Hotels. Id. at 3–4. Under the DRAA, because the award was not “solely for money 59 damages,” the Court of Chancery would have had to “enter a final judgment in conformity” with the award. 10 Del. C. § 5810(b). Yet the DRAA Petitioners had never filed the award in the Court of Chancery. Moreover, the award supposedly was signed in July 2019, yet somehow listed the Civil Action number for the DRAA Chancery Action, which had not been filed until August 2019. Over the next six weeks, Stamoulis commenced five additional enforcement actions involving additional awards.110 In each action, Stamoulis filed a similar affidavit that either referenced or attached an “October 1, 2019 confirmed final judgment” from this court or referenced a “judgment deemed confirmed by the Court of Chancery.” Each of the supposed underlying arbitration awards differed in terms of the amount of cash and number of properties awarded. The first, second, and third affidavits averred that each accompanying arbitration award was a “true and correct copy of the July 21, 2019 Final Award,” yet each attached a different version of the award.111 The fourth, fifth, and sixth affidavits referred to final awards dated on or after November 22, 2019, even though the last entry on the docket in the DRAA Chancery Action was the Notice of Documents filed on October 1, 2019.112 The last of the arbitration awards purported to award the DRAA 110 See JX 1585 (filed November 1, 2019); JX 1602 (filed November 8, 2019); JX 1663 (filed December 10, 2019); JX 1682 (filed December 16, 2019); JX 1708 (filed December 16, 2019). 111 See JX 5181 at 479–87, 508–15, 537–45. 112 Id. at 575, 614, 655. 60 Petitioners at least $369 billion in cash plus “full ownership of . . . 26 companies and 20 properties, including hotels, minus their debt.” JX 5181 at 662. After filing the last of the six awards on December 16, 2019, Stamoulis congratulated Mike Martin and Nielsen: “You now have six (6) judgments accepted on the docket in Delaware for a total of about 1 Trillion dollars (936,000,000,000 to be exact).” Id. at 1628 (collectively, the “Delaware Judgments”). 4. The California Judgment On November 15, 2019, Stamoulis asked the Delaware Superior Court to provide exemplified copies of the judgments he had docketed.113 He received an exemplified copy of the judgment docket in the third Delaware Superior Court case, as well as a purported arbitration award that supposedly awarded the DRAA Petitioners $180 billion in cash plus “7 banks, 23 branches, assets, and companies,” including the six California Hotels. JX 1626 at 5. On December 6, 2019, a California attorney named Bruce Methven filed these documents in Alameda County, California, and asked for recognition of the sister-state judgment (the “Alameda Action”).114 Methven claimed that the Delaware Superior Court had entered judgment on November 16, 2019, and that the amount remaining unpaid on the sister-state judgment was $177 billion, citing “six hotels as 3 billion paid already.” JX 113 See JX 1621; JX 1622; JX 1623. 114 See JX 1651; JX 1652; JX 1659 61 5181 at 693. A clerk of a California court granted the application and entered a judgment in California (the “California Judgment”).115 Also on December 6, 2019, Stamoulis entered his appearance in the DRAA Chancery Action and filed a document titled “NOTICE OF APPOINTMENT OF ARBITRATORS.”116 It recited that the DRAA Petitioners had named five arbitrators to resolve an alleged dispute under the DRAA Agreement.117 M. Anbang Responds To The California Judgment. On December 11, 2019, Methven called Lance and informed him about the California Judgment. Later that night, Methven provided a Gibson Dunn litigator with the case number for the Alameda Action and a link to the docket.118 115 See JX 5181 at 744; see also id. at 56. 116 See JX 1649; JX 1650. After seeing the notice. the court contacted Williford to ask if he was still counsel in the case and to remind him that if he was not, then he and Stamoulis submit a stipulation of substitution of counsel. See JX 1868 at 27–33. Before the court’s call, Williford did not know that Stamoulis was involved. Id. 117 Gibson Dunn investigated the arbitrators. See, e.g., JX 1809 (Marijke Edler); JX 2090 (Adrian Tyson Edler); JX 2091 (Melvin Lee Raby). Their backgrounds were not consistent with a legitimate arbitral proceeding. While these actions were unfolding, Great Hua Bang filed an appeal in the Intermediate People’s Court from the adverse ruling from the Beijing IP Court in its trademark dispute with Anbang. See JX 1635. The appellate court rejected the appeal and affirmed the ruling in favor of Anbang. See JX 5189. Great Hua Bang appealed to the Beijing Higher People’s Court. See JX 5242. 118 See JX 1679 at 1; JX 1680; JX 4566 at 13–14; see also JX 1690 at 2. 62  On December 12, the Gibson Dunn partner who was overseeing the Quiet Title Actions, Ben Wagner, emailed his colleagues about a “phony arbitration award document,” explaining that it “was actually filed in Delaware recently” and “purported to take a default judgment against Anbang for billions of dollars.” JX 1686 at 2. Wagner forwarded the information to Chan later that day. Id. at 1. Wagner concluded that the California Judgment “was intended to help manufacture some sort of claim to the hotels.” JX 1690 at 2. That same day, Wagner emailed Ivanhoe with an update on the status of the Quiet Title Actions. He did not mention the Alameda Action, California Judgment, the DRAA Chancery Litigation, the arbitration awards, or the Delaware Judgments. See JX 1688. On December 13, 2019, Lance sent Li copies of the documents from the case that Methven had filed. See JX 4939. He also sent Li a collection of the “arbitration award documents” that had been filed with the Delaware Superior Court. See JX 1686 at 1. Li reviewed the documents, understood that they related to claims against the Hotels, and discussed them with Chan and Vice Chairman Luo. Li Tr. 369–70. Li and a group of Gibson Dunn attorneys exchanged privileged emails regarding a set of documents from the DRAA Chancery Action under the subject line “Urgent matter.” See JX 1689. Li and Gibson Dunn discussed whether these developments should be disclosed to Buyer, the Lenders, or the Title Insurers. Li Tr. 370–72. Li and Gibson Dunn recognized that the DRAA Chancery Action and the related judgments concerned the Hotels, 63 understood that the same parties were behind the Fraudulent Deeds, and connected the scheme with the long-running trademark dispute with Hai Bin Zhou.119 Li and Gibson Dunn decided not to say anything. Li Tr. 370–72. When reporting on the Litigation Plan to Greenberg Traurig, Gibson Dunn pretended as if nothing else was going on that had any bearing on the Hotels or the Transaction. Given what Gibson Dunn knew, its statements to Greenberg Traurig were materially misleading. 1. Anbang Appears In The DRAA Chancery Action And Obtains A TRO. On December 19, 2019. Anbang appeared in the DRAA Chancery Action and sought a temporary restraining order and sanctions against the DRAA Petitioners. JX 1729. In its supporting brief, Anbang connected the DRAA Chancery Action to the Fraudulent Deeds, explaining: [Anbang] brings this motion because it needs this Court’s urgent intervention to stop Petitioners’ brazen and far-reaching fraud that now spans two states, three courts and eight separate actions—and stems directly from this and other actions Petitioners have filed in Delaware courts. The scheme began in 2018 in a handful of county recording offices in California, when Petitioners, and those acting in concert with them, began recording false grant deeds purporting to transfer six luxury hotel properties in California that were owned by [Anbang] subsidiaries. JX 1730 at 4–5. Anbang explained that the DRAA Chancery Action was “the next chapter of Petitioners’ fraud.” Id. at 5. Anbang linked the TRO application to the Transaction, arguing that “Petitioners’ wholesale fraud on the Delaware Courts is a naked attempt to 119 See, e.g., JX 1701; JX 1719; JX 4939; JX 4940; JX 4943; JX 4944. 64 derail [Anbang’s] agreement to sell several billion dollars’ worth of luxury hotel properties across the United States held by [Anbang’s] subsidiaries.” Id. at 4. Anbang represented that the fraud “began in the fall of 2018 when a convicted felon named Daniil Belitskiy executed false grant deeds to six luxury hotel properties in California, which were held by Dajia subsidiaries.” Id. at 8. Anbang further represented that “[i]t is clear that the shell LLCs listed in these false grant deeds and the Petitioners in this case are part and parcel of the same fraud scheme.” Id. at 9. In presenting the dispute to the court, Anbang provided a misleadingly incomplete picture of what it knew. Anbang did not disclose the lengthy history of trademark disputes with the DRAA Petitioners and Hai Bin Zhou dating back to 2008. Anbang did not share what it had learned about the DRAA Petitioners and their connections to Hai Bin Zhou. Internally, Anbang and Gibson Dunn had literally connected the dots in the form of a network map of the many interconnections. See JX 1807 at 1, 8. In their internal depiction of the key players, Anbang and Gibson Dunn did not even mention Belitskiy, having recognized that he was a low-level patsy and not one of the orchestrators of the scheme. See id. Anbang and Gibson Dun also connected the DRAA Chancery Action with the specific trademark dispute involving Great Hua Bang in the Beijing IP Court, where Great Hua Bang introduced the DRAA Summary. See JX 4688 at 4. The arbitration awards cited a hearing in the “BJIPC” on March 5, 2019. TianZhen Fan and YuLin Song had both attended a hearing before the Beijing IP Court on March 5, 2019, during which Great Hua Bang introduced the DRAA Summary, and they had signed an attestation confirming the 65 accuracy of the record from that hearing. But rather than acknowledging this fact and dealing with it candidly, both TianZhen Fan and YuLin Song filed declarations in support of Anbang’s application for a TRO which stated, “I did not appear at, nor sign any documents relating to, any arbitration or arbitration award relating to Petitioners on March 5, 2019 or on any other date. In fact, I have not visited the State of California during 2019.”120 That was technically true in an misleading way, because it misdirected the court’s attention from the hearing before the Beijing IP Court to a non-existent arbitral hearing in California. On December 20, 2019, Wagner provided an update to Greenberg Traurig on the states of the Quiet Title Actions. JX 1780 at 1. Wagner did not mention the emergency petition that his team had filed in Delaware. Instead, he expressed optimism that “we should be able to . . . clear title” assuming “no further action by the defendants.” Id. That same day, Gibson Dunn sent Anbang a memorandum that provided an update on both “the litigation in Delaware and in California involving the false deeds and false arbitration awards.” JX 1776 at 2. Wagner’s report to Greenberg Traurig omitted material information and was misleadingly incomplete. This court scheduled a hearing on Anbang’s TRO application for December 23, 2019. JX 1762. On December 20, the day after the application was filed, the DRAA 120 JX 1727 at 3; accord JX 1728 at 3. 66 Petitioners stipulated to the entry of a TRO and an expedited schedule in anticipation of a hearing on an application for a preliminary injunction. JX 1765. It stated: 1. Upon the Court’s entry of this Temporary Restraining Order, Petitioners . . . and each of Petitioners’ respective officers, managers, agents, servants, employees, attorneys, and persons in active concert or participation with Petitioners, are enjoined and restrained, pending further Order of this Court, from: a. Purporting to arbitrate any dispute against [Anbang]; b. Representing to any other court that they have obtained a judgment from this Court or the Delaware Superior Court; c. Prosecuting or seeking any action or relief in any of the [enforcement] actions pending in the Delaware Superior Court . . . ; and d. Making any further filings in any court relating to any purported arbitration with [Anbang]. 2. [Anbang’s] Motion to Expedite is granted, and the parties will engage in expedited discovery, including document production and depositions, with discovery to commence immediately upon entry of this Order and with discovery to conclude on January 31, 2020 . . . . Id. One day after Anbang obtained the TRO, Wagner provided a litigation update to Ivanhoe. He reported on the Quiet Title Actions in California. He did not mention the DRAA Chancery Action. See JX 1782. Wagner’s report was misleadingly incomplete. 2. The DRAA January Judgment On December 20, 2019, thirty minutes after the stipulated TRO was entered, Williford formally moved to withdraw. JX 1763. Anbang opposed the motion, contending that the DRAA Petitioners had engaged in a 67  brazen and far-reaching real estate fraud scheme that now spans two states, three courts and eight separate actions . . . . [which] followed on the heels of a fraudulent deed transfer scheme whereby Petitioners (or affiliates) had initially tried to transfer luxury hotel properties to entities they (or their agents and affiliates) control, in an effort to derail [Anbang’s] multibillion dollar deal to sell those hotels. JX 1785 ¶¶ 1–2. Anbang thus again linked the DRAA Chancery Action to the Fraudulent Deeds and the Transaction, despite not having mentioned the DRAA Chancery Action to Buyer or Greenberg Traurig. Days later, Anbang moved for a TRO in the Alameda Action to block the DRAA Petitioners from taking any action to enforce the California Judgment. On December 23, 2019, the court granted the TRO. JX 1787. Methven moved to withdraw, and his motion was later granted.121 On December 31, 2019. Stamoulis asked the court to “hold a status conference as soon as practicable so that we may develop a plan to transition this matter to other counsel.” JX 1815 at 4. Anbang opposed his withdrawal, relying again on the connection between the Delaware Litigation and the Transaction. JX 1821. Stamoulis formally moved to withdraw on January 6, 2020. JX 1834. The court scheduled a status conference for January 8, 2020. JX 1833. During the status conference, Gibson Dunn again linked the DRAA Chancery Action to the Transaction. A Gibson Dunn attorney explained: The problem is that we can’t proceed to closing with these six judgments in the Superior Court outstanding and this judgment in California. So I think in 121 See JX 1756; JX 1759; JX 1768; JX 1954; JX 1955. 68  the very immediate term, in order for us to get to closing – and we have a deal. We are waiting to clear title and clear the overhang of the litigation on this deal to get it done – we need the six judgments in Superior Court vacated, possibly an order from this Court to help us get that done, and then something we can take to California to show the California court in Alameda County that the judgment did not really exist and ought to be vacated there. JX 1868 at 4–5. The attorney represented that closing was “contingent upon clearing title and clearing up this litigation overhang,” that “the closing would have already occurred but for this fraudulent scheme,” and that “as soon as we can clear up what’s happening now, we can get the deal done.” Id. at 5. The court asked counsel to confirm that “this is the last condition to closing” and that “[a]s soon as this happens, you-call can close?” Id. Counsel twice confirmed that this was the case. Id. Counsel later reiterated, “We want to make sure that we get these judgments vacated as quickly as we can so that this deal can proceed to closing. . . . [W]e’ve got a deal for multiple billions of dollars, and we need to get it done.”122 Yet Gibson Dunn had not told Buyer or Greenberg Traurig anything about the DRAA Chancery Action. Sadly, the Gibson Dunn attorney misled the court about the state of Anbang and Gibson Dunn’s knowledge about the DRAA Petitioners. The following exchange took place: THE COURT: And so do you believe that, other than these lawyers, there are any human beings associated with the plaintiffs who are in this country? Id. at 10; accord id. at 11 (“we’ve got to get this stuff out of the way so we can 122 get the deal done”); id. at 22 (representing that a four- or six-month delay in vacating the judgments would “risk derailing the deal”). 69  COUNSEL: We believe there is one in California. THE COURT: Who is that? COUNSEL: According to the incorporation papers, theres’s a fellow named Hai Bin Chou. It’s H-a-i, B-i-n, C-h-o-u. He signed incorporation papers for a number of the LLCs. He sometimes signs those papers as Andy Bang, H.B. Chou. So we believe that he is the natural person behind these LLCs. But without discovery, we don’t know. JX 1868 at 20–22. In reality, Anbang and Gibson Dunn knew quite a bit more. Anbang had known about Hai Bin Zhou for years, and not only because his name appeared on incorporation papers. Anbang had been litigating against Hai Bin Zhou since 2008 and had investigated him repeatedly. Gibson Dunn had been embarked on a massive investigation in August 2019, and it had uncovered considerable information.123 Anbang and Gibson Dunn had also connected the DRAA Chancery Action with the DRAA Summary.124 After the presentation from Gibson Dunn, Williford and Stamoulis each argued why they should be permitted to withdraw. Stamoulis argued that he had a good faith basis to believe that the DRAA Petitioners had legitimate claims based on the following:  He had been contacted by Nielsen, who had “prosecuted a fairly extensive patent portfolio for the principals of the petitioners.” JX 1868 at 46–47. 123 See, e.g., JX 1794; JX 1795; JX 1799; JX 1800; JX 1802; JX 1803; JX 1804; JX 1805; JX 1806; JX 1811; JX 1880; JX 1823; JX 1894; JX 1895. 124 On December 26, 2016, just before a call with Li and Gibson Dunn to discuss the trademark dispute and its connection to the DRAA Chancery Action, TianZhen Fan had the DRAA Summary scanned and emailed to herself. See JX 1794; JX 1800 at 3–21. 70  Nielsen advised him that the DRAA Petitioners had been involved in a successful trademark dispute with Anbang before the USPTO, which was publicly docketed, and where the DRAA Petitioners had been represented by Venable. Id. at 47–49.  He understood that the DRAA Petitioners were securing successor counsel and speaking with large, well-known firms. Id. at 51–54.  He had two documents that the court would review in camera that would assist the court in evaluating his motion. Id. at 54–55. The court agreed to review the two documents, both of which were in Chinese, and which Stamoulis represented were a copy of the DRAA Agreement and a filing in a Chinese court. The court granted both motions to withdraw.125 The court explained that before the hearing, there were many reasons to be skeptical about the DRAA Petitioners and their conduct. See JX 1868 at 62–64. The court noted that its suspicions “remain[ed] quite high” and that the “picture, as a whole, gave substantial color to the defendants’ assertions that these were likely fraudulent actors and potentially insubstantial shell companies who were using the courts for nefarious purposes.” Id. at 64. But Stamoulis’s representations had presented “something of a different cast.” Id. First, in the sense that World Award Foundation may indeed be an entity with some assets, be they patents or otherwise. He has also indicated that the plaintiffs are seeking successor counsel. And without describing or identifying the two documents that I reviewed in camera, I will say that they, in theory, if they are what they purport to be, provide some support for the plaintiffs’ position. 125 See JX 1869 (Williford); JX 1873 (Stamoulis). Because the court was concerned that the DRAA Petitioners had “gone dark” and that Anbang would not have any means of communicating with them, the court required Stamoulis to remain in the case solely for the purpose of relaying communications to his former clients. See JX 1868 at 67–68. The court later relieved Stamoulis of that obligation. See DRAA Chancery Action Dkt. 72. 71 Id. In light of the expedited schedule, which contemplated discovery closing on January 31, 2020, the court required the DRAA Petitioners to retain successor counsel by close of business on Friday, January 10. The DRAA Petitioners had known about Stamoulis’ desire to withdraw since December 31, 2019, and they had terminated his representation on January 4. Although they had received sufficient time to obtain successor counsel, the court gave the DRAA Petitioners a final chance to get their act together, obtain counsel, and defend this expedited proceeding. If they don’t do that, then I think they have effectively opted, at least in the short term, to accept some form of default judgment vacating the default judgments that they obtained. They may then subsequently come in, and we can have a grand fight on an appropriate schedule about what, if anything, should be done beyond that. Maybe they would be able to show that the judgments, in fact, are valid and should be put back in place. Maybe the defendants will be able to show that this is, in fact, a fraudulent or criminal scheme, and consequences will flow from that likely here and elsewhere. Id. at 70–71. The court ruled that if successor counsel did not appear, then Anbang could move for a default judgment.126 The DRAA Petitioners failed to retain successor counsel by the deadline, and Anbang moved for entry of a default judgment. JX 1889. Anbang submitted a proposed form of order that effectively tracked the earlier TRO. On January 15, 2020, the court granted the motion and entered the proposed form of order. Among other things, it stated: 126 JX 1868 at 68–69; see JX 1873 ¶ 10. 72  a. No arbitration award or judgment involving any of Petitioners has been entered, confirmed or deemed confirmed by this Court; b. The purported “Default Judgment” document filed in this action (Trans ID 64258346) is of no legal force or effect; and c. Petitioners are estopped and enjoined from challenging the vacatur of any and all purported judgments in the [enforcement] actions in the Delaware Superior Court . . . . JX 1925 ¶ 3 (the “DRAA January Judgment”). Anbang retained the right “to seek any further relief or sanctions,” and the order provided that “this action shall remain open and pending until such applications are resolved or [Anbang] notifies the Court that it does not intend to seek any further relief or sanctions in this matter.” Id. ¶ 9. With the entry of the DRAA January Judgment, except for a potential application for sanctions, the DRAA Chancery Action appeared to have reached a conclusion. The court viewed the case as resolved and turned to other matters. On January 17, 2020, Anbang asked the Delaware Superior Court to vacate the Delaware Judgments. Again connecting the Delaware proceedings to the Transaction, Anbang represented that the Delaware Judgments “appear[ed] calculated to try to derail the sale of several billion dollars’ worth of luxury hotel properties across the United States.” JX 1949 at 2. By order dated January 21, 2020, the Delaware Superior Court vacated all of the Delaware Judgments. JX 1974. Meanwhile, in the Quiet Title Actions, Seller’s counsel participated in “prove-up” hearings to establish Strategic’s ownership. At each hearing, a Gibson Dunn attorney led Needham through questions designed to create the impression that Seller had no prior involvement with or knowledge about Belitskiy and the entities that executed the 73 Fraudulent Deeds.127 Gibson Dunn claimed explicitly that “[t]hese entities and Mr. Blitzky [sic] are completely unknown to the true title holders of these properties.” JX 1640 at 25. That was not true. Anbang and Gibson Dunn had extensive information about the individuals who filed the Fraudulent Deeds, including their involvement in multiyear trademark disputes against Anbang.128 Throughout this period, Gibson Dunn communicated with Greenberg Traurig about the Quiet Title Actions. Gibson Dunn never mentioned the DRAA Chancery Action, the Delaware Judgments, the Alameda Action, or the California Judgment. Instead, Gibson Dunn reported that they had obtained default judgments in the Quiet Title Actions that resolved the difficulties involving the California Hotels. Gibson Dunn took the same approach when communicating with the Title Insurers. Gibson Dunn provided responses to the Title Insurers that only addressed the Quiet Title Actions and did not disclose any information about the California Judgment, the Alameda Action, the Delaware Judgments, or the DRAA Chancery Action. On January 14, 2020, 127 See JX 1640 at 12; JX 4945 at 15, 23–24; JX 4948 at 13–14. 128 It appears that Anbang and Gibson Dunn intentionally kept Needham in the dark about the DRAA Chancery Action, the trademark disputes between Anbang and the DRAA Petitioners, and the Delaware Judgments. Even though Gibson Dunn represented Strategic for purposes of the Quiet Title Actions, Needham was not told about the details of the Delaware proceedings until late January or February 2020. Needham Dep. 270–74. Needham did not learn until this litigation about the history of trademark litigation with the DRAA Counterparties or Belitskiy’s involvement in those disputes. Id. at 269–70, 281–82. 74 the Title Insurers asked for “[a]ny information about communicat[ions] with the defendants (if any).” JX 2488 at 12. Gibson Dunn responded, With respect to communications with the defendants, we have not had any. Although attorneys from the LA law firm of Larson O’Brien LLP appeared at three of the default judgment hearings (OC, SF, and SM), they knew nothing about the case and were only there to request a continuance. Importantly, nobody showed up on behalf of the defendants at today’s LA default judgment hearing. Id. at 11. Gibson Dunn thus answered as if the defendants in the Quiet Title Actions were wholly separate from the DRAA Petitioners, when Anbang and Gibson Dunn knew they were interrelated. Gibson Dunn’s response was materially misleading. By email dated January 22, 2020, the Title Insurers stated that based on what they knew, they were “prepared to remove the exceptions to title for the wild deeds against the California properties” if two conditions were met. JX 1994 at 1. First, the time for appeal from the default judgments had to expire, and second, the Title Insurers needed “written confirmation by [S]eller, or [S]eller’s counsel on behalf of [S]eller, that no additional communication from any of the defendants, or any counsel for the defendants has been received.” Id. Gibson Dunn again limited its response to the Quiet Title Actions, stating: “The defendants still have not filed anything in any of these cases. We also have not heard anything from any of the defendants or any counsel representing any of the defendants in these cases about potentially filing anything.” JX 2488 at 2. Gibson Dunn again answered as if the defendants in the Quiet Title Actions were wholly separate from the DRAA Petitioners, when Gibson Dunn knew they were interrelated. Gibson Dunn’s answer was materially misleading. 75  Based on what Greenberg Traurig and the Title Insurers knew, there would not be any issues with title once the appeal period elapsed in the Quiet Title Actions. See JX 1981. Based on that understanding, the parties planned for a closing at the end of March 2020. See JX 1991. N. The Lenders Uncover The DRAA Chancery Action In December 2020, Buyer informed Seller that it was reinitiating the bidding process for debt financing. Kim Tr. 1026. Because Buyer had negotiated the necessary documents with the Lenders in August 2019, before the discovery of the Fraudulent Deeds, the process was “smooth and seamless.” Id. at 1027. The financial markets had improved for borrowers, and Ivanhoe expected the effort to be “very successful.” Ivanhoe Tr. 581. By mid-February 2020, Buyer was close to executing the documentation for financing. Kim Tr. 1027–28. All of the Lenders were “working toward issuing a commitment as soon as possible.” JX 2139 at 1. The plan was to execute commitment letters during the week of February 17. Ivanhoe Tr. 582–83. Consistent with that expectation, Gibson Dunn told Greenberg Traurig on February 17, 2020, that it expected all of the conditions to closing to be met by March 15, 2020, so that the parties could close promptly thereafter. JX 2157. Greenberg Traurig agreed and suggested targeting April 1 as a closing date. Id. 76  On February 18, 2020, Buyer received final versions of the term sheets, commitment letter, flex letter, and rate lock agreement from Goldman.129 But that same day, Goldman’s counsel notified Gibson Dunn that “Goldman has become aware of a series of Delaware cases filed against Anbang that seem to relate to the Strategic portfolio” and sent Gibson Dunn the TRO application that Gibson Dunn had prepared. JX 2162. Goldman’s counsel asked for a call that evening to understand the background on this and the current status of the cases. See JX 2164. The Gibson Dunn lawyers claimed they could not put together a call that quickly.130 Instead, Seller formally gave notice to Buyer that all conditions to closing would be satisfied on March 15 and that the parties should prepare “to close the transaction shortly after March 15.” JX 2174. Still unaware of the DRAA Chancery Action, the Delaware Judgments, the Alameda Action, and the California Judgment, both Mirae and the Title Insurers expressed support for that schedule.131 Mirae proposed a closing date of April 6. JX 2219. On February 20, 2020, committed financing was just a signature away. Mirae had asked for the final wiring information and fee amounts from Goldman. See JX 2260. Mirae had wired the money to Buyer’s bank account in the U.S. “so that upon signing the 129 See JX 2240 at 2–3; Kim Dep. 92–95; Davis Dep. 199–202. 130 JX 2165; see JX 2241. 131 See JX 2216; JX 2219. 77 financing commitment letters and term sheets and et cetera, [it] would be able to quickly transfer necessary expense, deposits, and fees to Goldman instantly.” Kim Tr. 1032–33. With everyone poised to sign, Goldman informed Jones Lang about the DRAA Chancery Action. See JX 2244. Jones Lang then notified Mirae, explaining that no one had determined “if these claims run to the seller, the assets or both,” and although “it appear[ed] that the claims have been set aside by the courts,” this was “all new information which Goldman [was] reviewing.” JX 2266 at 1. Goldman’s discovery brought the financing process to a halt. The commitment letters did not get signed on February 19, and the signing was tentatively pushed until February 24 so that Mirae and the Lenders could investigate further.132 For both Mirae and the Lenders, the Delaware filings represented a second major hit to the credibility of Anbang and Gibson Dunn. When Gibson Dunn first disclosed the Fraudulent Deeds, the Lenders had expressed “concern . . . that Anbang knew about the deeds and deliberately concealed them from the bidders and their lenders.” JX 1048 at 1. The revelation of the DRAA Chancery Action reinforced those concerns.133 132 Wheeler Dep. 181; see JX 2312 at 2 (Wheeler telling Jones Lang, “We’ll need to figure out the new litigation issue before we can execute.”). 133 See JX 2245 (Jones Lang expressing hope that the latest disclosure “doesn’t turn into another fiasco”); JX 2272 (Ivanhoe telling Anbang and Gibson Dunn that he was “surprised, to say the least, that these new series of legal actions have been ongoing for over one month and no one brought this to our attention until after it was raised by Goldman a couple days ago”). 78  Goldman sent the litigation documents to Greenberg Traurig, who began studying them.134 Kim asked Li to explain, telling him “We also need to know ASAP if this is about the Strategic Portfolio.”135 Li responded evasively, saying “We don’t think there’s anything that your side should be concern[ed] with.” JX 2289 at 2. Kim followed up: “[C]an we take it that, whatever it is, it is NOT about the Strategic Portfolio?” Id. at 1. Li responded that the DRAA Chancery Action involved a “fraudulent arbitration judgment falsified by some criminals regarding Anbang’s use of the Anbang trademark in the US” and that Gibson Dunn would provide the “necessary details.” Id. The Lenders had already concluded that DRAA Chancery Action related to the Strategic portfolio. Glover Tr. 173. On February 21, 2020, during a call with Greenberg Traurig and the Lender’s counsel, Gibson Dunn downplayed the claims. The Gibson Dunn lawyers claimed that the DRAA Chancery Action was a fraud based on a “bizarre trademark dispute” that would “not be of much interest.” JX 5086 at 1. They characterized the Delaware proceedings as “insignificant” and “not a big deal.”136 Those representations conflicted with what Gibson Dunn had told this court about the significance of the DRAA Chancery Action. The Gibson Dunn lawyers also said they had first learned about the DRAA Chancery Action in mid- December 2019.137 That was not true. Gibson Dunn had learned about the DRAA Chancery 134 See JX 2246; JX 2268. 135 JX 2289 at 3; see Kim Tr. 1028–29. 136 Davis Dep. 219; see JX 2305 at 1; JX 2273 at 1. 137 Ivanhoe Tr. 595–96; see JX 2301. 79 Action four months earlier, in August 2019. Gibson Dunn said nothing about the connections among Belitskiy, Hai Bin Zhou, and the DRAA Petitioners. Gibson Dunn said nothing about Anbang’s multi-year litigation history with Hai Bin Zhou over trademark issues. See Ivanhoe Tr. 588–89. Based on Gibson Dunn’s representations and the events up to that point in the DRAA Chancery Action, including the entry of the DRAA January Judgment, Greenberg Traurig and Mirae concluded that the DRAA Chancery Action, the Delaware Judgments, and the California Judgment posted “little to no risk” to the Transaction.138 Internally, Mirae remained sufficiently concerned for Kim to ask Li specifically for any additional information that Anbang had about the parties involved: [I]f you have information or any idea about these fraudsters, please share with us ASAP . . . . It just does not make sense that the deed issue was caused by a [single U]ber driver who seemingly has nothing against Anbang. Also it is hard for us to understand that some companies (petitioners in the Delaware litigation) have committed such actions just as a simple vendetta. We need to understand the motives and also want to have absolute comfort that these fraudsters will walk away from our transaction/portfolio from now on for good. As you may imagine, we are getting tons of questions internally asking us if this is really it about the fraudster and if there are any other circumstances that we are not aware of. 138 JX 2304; see JX 2305. 80 JX 2353 at 2. Li represented that Anbang was not attempting to hide anything from Mirae. Id. at 1. Kim’s boss wrote back, noting the overlap between the DRAA Petitioners and the names of the entities on the Fraudulent Deeds. JX 2366 at 2. Li responded with another brief email that provided a few snippets about the trademark disputes. Id. at 1–2. As these exchanges were taking place, Goldman continued to evaluate the issues posed by the DRAA Chancery Action.139 The delay in securing financing could not have come at a worse moment. Over those critical days, the financial markets began gyrating as concern spread about COVID-19. Mirae pushed Goldman to finalize a financing package,140 and Goldman assured Mirae that it was working as expeditiously as possible.141 On Monday, February 24, 2020, Goldman was still not prepared to commit to a financing.142 With the market upheaval deepening, Goldman informed Mirae on February 26, 2020, that a committed CMBS financing was “off the table.”143 Goldman made a series of proposals, but all were far more expensive and would require additional negotiation. 139 See JX 2309; JX 2311; JX 2313; JX 2324. 140 See JX 2311 at 1; JX 2312 at 1–2; JX 2321; JX 2322; JX 2323. 141 See Wheeler Dep. 188–190; see also JX 2316. 142 See Wheeler Dep. 182–83, 187. 143 JX 2358 at 1; accord Wheeler Dep. 194. 81 Mirae and Jones Lang reached out to the members of the lending syndicate directly and approached other funding sources.144 As February entered its final days, concern about the novel coronavirus increased exponentially.145 Strategic’s hotels began to receive COVID-related cancellations.146 O. The DLA Letter For Mirae, the risk posed by the DRAA Chancery Action increased on February 28, 2020, when Greenberg Traurig located a letter that Stamoulis had filed on February 25.147 Stamoulis reported that DLA Piper LLP was considering whether to enter an appearance and attached a detailed, six-page, single-spaced letter from John Reed, a leading Delaware attorney and partner with DLA Piper (the “DLA Letter”).148 The DLA Letter stated that DLA Piper had been retained by the DRAA Petitioners “in connection with their rights under a [DRAA Agreement] (written in Chinese).” JX 2347 at 2. The letter explained: We have learned a lot in a short period of time, and many things do not add up if all of this is supposed to be some outright fraud. For example, the Amer Group is no stranger to AnBang Insurance. The parties have been adverse to 144 See JX 2370; JX 2404; JX 2408. 145 See JX 2353; JX 2359; JX 2362; JX 2404 at 2–3. 146 See, e.g., JX 2376; JX 2378; JX 2380; JX 2381; JX 2382; JX 2383; JX 2384; JX 2385; JX 2386; JX 2387; JX 2388; JX 2389; JX 2390; JX 2391; JX 2392; JX 2393; JX 2394; JX 2395; JX 2396; JX 2397; JX 2398; JX 2399; JX 2433; JX 2542; JX 2543; JX 2544; JX 2545; JX 2546. 147 See JX 2435; JX 2448; JX 5243. 148 See JX 2347; JX 5056. 82  each other for many years with regard to trademark disputes in the United States and China. From what we have been able to find through the United States Patent and Trademark Office (“USPTO”), Amer Group has thus far prevailed against AnBang Insurance with regard to the “AnBang” trademarks and other matters (see http://ttabvue.uspto.gov/ttabvue/v?gs=78653636), so it does not appear that the Amer Group is some gang of unknown con-artists who suddenly targeted AnBang Insurance. Id. at 3. The DLA Letter next described the DRAA Agreement. We understand it was executed in Beijing, China, on May 15, 2017, by AnBang Insurance’s then-Chairman, Wu Xiaohui. It is our understanding, and the [DRAA Agreement] expressly states, that the Agreement itself was a concept proposed by AnBang Insurance’s founder, Xiaolu Chen. Paragraph 88 of the [DRAA Agreement] states, that . . . it is governed by the “Delaware Rapid Arbitration Act (DRAA)” per the requirement of 10 Del. C. § 5803(a)(5). . . . The signature on the [DRAA Agreement] on behalf of AnBang Insurance appears to match the signatures on AnBang Insurance’s trademark applications filed with the USPTO. We also note that the signature is not identical to the other ones we reviewed so as to be a cut-and-paste copy. Id. The DLA Letter also posited (correctly) that Anbang had misrepresented the extent of its knowledge about the DRAA Agreement. AnBang Insurance’s Motion for a TRO filed with the Court of Chancery states that “‘[t]he Agreement’ does not exist” (TRO Mot., p. 6), but the two Declarations from TianZhen Fan and YuLin Song of [Dajia] do not (at least as we read them) squarely deny the existence or validity of the [DRAA Agreement] and simply say that [Dajia] “does not have any agreement to arbitrate disputes with” the Amer Group. (Decls., ¶ 9.) Of course, [Dajia] is the new name of AnBang Insurance following the seizure of the company by Chinese regulators and it did not exist with that name, or in its current state, when the [DRAA Agreement] was executed, so it is not clear whether the contention that it “does not have an agreement” with the Amer Group is based on a legal argument as opposed to a dispute of fact (we have reason to believe it is the former as explained later herein). In any event, we have also obtained and translated documents from a dispute in the Beijing Intellectual 83  Property Court involving the “AnBang” trademarks, where AnBang Insurance was a third party and the [DRAA Agreement] was a subject of proceedings back on March 5, 2019. We are in the process of doing much more due diligence on this and obtaining more filings from that proceeding through our China-based offices to determine whether AnBang Insurance ever challenged the validity of the [DRAA Agreement] before the Beijing Court. Id. at 3–4. The DLA Letter also discussed the Fraudulent Deeds: As to the history of the recorded deeds, that situation is tied to the long- standing trademark disputes and it appears the [DRAA Agreement] was specifically created to deal with the remedies to be implemented from the outcome of those disputes. For many years, AnBang Insurance did business in violation of the “AnBang” trademark and, at one point, AnBang Insurance had (and may still have) assets valued in excess of $300 billion (US), so the wildly large numbers identified in the [DRAA Agreement] and arbitration awards need to be understood in that context. While there have been actions to quiet title for the deeds that are alleged to have been fraudulently recorded (actions that were not vigorously defended for reasons we are still exploring). Paragraph 80 of the [DRAA Agreement] expressly states that if AnBang Insurance fails to cancel the Amer Group’s trademarks within one year of the date of the Agreement (May 15, 2018), a certain large sum of funds specified in the Agreement is to be deposited and, in the event of a failure to do so by June 15, 2018, the Amer Group “may appropriate the deposit directly without petitioning any arbitration commission or court, and the person designated by [the Amer Group] may with the DPOA (Durable Power of Attorney) granted by this Clause, directly sign a Grant Deed before any notary public in order to transfer the assets directly.” Not coincidentally. AnBang Insurance’s former Chairman executed and authorized a filing with the USPTO on June 7, 2017 (three weeks after the [DRAA Agreement] is claimed to have been executed), in furtherance of the effort to cancel the Amer Group’s trademarks as contemplated by Paragraph 88 of the [DRAA Agreement]. The assets to secure the required deposit are sixteen hotels and four properties specifically listed in Paragraph 79. Paragraph 80 further states that AnBang Insurance “shall guarantee that the aforesaid assets are free of liabilities.” The [DRAA Agreement] also provides for specified monetary penalties and multipliers for a breach of the various terms, obligations and conditions in the Agreement, which also explains the large figures in the arbitration awards. 84 Id.at 3–4. The DLA Letter explained that DLA Piper was still investigating these matters and that, given the serious allegations of fraud, the lawyers were proceeding “with as little client involvement as possible.” Id. at 6. The DLA Letter stressed, [W]e will not be entering our appearance and will not be making any representations to any Court until our investigation is complete; however, we wanted you to know what we have uncovered thus far for purposes of your own situation. . . . We can tell you that we are taking this situation very seriously, especially in light of the allegations of fraud, and we are deploying the necessary resources to get to the bottom of everything. Id. at 6. Anbang learned about DLA Letter the same day it was filed. Li immediately informed his superior, Vice Chairman Luo. See JX 2351. For Mirae and Greenberg Traurig, the DLA Letter was extremely concerning, because “all the substance [was] in direct contradict[ion] to what the seller was telling us.” Kim Tr. 1038. Ivanhoe viewed it as a game changer. He contacted the firm’s senior litigation partner and the head of its litigation practice and told them that they had “a very serious problem on a very large transaction.” Ivanhoe Tr. 599–600. Making a generational reference, Ivanhoe viewed it as the equivalent of, “Houston, there’s a problem.” Id. at 601. Anbang filed a response to the DLA Letter. See JX 2414. For the first time, Anbang began to share some of what it knew about Hai Bin Zhou and his associates in the form of an affidavit from the former FBI agent who had investigated the individuals who had purported to serve as arbitrators for the awards. See JX 2403. According to Anbang’s investigation, 85  [S]ix of the eleven total purported arbitrators appear to have been named as defendants in criminal cases; one appears to have pled guilty to a felony assault weapons charge and two misdemeanors; another appears to have pled guilty to at least four misdemeanors; another appears to have spent 40 years with a company called A-1 Pool & Spa Services; three arbitrators appear to have lived in the same R.V. Park in San Rafael, California (a fourth arbitrator is the mother of one of those three residents); and one of the arbitrators, who is a Chinese restaurant worker, affirmatively told Agent Douglas that he did not participate in any arbitration but signed the arbitration awards as a “favor” to a loyal customer. He also confirmed that he showed his driver’s license to the notary but was unaccompanied by the other “arbitrators” when he did so. We respectfully submit that these findings should be of interest in connection with the investigation new counsel claims to be conducting. JX 2414 at 3–4. Anbang also noted that “the person that purportedly notarized Petitioners’ verification in this action—Spencer John Chase—had his notary license revoked by the California Secretary of State pursuant to a stipulated decision entered weeks before Mr. Chase’s notary stamp was placed on the verification in this action.” Id. at 4 (emphasis omitted). After seeing the DLA Letter, Mirae and Greenberg Traurig concluded that they could not evaluate the risk posed by the DRAA Chancery Litigation without seeing the DRAA Agreement. Over the ensuing weeks, they consistently and repeatedly asked Anbang to provide a copy of the DRAA Agreement.149 P. COVID-19 Causes The Debt Markets To Close. As the calendar turned to March 2020, COVID-19 was causing “major headaches everywhere.” JX 2507 at 1. By March 4, “[t]he CMBS market [was] shut down for large 149 See, e.g., JX 2353 at 2; JX 2359 at 1; JX 2375 at 2; JX 2718 at 2; JX 2737 at 1; JX 2797 at 2; JX 3376 at 5, 8, 11. 86 hotel deals,” and debt funds were not entertaining any new hotel deals. JX 2508 at 1. A bridge loan was the only remaining option for the Transaction, and it was unclear whether that option could be executed successfully.150 Goldman circulated a term sheet, and several lenders declined to bid. See JX 2553. Buyer tried to convey the consequences of the market turmoil to Seller. See JX 2559. Anbang, however, refused to acknowledge that its decision to conceal the DRAA Chancery Action had delayed the financing process at a critical point. In an effort to get everyone on the same page, Jones Lang hosted a call on March 7, 2019, with Buyer, Seller, BAML, and Goldman. Kim Tr. 1048–51. The lead banker from Goldman explained that CMBS financing was not available and that putting together bridge financing was challenging.151 Not only was it difficult for Goldman to propose terms for a loan, but the markets were changing dramatically every day, so by the time the lenders in the syndicate obtained internal committee approvals, the terms were outdated.152 With the pandemic worsening, Strategic’s financial performance deteriorated at an accelerating rate.153 It became unclear whether Strategic could refinance its debt in the 150 See JX 2516; JX 2508 at 6; JX 2546. 151 Kim Tr. 1050–51; see JX 2564 at 1; JX 2566 at 1; JX 2676 at 1; JX 2577 at 1; JX 5053 at 1. 152 JX 2643; see Kim Tr. 1045–46; JX 2407 at 1–3; JX 2411; Kim Dep. 225–28. 153 See JX 2569; JX 2570; JX 2571; JX 2572; JX 2573; JX 2574; JX 2588; JX 2617; JX 2618; JX 2644. 87 ordinary course of business, and management and Strategic’s outside auditors discussed whether the Company’s financial statements needed to be a going-concern qualification.154 Given the worsening financial markets and the need to fully understand the issues raised by the DRAA Chancery Action, Buyer proposed to extend closing by three months.155 Li presented his supervisor, Vice Chairman Luo, with “potential options” that included strategies to “get control of the US$581m” deposit through litigation. JX 2590 at 1. Li did not regard specific performance as an option. See Li Dep. 472–73. On March 12, 2020, Anbang insisted on closing before April 8, 2020, unless Mirae agreed to Anbang’s counterproposal. See JX 2797 at 6–7. In exchange for the three-month extension, Anbang asked Mirae to (i) double its deposit, (ii) agree that all closing conditions had been satisfied or waived, (iii) agree that no purchase price adjustments were required, (iv) freeze the balance sheet date for calculating the estimated purchase price, and (iv) compensate Anbang approximately $400 million in purported funding costs. Id. Anbang threatened litigation, stating that if Mirae did not agree to Seller’s terms, “then we must close by April 8” and that “[i]f Mirae refuses to proceed to closing as contractually agreement, we will have no choice but to exercise all remedies available to us under the [Sale Agreement], including without limitation seeking specific performance compelling 154 See JX 2645; see also JX 3575. 155 See JX 2663 at 1; Ivanhoe Tr. 615–16; Kim Tr. 1047–48, 1051, 1055–56, 1212–13. 88 Mirae to close.” Id. Gibson Dunn separately told Greenberg Traurig that Anbang was prepared to litigate. JX 5131. Anbang’s terms were so extreme that Mirae viewed them as a flat rejection of its extension request.156 Mirae’s response, sent later that day, adopted a noticeably more formal tone. See JX 2718. Mirae noted that the closing date under the terms of the Sale Agreement was April 17, 2020, not April 8. Id. at 1. Mirae rejected Anbang’s terms as unrealistic. And Mirae noted that Seller’s failure to disclose the DRAA Chancery Action could affect the Title Insurers’ willingness to provide title insurance, resulting in a failure of a closing condition. Id. at 2. Mirae asked for a copy of the DRAA Agreement so that it could evaluate the issues raised by the DRAA Chancery Action. Id. In its response, Anbang claimed that it had “complied with all of our disclosure obligations under the Agreement.” JX 2727 at 1. Anbang represented that it did not have the DRAA Agreement and therefore could not provide it. Id. Anbang reiterated its threat of litigation, stating that it was “fully prepared to enforce our rights in court if it comes to that.” Id. On March 16, 2020, Mirae notified Anbang that “Buyer does not believe that the conditions obligating Buyer to close have been satisfied.” JX 2777 at 1. Buyer nevertheless exercised its right under the Sale Agreement to extend the closing date to April 17, 2020.157 156 Kim Tr. 1057–60; Ivanhoe Tr. 618; see JX 2942. 157 Id.; see also JX 2797 at 1–2. 89 Anbang disputed the April 17 date and contended that the closing date was April 8. Mirae sent an email disputing Anbang’s response. After a call between Gibson Dunn and Greenberg Traurig, the parties agreed to use April 17 as the closing date.158 Throughout March and early April 2020, Seller continued to seek financing.159 With the expanding COVID-19 pandemic, it was not available.160 During the same period, Strategic’s business performance continued to plummet.161 On March 24, Strategic temporarily closed the Four Seasons Palo Alto and the Four Seasons Jackson Hole “in response to very low demand as well as governmental orders.” JX 3105 at 1. The closing of the Four Seasons Jackson Hole advanced its normal seasonal closure by approximately two weeks. JX 3107 at 3. Other hotels began operating in state where they were “closed but open.” See JX 3159. 158 See JX 2846; JX 2907 at 2, 5–6; JX 2992 at 1. 159 See, e.g., JX 2596; JX 2600; JX 2623; JX 2713; JX 2730; JX 2738; JX 2739; JX 2760; JX 2855; JX 2859; JX 2862; JX 2864; JX 2895; JX 2896; at 1; JX 3212; JX 3951; Kim Tr. 1055, 1062; Wheeler Dep. 194–95; Davis Dep. 270. 160 See JX 3468; JX 3937; JX 4546 at 8, 25; Kim Tr. 1045–46; Hattem Dep. 121– 22; see also Wheeler Dep. 84–85, 197; Cookke Dep. 155. 161 See, e.g., JX 2750; JX 2763; JX 2764; JX 2767; JX 2768; JX 2769; JX 2770; JX 2771; JX 2772; JX 2773; JX 2778; JX 2839; JX 2905; JX 2988; JX 2989; JX 2990; JX 2991; JX 3041; JX 3044; JX 3236; JX 3282. 90 Q. The Title Insurers’ Concerns About The DRAA Chancery Action. While these events were unfolding, Ivanhoe kept the Title Insurers informed about deal-related developments.162 As a matter of personal and professional ethics, Ivanhoe wanted to be candid with the Title Insurers. He also knew that a failure to disclose information about the DRAA Chancery Action the Delaware Judgments, and the California Judgment could jeopardize Buyer’s coverage under a standard exclusion in title insurance policies for matters that were within the “knowledge of the insured” but were withheld from the Title Insurers.163 Lance and a colleague similarly engaged in regular communications with the Title Insurers throughout March and April.164 The Title Insurers were concerned about the DRAA Chancery Action, the DLA Letter, and the possibility that the DRAA Petitioners and their affiliates could reopen the various default judgments that Anbang and its affiliates had obtained. See JX 2791. On March 20, 2020, in response to Buyer’s request for an update on the status of the title insurance, the Title Insurers advised the parties that they were continuing to review “what is generally referred to as the Delaware litigation, and its impact on our underwriting of the title insurance.” JX 2997. Based on his conversations with the Title Insurers, Ivanhoe had expected the letter to take a stronger position. See JX 3006. 162 See JX 2647; JX 2648; JX 2657; JX 2658; JX 2659; JX 2660; JX 2693; JX 3006. 163 See Ivanhoe Tr. 604–06; JX 2649. 164 See JX 2911; JX 2914; JX 2998; JX 3000. 91  Mirae immediately asked Anbang to provide the Title Insurers with whatever addition they needed, including a copy of the DRAA Agreement. JX 3064. Mirae argued, If the Delaware Litigation is 100% based on fraud by Amer Group, as Seller insists, then it seems like the DRAA Agreement is the single most important document that Amer Group’s perpetration is based on. And if the DRAA Agmt does NOT exist as you say, then your assertion must be that it was fabricated by Amer Group. If so, have you, as defendant, tried to obtain a copy of it from the Delaware Court? The point is that if, as Amer Group insists, the DRAA Agreement is with Anbang (whether the agmt is authentic or not), then it would seem that Anbang must be able to obtain a copy of it from the court, without violating [the] confidentiality clause the document contains. If Seller can provide more information regarding the legitimacy of the DRAA Agreement to the title insurers, we believe that this would greatly help expediting their review of the Delaware Litigation. JX 3077 at 2 (formatting added). Anbang disputed that there was any reason for concern. JX 3157. To try to address the Title Insurers’ concerns, Gibson Dunn engaged with DLA Piper and provided additional evidence that the DRAA Petitioners were engaged in fraud. See JX 2995. Gibson Dunn leveled accusations at DLA Piper and asked DLA Piper to withdraw the DLA Letter. DLA Piper sent a strongly worded response that rejected any suggestion of wrongdoing. See JX 3066. Gibson Dunn provided the exchange to the Title Insurers and Buyer. Gibson Dunn also sent Ivanhoe a letter arguing that there was no basis on which anyone could set aside the default judgments in the Quiet Title Actions.165 165 See JX 3118; JX 3119; JX 3121. 92  On March 25, 2020, Anbang asked the Beijing Municipal Public Security Bureau to investigate Hai Bin Zhou and his activities.166 In its report, Anbang connected the Fraudulent Deeds with the DRAA Chancery Action and the years of trademark disputes, stating: In this case, the involved parties are significantly related, such as Great Hua Bang, Amer Group, and World Award Foundation, etc.; there is a high degree of overlap of these entities in the trademark dispute, document forgery, and fraudulent arbitration cases. Moreover, all the cases are related to a person named ZHOU Haibin (the Chinese name was transliterated; the English name was Hai Bin Zhou), who is likely to be the alleged suspect in this case. JX 3160 at 7. R. The Failed Closing The beginning of April 2020 saw activity on multiple fronts as the clock wound down toward the scheduled closing date on April 17, 2020. Anbang and Gibson Dunn continued to push for an immediate closing. Mirae and Greenberg Traurig identified problems and requested more time. As the parties’ relationship became more adversarial, they exchanged dispute letters and took the positions that they would assert in litigation. On April 3, 2020, Anbang notified Mirae that Strategic had responded to the COVID-19 pandemic by taking a number of actions involving the Hotels, including (i) closing the Four Seasons Palo Alto, (ii) closing the Four Seasons Jackson Hole in advance of its normal between-season closing, (iii) operating Strategic’s other hotels at reduced 166 See JX 3160; JX 3162; JX 3416. 93 levels with reduced staffing and with many restaurants closed, and (iv) pausing all non- essential capital spending JX 3444 at 2–3. Mirae asserted that it had the right to approve in advance any actions that Strategic might take that were outside the ordinary course of business and reserved its rights to challenge the actions that Strategic had taken. Id. at 1– 2. On April 7, 2020, the Title Insurers informed Gibson Dunn that they were having difficulty assessing the level of risk posed by the DRAA Agreement, which none of the Title Insurers had seen: [W]e are having a difficult time determining if the [DRAA Agreement] has any provisions in it that would have pledged, as collateral / security, or otherwise, the U.S. hotel properties. Or perhaps required Anbang not to sell any of these assets. We recognize your firm’s and your client’s position on the whole matter. We just do not know how to properly underwrite the risk without a copy of the DRAA Blanket Agreement, which we understand is not able to be provided us, apparently pursuant to its terms. Again, we understand that Anbang’s position is that this is a massive fraud being perpetrated against it. JX 3525 at 5. Anbang and Gibson Dunn possessed the DRAA Summary, which contained information pertinent to the Title Insurers’ questions and would have helped the Title Insurers perceive the illegitimacy of the DRAA Agreement.167 But Anbang and Gibson Dunn did not share the DRAA Summary with the Title Insurers, Mirae, or Greenberg Traurig. 167 See JX 2785; JX 4748. 94  On April 9, 2020, Gibson Dunn had a lengthy call with the Title Insurers in an effort to convince them to issue clean title insurance. See JX 3584. The next day, the principal decision makers for the Title Insurers convened “to reach a conclusion about the state of title they would be willing to insure.” Ivanhoe Tr. 621. The decision makers were the “deans of the insurance industry” and “a veritable who’s who of the most senior title insurance professionals in America.”168 Approximately one hour into the call, one of the representatives emailed Ivanhoe and asked him to join the call. See JX 3645. When the Title Insurers asked Ivanhoe what he would do in their position, Ivanhoe said he would continue to take an exception for the Fraudulent Deeds until “the seller . . . undertook proper action to have them removed of record.” Ivanhoe Tr. 632. The Title Insurers would then decide whether to provide affirmative coverage for the exception through an endorsement.169 On April 10, 2020, Gibson Dunn sent Greenberg Traurig an estimated closing statement for a closing on April 17, drafts of various closing deliverables, and a proposed closing checklist. JX 3607. Anbang was already planning for litigation, and on April 13, Gibson Dunn circulated a litigation strategy memo. See JX 3656. On August 14, Anbang circulated a litigation hold memo. See JX 3738. 168 Ivanhoe Tr. 621; Kravet Dep. 206–07. 169 See id.; Mertens Dep. 262; Chernin Dep. 104–06. 95  On April 13, 2020, Gibson Dunn wrote to the Title Insurers asking them to issue policies without taking exception for the Fraudulent Deeds.170 In the letter, Gibson Dunn offered to have Seller and one of its affiliates indemnify the Title Insurers for any losses they incurred and to assume the defense of any claims relating to the DRAA Agreement. JX 3670 at 5. That offer resembled the proposal that Anbang had made in August and September 2019, when Anbang first revealed the existence of the Fraudulent Deeds and the Lenders and Title Insurers balked. Anbang did not receive a more welcoming reception the second time around. After receiving the letter from Gibson Dunn, the Title Insurers issued title commitments for the Hotels that added the DRAA Exception. Under this broad exception, no coverage exists for [a]ny defect, lien, encumbrance, adverse claim, or other matter resulting from, arising out of, or disclosed by, any of the following: (i) that certain “[DRAA Agreement],” dated on or about May 15, 2017, to which AnBang Insurance Group Co., Ltd., Beijing Dahuabang Investment Group Co., Ltd., Amer Group LLC, World Award Foundation Inc., An Bang Group LLC, and AB Stable Group LLC are purportedly parties and/or also interested, and the rights, facts, and circumstances disclosed therein; (ii) that certain action styled World Award Foundation, et al. v. AnBang Insurance Group Co, Ltd, et al., in the Court of Chancery of the State of Delaware, as DRAA C.A. No. 2019-0605-JTL and the rights, facts, and circumstances alleged therein; (iii) those certain actions, each styled World Award Foundation, et al. v. AnBang Insurance Group Co Ltd, et al., in the Superior Court of the State of Delaware, as Nos. C.A. N19J-05055, C.A. N19J-05253, C.A. N19J-05458, C.A. N19J-05868, C.A. N19J-06026, and C.A. N19J-06027 and the rights, facts, and circumstances alleged therein; and (iv) that certain action styled World Award Foundation, et al., v. AnBang Insurance Group Co., Ltd., in 170 JX 3670 at 2–6; see also JX 3639; JX 3642. 96  the Superior Court of State of California for the County of Alameda, as Case No. RG19046027 and the rights, facts, and circumstances alleged therein. JX 3676 at 11. Both Buyer and Seller retained experts on title insurance who agreed that the language of the DRAA Exception was so broad as to eliminate coverage for the Fraudulent Deeds.171 It was only after the Title Insurers issued the commitments with the DRAA Exception that Anbang returned to this court in the DRAA Chancery Action in an effort to obtain a copy of the DRAA Agreement.172 On April 14, 2020, Anbang filed an emergency motion to compel production of the DRAA Agreement, representing that based on statements characterizing the content of this document made [in the DLA Letter], the title insurers involved in the [Transaction] have expressed reservations about their ability, without having the opportunity to review the document, to write “clean” title insurance policies before the closing date . . . . Mirae too has expressed serious reservations about closing this transaction because of the existence of this so called “DRAA Blanket Agreement” and related issues. [Anbang] believes that the purported DRAA Blanket Agreement has been fabricated and is part of Petitioner’s scheme to defraud [Anbang]. Thus, the DRAA Blanket Agreement should be irrelevant to the closing of the Mirae Transaction. Despite this, Mirae continues to attempt to hide behind the DRAA Blanket Agreement to delay the Mirae Transaction, which is why this motion is so urgent. 171 Chernin Tr. 1263; Nielsen Tr. 1441–43; accord Ivanhoe Tr. 633, 767. 172 Three months earlier, on January 6, 2020, Anbang had filed a motion to compel in connection with its TRO application, but that motion did not specifically seek production of the DRAA Agreement. See DRAA Chancery Action Dkt. 32. Anbang had also served subpoenas on the DRAA Petitioners’ former counsel, which the lawyers had moved to quash. With the entry of the default judgment embodied in the DRAA January Order, the court had viewed the DRAA Chancery Action as effectively over, mooting the discovery sought in connection with the TRO. 97 JX 3763 at 2. The court granted the motion that same day. JX 3765. On April 15, 2020, Stamoulis provided Anbang with the version of the DRAA Agreement that he possessed, which was missing a page.173 Also on April 15, Buyer provided formal notice that the Seller had failed to satisfy its representation that Seller and its Subsidiaries had good and marketable title to all owned real property. JX 3770 at 2. Buyer contended that because this representation was inaccurate, Seller had not satisfied a condition to closing. Id. Buyer further asserted that if Seller did not cure the breach, then Buyer would have the right to terminate the Sale Agreement. Id. On April 16, 2020, after obtaining the missing page of the DRAA Agreement from Nielsen, Stamoulis sent the page to Anbang.174 Seller provided it to Buyer and the Title Insurers.175 This was the first time that Buyer and the Title Insurers had seen the DRAA Agreement, which was written in Chinese. That evening, Greenberg Traurig obtained an English translation.176 On April 17, 2020, Buyer issued a formal notice of default based on the inaccuracy of Seller’s representation that Seller and its Subsidiaries had good and marketable title to all owned real property. Buyer also claimed that five other representations were inaccurate and that Seller had failed to operate the Company and its subsidiaries in the ordinary course 173 See JX 3775; JX 3796; JX 4968. 174 JX 3797; see JX 3843. 175 JX 3794; JX 3798. 176 See JX 3871; JX 3873. 98 of business. Buyer asserted that Seller therefore had failed to satisfy the conditions to closing and that Buyer was not obligated to close. Seller informed Buyer that if the breaches were not cured on or before May 2, 2020, then Buyer would be entitled to terminate the Sale Agreement. See JX 3829. In response, Seller delivered a certificate affirming that its representations were correct and that all conditions to closing were satisfied. Seller maintained that Buyer was obligated to close and that by failing to do so, Seller was in willful breach of the Sale Agreement. See JX 3848. S. Post-Closing, Pre-Litigation Developments On April 22, 2020, Gibson Dunn sent a copy of the DRAA Agreement to the Title Insurers. Gibson Dunn pointed out a series of issues with the DRAA Agreement that were indicative of fraud, including:  Temporal anomalies, such as references to events that had not yet occurred when the DRAA Agreement was purportedly signed.  Factual inaccuracies, such as references to a property that Strategic had sold two years before the DRAA Agreement was purportedly signed.  Legal impediments, such as the inability of the purported signatories to the DRAA Agreement to bind Anbang without first obtaining shareholder approval.  Patently unfair terms, such as a supposed arbitration provision that permitted Anbang to select one arbitrator and its counterparties to select five arbitrators. See JX 3957 at 1–3. Gibson Dunn sent a similar letter to Greenberg Traurig. See JX 3955. Greenberg Traurig asked Gibson Dunn for more information about the DRAA Agreement and its origins. JX 3891. Greenberg Traurig noted that at least of its face, the DRAA Agreement appeared to implicate the properties covered by the Sale Agreement and 99 seemed to be “sealed by Anbang’s corporate seal and signed by (ex) Chairman Wu.” Id. at 1. Greenberg Traurig also asked why the underlying trademark dispute was not identified when the Fraudulent Deeds first appeared in August 2019. Id. at 2. To clarify matters further, Greenberg Traurig asked Gibson Dunn to address the following questions:  Why does Seller contend that the [DRAA Agreement] is fraudulent or invalid and, if so, on what basis?  Is AnBang Insurance Group Co. Ltd. an affiliate of AnBang Insurance Group LLC?  What steps did AnBang take to locate a copy of this agreement within its organization since it became aware of its purported existence?  Did AnBang Insurance Group Co Ltd or any related entity engage patent application counsel (including Fross, Zelnick, Lehrman & Zissou PC or another) and make or cause[] to be made patent applications in[] U.S. numbered 87088221, 87088208, 87088196, 87088201, 87088186, 86945225; or 86945267 (and the last number may be an incorrect reference but please identify any other patent application it filed in [the] U.S.)  The [DRAA Agreement] states that there is an original English version of the document. May we obtain a copy of that version?  Even if the [DRAA Agreement] is invalid, was there an agreement between AnBang Insurance Group, Amer Group Inc. and others to abandon and/or transfer the AnBang trademark(s)?  Did AnBang Insurance Group Co. Ltd., Anbang Insurance Group LLC, or other AnBang-related entity transfer funds to any or all of the other parties listed in the [DRAA Agreement] per paragraph 79 of the [DRAA Agreement]? Id. at 2–3. Anbang never provided answers. 100  On April 24, 2020, this court granted Anbang’s motion to compel production of documents from counsel in the DRAA Chancery Action. In granting the motion, the court noted that there was “ample evidence to believe that Petitioners committed a fraud on [Anbang] and on the court” and there was “also reason to believe that Petitioners may have engaged in criminal conduct.”177 On April 24, 2020, Greenberg Traurig sent Gibson Dunn another set of questions about the DRAA Agreement and the DRAA Chancery Action. JX 4037 at 1. Greenberg Traurig explained that answers to these questions would help Mirae evaluate Anbang’s position that the DRAA Agreement was not authentic and assist Mirae in evaluating any claim to title. Id. Anbang never answered these questions. T. This Litigation On April 27, 2020, Seller filed this litigation, seeking a decree of specific performance compelling Buyer to perform its obligations under the Sale Agreement. In its complaint, Seller claimed that Buyer could have locked in its financing before signing the Sale Agreement, but that “[o]n information and belief, [Buyer] believed it could obtain preferential rates and terms if it waited to lock in terms, and thus did not attempt to seek 177 JX 4033 ¶ 5. The court addressed the motions after holding a status conference on April 17, 2020, and learning that Anbang did not regard the DRAA Chancery Action as over or the pending discovery motions as moot, largely because of the problems that the DRAA Agreement had created for the Transaction. The Gibson Dunn partner who handled the conference stated that “there may need be at some point a decision or judgment made about the DRAA agreement, potentially something along the lines of it being inoperative.” DRAA Chancery Action Dkt. 70 at 8. 101 financing until February 2020.” Dkt. 1 ¶ 81. That allegation was not truthful. Seller and its counsel knew that Buyer had planned to lock in debt financing before signing but that the belated disclosure of the Fraudulent Deeds caused the lenders to balk. On May 3, 2020, Buyer gave notice that it was terminating the Sale Agreement based on Seller’s failure to cure the breaches of contract that Buyer had identified on April 17. JX 4101. Buyer noted that the equity commitment letters automatically terminated as well and accordingly were no longer in effect. Id. at 1. On May 8, 2020, the court heard argument on Seller’s motion to expedite. During the hearing, Gibson Dunn doubled down on its story about Buyer taking a business risk by delaying financing. See Dkt. 57 at 5–6 (“The defendants bet big. They bet that they could get better terms if they waited and waited and negotiated and negotiated. And, lo and behold, they bet big and they lost big.”). That was not true. Buyer wanted to lock in debt financing in August 2019. It was Anbang and Gibson Dunn who prevented Buyer from doing so by withholding information about the Fraudulent Deeds until the eleventh hour, and then making partial and misleading disclosures about the extent of the fraud. The court granted the motion to expedite and scheduled a trial for August 2020. Buyer answered and filed counterclaims. Discovery unfolded, with the parties engaging in Herculean efforts to collect and produce documents and conduct depositions in multiple languages and across multiple continents, primarily by remote means, during the COVID-19 pandemic. In response to a subpoena, DLA Piper represented that it had disengaged from representing the DRAA Petitioners and would not be appearing on their behalf in any action. JX 5061. 102  During discovery, Anbang and Gibson Dunn sought to avoid revealing what they knew about Hai Bin Zhou and the years of trademark litigation, the DRAA Agreement, and the discovery of the Fraudulent Deeds.178 Buyer was forced to file four motions to compel to fight through Anbang and Gibson Dunn’s objections, and Seller put additional objections at issue through a motion for protective order.179 The court addressed the parties’ competing arguments in a series of rulings that granted the motions in part.180 178 See, e.g., Dkt. 4 at 3 (“The issues presented by this case are largely legal in nature, and resolution of AB Stable’s claims will require limited discovery.”); Dkt. 36 at 5 (“Defendants contend [their] counterclaims will require international discovery into ‘who knew what, when,’ and ‘other parties’—presumably the fraudsters—‘who have asserted interests in the Hotels.’ This is nonsense.” (citation omitted)); Dkt. 144 at 2 (“None of the sweeping discovery Defendants seek—regarding a decade’s worth of trademark disputes, . . . further information regarding the false deeds . . . , and communications with a Chinese regulator—has anything to do with Defendants’ ill-conceived claims.”); id. at 5 (“when Plaintiff became aware of the fact that deeds had been falsely recorded for two of the Hotels . . . is irrelevant” (emphasis omitted)); id. at 20 (“What Defendants are really asking is to open up wide-ranging discovery into ‘all claims or disputes’ with the DRAA Petitioners ‘since January 2, 2011, related to the use of the Anbang name and/or the trademarks referenced in the DRAA Agreement’ This is a fishing expedition: the requested information is irrelevant.” (citation omitted) (emphasis omitted)); Dkt. 297 at 25–26 (Gibson Dunn arguing against any internal production from Anbang’s counsel). 179 See Dkt. 129; Dkt. 303; Dkt. 373; Dkt. 391; Dkt. 408. 180 The discovery difficulties were not one-sided. Buyer took aggressive positions in discovery as well, most notably by delaying the production of documents from Greenberg Traurig. Seller was forced to file motions to compel of its own to challenge certain positions. See Dkt. 367; Dkt. 393. As with Buyer’s motions, the court granted the motions in part. The court appointed a discovery facilitator who provided invaluable assistance by promoting transparency, acting as an honest broker, and reducing the overall number of disputes. In addition, the court acknowledges the role of Delaware counsel, who fulfilled 103  On June 20, 2020, Anbang moved for entry of final judgment in the DRAA Chancery Action.181 Anbang sought an order that would have made permanent the expansive relief granted in the DRAA January Order. By this point, both as a result of the contents of the DLA Letter and the course of discovery in this litigation, the court had become sufficiently concerned about Anbang and Gibson Dunn’s lack of candor that the court was not willing to enter the broad relief requested.182 The court entered a final order that provided narrower relief limited to the matters raised in the DRAA Chancery Action. See JX 4519 (the “DRAA Final Order”).183 Despite the court’s concerns that Anbang and Gibson Dunn were not telling the whole truth, the court continued to believe there was a significant likelihood that the DRAA Petitioners had engaged in fraud. On July 21, 2020, the court and the judge who presided over the Delaware Superior Court actions referred the DRAA Petitioners to the Delaware Attorney General based on concerns that “crimes may have been committed in the State of Delaware.” JX 4588 at 1. The court and the judge who presided over the Delaware Superior their obligations as officers of the court by working cooperatively, communicating regularly, and restraining the adversarial instincts of their forwarding counsel. 181 JX 4403; see JX 4404. 182 Compare JX 4406 with JX 4521. 183 The DRAA Petitioners attempted to notice a series of appeals from the final judgment. Those appeals were all procedurally defective, and the Delaware Supreme Court rejected them. The DRAA Final Order has therefore become final. 104 Court actions made clear that they “defer[red] completely” to the prosecutorial discretion of the Attorney General as to “what action, if any,” to take. Id. II. AN OVERVIEW OF THE LEGAL ANALYSIS The briefs contain a deluge of legal arguments. Each side’s goals, however, are straightforward. Seller seeks to force Buyer to close or, in the alternative, to keep Buyer’s deposit plus interest and receive an award of attorneys’ fees and expenses. Buyer seeks declarations that it was not required to close and that it validly terminated the Sale Agreement. Buyer seeks the return of its deposit plus interest, to recover transaction-related expenses as damages, and an award of attorneys’ fees and expenses. As between Buyer and Seller, Buyer is generally the party seeking to establish propositions of fact or law, so this decision focuses primarily on Buyer’s arguments. Buyer’s manifold legal theories can be grouped into three general categories: (i) contractual theories that rely on express provisions, (ii) contractual theories that rely on the implied covenant of good faith and fair dealing, and (iii) tort theories based on fraudulent inducement and post-signing fraud. Buyer also contends that the Sale Agreement should be rescinded based on unilateral mistake and that specific performance should not be ordered. The contractual theories that rely on express provisions are dispositive, so this decision does not delve into the other categories.184 184 Although this decision does not reach Buyer’s other arguments, some of them could have merit given my factual findings. Most notably, there is reason to think it would be inequitable to award specific performance, given that the root cause of the parties’ difficulties is traceable to the initial decision by Anbang and Gibson Dunn not to disclose 105  The express contractual theories remain diverse and plentiful. They too can be grouped into three board categories: (i) theories that relieved Buyer of its obligation to close, (ii) theories that allowed Buyer to terminate, and (iii) theories that enable Buyer to recover the deposit, its transaction costs, and its attorneys’ fees and expenses. This decision addresses Buyer’s theories in that order. Because all of the issues addressed in this decision turn on express contractual provisions, the legal analysis relies on principles of contract interpretation. The elements of a claim for breach of contract are (i) a contractual obligation, (ii) a breach of that obligation by the defendant, and (iii) a causally related injury that warrants a remedy, such as damages or in an appropriate case, specific performance. See WaveDivision Hldgs. v. Millennium Digit. Media Sys., L.L.C., 2010 WL 3706624 , at *13 (Del. Ch. Sept. 17, 2010). When determining the scope of a contractual obligation, “the role of a court is to effectuate the parties’ intent.” Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728 , 739 (Del. 2006). Absent ambiguity, the court “will give priority to the parties’ intentions as reflected in the four corners of the agreement, construing the agreement as a whole and giving effect to all its provisions.” In re Viking Pump, Inc., 148 A.3d 633 , 648 (Del. 2016) (internal the Fraudulent Deeds earlier in the sale process, followed by misleading partial disclosures that fatally undermined their credibility. See Turchi v. Salaman, 1990 WL 27531 , at *8 (Del. Ch. Mar. 14, 1990) (explaining that a request for a decree of specific performance “will always be refused when the plaintiff has obtained the agreement by sharp and unscrupulous practices, by overreaching, by concealment of important facts, even though not actually fraudulent, by trickery, by taking undue advantage of [its] position, or by any other means which are unconscientious.” (quoting 2 John Norton Pomeroy, Equity Jurisprudence § 400, at 100–01 (5th ed. 1941))). 106 quotation marks omitted). “Unless there is ambiguity, Delaware courts interpret contract terms according to their plain, ordinary meaning.” Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381 , 385 (Del. 2012). III. BUYER’S OBLIGATION TO CLOSE The first category of issues involves whether Buyer was obligated to perform at closing. Buyer offers a series of reasons why it was not obligated to perform, and those reasons fall into two groups. The first group implicates what this decision refers to as the DRAA Issues, which relate to the DRAA Agreement, the Fraudulent Deeds, the DRAA Chancery Action, the Delaware Judgments, the Alameda Action, and the California Judgment. The second group implicates what this decision refers to as the COVID Issues, which relate to the effects of the COVID-19 pandemic. To excuse its failure to close, Buyer relies on the Title Insurance Condition, the Bring-Down Condition, and the Covenant Compliance Condition. For the Title Insurance Condition, Buyer only advances arguments based on DRAA Issues. For the Bring-Down Condition and the Covenant Compliance Condition, Buyer advances arguments based on both COVID Issues and DRAA Issues. The Title Insurance Condition conditioned Buyer’s obligation to close on Seller having obtained documentation sufficient to enable the Title Insurers to issue a policy of title insurance to Buyer in its capacity as the owner of the Hotels that either (i) did not contain an exception for the Fraudulent Deeds or (ii) contained an exception for the Fraudulent Deeds but expressly provided coverage through an endorsement. The Title Insurers have not issued title commitments that satisfy the Title Insurance Condition. The 107 Title Insurers only have issued title commitments that contain the DRAA Exception, which is broad enough to exclude coverage for the Fraudulent Deeds. The Title Insurance Condition therefore failed, and Buyer was not obligated to close. As noted, the outcome of the analysis of the Title Insurance Condition turns solely on the DRAA Issues. Having concluded that the DRAA Issues caused the Title Insurance Condition to fail, this decision does not reach Buyer’s other arguments based on the DRAA Issues.185 For purposes of the COVID Issues, Buyer makes two arguments. Under the Bring- Down Condition, Buyer was not obligated to close if Seller’s representations were not true and correct as of the closing date, unless “the failure to be so true and correct . . . would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.”186 The covered representations included the No-MAE Representation, in which 185 Some of Buyer’s other DRAA-related arguments have merit given my factual findings. Most notably, Buyer relies on covenants which required Seller to provide Buyer with notice of communications from governmental authorities, to use commercially reasonable efforts to eliminate impediments to closing, to keep Buyer reasonably informed about the Fraudulent Deeds, and to operate in the ordinary course of business. See SA §§ 5.1, 5.5(a), 5.5(d), 5.5(i), 5.10(a). Buyer has strong arguments that Seller did not fulfill these covenants in connection with the DRAA Issues, causing the Covenant Compliance Condition to fail. By contrast, Buyer’s arguments about Seller’s breaches of its representations are weaker, as those representations are highly technical, would have to be construed broadly to extend to the DRAA Issues, and require a variance from the as- represented condition that would be sufficient to qualify as a Material Adverse Effect. It is therefore less likely that the DRAA Issues caused a failure of the Bring-Down Condition. To reiterate, this decision has not reached these issues. 186 SA § 7.3(a). This description simplifies the Bring-Down Condition, which contemplates that when the Sale Agreement provides that a representation by Seller must 108 Seller’s represented that since July 31, 2019, the business of Strategic and its subsidiaries had not suffered a contractually defined “Material Adverse Effect.” SA § 3.8. Buyer argues that the COVID-19 pandemic and its effects caused the No-MAE Representation to become inaccurate and the Bring-Down Condition to fail. The contractual definition of a Material Adverse Effect (the “MAE Definition”) follows standard form, consisting of an initial definition followed by a series of exceptions. Assuming for purposes of analysis that the business of Strategic and its subsidiaries suffered an effect that was material and adverse, Seller proved that the cause of the effect fell within an exception to the MAE Definition for “natural disasters and calamities.” Consequently, the effect could not constitute a Material Adverse Effect under the MAE Definition. The Bring-Down Condition therefore did not fail because of the effects of the COVID-19 pandemic. Buyer also relies on the Covenant Compliance Condition, which makes it a condition to Buyer’s obligation to close that “Seller shall have performed in [all] material respects all obligations and agreements and complied in all material respects with all covenants and conditions required by this Agreement.” SA § 7.3(a). Seller’s covenants included the Ordinary Course Covenant, which was a commitment that “the business of be true and correct as of a specific date, then for purposes of the Bring-Down Condition, “such representations and warranties shall be true and correct as of such specified date.” SA § 7.3(a). This detail is not relevant to the representations analyzed in this case, so for simplicity, this decision refers to the representations being true and correct as of the closing date. 109 the Company and its Subsidiaries shall be conducted only in the ordinary course of business consistent with past practice in all material respects.” SA § 5.1. Buyer proved that Seller failed to comply with the Ordinary Course Covenant because the effects of the COVID-19 pandemic led to massive changes in the business of Strategic and its subsidiaries. As a result, the business of Strategic and its subsidiaries was not operated only in the ordinary course of business consistent with past practice in all material respects. The Covenant Compliance Condition therefore failed, and Buyer was not obligated to close. A. The Allocation Of The Burden Of Proof For Purposes Of The Conditions Under Delaware law, parties can allocate the burden of proof contractually. 187 In this case, the Sale Agreement did not do so explicitly, and its imprecise language did not do so implicitly. This decision therefore relies on common law principles to allocate the burden of proof. In disputes over contractual conditions, the Restatement (Second) of Contracts instructs courts to look to the nature of the condition at issue. If a condition must be satisfied before a duty of performance arises (formerly known as a condition precedent), then the burden of proof rests with the party seeking to enforce the obligation. If a condition would 187 See, e.g., Hexion Specialty Chems., Inc. v. Huntsman Corp., 965 A.2d 715 , 739 n.60 (Del. Ch. 2008) (“Of course, the easiest way that the parties could evidence their intent as to the burden of proof would be to contract explicitly on the subject.”); Frontier Oil Corp. v. Holly Corp., 2005 WL 1039027 , at *34 (Del. Ch. Apr. 29, 2005) (“The parties could have expressly allocated the burdens as a matter of contract, but they did not do so.”). 110 extinguish a party’s duty of performance (formerly known as a condition subsequent), then the burden of proof rests with the party seeking to avoid the obligation.188 When interpreting conditions in transaction agreements, Delaware decisions generally have not looked to the Restatement and the nature of the condition at issue.189 They instead have jumped over the Restatement inquiry by treating the transaction agreement as an existing contractual obligation, then allocating the burden of proof to the party seeking to invoke the condition. The Delaware cases fall into two broad categories. The first involves conditions that ordinarily would be satisfied absent a departure from the status quo that existed at signing. The second involves conditions where non-satisfaction 188 See Restatement (Second) of Contracts § 224 cmt. e (Am. L. Inst. 1981). The principles that govern the allocation of the burden of proving the non-occurrence of a condition may differ from the principles that apply in other contractual settings. For example, when a party seeks to exercise a termination right, this court has held that the party invoking the termination right bears the burden of establishing that the requirements for its exercise have been met. Channel Medsystems, Inc. v. Bos. Sci. Corp., 2019 WL 6896462 , at *37 (Del. Ch. Dec. 18, 2019). 189 The principal exception is Shareholder Representative Services LLC v. Shire US Holdings, Inc., which explained the difference between the Restatement’s approach and Delaware precedent and grappled with the resulting tension. 2020 WL 6018738 , at *17–19 (Del. Ch. Oct. 12, 2020) (considering whether the “Fundamental Circumstance Clause” was a condition precedent or condition subsequent and using Restatement framework). The other exception is Hexion, where the parties argued about whether a no-MAE condition was a condition precedent or a condition subsequent, and the court sidestepped the issue by characterizing MAE conditions as “strange animals, sui generis among their contract clause brethren.” Hexion, 965 A.2d at 739 . The court ultimately allocated the burden of proof to the buyer. Id. at 739–40. That result “effectively treated the clause as a condition subsequent.” Eric L. Talley, On Uncertainty, Ambiguity, and Contractual Conditions, 34 Del. J. Corp. L. 755 , 800 (2009). 111 depends on proof of contractual non-compliance. Both categories involve conditions that are best understood as extinguishing a duty of performance. The representative example for the first category involves a buyer citing an MAE as a basis for non-performance.190 Upon signing the transaction agreement, the buyer assumes an obligation to perform unless the seller suffers an MAE. If the status quo that existed at signing had continued, then the seller would be obligated to close. It is therefore logical to treat a no-MAE condition as one in which the existence of an MAE extinguishes the buyer’s obligation to perform, such that the burden of proof rests with the buyer. Placing the burden on the buyer also requires the buyer to prove an affirmative fact, rather than forcing the seller to prove a negative.191 190 See Akorn v. Fresenius Kabi AG, 2018 WL 4719347 , at *47 (Del. Ch. Oct. 1, 2018) (“Because Fresenius seeks to establish a General MAE to excuse its performance under the Merger Agreement, Fresenius bore the burden of proving that a General MAE had occurred.”); Hexion, 965 A.2d at 739 (“[I]t seems the preferable view, and the one the court adopts, that absent clear language to the contrary, the burden of proof with respect to a material adverse effect rests on the party seeking to excuse its performance under the contract.”). 191 See, e.g., Quantum Tech. P’rs IV, L.P. v. Ploom, Inc., 2014 WL 2156622 , at *19 (Del. Ch. May 14, 2014) (allocating burden to prove public disclosure of information to the party relying on that exception to a confidentiality order, rather than requiring opposing party to prove that the information was not publicly disclosed); Behrman v. Rowan Coll., 1997 WL 719080 , at *2 (Del. Super. Ct. Aug. 29, 1997) (reallocating burden of proof to avoid requiring a party to prove a negative); Wilm. Tr. Co. v. Culhane, 129 A.2d 770 , 773 (Del. Ch. 1957) (questioning allocation requiring a party to bear “the burden to prove a negative”). See generally 29 Am. Jur. 2d Evidence § 173 (“Courts generally do not require litigants to prove a negative, because it cannot be done. Thus, the affirmative of an issue has to be proved, and the party against whom the affirmative defense is asserted is not required to prove a negative.” (footnote omitted)). 112  The second category contains two illustrative examples, one involving a bring-down condition and another involving the interaction of a covenant compliance condition with an ordinary course covenant. This court has held that when a buyer claims that a bring- down condition failed because of the inaccuracy of a representation, then the buyer has asserted a theory analogous to a claim for breach of warranty and therefore bears the burden of proof.192 This court also has held that when a buyer claims that a covenant compliance condition failed because the seller failed to operate its business in the ordinary course, then the buyer has asserted a theory analogous to a claim for breach of the underlying covenant and bears the burden of proof.193 In both settings, the baseline assumption is contractual compliance; parties are assumed to make accurate representations and operate in the ordinary course. Unless the buyer can prove that the seller departed from the baseline of 192 See Akorn, 2018 WL 4719347 , at *62 (holding that where buyer claimed that bring-down condition failed because of a representation about regulatory compliance had become inaccurate, the buyer bore the burden of proof). The operation of burden for proving the failure of a bring-down condition parallels the assignment of the burden of proof in a case where, without such a condition, the buyer seeks to avoid performance by proving that one of the seller’s representation was inaccurate. See Frontier Oil, 2005 WL 1039027 , at *34 (assigning burden to party claiming that warranty was inaccurate; observing that “[t]o obtain relief for a breach of warranty, one would expect to be required to demonstrate an entitlement to that relief.”); id. at *38 n.233 (same); In re IBP Inc. v. Tyson Foods Inc., 789 A.2d 14 , 53 (Del. Ch. 2011) (assigning burden of proof to party seeking to establish that representation was inaccurate because “a defendant seeking to avoid performance of a contract because of the plaintiff’s breach of warranty must assert that breach as an affirmative defense”). 193 See Akorn, 2018 WL 4719347 , at *82–83 (assigning burden of proof to buyer to show failure of condition that required seller to comply with all covenants where buyer asserted that seller had not complied with ordinary course covenant). 113 contractual compliance, then the buyer is obligated to close. It is therefore logical to treat these conditions as extinguishing the buyer’s obligation to perform, such that the burden of proof rests on the seller. Allocating the burden in that fashion also requires the buyer to prove an affirmative fact rather than forcing the seller to prove a negative. In the future, parties and courts can promote clarity by starting with the Restatement approach and asking explicitly whether the condition is one that must be satisfied before an obligation to perform arises or whether the condition extinguishes an existing obligation to perform. Because existing precedent has assigned the burden consistent with the outcome that the Restatement would suggest, future decisions can rely on those cases when assigning the burden for similar conditions. For conditions that Delaware courts have not yet addressed, relevant factors would include (i) whether the condition turns on a specific and easily verified fact, such as the receipt of regulatory clearance or a favorable stockholder approval,194 (ii) whether the condition turns on a departure from what normally would occur between signing and closing, and (iii) which party would have to prove a negative.195 194 See Hexion, 955 A.2d at 739 (“Typically, conditions precedent are easily ascertainable objective facts, generally that a party performed some particular act or that some independent event has occurred.”). 195 The principal interpretive difficulty is usually linguistic. Drafters of transaction agreements typically frame no-MAE conditions, bring-down conditions, and covenant compliance conditions as conditions that must be satisfied for closing to occur. That framing opens the door to the argument that satisfying the condition is necessary before the buyer’s obligation to perform arises. But the use of conditional language is often not dispositive. “Conditions subsequent are often expressed using conditional language. For 114  As noted, the issues in this case involve the Bring-Down Condition, the Covenant Compliance Condition, and the Title Insurance Condition. Consistent with precedent, Buyer bore the burden to prove that the Bring-Down Condition failed because it is a condition that would extinguish Buyer’s obligation to perform. By signing the Sale Agreement, Buyer undertook an obligation to perform unless Seller’s representations became so inaccurate that they would result in a Material Adverse Effect. Seller did not have to take any action to satisfy the Bring-Down Condition, and the baseline expectation was for Seller’s representations to be accurate. Buyer therefore bore the burden of proving that a representation became sufficiently inaccurate to relieve Buyer of its obligation to perform. One nuance flows from the structure of the MAE Definition, which generally requires an effect that is material and adverse, but which is subject to a series of exceptions. As a matter of hornbook law, “[a] party seeking to take advantage of an exception to a contract is charged with the burden of proving facts necessary to come within the this reason, the difference between a condition precedent and a condition subsequent ‘is one of substance and not merely of the form in which the provision is stated.’” Shire, 2020 WL 6018738 , at *18 (quoting Restatement, supra, § 230 cmt. a). Drafters could nevertheless assist courts by framing conditions to use the language of extinguishment when they intend that outcome. It should be possible, for example, to frame the core bring- down condition to say something like, “If Seller’s representations are not true and correct at the time of measurement, and the extent of the inaccuracy (individually or in the aggregate) is sufficient to make it reasonably likely that Seller has suffered or would suffer a Material Adverse Effect, then Buyer’s obligation to perform at closing is extinguished.” 115 exception.” 29 Am. Jur. 2d Evidence § 173. Delaware decisions follow this rule.196 Accordingly, Buyer had the burden to prove that Seller suffered an effect that was material and adverse. After that, Seller had the burden to prove that the source of the effect fell within an exception. See Akorn, 2018 WL 4719347 , at *59 n.619. The substance of the Covenant Compliance Condition reveals it also to be a condition where non-satisfaction extinguishes Buyer’s obligation to perform. By signing the Sale Agreement, Buyer undertook an obligation to perform unless Seller failed to comply with its own contractual obligations. Unlike the Bring-Down Condition, the existence of contractual covenants meant that Seller was required to take action to comply with the Covenant Compliance Condition. Some of the underlying contractual covenants could operate as conditions that had to be satisfied to give rise to Buyer’s obligation to 196 See, e.g., Akorn, 2018 WL 4719347 , at *91 (“Akorn contends that Fresenius could not terminate the Merger Agreement because it breached both the Reasonable Best Efforts Covenant and the Hell-or-High-Water Covenant. Akorn bore the burden of proof on these issues because Akorn sought to invoke an exception to Fresenius’s termination right.”); Hollinger Int’l, Inc. v. Black, 844 A.2d 1022 , 1070 (Del. Ch. 2004) (“Black bears the burden to establish that this contractual exception applies.”); see also, e.g., E.I. du Pont de Nemours & Co. v. Admiral Ins. Co., 1996 WL 111133 , at *1 (Del. Super. Feb. 22, 1996) (“The undisputed application of Delaware law in an insurance coverage suit requires the insured . . . to prove initially . . . that the loss is within a policy’s coverage provisions. Once the insured meets that burden, the burden shifts to the insurer to establish a policy exclusion applies.”); E.I. du Pont de Nemours & Co. v. Admiral Ins. Co., 711 A.2d 45 , 53–54 (Del. Super. 1995) (placing burden of proof on insured to prove exception to exclusion from coverage; noting that the insured had better access to information about whether the exception to the exclusion applied and was better positioned to prevent events that might trigger coverage). 116 perform; others could operate as conditions where non-fulfillment extinguished Buyer’s obligation to perform. The analysis must extend to the underlying covenant. In this case, Buyer contends that Seller failed to fulfill the Ordinary Course Covenant. Consistent with prior precedent, Buyer bore the burden of proving that Seller breached this covenant and caused the Covenant Compliance Condition to fail. The baseline contractual expectation was for Seller to operate in the ordinary course of business. By asserting a departure from the ordinary course, Buyer sought to prove the fact of a deviation. It is logical to require Buyer to bear the burden of proving that assertion. For purposes of the Ordinary Course Covenant, the Covenant Compliance Condition operates as a condition under which non-satisfaction extinguishes Buyer’s obligation to close. Here, too, a nuance arises. Seller claims that to the extent it operated outside of the ordinary course, it was contractually obligated to do so to comply with other contractual requirements and legal obligations. As the party asserting that its actions fell within an exception to the Ordinary Course Covenant, Seller bore the burden of proving its position regarding compliance with competing contractual obligations. The last condition is the Title Insurance Condition, which obligates Buyer to obtain documentation sufficient to enable the Title Insurers to provide insurance in a form that satisfied the condition. This provision fits the model of a condition that must be satisfied before a duty of performance arises, as it identifies specific items that Seller must obtain. Under the Restatement approach, Seller should have had to carry the burden of proving that it satisfied the Title Insurance Condition. The parties, however, approached the burden 117 of proof as if it rested with Buyer, based on the proposition that Buyer relied on the failure of the condition to avoid its obligation to perform. This decision adopts that allocation, which does not affect the outcome in this case. Whether the issuance of title insurance containing the DRAA Exception satisfied the Title Insurance Condition is a question of law to be resolved based (i) on the plain language of the title commitments and (ii) undisputed facts about the DRAA Chancery Action, the Alameda Action, and the DRAA Agreement. Notwithstanding the initial allocation of the burden of proof to Buyer, Seller bore the burden of proving its contention that Buyer took action that caused the Title Insurance Condition to fail. Under the Restatement framework, which Delaware has adopted,197 “[w]here a party’s breach by non-performance contributes materially to the non-occurrence of a condition of one of his duties, the nonoccurrence is excused.” Restatement, supra, § 245. See generally In re Anthem-Cigna Merger Litig., 2020 WL 5106556 , at *90–91 (Del. Ch. Aug. 31, 2020) (discussing applicable principles). As the party seeking to show that Buyer caused the Title Insurance Condition to fail by breaching a contractual obligation, Seller bore the burden of proving both the breach of a contractual obligation and the requisite causal contribution. The “contributed materially” standard is a common law rule, and parties “can by agreement vary the rules” as long as the replacement “is not invalid for unconscionability 197 See Williams Cos. v. Energy Transfer Equity, L.P., 159 A.3d 264 , 273 (Del. 2017); WaveDivision, 2010 WL 3706624 , at *14–15. 118 or on other grounds.” Restatement, supra, § 346 cmt. a (citation omitted). Here, the parties agreed contractually to modify the “contributed materially” rule by substituting a requirement of causation. The Sale Agreement states, Frustration of Closing Conditions. No party may rely on the failure of any condition set forth in this Article VII to be satisfied if such failure was caused by such party’s failure to use efforts to cause the Closing to occur as required [by] the terms hereof. SA § 7.4. Under Section 7.4, Seller bore the burden of proving that Buyer’s breach caused the Title Insurance Condition to fail. B. The Bring-Down Condition The Bring-Down Condition extinguished Buyer’s obligation to close if Seller’s representations were not true and correct as of the closing date, except “where the failure to be so true and correct . . . would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.” SA § 7.3(a). This section considers whether the Bring-Down Condition failed due to the inaccuracy of the No-MAE Representation, in which Seller represented that since July 31, 2019, “there have not been any changes, events, state of facts or developments, whether or not in the ordinary course of business that, individually or in the aggregate, have had or would reasonably be expected to have a Material Adverse Effect.” SA § 3.8(b). The combination of the No-MAE Representation and the Bring-Down Condition creates a double-materiality problem, which here takes the form of a double-MAE problem. The No-MAE Representation already incorporates the concept of a Material Adverse Effect. The Bring-Down Condition then measures deviation from the as-represented 119 condition using the concept of a Material Adverse Effect. To solve this problem, the Bring- Down Condition contains a clause known as a “materiality scrape,”198 which provides that compliance with the Bring-Down Condition is measured “without giving effect to any limitation of qualification as to ‘materiality’ (including the word ‘material’[] or ‘Material Adverse Effect’ set forth therein.” SA § 7.3(a). For purposes of evaluating whether the Bring-Down Condition failed, the materiality scrape eliminates the phrase “would reasonably be expected to have a Material Adverse Effect” from Section 3.8(b), resulting in a flat representation that since July 31, 2019, “there have not been any changes, events, state of facts or developments, whether or not in the ordinary course of business.” The Bring-Down Condition then reintroduces the concept of a Material Adverse Effect by providing that any deviations from Seller’s as- represented condition are acceptable so long as they “would not . . . reasonably be expected to have a Material Adverse Effect.” The end result is a condition that turns on whether there have been “any changes, events, state of facts or developments, whether or not in the ordinary course of business that, individually or in the aggregate, have had or would 198 See Lou R. Kling & Eileen T. Nugent, Negotiated Acquisitions of Companies, Subsidiaries and Divisions § 14.02[3], at 14-12 to -13 (2020 ed.) (discussing materiality scrape as a solution to the double materiality problem). 120 reasonably be expected to have a Material Adverse Effect.” Such is the verbal jujitsu of transaction agreements. The MAE Definition defines “Material Adverse Effect” as follows: “Material Adverse Effect” means any event, change, occurrence, fact or effect that would have a material adverse effect on the business, financial condition, or results of operations of the Company and its Subsidiaries, taken as a whole, other than any event, change, occurrence or effect arising out of, attributable to or resulting from (i) general changes or developments in any of the industries in which the Company or its Subsidiaries operate, (ii) changes in regional, national or international political conditions (including any outbreak or escalation of hostilities, any acts of war or terrorism or any other national or international calamity, crisis or emergency) or in general economic, business, regulatory, political or market conditions or in national or international financial markets, (iii) natural disasters or calamities, (iv) any actions required under this Agreement to obtain any approval or authorization under applicable antitrust or competition Laws for the consummation of the transactions contemplated hereby, (v) changes in any applicable Laws or applicable accounting regulations or principles or interpretations thereof, (vi) the announcement or pendency of this Agreement and the consummation of the transactions contemplated hereby, including the initiation of litigation by any Person with respect to this Agreement or the transactions contemplated hereby, and including any termination of, reduction in or similar negative impact on relationships, contractual or otherwise, with any customers, suppliers, distributors, partners or employees of the Company and its Subsidiaries due to the announcement and performance of this Agreement or the identity of the parties to this Agreement, or the performance of this Agreement and the transactions contemplated hereby, including compliance with the covenants set forth herein, 121  (vii) any action taken by the Company, or which the company causes to be taken by any of its Subsidiaries, in each case which is required or permitted by or resulting from or arising in connection with this Agreement, (viii) any actions taken (or omitted to be taken) by or at the request of the Buyer, or (ix) any existing event, occurrence or circumstance of which the Buyer has knowledge as of the date hereof. For the avoidance of doubt, a Material Adverse Effect shall be measured only against past performance of the Company and its Subsidiaries, and not against any forward-looking statements, financial projections or forecasts of the Company and its Subsidiaries. SA § 1.1 (formatting added).199 The MAE Definition adheres to the general practice of defining a “Material Adverse Effect” self-referentially as “a material adverse effect.”200 Also consistent with general 199 The MAE Definition is obviously wordy and full of synonyms. For simplicity, except where the additional terminology advances the analysis, this decision abbreviates the multi-word phrases that appear in the definition. Thus, this decision substitutes “effect” for the lengthier phrase “event, change, occurrence or effect.” It substitutes “Strategic” or “the business of Strategic” or for the “business, financial condition, or results of the operations of the Company and its Subsidiaries, taken as a whole.” And it substitutes “resulting from” for “arising out of, attributable to or resulting from.” No change in meaning is intended, and readers may refer back to the longer phrases for comfort. 200 See Akorn, 2018 WL 4719347 , at *52 (“[T]he MAE definition adheres to the general practice and defines ‘Material Adverse Effect’ self-referentially as something that ‘has a material adverse effect.’”); Frontier Oil, 2005 WL 1039027 , at *33 (“It would be neither original nor perceptive to observe that defining a ‘Material Adverse Effect’ as a ‘material adverse effect’ is not especially helpful.”); Y. Carson Zhou, Essay, Material Adverse Effects as Buyer-Friendly Standard, 91 N.Y.U. L. Rev. Online 171, 173 (2016), http:// www.nyulawreview.org/sites/default/files/NYULawReviewOnline-91-Zhou.pdf (noting that in the typical MAE provision, the core concept of materiality is “left undefined”); Steven M. Davidoff & Kristen Baiardi, Accredited Home Lenders v. Lone Star Funds: A MAC Case Study 17 (Wayne State Univ. L. Sch. Legal Stud. Rsch. Paper Series, Paper No. 08-16, 2008), 122 practice, the definition follows the basic statement of what constitutes an MAE with a list of exceptions.201 Because of these exceptions, if an effect occurs that is both material and https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1092115 (“MAC clauses are typically defined in qualitative terms and do not describe a MAC in quantitative terms.”); Albert Choi & George Triantis, Strategic Vagueness in Contract Design: The Case of Corporate Acquisitions, 119 Yale L.J. 848 , 854 (2010) (“[T]he typical MAC provision is not quantitative and remains remarkably vague.”); Andrew A. Schwartz, A “Standard Clause Analysis” of the Frustration Doctrine and the Material Adverse Change Clause, 57 UCLA L. Rev. 789 , 826 (2010) (“A few MAC clauses include a quantitative definition of materiality, but the overwhelming majority offer no definition for the key term ‘material.’” (footnote omitted)); Kenneth A. Adams, A Manual of Style for Contract Drafting 229 (4th ed. 2017) [hereinafter Contract Drafting] (“[Q]uantitative guidelines are little used.”). One commentator sees no reason to criticize the MAE definition for its self- referential quality. See Kenneth A. Adams, A Legal-Usage Analysis of “Material Adverse Change” Provisions, 10 Fordham J. Corp. & Fin. L. 9 , 22 (“It has been suggested that there is some circularity or tautology involved in using the phrase material adverse change in the definition of MAC. . . . [I]n contracts it is routine, and entirely appropriate, for a definition to include the term being defined.” (footnotes omitted)); Adams, Contract Drafting, supra, at 169 (“Dictionaries shouldn’t use in a definition the term being defined, as that constitutes a form of circular definition. . . . In a contract, a defined term simply serves as a convenient substitute for the definition, and only for that contract. So repeating a contract defined term in the definition is unobjectionable.”). Professor Robert Miller has provided a helpful set of terminology for analyzing MAE definitions. See Robert T. Miller, Material Adverse Effect Clauses and the COVID- 19 Pandemic 30–31 (Univ. Iowa Coll. L. Legal Stud. Rsch. Paper, No. 2020-21, 2020) [hereinafter Miller, COVID-19]. 201 See Miller, COVID-19, supra, at 4 (“After [the] Base Definition, there typically follows a list of exceptions . . . that remove from the definition adverse changes or events arising from the materialization of particular kinds of risks.”); Robert T. Miller, The Economics of Deal Risk: Allocating Risk Through MAC Clauses in Business Combination Agreements, 50 Wm. & Mary L. Rev. 2007 , 2047 (2009) [hereinafter Deal Risk] (“From this definition [of a Material Adverse Effect], one or more exceptions . . . are then usually made . . . .”); Kling & Nugent, supra, § 11.04[9], at 11-61 (“Sellers often seek to negotiate certain generic exceptions to the no material adverse change representation, in addition to any specific issues they might be aware of.”); John C. Coates IV, M&A Contracts: Purposes, Types, Regulation and Patterns of Practice, in Research Handbook on Mergers 123 adverse and yet results from a cause falling within one of the exceptions, then that effect— despite being material and adverse—is not a contractually defined “Material Adverse Effect.” Buyer asserts that Strategic suffered a Material Adverse Effect due to the consequences of the COVID-19 pandemic. The parties debated at length whether the effect was material and adverse. To that end, both sides amassed factual evidence, expert analyses, and arguments in favor of their positions. They also debated at length whether the effect fell within an exception. Ordinarily, this court would determine first whether Strategic suffered an effect that was sufficiently material and adverse to meet the strictures of Delaware case law. See Hexion, 965 A.2d at 736–38. At times, however, it is more straightforward to determine whether the effect was attributable to a cause that fell within one of the exceptions. See Genesco, Inc. v. The Finish Line, Inc., 2007 WL 4698244 (Tenn. Ch. Dec. 27, 2007) (“Having concluded that [the seller] fits within one of the MAE carve-outs, it is not and Acquisitions 29, 48 (Claire A. Hill & Steven Davidoff Solomon, eds., 2015) (describing the “many and increasing exceptions to MACs”); JX 4549 ¶ 59 [hereinafter Coates Report] (“Generally speaking, MAE clauses have two or three components – (1) the basic definition and (2) exclusions, and in many agreements, (3) exceptions to the exclusions.”). 124 necessary for the Court to decide whether an MAE has occurred.”). This is one of those cases. This decision assumes for purposes of analysis that Strategic suffered an effect due to the COVID-19 pandemic that was sufficiently material and adverse to satisfy the requirements of Delaware case law. Based on that assumption, the burden rested with Seller to prove that the effect fell within at least one exception. See Part III.A, supra. For the reasons that follow, Seller carried its burden of proof. 1. The Potential Exceptions To argue that the effects of the COVID-19 pandemic did not constitute a contractually defined Material Adverse Effect, Seller relies on four exceptions:  exception (i) for “general changes or developments in any of the industries in which the Company or its Subsidiaries operate,”  exception (ii) for “changes in regional, national or international political conditions (including any outbreak or escalation of hostilities, any acts of war or terrorism or any other national or international calamity, crisis or emergency) or in general economic, business, regulatory, political or market conditions or in national or international financial markets,”  exception (iii) for “natural disasters or calamities,” and  exception (v) for “changes in any applicable Laws.” Dkt. 467 at 73–74 (quoting SA § 1.1). Notably, none of these exceptions uses the word “pandemic.” None of the other exceptions in the MAE Definition use the term “pandemic” either. Buyer fixates on this 125 omission and argues that without an explicit reference to “pandemic,” the risk of a pandemic remained with Seller.202 Seller initially responds that exceptions (i), (ii), and (v) apply even without an express reference to “pandemic.” Seller argues, for example, that exception (i) applies because Strategic’s business suffered due to a general change in the hotel industry, namely a significant drop-off in demand. In response, Buyer returns to the absence of an explicit exception for “pandemic.” According to Buyer, the court must determine the root cause of the MAE. Buyer argues that if an exception does not explicitly refer to the root cause, then it is not implicated.203 Translated for purposes of exception (i), Buyer argues that the root cause of the drop-off in demand was not a general change in the hotel industry, such as a newfangled type of hotel, but rather the COVID-19 pandemic. As Buyer sees it, exception (i) therefore does not apply, and the question remains whether any exception specifically refers to a pandemic.204 202 The same is true for close synonyms of “pandemic,” such as “epidemic,” “disease,” or “health crisis.” When referring to “pandemics,” this decision uses that term broadly to incorporate its close synonyms as well. 203 See Dkt. 470 at 51 (“Seller wrongly relies on exclusions (i), (ii) and (v) for general changes or developments in [Strategic’s industry], changes in ‘general economic, business, regulatory, political or market conditions,’ and changes in applicable Laws. . . . Seller cannot meet its burden by arguing . . . that the dramatic decline in demand that affected the Company’s results did result from such changes.” (citation and internal quotation marks omitted)). 204 See Dkt. 463 at 93–94 (“The COVID-19 pandemic indisputably did not arise out of, is not attributable to, and did not result from general changes or developments in any of the industries in which the Company or its Subsidiaries operate.” (alterations and 126  Buyer’s argument runs contrary to the plain language of the MAE Definition. The definition does not require a determination of the root cause of the effect. The definition lists nine categories of effects, which are separated by the word “or.” Section 9.5 of the Sale Agreement, titled “Interpretation,” provides that “[t]he term ‘or’ is not exclusive.” The use of “or” in its non-exclusive sense means that each exception applies on its face, not based on its relationship to any other exception or some other root cause. Buyer’s interpretation of these exceptions also contradicts the plain language of the MAE Definition because it amounts to an implicit exclusion. In substance, Buyer’s interpretation is the equivalent of language stating, “provided, however, that exceptions (i), (ii), and (v) shall not apply unless the cause of any event that otherwise would fall within those exceptions is itself subject to an exception.” Parties can contract for exclusions from the exceptions. In fact, parties typically agree to an exclusion for any event that otherwise internal quotation marks omitted)). Professor Miller has suggested that courts may need to parse causes when applying MAE exceptions. See Miller, COVID-19, supra, at 22 (“[I]n evaluating the adverse effects suffered by a company in the current pandemic, it may be important to attempt to separate adverse effects arising (a) proximately from the COVID- 19 pandemic itself, from (b) effects arising proximately from governmental orders suspending or curtailing the company’s operations and only remotely from COVID-19, and from (c) effects arising proximately from actions taken by the company itself in response to COVID-19 or governmental lockdown orders or both.”). Professor Miller also anticipated and argued against a root-cause argument similar to Buyer’s. See id. at 25 (“Conceivably, if a company is adversely affected by a governmental lockdown, an acquirer could argue that the materializing risk is not really a change in law but the underlying COVID-19 pandemic, and thus if pandemic risks are not shifted to the acquirer by the agreement, then all of the risk remains with the seller. In my opinion, that argument should fail.”). 127 would fall within an exception but has a disproportionate effect on the seller—an exclusion that is absent from the definition in this case.205 Here, the parties did not agree to any exclusions.206 205 See ABA Mergers & Acqs. Comm., Model Merger Agreement for the Acquisition of a Public Company 238, 242 (2011) [hereinafter Model Merger Agreement] (explaining that a standard exclusion from the buyer’s acceptance of general market or industry risk returns the risk to the seller when the seller’s business is uniquely affected, which is accomplished by having the relevant exceptions “qualified by a concept of disproportionate effect.”); Kling & Nugent, supra, § 11.04[9], at 11-61 n.106 (“Often there is an exception to the exception, requiring that the impact not be disproportionate to the company relative to other participants in the industry or to other participants in the industry in the geographical areas where the company operates.”); Miller, COVID-19, supra, at 5–6 (“MAE Exceptions related to systematic risks are typically further qualified by language that excludes from the exception, and thus shifts back to the company, systematic risks to the extent that they adversely affect the company disproportionately relative to some control group of companies, generally other companies operating in the same industries . . . .”); Miller, Deal Risk, supra, at 2047–48 (“In some agreements, exceptions . . . are then further qualified so that events otherwise falling within the exception . . . will nevertheless count as MACs after all if they affect the company disproportionately relative to some control group, such as companies operating in the same industry . . . .”); see also Choi & Triantis, supra, at 867 (“The most common carve outs remove from the MAC definition changes in the general economic, legal, or political environment, and conditions in the target’s industry, except to the extent that they have ‘disproportionate’ effects on the target.”). 206 Buyer’s root-cause argument also effectively treats the other potentially applicable exceptions as indicator risks. See Miller, COVID-19, supra, at 25 (noting that “the distinction involved in the suggested argument . . . . is exactly the distinction that appears in MAE Exceptions related to indicator risks”). An indicator risk is an event that signals that an MAE may have occurred, such as a drop in the seller’s stock price, a credit rating downgrade, or a failure to meet a financial projection. See Miller, Deal Risk, supra, at 2071–72. MAE definitions often contain exceptions for indicator risks, and those exceptions are typically qualified by exclusionary language, which makes clear that the exceptions do not foreclose the underlying cause of the negative events from being used to establish an MAE, unless it otherwise falls within a different carve-out. See Akorn, 2018 WL 4719347 , at *49–51 (describing indicator risks and analyzing their use in the MAE definition at issue); Miller, Deal Risk, supra, at 2072, 2082–83 (discussing indicator risks). 128  Although the plain language of the MAE Definition forecloses Buyer’s argument, Buyer’s reasoning helpfully concentrates on a single exception. According to Buyer, under its root-cause approach, the only exception that could encompass the COVID-19 pandemic is exception (iii), which applies to “natural disasters or calamities.” See Dkt. 463 at 95–98; Dkt. 470 at 53–54. Buyer maintains that the COVID-19 pandemic is not a natural disaster or calamity, but Buyer agrees that if it were, then that exception would apply. It would not be necessary, as with the other exceptions, to look for some other root cause. This decision therefore examines exception (iii) to determine whether it covers the effects of the COVID- 19 pandemic. 2. “Natural Disasters Or Calamities” As noted, exception (iii) provides that if Strategic suffers an effect that is material and adverse but resulted from a “natural disaster” or a “calamity,” then the resulting effect does not qualify as a contractually defined “Material Adverse Effect.” Under a plain reading of the MAE Definition, the exception for “calamities” encompasses the effects that The fact that parties typically call out indicator risks implies that if the parties intended an exception to be read as an indicator risk, then the exception would say so explicitly. See Miller, COVID-19, supra, at 25 (“MAE Exceptions related to indicator risks . . . almost always expressly distinguish between, for example, a downgrade of the company’s debt securities and the underlying causes for such a downgrade. This strongly suggests that if an MAE exception for changes in law was to be read as involving a distinction between the event itself and the underlying cause of the event, then the agreement would be explicit on this point.” (footnote omitted)). This rationale provides yet another reason to reject the root-cause argument. 129 resulted from the COVID-19 pandemic, excluding the pandemic’s effects from the MAE Definition. a. The Plain Meaning Of “Natural Disasters Or Calamities” When assessing plain meaning, Delaware courts look to dictionaries.207 The dictionary meaning of “calamity” encompasses the COVID-19 pandemic. Black’s Law Dictionary defines “calamity” as A state of extreme distress or misfortune, produced by some adverse circumstance or event. Any great misfortune or cause of loss or misery, often caused by natural forces (e.g., hurricane, flood, or the like). See Act of God; Disaster. Calamity, Black’s Law Dictionary (6th ed. 1990). A vernacular definition of “calamity” is “a serious accident or bad event causing damage or suffering.”208 The following example illustrates the proper vernacular use of calamity: “A series of calamities ruined them— 207 In re Solera Ins. Coverage Appeals, 2020 WL 6280593 , at *9 (Del. Oct. 23, 2020) (“This Court often looks to dictionaries to ascertain a term’s plain meaning.”); Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728 , 738 (Del. 2006) (“Under well- settled case law, Delaware courts look to dictionaries for assistance in determining the plain meaning of terms which are not defined in a contract.”). 208 Calamity, Cambridge English Dictionary, https://dictionary.cambridge.org/dictionary/english/calamity (last visited Nov. 21, 2020); accord Calamity, Merriam-Webster, https://www.merriam- webster.com/dictionary/calamity (last visited Nov. 21, 2020) (“a disastrous event marked by great loss and lasting distress and suffering” or “a state of deep distress or misery caused by major misfortune or loss”); Calamity, Oxford English Dictionary Online (2020) (“1. The state or condition of grievous affliction or adversity; deep distress, trouble, or misery, arising from some adverse circumstance or event. 2. A grievous disaster, an event or circumstance causing loss or misery; a distressing misfortune.”). 130 floods, a failed harvest, and the death of a son.”209 The COVID-19 pandemic fits within the plain meaning of the term “calamity.” Millions have endured economic disruptions, become sick, or died from the pandemic.210 COVID-19 has caused human suffering and loss on a global scale, in the hospitality industry,211 and for Strategic’s business.212 The COVID-19 outbreak has caused lasting suffering and loss throughout the world. Buyer’s argument against the scope of the term “calamity” does not turn on its meaning, but rather on the meaning of “natural disasters.” Buyer invokes the canon of 209 Calamity, Cambridge English Dictionary, https://dictionary.cambridge.org/dictionary/english/calamity (last visited Nov. 21, 2020). 210 See JX 3132 at 3 (“The global economy is now in recession, and we forecast a 1.1% [year-over-year] decline in global GDP this year, the sharpest decline since [World War II].”); JX 4535 (timeline of the COVID-19 pandemic including unemployment, infections and deaths); JX 4826 at 3 (reporting 1.5 million cases and 92,000 deaths in the United States as of May 20, 2020); JX 5261 at 1 (“COVID-19’s unprecedented adverse shock to the economy brought an end to the longest economic expansion in U.S. history.”). 211 See, e.g., JX 3443 at 1 (“In the wake of the coronavirus pandemic, few industries have fallen as far and as fast as tourism.”).; JX 4271 at 1 (“We have never seen this level of illiquidity in the hotel market. It is effectively a frozen marketplace.”); JX 4600 at 5–10 (detailing the impacts of COVID-19 on various hotel operators); JX 4853 ¶ 55 (“COVID- 19 has affected every sector across the globe, and the hotel industry is among the hardest hit.” (internal quotation marks omitted)); JX 5116 at 1 (“[W]e have not as an industry experienced anything like this before.”); Fischel Tr. 1361 (agreeing that COVID-19 caused “a dramatic decline in the demand for hotel rooms”); Tantleff Dep. 41 (stating that COVID- 19 “has had a widespread impact on the hotel industry in general”). 212 See JX 4480 (financial statements showing sharp decline in Strategic’s operating profit); JX 4730 at 12 [hereinafter Lesser Report] (comparing Strategic’s post-COVID-19 performance with that of its competitors); Lesser Tr. 1283–84 (stating that Strategic’s operations “were dramatically negatively impacted by the pandemic”). 131 noscitur a sociis, which means that “a word in a contract is to be read in light of the words around it.” Dkt. 463 at 96 (quoting Smartmatic Int’l Corp. v. Dominion Voting Sys. Int’l Corp., 2013 WL 1821608 , at *10 (Del. Ch. May 1, 2013)). Buyer asserts that because the word “calamity” appears in the phrase “natural disasters or calamities,” it must be read as referring to phenomena that have features similar to natural disasters. Black’s Law Dictionary does not define “natural disaster.” A vernacular definition is a “a sudden and terrible event in nature (such as a hurricane, tornado, or flood) that usually results in serious damage and many deaths.”213 The COVID-19 pandemic arguably fits this definition as well. It is a terrible event that emerged naturally in December 2019, grew exponentially, and resulted in serious economic damage and many deaths.214 Buyer’s contrary interpretation depends on a narrower interpretation of “natural disaster.” According to Buyer, natural disasters share some or all of three features: (i) they are generally sudden, singular events; (ii) they are usually attributable to the four classical 213 Natural disaster, Merriam-Webster, https://www.merriam- webster.com/dictionary/natural%20disaster (last visited Nov. 21, 2020); accord Natural disaster, Cambridge English Dictionary, https://dictionary.cambridge.org/dictionary/english/natural-disaster (last visited Nov. 21, 2020) (“a natural event such as a flood, earthquake, or tsunami that kills or injures a lot of people”). 214 Some individuals, concerned about conspiracies, have suggested that humans created COVID-19 as a bioweapon. If true, that could undermine its status as a natural disaster. The record in this case does not support a finding that the virus was anything other than a natural product of germ evolution. 132 elements of nature (earth, water, fire, and air), as in the cases of earthquakes, floods, wildfires, and tornados; and (iii) they generally cause direct damage to physical property. Dkt. 463 at 96. Buyer invokes noscitur a sociis to contend that the term “calamities” should be understood as having similar limitations. Id. It therefore should encompass only sudden, single events that threaten direct damage to physical property, such as “an oil-well blowout or the collapse of a building due to structural defects.” Dkt. 463 at 97. According to Buyer, the COVID-19 pandemic does not qualify as a calamity under this definition because it spread over time, was not attributable to the classical elements of nature, and harmed humans rather than property. Buyer’s argument is creative but unconvincing. Buyer has identified three characteristics that describe some natural disasters, but not all. A natural disaster need not be sudden—drought conditions develop and persist over years, and the ultimate natural disaster of climate change has developed over decades. And although many natural disasters result from the four earthly elements, others do not. The harm from a meteor strike or massive solar flare could qualify as a natural disaster, but would not have an earthly source. There is also no reason to prioritize property damage over the suffering of living beings. Buyer’s argument also depends on using noscitur a sociis to yoke “calamities” to “natural disasters,” but that interpretative canon only applies when a contractual term is ambiguous. Zimmerman v. Crothall, 2012 WL 707238 , at *7 (Del. Ch. Mar. 5, 2012). The term “calamities” is not ambiguous. And when the doctrine applies, its principal function is to imbue a collective term with the content of other terms in a list. Del. Bd. of Nursing 133 v. Gillespie, 41 A.3d 423 , 427 (Del. 2012). Thus, if an agreement gave a broker the exclusive right to sell a farm’s “oranges, lemons, grapefruit, and other fruit,” a court might rely on the doctrine to interpret “other fruit” to mean familiar types of citrus fruit and exclude melons, pineapples, and durians.215 The phrase “natural disasters and calamities” does not fit this model. And ultimately, a canon of interpretation like noscitur a sociis serves as aid to interpretation; it does not mandate a particular outcome. The plain language of the term “calamities” therefore controls. It encompasses the COVID-19 pandemic and its effects. b. The Structure Of The Definition Of “Material Adverse Effect” In addition to the dictionary meaning of “calamities,” the structure and content of the MAE Definition point in favor of a plain-language interpretation that encompasses the COVID-19 pandemic. From a structural standpoint, MAE definitions allocate risk through exceptions and exclusions from exceptions.216 The typical MAE clause allocates general market or industry risk to the buyer and company-specific risk to the seller.217 The standard 215 See, e.g., id. (interpreting “any other person” in light of “specifically enumerated professionals” in the preceding list); cf. Adams, Contract Drafting, supra, at 360 (providing citrus fruit example). 216 See Miller, Deal Risk, supra, at 2013 n.7 (“There is virtually universal agreement, among both practitioners and academics, that MAC clauses allocate risk between the parties.”); Gilson & Schwartz, supra, at 339–54 (analyzing how MAE clauses allocate risk). 217 Zhou, supra, at 173; accord Choi & Triantis, supra, at 867 (“The principal purpose of carve outs from the definition of material adverse events or changes seems to be to remove systemic or industry risk from the MAC condition, as well as risks that are 134 MAE provision achieves this result by placing the general risk of an MAE on the seller, and then using exceptions to reallocate specific categories of risk to the buyer.218 Exclusions from the exceptions return risks to the seller. As noted previously, one standard exclusion applies when a particular event has a disproportionate effect on the seller’s known by both parties at the time of the agreement.”). “A possible rationale” for this allocation “is that the seller should not have to bear general and possibly undiversifiable risk that it cannot control and the buyer would likely be subject to no matter its investment.” Davidoff & Baiardi, supra, at 15; see also Gilson & Schwartz, supra, at 339 (arguing that “an efficient acquisition agreement will impose endogenous risk on the seller and exogenous risk on the buyer”). Another likely explanation is that when a business risk is “preventable at a cost less than the expected cost of the loss if the risk materializes[,] . . . the efficient solution is to take precautions to forestall the risk,” and the seller ordinarily “will have a clear cost advantage over the [buyer] to forestall this risk.” Robert T. Miller, Canceling the Deal: Two Models of Material Adverse Change Clauses in Business Combination Agreements, 31 Cardozo L. Rev. 99 , 160–61 (2009). As with any general statement, exceptions exist, and “different agreements will select different exogenous risks to shift to the counterparty, and in stock-for-stock and cash-and-stock deals, parties may shift different exogenous risks to each other.” Miller, Deal Risk, supra, at 2070. 218 See Miller, Deal Risk, supra, at 2073 (“Because of the drafting conventions used in MAC Definitions—all the risks are on the [seller] except for those shifted to the [buyer] by the MAC Exceptions—this class of risks would, strictly speaking, probably be best defined negatively.”); Schwartz, supra, at 822 (“[T]he risk of a target MAC resulting from a carved-out cause is allocated to the acquirer, while the risk of a target MAC resulting from any other cause is allocated to the target.”). See generally Hexion, 965 A.2d at 737 (“The plain meaning of the carve-outs found in the [MAE clause’s] proviso is to prevent certain occurrences which would otherwise be MAE’s being found to be so.”); ABA Mergers & Acqs. Comm., Model Stock Purchase Agreement with Commentary 33–34 (2d ed. 2010) [hereinafter Model Stock Purchase Agreement] (discussing exceptions as a way for sellers to narrow MAE provisions). 135 business.219 Both MAE exceptions and disproportionality exclusions have become increasingly prevalent.220 For purposes of finer-grained analysis, the risks that parties address through exceptions can be divided into four categories: systematic risks, indicator risks, agreement risks, and business risks. See generally Miller, Deal Risk, supra, at 2071–91.  Systematic risks are “beyond the control of all parties (even though one or both parties may be able to take steps to cushion the effects of such risks) and . . . will generally affect firms beyond the parties to the transaction.”221 219 Model Merger Agreement, supra, at 242; see Kling & Nugent, supra, §11.04[9], at 11-61 n.106; Miller, COVID-19, supra, at 5. “For example, a buyer might revise the carve-out relating to industry conditions to exclude changes that disproportionately affect the target as compared to other companies in the industries in which such target operates.” Model Merger Agreement, supra, at 242; accord Miller, Deal Risk, supra, at 2048; see Choi & Triantis, supra, at 867 (“The most common carve outs remove from the MAC definition changes in the general economic, legal, or political environment, and conditions in the target’s industry, except to the extent that they have ‘disproportionate’ effects on the target.”). 220 See Nixon Peabody LLP, MAC Survey NP 2019 Report, at 2 (2019) [hereinafter 2019 MAC Survey], https://www.nixonpeabody.com/ideas/articles/2019/11/19/2019-mac- survey (reporting an “increase in MAC exceptions in the years since the [Global Financial Crisis]). Compare Gilson & Schwartz, supra, at 351 (0% of deals in 1993, 0% of deals in 1995, and 17% of deals in 2000 had disproportionality exclusions), with Nixon Peabody LLP, 2019 MAC Survey, supra, at 7 (87% of agreements had disproportionality exclusions). 221 Miller, Deal Risk, supra, at 2071; see Richard A. Brealey & Stewart C. Myers, Principles of Corporate Finance 168 & n.22 (7th ed. 2003) (explaining that market risk, also known as systematic risk, “stems from the fact that there are . . . economywide perils that threaten all businesses”). 136  Indicator risks signal that an MAE may have occurred. For example, a drop in the seller’s stock price, a credit rating downgrade, or a failure to meet a financial projection would not be considered adverse changes, but would evidence such a change.222  “Agreement risks include all risks arising from the public announcement of the merger agreement and the taking of actions contemplated thereunder by the parties,” such as potential employee departures, Id. at 2087.  Business risks are those “arising from the ordinary operations of the party’s business (other than systematic risks), and over such risks the party itself usually has significant control.” Id. at 2073. “The most obvious” business risks are those “associated with the ordinary business operations of the party—the kinds of negative events that, in the ordinary course of operating the business, can be expected to occur from time to time, including those that, although known, are remote.” Id. at 2089. Generally speaking, the seller retains the business risk. The buyer assumes the other risks.223 The MAE Definition in the Sale Agreement follows the typical structure. Most notably, it broadly shifts systematic risk to Buyer through exceptions (i), (ii), and (v). See SA § 1.1. The risk from a global pandemic is a systematic risk, so it makes sense to read 222 Miller, Deal Risk, supra, at 2072, 2082–83. 223 See, e.g., id. at 2073 (explaining that “(a) systematic risks and agreement risks are usually, but not always, shifted to the [buyer], (b) indicator risks are so shifted in a significant minority of cases, and (c) business risks are virtually always assigned to the party itself”); accord Coates Report ¶ 11(f) (“MAE clauses customarily . . . exclude ‘systematic’ risks (such as economic recessions) and . . . include non-systematic risks . . . .”); JX 4602 ¶ 6 [hereinafter Davidoff-Solomon Report] (transaction agreements ordinarily allocate “idiosyncratic risk (or risk that is specific to a firm) to the seller and systemic risk to the buyer”); id. at 45 (“[T]he focus in negotiating MAE exclusions is with systemic issues, typically allocating the risk of such issues with the buyer.”). 137 the term “calamity” as shifting that risk to Buyer. The structural risk allocation in the definition thus points in the same direction as the plain-language interpretation. The content of the MAE Definition also supports allocating the risk from the COVID-19 pandemic to Buyer. The MAE Definition contains additional, Seller-friendly features that under which Buyer assumed a greater-than-normal range of risks.224 For example, exception (ix) eliminates any effect from “any existing event, occurrence or circumstance of which the Buyer has knowledge as of the date hereof.” SA § 1.1. That broad language dramatically favors Seller by contemplating that any subject covered in due diligence, in the data room, or that otherwise is within Buyer’s knowledge cannot give rise to a “Material Adverse Effect.” In Akorn, this court refused to imply a knowledge- based exception of this type, precisely because of its breadth and the sweeping implications it would have for the parties’ allocation of risk through representations. See Akorn, 2018 WL 4719347 at *79–80. The Akorn decision noted that “[i]f parties wish to carve out anything disclosed in due diligence from the scope of a representation, then they can do so.” Id. at *80. Here, Seller obtained that expansive carve-out. As this decision already noted, the MAE Definition does not contain an exclusion for events that have a disproportionate effect on Strategic. A disproportionate-effect exclusion favors the seller by shifting risk back to the buyer. See Akorn, 2018 WL 4719347 , 224 See Davidoff-Solomon Report ¶ 73 (“The industry carve-out . . . . is significantly more seller-friendly because its net effect is to allocate all adverse effects related to the ‘industry’ of the target to the buyer.”). 138 at *52. The overwhelming majority of contemporary deals include disproportionality exclusions, so the omission of a disproportionality exclusion signals a seller-friendly MAE clause.225 Yet another seller-friendly aspect of the MAE Definition consists of two features designed to limit the forward-looking nature of the definition. The concept of a material adverse effect is inherently forward looking, and necessarily so because of “the basic proposition of corporate finance that the value of a company is determined by the present value of its future cash flows.” Hexion, 965 A.2d at 743 n.75. The forward-looking nature of the concept also flows from the language of a standard MAE provision, which asks 225 See Nixon Peabody LLP, 2019 MAC Survey, supra, at 7 (87% of agreements in 2019 annual transaction agreement survey contained disproportionality exclusions); Miller, COVID-19, supra, at 5, 26 (“MAE Exceptions related to systematic risks are typically further qualified by a Disproportionality Exclusion which shifts the applicable systematic risks back to the seller to the extent their materialization adversely affects the seller disproportionately . . . .”); see also Davidoff-Solomon Report ¶ 6 (the Sale Agreement lacks “customary and usual” disproportionality language); id. at 49 (“The lack of [a disproportionality exclusion] makes the MAE significantly more seller-friendly because its net effect is to allocate all adverse effects related to ‘economic,’ ‘business,’ or ‘regulatory’ reasons, among others, to the buyer.”); Coates Report ¶ 11(f) (MAE clauses usually “include non-systematic risks . . . such as disproportionate impacts of recessions on a target”). Buyer’s expert on transaction agreements analyzed 144 agreements containing MAE clauses. See Coates Report App’x D. Seller’s expert on transaction agreements pointed out that the overwhelming majority of MAE clauses in the sample which contained MAE exclusions for economic and industry developments in Buyer’s expert’s sample also contained disproportionality exclusions. Davidoff-Solomon Report ¶¶ 97–98. 139 whether an effect “has had or is reasonably expected to have” a material adverse effect.226 And it flows from IBP’s gloss on the concept of a material adverse effect, which requires a “durationally-significant” change that is “material when viewed from the long-term perspective of a reasonable acquirer.”227 Nevertheless, deal lawyers negotiate vigorously over language that is designed to make an MAE definition relatively more or relatively less forward-looking with the goal of limiting a buyer’s ability to assert an MAE based on deviations from the seller’s projected performance. A more explicitly forward-looking definition is more favorable to the buyer, who can more easily claim that the seller suffered a material adverse effect if the seller fell short of its projected results. A less explicitly forward-looking definition is more favorable to the seller, because the seller can argue for comparing its results to a historical trend, The MAE Definition uses the standard framing of the conditional future tense— “would have a material adverse effect.” So does the No-MAE Representation, which represents that there have not been any changes, events, state of facts, or developments that “have had or would reasonably be expected to have a Material Adverse Effect.” But the MAE Definition itself contains two aspects designed to limit its forward-looking nature. 226 See id.; accord Frontier, 2005 WL 1039027 , at *33 (explaining that “the definition chosen by the parties emphasizes the need for forward looking analysis” by using the phrase “would not reasonably be expected to have” an MAE). 227 IBP, Inc. v. Tyson Foods, Inc., 789 A.2d 14 , 68 (Del. Ch. 2001); see Hexion, 965 A.2d at 738 (holding that to qualify as an MAE, “poor earnings must be expected to persist into the future”). 140  First, the term “prospects” does not appear in the list of dimensions of “the business of the Company and its Subsidiaries” that could suffer a material and adverse effect.228 The MAE Definition refers to “the business, financial condition, or results of operations of the Company and its Subsidiaries, taken as a whole,” but it does not refer to their “prospects.” A lively debate exists about whether omitting “prospects” matters, with those who favor its omission claiming that it limits the forward-looking nature of an MAE.229 Because an MAE is inherently forward-looking, there is reason to doubt whether that is true, but the absence of a reference to “prospects” is generally regarded as favorable to the seller.230 228 Professor Miller helpfully defines this list as the “MAE Objects,” which is a useful term. See Miller, COVID-19, supra, at 2 (“[T]he typical MAE clause begins with a base definition . . . that defines “Material Adverse Effect” for purposes of the agreement to be any event . . . that has had . . . a material adverse effect . . . on the company or various aspects of it, such as its business, financial condition, or results of operations (the ‘MAE Objects’).”); Miller, Deal Risk, supra, at 2045 (“Generally speaking, a MAC is defined as being any event . . . that . . . would reasonably be expected . . . to have a material adverse effect . . . on various items (MAC Objects) . . . .”). 229 See Miller, COVID-19, supra, at 3 n.12 (collecting authorities); Miller, Canceling the Deal, supra, at 137 n.122 (same). 230 See, e.g., Michelle Shenker Garrett, Efficiency and Certainty in Uncertain Times: The Material Adverse Change Clause Revisited, 43 Colum. J.L. & Soc. Probs. 333 , 36 (2010) (“Sellers generally want to exclude ‘prospects . . . .’”); Jonathon M. Grech, “Opting Out”: Defining the Material Adverse Change Clause in a Volatile Economy, 52 Emory L.J. 1483 , 1488–89 (2003) (“[T]he seller will not want to be responsible for sustaining the buyer’s vision of the future and will seek to exclude its prospects from the definition of a MAC.”); Sherri L. Toub, Note, “Buyer’s Regret” No Longer: Drafting Effective MAC Clauses in a Post-IBP Environment, 24 Cardozo L. Rev. 849 , 868 (2003) (“Typically, one focus of Seller’s efforts will be to delete any reference in the MAC definition to ‘prospects’ or to other forward-looking concepts”). Compare Choi & Triantis, supra, at 881 n.95 (citing practitioner study which referenced “sellers’ desire for increased deal certainty” by eliminating forward-looking language), with Daniel Gottschalk, Weaseling Out of the 141  The second and more striking feature is a proviso which states that “a Material Adverse Effect shall be measured only against past performance of the Company and its Subsidiaries, and not against any forward-looking statements, financial projections or forecasts of the Company and its Subsidiaries.” SA § 1.1. Ostensibly included “[f]or the avoidance of doubt,” the proviso can only inject doubt into an inherently forward-looking inquiry. But from the standpoint of evaluating whether the MAE Definition is favorable to the seller or the buyer, this feature goes beyond the omission of “prospects” by attempting to make the MAE Definition exclusively backwards looking. All else equal, that is highly favorable to Seller. Consistent with the allocation of systematic risk to Buyer, the generally seller- friendly nature of the MAE Definition supports interpreting the exception for “calamities” as including pandemic risk. To interpret the term narrowly would cut against the flow of the definition. Buyer has not offered any explanation why the parties would have excluded pandemic risk from their overarching risk allocation despite assigning all similar risks to Buyer. Absent a persuasive (or at least rational) explanation, there is no reason to think that the term “calamities” should be construed narrowly to achieve that result. Deal: Why Buyers Should Be Able to Invoke Material Adverse Change Clauses in the Wake of a Credit Crunch, 47 Hous. L. Rev. 1051 , 1078 (2010) (“The buyer should draft the MAC clause with forward-looking language.”). 142  c. Evidence Of Deal Studies Finally, studies of transaction agreements support reading the term “calamities” as encompassing pandemics. These studies rebut Buyer’s argument that the MAE Definition does not encompass the COVID-19 pandemic because it does not expressly use the term “pandemic.” According to Buyer, the failure to include the term “pandemic” must have been intentional, and its omission therefore should be dispositive. See Dkt. 463 at 97. To support this argument, Buyer observes that because Anbang is based in China, it must have been aware of the risk of an epidemic or pandemic, given China’s experience with the avian flu in 1997, SARS in 2002, H1N1 swine flu in 2009, and MERS in 2012. Id. Buyer also points out that during its life as a public company, between 2009 and 2014, Strategic consistently identified the outbreak of a pandemic as a material risk to its business.231 As further support for its argument that Seller intentionally omitted the term “pandemic,” Buyer cites precedent transaction agreements. Buyer observes that Anbang acquired a company in 2015 under a transaction agreement that contained an explicit carve-out for pandemics.232 231 Dkt. 463 at 97–98; see JX 26 at 15; JX 32 at 17; JX 35 at 18; JX 37 at 16; JX 46 at 16; JX 61 at 15. In its disclosures, Strategic identified “natural disasters such as earthquakes, hurricanes, floods or fires” as a separate risk to its business model. JX 26 at 19; JX 32 at 17; JX 35 at 18; JX 37 at 16; JX 46 at 16–17; JX 61 at 15. 232 Dkt. 463 at 97; see JX 71 at 9 (exception for “the outbreak or escalation of war, military action, sabotage or acts of terrorism, or changes due to any pandemic, natural disaster or other act of nature, in each case involving or impacting the United States and arising or occurring after the date of this Agreement”). 143 Buyer also observes that Seller’s counsel included explicit references to “epidemics” or similar language in the exceptions from the MAE definitions in other transaction agreements that they prepared contemporaneously with the Sale Agreement.233 Broader studies of transaction agreements help put this anecdotal evidence in perspective. Both sides retained legal experts who conducted studies of the prevalence of pandemic-specific exceptions. Professor John Coates of Harvard Law School provided expert analysis for Buyer. Professor Steven Davidoff-Solomon of the University of California, Berkeley School of Law provided expert analysis for Seller. Coates assembled a sample of 144 publicly available transaction agreements for deals that were announced in the year before Buyer and Seller signed the Sale Agreement and had a deal value greater than $1 billion. See Coates Report ¶¶ 42–43. Both experts examined this sample.234 233 JX 389 at 11 (exception for “any acts of war (whether or not declared), sabotage, terrorism or any epidemics, or any escalation or worsening of any such acts of war (whether or not declared, sabotage or terrorism, or any epidemics”); JX 558 at 8 (exception for “earthquakes, volcanic activity, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions, pandemics and other force majeure events”). 234 Davidoff-Solomon also examined a broader sample that included acquisitions with a value greater than $1 billion announced between January 1, 2017, and December 31, 2019. See Davidoff-Solomon Report ¶ 79. His general observations on the frequency and use of “pandemics” were comparable to the smaller sample. Davidoff-Solomon also reviewed the broader sample for deals in which Buyer and Seller’s counsel were involved. He found only one transaction agreement in which Greenberg Traurig used the word “pandemic” or its synonyms, and it was not used as a subset of “calamity,” “natural disaster,” or “force majeure.” Id. ¶ 94. He found nine agreements in which Gibson Dunn 144  Based on the sample, Coates made the following observations:  All MAE definitions in the sample contained one or more specific exclusions for general economic, political, or industry changes.  Nearly all (99%) contained specific exclusions for changes in laws and regulations.  A supermajority (87%) contained exclusions for natural disasters, crises, or calamities.  A large minority (33%) specifically excluded one or more of pandemics, epidemics, public health crises, or influenzas. Coates Report ¶ 72. Coates noted that in agreements that contained a specific exclusion for “pandemics,” there was no consistent pattern of treatment:  Some agreements distinguished “pandemics” from “natural disasters” or “calamities” by including them in separately enumerated exceptions.  Some agreements included “pandemics” and “natural disasters” in the same exception, but treated them as separate concepts.  Some agreements included “pandemics” as a co-equal but distinct item in a list with “acts of war” and “natural disasters.”  Some agreements included “pandemics” as an example of an “Act of God” within the same class as “natural disasters.”  Some agreements included “pandemics” as an example of an “Act of God” within the category of “natural or man-made disaster.” Id. ¶ 74. After examining Coates’ sample, Davidoff-Solomon made the following additional used the term “pandemic” or its synonyms. In six of those instances, the term was a subset of “calamity,” “natural disaster,” or “force majeure.” Id. 145 observations:  The term “pandemic” appeared in twenty-nine agreements. o Seventeen agreements (59%) used the term “pandemic” as a subtype of “natural disaster,” calamity,” or “force majeure.” See Davidoff-Solomon Report ¶ 84. o The words “pandemic” and “calamity” appeared together in only four agreements. In two of those four agreements, the terms appeared in separate exceptions. In a third agreement, they appeared in the same exception, with pandemic being treated as a type of calamity. In the fourth agreement, both appeared as examples of force majeure events. Id. ¶ 80.  The term “calamity” appeared in twenty-one agreements. o Six agreements used “calamity” and “force majeure” interchangeably. Id. ¶ 81. o Nine agreements used “calamity” as a catchall for other events. Id.  The term “natural disaster” appeared in 114 agreements. o Seventy-seven agreements used the term as a catchall for other types of misfortunes, sometimes including epidemics and pandemics. Id. ¶ 82. o In twenty-nine agreements, the words “pandemic” and “natural disaster” appeared together. Id. o Only one agreement included “pandemic” and “natural disaster” in separate exceptions. Id. o In eight agreements, “pandemic” appeared as a subtype of “natural disaster.” Id. It is difficult to reach strong conclusions based on these data, but it is possible to reject the proposition that general terms like “calamity,” “natural disaster,” “Act of God,” or “force majeure” never can encompass pandemic risk because a meaningful number of 146 agreements make explicit connections among these terms.235 The fact that the Sale Agreement omitted an express reference to “pandemics” is therefore not dispositive, providing an additional reason to reject Buyer’s argument.236 Policy considerations also counsel against adopting Buyer’s proposed narrow interpretation of the broader term “calamities.” Drafters of MAE definitions must contemplate the three Rumsfeldian categories of risk: known knowns, known unknowns, 235 The authors of a working paper cited by both experts drew the same inference from a study of 1,702 MAE provisions for deals from 2003 until the end of 2020. See Matthew Jennejohn et al., COVID-19 as a Force Majeure in Corporate Transactions 7, (Columbia L. Econ. Working Paper, Paper No. 625, 2020), https://ssrn.com/abstract=3577701. That study found that over the full sample, less than 12% of MAE provisions identified pandemics explicitly, another 36.2% used broad terms like force majeure, Act of God, or calamities, and 52.8% did not contain either specific language referencing pandemics or broader language referencing calamities or force majeure concepts. Id. at 4. Over time, however, the percentages of deals that included these concepts increased, with general force majeure language becoming more common after the 2008 financial crisis, and pandemic-related language starting to appear during the same period, perhaps as a byproduct of the H1N1 crisis. See id. at 5. The authors note that by 2019, approximately 23% of deals specifically referenced pandemics. Id. 236 Except for excluding the possibility that the term “calamity” can never include the concept of “pandemics,” the data from the deal studies are inconclusive. The deal studies do not reveal a consistent pattern in how drafters of transaction agreements treat pandemics. See Coates Report ¶ 74. They provide some support for the proposition that drafters view a “pandemic” as a subtype of “calamity,” “natural disaster,” or “force majeure” event, consistent with the plain meaning of the term “pandemic.” See Davidoff- Solomon Report Ex. B. But a minority of agreements treat pandemics differently, implying that not all drafters view the broader terms (i.e., “calamity,” “natural disaster,” or “force majeure” event) as sufficient. Of course, that may be the result of lawyerly belt-and- suspenders drafting. 147 and unknown unknowns.237 Drafters can use specific terms to address known knowns and known unknowns, but only broad terms can encompass unknown unknowns. To read a term like “calamities” narrowly would interfere with drafters’ ability to allocate systematic risk for as-yet-unknown and as-yet-unimaginable calamities. By contrast, reading a term like calamities broadly allows drafters to carve out known knowns and known unknowns through exclusions. For instance, if parties believe that the seller is better suited to shoulder the risk of a pandemic than the buyer, then the drafters can say “natural disasters and calamities (excluding pandemics).” 3. The Finding Regarding The Bring-Down Condition The Bring-Down Condition did not fail due to the No-MAE Representation becoming inaccurate. Even assuming that Strategic suffered an effect that was both material and adverse, the cause of that effect was the COVID-19 pandemic, which falls within an exception to the MAE Definition for effects resulting from “calamities.” Accordingly, a COVID-19-related failure of the Bring-Down Condition did not relieve Buyer of its obligation to close. 237 See Donald Rumsfeld, Known and Unknown: A Memoir 23 (2011) (“[A]s we know, there are known knowns: there are things we know we know. We also know there are known unknowns: that is to say we know there are some things [we know] we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know.” (alteration in original)). 148 C. The Covenant Compliance Condition The next issue is whether Buyer validly refused to close because the Covenant Compliance Condition failed. Buyer argues that the Covenant Compliance Condition failed because Seller did not comply with the Ordinary Course Covenant. According to Buyer, Strategic made significant changes in its business in response to the COVID-19 pandemic, resulting in a departure from the ordinary course. Buyer established that the Covenant Compliance Condition failed. 1. The Ordinary Course Covenant The Ordinary Course Covenant appears in the first sentence of Section 5.1 of the Sale Agreement. It states, Except as otherwise contemplated by this Agreement or as set forth in Section 5.1 of the Disclosure Schedules, between the date of this Agreement and the Closing Date, unless the Buyer shall otherwise provide its prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed), the business of the Company and its Subsidiaries shall be conducted only in the ordinary course of business consistent with past practice in all material respects, including using commercially reasonable efforts to maintain commercially reasonable levels of Supplies, F&B, Retail Inventory, Liquor Assets and FF&E consistent with past practice, and in accordance with the Company Management Agreements. SA § 5.1. The parties have parsed the Ordinary Course Covenant closely. They disagree about the “business” in question, what it means to conduct the business in the “ordinary course of business,” what it means to operate “only” in the ordinary course of business “consistent with past practice,” whether the Ordinary Course Covenant created a flat or efforts- qualified contractual obligation, and how the covenant relates to the MAE Definition. 149  a. The “Business” In Question In its lead argument, Seller maintains that the “business” in question is Strategic’s business as an asset management firm, which Seller claims does not involve the day-to- day operation of the Hotels. Seller frames Strategic’s business at a high level and claims that it primarily involves deploying capital and overseeing the Hotels’ managers, reducing Strategic’s role to a supervisory manager of managers. According to Seller, the COVID- 19 pandemic did not result in any changes to these high-level tasks, which Strategic continued performing as the pandemic raged and as the hotels radically changed their operations. Seller thus concludes that the Ordinary Course Covenant was not breached.238 The plain language of the Ordinary Course Covenant forecloses this argument. The covenant provides that “the business of the Company and its Subsidiaries shall be operated in the ordinary course.” This obligation includes the business of Strategic, but it does not end there. It encompasses the business of each of the “Subsidiaries,” necessarily including the entities that own the Hotels. The Ordinary Course Covenant also includes a lengthy, non-restrictive adverbial phrase that appears in the middle of the main clause that constitutes the Ordinary Course Covenant. It confirms that operating the “business” in the ordinary course includes “using 238 See Dkt. 467 at 82 (“Buyer points to certain temporary changes to the affairs of the Hotels, but the question is whether the Company continued to operate in the ordinary course. It did[.]” (citation omitted)); Dkt. 472 at 47–48 (“The ordinary course of Strategic’s business included adapting its asset management strategy to meet prevailing conditions, including industry downturns. . . . Buyer will receive what it bargained for—a premier portfolio ‘managed by an industry leading, best-in-class management team’ . . . .”). 150 commercially reasonable efforts to maintain commercially reasonable levels of Supplies, F&B, Retail Inventory, Liquor Assets and FF&E consistent with past practice.” SA § 5.1 (the “Inventory Maintenance Covenant”). The Sale Agreement defines those terms as follows:  “Supplies” means “all of any Subsidiary’s right, title and interest in all china, glassware, silverware, linens, uniforms, engineering, maintenance, cleaning and housekeeping supplies, matches and ashtrays, soap and other toiletries, stationery, menus and other printed materials, and all other similar materials and supplies, which are located at a Company Property and used or to be used in the operation of the Company Property.” SA § 1.1.  “F&B” means “all of any Subsidiary’s right, title and interest in all unexpired food and beverages which are located or to be located at a Company Property (whether opened or unopened), but expressly excluding the Liquor Assets.” Id.  “Retail Merchandise” means “all of any Subsidiary’s right, title and interest in all merchandise located at the Company Property, including any gift shop or newsstand maintained by Seller, that is held or to be held for sale to guests and customers of any Company Property, but expressly excluding the F&B and Liquor Assets.” Id.239  “Liquor Assets” means “the alcoholic beverage inventory at any Company Property owned by a Subsidiary,” but excludes “licenses to sell alcohol.” Id.  “FF&E” means “all of any Subsidiary’s right, title and interest in all of the furniture, furnishings, fixtures and equipment, machinery, building systems, vehicles, appliances, computer hardware, art work, security systems, key cards (together with all devices for coding and monogramming such key cards) and other items of corporeal (tangible) movable (personal) property which are located or are to be located at a Company Property and used in the operation of the Company Property, 239 The Ordinary Course Covenant deploys the term “Retail Inventory,” which the Sale Agreement does not define or use elsewhere. In other provisions, the Sale Agreement uses the defined term “Retail Merchandise.” It seems likely that the use of “Retail Inventory” rather than “Retail Merchandise” was a scrivener’s error. 151  but expressly excluding any such items that constitute Supplies, F&B, Liquor Assets or Retail Merchandise.” Id. These definitions demonstrate that the “business of the Company and its Subsidiaries” extends to the day-to-day operation of the Hotels themselves, including minutia such as “matches and ashtrays, soap and other toiletries.”240 The Ordinary Course Covenant thus does not focus narrowly on Strategic, nor does it treat Strategic as simply an asset management firm. The “business of the Company and its Subsidiaries” for purposes of the Ordinary Course Covenant includes the operation of the Hotels.241 Seller’s lead argument is a non-starter. 240 The Inventory Maintenance Covenant notably extends to “any gift shop or newsstand maintained by Seller.” Seller is a holding company that owns Strategic. But Seller does not maintain any gift shop or newsstand. The parties’ reference to “Seller” thus demonstrates that for purposes of the Ordinary Course Covenant, the parties did not draw bright-line distinctions based on specific corporate entities and the business conducted by any particular entity. Rather, they understood and intended for the provision to encompass the business in its entirety, including the operation of the fifteen Hotels. 241 To the extent that the analysis moves beyond the Ordinary Course Covenant to the Sale Agreement as a whole, it is even clearer that the “business” in question involved owning and operating fifteen luxury hotels, rather than merely deploying capital like a private equity fund. The representations and warranties in the Sale Agreement address the business of “the Company and its Subsidiaries,” including the Hotels, and encompass matters such as their employees, material contracts, pending litigation, legal compliance, and financial statements. See, e.g., SA §§ 3.7, 3.9–12, 3.18. If the analysis extended to encompass extrinsic evidence, then mountains of documentation point to the same result, ranging from the language of the teaser document and the contents of the confidential information memorandum, to the materials in the data room. The factual record also establishes that the business of Strategic as an asset manager includes an “INTENSE FOCUS ON HOTEL OPERATIONS.” JX 403 at 35 (emphasis in original); see id. at 7, 10. And the record demonstrates that Strategic oversaw, approved, and in many cases directed the operational changes that the Hotels made in response to the 152  b. “The Ordinary Course Of Business” The parties next debate what it means for the business to be “conducted only in the ordinary course of business.” Buyer contends that this language means operating in accordance with how the business routinely operates under normal circumstances. See Dkt. 463 at 76–77. Buyer argues that the radical changes that management implemented to respond to the COVID-19 pandemic obviously deviated from how the Hotels normally operated and therefore fell outside the ordinary course of business. Seller responds that management must be afforded flexibility to address changing circumstances and unforeseen events, including by engaging in “ordinary responses to extraordinary events.” Dkt. 467 at 83 (internal quotation marks omitted). Seller argues that the COVID-19 pandemic necessitated an extraordinary response, such that management operated in the ordinary course of business based on what is ordinary during a pandemic. Although prior cases have not framed the interpretive question so starkly, the weight of Delaware precedent supports Buyer. In a seminal decision, this court gave meaning to a representation that the company had operated “only in the usual and ordinary course” using the following dictionary definitions: Black’s Law Dictionary defines “usual” as “1. Ordinary; customary. 2. Expected based on previous experience,” defines “ordinary” as “occurring in the regular course of events; normal; usual,” and defines “course of COVID-19 pandemic, including employee layoffs and furloughs. See JX 3282 at 1–2 (memorandum from Strategic management detailing responses to COVID-19); Hogin Dep. 283–85 (discussing “major adjustments” that Strategic made in response to COVID-19); id. at 289–91 (discussing changes that Strategic made, including closing amenities). 153  business” as “[t]he normal routine in managing a trade of business-Also termed ordinary course of business.” Ivize of Milwaukee, LLC v. Compex Litig. Support, LLC, 2009 WL 1111179 , at *8 (Del. Ch. Apr. 27, 2009) (emphasis omitted) (footnotes omitted).242 The court thus treated the 242 The sell-side management team in Ivize made plans to start a competing entity in violation of their non-competition agreements, solicited the company’s key salespeople, diverted company business, stole or destroyed company records, and stole company equipment. Understandably, the court had little difficulty concluding that “[t]he normal and ordinary routine of conducting business does not include destroying business assets and planning to transfer the essence of the business to a competitor.” Id. at *9. Consistent with Ivize, a series of decisions have held that a target company failed to operate in the ordinary course of business when it engaged in fraudulent or deceptive conduct. See, e.g., Anschutz Corp. v. Brown Robin Cap., LLC, 2020 WL 3096744 , at *12 (Del. Ch. June 11, 2020) (holding that buyer stated claim for breach of ordinary course covenant where buyer alleged that target company “knowingly inserted fanciful sales data” into its pipeline of projects because it was “reasonably conceivable that manipulating pipeline data in May, 2018, as a means to quiet the concerns of an anxious buyer, is not conduct undertaken ‘in the ordinary course of business consistent with past practices), rearg. granted on other grounds, 2020 WL 4249874 (Del. Ch. July 24, 2020); Akorn, 2018 WL 4719347 , at *88 (finding after trial that generic pharmaceutical company failed to act in the ordinary course of business by submitting regulatory filings to the FDA based on fabricated data); ChyronHego Corp. v. Wight, 2018 WL 3642132 , at *8 (Del. Ch. July 31, 2018) (holding that buyer stated a claim for breach of a representation that the company had “conducted its business in all material respects in the ordinary course of business consistent with past practice” based on allegations that the company inappropriately “smoothed” its revenue over monthly periods to mislead the buyer (internal quotation marks omitted)); Osram Sylvania Inc. v. Townsend Ventures, LLC, 2013 WL 6199554 , at *7–8 (Del. Ch. Nov. 19, 2013) (finding that buyer stated claim for breach of ordinary course covenant based on allegations that target company manipulated its financial information and sales results by billing and shipping excess product without applying proper credits or discounts, delaying the issuance of invoices to customers, and altering the size and nature of its business segments). These cases demonstrate that some categories of conduct are so extreme as to fall outside the ordinary course of business, even if a company theoretically might have engaged in them as part of its normal practice. It is extraordinary in the sense of being beyond the bounds of permissible conduct for a company to deceive regulators, fail to 154 ordinary course of business as the customary and normal routine of managing a business in the expected manner. Relying on Ivize, subsequent decisions have interpreted “the contractual term ‘ordinary course’ to mean ‘[t]he normal and ordinary routine of conducting business.’”243 Consistent with this approach, this court has explained that an ordinary course provision is “included to reassure a buyer that the target company has not materially changed its business or business practices during the pendency of the transaction.”244 This court also comply with the law, or engage in fraud. Activities of that nature cannot constitute the ordinary course of business under any circumstances. 243 Cooper Tire & Rubber Co. v. Apollo (Mauritius) Hldgs. Pvt. Ltd., 2014 WL 5654305 , *17 (Del. Ch. Oct. 31, 2014) (alteration in original) (quoting Ivize, 2009 WL 1111179 , at *9); accord Project Boat Hldgs., LLC v. Bass Pro Gp., LLC, 2019 WL 2295684 , at *20 (Del. Ch. May 29, 2019); see Anschutz, 2020 WL 3096744 , at *11 (quoting Cooper Tire, 2014 WL 5654305 , at *17). The Project Boat decision did not involve an ordinary course covenant, but rather a more specific obligation that a boat manufacturer undertook to disclose warranty claims “made outside of the ordinary course of business” and “not consistent with past practice.” Project Boat, 2019 WL 2295684 , at *20. In a post-trial decision, the court examined the seller’s “past practice of receiving and processing warranty claims” and held that the claims at issue were “not claims made within the ordinary course of business” because the claims in question involved “unusual” cracks in the hulls of the boats. Id. at *20–21. 244 Anschutz, 2020 WL 3096744 , at *11. The Anschutz case involved two claims by a buyer that the target company failed to operate in the ordinary course of business. One involved a contention that the seller “knowingly inserted fanciful sales data” into its pipeline of projects, which the court easily found constituted a failure to operate in the ordinary course. Id. at *11–12. The other rested on allegations that when a major customer of the target company sought to renegotiate a material contract, the seller resisted, ostensibly to avoid having to disclose the renegotiated contract to the seller. Id. at *10. The court held that the second aspect of the buyer’s theory did not state a claim on which relief 155 has observed that “[p]arties include ordinary-course covenants in transaction agreements to . . . help ensure that ‘the business [the buyer] is paying for at closing is essentially the same as the one it decided to buy at signing.’”245 The Cooper Tire decision illustrates how these principles operate on somewhat analogous facts. There, the acquirer contracted to buy a large American tire company (Cooper), largely because it was the majority owner of a joint venture that manufactured and sold tires in China. An individual known as Chairman Che controlled the minority partner in the joint venture. Chairman Che vehemently opposed the merger, and he used his position of authority over the joint venture’s workers “to physically seize the [joint venture’s] facility, prevent the production of Cooper products there, and deny access of the parties to the facility and to [the joint venture’s] financial records.” Cooper Tire, 2014 WL 5654305 , at *1. These events were unprecedented, and in an effort to force Chairman Che and the workers to capitulate by stopping production at the plant, Cooper “adopted a policy of suspending payments to suppliers who continued to ship supplies [to the plant].” Id. at *4. When the seller sought to force a closing, the buyer asserted that Cooper had failed to comply with its obligation under the agreement to “conduct its business in the ordinary course of business consistent with past practice.” Id. at *14. could be granted because it was not reasonably conceivable “that fighting to keep a customer was somehow out of [the seller’s] ordinary course of business.” Id. 245 Akorn, 2018 WL 4719347 , at *83 (alteration in original) (quoting Kling & Nugent, supra, § 13.03, at 13-19). 156  In the ensuing litigation, this court agreed with the buyer. The court found that Cooper failed to operate in its normal and ordinary routine of conducting business when “[a]s a result of Chairman Che’s instigation, Cooper’s largest subsidiary . . . stopped producing Cooper-branded tires or generating financial statements, and physically prevented Cooper employees from accessing records and facilities.” Id. at *17. The court did not regard Chairman Che’s intervention as an extraordinary external event beyond management’s control to which management necessarily had to respond. The unforeseen event itself and its consequences on Cooper’s business resulted in a deviation from the ordinary course. The Cooper decision further held that Cooper deviated from the ordinary course of business when it stopped paying suppliers to the joint venture. The court acknowledged that Cooper’s actions were “perhaps a reasonable reaction to the extralegal seizure of [the joint venture],” implying that management had taken action that might be thought of as an ordinary response to an extraordinary event. Id. But the court held that this arguably reasonable response nevertheless reflected “a conscious effort to disrupt the operations of the facility” and therefore fell outside of the ordinary course of business. Id. (emphasis omitted). Cooper thus failed “to cause [its largest subsidiary] to conduct business in the ordinary course, and demonstrate[d] just the opposite.” Id. Even though management took actions that could have been characterized as an ordinary course response to an extralegal seizure, what mattered for the covenant was the departure from how the company had operated routinely in the past. 157  Citing FleetBoston Financial Corp. v. Advanta Corp., 2003 WL 240885 (Del. Ch. Jan. 22, 2003), Seller responds that management cannot be limited to a playbook containing only plays that management has run previously on a regular basis. Dkt. 472 at 50–51. In FleetBoston, the seller of a consumer credit card business agreed that between signing and closing, the business would conduct solicitation campaigns “in the ordinary course of business consistent with past practices.” FleetBoston, 2003 WL 240885 , at *25. Instead, the business launched a “relationship management” campaign that offered very low interest rates to its current customers. Id. The buyer argued that the campaign was “unprecedented” and hence breached the ordinary course covenant. Id. The court rejected the buyer’s argument for two reasons. First, the court found that “the volume of relationship management accounts and [the interest rates] were consistent with [the business’s] past practices and current marketing plans.” Id. at *26. Second, the court noted that “during the Summer and Fall of 1997, competition for customers among the credit card companies had become increasingly fierce, manifesting itself in the form of lower [interest rates].” Id. The court explained that when “[f]aced with the threat of an exodus of existing balances, [the business] had only one alternative: match its competitors’ strategy by offering attractive [interest rates] to its existing customers.” Id. The court concluded that nothing in the transaction agreement suggested that the parties intended for the business “to be contractually precluded from making relationship management offers that would be competitive.” Id. Citing the second rationale, Seller contends that a seller can take unprecedented actions as long as they are reasonable under the circumstances. See Dkt. 467 at 81. The 158 FleetBoston case makes clear that an ordinary course covenant is not a straitjacket, but it nevertheless constrains the seller’s flexibility to the business’s normal range of operations. To that end, the court indicated that the buyer’s argument that gave it “the most pause” was the buyer’s contention that the business lowered its credit standards to attract less creditworthy customers and made inherently unprofitable offers. FleetBoston, 2003 WL 240885 , at *27. The court seemed to believe that a significant change in credit standards could have fallen outside the ordinary course of business, but the court found that the evidence was “too thin” to support a factual finding to that effect. Id. The court also concluded that the evidence supported a finding that the low-interest-rate offers were profitable over time. Id. The FleetBoston case thus does not suggest that when faced with an extraordinary event, management may take extraordinary actions and claim that they are ordinary under the circumstances. Put differently, the FleetBoston case does not support reading the Ordinary Course Covenant to permit management to do whatever hotel companies ordinarily would do when facing a global pandemic. Instead, Cooper Tire and other precedents compare the company’s actions with how the company has routinely operated and hold that a company breaches an ordinary course covenant by departing significantly from that routine.246 246 The fact that the Ordinary Course Covenant includes a requirement to obtain Buyer consent for actions outside the ordinary course of business supports the Cooper Tire approach. Under Seller’s interpretation of the covenant, the ordinary course of business permits management to do whatever they “ordinarily” would do in the absence of the 159  c. “Only In The Ordinary Course Of Business Consistent With Past Practice” The parties also argue about what it means for the Ordinary Course Covenant to include the adverb “only” and the express language “consistent with past practice.” SA § 5.1. Buyer views these additions as meaningful limitations. Seller treats them as inconsequential. Generally speaking, there are two principal sources of evidence that the court can examine to establish what constitutes the ordinary course of business. First, the court can look to how the company has operated in the past, both generally and under similar circumstances. Second, the court can look to how comparable companies are operating or have operated, both generally and under similar circumstances. In Akorn, the ordinary course covenant did not include the phrase “consistent with past practice,” and the court considered both sources. See Akorn, 2018 WL 4719347 , at *88. The seller was a generic pharmaceutical company, and when analyzing whether the seller breached the ordinary course covenant, the court contrasted the seller’s actions with “a generic pharmaceutical company operating in the ordinary course of business.” Id. That dimension of the analysis transaction agreement, even if extraordinary times call for extraordinary actions. That view would mean that Seller rarely (if ever) would need to seek Buyer’s consent because virtually any action could be justified as situationally ordinary. The obligation to seek Buyer’s consent before engaging in action outside of the ordinary course of business implies an understanding consistent with Cooper Tire’s concept of the normal and routine operation of the business. 160 looked at comparable companies. The court also considered that the seller had stopped engaging in important activities that it historically conducted, such as regularly auditing its operations, remediating deficiencies, and devoting IT resources to data integrity projects. Id. That dimension of the analysis looked at the company’s past practice. By including the adverb “only” and the phrase “consistent with past practice,” the parties created a standard that looks exclusively to how the business has operated in the past.247 When determining whether a party has acted “consistent with past practice,” the court must evaluate the company’s operations “before and after entering into” the transaction agreement to determine whether those operations are “consistent.” Mrs. Fields Brand, Inc. v. Interbake Foods, LLC, 2017 WL 2729860 , at *32 (Del. Ch. June 26, 2017). Because of the standard that the parties chose, the court cannot look to how other companies responded to the pandemic or operated under similar circumstances. d. “Commercially Reasonable Efforts” Surprisingly, the parties even disagree about whether the Ordinary Course Covenant imposes a flat contractual obligation or whether it only imposes an obligation to use 247 See Kling & Nugent, supra, § 13.03, at 13-19 n.1 (“Arguably, an obligation to conduct business only ‘in the ordinary course, consistent with past practice’ is a stricter standard than one which merely refers to the ‘ordinary course.’”); Model Merger Agreement, supra, at 123 (“The target might object to the limitation ‘consistent with past practices,’ particularly when its business has been changing in recent periods or where its business or its industry is troubled or is growing rapidly.”). 161 commercially reasonable efforts. Contrary to the plain language of the provision, Seller argues that the covenant only required commercially reasonable efforts.248 “[L]iability for breach of contract under common law turns on a concept of strict liability and parties are held to the standard expressed in the words of the contract. If a 248 See Dkt. 467 at 84–85 (“The absence of commercially reasonable ‘efforts’ language before ‘ordinary course’ does not affect the analysis. The ‘past practice’ language permits a court to look . . . to the company’s practices to determine what is commercially reasonable under the circumstances.” (citation omitted)). Glover, Seller’s deal counsel, testified that he believed adding “commercially reasonable efforts” before the ordinary course obligation would be redundant, and that the commercial reasonability standard was “implicit in the ordinary course.” Glover Dep. 296–99. Given the plain language of the text and Glover’s experience, that testimony was not credible. Seller argues obliquely that the Ordinary Course Covenant only requires that Strategic and its subsidiaries act with the intent to preserve their business. See Dkt. 467 at 85 (“Whether compared to past practices or industry conduct, the fundamental question is whether the Company acted consistent with the normal intent to preserve its business in all material respects.”). A contract provision can turn on a party’s mental state. See, e.g., Hexion, 965 A.2d at 746–49 (interpreting merger agreement in which contractual limitation on liability did not apply to a “knowing and intentional breach”). But absent specific language, proving a breach of contract claim does not require scienter. See Hifn, Inc. v. Intel Corp., 2007 WL 1309376 , at *13 (Del. Ch. May 2, 2007) (“[T]o the extent that [plaintiff] is contending that [defendant’s] subjective motivations for wanting out of the contract give rise to an inference that it acted in bad faith, that argument fails under settled law.”); Myer Ventures, Inc. v. Barnak, 1990 WL 172648 , at *5 (Del. Ch. Nov. 2, 1990) (“[T]he contract does not require scienter for a breach to exist.”); Gilbert v. El Paso Co., 490 A.2d 1050 , 1055 (Del. Ch. 1984) (holding that when party enforces conditions that “are expressed, the motivation of the invoking party is, in the absence of fraud, of little relevance”), aff’d, 575 A.2d 1131 (Del. 1990); see also NACCO Indus., Inc. v. Applica, Inc., 997 A.2d 1 , 35 (Del. Ch. 2009) (noting Delaware’s recognition of efficient breach). See generally Restatement, supra, ch. 16 intro. (“The traditional goal of the law of contract remedies has not been compulsion of the promisor to perform his promise but compensation of the promisee for the loss resulting from breach. ‘Willful’ breaches have not been distinguished from other breaches . . . .”). The Ordinary Course Covenant does not contain any language suggesting an intent-based obligation. 162 party agrees to do something, he or she must do it or be liable for resulting damages.” Kling & Nugent, supra, § 13.06, at 13-44. Clauses that obligate a party to use a certain degree of efforts to achieve a particular contractual outcome “mitigate the rule of strict liability for contractual non-performance that otherwise governs.” Akorn, 2018 WL 4719347 , at *86. Efforts clauses also recognize that “a party’s ability to perform its obligations depends on others or may be hindered by events beyond the party’s control.”249 In those situations, drafters commonly add an efforts clause to define the level of effort that the party must deploy to attempt to achieve the outcome.250 “The language specifies how hard the parties have to try.” Akorn, 2018 WL 4719347 , at *86. The Ordinary Course Covenant imposes an overarching obligation that is flat, absolute, and unqualified by any efforts language. The core obligation mandates that between signing and closing, absent Buyer’s prior written consent, “the business of the Company and its Subsidiaries shall be conducted only in the ordinary course of business consistent with past practice in all material respects . . . and in accordance with the 249 Akorn, 2018 WL 4719347 , at *86; see Kling & Nugent, supra, § 13.06, at 13-44 (“[P]arties will generally bind themselves to achieve specified results that are within their control . . . , and reserve a ‘reasonable best efforts,’ ‘commercial[ly] reasonable best efforts,’ or ‘best efforts’ standard for things outside of their control . . . .”); accord Model Stock Purchase Agreement, supra, at 212; see also Coates Report ¶ 11(b) (ordinary course covenants “vary in content . . . particularly regarding decisions that are within the control of the target, including how it responds to materialized risks of changes that may never have been within its control”). 250 See Model Stock Purchase Agreement, supra, at 212 (“‘Efforts’ clauses are commonly used to qualify the level of effort required in order to satisfy an applicable covenant or obligation.”). 163 Company Management Agreements.” SA § 5.1. No efforts-based language modifies the core obligation. The Ordinary Course Covenant therefore “imposes an unconditional obligation” to operate in the ordinary course consistent with past practice. Cooper Tire, 2014 WL 5654305 , at *15. The sentence that establishes the Ordinary Course Covenant contains the phrase “commercially reasonable efforts,” but that phrase does not modify the overarching ordinary-course obligation. Rather, it appears as part of the Inventory Maintenance Covenant. The overarching contractual duty to operate in the ordinary course includes “using commercially reasonable efforts to maintain commercially reasonable levels of Supplies, F&B, Retail Inventory, Liquor Assets and FF&E consistent with past practice.” SA § 5.1. The location of the phrase “commercially reasonable efforts” demonstrates that it only modifies the Inventory Maintenance Covenant, not the overarching obligation. See ITG Brands, LLC v. Reynolds Am., Inc., 2017 WL 5903355 , at *6–7 (Del. Ch. Nov. 30, 2017) (explaining the implications of an independent clause with a non-restrictive dependent clause for purposes of contractual interpretation). The phrase “commercially reasonable efforts” also appears in a separate obligation found in Section 5.1: The Seller shall cause the Company and its Subsidiaries to use their respective commercially reasonable efforts to preserve intact in all material respects their business organization and to preserve in all material respects the present commercial relationships with key Persons with whom they do business. SA § 5.1 (the “Organizational Preservation Covenant”). This provision combines a flat obligation with efforts-based language. It begins by imposing an unqualified obligation on 164 Seller (“[t]he Seller shall cause”), but then qualifies the obligation that Seller must cause “the Company and its Subsidiaries” to fulfill with effort-based language (“[t]he Seller shall cause the Company and its Subsidiaries to use their respective commercially reasonable efforts”). The use of efforts-based language in the Inventory Maintenance Covenant and the Organizational Preservation Covenant demonstrates that the drafters of the Sale Agreement knew how to craft an efforts-based provision when they intended to do so. By contrast, the Ordinary Course Covenant imposes a flat contractual obligation. Seller’s argument for an implicit efforts qualifier is plainly wrong. e. The Relationship Between The Ordinary Course Covenant And A Material Adverse Effect Finally, the parties differ on the relationship (if any) between the Ordinary Course Covenant and the existence of a Material Adverse Effect. Seller argues that the Ordinary Course Covenant necessarily permits changes to the business of “the Company and its Subsidiaries” as long as those changes would not satisfy the MAE Definition. According to Seller, any other interpretation “would negate the careful risk allocation negotiated by the parties—under which the MAE clause expressly assigned to Buyer the risk that materialized here, namely the pandemic and consequent decline in demand.” Dkt. 467 at 84. Seller claims that pandemic risk “was not then assigned back to Seller through the ordinary course provision, which would necessarily prohibit the Company from taking any action to contend with the pandemic (even actions required by law), a result wholly 165 inconsistent with the covenant’s purpose.” Id. The plain language of the Ordinary Course Covenant and the structure of the Sale Agreement foreclose this argument. The plain language of the Ordinary Course Covenant does not support Seller’s reading. An ordinary course covenant could provide that only a departure from the ordinary course that constituted a Material Adverse Effect would breach the covenant. A covenant drafted in that fashion would incorporate any exceptions in the definition of Material Adverse Effect so that if a deviation from the ordinary course fell within one of those exceptions, then the deviation would be excluded for purposes of the ordinary course covenant. The Ordinary Course Covenant in this case does not incorporate the concept of a Material Adverse Effect. The parties selected a different materiality standard, which requires compliance with the Ordinary Course Covenant “in all material respects.” That standard does not require a showing equivalent to a Material Adverse Effect, nor a showing equivalent to the common law doctrine of material breach.251 The purpose of the standard is to “eliminate the possibility that an immaterial issue could enable a party to claim breach or the failure of a condition. The language seeks to exclude small, de minimis, and nitpicky 251 See Channel Medsystems, 2019 WL 6896462 , at *24 (rejecting an argument equating “in all material respects” with a material adverse effect as “devoid of merit”); Akorn, 2018 WL 4719347 , at *85–86 (distinguishing “in all material respects” from common law doctrine of material breach); Frontier Oil, 2005 WL 1039027 , at *38 (explaining that the “concept[s] of ‘Material Adverse Effect’ and ‘material’ are analytically distinct”). 166 issues that should not derail an acquisition.” Akorn, 2018 WL 4719347 , at *85 (footnote omitted). To qualify as a breach, the deviation must significantly alter the total mix of information available to the buyer when viewed in the context of the parties’ contract.252 The plain language of the Ordinary Course Covenant neither incorporates nor turns on whether the event prompting the departure from the ordinary course would qualify as an exception in the contractual definition of a Material Adverse Effect.253 252 See Channel Medsystems, 2019 WL 6896462 , at *17 (“Based on the analysis in Akorn, the court will apply here the disclosure-based standard that Akorn endorses in evaluating the alleged inaccuracies of representations in the Agreement.”); Akorn, 2018 WL 4719347 , at *85–86 (adopting the Frontier Oil materiality test because it “strives to limit the operation of the Covenant Compliance Condition and the Ordinary Course Covenant to issues that are significant in the context of the parties’ contract, even if the breaches are not severe enough to excuse a counterparty’s performance under a common law analysis”); Frontier Oil, 2005 WL 1039027 , at *38 (“A fact is generally thought to be ‘material’ if [there] is ‘a substantial likelihood that the . . . fact would have been viewed by the reasonable investor as having significantly altered the “total mix” of information made available.’” (omission in original) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 , 449 (1976))). 253 When analyzed in combination, the Ordinary Course Covenant and the Covenant Compliance Condition create a double-materiality problem. The Ordinary Course Covenant requires that the business be operated in the ordinary course “in all material respects.” SA § 5.1(a). The Covenant Compliance Condition only fails if Seller has not performed its obligations “in all material respects.” SA § 7.3(a). Unlike the Bring-Down Condition, the Covenant Compliance Condition lacks a materiality scrape, resulting in double materiality. Lawyers sometimes obsess about these things, and logicians could write theses about their implications, but the parties have not argued that the double-materiality combination changes the nature of the materiality analysis. As in Akorn, the twice-material combination simply emphasizes that Covenant Compliance Condition will not fail unless the breach of the Ordinary Course Covenant is material. The departure from the ordinary course of business for the Company and its Subsidiaries must be a significant deviation from past practice and result in a meaningful change from Buyer’s reasonable expectations about how the business would be operated between signing and closing. See Akorn, 2018 WL 4719347 , at *86. 167  The plain language of the No-MAE Representation points in the same direction. There, Seller represented that “there have not been any changes, events, state of facts [sic] or developments, whether or not in the ordinary course of business that, individually or in the aggregate, have had or would reasonably be expected to have a Material Adverse Effect.” SA § 3.8(b) (emphasis added). The No-MAE Representation thus distinguishes between the question of whether the business operated in the ordinary course and whether the business suffered a Material Adverse Effect, and it makes the former irrelevant to the latter. The No-MAE Representation also does not specifically contemplate that Seller, Strategic, or their subsidiaries might take particular actions that otherwise would deviate from the ordinary course of business, and it does not authorize any such actions. The No- MAE Representation thus does not implicate the introductory clause in the Ordinary Course Covenant, which provides that its obligations apply “[e]xcept as otherwise contemplated by this Agreement.” SA § 5.1. The overall structure of the Sale Agreement reinforces this interpretation. The Ordinary Course Covenant and the No-MAE Representation are separate provisions, and they implicate separate closing conditions. The Ordinary Course Covenant is a covenant that implicates the Covenant Compliance Condition. The No-MAE Representation is a representation that implicates the Bring-Down Condition. Absent express contractual language, which the Sale Agreement lacks, neither provision would operate as a constraint on or exception to the other. Moving beyond the Sale Agreement, a material adverse effect provision and an ordinary course covenant serve different purposes and rest on different assumptions. 168 Conditioning the buyer’s obligation to close on the absence of a material adverse effect addresses the risk of a significant deterioration in the value of the seller’s business between signing and closing that threatens the fundamentals of the deal.254 A condition that turns on the absence of a material adverse effect is concerned primarily with a change in valuation, irrespective of any change in how the business is being operated. See generally Miller, COVID-19, supra, at 12–18 (explaining that a “material adverse effect . . . is really a change in the reasonable valuation of the company”). The provision assumes that the business has continued to operate in the ordinary course and protects the buyer against a significant decline in valuation. The ordinary course covenant recognizes that the buyer has contracted to buy a specific business with particular attributes that operates in an established way. The buyer has not contracted to purchase a basket of fungible goods. As a result, even without any change in valuation, a significant change in how the business operates can threaten the fundamentals of the deal. The seller’s representations and warranties provide some 254 See Akorn, 2018 WL 4719347 at *47 (“In any M & A transaction, a significant deterioration in the selling company’s business between signing and closing may threaten the fundamentals of the deal.”); Schwartz, supra, at 820 (“[T]he MAC clause allows the acquirer to costlessly avoid closing the deal if the target’s business suffers a sufficiently adverse change during the executory period.”); Miller, Deal Risk, supra, at 2012 (“Merger agreements typically address [the risk of a substantial decline in valuation] through complex and highly-negotiated ‘material adverse change’ or ‘MAC’ clauses, which provide that, if a party has suffered a MAC within the meaning of the agreement, the counterparty can costlessly cancel the deal.” (footnote omitted)). 169 protection to the buyer,255 but “[f]or a variety of reasons, reliance on the target’s representations . . . will not provide the buyer adequate assurance as to the target’s maintenance of its business.”256 An ordinary course covenant provides an additional and greater level of protection to ensure that “the business of the target will be substantially the same at closing as it was on the date the purchase agreement was signed.” 257 The ordinary course covenant thus is primarily concerned with a change in how the business operates, irrespective of any change in valuation. It assumes stability in valuation and tests for variation in operations. The two provisions that Seller seeks to link are separate and distinct. An unexpected event might well affect the valuation of a business and lead to changes in its operations, which would implicate both provisions. But that does not mean that the outcome of the analysis under both provisions would be the same. To the contrary, because the provisions guard against different risks, the contractual results could be different. If contracting parties want the analysis to be the same, then they have many options available. To pick just two, they could omit one of the provisions as superfluous, or they could build MAE language into the ordinary course covenant. 255 Kling & Nugent, supra, § 14.02[1], at 14-9; accord id. §§ 1.05[2]–[4]. 256 Model Merger Agreement, supra, at 120. 257 Model Stock Purchase Agreement, supra, at 202; accord Kling & Nugent, supra, § 13.03, at 13-19. 170  Because the Ordinary Course Covenant does not incorporate MAE language, the fact that Strategic did not suffer a Material Adverse Effect does not dictate the outcome under the Ordinary Course Covenant. Contrary to Seller’s assertions, treating the provisions as separate does not alter the parties’ bargain. Treating the provisions as co- extensive would alter it. 2. Seller’s Breach Of The Ordinary Course Covenant Seller breached the Ordinary Course Covenant when Strategic made extraordinary changes to its business in response to the COVID-19 pandemic. The circumstances created by the pandemic warranted those changes, and the changes were reasonable responses to the pandemic. Consequently, if acting in the ordinary course of business meant doing what was ordinary during the pandemic, then Seller would not have breached the Ordinary Course Covenant. But under extant Delaware law, the Ordinary Course Covenant required Seller to maintain the normal and ordinary routine of the business. Overwhelming evidence demonstrates that Strategic departed from the normal and customary routine of its business as established by past practice. In response to the COVID- 19 pandemic, Strategic closed two of the Hotels entirely and limited operations at the other thirteen severely. Seller closed the Four Seasons Jackson Hole and the Four Seasons Palo Alto. By closing the Four Seasons Jackson Hole, Seller departed from past practice by lengthening its normal seasonal closure by approximately two months.258 The Four Seasons 258 See Lesser Dep. 86 (the Four Seasons Jackson Hole is normally closed for one month, but in 2020 it was closed for three months); compare Hogin Tr. 822 (the Four 171 Hotel Palo Alto did not close seasonally; its closure was unprecedented. When announcing the closures, Strategic cited “very low demand as well as governmental orders.” 259 Strategic’s other thirteen hotels were placed in a state that Strategic described as “closed but open.” See JX 3159. The hotels stopped all food and beverage operations except for room service, which was limited to “breakfast, lunch and dinner with no overnight operations.”260 The hotels shut down or limited all other amenities, including gyms, pools, spa and health club operations, recreational activities, club lounge operations, valet parking, retail shops, and concierge and bellhop services.261 Strategic slashed employee headcount, with over 5,200 full-time-equivalent employees laid-off or furloughed.262 The remaining employees saw their work weeks Seasons Jackson Hole ordinarily is closed “twice a year for about a month” and was scheduled to close in the first week of April), with JX 3207 at 1 (the Four Seasons Jackson Hole was closed by late March), and Hogin Tr. 823 (“we ended up reopening [the Four Seasons Jackson Hole] in the middle of June”). 259 JX 3105 at 1; see JX 3207 at 1 (the Four Seasons Palo Alto “was running at zero occupancy, so [it] made sense to shut it down”); JX 3282 at 1 (the hotel was closed because “we can reasonably expect no demand as local employees shelter-in-place”); JX 3107 at 3 (the hotel is “small and closure is an effective way to reduce the operating [costs]”); JX 4537 at 6 (the hotel was closed based on “analyses of the costs and benefits of closing versus remaining open”). 260 JX 3282 at 3; see Lesser Report at 78, 83, 88, 93, 103, 114, 119, 124, 129, 134, 139, 144, 149 (describing changes at individual hotels). 261 See JX 2771; JX 3282 at 3; Lesser Report at 10; JX 4547 at 23–24 [hereinafter Tantleff Report]. 262 Tantleff Report at 29; see Lesser Report at 78, 83, 88, 93, 103, 114, 119, 124, 129, 134, 139, 144, 149 (reporting furloughs and layoffs at individual hotels). 172 shortened, were encouraged to take vacation or paid time off, and had any pay increases deferred until further notice. See JX 3282 at 3. Across many areas, Seller reduced hotel operations to skeleton staffing. Seller limited engineering coverage to safety and OSHA issues, and the Hotels’ front desks assumed responsibility from call centers for all calls.263 Strategic minimized spending on marketing and capital expenditures. Seller’s expert on the hospitality industry calculated that marketing expenses decreased year-over-year by 33.1%, 76.4%, and 69% in March, April, and May of 2020. Lesser Report at 15–17. Strategic placed all non-essential capital spending on hold and directed all of the Hotels to “[h]old all FF&E spending until further notice.” JX 3282 at 2–3. These changes departed radically from the normal and routine operation of the Hotels and were wholly inconsistent with past practice. A reasonable buyer would have viewed them as having significantly altered the operation of the business.  Hogin, Strategic’s top executive, admitted that by April 23, 2020, “Strategic had made major material changes to its business when compared to its past practice as a result of COVID-19.” Hogin Tr. 855–56.  Buyer’s expert on the hospitality industry opined that the changes in the Hotels were “the opposite of normal or ordinary.” Tantleff Report at 27. During his thirty-year career in the hospitality industry, he had “never seen or heard of such monumental or extensive changes in the operations of a hotel or portfolio, much less a luxury one.” Id. at 27–28.  Seller’s expert on the hospitality industry testified that the Hotels’ “operations, once COVID hit, were dramatically negatively impacted by the pandemic compared to prior to the pandemic.” Lesser Dep. 33. He could not identify any other period of 263 JX 2771; JX 3207 at 1; JX 3282 at 1; see Tantleff Dep. 24. 173  time in history during which the Hotels had laid off or furloughed employees in remotely comparable numbers. Id. at 80.  The experts agreed that the Hotels took unprecedented actions regarding employees.264 Buyer’s expert explained that the layoffs were material because they meant that to reopen, the Hotels would face the challenges of “rehiring and retraining employees, addressing collective bargaining agreements, re-stocking supplies, re-opening spas and restaurants with employees who may no longer be available to work . . . . The list is monumental.” Tantleff Report at 28.  Eliminating all food and beverage service except for room service for breakfast, lunch, and dinner was unprecedented and material. Between 2015 and 2018, revenue for food and beverage services constituted approximately thirty-five percent of hotel revenue. The dramatic reduction in these services caused this component of the Hotels’ revenue to drop precipitously.265  The changes that Strategic made to its sales and marketing efforts were unprecedented and material. The marketing budget dropped almost sixty percent year-over-year in March, April, and May 2020. The Hotels also shut down their call center operations, routing calls instead to the front desk.266  Strategic’s reduction in capital expenditures represented an extreme deviation from past practice. Delaying renovations and repairs will impair the Hotels’ competitiveness and increase costs in the future. See Tantleff Report at 31, 33.  Reducing staffing and amenities was “inconsistent with the very nature of the luxury hotel business.” Tantleff Report at 25. The reductions could imperil the Hotels’ status as “Four Diamond” and “Five Diamond” hotels. Id. at 24–25. In his testimony, Hogin tried to blunt these dramatic changes by drawing high-level general comparisons to previous crises, such as the global financial crisis in 2008, and asserting 264 See id.; Tantleff Report at 23–24. 265 See JX 508; JX 5011; Lesser Report at 77. 266 See JX 3282 at 1; Tantleff Report at 27. 174 that during those crises, Strategic cut operations that ceased being profitable.267 He admitted that Strategic had not previously shut down amenities such as spas or gyms. See Hogin Dep. 292–93. And although Hogin maintained that Strategic deployed “the same playbook[]” in the 2008 financial crisis, he conceded that “the depth of the recession or the change in demand dictates” the magnitude of changes that Strategic makes in response to economic downturns. Hogin Tr. 873. He acknowledged that the decline in revenues expected as a result of COVID-19 was much more severe than during the 2008 crisis.268 Seller’s expert described the industry-wide decline in hotel revenues during 2008 as a “blip[] on the screen” compared to the impact of COVID-19. Lesser Tr. 1292–93. In an effort to evade the implications of the dramatic changes to the Hotels’ operations, Seller argues that the hotel operators—the hotel brands like Four Seasons, Fairmont, InterContinental, and JW Marriott—implemented those changes. See Dkt. 467 at 31–32. Legally, that is irrelevant. The Ordinary Course Covenant uses passive voice. It requires that “the business of the Company and its Subsidiaries shall be conducted only in the ordinary course of business consistent with past practice in all material respects.” For purposes of the covenant, it does not matter whether the decision to depart from the 267 See Hogin Tr. 815–16; Hogin Dep. 292–94. 268 Hogin Tr. 847, 852; compare JX 19 at 25 (reporting 72.2% average occupancy rate in 2008), and JX 3518 at 8 (displaying positive $155 million in EBITDA in 2008), with JX 4966 (projecting negative $25.7 million in EBITDA and 28% occupancy rate for 2020). 175 ordinary course of business was made by Seller, Strategic, a manager at a subsidiary of Strategic, or a third-party management firm. Factually, Seller’s argument is incorrect. The hotel management agreements between Strategic’s subsidiaries and the hotel management firms generally delegate some decision-making authority to the hotel manager as an agent (defined as the “Operator”), but the relevant subsidiary (defined as the “Owner”) retains ultimate control.269 Strategic also controlled the purse strings, giving it final decision-making authority over whether to fund the Hotels.270 And the record makes clear that Strategic made a wide range of 269 For example, under eleven of the fifteen agreements, Strategic retained ultimate control over hiring and firing employees, with the hotel management firm acting only as an agent for the Owner. See JX 5099 § 3.3 (“In the performance of its duties as operator and managing agent of the Hotel pursuant to this Agreement, the Operator shall act solely on behalf of and as agent for the Owner and not on its own behalf.”); accord JX 5100 § 3.3; JX 5105 § 5.02; JX 5109 §§ 6.6, 7.1; see also JX 5101 §§ 3.02(c), 4.01 (delegating hiring and firing to the hotel operator but only in accordance with an “Annual Plan” approved by the Owner); JX 5102 §§ 2.03(c), 2.04 (delegating hiring and firing power to the hotel operator but prohibiting the operator from “adopt[ing] any major change in the policy of operating the Hotel”); JX 5103 § 5.02(c) (authorizing the hotel operator to hire and fire hotel employees but making the Owner responsible for “the expenses relating to the employment or discharge of such personnel”); JX 5104 § 5.02(c) (same); JX 5106 §§ 5.03(a), 23.01(lllll) (same); JX 5107 §§ 5.03(a), 23.01(lllll) (same); JX 5113 § 2.5(c) (“All Hotel Personnel shall be employed at Owner’s cost and expense . . . .”). Four hotel management agreements delegated broader hiring-and-firing authority to the Operator, but the Owner retained authority to hire and fire certain senior hotel personnel. See JX 5108 §§ 1.04, 1.06; JX 5110 §§ 2.1, 2.6, 4.1; JX 5111 § 2.3; JX 5112 § 4.2. 270 See Hogin Tr. 826–27 (explaining that Strategic “fund[s] the bank accounts that are in the brands’ names,” so although “[e]ach [brand] manager put forward a plan,” Strategic retained final decision-making authority); Tantleff Report at 19–20 (describing Strategic’s “industry-standard arrangement” with its hotel operators and Strategic’s “hands on” management role (internal quotation marks omitted)). 176 decisions in response to the pandemic and directed the Hotels to take actions that radically changed the character of their operations.271 Seller’s hospitality industry expert devoted much of his report to comparing Strategic’s actions and financial performance with its competitors to support the argument that Strategic acted in the ordinary course of what managers do in response to a pandemic.272 That is not the test. The parties agreed that to measure whether Seller deviated from ordinary course, the relevant question is whether “the business of the Company and its Subsidiaries” was conducted consistent with past practice. Quite obviously, it was not. 3. Seller’s Claim That It Was Contractually Obligated To Deviate From The Ordinary Course Of Business In a single sentence in its initial post-trial brief, Seller advanced two arguments. First, Seller argued that it was contractually obligated to depart from the ordinary course 271 See JX 2990 at 1 (Strategic “holds the right to make the final decision” whether to close hotel operations); JX 3282 at 1 (memorandum from Strategic’s management to its board of directors indicating that decisions to close two hotels, furlough and lay off employees, and employ “[s]keleton sales staff” were made by Strategic); id. at 3 (detailing Strategic’s “Contingency Request to Hotels,” which included closing or limiting amenities, pausing spending, laying off or furloughing employees, and reducing work week “for all managers and non-union hourly staff”); JX 3978 at 9 (describing similar changes as the result of decisions by Strategic management); Hogin Dep. 289–91 (confirming that Strategic directed the furloughs, layoffs, reduced work hours, and amenities closures). 272 See Lesser Report at 4 (“[W]e have determined that throughout the pandemic Strategic has generally conducted its business in a manner that is consistent with typical owners of comparable hotels.”); id. at 21–70 (comparing occupancy and revenue metrics between Strategic its competitors); id. at 71–153 (comparing financial performance between Strategic and its competitors); see also Dkt. 435 at 31–32 (Seller arguing that “[m]ost other luxury hotels in the United States—including Mirae-owned properties—took similar, if not identical, steps in response to COVID-19” (citing Lesser Report)). 177 of business because Seller had represented that its operations complied with applicable law. Seller suggested that this representation created an implied obligation that required Seller to continue complying with the law to ensure that the representation remained true. See Dkt. 467 at 85 (citing SA § 3.9). In the same sentence, Seller implied that the Inventory Maintenance Covenant and the Organizational Preservation Covenant obligated Seller to deviate from the ordinary course of business. The Seller described those covenants as imposing obligations to “use commercially reasonable efforts to maintain supply and inventory [and] preserve the business and its relationships.” Id. (citing SA § 5.1). Seller seemed to suggest that if it had to deviate from the ordinary course of business to comply with the law or with those covenants, then it did not breach the Ordinary Course Covenant by doing so.273 273 In its post-trial reply brief, Seller devoted two sentences to these arguments. See Dkt. 472 at 48–49. In the first sentence, Seller objected that Buyer “never explain[ed] how maintaining the Company’s business and complying with the law could be outside the ordinary course ‘in all material respects,’” without saying anything more. See id. at 48. In the second sentence, Seller asserted in conclusory fashion, Nor could there be a breach when Section 5.1 requires the Company to operate in the ordinary course “except as otherwise contemplated by the agreement,” which requires “compl[ying] with all Laws” and using “commercially reasonable efforts” to maintain supply and inventory and “preserve” its organization and relationships, as Strategic did. Id. at 48–49. Seller had an obligation to support its arguments and explain how they applied. It did not satisfy that obligation by making conclusory statements. 178  It is difficult to address these theories because Seller only mentioned them briefly, did not develop the arguments, and did not provide any supporting authority other than bare citations to provisions of the Sale Agreement. A court need not address arguments that are presented in such a cursory and elliptical manner.274 These arguments are deemed waived and rejected on that basis.275 Rejecting these arguments is particularly appropriate because Seller sought to create exceptions to the Ordinary Course Covenant, and Seller therefore bore the burden of proving that the exceptions were satisfied. See Part III.A, supra. That said, it is relatively easy to reject Seller’s argument about the Inventory Maintenance Covenant. That covenant appears as a non-restrictive adverbial phrase within the Ordinary Course Covenant. That structure demonstrates that the Inventory Maintenance Covenant is a subsidiary obligation within the Ordinary Course Covenant. It cannot override the Ordinary Course Covenant because it is included within it. It is also 274 In re Mobilactive Media, LLC, 2013 WL 297950 , at *12 n.152 (Del. Ch. Jan. 25, 2013) (“[I]ssues adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived. . . . It is not enough merely to mention a possible argument in the most skeletal way, leaving the court to do counsel’s work. . . . Judges are not expected to be mindreaders. Consequently, a litigant has an obligation to spell out its arguments squarely and distinctly, or else forever hold its peace.” (omissions in original) (quoting Roca v. E.I. duPont de Nemours & Co., Inc., 842 A.2d 1238 , 1243 n.12 (Del. 2004))). See Emerald P’rs v. Berlin, 726 A.2d 1215 , 1224 (Del. 1999) (“Issues not briefed 275 are deemed waived.”); Murphy v. State, 632 A.2d 1150 , 1152 (Del. 1993) (“The failure to raise a legal issue in the text of the opening brief generally constitutes a waiver of that claim on appeal.” (footnote omitted)). 179 overwhelmingly clear from the record that the Hotels’ deviations from the ordinary course did not result from their efforts to comply with the Inventory Maintenance Covenant. The Hotels did not place their operations in a quasi-catatonic state because they faced a massive uptick in the use of soap, the consumption of alcohol, or thefts of towels that prevented them from maintaining inventory at levels consistent with past practice. Nothing suggests that the Inventory Maintenance Covenant was an issue. The analysis of the Organizational Preservation Covenant is more difficult and less clear. The parties have not briefed the interaction between the Organizational Preservation Covenant and the Ordinary Course Covenant, which appear in separate sentences in Section 5.1. On a cold read, the introductory clause in the Ordinary Course Covenant provides that the business must be operated in the ordinary course “[e]xcept as otherwise contemplated by this Agreement or as set forth in Section 5.1 of the Disclosure Schedules.” SA § 5.1. It is thus arguable that compliance with the Organizational Preservation Covenant might operate as an exception to the obligation to operate in the ordinary course. But that is not the only possible reading. It is also arguable that the efforts-based Organizational Preservation Covenant could be regarded as a subsidiary obligation, like the efforts-based Inventory Preservation Covenant. The scope of the Organizational Preservation Covenant also is not clear. The covenant requires Seller to cause the Company and its Subsidiaries to use commercially reasonable efforts “to preserve in all material respects their business organization and to preserve in all material respects the present commercial relationships with key Persons with whom they do business.” SA § 5.1. The Sale Agreement does not define “business 180 organization” or “commercial relationships,” and the parties have not pointed to any authorities that address what this obligation entails. Factually, Seller has asserted that Strategic “sought to preserve its operations during the pandemic.” Dkt. 467 at 81. To support that assertion, however, Seller relied on high- level descriptions of the business functions in which Strategic engages as an asset manager. See id. at 81–82. Seller’s bottom line position asserts that Strategic operated in the ordinary course, consistent with past practice, by “maximiz[ing] margins given existing demand.” Id. at 82. The breadth of this statement shows that it is no standard at all. As discussed, Seller’s interpretation of the “business” in question disregards the plain language of the Sale Agreement. Interpreted correctly, the relevant business includes operating the Hotels. Consequently, to use commercially reasonable efforts to maintain the relevant “business organization,” Strategic needed to use commercially reasonable efforts to retain the Hotels’ employees. Strategic instead laid off or furloughed over 5,200 employees, reduced its operations to skeleton staffing, and operated the Hotels in a state that it described as “closed but open.” The layoffs and furloughs mean that to reopen the Hotels, Buyer would face serious challenges related to staffing and labor relations. See Tantleff Report at 28. Rather than preserving the business organization, Seller gutted it. It is thus not clear in the abstract, without assistance from the parties, what the Organizational Preservation Covenant requires, how it interacts with the Ordinary Course Covenant, or whether Seller either complied with or breached the Organizational Preservation Covenant. As a result, Seller failed to carry its burden of proving that the 181 Organizational Preservation Covenant forced Strategic to depart from the ordinary course of business such that the failure of the Covenant Compliance Condition would be excused. The most difficult issue is Seller’s argument regarding compliance with applicable law. Whether Seller could rely on its obligation to comply with the law to evade liability for taking actions outside of the ordinary course is freighted with competing policy considerations. That said, Seller’s representation that it complied with the law seems unlikely to have any impact on the analysis. That representation is important in its own right and for purposes of the Bring-Down Condition, but it is not clear what it adds for purposes of the Ordinary Course Covenant. As a general matter, parties are obligated to comply with the law, and Delaware law does not permit a court to enforce a contract prohibited by law.276 The Restatement likewise recognizes that if compliance with a contractual obligation “is made impracticable by having to comply with a domestic or foreign governmental regulation or order,” then the obligation is discharged. Restatement, supra, § 264. These principles suggest that if a governmental authority had issued an order that required a target business to close entirely due to the COVID-19 pandemic, and if a buyer sought an injunction forcing the business to remain open and to continue operating in 276 See Della Corp. v. Diamond, 210 A.2d 847 , 849 (Del. 1965) (“[I]t is against the public policy of this State to permit its courts to enforce an illegal contract prohibited by law.”); accord Restatement, supra, § 178 (“A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms.”). 182 accordance with its normal and ordinary routine, then the seller’s obligation to operate in the ordinary course would be discharged. The buyer would be unable to obtain injunctive relief and could not obtain damages for breach of the discharged obligation. But a contractual provision that makes operating in the ordinary course a condition to the buyer’s obligation to close does not raise the same issues. The condition allocates the risk of action outside of the ordinary course of business to the seller and extinguishes the buyer’s obligation to close under those circumstances. No one is required to comply with an illegal contract, and no one receives damages based on a breach of an unenforceable obligation. The scenario involves a risk whose materialization the parties anticipated, and a contractual consequence that follows as a result. The situation in this case is more complicated than either of these hypotheticals because two provisions in the Sale Agreement operate together to create a hybrid fact pattern. The Covenant Compliance Condition is not framed plainly as a condition that looks to whether the business of Strategic and its subsidiaries was operated in the ordinary course. The Covenant Compliance Condition instead conditions Buyer’s obligation to close on Seller having “complied in all material respects with all covenants and conditions required by this Agreement.” SA § 7.3(a). If Strategic deviated from the ordinary course to comply with a government order, then it could argue legitimately that the underlying obligation was discharged and hence that it “complied in all material respects with” the covenant. But Buyer could argue legitimately that the Covenant Compliance Condition in this scenario would turn on whether the business failed to operate in the ordinary course, not why it failed to do so. To my mind, there are credible and contestable contractual, conceptual, and 183 policy-based arguments for both positions. It is not clear which position ultimately would prove more persuasive. Assuming for the sake of argument that Seller could invoke illegality to exclude its deviation from ordinary course operations for purposes of the Covenant Compliance Condition, then Seller would bear the burden of proving that it indeed was legally obligated to deviate from the ordinary course. See Part III.A, supra. Seller did not make that showing. Seller does not seriously contend that the drastic changes that Strategic made in response to the outbreak of COVID-19 were required by law, nor does it cite any examples of legally-required deviations from the ordinary course. Seller cited testimony from Hogin, who described the impact of “orders precluding spas, pools, . . . food and beverage, restaurants, and gyms,” Dkt. 467 at 31 n.19 (citing Hogin Dep. 290, 293, 297), but Hogin did not actually testify about any specific order. He described the decision to close spas, pools, and food and beverage amenities as resulting from “the anticipation or the actual materializing of an executive order that said, don’t operate spas, pools, food and beverage outlets.” Hogin Dep. 297. He then confirmed that the decision was commercial: “Some [jurisdictions] were takeout only. If it didn’t make sense to provide takeout only in a jurisdiction where takeout only was being offered, we did not.” Hogin Dep. 297; accord Hogin Tr. 826 (“The compliance required that we weren’t serving anything inside early on. And then it went to not serving anything other than takeout. We can’t make a living serving takeout. It doesn’t work.”). In his deposition testimony, Hogin did not describe any government orders that required Strategic to close restaurant obligations at all; he simply described closures and limitations of food and beverage services. See Hogin Dep. 290. As 184 to gym closures, Hogin’s recollection was vague: “I believe the executive order across most or all of our portfolio was recommending or ordering gyms closed, but I’d have to go back and check the total accuracy of that.” Id. at 293. None of this testimony suffices to establish that any government order required any particular class of amenities to shut down. The record shows that state and local governments issued stay-at-home orders in response to COVID-19 in all of the jurisdictions in which the Hotels were located. See JX 4817. But Strategic implemented sweeping changes before the orders went into effect. On March 16, 2020, a Strategic executive disseminated a set of guidelines to several Four Seasons employees that included a litany of changes, including reduced staffing, closure of amenities, limiting security coverage, encouraging employees to take vacation or paid leave, halting categories of spending, and minimizing operating expenses.277 At that point, no state had issued a stay-at-home order. Three days later, on March 19, California issued a stay-at-home order; other states followed suit, but not until over a week later.278 It is thus unclear whether the ordinary course deviations were legally required. 277 JX 2778 at 1; see also JX 2773 (email dated March 16, 2016, describing sweeping changes at the JW Marriott Essex House hotel including closure of all food and beverage operations, “[l]ayoffs and reduced work weeks in all departments,” and “[c]urtailment of all discretionary spending”); see also JX 2775 (memorandum attached to email dated March 16, 2020, directing work-from-home for Strategic employees). 278 JX 4817; see also Hogin Dep. 205–07 (acknowledging that Strategic implemented its work-from-home policy in Chicago before Illinois issued its stay-at-home order). 185  The record evidence also does not indicate whether state and local shutdown orders required the Hotels to close. Seller admitted that there was “no binding law, order, government regulation, or other legal directive that specifically required that . . . the Four Seasons [Palo Alto] suspend all operations.” JX 4537 at 6. Rather, Strategic shut down the hotel because there was no demand.279 The public health order governing Teton County, Wyoming, where the Four Seasons Jackson Hole is located, limited gatherings but permitted “[t]ravel to and work at a place of employment, if the work cannot be remotely from home.” JX 3287 at 3. A stay-at-home recommendation promulgated the day before the public health order identified hotels as essential businesses exempt from its recommendations. JX 3276 at 1–3. Strategic closed the Four Seasons Jackson Hole anyway. The stay-at-home order in Illinois exempted hotels and motels “to the extent used for lodging and delivery or carry-out food services.”280 Even if Strategic had been legally required to close two of its hotels and cease or limit amenities at the other hotels, that would not obligate Strategic to make other changes, such as layoffs and staff reductions, cuts to sales and marketing efforts, or decreased capital expenditures. 279 See JX 3107 at 3; JX 3207 at 1; JX 3282 at 1; JX 4537 at 6. 280 Ill. Exec. Order No. 2020-10 (Mar. 20, 2020), https://www2.illinois.gov/Pages/Executive-Orders/ExecutiveOrder2020-10.aspx. The parties did not introduce the order into evidence, although they included exhibits that reference it. See, e.g., JX 3027 (press release announcing the executive order). The court can take judicial notice of the order. See D.R.E. 201(b); Windsor I, LLC v. CWCapital Asset Mgmt. LLC, 238 A.3d 863 , 873 (Del. 2020) (“The trial court may also take judicial notice of matters that are not subject to reasonable dispute.” (internal quotation marks omitted) (quoting In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162 , 169 (Del. 2006))). 186  There are thus substantial questions about whether Strategic was legally obligated to make changes to its business. Neither this argument nor the other arguments that Seller raised in passing enabled Seller to carry its burden of demonstrating that Strategic’s deviations from the ordinary course of business were excused. 4. Seller’s Argument About Buyer Consent Finally, Seller suggested in a footnote in its reply brief that any deviation from the ordinary course of business could not constitute a breach of the Ordinary Course Covenant because that provision permitted deviations if Buyer consented and further provided that Buyer’s consent “shall not be unreasonably withheld.” Dkt. 472 at 51 n.34 (citing SA § 5.1(a)). During post-trial argument, Seller’s counsel returned to this argument at somewhat greater length. See Dkt. 481 at 116. Seller admitted that it never sought Buyer’s consent, but argued that if it had, then Buyer could not reasonably have withheld its consent. According to Seller, consent therefore should be deemed given, meaning that Seller did not breach the Ordinary Course Covenant. Compliance with a notice requirement is not an empty formality. Notice to the buyer is a prerequisite because it permits the buyer to engage in discussions with the seller and if warranted, seek information about the situation under its access and information rights. The buyer then can protect its interests. For example, it can propose reasonable conditions to its consent, and it can anticipate and account for the implications of the non-ordinary- course actions when planning for post-closing operations. Seller did not cite any authority to support its Buyer-would-have-been-obligated-to- consent theory, much less any case involving an ordinary course covenant. Vast bodies of 187 case law, commentary, and scholarship address the giving of notice in other contexts. The parties did not cite or discuss any of these authorities. Absent authority suggesting a different outcome, the most logical reading of the Ordinary Course Covenant is that Seller was required to seek Buyer’s consent before taking action outside of the ordinary course. If Seller asked, and if Buyer refused, then Seller could litigate the reasonableness of Buyer’s refusal. Seller admitted that it did not seek Buyer’s consent under Section 5.1 until April 2, 2020, after it had already made major operational changes.281 Seller waived this argument by not presenting it in a meaningful fashion. The notion that Buyer might have been obligated to consent if asked does not provide grounds to excuse the breach of the Ordinary Course Covenant. 5. The Finding Regarding The Covenant Compliance Condition Buyer proved that the business of Strategic and its subsidiaries was not conducted only in the ordinary course, consistent with past practice, in all material respects. The resulting breach of the Ordinary Course Covenant was never cured, and the Covenant Compliance Condition thus failed. 281 Compare JX 4335 at 61 (“[Seller] first requested [Buyer’s] consent under Section 5.1 of the [Sale Agreement] on April 2, 2020.”), with JX 3282 (memorandum dated March 30, 2020, summarizing major operational changes “taken to mitigate” the impact of COVID-19). 188 D. The Title Insurance Condition The Buyer’s obligation to close was subject to a specific condition that the parties negotiated to address the Fraudulent Deeds. Appearing in Section 7.3(c), the condition consists of a single, dense, compound-complex sentence containing 366 words. Diagramming the sentence would likely be achievable only using software designed for computer-assisted drafting. The condition contains multiple points of potential failure, one of which is the Title Insurance Condition. Buyer proved that the Title Insurance Condition failed, relieving Buyer of its obligation to close. 1. The Plain Meaning Of The Title Insurance Condition Section 7.3(c) conditioned Buyer’s obligation to close on Strategic having done two things: (i) obtaining a specified type of documentation and (ii) providing that documentation to the Title Insurer. To satisfy the condition, the documentation had to be sufficient to accomplish two things: (i) satisfy the Expungement Condition by removing the Fraudulent Deeds from the public record and (ii) satisfy the Title Insurance Condition by enabling the Title Insurers to issue a specified level of title insurance. To satisfy the Title Insurance Condition, the documentation had to be sufficient for the Title Insurers to issue a policy of title insurance to Buyer in its capacity as the owner of the Hotels that either (i) did not contain an exception for the Fraudulent Deeds or (ii) contained an 189 exception the Fraudulent Deeds and expressly provided coverage for the exception through an endorsement.282 Parsing the actual language of Section 7.3(c) requires a difficult slog through a contractual thicket. Initially, Section 7.3(c) conditioned closing on Strategic having obtained a specified type of documentation. In the language of the provision, [t]he Company shall have obtained (X) a judgment, order, decree, ruling or other action from a Governmental Authority of competent jurisdiction (each a “Wild Deed Judgment”) or (Y) such other documentation which is reasonably satisfactory to Buyer . . . . Id. (the “Required Documentation”). Section 7.3(c) next required that the Required Documentation be sufficient to satisfy both the Expungement Condition and the Title Insurance Condition. To satisfy the Expungement Condition, the Required Documentation had to have resulted in the expungement of the Fraudulent Deeds. Using the language of the provision, the Required Documentation had to be sufficient so that when filed in the recording office for the applicable county in which each Company Property affected by each Fraudulent Deeds is located, [the Required Documentation] shall result in the expungement, removal or clearing of the Fraudulent Deed from the public record, with respect to any Company Property which is encumbered by a Fraudulent Deed. Id. 282 This summary simplifies the title insurance requirement in Section 7.3(c). As discussed below, in addition to being sufficient for the Title Insurer to issue a policy to Buyer as owner of the Hotels, the documentation also had to be sufficient for the Title Insurer to issue a policy of title insurance to the lenders financing the Transaction. 190  To satisfy the Title Insurance Condition, the Required Documentation had to be sufficient for the Title Insurers to provide clean title insurance both to Buyer in its capacity as owner of the Hotels and to the lenders who were financing the Transaction. Using the language of the condition, Strategic must have submitted same [viz. the Required Documentation] to the [Title Insurers] for recording in a manner sufficient for the [Title Insurers] to issue as of the Closing Date (I) an owner’s title insurance policy either (A) without taking exception therefrom for the Fraudulent Deeds or (B) issuing affirmative insurance (which may be in the form of an endorsement) providing coverage over the Fraudulent Deeds in form and substance reasonably acceptable to Buyer, and (II) a lender’s title insurance policy for such Fraudulent Deed Encumbered Property that does not take exception therefrom for the Fraudulent Deeds, dated as of the Closing Date (subject to Seller’s right to satisfy the foregoing pursuant to Section 5.10), in each case subject only to the payment by Buyer of the premium therefor on the Closing Date and satisfaction by Buyer, Seller and/or the Company of the other conditions to issuance of the owner and lender title insurance policies . . . . Id. (formatting added) The parties have focused on subpart (I) of this aspect of Section 7.3(c), which refers the owner’s title insurance policy; they largely have ignored subpart (II), which refers to the lender’s title insurance policy. This decision follows their lead, which means that when this decision uses the term “Title Insurance Condition,” it refers to the condition relating to the owner’s title insurance policy.283 283 There is an odd divergence between the two subparts. Unlike the owner’s policy, the aspect of the condition relating to the lender’s policy does not permit the policy to take an exception for the Fraudulent Deeds and then provide express coverage through an endorsement. It is not clear why the parties framed the requirements differently. 191  Section 7.3(c) finishes with a proviso that describes one way in which the Title Insurance Condition could fail: provided, that it shall be deemed a failure of condition hereof with respect to any Company Property affected by a Fraudulent Deed in the event that the [Title Insurers] confirm[] in writing that any Wild Deed Judgment or other document or instrument presented by Seller (or the Company) is insufficient to permit the [Title Insurers] to issue all or any portion of the title insurance with respect to such Company Property in the manner as described above following Buyer’s request for a written explanation therefor from the [Title Insurers] (and Buyer hereby agrees to timely make such request of the [Title Insurers] promptly following receipt and review of any Wild Deed Judgment or other document or instrument delivered by Seller to Buyer for such purpose). Id. (the “Written Confirmation Proviso”). By its terms, Section 7.3(c) does not impose any mandatory obligations on Strategic. It rather conditions Buyer’s obligation to close on Strategic having accomplished the tasks identified in Section 7.3(c). Most notably, for present purposes, Strategic had to satisfy the Title Insurance Condition. 2. The Failure Of The Title Insurance Condition The title commitments for each of the Hotels contain the DRAA Exception. The Title Insurers added this exception to the commitments on April 13, 2020, after Seller obtained the default judgments that ostensibly quieted title, thereby satisfying the Expungement Condition.284 284 See JX 3675 at 17; JX 3676 at 11; JX 3679 at 18; JX 3698 at 13. 192  The DRAA Exception encompasses “[a]ny defect, lien, encumbrance, adverse claim, or other matter resulting from, arising out of, or disclosed by, any of the following.” JX 3698 at 13. The DRAA Exception then identifies four items, including,  “(i) that certain ‘[DRAA Agreement],’ dated on or about May 15, 2017, to which AnBang Insurance Group Co., Ltd., Beijing Dahuabang Investment Group Co., Ltd., Amer Group LLC, World Award Foundation Inc., An Bang Group LLC, and AB Stable Group LLC are purportedly parties and/or also interested, and the rights, facts, and circumstances disclosed therein,”  “(ii) that certain action styled World Award Foundation, et al. v. AnBang Insurance Group Co, Ltd, et al., in the Court of Chancery of the State of Delaware, as DRAA C.A. No. 2019-0605-JTL and the rights, facts, and circumstances alleged therein,”  “(iii) those certain actions, each styled World Award Foundation, et al. v. AnBang Insurance Group Co Ltd, et al., in the Superior Court of the State of Delaware, as Nos. C.A. N193-05055, C.A. N19J-05253, C.A. N193-05458, C.A. N19J-05868, C.A. N193-06026, and C.A. N19J-06027 and the rights, facts, and circumstances alleged therein,” and  “(iv) that certain action styled World Award Foundation, et al., v. AnBang Insurance Group Co., Ltd., in the Superior Court of State of California for the County of Alameda, as Case No. RG19046027 and the rights, facts, and circumstances alleged therein.” JX 3698 at 13 (formatting added). In other words, the DRAA Exception creates an exception from coverage for anything resulting from, arising out of, or disclosed by the DRAA Agreement, the DRAA Chancery Action, the Delaware enforcement actions, and the California Action. The DRAA Exception encompasses the Fraudulent Deeds. First, the DRAA Exception excludes from coverage any matter “resulting from, arising out of, or disclosed by” the DRAA Agreement “and the rights, facts, and circumstances disclosed therein.” Even though fraudulent, the DRAA Agreement purports to provide the authority on which 193 Hai Bin Zhou and Belitskiy relied when recording the Fraudulent Deeds. After supposedly making Anbang contractually liable for significant sums, the DRAA Agreement states, In the event that the deposit and assets under the preceding Paragraph 79 have not been delivered by then, after June 15, 2018, all other parties may, without going through arbitration or court, directly transfer and, following the Durable Power of Attorney conveyed in this Paragraph, persons appointed by the other five parties can directly transfer the ownership of the assets by signing a Grant Deed in front of any Notary Public. [Anbang] guarantees that the aforementioned assets are free from any joint liability; if there is any such liability, [Anbang] shall compensate the other parties ten times their worth, the other parties may file directly in the county recording office of the place where such asset is located. JX 4837 at 13, 30. When preparing and filing the Fraudulent Deeds, Hai Bin Zhou and Belitskiy claimed to use the durable power of attorney granted by this paragraph, with each of the Fraudulent Deeds containing a reference to a “DPOA” or “POA” bearing the ostensible date of signing of the DRAA Agreement. See Part I.E, supra. The plain language of the DRAA Exception therefore covers the Fraudulent Deeds. For purposes of the exception, it does not matter that the DRAA Agreement is fraudulent or that Hai Bin Zhou could not use it to create any rights against the Hotels that a legitimate legal system ultimately would respect. The Title Insurers were the masters of their offers of coverage, and they could limit that coverage in any way they wished. Next, the DRAA Exception excludes from coverage any matter “resulting from, arising out of, or disclosed by” the Alameda Action “and the rights, facts, and circumstances disclosed therein.” Seller’s title expert agreed that the DRAA Exception exempts from coverage “anything referenced in or disclosed by the Alameda action,” including any “fact, right, or circumstance,” and that “what that means” is that “any 194 encumbrance, claim, or other matter arising from the grant deed . . . is excepted from coverage under the [DRAA Exception].”285 An affidavit filed in the Alameda Action identifies all of the Fraudulent Deeds and describes the facts and circumstances surrounding the deeds.286 As a result, the plain language of the DRAA Exception eliminates coverage for the Fraudulent Deeds.287 Finally, the DRAA Exception excludes from coverage any matter “resulting from, arising out of, or disclosed by” the DRAA Chancery Action “and the rights, facts, and circumstances disclosed therein.” When seeking a temporary restraining order against the petitioners in the DRAA Chancery Action, Anbang provided the court with copies of the Fraudulent Deeds for the Ritz Carlton Laguna Niguel, the Ritz Carlton Half Moon Bay, the Westin St. Francis, the Loews Santa Monica, and the Four Seasons Palo Alto.288 When seeking to compel production of the DRAA Agreement, Anbang referred to the Fraudulent Deeds, citing the existence of “a multi-state conspiracy to derail a multi-billion deal that [Anbang] had entered into for the sale of a number of luxury for the sale of a number of luxury properties across the United States.” JX 5181 at 845. Asserting that the DRAA Petitioners were “directly involved in that fraud,” Anbang alleged the following: 285 Chernin Tr. 1261–63; accord id. at 1257–58. 286 See JX 1757 at 2–6, 24–25, 73, 79, 143, 152, 157, 166, 226, 235, 240, 249, 284. 287 See Nielsen Tr. 1441–43 (explaining that because “there are references in the [Alameda Litigation] pleadings to the deeds,” the DRAA Exception “fully encompasses the former exception for just the California deeds”); see JX 4541 ¶¶ 153, 169–171, 261. 288 See JX 5181 at 379–80, 392–92, 417, 426, 431, 440, 464, 470. 195  Petitioner AB Stable Group LLC was a grantee on the false deeds involving the Ritz-Carlton, Half Moon Bay and the Four Seasons Hotel [Palo Alto], two of the six hotels that are the object of Petitioners’ real estate fraud scheme, and Andy Bang, who verified the petition commencing this action, is the secretary of AB Stable Group LLC according to corporate documents filed with the Delaware Secretary of State. In addition, Bang’s eponymous Andy Bang LLC was the grantee of the false deed for the Montage Laguna Beach, another of the six California properties. Finally, as set forth in more detail in [Anbang’s] opening brief in support of its TRO Motion, the individual who attempted to fraudulently transfer these deeds in the first instance was Daniil Belitskiy, who purports to be the VP of AB Stable Group LLC. Id. at 845–46 (citations omitted). The opposition to the motion also referenced the deeds. See id. at 1078–79. And when providing the court with a status update about the DRAA Chancery Action and the Transaction, Anbang’s counsel discussed the Fraudulent Deeds. See id. at 1112–13, 1118, 1130. The DLA Piper letter that was docketed in the DRAA Chancery Action also discussed the Fraudulent Deeds. See id. at 1186–91. In light of these disclosures in the DRAA Chancery Action, the DRAA Exception again eliminates coverage for the Fraudulent Deeds. In response to the plain language of Title Insurance Condition and the DRAA Exception, Seller argues that the Title Insurance Condition was satisfied because it only requires that the title insurance policies “not take exception therefrom for the Fraudulent Deeds.” SA § 7.3(c); see Dkt. 467 at 86–87. Seller maintains that this language is satisfied if the title insurance policies do not explicitly reference the Fraudulent Deeds, even if the title insurance policies contain a broader exception that encompasses the Fraudulent Deeds. Seller’s interpretation is contrary to the plain language of the Title Insurance Condition. The parties agreed that Buyer would not be obligated to close without insurance 196 policies that do “not take exception therefrom for the Fraudulent Deeds.” SA § 7.3(c). The plain language of the condition does not treat the term “Fraudulent Deeds” as magic words that must appear in the exception. The condition turns on whether the title commitments take exception for the Fraudulent Deeds, regardless of the specific words used. The DRAA Exception plainly encompasses the Fraudulent Deeds, causing the Title Insurance Condition to fail. Both sides’ title experts agreed.289 Ivanhoe, who served both as Buyer’s lead deal lawyer and as Buyer’s lead real estate lawyer, expressed the same understanding. Ivanhoe Tr. 633. Seller’s lead deal lawyer did not offer testimony on the issue, and its lead real estate lawyer did not testify at trial.290 Attempting to reinforce its argument about magic words, Seller correctly points out that (i) the title insurance commitments do not contain an exception that refers explicitly to the “Fraudulent Deeds,” (ii) the DRAA Exception does not expressly use the term “Fraudulent Deeds,” and (iii) earlier drafts of the title commitment contained a specific exception for the Fraudulent Deeds, but the Title Insurers removed that narrower exception 289 Chernin Tr. 1263; Nielsen Tr. 1442–43. 290 At a conceptual level, the relationship between the broader DRAA Exception and a narrower exception for the Fraudulent Deeds tracks the relationship between a broad exception to the MAE Definition for a “calamity” and a narrower exception for a pandemic. See Part III.B.2, supra. The only difference is that the parties’ positions are reversed. For the DRAA Exception, Buyer argues that the broader provision encompasses the narrower concept, while Seller argues that it cannot. For the calamity exception, Seller argues that the broader provision encompasses the narrower concept, while Buyer argues that it cannot. In both cases, the answer is the same: the broader exception encompasses the narrower concept. 197 when they added the broader DRAA Exception.291 These observations are factually accurate but legally irrelevant. As Seller’s title insurance expert explained, the deletion of an exception from a prior title commitment carries no independent significance because the scope of a title commitment is limited to the four corners of that commitment.292 The plain language of the title commitments makes clear that the removal of an earlier exception does not affect the interpretation of existing exceptions. The title commitments stated, LIABILITY OF THE COMPANY MUST BE BASED ON THIS COMMITMENT. ... (c) Until the Policy is issued, this Commitment, as last revised, is the exclusive and entire agreement between the parties with respect to the subject matter of this Commitment and supersedes all prior commitment negotiations, representations, and proposals of any kind, whether written or oral, express or implied, relating to the subject matter of the Commitment. JX 3698 at 3. This language functions like a powerful integration clause. Both parties’ title experts agreed that in light of this language, the scope of the exceptions in the commitments 291 See Dkt. 467 at 87–88. Compare JX 2532 at 16–17, with JX 3700 at 11–12. In making this argument, Seller relies heavily on testimony from Kravet, who agreed that the specific exception for the Fraudulent Deeds was removed when the DRAA Exception was added. See Dkt. 467 at 89–90 (citing Kravet Dep. 161, 216). Kravet’s testimony accurately reflects the historical changes in the title insurance commitments, in which the Title Insurers initially included a specific exception for the Fraudulent Deeds, and then replaced it with the broader DRAA Exception. Kravet’s testimony did not address the legal implications of the change, and he testified that the DRAA Exception was a “separate exception” that “stands on its own.” Kravet Dep. 216. 292 See Chernin Tr. 1253–54; Chernin Dep. 86–87; accord Ivanhoe Tr. 766. 198 depends entirely on the words in those exceptions, without giving any effect to any prior commitments. Chernin Dep. 87–88; Nielsen Dep. 1442. The operative question for purposes of the Title Insurance Condition is whether the DRAA Exception covers the Fraudulent Deeds, not whether the Title Insurers previously included a narrower exception that focused specifically on the Fraudulent Deeds. The plain language of the DRAA Exception encompasses the Fraudulent Deeds, which caused the Title Insurance Condition to fail. Seller further argues that the DRAA Exception did not cause the Title Insurance Condition to fail because the Written Confirmation Proviso required that the Title Insurers “confirm that the judgment obtained is insufficient to issue insurance.” Dkt. 467 at 87 n.63. In making this argument, Seller misreads the Written Confirmation Proviso, which contemplates that Section 7.3(c) “shall be deemed” to have failed in the event the title insurer issues such a notice “following Buyer’s request for a written explanation therefor.” SA § 7.3(c). The Written Confirmation Proviso does not require written confirmation from the Title Insurers for the Title Insurance Condition to fail; it instead provided one means by which the Title Insurance Condition would be deemed to have failed. The Written Confirmation Proviso enables the parties to determine whether the Title Insurance Condition failed without awaiting formal title commitments. But the Title Insurance Condition also would fail if the Title Insurers did not issue a policy that satisfied the Title Insurance Condition. 199  3. The Parenthetical Reference And The Possibility Of Satisfying The Title Insurance Condition By Complying With Section 5.10 To avoid the implications of the Title Insurance Condition, Seller tries to redraft Section 7.3(c) to eliminate it. That attempt fails. Initially, Seller claims that Section 7.3(c) only requires that Seller obtain a “Wild Deed Judgment” that, once recorded, “shall result in the expungement . . . of [each] Fraudulent Deed from the public record.”293 That assertion describes the Expungement Condition; it ignores the Title Insurance Condition. In a slightly better argument, Seller claims that it satisfied Section 7.3(c) by complying with Section 5.10(a) and causing the Company to clear the Fraudulent Deeds in accordance with the Litigation Plan. See Dkt. 467 at 61. Seller did not satisfy Section 7.3(c) under this route either. In August 2019, Anbang proposed to address the Fraudulent Deeds through the Quiet Title Actions. Anbang made this proposal after representing to Mirae that the Fraudulent Deeds represented the solitary work of a twenty-something Uber driver with a criminal record, while withholding its broader knowledge about Hai Bin Zhou and his years of disputes with Anbang. Anbang’s proposed solution thus only addressed the misleadingly narrow version of the problem that Anbang had identified, but it achieved the desired effect of making Mirae think that Anbang was being forthright and responsible. 293 Dkt. 467 at 86 (alterations and omissions in original) (quoting JX 1226 § 7.3(c)). 200  The result was Section 5.10 of the Sale Agreement, in which Seller covenanted to cause Strategic “to take actions . . . and use best efforts as are necessary to satisfy the condition to closing set forth in Section 7.3(c) prior to the Termination Date.” SA § 5.10(a). In another example of the convoluted drafting that is typical of the Sale Agreement, Section 5.10 required Seller to cause Strategic “to take such actions . . . as are necessary to satisfy the condition,” thereby imposing an unconditional obligation, while following that requirement with an efforts-based obligation under which Seller committed to cause Strategic to “use best efforts as are necessary to satisfy the condition.” The flat and unconditional obligation necessarily dominates the efforts-based obligation. In Section 5.10(a), the parties agreed that actions required to satisfy Section 7.3(c) “includ[ed], without limitation,” causing Strategic and any applicable subsidiary to hire counsel . . . and cause such counsel to promptly commence and diligently prosecute such actions as necessary to accomplish the same [viz. satisfaction of the condition in Section 7.3(c)]. Buyer and Seller agree that those certain actions identified in Section 5.10(a)(ii) of the Disclosure Schedules (the “Litigation Plan”) are approved for such purpose; provided, however, the actions set forth in the Litigation Plan shall not be deemed a limitation of Seller’s obligation hereunder. SA § 5.10(a). The parties approved Gibson Dunn as counsel to carry out the Litigation Plan. Id. Seller now argues that as long as Strategic followed the Litigation Plan, then it necessarily satisfied all aspects of Section 7.3(c), including the Title Insurance Condition. Under Seller’s logic, the Litigation Plan was “approved for such purpose,” with the “purpose” being prosecuting the actions “necessary to accomplish the same,” with the “same” being “to satisfy the condition to closing set forth in Section 7.3(c).” 201  This argument ignores the structure of Section 7.3, which requires fulfilling both the Expungement Condition and the Title Insurance Condition. At most, compliance with the Litigation Plan could satisfy the Expungement Condition; it could not inherently result in satisfaction of the Title Insurance Condition. Equally important, the plain language of Section 5.10(a) does not support Seller’s reading. Section 5.10(a) imposed on Seller an obligation “to take such actions . . . as are necessary to satisfy the condition to closing set forth in Section 7.3(c).” Section 5.10(a) did not modify the parameters of Section 7.3(c); it left them intact and obligated Seller to satisfy them. The bottom-line obligation thus required Seller to satisfy Section 7.3(c). Whether Seller fulfilled the covenant and satisfied Section 7.3(c) depended on the terms of Section 7.3(c), not Section 5.10(a). Other language in Section 5.10(a) confirms that the provision does not equate carrying out the Litigation Plan with satisfying all of the conditions in Section 7.3(c). Seller’s obligations under Section 5.10(a) “includ[ed], without limitation” pursuing the Litigation Plan, which by definition meant that Seller’s obligations under Section 5.10(a) were not limited to pursuing the Litigation Plan and that Seller might need to take further action to satisfy Section 7.3(c). Eliminating any doubt, a proviso in Section 5.10(a) stated that “the actions set forth in the Litigation Plan shall not be deemed a limitation of Seller’s obligation hereunder.” And after making this statement, an additional proviso added nor shall [the actions set forth in the Litigation Plan] constitute the exclusive means for Seller to satisfy the condition to closing set forth in Section 7.3(c) and Seller shall have the right to take such action as it deems reasonably necessary to satisfy the condition to closing set forth in Section 7.3(c) (as the same may be satisfied under this Section 5.10). Seller shall make all material 202  decisions pertaining to the action it takes to satisfy the condition to closing set forth in Section 7.3(c) (as the same may be satisfied under this Section 5.10); provided, that, following Closing, Seller shall not enter into or agree to any settlement, compromise or discharge relating to the Fraudulent Deeds unless in accordance with clause (iv) of this Section 5.10(a) below; provided, further, that, in the event that, following the Closing if such actions are still ongoing and Seller fails to diligently pursue such actions, Buyer shall have the right, by written notice to Seller, to assume control of such actions in accordance with the Litigation Plan. Id. Carrying out the Litigation Plan and satisfying Section 7.3(c) were not coextensive. And still more language, this time appearing in Section 5.10(c), illustrates that fulfilling the Litigation Plan was not equivalent to satisfying Section 7.3(c). In Section 5.10(c), the parties expressly agreed upon a means by which Seller could satisfy Section 7.3(c): Notwithstanding the foregoing, if prior to the Termination Date Seller shall have satisfied the condition to closing set forth in Section 7.3(c) with respect to at least three (3) but less than all of the Company Properties affected by the Fraudulent Deeds, then, so long as all other conditions to the parties’ respective obligations set forth in Article VII are then satisfied or waived (other than those conditions which may only be satisfied at Closing), Seller may, in its sole discretion, and by delivery of written notice to Buyer, elect to satisfy the condition precedent to Buyer’s obligation to close as set forth in Section 7.3(c) by delivering at Closing the Section 5.10(c) Closing Deliverables (as hereafter defined). Id. § 7.3(c). The deliverables consisted of  either cash or a letter of credit in an amount equal to the amount of the purchase price allocated to the properties that were still subject to Fraudulent Deeds,  additional funds in an amount sufficient to satisfy the condition to closing set forth in Section 7.3(c) on a post-closing basis,  additional funds sufficient to cover any release price premium, yield maintenance premium, spread maintenance premium or other prepayment charges or premiums payable to the Lenders by Buyer, 203  a prorated portion of any acquisition costs incurred by Buyer under the Sale Agreement allocated to the properties that were still subject to Fraudulent Deeds, and  for the three or more properties where the Fraudulent Deeds had been removed, an affidavit from an officer of Seller attesting to the expungement of the Fraudulent Deeds and such other documents or instruments as the Title Insurers reasonably required to satisfy the condition to closing set forth in Section 7.3(c). Id. § 5.10(c). As shown by Section 5.10(c), when the parties agreed on requirements that would cause Section 7.3(c) to be satisfied, they said so explicitly. Just as important, even when they did so, expunging a certain number of the Fraudulent Deeds and providing economic assurances equivalent to the expungement of the remaining Fraudulent Deeds did not suffice. To satisfy the condition to closing set forth in Section 7.3(c), Seller still had to provide such other documents or instruments as the Title Insurers reasonably required.294 294 The existence of Section 5.10(c) and the specific path it contemplates for satisfying Section 7.3(c) helps to explain parenthetical language that otherwise could be confusing. In Section 7.3(c), after describing the title insurance policies and specifying that they are to be “dated as of the Closing Date,” and before stating that the policies are to be “subject only to the payment by Buyer of the premium therefor on the Closing Date and satisfaction by Buyer,” the provision states, “(subject to Seller’s right to satisfy the foregoing pursuant to Section 5.10).” Although this language cites Section 5.10, the parenthetical necessarily refers to the specific means of satisfying Section 7.3(c) that appears in Section 5.10(c). Two similar parenthetical references appear in Section 5.10(a) in the form of language stating that Seller has the right to take action and make decisions to satisfy the condition to closing set forth in Section 7.3(c) “(as the same may be satisfied under this Section 5.10).” Once again, although the citation is to “Section 5.10,” the parenthetical necessarily refers to the specific means of satisfying Section 7.3(c) that appears in Section 5.10(c). 204  4. Buyer’s Actions Did Not Cause The Failure Of The Title Insurance Condition Up to this point in the analysis, the evidence establishes that Seller failed to satisfy the Title Insurance Condition, relieving Buyer of its obligation to close. Seller argues that Buyer cannot rely on the failure of the Title Insurance Condition because Buyer’s actions caused the condition to fail. Seller failed to prove that Buyer caused the failure of the Title Insurance Condition by breaching a performance obligation. a. No Breach Seller relies on Sections 5.5(a) and (i) of the Sale Agreement to establish that Buyer breached a performance obligation sufficient to excuse the failure of the Title Insurance Condition. See Dkt. 467 at 90. According to Seller, both provisions impose broad obligations on the parties to use commercially reasonable efforts to complete the Transaction. Although the provisions look similar, they create different obligations. Only Section 5.5(a) is relevant. Section 5.5(a) imposes the type of broad reasonable efforts obligation that Seller seeks to invoke. It states: Each of the parties shall use all commercially reasonable efforts to take, or cause to be taken, all appropriate action to do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to Regardless, the plain language of Section 5.10, including Section 5.10(c), demonstrates that compliance with Section 5.10 provides a means of satisfying only the Expungement Condition in Section 7.3(c). It does not also provide a means of satisfying the Title Insurance Condition. 205  consummate and make effective the transactions contemplated by this Agreement as promptly as practicable, including to (i) obtain from Governmental Authorities all consents, approvals, authorizations, qualifications and orders as are necessary for the consummation of the transactions contemplated by this Agreement and (ii) promptly (and in no event later than five (5) Business Days after the date hereof) make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement required under the HSR Act or any other applicable Law. SA § 5.5(a) (formatting added) (the “Reasonable Efforts Covenant”). The Reasonable Efforts Covenant thus imposes a general obligation on each party to use commercially reasonable efforts “to do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to consummate and make effective the transactions contemplated by this Agreement.” The “including” clause confirms that general obligation “includ[es]” an obligation to use commercially reasonable efforts to accomplish the two enumerated items, both of which involve obtaining government approvals and making regulatory filings. Section 5.5(i) imposes a different type of obligation: It requires each party to use commercially reasonable efforts to take actions that the other party identifies as reasonably required to complete the Transaction. It states: Seller and Buyer will use commercially reasonable efforts to do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, consents, estoppels, waivers, assignments, notices, transfers and assurances as may be reasonably required by the other party for carrying out the intentions or facilitating the consummation of this Agreement, including, without limitation, such further acts, deeds, conveyances, consents, estoppels, waivers, assignments, notices, transfers and assurances as may be reasonably required in order to satisfy the contingencies and conditions 206  established by any Lender in connection with the Buyer’s financing of the transactions contemplated hereby. SA § 5.5(i) (emphasis added) (the “Reasonable Assistance Covenant”). The provision thus imposes on each party a general obligation that is identical to the Reasonable Efforts Covenant—to use commercially reasonable efforts—but with an important difference. The Reasonable Assistance Covenant mandates that each party must use commercially reasonable efforts that are “reasonably required by the other party.” Section 5.5(i) is thus a covenant to provide reasonable assurances. As noted, Seller relies on both the Reasonable Efforts Covenant and the Reasonable Assistance Covenant in arguing that Buyer caused the failure of the Title Insurance Condition. To succeed on its claim that Buyer breached the Reasonable Assistance Covenant, Seller must point to an action that it identified to Buyer as “reasonably required . . . for carrying out the intentions or facilitating the consummation of this Agreement,” which Buyer then failed to take. Seller has not identified any actions falling into this category. The analysis therefore focuses on the Reasonable Efforts Covenant. The Reasonable Efforts Covenant requires “commercially reasonable efforts,” which is one gradation in what many deal practitioners believe to be a hierarchy of efforts standards.295 The ABA Mergers and Acquisitions Committee has ascribed the following meanings to commonly used terms: 295 See Kling & Nugent, supra, § 13.06, at 13-46 to -47; Model Stock Purchase Agreement, supra, at 212. 207   Best efforts: the highest standard, requiring a party to do essentially everything in its power to fulfill its obligation (for example, by expending significant amounts [of] management time to obtain consents).  Reasonable best efforts: somewhat lesser standard, but still may require substantial efforts from a party.  Reasonable efforts: still weaker standard, not requiring any action beyond what is typical under the circumstances.  Commercially reasonable efforts: not requiring a party to take any action that would be commercially detrimental, including the expenditure of material unanticipated amounts [of] management time.  Good faith efforts: the lowest standard, which requires honesty in fact and the observance of reasonable commercial standards of fair dealing. Good faith efforts are implied as a matter of law.296 Kling and Nugent “believe that most practitioners treat ‘reasonable efforts,’ ‘commercially reasonable efforts’ and ‘reasonable best efforts’ as all different from and as imposing less of an obligation than, ‘best efforts.’”297 They also observe that “‘reasonable best efforts’ sounds as if it imposes more of an obligation than ‘commercially reasonable efforts.’”298 296 Model Stock Purchase Agreement, supra, at 212 (citation omitted); see Ryan A. Salem, Comment, An Effort to Untangle Efforts Standards Under Delaware Law, 122 Penn St. L. Rev. 793 , 800–04 (2018) (identifying five commonly used standards: good faith efforts, reasonable efforts, best efforts, commercially reasonable efforts, and diligent efforts). 297 Kling & Nugent, supra, § 13.06, at 13-46 to -47 (footnote omitted); see Adams, Contract Drafting, supra, at 195 (“Anecdotal evidence suggests that many who work with contracts believe that best efforts obligations are more onerous than reasonable efforts obligations. The distinction is often expressed like this: reasonable efforts requires only what is reasonable in the context, whereas best efforts requires that you do everything you can to comply with the obligation, even if you bankrupt yourself.”). 298 Kling & Nugent, supra, § 13.06, at 13-47. 208  Commentators who have surveyed the case law find little support for the distinctions that transactional lawyers draw.299 Consistent with this view, in Energy Transfer, the Delaware Supreme Court interpreted a transaction agreement that used both “commercially reasonable efforts” and “reasonable best efforts.” 159 A.3d at 271–73. Referring to both provisions, the high court stated that “covenants like the ones involved here impose obligations to take all reasonable steps to solve problems and consummate the transaction.” Id. at 272 . The high court did not distinguish between the two. While serving as a member of this court, former Chief Justice Strine similarly observed that even a “best efforts” obligation “is implicitly qualified by a reasonableness test—it cannot mean everything possible under the sun.” Alliance Data Sys. Corp. v. Blackstone Cap. P’rs V L.P., 963 A.2d 746 , 763 n.60 (Del. Ch. 2009) (quoting Coady Corp. v. Toyota Motor Distribs., Inc., 361 F.3d 50 , 59 (1st Cir. 2004)). Another Court of Chancery decision—Hexion—framed a buyer’s obligation to use its “reasonable best efforts” to obtain financing in terms of commercial reasonableness: “[T]o the extent that an act was both commercially reasonable 299 The most thorough analytical treatment of efforts clauses rejects the existence of a hierarchy. See Kenneth A. Adams, Interpreting and Drafting Efforts Provisions: From Unreason to Reason, 74 Bus. Law. 677, 693–703 (2019) (surveying field). Other commentators agree. See Kling & Nugent, supra, § 13.06, at 13-44 to -49 & nn.2–9, 11 (collecting cases); Adams, Contract Drafting, supra, at 193 (observing that “[t]here’s widespread confusion over phrases using the word efforts” and recommending that drafters use a single standard of “reasonable efforts”); Salem, supra, at 800–21 (surveying case law; recommending that Delaware resolve the ambiguity created by different efforts standards by adopting a single standard of “reasonable efforts”); Zachary Miller, Note, Best Efforts?: Differing Judicial Interpretations of a Familiar Term, 48 Ariz. L. Rev. 615 , 615 (2006) (“The judicial landscape is littered with conflicting interpretations of efforts clauses.”). 209 and advisable to enhance the likelihood of consummation of the financing, the onus was on [the buyer] to take that act.” Hexion, 965 A.2d at 749 . The language from Hexion also suggests that in a commercial agreement, including the word “commercially” in an efforts obligation is redundant. The leading commentator on efforts clauses agrees: Determining whether someone has tried hard involves considering the circumstances, and in the case of a business transaction, that necessarily involves acknowledging that the parties are engaged in the world of commerce. That would be the case whether or not the word commercially is used in the efforts standard. Adams, Interpreting and Drafting Efforts Provisions: From Unreason to Reason, supra, at 702 (footnote omitted). Buyer’s obligation under the Reasonable Efforts Covenant thus was an obligation to use reasonable efforts. Seller contends that Buyer breached the Reasonable Efforts Covenant by seeking to convince the Title Insurers to adopt the DRAA Exception. See Dkt. 467 at 90–91. There are grounds for concern about Buyer’s conduct, but Seller ultimately failed to prove a breach. The dispositive evidence on this point came from Seller’s own title expert, who concluded that Ivanhoe acted appropriately when communicating with the Title Insurers. The record indicates that during March and April 2020, Ivanhoe made statements to the Title Insurers that supported the inclusion of the DRAA Exception, rather than arguing that the Title Insurers should provide clean commitments without any exceptions. As someone who is not personally familiar with the dynamics of seeking title insurance, this behavior looks to me like conduct that was designed to undermine the deal. Viewed from that standpoint, that behavior would breach the Reasonable Efforts Covenant. 210  Not surprisingly, Seller argues that Ivanhoe sought to cause the Title Insurance Condition to fail and give his client a basis for refusing to close. Seller’s account stresses that on February 19, 2020, after the Lenders discovered the DRAA Chancery Action and the related proceedings in Delaware Superior Court, the Lenders sent various filings from those actions to Greenberg Traurig.300 Anbang and Gibson Dunn had never mentioned these lawsuits, so Greenberg Traurig immediately began investigating them. As part of that process, a litigator in Greenberg Traurig’s Delaware office circulated a summary of the filings, including a copy of the transaction from the status conference held on January 8, 2020.301 While these events were unfolding, Ivanhoe was vacationing in the Middle East. He returned on February 21, 2020, and participated in a call with Gibson Dunn.302 The Gibson Dunn lawyers downplayed the Delaware filings, arguing that they were part and parcel of the same fraud involving the Fraudulent Deeds and that they had been addressed by the January Chancery Judgment. The Gibson Dunn lawyers did not tell Ivanhoe about Anbang’s long history of trademark disputes with Hai Bin Zhou, nor did they share the information they had about Hai Bin Zhou. 300 Dkt. 467 at 21; see JX 2246. 301 See Ivanhoe Tr. 673–76; JX 2280. 302 See JX 2292; Ivanhoe Tr. 588–89. 211  Although Ivanhoe was taken aback that Gibson Dunn and Anbang had not mentioned the filings previously, he again relied on what Gibson Dunn told him. His litigation colleague’s review of the filings in the DRAA Chancery Action also suggested that the threat from that proceeding had been beaten back. On Sunday, February 23, 2020, Ivanhoe told the Lenders’ counsel that he had consulted with Mirae and that they did not view the DRAA Chancery Action as an impediment: Their view is that since the Delaware litigation does not involve Strategic or the hotel properties (and has been successfully beaten back by Anbang with the latest Delaware judgment and Alameda County ruling), there is little to no risk on our transaction from these cases.303 According to Seller, because Ivanhoe determined that the DRAA Chancery Action did not pose any risk, he could not later advocate to the Title Insurers that the DRAA Chancery Action and the DRAA Agreement posed a risk. See Dkt. 467 at 91–92. Doing so, Seller claims, constituted bad faith and a clear breach of the Reasonable Efforts Covenant. The problem for Seller’s argument is that events did not stop after Ivanhoe communicated with the Lenders on February 23, 2020. On February 25, Stamoulis filed the DLA Letter in the DRAA Chancery Action. Over the weekend of February 29, 2020, Ivanhoe reviewed the DLA Letter, which raised alarm bells. As he explained at trial, “you have the partner at a major law firm, major international law firm, I think a peer of ours and Gibson and Dunn, who is now describing the basis of all of these claims . . . .” Ivanhoe 303 JX 2304; accord JX 2311 at 2 (Jones Lang telling Goldman on February 23, 2020, “Mirae is prepared to proceed based on its understanding of the [Delaware] litigation.”). 212 Tr. 600. He called the head of Greenberg Traurig’s litigation practice and asked him to assemble a team to address “a very serious problem on a very large transaction.” Id. Ivanhoe viewed the situation as an “emergency.” Id. Ivanhoe’s testimony was credible and supported by corroborating evidence. In addition, as the judge presiding over the DRAA Chancery Action, I recall reviewing the DLA Letter when it was filed on the docket. It depicted a different and more serious situation than Anbang and its counsel had presented, and it caused me to question whether counsel had provided me with the full story. In fact, they had not. Anbang and its counsel knew much more about Hai Bin Zhou and his fraud than they had shared. I am therefore persuaded that Ivanhoe viewed the DLA Letter as materially changing the landscape and elevating the risk to the Transaction. I am likewise persuaded that the letter caused Ivanhoe to lose whatever remaining faith he might have had in Anbang and Gibson Dunn. They had delayed disclosing the Fraudulent Deeds. They had failed to disclose the DRAA Chancery Action, the Delaware Judgments, and the Alameda Action. And they did not share any information about Hai Bin Zhou or the history of the trademark litigation. Instead, they claimed that the whole mess was the work of a twenty- something-year-old Uber driver with a criminal record. Anbang and Gibson Dunn’s behavior destroyed their credibility. By March 10, 2020, Ivanhoe concluded that he needed to disclose to the Title Insurers the information that the Greenberg Traurig team had assembled. See Ivanhoe Tr. 601–02, 604–06. Ivanhoe forwarded to Kravet, the agent for the title companies, all of the filings from the DRAA Chancery Action, the proceedings in Delaware Superior Court, and 213 the Alameda Action. See id. at 604–05. After doing so, Ivanhoe and his litigation partners continued to provide the Title Insurers with information and analysis as they evaluated the risk. See id. at 615, 629–30. At the time, Buyer and Greenberg Traurig sought to understand the risk posed by the DRAA Agreement so that they could work out a solution that would enable the Transaction to close. In an internal email, dated March 12, 2020, a senior member of Buyer’s deal team told his colleagues that “the key at the moment is to have a clarification on the Delaware litigation issue first.” JX 2737 at 1. As Ivanhoe commendably admitted at trial, he did not want Seller to be able to force Buyer to close until Ivanhoe understood the risk posed by the DRAA Chancery Action and the DRAA Agreement. He believed that if the Title Insurers raised an exception based on the DRAA Chancery Action, then that exception would operate as a “failsafe” that would eliminate any risk that Buyer could be forced to close before the risk was fully understood and addressed. Ivanhoe Tr. 724–25. Seller portrays Ivanhoe’s forthright testimony as an admission that he was trying to torpedo the deal, but I do not view it that way. Ivanhoe acted reasonably. He tried to protect his client’s rights within the scope of the Sale Agreement by ensuring that if the Transaction closed, then his client would have title insurance. During the same period, by contrast, Anbang refused to acknowledge the apparent seriousness of the DLA Letter or the risk posed by the as-yet-unseen DRAA Agreement. With the benefit of hindsight, it seems likely that Anbang’s different perspective stemmed from the fact that Anbang had been dealing with Hai Bin Zhou since 2008. Anbang properly regarded him as a hold-up artist. During the intervening years, Anbang had 214 investigated Hai Bin Zhou, and since the discovery of the Fraudulent Deeds, both Anbang and Gibson Dunn had done so extensively. They had assembled a trove of information, so their dismissive views were well-founded. But Anbang and Gibson Dunn did not share this information with Buyer (or with the court), and they failed to understand that parties who did not possess similar information could have concerns about the DLA Letter. Anbang and Gibson Dunn also appear not to have understood how they destroyed their own credibility by initially withholding information about the Fraudulent Deeds, then providing misleading half-truths about their origins, and later failing to disclose the DRAA Chancery Action, the Delaware Judgments, and the Alameda Action. Seemingly blind to the problems that they had created, Anbang and Gibson Dunn became more aggressive in attempting to force a closing. Glover, the lead deal lawyer from Gibson Dunn, “made very clear” to Ivanhoe that “Anbang was not going to take an adjournment to address these things.” Ivanhoe Tr. 616. “[H]e said something like, ‘Well, if you’re not ready on the date you have to close, we will litigate.’” Id. Those bullying tactics only caused Buyer and Greenberg Traurig to become more concerned, which understandably led Ivanhoe to want to ensure that his client was protected. On April 10, 2020, the senior representatives of the Title Insurers met to make a decision on the DRAA Exception. They spoke with Gibson Dunn, then spoke among themselves. At the end of the call, they reached out to Ivanhoe and asked him to join. Ivanhoe Tr. 619–20, 623. Ivanhoe had no agenda and no script, and he did not know what questions the Title Insurers would ask. Id. at 619–20. To ensure that all of the Title Insurers had the same information, he provided an overview of the facts. Id. at 626–28. The Title 215 Insurers then asked directly for his candid view of potential title risks and what he thought they should do. Id. at 626, 631. Unlike the Gibson Dunn lawyers, who had eschewed candor throughout the deal process, Ivanhoe provided the complete, unvarnished truth. He explained that he thought that there was a very clear link between the Delaware litigation, the Fraudulent Deeds and the 15 Properties that seem to have been pledged to the Delaware Petitioner, something that they and we have notice of, and asked how they could possibly insure and omit both the Fraudulent Deeds and not raise an exception to title for the Delaware case. JX 3645 at 1. Ivanhoe testified credibly that if he had provided any other assessment, then his client would have faced an unacceptable risk: If a claim emerged post-closing, and if discovery in litigation revealed his contemporaneous concerns about the DRAA Agreement and the DRAA Chancery Action, then Buyer could have lost coverage. Ivanhoe Tr. 763. If Anbang and Gibson Dunn had been equally candid with Mirae by disclosing the Fraudulent Deeds in May 2019 and explaining the context of the longstanding dispute with Hai Bin Zhou, then the Transaction likely would have closed, and this litigation would never have happened. If I were considering Ivanhoe’s actions without the benefit of expert testimony, I still would be concerned that Ivanhoe could have caused Buyer to breach its obligations under the Reasonable Efforts Covenant by arguing for an exception to coverage for the DRAA Chancery Action. Whether that evidence rose to a preponderance would be a difficult call. But in this case, both sides retained experts who evaluated the interactions with the Title Insurers. Seller’s own title insurance expert opined that “they all seem to be working in a normal fashion . . . toward accomplishing a closing.” Chernin Tr. 1250. He 216 reached this opinion after reviewing “the corpus of communications between buyer or seller’s counsel, on the one hand, and Mr. Kravet or the title insurers, on the other hand.”304 The testimony of Seller’s own expert is dispositive on the question of whether Ivanhoe’s interactions with the Title Insurers breached Buyer’s obligations under the Reasonable Efforts Covenant. Two unique aspects of title insurance practice explain how Seller’s expert could conclude that everyone interacted in a normal fashion, even though Ivanhoe seemed to be working against the Transaction by suggesting that the Title Insurers include the DRAA Exception. The first is the knowledge-of-the-insured doctrine. The second is drafting practice for title insurance policies. Under the knowledge-of-the-insured doctrine, a title insurer can deny coverage for a claim if the insured withheld knowledge relating to the claim from the title company before the title company issued the policy. Even if an insured disclosed all the factual information that it possessed, a title insurer can avoid coverage if the insured had an internal negative assessment of the risk that it failed to disclose under the principle that “a prospective insured cannot select and present only favorable information on a subject and delete less favorable information on the same point, even if no follow up questions are asked.” Commonwealth Land Title Ins. Co. v. IDC Prop., Inc., 547 F.3d 15 , 20–23 (1st Cir. 2008) (upholding denial of coverage where insured failed to disclose its unfavorable 304 Id. at 1249–50; accord JX 4543 ¶ 21(d). 217 internal assessment). If a party applying for insurance “withholds information from the insurer about a title risk out of concern that the insurer will not protect against the risk,” then “that concealment of the material risk is emphatic proof that the applicant obtained insurance by the concealment.” J. Bushnell Nielsen, Title & Escrow Claims Guide § 11.3.4, 2016 WL 6637232 (2020 ed.). To avoid any risk under the knowledge-of-the-insured doctrine, Ivanhoe ensured that the Title Insurers knew everything that he did, including his assessment of the risks. Ivanhoe Tr. 600–01. Seller’s title insurance expert admitted that Ivanhoe’s communications with the Title Insurers “fulfilled [Buyer’s] obligations to provide information to avoid application of a knowledge of the insured exclusion.” Chernin Dep. 53–54. To someone who lacks expertise as to title insurance, Ivanhoe’s communications might seem designed to cause the Title Insurers to include an exception for coverage that would cause the Title Insurance Condition to fail. But because of the knowledge-of-the- insured doctrine, Ivanhoe had to provide his negative assessments to avoid a situation in which the Title Insurers later might deny coverage. The second reason why Ivanhoe’s actions make sense is the nature of drafting practice in the title insurance industry. The standard structure of a title insurance policy consists of a base policy that provides coverage, followed by a list of exceptions removing coverage, followed by a series of endorsements restoring coverage for particular exceptions. The experts agreed that title insurance companies prefer to exclude known risks through exceptions, then provide coverage for specific exceptions through endorsements. Mertens Dep. 139–41; Chernin Dep. 106. Ivanhoe’s communications with the Title 218 Insurers reflected the preferred approach. He advised them to identify an exception, and then to address the exception through an endorsement. The consensus among the experts regarding the knowledge-of-the-insured doctrine and drafting practice in the title insurance industry negates Seller’s otherwise intuitive argument that all Ivanhoe needed to do was provide the Delaware filings and DLA Letter to the Title Insurers. At that point, the argument goes, he had fulfilled his obligation to the Title Insurers and needed to exercise reasonable efforts to advocate in favor of the deal. That meant pushing the Title Insurers to omit any exception that would encompass the Fraudulent Deeds. See Hexion, 965 A.2d at 753 (“Hexion had been feeding the banks Huntsman’s updated forecasts as it received them. Its obligations to update the banks ended there.”). The testimony of Seller’s title expert establishes that in the title industry, the practice is different. A party seeking title insurance is obligated to provide more information, including negative assessments. The title insurers then address the known risks through exceptions and endorsements. Ivanhoe acted properly by continuing to disclose his concerns about the DRAA Chancery Action and the DRAA Agreement and by suggesting that the Title Insurers include the DRAA Exception to make their coverage position clear. The consensus among the experts regarding the knowledge-of-the-insured doctrine and drafting practice in the title insurance industry also negates Seller’s second intuitive argument. By suggesting that the Title Insurers should include the DRAA Exception, the argument goes, Ivanhoe sought to obtain less coverage for his client than if he sought to exclude the exception. That is illogical, so Ivanhoe must have been trying to tank the deal. 219 To the contrary, Ivanhoe believed that if the title commitments did not include the DRAA Exception, then his client would be at risk under the knowledge-of-the-insured doctrine. Once the Title Insurers knew about the DRAA Agreement and the related litigation, the standard practice in the industry was to include the DRAA Exception and then address it with an endorsement. Based on the factual record and the expert testimony in the case, Ivanhoe’s conduct did not give rise to a breach of the Reasonable Efforts Covenant. Seller therefore cannot rely on a breach of the Reasonable Efforts Covenant to excuse the failure of the Title Insurance Condition. b. No Causation Assuming for the sake of argument that Ivanhoe’s conduct breached the Reasonable Efforts Covenant, Seller failed to prove that the breach caused the failure of the Title Insurance Condition, as required by Section 7.4 of the Sale Agreement. The Title Insurers made an independent decision to include the DRAA Exception. Ivanhoe’s actions did not cause the Title Insurance Condition to fail. For starters, the decision-makers for the Title Insurers were not ingénues. They were “a veritable who’s who of the most senior title insurance professionals in America.”305 Seller’s expert on title insurance opined that “title insurers are independent and make their own decisions independent of whatever advocacy seller’s counsel or buyer’s counsel 305 Kravet Dep. 206; see id. at 204–08 (describing individuals). 220 presents,” and he concluded after reviewing the record that the Title Insurers acted in that fashion in this case. Chernin Dep. 158–59. Kravet was a first-hand witness to the Title Insurers’ deliberations, and he did not perceive any basis to think that the Title Insurers were influenced to add an exception. Kravet Dep. 203. Moreover, the critical issue for the Title Insurers, particularly after the DLA Letter, was to review a copy of the DRAA Agreement. On April 7, 2020, three days before the meeting when Ivanhoe allegedly convinced the Title Insurers to add the DRAA Exception, the Title Insurers informed Lance that they needed a copy of the DRAA Agreement to evaluate the risk. JX 3525 at 5. The Title Insurers’ position on the risk posed by the DRAA Agreement and the related litigation did not change. The Title Insurers also did not provide Ivanhoe with disproportionate access or special treatment. Lance, the lead real estate lawyer from Gibson Dunn, and a group of litigators from Gibson Dunn advocated persistently for “clean” title commitments in multiple emails, calls, and letters with the Title Company. 306 On March 17 and 18, 2020, Lance and his Gibson Dunn colleges engaged in calls with the Title Insurers and provided them with documents in an effort to convince them that the DRAA Action and the DRAA Agreement were frauds that should not result in an exception to title. When the Title Insurers remained unconvinced, Gibson Dunn kicked its advocacy up a gear, sending the 306 See Lance Dep. 367–69, 375–79; JX 2652 at 52. 221 Title Insurers a series of missives over the next two weeks.307 On April 9, Gibson Dunn held a call with the Title Insurers’ highest-ranking decision makers, and on April 13, Gibson Dunn sent the Title Insurers more documents. See JX 3662. Gibson Dunn later sent the Title Insurers a detailed letter which concerned the “allocation of risk in the Purchase Agreement,” and “strongly urge[d] . . . that no exception is required or appropriate for these matters . . . arising from criminal activity by shadowy, unknown actors.” JX 3674 at 4. Last, after obtaining a copy of the DRAA Agreement, Gibson Dunn sent it to the Title Insurers on April 22 with a detailed letter identifying purported “examples of why this document is fraudulent” in an effort to convince the Title Insurers to remove the DRAA Exception. JX 3950 at 1–3. The Title Insurers were unpersuaded. The Title Insurers’ rejection of Gibson Dunn’s advocacy is noteworthy, because the Title Insurers had a financial interest in accepting Gibson Dunn’s arguments and not asserting the DRAA Exception. The Transaction was a massive deal, and the Title Insurers and Kravet stood to gain “tens of millions” of dollars in fees by and providing clean title commitments. Ivanhoe Tr. 604. The Title Insurers also had the potential to receive additional fees by providing title commitments in connection with the refinancing of the debt on the properties. This court has seen situations in which advisors modified their positions or engaged in motivated reasoning to reach results that helped their clients or earned them contingent compensation. Here, the Title Insurers were not working for Mirae 307 See JX 3119 at 1; JX 3638 at 9–13. 222 or Greenberg Traurig, and they did not have any financial incentive to cater to what Ivanhoe and Buyer allegedly wanted. Finally, the record indicates that the senior representatives of the Title Insurers made a thorough decision. They reviewed the Gibson Dunn analyses and dozens of documents from the DRAA Chancery Action, the enforcement actions in Delaware Superior Court, and the Alameda Action. They deliberated in three internal calls. And they ultimately determined to include the DRAA Exception. Under the circumstances, assuming for the sake of argument that Ivanhoe breached the Reasonable Efforts Covenant, that breach did not cause the failure of the Title Insurance Condition. The Title Insurers made a separate and independent decision. 5. The Finding Regarding The Title Insurance Condition The Title Insurance Condition failed because the Title Insurers did not issue title commitments that provided coverage for the Fraudulent Deeds. The Title Insurers issued title commitments containing the DRAA Exception, which was broad enough to eliminate coverage for the Fraudulent Deeds. Buyer did not breach the Reasonable Efforts Covenant through its dealings with the Title Insurers, nor did Buyer cause the Title Insurance Condition to fail. Consequently, the non-satisfaction of the Title Insurance Condition is not excused. The failure of the Title Insurance Condition extinguished Buyer’s obligation to close. IV. BUYER’S RIGHT TO TERMINATE The next category of legal issues involves Buyer’s right to terminate the Sale Agreement. The parties’ rights to termination appear in Section 8.1 of the Sale Agreement, 223 which consists in its entirety of two (yes, two) sentences. The first is a linguistic train wreck containing 453 words, spanning four contractual subsections, and setting forth eleven distinct subparts or provisos. The second is twenty-eight words long and addresses notice of termination. It is not linked structurally to the other subparts. It appears to be an afterthought. Buyer relies on two subsections in the first sentence to support its right to terminate. Section 8.1(b) of the Sale Agreement granted each party the right to terminate in the event that the other breached. Section 8.1(c) granted each party the right to terminate in the event that the contractually defined Termination Date passed. Buyer validly terminated the Sale Agreement under the first provision and has the right to terminate under the second. A. The Termination Right For Breach Section 8.1(b)(ii) provides that Buyer may terminate the Sale Agreement at any time prior to closing if the Buyer is not in material breach of its obligations under this Agreement and the Seller breaches or fails to perform in any respect any of its representations, warranties or covenants contained in this Agreement and such breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 7.3, (B) cannot be or has not been cured within 15 days following delivery of written notice of such breach or failure to perform and (C) has not been waived by the Buyer. SA § 8.1(b)(ii) (formatting added) (the “Termination Right for Breach”). Section 8.1(b) also contains a reciprocal termination right for Seller in the event of Buyer’s breach, but it 224 is not relevant here. See SA § 8.1(b)(i). On April 17, 2020, the scheduled closing date, Buyer issued a Notice of Default in which Buyer cited a series of breaches of the Sale Agreement, including Seller’s failure to comply with the Ordinary Course Covenant. JX 3841 at 2–3. Buyer gave Seller the contractually required fifteen days to cure, while noting that cure did not seem possible. Id. at 4. On April 27, Seller filed this litigation. Seller failed to cure the identified breaches within fifteen days, and on May 3, Buyer terminated the Sale Agreement. JX 4100 at 2. Buyer’s termination notice validly terminated the Sale Agreement. This decision already has found that Seller failed to comply with the Ordinary Course Covenant, supplying the predicate breach for Buyer to exercise the Termination Right for Breach. This decision has held that Seller’s failure to comply with the Ordinary Course Covenant caused the Covenant Compliance Condition to fail, which satisfying subpart (A) of the Termination Right for Breach. Seller failed to cure its breach of the Ordinary Course Covenant, satisfying subpart (B) of the Termination Right for Breach. And Buyer never waived compliance with the Ordinary Course Covenant, satisfying subpart (C) of the Termination Right for Breach. The only remaining question is whether Seller proved that Buyer was in “material breach of its obligations under this Agreement.” By using the term “material breach,” the Termination Right for Breach invokes the common law standard, under which “[a] party is excused from performance under a contract if the other party is in material breach thereof.” BioLife Sols., Inc. v. Endocare, Inc., 838 A.2d 268 , 278 (Del. Ch. 2003). As a matter of common law, “[a] breach is material if it goes to the root or essence of the 225 agreement between the parties, or touches the fundamental purpose of the contract and defeats the object of the parties in entering into the contract.” Mrs. Fields, 2017 WL 2729860 , at *28. Under this doctrine, whether a breach is material “is determined by weighing the consequences in the light of the actual custom of men in the performance of contracts similar to the one that is involved in the specific case.”308 The Restatement provides five guiding factors: (i) “the extent to which the injured party will be deprived of the benefit which he reasonably expected,” (ii) “the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived,” (iii) “the extent to which the party failing to perform or to offer to perform will suffer forfeiture,” (iv) “the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances,” and (v) “the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.” Restatement, supra, § 241. “[N]onperformance will attain this level of materiality . . . when the covenant not performed is of such importance that the contract would not have been made without it.” 14 Williston on Contracts § 43:6 (4th ed. 2003). The resulting standard is more onerous than a requirement of compliance “in all material respects.” See Akorn, 2018 WL 4719347 , at *86. Seller has not shown that Buyer breached the Sale Agreement, much less that Buyer 308 BioLife Sols., 838 A.2d at 278 (internal quotation marks omitted); accord 23 Williston on Contracts § 63:3 (4th ed. 2003). 226 committed a material breach. Seller has not even argued the test for material breach. The closest that Seller came to arguing a material breach was to allege a breach of the Reasonable Efforts Covenant, and that ultimately unproven breach affected the Title Insurance Condition, not the Covenant Compliance Condition or the Ordinary Course Covenant. Buyer has proven that both the Title Insurance Condition and the Covenant Compliance Condition failed, which extinguished Buyer’s obligation to close. Buyer therefore validly terminated the Sale Agreement as of May 4, 2020, by invoking the Termination Right for Breach. B. The Temporal Termination Right Section 8.1(c) provides that the Sale Agreement may be terminated at any time prior to closing by either the Seller or the Buyer if the conditions to Closing as set forth in Article VII shall not have been satisfied by June 10, 2020; provided, that if all conditions to closing shall have been satisfied (other than those conditions that may only be satisfied as of the Closing) other than the condition to Closing set forth in Section 7.3(c) (subject to Section 5.10), then the Termination Date shall automatically be extended until September 10, 2020 (such date, as it may be so extended, the “Termination Date”); notwithstanding the foregoing, the right to extend the Termination Date or to terminate this Agreement under this Section 8.1(c), as applicable, shall not be available to such party whose failure to fulfill any obligation under this Agreement shall have been the cause of the failure of the Closing to occur on or prior to such date . . . . SA § 8.1(c) (formatting added) (the “Temporal Termination Right”). Buyer is entitled to terminate the Sale Agreement under the Temporal Termination Right. This decision already has found that the Covenant Compliance Condition failed, 227 meaning that “the conditions to Closing as set forth in Article VII” were not “satisfied by June 10, 2020.” Assuming the Covenant Compliance Condition was a condition that “may only be satisfied as of the Closing” (an issue the parties did not brief), then the Termination Date extended automatically to September 10, 2020. As of that date, the Covenant Compliance Condition remained unsatisfied, meaning that Buyer could exercise the Temporal Termination Right. As of September 10, 2020, Buyer also could exercise the Temporal Termination Right because the Title Insurance Condition had failed. Buyer could not have exercised the Temporal Termination Right previously based on the Title Insurance Condition because that condition appears in Section 7.3(c), and its non-satisfaction (assuming the satisfaction of other pertinent conditions) resulted in the automatic extension of the Termination Date until September 10. Once that date came and went, Buyer could exercise the Temporal Termination Right because the Title Insurance Condition remained unsatisfied. The only possible impediment to Buyer’s ability to exercise the Temporal Termination Right is if Buyer’s “failure to fulfill any obligation under this Agreement shall have been the cause of the failure of the Closing to occur.” Seller has not proven that Buyer failed to fulfill an obligation under the Sale Agreement, much less that the failure caused the Closing not to occur. V. THE CONSEQUENCES OF TERMINATION The last category of issues involves the consequences of termination. Each side wants to keep the deposit. Each side claims that it is entitled to its attorneys’ fees and expenses. Buyer seeks its transaction-related expenses, which are effectively a form of 228 reliance damages. Seller seeks damages so that it receives “complete and full relief.” Dkt. 367 at 96 n.69. A. The Deposit Sections 8.2(a) and (b) govern the fate of the deposit once the Sale Agreement is terminated. Section 8.2(a) identifies four scenarios in which Seller receives the deposit, but none of those scenarios came to pass. Under Section 8.2(b) of the Sale Agreement, if closing does not occur “for reasons other than as set forth in Section 8.2(a),” then Buyer receives the deposit, “together with all interest accrued thereon.” In mandatory language, the provision states that “Buyer and Seller shall instruct the Escrow Agent to transfer to Buyer the full amount of the [d]eposit, together with all interest accrued thereon, by wire transfer of immediately available funds to an account designated by Buyer in writing.” Accordingly, under the plain language of Section 8.2(b), Buyer is entitled to the deposit and all accrued interest. Seller is not entitled to the deposit or any interest. B. Attorneys’ Fees And Expenses The Sale Agreement contains a standard fee-shifting provision that entitles the prevailing party to recover its attorneys’ fees and expenses from the non-prevailing party. It states, If there shall occur any dispute or proceeding among the parties relating to this Agreement or the transactions contemplated hereby, the non-prevailing party shall pay all reasonable costs and expenses (including reasonable attorneys’ fees and expenses) of the prevailing party. SA § 9.22 (the “Prevailing Party Provision”). Under Delaware law, “[a]bsent any qualifying language [indicating] that fees are to 229 be awarded . . . [on a] partial basis,” a fee-shifting provision like the Prevailing Party Provision “will usually be applied in an all-or-nothing manner.” W. Willow-Bay Ct., LLC v. Robino-Bay Ct. Plaza, LLC, 2009 WL 458779 , at *8 (Del. Ch. Feb. 23, 2009). For purposes of such a provision, the “prevailing party” is the party that prevails on “the main issue in the case.” World-Win Mktg., Inc. v. Ganley Mgmt. Co., 2009 WL 2534874 , at *3 (Del. Ch. Aug. 18, 2009). The Prevailing Party Provision does not contain any language indicating that fees are to be awarded on a partial basis. Buyer prevailed on the main issues in the case—whether Buyer was obligated to close and later validly terminated the Sale Agreement. Buyer is therefore entitled to its reasonable attorneys’ fees and expenses. As the non-prevailing party, Seller is not entitled to recover any of its fees or expenses. C. Transaction-Related Expenses Both sides seek their transaction-related expenses, which are a form of reliance damages. Unlike many transaction agreements, the Sale Agreement preserves a non- breaching party’s right to recover transaction-related expenses from a breaching party. It also preserves a non-breaching party’s ability to recover damages, including expectation damages, in the event of a willful breach. 230  1. Common Law Principles Governing Contract Damages The common law has established a series of default rules governing the ability of a party to recover damages for a breach of contract. They form a backdrop to negotiated provisions.309 As a matter of common law, a party to a contract “has a right to damages for any breach by a party against whom the contract is enforceable unless the claim for damages has been suspended or discharged.” Restatement, supra, § 346(1). “Contract damages are ordinarily based on the injured party’s expectation interest and are intended to give him the benefit of his bargain by awarding him a sum of money that will . . . put him in as good a position as he would have been in had the contract been performed.” Id. § 347 cmt. a. Delaware follows the Restatement and recognizes that “the standard remedy for breach of contract is based upon the reasonable expectations of the parties ex ante. This principle of expectation damages is measured by the amount of money that would put the promisee in the same position as if the promisor had performed the contract.” Duncan v. Theratx, Inc., 775 A.2d 1019 , 1022 (Del. 2001) (citing Restatement § 347 cmt. a). 309 See Restatement, supra, § 204 (“When the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court.”); see also Alan Schwartz & Robert E. Scott, The Common Law of Contract and the Default Rule Project, 102 Va. L. Rev. 1523 , 1533 (2016); Robert E. Scott & George G. Triantis, Anticipating Litigation in Contract Design, 115 Yale L.J. 814 , 817– 18 (2006); Ian Ayres & Robert Gertner, Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99 Yale L.J. 87 , 87–88 (1989). 231  “As an alternative to [expectation damages], the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance . . . .” Restatement, supra, § 349. Reliance damages recognize that [t]he promisee may have changed his position in reliance on the contract by, for example, incurring expenses in preparing to perform, in performing, or in foregoing opportunities to make other contracts. In that case, the court may recognize a claim based on his reliance rather than on his expectation. It does this by attempting to put him back in the position in which he would have been had the contract not been made . . . . Although it may be equal to the expectation interest, it is ordinarily smaller because it does not include the injured party’s lost profit. Id. § 344 cmt. a. Delaware follows the Restatement in this respect as well. See, e.g., NAACO Indus., Inc. v. Applica Inc., 997 A.2d 1 , 19 (Del. Ch. 2009). At common law, “every breach gives rise to a claim for damages,” but “not every claim for damages is one for damages based on all of the injured party’s remaining rights to performance under the contract.” Restatement, supra, § 236 cmt. b. An injured party’s claim for damages depends on whether the breaching party committed a partial breach or a total breach. A partial breach is one that is “relatively minor and not of the essence.” 23 Williston on Contracts § 63:3. When a partial breach has occurred, “the [injured party] is still bound by the contract and may not abandon performance . . . .” Id. Despite performing, the injured party “is entitled to damages caused even by the immaterial breach, albeit that these may be nominal in amount.” Id. A total breach is one that “touches the fundamental purpose of the contract and defeats the object of the parties in entering into the contract, or affect[s] the purpose of the 232 contract in an important or vital way.” Id. (footnotes omitted). In the case of a total breach, “the [injured] party is discharged from further performance, and is entitled to substantial damages.” Id.; see 3 Farnsworth on Contracts § 12.09, at 12-79 (4th ed. Supp. 2019) (“[I]f the breach is material, the owner can choose . . . to terminate, refuse to render any further performance, and claim damages for total breach.”). Alternatively, an injured party may choose “to hold itself ready to perform the remainder of the contract and demand performance from the other party . . . .” 23 Williston on Contracts § 63:13. If the injured party chooses this path, then the injured party re-establishes its obligation to perform.310 Nevertheless, this election by the injured party “does not waive the right to obtain damages for the breach.” Id. This court summarized the rule as follows: “Continuing performance waives the argument that the waiving party’s performance obligation was discharged, but it does not waive recovery for the material breach.” Williams Cos., Inc. v. Energy Transfer Equity, L.P., 2020 WL 3581095 , at *14 & n.141 (Del. Ch. July 2, 2020) (citing 23 Williston on Contracts § 43:15)). 310 See 14 Williston on Contracts § 43:15 (4th ed. 2003) (explaining that if a party chooses to perform, “the general rule that one party’s uncured, material failure of performance will suspend or discharge the other party’s duty to perform does not apply” (footnote omitted)); 2 Farnsworth on Contracts § 8.20, at 8-166 to -67 (“Under this reasoning, the injured party cannot later reconsider, terminate, and recover damages for total breach unless the party in breach should commit a further breach, subsequent to the election, that would give the injured party a second chance to terminate.”). 233  2. Standard Provisions In Transaction Agreements Governing Contract Damages Parties to transaction agreements frequently agree to provisions that alter the default common law rules governing remedies. See Tina L. Stark et al., Negotiating and Drafting Contract Boilerplate 207, 373 (2003) [hereinafter Boilerplate]. Absent a provision limiting remedies, “all remedies, whether at common law, under statute, or under equitable principles, are cumulative.” Id. at 211. Parties can alter the common law rules by limiting the remedies available for breach (a “limited-remedies provision”). See id. at 219–20. A straightforward limited-remedies provision might identify a breakup fee as the exclusive remedy for breach. See id. at 230- 31. A simple version of such a provision might state: Breakup Fee. If Seller breaches Section __, Seller shall pay to Buyer the sum of $________. This fee is the exclusive remedy to Buyer under this letter of intent in the event of a breach by Seller of Section __. Id. at 231. The author notes that if the provision did not refer to the fee as “the exclusive remedy,” then the seller would remain exposed to a claim for “all of the buyer’s actual out- of-pocket costs and any other claims for damages that the buyer may be able to prove.” Id. Parties may draft provisions that address the effect of terminating an agreement (an “effect-of-termination provision”). The following provisions give the buyer (i) a right to terminate in the event of a material breach or failure of performance by the seller and (ii) confirm that termination is not the buyer’s only remedy for breach: Termination by Buyer. Buyer is entitled to terminate this Agreement upon written notice to Seller, with the effect set forth in Section __ of this Agreement, if 234  (a) Seller has materially violated or breached any of the agreements, representations or warranties contained in this Agreement, and Buyer has not waived the violation or breach in writing at or before Closing; or (b) Seller has failed to satisfy a condition to the obligations of Buyer, and Buyer has not waived the condition in writing at or before closing. Effect of Termination. Termination of this Agreement pursuant to Section __ does not terminate, limit or restrict the rights and remedies of Buyer. In addition to Buyer’s right under common law to redress for any breach or violation, Seller shall indemnify and defend Buyer against all losses, damages (including, without limitation, consequential damages), cost and expenses (including, without limitation, interest (including prejudgment interest in any litigated matter), penalties, court costs, and attorney’s fees and expenses) asserted against, imposed upon, or incurred by Buyer, directly or indirectly, arising out of or resulting from the breach or violation and the enforcement of this Section. Id. at 220. The second clause “presents Buyer with the possibility of a common law claim for remedies from the breach of contract, as well as a contractual ‘right’ to indemnification for a broad spectrum of incidental and consequential damages.” Id. at 221. Notably, this effect-of-termination provision confirms the common law rule under which termination is not an injured party’s exclusive remedy. When a party has committed a breach that “touches the fundamental purpose of the contract and defeats the object of the parties in entering into the contract,” the injured party may both terminate the contract and claim damages. 23 Williston on Contracts § 63:3; see 3 Farnsworth on Contracts § 12.09, at 12- 79. Another common provision requires each party to bear the fees and expenses it has incurred pursuing a transaction regardless of whether or not the transaction closes (a “pay- your-own-way provision”). Whether parties agree to such a provision or provide for 235 expense reimbursement is a transaction-specific issue: “There is certainly no general rule in the area of expense reimbursement. In each case the issue is negotiated and a resolution achieved depending upon the relative negotiating strength of the parties.” Kling & Nugent, supra, § 13.05[2], at 13-42. The following provision is a simple example of a pay-your-own-way provision: Except as expressly provided in this Agreement, each party shall pay its own fees and expenses (including, without limitation, the fees and expenses of its agents, representatives, attorneys and accountants) incurred in connection with the negotiation, drafting, execution, delivery and performance of this Agreement and the transactions it contemplates. Stark, Boilerplate, supra, at 379. As suggested by the introductory language “[e]xcept as expressly provided in this Agreement,” a transaction agreement may create exceptions to a pay-your-own-way provision. The Boilerplate treatise provides the following example of a provision that “might be used in tandem” with a pay-your-own-way provision to make clear “that, in the event of a breach, the breaching party will pay the other party’s transaction costs.” Id. at 381. (a) Negligent or Unintentional Breaches. If this Agreement terminates because of a breach based on a negligent or unintentional misrepresentation by one party (the “Breaching Party”), but not the other, then the Breaching Party shall pay to the other party an amount equal to the lesser of (i) all documented out-of-pocket expenses and fees incurred by the other party (including, without limitation, fees and expenses of all legal, accounting, financial, public relations and other professional advisors arising out of or relating to this Agreement and the transactions it contemplates); and (ii) $__ million. 236  (b) Breaches of Covenants and Intentional Breaches. If this Agreement terminates because of a breach of a covenant or because of a breach based on an intentional misrepresentation or gross negligence by the Breaching Party, but not the other, then the Breaching Party shall pay to the other party an amount equal to (i) the amount payable pursuant to subsection (a), plus (ii) all other amounts that the other party is entitled to receive at law or in equity. Id. 3. The Provisions In The Sale Agreement The Sale Agreement contains an effect-of-termination provision and a pay-your- own-way provision. Both provisions limit potential liability, but both contain exceptions that preserve specific types of liability. The Sale Agreement contains the following effect-of-termination provision: In the event of termination of this Agreement as provided in Section 8.1, this Agreement shall forthwith become void and there shall be no liability on the part of either party except (a) for the provisions of Sections 3.19 and 4.7 relating to broker’s fees and finder’s fees, Section 5.4 relating to confidentiality, Section 5.6 relating to public announcements, this Section 8.2 and Article IX and (b) that nothing herein shall relieve either party from liability for any willful breach of this agreement or any Agreement made as of the date hereof or subsequent thereto pursuant to this Agreement. SA § 8.2(c) (the “Effect-Of-Termination Provision”). The Effect-Of-Termination Provision states that if terminated, the Sale Agreement “shall forthwith become void.” Under the common law, termination results in an agreement becoming void, but that fact alone does not eliminate liability for a prior breach. See 23 Williston on Contracts § 63.3; 3 Farnsworth on Contracts § 12.09, at 12-79. The Effect- Of-Termination Provision alters the common law rule by stating that upon termination, 237 subject to two exceptions, “there shall be no liability on the part of either party.” Setting aside the exceptions, the Effect-Of-Termination Provision broadly waives contractual liability and all contractual remedies.311 The two exceptions in the Effect-Of-Termination Provision modify its broad waiver of contractual liability. The first exception preserves liability under specified provisions in the Sale Agreement, which survive and can be enforced (the “Specified-Provision Exception”). The second exception preserves liability for bad conduct, here for a “willful breach” (the “Bad Conduct Exception”). Both exceptions are relatively standard.312 311 See ABA Mergers & Acqs. Comm., Model Tender Offer Agreement 240 (2020) [hereinafter Model Tender Offer Agreement] (discussing exceptions to a provision contemplating no liability upon termination and stating that “[w]ithout this proviso, the language in Section 8.02 would provide that neither party would be liable for breach to the other after termination, regardless of pre-closing breaches”); Kling & Nugent, supra, § 15A.02 at 15A-4.3 (noting the effect of a broad elimination of liability upon termination and suggesting that “[it] is important . . . to continue and carve out a proviso to the effect that the foregoing will not relieve any party for liability for its breach of any provision prior to termination”). Cf. Model Stock Purchase Agreement, supra, at 275, 280–81 (discussing effect-of-termination provision that did not contain liability-extinguishing language but did contain an exception for specified provisions as well as confirmatory language stating that “termination of this Agreement will not relieve an party from any liability for any Breach of this Agreement occurring prior to termination”); ABA Mergers & Acqs. Comm., Model Asset Purchase Agreement with Commentary 199 (2001) [hereinafter Model Asset Purchase Agreement] (discussing effect-of-termination provision without liability- extinguishing language and with confirmatory language stating that “the terminating party’s right to pursue all legal remedies will survive such termination unimpaired”). 312 See, e.g., Hexion, 965 A.2d 715 (interpreting effect-of-termination provision in merger agreement that included both specified-provision exception and bad-conduct exception); Frontier Oil, 2005 WL 1039027 , at *39 (same); Model Tender Offer Agreement, supra, at 240 (discussing effect-of-termination provision that broadly eliminated liability subject to specific-provision exception and bad-conduct exception); see also Model Merger Agreement, supra, at 273–74 (discussing effect-of-termination 238  By preserving liability under Article IX, the Specified-Provision Exception maintains the scheme for transaction-related expenses that appears in that article. The pertinent provision states, Except as otherwise provided herein, all fees and expenses incurred in connection with or related to this agreement and the transactions contemplated hereby shall be paid by the party incurring such fees or expenses, whether or not such transactions are consummated. In the event of termination of this Agreement, the obligation of each party to pay its own expenses will be subject to any rights of such party arising from a breach of this Agreement by the other. SA § 9.1 (the “Pay-Your-Own-Way Provision”). The Pay-Your-Own-Way Provision begins by barring any recovery of fees or expenses “[e]xcept as otherwise provided herein.” That introductory clause preserves the right to recover fees and expenses under the Prevailing Party Provision. It also ensures that the Pay-Your-Own-Way Provision does not limit any right of recovery under the Effect- Of-Termination Provision. But the Pay-Your-Own-Way Provision further states that the obligation of “each party to pay its own expenses will be subject to any rights of such party arising from a breach of this Agreement by the other” (the “Breach Exception”). This exception “avoid[s] a conflict between a judgment for damages due to a breach of the provision without liability-extinguishing language but with specified-provision exception and bad-conduct exception). 239 acquisition agreement and any obligation to pay expenses by providing that a judgment for a breach will supersede [a provision like the Pay-Your-Own-Way Provision].”313 Notably, the reference to “breach” in the Breach Exception is not limited to a “willful breach.” The Breach Exception contemplates the potential recovery of transaction expenses for any breach. Reading these provisions together, the Effect-Of-Termination Provision broadly eliminates liability except as preserved through the Specified-Provision Exception or the Bad-Conduct Exception. The Specified-Provision Exception preserves the regime for expense allocation established in the Pay-Your-Own-Way Provision. Although that provision requires each party to pay its own expenses, the Breach Exception preserves the right of a non-breaching party to recover transaction expenses (effectively a form of reliance damages) regardless of the nature of the breach. The Bad-Conduct Exception preserves the full panoply of contract damages, including expectation damages, in the event of a willful breach. This combination of provisions enables Buyer to recover its transaction expenses. Buyer proved that Seller breached the Ordinary Course Covenant. Buyer introduced 313 Model Asset Purchase Agreement, supra, at 249 (discussing pay-your-own-way provision with breach exception, stating that the obligation of each party to pay its own way is “subject to any rights of such party arising from a Breach”); see Model Stock Purchase Agreement, supra, at 351 (discussing pay-your-own-way provision with breach exception, stating that “[t]he obligation of each party to bear its own fees and expenses will be subject to any rights of such party arising from a Breach of this Agreement by another party”). 240 evidence that it incurred transaction expenses of $3.685 million, and Seller has not contested that amount. Buyer did not have to prove a willful breach to recover these transaction expenses, because that right was preserved under the Breach Exception. Buyer did not seek expectation damages, which would require a willful breach by Seller. Because the question of willful breach does not appear to be at issue, this decision does not reach it. Buyer therefore is awarded transaction expenses in the amount of $3.685 million. Seller has not proven that Buyer breached the Sale Agreement. Seller is not entitled to recover any transaction expenses. 4. Additional Damages For Fraud Buyer contends that it is entitled to additional amounts because it proved post- signing fraud. This decision has not reached Buyer’s fraud claim, and Buyer did not articulate how its damages for post-signing fraud would differ from the amounts Buyer can recover under the Breach Exception. This decision therefore does not address the suggestion that Buyer might recover additional damages on a fraud theory. VI. CONCLUSION The Covenant Compliance Condition and the Title Insurance Condition were not satisfied on the closing date, which relieved Buyer of its obligation to close. Seller failed to cure its breach of the Ordinary Course Covenant, and Buyer properly terminated the Sale Agreement. Buyer is entitled to the return of the deposit with all associated interest. Buyer is awarded transaction-related expenses of $3.685 million. Buyer also is entitled to its attorneys’ fees and expenses under the Prevailing Party Provision. Separate and apart from 241 the Prevailing Party Provision, Buyer is entitled to court costs as the prevailing party. Seller is not entitled to any relief. The court will enter judgment in the form of a final order. Within thirty days, the parties will submit a joint letter that either attaches an agreed-upon form of final order or identifies the issues that still need to be addressed at the trial level and proposes a schedule for resolving them. 242

2020-11-30 21:01:03.224475+00

https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2675-81

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA WILLIAM E. POWELL, Plaintiff, v. Civil Action No. 18-2675 (JEB) INTERNAL REVENUE SERVICE, Defendant. MEMORANDUM OPINION Pro se Plaintiff William E. Powell moves once again to supplement his Amended Complaint, which seeks records from the Internal Revenue Service concerning his family’s printing business. He desires to add claims: (1) challenging the IRS’s failure to respond to two specific requests for documents, and (2) characterizing the Service’s behavior as amounting to an unlawful pattern or practice of withholding information under the Freedom of Information Act. Because such proposed counts would be futile, the Court will deny the Motion. I. Background The present Motion to Supplement Plaintiff’s already-supplemented, thrice-amended Complaint represents merely the most recent chapter in Powell’s years-long quest to obtain tax records relating to him and his family’s printing business. See ECF No. 62 (Mot. to Suppl.). The Court’s most recent Opinion on the matter sketches the history of this journey. See Powell v. IRS, No. 18-2675, 2020 WL 3605774 , at *1–2 (D.D.C. July 2, 2020).  Powell now seeks to supplement his Complaint to challenge the IRS’s failure to provide him with two specific — and familiar — records. The first is the Powell Printing Company’s 1989 corporate tax return. See Mot. to Suppl. at 2. The second is Powell’s specific master file transcript using MFT code 30 for the years 1989 to 1992. Id. A master file is “the official repository of all taxpayer data extracted from magnetic tape records, paper and electronic tax returns, payments, and related documents,” I.R.S. IRM 21.2.1.2(1), Master File (Oct. 1, 2011), and MFT code 30 narrows the request to Form 1040 information. Powell, 2020 WL 3605774 , at *5; see also I.R.S. IRM 21.2.4.2.1.1(1), AMRH Transcripts (May 12, 2015) (“A specific module transcript generates for all [individual master file] categories with the numeric indicator for the . . . category met.”). Plaintiff seems to assert causes of action to access these records under 26 U.S.C. § 6103 , id. at 1–2, 4–5, as well as FOIA. Id. at 5; but see ECF No. 70 (Pl. Reply) at 5–7 (suggesting that Plaintiff seeks to add claim solely under 26 U.S.C. § 6103 ). Finally, Powell wishes to include an allegation that the IRS is engaging in an unlawful pattern or practice of not responding to his document requests. See Mot. to Suppl. at 1–2, 5; Pl. Reply at 6–8. II. Legal Standard Federal Rule of Civil Procedure 15(d) allows the Court, “[o]n motion and reasonable notice . . . [and] on just terms,” to permit a party to serve a supplemental pleading setting forth events that have happened since the filing of its complaint. “Rule 15(d) is used to set forth new facts that update the original pleading or provide the basis for additional relief; to put forward new claims or defenses based on events that took place after the original complaint or answer was filed.” United States v. Hicks, 283 F.3d 380 , 386 (D.C. Cir. 2002) (citing Wright & Miller, 6A Fed. Prac. & Proc. Civ. § 1504 (2d ed. 1990)). 2  Rule 15(d)’s intent is “to make pleadings a means to achieve an orderly and fair administration of justice.” Gomez v. Wilson, 477 F.2d 411 , 417 n.34 (D.C. Cir. 1973) (quoting Griffin v. County School Bd., 377 U.S. 218 , 227 (1964)). The Rule “promote[s] as complete an adjudication of the dispute between the parties as is possible.” Wright & Miller, 6A Fed. Prac. & Proc. Civ. § 1504 (3d ed. 2020). It seeks “to avoid ‘needlessly remitt[ing] [plaintiffs] to the difficulties of commencing a new action even though events occurring after the commencement of the original action have made clear the right to relief.’” Scahill v. District of Columbia, 909 F.3d 1177 , 1183 (D.C. Cir. 2018) (quoting Fed. R. Civ. P. 15(d), advisory committee notes to 1963 amendment). “It follows that supplementation of pleadings is encouraged ‘when doing so will promote the economic and speedy disposition of the entire controversy between the parties, will not cause undue delay or trial inconvenience, and will not prejudice the rights of any of the other parties to the action.’” U.S. ex rel. Gadbois v. PharMerica Corp., 809 F.3d 1 , 4 (1st Cir. 2015) (quoting Wright & Miller, 6A Fed. Prac. & Proc. Civ. § 1504 (3d ed. 2010)). Courts typically resolve motions to supplement under the same standard as motions to amend under Rule 15(a). See, e.g., Banner Health v. Burwell, 55 F. Supp. 3d 1 , 8 n.9 (D.D.C. 2014); Wildearth Guardians v. Kempthorne, 592 F. Supp. 2d 18 , 23 (D.D.C. 2008). The key difference between the two Rules is that amendments “relate to matters that occurred prior to the filing” of the pleading to be amended, whereas supplements “set[] forth transactions or occurrences or events which have happened since” that pleading. Hall v. CIA, 437 F.3d 94 , 100 (D.C. Cir. 2006) (emphases added) (quoting Wright & Miller, 6A Fed. Prac. & Proc. Civ. § 1504 (3d ed. 1990), then quoting Hicks, 283 F.3d at 385 ). Further, “[s]upplements under Rule 15(d) always require leave of the court, and the court has broad discretion in determining 3 whether to allow supplemental pleadings in the interests of judicial economy and convenience.” The Fund For Animals v. Hall, 246 F.R.D. 53 , 54 (D.D.C. 2007). Typically, Courts grant leave to amend or supplement “unless there is a good reason, such as futility, to the contrary.” Willoughby v. Potomac Elec. Power Co., 100 F.3d 999 , 1003 (D.C. Cir. 1996); see also Foman v. Davis, 371 U.S. 178 , 182 (1962) (noting that reasons not to permit Rule 15(a) amendment may include “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, [and] undue prejudice to the opposing party”). In other words, if the new causes of action would be deficient as stated in the proposed supplement, courts need not grant leave. See In re Interbank Funding Corp. Secs. Lit., 629 F.3d 213 , 218 (D.C. Cir. 2010) (“[A] district court may properly deny a motion to amend if the amended pleading would not survive a motion to dismiss.”) (citing Foman, 371 U.S. at 182 , for proposition that “‘futility of amendment’ is permissible justification for denying Rule 15(a) motion”); James Madison Ltd. v. Ludwig, 82 F.3d 1085 , 1099 (D.C. Cir. 1996) (“Courts may deny a motion to amend a complaint as futile . . . if the proposed claim would not survive a motion to dismiss.”). III. Analysis As Powell offers two new proposed causes of action, the Court will consider each separately. A. Failure to Provide Records Plaintiff seeks to add a count relating to two types of records — the 1989 corporate return and the 1989–92 master file transcripts — under both FOIA and 26 U.S.C. § 6103 . See Mot. to Suppl. at 5. The Government responds that claim preclusion bars any FOIA count, and that § 6103 provides no independent cause of action. It is correct. 4  “A subsequent lawsuit is barred by claim preclusion ‘if there has been prior litigation (1) involving the same claims or cause of action, (2) between the same parties or their privies, and (3) there has been a final, valid judgment on the merits, (4) by a court of competent jurisdiction.’” NRDC v. EPA, 513 F.3d 257 , 260 (D.C. Cir. 2008) (quoting Smalls v. United States, 471 F.3d 186 , 192 (D.C. Cir 2006)). Because Powell has previously brought (1) claims under FOIA to access these very records, (2) against the IRS, (3) which were denied, (4) in federal courts with jurisdiction to decide them, each of these elements is easily met. This very Court held last year that Powell’s request for the Powell Printing Company’s 1989 corporate tax return under the Privacy Act was barred by claim preclusion, given that the same request, brought under FOIA, had been previously adjudicated on the merits in the Eastern District of Michigan. See Powell v. IRS, No. 17-278, 2019 WL 4247246 , at *2 (D.D.C. Sept. 6, 2019); see also Powell v. IRS, No. 14-12626, 2015 WL 5271943 , at *2 (E.D. Mich. 2015). A third effort for the same document meets the same fate. Similarly, the request for Powell’s specific master file transcript for the years 1989 to 1992 using MFT code 30 has also already been litigated and denied. When he last tried to supplement his Complaint here, the Court held that “the doctrine of collateral estoppel precludes Powell from relitigating requests for . . . MF-Specific transcripts for Form 1040 between 1987 and 2017.” Powell v. IRS, No. 18-2675, 2019 WL 4750317 , at *5–6 (D.D.C. Sept. 30, 2019) (reasoning that “this Court previously found these requests moot because the IRS had turned over Form 1040 transcripts from 1989 to 1992, . . . and it had adequately searched for the 1987 to 2017 forms”) (cleaned up); see also Powell, 2020 WL 3605774 , at *5 (explaining that MFT codes simply indicate the type of form requested, and MFT code 30 is used to request a Form 1040). Not only does the Court’s application of the collateral-estoppel doctrine still hold true, 5 but given that ruling, claim preclusion now also prohibits Plaintiff from supplementing his Complaint with such a count. Powell seems to realize the weakness of his position under FOIA, arguing that, although “[c]ollateral [e]stoppel would be applied if [he were] trying to litigate the same issue under the same statute . . . as [was] litigated in Plaintiff’s prior cases,” he now seeks to bring his claim under 26 U.S.C. § 6103 instead, which delineates the IRS’s responsibilities to disclose tax-return information. See Pl. Reply at 5. This Court explained in its most recent Opinion, however, that section 6103 does not “provide an independent basis for subject matter jurisdiction” over claims seeking the disclosure of return information. See Powell, 2020 WL 3605774 , at *5 (quoting Maxwell v. O’Neill, No. 00-1953, 2002 WL 31367754 , at *4 (D.D.C. Sept. 12, 2002), aff’d, Maxwell v. Snow, 409 F.3d 354 , 357–58 (D.C. Cir. 2005)). Instead, section 6103 “operates as part of the larger FOIA framework,” id. (quoting Maxwell, 2002 WL 31367754 , at *3), and requests for tax-return information thus must comply with the procedures set forth under FOIA. Id. (citing Maxwell, 2002 WL 31367754 , at *4); see also Powell v. IRS, No. 16-1682, 2017 WL 2799934 , at *1 (D.D.C. Jan. 24, 2017) (collecting cases). In other words, FOIA provides the sole avenue through which Powell could conceivably add the claims he seeks, but, as just explained, that route is closed. In sum, because supplementing the Complaint with counts concerning the records at issue would be futile under either FOIA or section 6103, the Court will deny the Motion in this regard. B. Policy-or-Practice Claim Powell also moves to add an allegation that the IRS “is engaging in a pattern or practice of withholding” tax-return information and “not responding or providing any . . . status correspondences” to him. See Mot. to Suppl. at 2; see also Pl. Reply at 6–8. He alleges that he 6 not only received no response from the IRS regarding his requests for the two documents at issue in this case, but that he also “has submitted multiple Form 4506 (non-FOIA) Requests for the Federal Estate Tax Return (706s)” for many of his family members without response. See Pl. Reply at 6–7. These allegations are plainly insufficient to withstand a motion to dismiss. “To state a policy-or-practice claim, a plaintiff must plausibly allege ‘that the agency has adopted, endorsed, or implemented some policy or practice that constitutes an ongoing failure to abide by the terms of the FOIA.’” Am. Ctr. for Law & Justice v. U.S. Dep’t of State, 249 F. Supp. 3d 275 , 281 (D.D.C. 2017) (quoting Muttitt v. Dep’t of State, 926 F. Supp. 2d 284 , 293 (D.D.C. 2013) (internal quotation omitted)). “Claims targeting agencies’ internal FOIA workings usually . . . involve instances where conduct is ‘sufficiently outrageous.’” Id. (quoting Payne Enters., Inc. v. United States, 837 F.2d 486 , 494 (D.C. Cir. 1988)). In contrast, there is little meat on the bones of Powell’s claim here; in any event, the agency has already largely provided him with the documents he seeks. See Powell, 2019 WL 4750317 , at *6. As Plaintiff has not pled sufficient facts on which a policy-or-practice claim could proceed, the Court will deny as futile the Motion to Supplement with regard to this claim. IV. Conclusion For the foregoing reasons, the Court will deny Plaintiff’s Motion to Supplement the Amended Complaint. An Order so stating will issue this day. /s/ James E. Boasberg JAMES E. BOASBERG United States District Judge Date: November 30, 2020 7

2020-11-30 21:01:04.131654+00

https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2675-79

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA WILLIAM E. POWELL, Plaintiff, v. Civil Action No. 18-2675 (JEB) INTERNAL REVENUE SERVICE, Defendant. MEMORANDUM OPINION In its latest Opinion in this case, this Court granted Defendant Internal Revenue Service’s Partial Motion to Dismiss and granted in part its Partial Motion for Summary Judgment, foreclosing many of pro se Plaintiff William E. Powell’s claims for certain tax records under the Freedom of Information Act. See Powell v. IRS, No. 18-2675, 2020 WL 3605774 (D.D.C. July 2, 2020). Plaintiff now moves for partial reconsideration with respect to four of those claims. He first argues that two should not have been dismissed on collateral-estoppel grounds. He also contends that Defendant failed to meet its summary-judgment burden of proving that it had performed an adequate search for certain other documents. Because the Court ultimately finds Powell’s arguments unavailing, it will deny the Motion. I. Background Plaintiff has engaged in long-running FOIA litigation to locate various tax records relating to his family’s printing business. Because the Court’s most recent Opinion on the matter sets out the history of these efforts, see Powell, 2020 WL 3605774 , at *1–2, it will briefly discuss only those claims relevant to the present Motion. 1  Powell initially filed this action under FOIA and the Privacy Act on October 29, 2018, seeking from the IRS various tax records regarding family members and his family’s business, the Powell Printing Company. See ECF No. 1 (Complaint). He has since amended or supplemented his original Complaint three times with additional requests for tax records submitted to the IRS. See ECF Nos. 9, 31, 34. In its latest Opinion, the Court granted Defendant’s Partial Motion to Dismiss claims relating to certain requests and Partial Motion for Summary Judgment with respect to others. Powell, 2020 WL 3605774 , at *5–6, 9, 11. Powell now seeks reconsideration of the Court’s Opinion with respect to the following four records requests: (1) various non-master file transcripts for William A. Powell, William E. Powell, and Andrew Powell; (2) William A. Powell’s Form 706; (3) Andrew Powell’s Form 706; and (4) the Powell Printing Company’s Forms 813. See ECF No. 61 (Pl. Mot. to Recon.). For those not fully versed in IRS procedure, a Form 706 estate-tax return is a “one-time submission [filed] by the executor to determine the contents of an estate.” Powell v. IRS (Powell V), No. 17-278, 2019 WL 4247246 , at *3 (D.D.C. Sept. 6, 2019). A taxpayer’s non-master file (NMF) contains information regarding “certain types of tax assessments that cannot be implemented by [processing the Master File],” I.R.S. IRM 21.2.1.5(1), Non-Master File (Apr. 12, 2011), which primarily holds all major categories of taxpayer data. Id. IRM 21.2.1.2, Master File (Oct. 1, 2011); see also ECF No. 39-12 (Declaration of Delphine Thomas), ¶ 7 (“Most taxpayers do not have NMF transcripts associated with their accounts . . . .”). Finally, Form 813 is “an ‘internal IRS document’ that lists ‘payment transactions’ for taxpayers.” Powell, 2020 WL 3605774 , at *11 (quoting Thomas Decl., ¶ 42). 2 II. Legal Standard Because Plaintiff seeks reconsideration of an interlocutory order granting in part Defendant’s dispositive motions, Federal Rule of Civil Procedure 54(b) governs the Court’s analysis. “The standard of review for interlocutory decisions differs from the standards applied to final judgments under Federal Rules of Civil Procedure 59(e) and 60(b).” Williams v. Savage, 569 F. Supp. 2d 99 , 108 (D.D.C. 2008). Plaintiff has a lower bar to clear, as “reconsideration of an interlocutory decision is available under the standard ‘as justice requires.’” Judicial Watch v. Dep’t of Army, 466 F. Supp. 2d 112 , 123 (D.D.C. 2006) (quoting Childers v. Slater, 197 F.R.D. 185 , 190 (D.D.C. 2000)); accord Lemmons v. Georgetown Univ. Hosp., 241 F.R.D. 15 , 21–23 (D.D.C. 2007). The “as justice requires” standard may be met where, for example, the court has patently misunderstood the parties, strayed far afield from the issues presented, or failed to consider a controlling or significant change in the law or facts since the submission of the issue. See Cobell v. Norton, 224 F.R.D. 266 , 272 (D.D.C. 2004). “These considerations leave a great deal of room for the court’s decision and, accordingly, the ‘as justice requires’ standard amounts to determining ‘whether [relief upon] reconsideration is necessary under the relevant circumstances.’” Lewis v. District of Columbia, 736 F. Supp. 2d 98 , 102 (D.D.C. 2010) (quoting Cobell, 224 F.R.D. at 272). The court’s discretion under Rule 54(b), however, is “subject to the caveat that where litigants have once battled for the court’s decision, they should neither be required, nor without good reason permitted, to battle for it again.” Singh v. George Washington Univ., 383 F. Supp. 2d 99 , 101 (D.D.C. 2005) (internal citations and quotation marks omitted). “Ultimately, the moving party has the burden to demonstrate ‘that reconsideration is appropriate and that harm or injustice would result if reconsideration were denied.’” United States v. All 3 Assets Held at Bank Julius, Baer & Co., Ltd., 315 F. Supp. 3d 90 , 97 (D.D.C. 2018) (quoting FBME Bank Ltd. v. Mnuchin, 249 F. Supp. 3d 215 , 222 (D.D.C. 2017)). III. Analysis The Court addresses each of Plaintiff’s four sets of records requests, turning first to the two claims dismissed on collateral-estoppel grounds, then examining the two on which the Court granted summary judgment for Defendant. A. Requests Subject to Dismissal In seeking reconsideration, Plaintiff contends that his claims relating to various family members’ non-master file transcripts and for his father William A. Powell’s Form 706 federal- estate-tax return should not have been dismissed on collateral-estoppel grounds. “Under collateral estoppel, once a court has decided an issue of fact or law necessary to its judgment, that decision may preclude relitigation of the issue in a suit on a different cause of action involving a party to the first case.” Allen v. McCurry, 449 U.S. 90 , 94 (1980). In other words, “an issue of fact or law that was actually litigated and necessarily decided is conclusive in a subsequent action between the same parties or their privies.” Johnson v. Duncan, 746 F. Supp. 2d 163 , 168 (D.D.C. 2010). When the determination of that factual or legal issue “is essential to the judgment, [it] is conclusive in a subsequent action between the parties, whether on the same or a different claim.” Consol. Edison Co. of N.Y. v. Bodman, 449 F.3d 1254 , 1258 (D.C. Cir. 2006) (internal citation omitted). For collateral estoppel — also known as issue preclusion — to apply, (1) “the same issue now being raised must have been contested by the parties and submitted for judicial determination in the prior case”; (2) “the issue must have been actually and necessarily determined by a court of competent jurisdiction in that prior case”; and (3) “preclusion in the 4 second case must not work a basic unfairness to the party bound by the first determination.” Martin v. Dep’t of Justice, 488 F.3d 446 , 454 (D.C. Cir. 2007) (quoting Yamaha Corp. of Am. v. United States, 961 F.2d 245 , 254 (D.C. Cir. 1992)). Non-Master File Transcripts The Court begins with the NMF transcripts for William A. Powell, William E. Powell, and Andrew Powell for various tax years. Powell does not dispute that he seeks the same documents previously adjudicated in prior suits, but instead argues that preclusion is improper because, whereas his past claims were brought under FOIA, his current claims are based on requests made pursuant to separate statutes and procedures. Specifically, Plaintiff contends that he submitted the NMF-transcript requests at issue here under 26 U.S.C. § 6103 . See Pl. Mot. to Recon. at 9–12. He relatedly suggests that he requested these NMF-transcript records through a “non-FOIA process,” and, as a result, they should not have been barred by collateral estoppel. Id. at 10–12. Plaintiff’s arguments, which he also raised in various places throughout his prior Opposition, confuse the relationship between FOIA and Section 6103. As this Court most recently explained, Section 6103 “does not ‘provide an independent basis for subject matter jurisdiction’ over claims seeking the disclosure of return information.” Powell, 2020 WL 3605774 , at *5 (quoting Maxwell v. O’Neill, No. 00-1953, 2002 WL 31367754 , at *4 (D.D.C. Sept. 12, 2002), aff’d, Maxwell v. Snow, 409 F.3d 354 , 357–58 (D.C. Cir. 2005)). Instead, Section 6103 sets out the IRS’s disclosure duties and exemptions for tax returns, “allow[ing] the IRS to disclose certain tax records . . . which records, in turn, are subject to FOIA.” Elec. Privacy Info. Ctr. v. IRS, 910 F.3d 1232 , 1237 (D.C. Cir. 2018) (emphasis added). Thus, “§ 6103 ‘operates as part of the larger FOIA framework’” and does not provide plaintiffs with a 5 separate cause of action. See Powell, 2020 WL 3605774 , at *5 (quoting Maxwell, 2002 WL 31367754 , at *3). Similarly, the fact that Powell originally submitted his records requests through a “non- FOIA procedure” does not mean that they remain outside of FOIA’s framework. Plaintiff is correct that IRS regulations set out routine “non-FOIA” procedures for parties seeking certain tax-return and tax-transcript information, which direct them to submit requests via Form 4506 to the IRS’s Return and Income Verification Systems (RAIVS) unit. Goldstein v. IRS, 174 F. Supp. 3d 38 , 48 (D.D.C. 2016). In processing these requests, RAIVS must comply with the disclosure requirements of Section 6103. Id. But a party dissatisfied with the Service’s response to its RAIVS requests must then follow the Service’s specified FOIA procedures, see Powell v. IRS, No. 18-453, 2019 WL 1980973 , at *3 (D.D.C. May 3, 2019), and the Service’s responses to these requests are ultimately subject to judicial review under FOIA. See Goldstein, 174 F. Supp. 3d at 47 (“[E]ven though the IRS has established a separate ‘non-FOIA’ process for requesting tax returns, . . . the IRS must defend [its disclosure decisions] under the procedural and substantive rules of FOIA.”). Indeed, “[t]o invoke the jurisdiction of a federal district court [in the first place], requests for tax-return information . . . must comply with the procedures set forth under FOIA.” Powell, 2020 WL 3605774 , at *5. Therefore, even if Powell had originally utilized the “non-FOIA” RAIVS process to make his requests, his claims challenging the IRS’s failure to fulfill those requests are correctly construed as causes of action under FOIA. As a result, FOIA governs Plaintiff’s present requests for the NMF-transcript documents, which are the same records he sought under the same statute in one of his prior suits. For this reason, the Court properly held that the doctrine of collateral estoppel precludes him from relitigating his claims here. As the Court found, and Plaintiff does not contend otherwise, his 6 NMF-transcript requests in this case “are clearly duplicative of those adjudicated in Powell V.” Powell, 2020 WL 3605774 , at *5 (concluding that Plaintiff’s 2017 requests for NMF transcripts for Form 1040 and his current requests for NMF transcripts using the command code MFT 30 “are for the same record”). In that suit, the Court granted summary judgment for Defendant as to William A. Powell’s and William E. Powell’s NMF transcripts, Powell v. IRS, 317 F. Supp. 3d 266 , 279 (D.D.C. 2018), and Andrew Powell’s NMF transcript. Powell, 2019 WL 4247246 , at *5. Finally, Plaintiff’s Motion suggests that the Court failed to address new evidence that was unavailable in prior litigation — namely, a handwritten “NMF” under William A. Powell’s name apparently made by Defendant in response to a separate request submitted in August 2018, see Pl. Mot. to Recon. at 11 (citing ECF No. 42-3) — thus rendering preclusion inappropriate as to those transcripts. Even if this evidence warranted turning to the underlying merits of Defendant’s search, it falls well short of upending the Court’s finding on the adequacy of the IRS’s previous efforts. Powell, 317 F. Supp. 3d at 279. William A. Powell’s Form 706 Next up is Plaintiff’s request for William A. Powell’s Form 706. Here, Powell asserts that preclusion is inappropriate because he “never stated a claim” for William A. Powell’s Form 706 in any of his previous suits. See Pl. Mot. to Recon. at 3, 5–6, 8. Instead, the Court previously required Defendant to search for Form 706 only because that form was relevant in determining the adequacy of the Service’s search for a separate record (a Form K-1), which may have been attached to Form 706. Powell, 317 F. Supp. 3d at 280–81; see also Powell, 2019 WL 4247246 , at *1. 7  Powell’s contention that he has never sought relief for this Form 706 in his prior FOIA litigation misunderstands the difference between claim preclusion and issue preclusion. “Claim preclusion ‘forecloses successive litigation of the very same claim, whether or not relitigation of the claim raises the same issues as the earlier suit.’” Proctor v. District of Columbia, 74 F. Supp. 3d 436 , 450 (D.D.C. 2014) (quoting Taylor v. Sturgell, 553 U.S. 880 , 892 (2008)). Issue preclusion, by contrast, “prevents the relitigation of any issue that was raised and decided in a prior action.” Alford v. Providence Hosp., 60 F. Supp. 3d 118 , 124 (D.D.C. 2014) (internal quotation marks and citations omitted). Thus, “issue preclusion may conclusively establish facts such that the plaintiff’s [subsequent] claim must fail as a matter of law.” Proctor, 74 F. Supp. 3d at 454. Applying the three elements of issue preclusion, this Court directly decided the same issue — namely, whether Defendant conducted an adequate search for William A. Powell’s Form 706 — when it decided the adequacy of the Service’s search for his Form K-1 in a prior suit between the same parties. See Powell, 2019 WL 4247246 , at *3–5. Finding that the “IRS’s updated explanation shows that its search for the Form 706 was adequate,” id. at *4, the Court concluded that the search for the requested K-1 information was “reasonably calculated to uncover all responsive documents” and therefore entered summary judgment for Defendant on that claim. Id. (quoting Truitt v. Dep’t of State, 897 F.2d 540 , 542 (D.C. Cir. 1990)). Because a “final outcome” in that suit — that is, the adequacy of the Form K-1 search — “hinge[d]” on the adequacy of the Form 706 search, the Form 706 issue was “actually and necessarily determined” by the Court in a prior proceeding. Proctor, 74 F. Supp. 3d at 453 (first quoting Bobby v. Bies, 556 U.S. 825 , 835 (2009), then quoting Martin, 488 F.3d at 454 ). 8  Finally, applying issue preclusion in this case does not work a “basic unfairness” against Plaintiff. Id. at 450-51 (quoting Martin, 488 F.3d at 454 ). As the Court observed in its Opinion, Powell’s arguments against preclusion in his Opposition papers, which focus on the adequacy of the IRS’s search, “miss[] the mark” because he could have raised them when the parties previously litigated the Service’s search for the Form. Powell, 2020 WL 3605774 , at *6. His only newly asserted evidence is a June 9, 2020, email received from Wanda Williams, a FOIA Archivist at the National Archives and Records Administration, attaching a Standard Form 135 that purportedly confirms the existence of a Form 706 for William A. Powell at a specific Document Location Number (DLN). See Pl. Mot. to Recon. at 6–8 (citing ECF Nos. 57-1 (Pl. Sur-reply) at 5–6; 57-4). Although such evidence was unavailable in 2019 when the Court decided the Form 706 search in Powell V, it does not suggest that Plaintiff was denied “a fair opportunity procedurally, substantively, and evidentially to pursue his claim the first time.” Canonsburg Gen. Hosp. v. Sebelius, 989 F. Supp. 2d 8 , 17 (D.D.C. 2013) (quoting Blonder– Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313 , 333 (1971)), aff’d sub nom. Canonsburg Gen. Hosp. v. Burwell, 807 F.3d 295 (D.C. Cir. 2015); cf. Paulo v. Holder, 669 F.3d 911 , 918 (9th Cir. 2011) (citing 18 James W. Moore et al., Moore’s Federal Practice § 132.02[2][c] (3d ed. 2010) (“If a new . . . factual assertion raised in the second action is relevant to the issues that were litigated and adjudicated previously, the prior determination of the issue is conclusive on the issue despite the fact that new evidence . . . [was not] introduced into evidence, or otherwise urged.”)). Even if preclusion is not appropriate, the SF-135 fails to cast doubt on the adequacy of the IRS’s search that the Court evaluated in Powell V. This is because the Service’s efforts to track down Form 706 using multiple DLNs were sufficient and led to the ultimate conclusion 9 “that the record sought was not found in the location where the [Federal Records Center] would expect to find [the] document.” ECF No. 66 (Def. Opp.) at 7–8 (quoting Powell V, No 17-278, ECF No. 78-4 (Declaration of Joy E. Gerdy Zogby), ¶ 20); see Iturralde v. Comptroller of Currency, 315 F.3d 311 , 315 (D.C. Cir. 2003) (adequacy of FOIA search determined “not by the fruits of the search, but by the appropriateness of the methods”). The Court thus declines to alter its prior finding in Powell V or reconsider its Opinion here. B. Requests Subject to Summary Judgment Powell also challenges the Court’s grant of partial summary judgment to Defendant with respect to two requests, disputing its finding that the Service adequately searched for Andrew Powell’s Form 706 and the Powell Printing Company’s Form 813 for multiple tax years. “FOIA cases typically and appropriately are decided on motions for summary judgment.” Defs. of Wildlife v. U.S. Border Patrol, 623 F. Supp. 2d 83 , 87 (D.D.C. 2009) (citing Bigwood v. U.S. Agency for Int’l Dev., 484 F. Supp. 2d 68 , 73 (D.D.C. 2007)). For an agency to prevail on summary judgment, it must demonstrate that it performed an adequate search for the requested records, id. at 91 , and did not improperly withhold any responsive documents. Id. at 87 (quoting Military Audit Project v. Casey, 656 F.2d 724 , 738 (D.C. Cir. 1981)). “An agency fulfills its obligations under FOIA if it can demonstrate beyond material doubt that its search was ‘reasonably calculated to uncover all relevant documents.’” Valencia-Lucena v. U.S. Coast Guard, 180 F.3d 321 , 325 (D.C. Cir. 1999) (quoting Truitt, 897 F.2d at 542 ). In reviewing the reasonableness of an agency’s search, courts focus their inquiry on “the methods used to carry out the search, not . . . the search results.” Rodriguez v. Dep’t of Def., 236 F. Supp. 3d 26 , 34 (D.D.C. 2017). For that reason, “the failure of an agency to turn up” specific records “does not alone render a search inadequate.” Iturralde, 315 F.3d at 315 . Instead, to satisfy this standard, 10 an agency “must show that it made a good faith effort to conduct a search for the requested records, using methods which can be reasonably expected to produce the information requested.” Oglesby v. U.S. Dep’t of Army, 920 F.2d 57 , 68 (D.C. Cir. 1990). “[A]n agency is only required to search those record systems that are likely to turn up the information requested.” Schoenman v. FBI., 764 F. Supp. 2d 40 , 45 (D.D.C. 2011) (internal quotation marks and citation omitted). Andrew Powell’s Form 706 In seeking reconsideration of the Court’s determination on his request for Andrew Powell’s Form 706 federal-estate-tax return, Plaintiff does not directly challenge the IRS’s search methods. See Powell, 2020 WL 3605774 , at *9 (citing Thomas Decl., ¶¶ 71–74). Instead, he identifies various other tax documents, including a 2015 business-master file (BMF) transcript for the Andrew Powell Trust and a 1993 individual-master file (IMF) transcript for Amelia Powell, in an apparent attempt to contradict the Service’s conclusion that a master file for Andrew Powell, where a Form 706 would be stored, does not exist. See Pl. Mot. to Recon. at 13; ECF No. 71 (Pl. Reply) at 10. Neither of these cited documents, however, calls into question the adequacy of Defendant’s search. As the Service reasonably explains, the existence of the Andrew Powell Trust BMF transcript, which was previously produced to Plaintiff, does not indicate the existence of a Form 706, a different tax record, for Andrew Powell, a taxpayer different from the trust entity. See Def. Opp. at 12. Similarly, it is unclear — and Plaintiff does not offer any explanation — how an IMF transcript for Amelia Powell bears on Defendant’s search for the Andrew Powell Form 706 at issue. Additionally, Plaintiff maintains that Defendant failed to search the FRC, see Pl. Mot. to Recon. at 13, and points to what he maintains are the first two pages of a Form 706 filed for Andrew Powell, see Pl. Reply at 10 (citing ECF No. 42-7 at 1–2), to refute the sufficiency of the 11 Service’s efforts. These arguments simply rehash Plaintiff’s summary-judgment Opposition and do not provide any valid reason to alter the Court’s decision. See ECF No. 42 (Pl. MTD/MSJ Opp.) at 15. Plaintiff does, however, identify a small factual discrepancy that bears correcting. In its Opinion, the Court expressly considered the partial Form 706 for Andrew Powell, but appears to have erroneously noted that Plaintiff had received the document from the FOIA Officer at NARA in June 2020, Powell, 2020 WL 3605774 , at *9, when, as discussed above, those June 2020 NARA communications related to the Form 706 for William A. Powell. The details of how Powell obtained his abridged copy remain unknown to the Court. See Pl. MTD/MSJ Opp. at 15; ECF No. 42-7; see also ECF No. 47 (Def. MSJ Reply) at 8 (“Powell does not explain where or how he located those two pages or why he does not have a complete copy.”). In any case, this error does not alter the Court’s determination that the two pages fail to cast doubt on the adequacy of the IRS’s search. See Powell, 2020 WL 3605774 , at *9 (finding reasonable IRS’s explanation that even if Form 706 still existed, it remained unable to locate it). The Court concludes that its findings are supported by the factual record, and reconsideration is thus unwarranted. Powell Printing Company’s Form 813 Powell last contends that the IRS never established the adequacy of its search for certain Forms 813 for the Powell Printing Company. See Pl. Mot. to Recon. at 14. Such a contention overlooks the Court’s explicit mention of the Company in its discussion of the Forms 813 requests more broadly. Powell, 2020 WL 3605774 , at *11. Perhaps Powell is calling attention to the fact that the Opinion there, but not elsewhere, mischaracterized the relevant tax years of his Powell Printing Company request as 1987–1997, id., not 1987–2007. Id. at *3, *11; ECF No. 9-19 (Nov. 26, 2018, Document Request). To the extent that this typo caused confusion, the 12 Court now clarifies that its consideration of Defendant’s search for the Powell Printing Company Forms 813 covered those documents for the full 1987–2007 period — as requested by Powell and searched for by the IRS. See Thomas Decl., ¶¶ 50, 61–65. Plaintiff’s additional challenges to the Court’s Forms 813 ruling echo arguments previously raised in his Opposition papers, and they once again fall short. Contrary to Powell’s claims, see Pl. Mot. to Recon. at 14; Pl. Reply at 11, the IRS did set out a “detailed account of [its] searches for [this form].” Powell, 2020 WL 3605774 , at *11; see Thomas Decl., ¶¶ 41–54, 61–65. Thomas first searched for the Forms by looking for associated non-master file transcripts in the Information Data Retrieval System (IDRS). Powell, 2020 WL 3605774 , at *11 (citing Thomas Decl., ¶ 52). When her search failed to identify any responsive documents, she turned to an Automated Non-Master File (ANMF) System specialist, whose search of that database also came up empty. Id. (citing Thomas Decl., ¶¶ 52–53). Thomas then searched the IDRS for master-file payment transactions using various command codes and the two employer identification numbers (EINs) provided by Plaintiff. See Thomas Decl., ¶¶ 61–62 (describing how first EIN produced information results for Powell Printing Company, but second one did not). Although these searches returned several forms for the Powell Printing Company, based on the IRS’s retention schedules, none of these forms contained or attached any associated Forms 813. Id., ¶¶ 63–65. Powell also takes issue with the description of the ANMF specialist’s search, arguing that the IRS omitted the identity of the person and more specific details about the search parameters and findings. See Pl. Reply at 11. The Court, however, explicitly rejected this same argument when raised by Plaintiff in relation to a separate request, explaining that “FOIA does not require this level of detail” to deem a search reasonably specific enough. Powell, 2020 WL 3605774 , at 13 *9 (citing Dillon v. DOJ, 102 F. Supp. 3d 272 , 282 (D.D.C. 2015)). Indeed, “an agency’s declarant need not have participated directly in the actual processing of a FOIA request” as long as she has “personal knowledge of the procedures used in handling [the] request and . . . familiarity with the documents in question.” Dugan v. DOJ, 82 F. Supp. 3d 485 , 496 (D.D.C. 2015) (internal quotation marks and citation omitted); see also SafeCard Servs., Inc. v. SEC, 926 F.2d 1197 , 1201 (D.C. Cir. 1991) (crediting affidavit of SEC employee that recounted efforts of other employees because she was “in charge of coordinating” agency’s search efforts and therefore was “the most appropriate person to provide a comprehensive affidavit”). Finally, the Court already addressed Powell’s contention that the IRS failed to adequately search additional databases for the Form, see Powell, 2020 WL 3605774 , at *11–12, and credits Defendant’s conclusion that there was no other way to search for the requested records. See Thomas Decl., ¶ 67. The Court consequently sees no good reason to disturb its finding that the IRS’s search here was reasonably tailored to yield any responsive documents. IV. Conclusion For the reasons stated above, the Court will deny Plaintiff’s Motion for Reconsideration. A separate Order so stating will issue this day. /s/ James E. Boasberg JAMES E. BOASBERG United States District Judge Date: November 30, 2020 14

2020-11-30 21:02:11.704903+00

http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/1%20CA-CV%2020-0138%20Stephens%20Final.pdf

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. IN THE ARIZONA COURT OF APPEALS DIVISION ONE THOMAS S. STEPHENS, et al., Plaintiffs/Appellees, v. JAGO HOLDINGS LLC, Defendant/Appellant. No. 1 CA-CV 20-0138 FILED 11-24-2020 Appeal from the Superior Court in Maricopa County No. CV2019-004467 The Honorable Daniel G. Martin, Judge VACATED AND REMANDED COUNSEL Stein and Stein, P.C., Mesa By Henry M. Stein, Amy R. Wilson Counsel for Plaintiffs/Appellees Schern Richardson Finter, PLC, Mesa By Aaron M. Finter Counsel for Defendant/Appellant MEMORANDUM DECISION Judge David B. Gass delivered the decision of the Court, in which Presiding Judge Jennifer M. Perkins and Judge Michael J. Brown joined.  STEPHENS, et al. v. JAGO HOLDINGS Decision of the Court G A S S, Judge: ¶1 Thomas S. Stephens, acting on behalf of the estate of Thomas C. Stephens, Mark Stephens, and Marketing Support Services, Inc. (collectively, appellees) sued Jago Holdings LLC, alleging Jago holds unpaid commissions belonging to them. The superior court granted a preliminary injunction in appellees’ favor, enjoining Jago from using, spending, dissipating, disbursing, encumbering, assigning, or otherwise transferring the alleged unpaid commissions. Because appellees seek money damages, the issuance of the preliminary injunction was an abuse of discretion. We, therefore, vacate the injunction and remand the case to the superior court. FACTUAL AND PROCEDURAL HISTORY ¶2 This court views the facts in a light most favorable to upholding the superior court’s ruling. IB Prop. Holdings, LLC v. Rancho Del Mar Apartments Ltd. P’ship, 228 Ariz. 61 , 63, ¶ 2 (App. 2011). ¶3 Appellees filed a complaint alleging breach of contract, breach of the implied covenant of good faith and fair dealing, conversion, and unjust enrichment. Appellees alleged they were entitled to money from Jago arising from commissions Thomas C. Stephens (deceased) earned from the sales of telecommunications services. In addition to a money judgment, appellees sought injunctive relief to: (1) prevent Jago from “[u]sing, spending, dissipating, disbursing . . . , encumbering, assigning or otherwise transferring” the commissions they believed were owed to them; (2) order Jago to deposit the commission payments on an ongoing basis with the clerk of the superior court; and (3) order Jago to provide accountings of all outstanding payments. ¶4 After an evidentiary hearing, the superior court granted a preliminary injunction. The superior court’s signed order only found appellees would suffer immediate and irreparable harm without the injunction and could be left without an adequate remedy. ¶5 Jago timely appealed the preliminary injunction. This court has jurisdiction under Article 6, Section 9, of the Arizona Constitution, and A.R.S. § 12-2101.A.5.b. ANALYSIS ¶6 Jago argues, among other things, the superior court abused its discretion because appellees have an adequate remedy at law should they 2  STEPHENS, et al. v. JAGO HOLDINGS Decision of the Court prevail on the merits given the relief they seek is solely monetary in nature. We agree. ¶7 This court reviews an issuance of a preliminary injunction for abuse of discretion. TP Racing, L.L.L.P. v. Simms, 232 Ariz. 489 , 492, ¶ 8 (App. 2013). The superior court abuses its discretion when it: (1) applies the incorrect substantive law or preliminary injunction standard; (2) bases its decision on a clearly erroneous finding of fact that is material to the decision to grant or deny the injunction; or (3) applies an acceptable preliminary injunction standard in a manner that results in an abuse of discretion. McCarthy W. Constructors, Inc. v. Phx. Resort Corp., 169 Ariz. 520 , 523 (App. 1991). This court defers to the superior court’s factual findings unless clearly erroneous but reviews its legal conclusions de novo. IB Prop. Holdings, 228 Ariz. at 64, ¶ 5. ¶8 Here, the superior court needed to consider four equitable factors: (1) whether there was a strong likelihood appellees would succeed at trial on the merits; (2) the possibility of irreparable injury to appellees not remediable by damages if the requested relief is not granted; (3) whether the balance of hardships favors appellees; and (4) if public policy favors the injunction. See Shoen v. Shoen, 167 Ariz. 58 , 63 (App. 1990). These factors have been condensed to a “sliding scale” in which appellees may establish either: “1) probable success on the merits and the possibility of irreparable injury; or 2) the presence of serious questions and that the balance of hardships tips sharply in favor of [appellees].” Ariz. Ass’n of Providers for Pers. with Disabilities v. State, 223 Ariz. 6 , 12, ¶ 12 (App. 2009) (quotation omitted). When damages can be proven with reasonable certainty and are adequate to address the harm suffered, injunctive relief is generally not appropriate. See IB Prop. Holdings, 228 Ariz. at 73, ¶¶ 10–11. ¶9 Because appellees do not face an “irreparable injury not remediable by damages,” we conclude as a matter of law the preliminary injunction was an inappropriate remedy. See id. Appellees characterize their request as merely seeking to preserve their property. We are not convinced. Indeed, appellees seek a money judgment in the amount of sales commissions they believe Jago owes them. They sought the preliminary injunction to guarantee a potential future judgment’s full satisfaction. ¶10 Appellees’ core claim is Jago owes them payment of the commissions in the form of money. A commission is “a sum or percentage allowed to agents, sales representatives, etc., for their services.” See Random House Webster’s Unabridged Dictionary 412 (2d ed. 2001). Appellees cannot reclassify their claims—for which they concede they seek a money 3  STEPHENS, et al. v. JAGO HOLDINGS Decision of the Court judgment to satisfy—as merely seeking “property.” This court has long recognized when damages are sought, the amounts can be ascertained, and would remedy the harm, injunctive relief is inappropriate. See Cracchiolo v. State, 135 Ariz. 243 , 247 (App. 1983) (vacating a preliminary injunction when damages sufficed as a remedy); accord Fin. Assocs., Inc. v. Hub Props., Inc., 143 Ariz. 543 , 546 (App. 1984) (affirming denial of preliminary injunction for the same reasons). True, money is personal property. But money is fungible and not so unique as to require payment of any specific dollars. Cf. Woliansky v. Miller, 135 Ariz. 444 , 446 (App. 1983) (“Specific performance is ordinarily available to enforce contracts for the sale of real property because land is viewed as unique and an award of damages is usually considered an inadequate remedy.”). ¶11 Nothing in the superior court’s analysis supports a conclusion this case is an exception to that general rule. During the evidentiary hearing, the superior court made no specific factual findings on the record to establish appellees face a possibility of irreparable harm with no adequate legal remedy. And the superior court’s signed order lacks factual support. Findings of fact prompt judges to consider not just “the end results of their inquiry, but the process by which they reached it.” Miller v. Bd. of Supervisors of Pinal Cnty., 175 Ariz. 296 , 299 (1993) (quoting United States v. Merz, 376 U.S. 192 , 199 (1964)). “Without this explanation, an appellate court cannot effectively review the decision-making process of the trial court.” Id. ¶12 Here, the superior court made no findings to support its conclusion—appellees face irreparable harm—and it did not address the other three factors it is charged with considering when weighing a preliminary injunction. In the full context of the Shoen factor analysis, appellees cannot meet their burden of showing irreparable harm for which damages are insufficient. See 167 Ariz. at 63 . The money damages they seek are ascertainable and sufficient to remedy their harm should they prevail. ¶13 In short, there is no need to enjoin Jago from using these specific funds. Should appellees prevail, Jago simply may pay the amount proven at trial with the money it has at that time. Even assuming appellees face present, irreparable harm by not having this money, the injunction ordered Jago not to use or spend the money, to deposit it with the superior court, and to account for it. The injunction does nothing to cure the purported harm of appellees not having the funds now and amounts to an abuse of discretion. Because this issue is dispositive, we decline to reach the other issues Jago raises. See Sw. Barricades, L.L.C. v. Traffic Mgmt., Inc., 240 Ariz. 139 , 142, ¶ 17 n.3 (App. 2016). 4  STEPHENS, et al. v. JAGO HOLDINGS Decision of the Court ATTORNEY FEES ¶14 Jago requests its attorney fees incurred on appeal pursuant to ARCAP 21, and A.R.S. §§ 12-341.01 and -349. We decline to award attorney fees at this stage, but the superior court may reconsider any requests for fees on remand, including fees incurred in this appeal, pending the outcome of this litigation. See Eans-Snoderly v. Snoderly, 249 Ariz. 552 , 559, ¶ 27 (App. 2020). CONCLUSION ¶15 For the above reasons, we vacate the preliminary injunction and remand the case to the superior court. AMY M. WOOD • Clerk of the Court FILED: AA 5

2020-11-20 19:24:55.415174+00

J. Don Trelfall and Lucille M. Trelfall v. Commissioner. Samuel S. Bruce and Margaret S. Bruce v. Commissioner. Trelfall v. Commissioner Docket Nos. 1533, 1535. United States Tax Court 1944 Tax Ct. Memo LEXIS 253; 3 T.C.M. (CCH) 461; T.C.M. (RIA) 44157; May 16, 1944 *253 Eugene R. Speer, Esq., 2137 Oliver Bldg., Pittsburgh, Pa., for the petitioners. J. Harrison Miller, Esq., for the respondent. SMITH Memorandum Findings of Fact and Opinion SMITH, Judge: These proceedings, consolidated for hearing, are for the redetermination of deficiencies in income tax as follows: DocketDeficiency No.PetitionerYearAmount 1533J. Don Trelfall and1939$138.38 Lucille M. Trelfall1940306.18 1535Samuel S. Bruce and1939257.80 Margaret S. Bruce1940376.62 The question in issue is whether J. Don Trelfall and Samuel S. Bruce, conducting an agency business under the name of Martin, Trelfall and Bruce as copartners, are liable to income tax upon the amounts of money paid by the partnership to Kathryn W. Martin, the widow of a deceased partner. Findings of Fact The petitioners, J. Don Trelfall and Lucille M. Trelfall, husband and wife, are residents of Pittsburgh, Pa., and Samuel S. Bruce and Margaret S. Bruce, husband and wife, of Washington, D.C. The wives appear as petitioners solely because the returns for 1939 and 1940 filed by their husbands with the collector of internal revenue at Pittsburgh, Pa., were joint returns. The*254 husbands will hereinafter be referred to as the petitioners. During the taxable years the petitioners operated an agency business under the name of Martin, Trelfall and Bruce, the business of which was to secure contracts of railroad companies for The D. & M. Cleaning Process, Inc. [hereinafter sometimes called the "Cleaning Company"], whose headquarters were in Chicago. This corporation owned several patents on machines and on processes for cleaning locomotives and other car equipment. The income of the agency business consisted of commissions paid by the Cleaning Company upon the contracts secured by the petitioners with the railroad companies. Partnership returns for the partnership of Martin, Trelfall and Bruce were filed by the petitioners with the collector of internal revenue at Pittsburgh for the calendar years 1939 and 1940. Such returns showed the amounts of profits which accrued to the petitioners and, also, the amount which was accrued and paid over to Kathryn W. Martin under certain contracts which the petitioners had with her. Prior to April 18, 1934, P. A. Martin, as sales representative of the Cleaning Company, had negotiated continuing contracts between it and *255 various railroads comprising the New York Central railroad system. Martin had formerly been a car builder employed by the New York Central Railroad and had a large acquaintanceship with officials of that railroad. It was through such association that he had been able to obtain contracts from the New York Central system. His compensation consisted of commissions on the pieces of equipment cleaned. On April 18, 1934, P. A. Martin and J. Don Trelfall entered into a partnership agreement to carry out the provisions of an agency contract between the Cleaning Company and Martin. The compensation to be received on account of the continuing contract with the various railroads comprising the New York Central system was under the partnership agreement to remain the property of P. A. Martin. The partnership agreement provided that upon the death of either party revenues received should be applied "to the benefit of his heirs or assigns during their lives." On December 31, 1935, the Cleaning Company entered into a new agency agreement with Martin and Trelfall. This agreement provided for the payment of the compensation of the agents to P. A. Martin and J. Don Trelfall, or the survivor of them, *256 upon all contracts negotiated by the agents so long as the contracts remained in force. Martin and Trelfall instructed The D. & M. Cleaning Process, Inc., to make all payments derived from contracts with the railroads comprising the New York Central system to P. A. Martin, his heirs, or assigns, and not to pay them over to the partnership. Some time during the summer of 1937 Samuel S. Bruce, the general traffic manager of the Koppers Co., became associated with P. A. Martin and J. Don Trelfall in the agency of the Cleaning Company. P. A. Martin died September 16, 1937. Soon thereafter the Cleaning Company advised Trelfall and Bruce that it was freed from the contract which it had with Martin and Trelfall. It proposed thereafter to discontinue the payment of commissions upon the New York Central system contracts. Representations were made to the Cleaning Company by Trelfall and Bruce that if this were done the New York Central system might not continue its contracts for the use of the Cleaning Company's apparatus and processes; for the former associates of Martin connected with the New York Central system were interested in seeing that his widow receive the commissions upon the contracts*257 which had formerly been his. During the period from September 17, 1937, the date of the death of P. A. Martin, to March 10, 1938, J. Don Trelfall was negotiating with the Cleaning Company for the purpose of obtaining a new agency contract. On March 10, 1938, the Cleaning Company and Trelfall entered into an agreement under which Trelfall was to act as agent for the Cleaning Company. This agreement was dated September 17, 1937, although actually executed March 10, 1938. On the same date (March 10, 1938) Trelfall by letter addressed to The D. & M. Cleaning Process, Inc., appointed Samuel S. Bruce his working assignee under the agency agreement. On March 17, 1938, J. Don Trelfall, Samuel S. Bruce, and Kathryn W. Martin entered into an agreement with regard to the distribution of compensation to be received by Trelfall under his agency agreement with the Cleaning Company. This agreement provided that the income derived from contracts with railroads of the New York Central system, less the actual expense of continuing in effect such contracts, would be payable to Kathryn W. Martin during her life or until her remarriage. By a subsequent agreement dated October 25, 1938, between Trelfall, *258 Bruce and Kathryn W. Martin it was provided that Kathryn W. Martin's participation in the income derived from contracts with the railroads of the New York Central system was changed to two-thirds of such net income not in excess of $300 per month. By an agreement of October 13, 1939, this participation in the agency profits was reduced to one-half of the net income from the New York Central system contracts. The net income of Martin, Trelfall and Bruce for the year 1939 and its distribution were as follows: Kathryn W. Martin$4,251.32 Samuel S. Bruce2,911.70 J. Don Trelfall3,528.45 Total$10,691.47 The distribution was in accordance with the contracts dated October 25, 1938, and October 13, 1939. The net income of Martin, Trelfall and Bruce for the year 1940 and its distribution were as follows: Kathryn W. Martin$3,112.61 Samuel S. Bruce3,981.46 J. Don Trelfall4,581.47 Total$11,675.54 This distribution was in accordance with the contract dated October 13, 1939. Opinion The petitioners allege that the respondent erred in taxing equally to them the amounts paid by the organization known as Martin, Trelfall and Bruce during the years 1939 and 1940. *259 They allege that Kathryn W. Martin was a partner in the business; if not, that the amounts paid to her were pursuant to a business contract and that the amounts constitute legal deductions from the gross income of the partnership business actively carried on by Trelfall and Bruce. The position of the respondent is, first, that Kathryn W. Martin was not a partner in any business carried on by Trelfall and Bruce; secondly, that the amounts are not a legal deduction from the gross income of the partnership carried on by Trelfall and Bruce since they were amounts paid to her in purchasing the goodwill of the partnership and were therefore a capital expense or, if not a capital expense, that they were gratuities paid by the petitioners to Kathryn W. Martin. In the circumstances of the case we do not think it is important to consider whether Kathryn W. Martin was a partner in the business conducted by Trelfall and Bruce. There is no evidence that she contributed any services to the partnership or that she contributed capital - unless it be that her acquaintanceship with her deceased husband's associates in the New York Central system can be regarded as a contribution of capital. All *260 the evidence goes to show that the maintenance of the contracts between the different railroads comprising the New York Central system and The D. & M. Cleaning Process, Inc. was necessary in order that Trelfall and Bruce might obtain the contracts of other railroads. The petitioners feared that if Kathryn W. Martin did not receive a share of the profits of the agency business her friends in the New York Central system would not be interested in continuing the contracts in force and that the contracts might be cancelled. The respondent argues that the payments made to Kathryn W. Martin were gifts. In our opinion there is no evidence to support such a contention. The contracts which the petitioners entered into with Kathryn W. Martin were business contracts. The evidence completely refutes the respondent's contention that the payments were made because of any friendship for Mrs. Martin or her deceased husband. The respondent's contention that the payments were made for the purchase of P. A. Martin's interest and were therefore capital expenditures has nothing to support it. The payments were not made for the purchase of goodwill but for the purpose of continuing in existence the contracts*261 between the railroads comprising the New York Central system and The D. & M. Cleaning Process, Inc. The petitioners feared that if Martin's widow did not receive a share in the profits she would become dissatisfied and that the New York Central system contracts would be cancelled. Clearly, a payment which is made under these circumstances can not be regarded as an amount paid for the acquisition of a capital asset. We are of the opinion that the amounts paid by the petitioners to Kathryn W. Martin constituted an ordinary and necessary expense of carrying on the business of the partnership which existed between petitioners Trelfall and Bruce. Decisions will be entered under Rule 50.

2020-11-20 19:11:08.644263+00

South Penn Oil Company, Petitioner, v. Commissioner of Internal Revenue, Respondent South Penn Oil Co. v. Commissioner Docket No. 21975 United States Tax Court July 17, 1951, Promulgated 1951 U.S. Tax Ct. LEXIS 127">*127 Decision will be entered under Rule 50. 1. A trust, forming part of a pension plan, was created by petitioner in 1933, within the meaning of section 165 (a), I. R. C., and the amendments made thereto by the Revenue Act of 1942. 2. The amount of deductions to which petitioner is entitled on account of its contributions to such trust pursuant to section 23 (p), I. R. C., as amended by the Revenue Act of 1942, determined for 1942, 1943, and 1944. 3. The amount of deductions to which petitioner is annually entitled for the years 1943 and 1944 as "normal cost" of the plan for those respective years under section 23 (p) (1) (A) (iii) is not to be reduced by any surplus resulting from the overfunding of liabilities under the plan in years prior to 1942. 1951 U.S. Tax Ct. LEXIS 127">*128 Sidney B. Gambill, Esq., Thomas J. McManus, Esq., and Norman D. Keller, Esq., for the petitioner. W. Morgan Hunter, Esq., for the respondent. Leech, Judge. LEECH 1951 U.S. Tax Ct. LEXIS 127">*129 17 T.C. 27">*28 This proceeding involves deficiencies in Federal income taxes as follows: YearAmount 1942$ 104,644.68 1943166,895.22 194442,817.05 By amended answer the respondent asks an increased deficiency for the year 1944 in an amount which will result from the reduction from $ 136,222.43 to $ 76,283 of the amount heretofore allowed as a deduction under section 23 (p) (1) of the Internal Revenue Code. The amount of the requested increased deficiency is not presently determinable, since the amount of petitioner's deduction for depletion depends upon the decision with respect to other issues involved. The issues are: 1. Whether petitioner is entitled to deductions for the years 1942, 1943, and 1944 in the amounts of $ 299,572.44, $ 262,074.29, and $ 102,798.72, respectively, on account of payments to or deposits with the Equitable Life Assurance Society of the United States in the years 1933 to 1937, inclusive, with respect to services of petitioner's employees rendered prior to 1933, by apportioning such payments in equal parts over a period of 10 consecutive years beginning with the years in which payments or deposits were made, pursuant to section 23 (q) of the Revenue1951 U.S. Tax Ct. LEXIS 127">*130 Acts of 1932 and 1934 and section 23 (p) of the Revenue Act of 1936 and section 23 (p) (2) of the Internal Revenue Code. 2. Whether petitioner is entitled to deductions for the years 1943 and 1944 in the amounts of $ 144,865.44 and $ 146,478.99, respectively, or any lesser amounts, representing payments made by it to Equitable on account of the normal costs of the Equitable plan for those years, arising from services rendered by petitioner's employees subsequent to 1932. 3. Whether petitioner is entitled to additional deductions for depletion for the years 1942, 1943, and 1944, it being stipulated that the 17 T.C. 27">*29 amount of depletion deductions depends upon the decision as to the other issues and may be determined under Rule 50. The case was submitted upon a partial stipulation of facts, and evidence. The facts as stipulated are so found. FINDINGS OF FACT. Petitioner is a Pennsylvania corporation having its principal office at Bradford, Pennsylvania. Its returns for the taxable years involved were filed with the collector of internal revenue for the twenty-third district of Pennsylvania. Petitioner kept its books and filed its tax returns on a calendar year basis and on an accrual1951 U.S. Tax Ct. LEXIS 127">*131 method of accounting. For many years prior to 1933 petitioner maintained a plan for annuities without contribution to its cost by the employees, which provided life annuities for a large number of its employees. The cost of the plan steadily rose and it became evident to petitioner that it would be unable to meet the still larger outlays which a continuation of the plan would require. At a meeting of petitioner's board of directors on January 3, 1933, the directors recommended to the stockholders a modification of the plan as set forth in a resolution adopted at that meeting. A stockholders' meeting was held on January 17, 1933, approving the recommendations of the directors and authorizing and empowering the officers and directors to enter into a suitable contract with such responsible insurance company or trustee as they might select from time to time to carry into effect the proposed modifications or new plan for annuities substantially as outlined in their resolution of January 3, 1933. Acting upon the authority of the stockholders and board of directors of petitioner, the plan existing prior to 1933 was terminated. On March 1, 1933, petitioner issued and distributed among its1951 U.S. Tax Ct. LEXIS 127">*132 employees a booklet entitled "Contributory Plan for Annuities for the Employees of South Penn Oil Company." This plan for annuities (hereinafter referred to as the "plan") was effective January 1, 1933. The principal features of the plan, as set forth in the letter of introduction included in the booklet, were as follows: 1. All employees in active service on December 31, 1932, who have completed one year of service and who are under age 64 1/2 if males or 60 if females and who were under age 45 when hired if after November 25, 1918, become Members of the Contributory Plan for Annuities. The Company will provide at the normal age of retirement for Members in the service at that time a monthly annuity equal to 1 1/2 per cent of the regular monthly pay of December, 1932, for each year of service prior thereto. The total cost of providing these past service annuities will be borne by the Company. 2. Employees who become Members of the Contributory Plan as of January 1, 1933, may at their own option become contributing Members. All employees with less than one year of service on December 31, 1932, and all employees 17 T.C. 27">*30 hired after January 1, 1933, must upon the completion of one1951 U.S. Tax Ct. LEXIS 127">*133 year's service become contributing Members. Only contributing Members may receive annuities in respect of service after January 1, 1933. 3. Contributing Members' payments will be accumulated at certain guaranteed rates of interest and will be applied at retirement to the purchase of an annuity of the kind selected by the employee. 4. The Company will provide, at the normal age of retirement, an annuity having exactly the same value as the annuity provided by the employee himself. 5. Although not stated in the Plan, employee contributions have been fixed so that the accumulations at the normal age of retirement, when doubled by the Company adding an equal amount, will purchase a life annuity equal on the average for all employees to 1 1/2 per cent of the average pay received while a contributor, for each year of service. Individual annuities, even on the life basis, will not have this exact relationship to pay. The assessments have been graduated by age at entry in order that the accumulations of employees entering the Plan at different ages would buy about the same amount of annuity relative to their pay and service. Compound interest is a major factor in accumulating funds and1951 U.S. Tax Ct. LEXIS 127">*134 the older the Member is when he joins the Plan, the shorter the period which compound interest works for him. 6. Members will normally retire on the first of the month after reaching their 65th birthday if men, or their 60th birthday if women. At the discretion of the Company, male Members may be retired as early as age 55 and female Members as early as age 50, with annuities mathematically adjusted. 7. Retiring Members may elect other forms of annuities, purchasable with the same amounts, providing for continuance of the annuity in whole or part to a surviving wife or husband. Contributing Members must specify before retirement the form of annuity toward the purchase of which their own contributions will be applied. Any contributing Member who so desires may elect an annuity form which will insure that the unpaid balance of his own accumulations applied to the purchase of the annuity be paid out to some beneficiary, or to his estate, should he die before the annuity payments received by him equal the full amount of his accumulations. 8. All employee contributions, and all the funds provided under this Contributory Plan by the Company, which for many years will greatly exceed the1951 U.S. Tax Ct. LEXIS 127">*135 total of the employee deposits, will be paid over to The Equitable Life Assurance Society of the United States, subject to a right of the Directors to substitute another insurance company or to appoint trustees in place of an insurance company. The Society will guaranty all annuities purchased from it under this Plan. 9. Any contributing Member who leaves the service or dies prior to retirement will have returned to him or his beneficiary by The Company all the money he has paid into the Plan, with interest credited monthly and compounded annually at the rate, for the next ten years at least, of 3 1/2 per cent per annum. Section V (a) of the plan further provides as follows: The Company will provide, at Normal Retirement Date, for each Member then surviving in the service who had been actively in service on December 31, 1932, a monthly Past Service Life Annuity equal to one and one-half per cent of his regular salary or wages for the month of December, 1932, multiplied by the number of years of continuous service prior to January, 1933. The funds estimated to be necessary to provide these annuities at Normal Retirement Date will be paid to the Insurance Company by the Company 1951 U.S. Tax Ct. LEXIS 127">*136 either in one lump sum or in instalments over a period of years. * * * * 17 T.C. 27">*31 Section XII of the plan further provides as follows: * * * Moreover, in event of discontinuance of this Plan, the Company will arrange with the Insurance Company or trustee to provide for each Member then in the Plan a Paid-up Deferred Life Annuity contract with income payments to commence at Normal Retirement Date of an amount to be determined by some just and fair formula for distributing all funds, not already applied to purchase annuities, arising from the money paid to the Insurance Company or trustee; PROVIDED, however, that no Member will receive Paid-up Deferred Life Annuities to exceed the sum of (a) the Past Service Regular Annuity and (b) two times the Paid-up Deferred Life Annuity purchasable by the Member's accumulated payments to date of such discontinuance. * * * * Pursuant to the plan, petitioner on December 27, 1933, entered into a contract with the Equitable Life Assurance Society of the United States (hereinafter referred to as "Equitable"). This contract contains the following introductory and general provisions: THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES A MUTUAL1951 U.S. Tax Ct. LEXIS 127">*137 COMPANY ORGANIZED JULY 26, 1859 (herein called the Equitable) HEREBY AGREES TO RECEIVE PREMIUM PAYMENTS IN ACCORDANCE WITH THE TERMS OF THIS CONTRACT from the SOUTH PENN OIL COMPANY (herein called the Employer) and to pay Annuities Purchased by Application of such Premium Payments and Interest Thereon in Accordance with the following GROUP ANNUITY PLAN This contract is issued in consideration of the payment by the Employer to the Equitable as of the Register date hereof of     Fifty Thousand and 00/100     Dollars, and the payment monthly thereafter of the premium payments described in the provision hereof entitled "Premium Payments," the amount so payable for each month being hereinafter referred to as the "aggregate monthly premium." THE PROVISIONS of the subsequent pages hereof form a part of this contract as fully as if recited at length over the signatures hereto affixed. This contract is executed at the Home Office of the Equitable in New York on its date of issue, the     27th     day of     December, 1933    . * * * * GENERAL PROVISIONS MANNER OF PAYMENT OF ANNUITIES: * * * * 17 T.C. 27">*32 Supplemental Certificate: Upon the date for commencement1951 U.S. Tax Ct. LEXIS 127">*138 of Annuity payments to the Employee, the Equitable will issue to the Employee a Supplemental Certificate or Certificates providing for the payment to him of the Annuity or Annuities to which he is entitled hereunder. * * * * PAYMENT OF PREMIUMS: Each aggregate monthly premium under this contract shall be payable by the Employer at the Home Office of the Equitable on or before the day upon which due. GRACE: A grace of thirty-one days, subject to an interest charge at the rate of 6% per annum, will be granted for the payment of each aggregate monthly premium after the first. Except as herein otherwise expressly provided, the payment of the aggregate monthly premium for any month shall not maintain this contract in force beyond the date when the aggregate monthly premium for the next succeeding month becomes due. BASIS OF RESERVE: The RESERVE for which funds are to be held on the Annuities under this contract shall be at least that computed upon     the Combined Annuity Mortality Table     using an interest rate of     4%    . CONTRACT: This contract together with the Employer's application therefor, copy of which is securely attached hereto, shall constitute the entire1951 U.S. Tax Ct. LEXIS 127">*139 contract between the parties. All statements made by the Employer, shall, in the absence of fraud, be deemed representations and not warranties, and no statement shall avoid this contract or be used in defense of a claim hereunder unless contained in a written application. CONTRACT YEARS: The first contract year hereunder shall begin on the Register date stated on the back hereof and the second and subsequent contract years shall begin on the respective anniversaries of the Register date. * * * * PARTICIPATION: Commencing at the end of the third contract year this contract, prior to termination, shall participate annually in the surplus of the Equitable as determined and apportioned by it. Any surplus apportioned by the Equitable to this contract shall be payable to the Employer in cash, or, upon written notice to the Equitable by the Employer, may be applied toward the payment of the aggregate monthly premium for any month under this Group Annuity contract provided the balance of such premium is duly paid. NOTE: The terms of this contract do not warrant the expectation that the surplus to be apportioned hereunder to the Employer will be great. * * * * The contract refers to three1951 U.S. Tax Ct. LEXIS 127">*140 classes of membership in the plan: CLASS A -- Employees who retired prior to 1933. CLASS B -- Employees who elected to become contributing members of the plan. CLASS C -- Employees entitled to annuities in recognition of services rendered prior to 1933 (hereinafter referred to as "past service annuities") who did not elect to become contributing members of the plan. The contract contains the following provisions as to "PREMIUM PAYMENTS": II. CLASS II: The Employer may make premium payments, herein called "Class II premium payments," arising from contributions represented by the Employer as having been received by it from Class B Members at the rate of a 17 T.C. 27">*33 percentage of monthly earnings (as determined by the Employer) set forth in Column (2) below corresponding to such Employee's age (nearest birthday) at entry into the Plan. It is understood and agreed that the amount of the Employer's Class II premium payments made on any monthly premium due date shall equal the total amount of contributions received by it from Class B Members during the calendar month immediately preceding such date. It is further understood and agreed that the Equitable shall not be responsible in any1951 U.S. Tax Ct. LEXIS 127">*141 way for the Employer's failure to make Class II premium payments in accordance with the foregoing understanding. [Withholding Table] III. CLASS III: The Employer may on monthly premium due dates make monthly and/or single sum premium payments, arising from the Employer's contributions toward the cost of Annuities to be purchased hereunder as credits for service rendered both prior to and after the Register date hereof by Employees included in the Plan, such premium payments to be of an amount to be determined upon the basis of estimates to be made and furnished by the Equitable to the Employer. Such premium payments are herein called "Class III premium payments." The Equitable shall not be required to make the estimates referred to in this paragraph more frequently than at intervals of three years. IV. PREMIUM FUND (A): Premium Fund (A) shall consist of all Class II premium payments made by the Employer to the Equitable, together with any interest transferred thereto in accordance with the provision entitled "Interest Transfers to Premium Fund (A)", except that any portion of such premium payments and interest after being applied to the purchase of Annuities under this contract or1951 U.S. Tax Ct. LEXIS 127">*142 after being allowed to the Employer in accordance with the provision entitled "Benefit upon Employees' Separation from Service Prior to Retirement," shall not thereafter constitute a part of the said Premium Fund. V. PREMIUM FUND (B): Premium Fund (B) shall consist of all Class III premium payments made by the Employer to the Equitable and of any allowances to the Employer under the provision hereof entitled "Benefit upon Employees' Separation from Service Prior to Retirement" which are treated in accordance with Sub-Paragraph (c) of the third paragraph of provision, together with any interest that may be credited to such Fund in accordance with the provision entitled "Interest" hereinafter set forth, except that any portion of such premium payments, allowances and interest after being applied to the purchase of Annuities under this contract or after being transferred to Premium Fund (A) in the manner set forth in the provision hereof entitled "Interest Transfers to Premium Fund (A)" shall not thereafter constitute a part of such Premium Fund. VI. APPLICATION OF PREMIUM FUNDS: Premium Fund (A) -- Immediately prior to the attainment by an Employee while included in Class B Membership1951 U.S. Tax Ct. LEXIS 127">*143 of the Normal Retirement Age or any earlier duly elected Special Retirement Age, the Employer is to file written notice at the Home Office of the Equitable of the amount of the total Class II premium payments made by the Employer arising from contributions received by it from such Employee, in accordance with the records maintained by the Employer, accumulated to such Retirement Age at the interest rate or rates on the basis of which and in the manner by which interest was transferred to Premium Fund (A) from Premium Fund (B) during the period of such Employee's inclusion in this Plan. Provided such notice is duly received, together with any other facts which the Equitable shall deem pertinent for the purposes of this provision, upon the attainment by 17 T.C. 27">*34 such an Employee of the appropriate Retirement Age, while included in the Plan, a part of Premium Fund (A) (if then sufficient for the purpose under the terms of this contract) equal to the accumulated amount of Class II premium payments and interest with respect to such Employee as set forth in the Employer's notice to the Equitable shall, subject to the subsequent provisions hereof, be applied by the Equitable to the purchase1951 U.S. Tax Ct. LEXIS 127">*144 (on the basis of Tables IV, VII, VIII and IX on Pages 2 (v), 2 (aa) and 2 (bb) hereof) of an Annuity with respect to such Employee which shall be of the kind elected by the Employee in accordance with the provision entitled "Optional Annuity Forms" on Pages 2 (h) and 2 (i) hereof provided that the Equitable shall have the right to require proof of age of the Employee before making such application. It is agreed between the Equitable and the Employer that the Employer shall file such notice with respect to all lives embraced in Class B Membership in this Plan on or prior to their attainment of the Normal Retirement Age or any earlier duly elected Special Retirement Age and that the Equitable shall apply the part of Premium Fund (A) (if then sufficient for that purpose under the terms of this contract) in accordance with this provision toward the purchase of the Annuities covering the retirement benefits with respect to all Employees embraced in such membership as to whom such notice is filed by the Employer, upon attainment of the respective retirement ages. Premium Fund (B) -- Subject to the subsequent provisions hereof and while this contract is in force, upon attainment by an Employee1951 U.S. Tax Ct. LEXIS 127">*145 while included in Class B or Class C Membership in the Plan of the Normal Retirement Age or any earlier duly elected Special Retirement Age, such part of Premium Fund (B) as may be necessary (if then sufficient for that purpose under the terms of this contract) shall be applied by the Equitable to the purchase (on the basis of Table III on page 2 (u) hereof) of an Annuity with respect to such Employee which shall be of the kind and shall provide for monthly payments of an amount to be determined in accordance with the respective provisions entitled "Normal Retirement Benefit" and "Amount of Annuity Payments" on Page 2 (g) hereof. The Equitable shall have the right to require proof of age of the Employee before applying Premium Fund (B) as above set forth. It is agreed between the Employer and the Equitable that the Employer shall report all lives embraced in Class B or Class C Membership in this Plan on or prior to their attainment of the Normal Retirement Age or any earlier duly elected Special Retirement Age and that the Equitable shall apply the appropriate part of Premium Fund (B) (if then sufficient for that purpose under the terms of this contract) in accordance with this provision1951 U.S. Tax Ct. LEXIS 127">*146 toward the purchase of the Annuities covering the retirement benefits with respect to all Employees embraced in either of such memberships who are so reported by the Employer upon attainment of the respective retirement ages. VII. SUFFICIENCY OF PREMIUM FUNDS: Premium Fund (A) -- It is expressly understood and agreed that the Equitable makes no representation and assumes no liability as to the sufficiency of Premium Fund (A) to purchase the Annuities described hereunder and/or to effect the allowances to the Employer as provided hereinafter under the provision entitled "Benefit upon Employees' Separation from Service Prior to Retirement;" that no Annuity shall be purchased at any time with respect to any Employee unless Premium Fund (A) (less the amount of any sums then to be allowed to the Employer under the provision entitled "Benefit upon Employees' Separation from Service Prior to Retirement") shall then be sufficient to purchase the appropriate Annuity with respect to each Employee then attaining retirement age as to whom notice is filed with the Equitable in accordance with this provision; and that the Equitable17 T.C. 27">*35 shall have fulfilled all its obligations hereunder in 1951 U.S. Tax Ct. LEXIS 127">*147 respect of the application of said Premium Fund in applying said Premium Fund in accordance with the record of Employees and with the written notices of the amounts of the accumulated Class II premium payments made with respect to them furnished it by the Employer and in following the instructions of the Employer as to the order in which said Premium Fund is to be applied in accordance with the appropriate provision or provisions of the contract in all cases where the terms of the contract would require simultaneous application of such Premium Fund with respect to two or more Employees; it being the intention of the parties to this contract that no Employee shall have any right against the Equitable with respect to any action or omission on its part hereunder. Premium Fund (B) -- It is expressly understood and agreed that the Equitable makes no representation and assumes no liability as to the sufficiency of Premium Fund (B) to purchase the Annuities described in this contract with respect to Class B and Class C Members; that no Annuity shall be purchased with respect to any such Employee unless said Premium Fund shall then be sufficient to purchase with respect to him an Annuity of1951 U.S. Tax Ct. LEXIS 127">*148 the kind and providing for monthly payments of an amount determined in accordance with the said provision entitled "Normal Retirement Benefit;" and that the Equitable shall have fulfilled all its obligations hereunder in respect of the application of said Premium Fund in applying said Premium Fund in accordance with the record of Employees furnished it by the Employer and in following the instructions of the Employer as to the order in which said Premium Fund is to be applied in accordance with the appropriate provision or provisions of this contract in all cases where the terms of the contract would require simultaneous application of said Premium Fund with respect to two or more Employees; it being the intention of the parties to this contract that no Employee shall have any right against the Equitable with respect to any action or omission on its part hereunder. Notwithstanding any of the foregoing reservations, the Equitable pledges that at all times while this contract remains in force the combined Premium Funds (A) and (B) shall be the total of the Class II and Class III premium payments paid to it by the Employer under this contract plus the interest credited to Premium Fund1951 U.S. Tax Ct. LEXIS 127">*149 (B) as hereinafter specified, less the amount of any sums paid to the Employer in cash or applied to the payment of premiums under the provision entitled "Benefit upon Employee's Separation from Service Prior to Retirement" and less any amounts applied to the purchase of Annuities under this contract for any Class B or Class C Members. The contract contains the following provisions as to "INTEREST CREDITS TO PREMIUM FUND (B)": INTEREST CREDITS: On each anniversary of the Register date of this contract, the Equitable shall credit interest to Premium Fund (B), at the annual rate determined on any such contract anniversary in accordance with the paragraph set forth below entitled "Interest Rate," on the amount of the combined Premium Funds determined as of the last preceding anniversary with appropriate allowance or deduction for increases or decreases in such combined Funds since said last anniversary. (For interest to Premium Fund (A) see next following provision entitled "Interest Transfers to Premium Fund (A)".) INTEREST RATE: Subject to the paragraph below entitled "Minimum Interest Rate," the annual rate per centum at which interest on the combined Premium Funds is to be credited1951 U.S. Tax Ct. LEXIS 127">*150 to Premium Fund (B) on any contract anniversary in accordance with the immediately foregoing paragraph shall be that interest, taken to two places of decimals, which, when applied to the combined Premium 17 T.C. 27">*36 Funds in the manner described in said paragraph, will reproduce as nearly as may be an amount of interest determined as follows, such amount to be known as the "working amount of interest." The "working amount of interest" shall be an amount of interest determined by the application to the combined Premium Funds in the manner described in the paragraph above entitled "Interest Credits" of the "modified Gain and Loss Exhibit interest rate," defined below, less the sum of $ 1,000, and less any state and/or federal taxes payable with respect to the contract year immediately preceding the said contract anniversary on the Premium Funds and/or on Annuities that have been purchased therewith. The "modified Gain and Loss Exhibit interest rate" shall be the net interest rate per centum earned by the Equitable during the calendar year next preceding such contract anniversary, determined as hereinafter stated, less a rate of .25%, subject, however, to the paragraph set forth below1951 U.S. Tax Ct. LEXIS 127">*151 entitled "Revision of Interest Rate." The net interest rate earned by the Equitable during any calendar year shall be determined to two places of decimals as the ratio of the net interest (including rents) earned on its investments for such year, corresponding to Item 12 of Page 8 of the Gain and Loss Exhibit of the Annual Statement in the form used for the year 1932, to its mean ledger assets for such year less one-half of such interest. MINIMUM INTEREST RATE: Subject to the paragraph below entitled "Revision of Interest Rate" the annual rate per centum referred to above in the paragraph entitled "Interest Rate" at which interest on the combined Premium Funds is to be credited to Premium Fund (B) shall be not less than 3 1/2%. REVISION OF INTEREST RATE: The Equitable reserves the right, by giving at least sixty days written notice to the Employer, to change from time to time at the commencement of any contract year beginning with the eleventh contract year the rate of the deduction (.25%) used in determining the "modified Gain and Loss Exhibit interest rate" referred to in the paragraph above entitled "Interest Rate" provided, however, that subsequent changes, if made, shall not1951 U.S. Tax Ct. LEXIS 127">*152 be effected at more frequent intervals than five years and that the change in such deduction at any time shall not exceed .05%. The Equitable also reserves the right, by giving at least sixty days written notice to the Employer, to change from time to time at the commencement of any contract year beginning with the twenty-sixth contract year the minimum rate at which interest is to be credited annually in accordance with the paragraph above entitled "Minimum Interest Rate" provided, however, that subsequent changes, if made, shall not be effected at more frequent intervals than five years and that the change in the annual rate per centum at any time shall not exceed .25. The contract contains the following provisions as to "INTEREST TRANSFERS TO PREMIUM FUND (A)": INTEREST TRANSFERS: On the first day of each calendar month after the Register date of this contract, the Equitable shall transfer from Premium Fund (B) to Premium Fund (A), subject to the subsequent provisions hereof, an amount equal to interest for one month, at a monthly rate corresponding to the annual rate to be specified by the Employer as hereinafter provided, on the amount of said Premium Fund (A) determined as of1951 U.S. Tax Ct. LEXIS 127">*153 the last preceding such first day of the month with appropriate adjustment for any changes during the month. It is expressly understood and agreed that the Equitable makes no representation and assumes no liability as to the sufficiency of Premium Fund (B) to cover the interest transfers herein referred to and that no such interest transfer will be made on any first day of a calendar month unless Premium Fund (B) is then sufficient for that purpose. 17 T.C. 27">*63 INTEREST RATE: It is understood and agreed between the Equitable and the Employer that the interest rate on the basis of which the interest transfers in the foregoing paragraph are to be computed shall be 4 % per annum, compounded annually, for the first ten contract years and that the Employer may change such rate thereafter by written notice filed at the Home Office of the Equitable provided that such changes may not be effected at more frequent intervals than five years and that the change in the annual rate per centum at any one time may not exceed .25. The balances in Premium Funds (A) and (B) appear on the balance sheets of Equitable as reserve liabilities. The money paid as premiums by petitioner to Equitable is received1951 U.S. Tax Ct. LEXIS 127">*154 as any other money received by Equitable, deposited in bank or banks, and not segregated in any way from funds received from other customers of Equitable. The contract contains the following provisions as to "TERMINATION OF CONTRACT": I. MANNER OF TERMINATION OF CONTRACT: Subject to the terms of Section IV of this provision, this contract shall terminate upon the happening of any one of the events described in any one of the four following Sub-Paragraphs provided, however, that notwithstanding such termination, the Employer, the Employees and the Equitable shall have the rights set forth in either Section II or Section III (depending upon the manner of termination) and in Section VI of this provision: (1) Discontinuance by Employer: The Employer shall have the right at or prior to any monthly premium due date to elect to discontinue all premium payments under this contract, in which event this contract upon such date shall terminate and no further premium payments of any kind hereunder will be accepted by the Equitable. (2) Default: If the Employer shall make no premium payment for any month on or before the day upon which the aggregate monthly premium for that month is due1951 U.S. Tax Ct. LEXIS 127">*155 such failure shall constitute a default hereunder as of such due date. Subject to the provision hereof entitled "Grace," upon such default this contract shall terminate. (3) Failure to Maintain Premium Fund: This contract shall automatically terminate (a) on the date that, an Employee included hereunder having attained his Normal Retirement Age or any earlier duly elected Special Retirement Age, Premium Fund (B) is insufficient to provide for the purchase of the Life Annuity with respect to such Employee in accordance with the provision hereof entitled "Premium Payments," or (b) on any anniversary of the Register date of this contract in event of either one of the following contingencies happening: (i) If the sum of the Employer's Class III premium payments made during the twelve months' period preceding such anniversary under Section III of the provision entitled "Premium Payments" heretofore set forth amount to less than 25% of the sum of the premiums estimated to be required for such period in accordance with such section, or (ii) If the sum of the Employer's Class III premium payments made during the period from the Register date of this contract up to such an anniversary, 1951 U.S. Tax Ct. LEXIS 127">*156 coincident with any one of those indicated below, under Section III of the provision entitled "Premium Payments" heretofore set forth is less 17 T.C. 27">*38 than the respective percentages stated below of the sum of the premiums estimated to be required for such period in accordance with such section: Anniversaries of register date of contractPercentage 6th75 12th80 18th85 24th and each subsequent sixth anniversary90 (4) Employer's Election to Obtain Benefits from Another Carrier: The Employer shall have the right, prior to termination in any one of the manners described in Sub-Paragraphs (1), (2) and (3) above, to elect to discontinue this contract as of any monthly premium due date subsequent to the exercise of such right and continue the Plan of retirement benefits by contractual arrangement with another carrier. In event of the Employer's exercise of such right this contract shall terminate upon the date stated in such election, or, if no date is stated, upon the first day of the calendar month next following the date upon which written notice of such election is received at the Home Office of the Equitable. II. RIGHTS OF EMPLOYEES AND EMPLOYER UPON TERMINATION1951 U.S. Tax Ct. LEXIS 127">*157 IN MANNER DESCRIBED IN ANY ONE OF SUB-PARAGRAPHS (1), (2), OR (3) OF SECTION I: If this contract terminates in the manner described in any one of Sub-Paragraphs (1), (2) or (3) of Section I of this provision, the Equitable as of the date of termination Employees' Rights: (a) will grant to each Employee included in Class B Membership in the Plan at the date of termination and with respect to whom no benefit shall previously have become due under this contract, the Non-Participating Paid-up Annuity contract described in Paragraph (1) of the sub-section hereinafter entitled "Employees' Non-Participating Annuities;" (b) will grant to each Employee included in Class B or Class C Membership in the Plan on the date of said termination, exclusive of Employees who shall have attained, on or prior to such date of termination, their respective Normal Retirement Ages or any earlier duly elected Special Retirement Age, a Non-Participating Annuity contract of the kind and with payments of the amount and commencing at the date determined in accordance with Paragraph (2) of the said sub-section hereinafter entitled "Employees' Non-Participating Annuities;" (c) will grant to each Employee included1951 U.S. Tax Ct. LEXIS 127">*158 in Class B or Class C Membership then surviving with respect to whom the first Annuity payment shall have become due on or prior to said date of termination under an Annuity purchased by the application of Premium Fund (B) and with respect to which no Supplemental Certificate shall have been issued, a Supplemental Certificate entitling such Employee to receive any of such Annuity payments becoming due and payable on or after said date of termination; and Employer's Rights: will grant to the Employer the Cash Surrender Value, if any, to which it may be entitled as hereinafter provided. All rights of the Employer under this contract, except with respect to any such Cash Surrender Value, shall cease as of the date of the termination, and the granting to the Employees of the Non-Participating Annuities above mentioned shall be in lieu of all benefits, except such Cash Surrender Value, to either the Employees or Employer under this contract. * * * * Employer's Cash Surrender Value: In the event that there shall be any balance remaining in Premium Fund (B) after providing all eligible Employees 17 T.C. 27">*39 with the maximum Annuity determined as provided in the sub-paragraph hereof 1951 U.S. Tax Ct. LEXIS 127">*159 entitled "Maximum Annuity" or "Maximum Annuity Where Termination Is Due to Enactment of Pension Law," 95% of such remaining balance shall be returned to the Employer in a single sum in cash as a Cash Surrender Value. The Equitable reserves the right to defer payment of said Cash Surrender Value for a period of ninety days after the date of termination. III. PROCEDURE UPON TERMINATION IN MANNER DESCRIBED IN SUB-PARAGRAPH (4) OF SECTION I: * * * On and after the date of termination in the manner described in Sub-Paragraph (4) of Section I of this provision, the Equitable shall be discharged of all liability under this contract except (1) with respect to Annuities under which Annuity payments shall have commenced at the date of termination, and (2) for the payment of the Transfer Values in accordance with this Section, and shall be under no responsibility whatsoever to the Employer or any Employee as to the application of such Transfer Values by the other carrier. * * * * Amount of Transfer Values: The combined Transfer Values with respect to the Premium Funds as of the date of termination shall be equal to a percentage of the combined amounts of the respective Premium Funds as1951 U.S. Tax Ct. LEXIS 127">*160 of the date of termination, dependent upon the contract year during which termination in the manner described in Sub-Paragraph (4) of Section I of this provision occurs, and to be determined in accordance with the following schedules: Percentage of combined amounts of premium funds On portion upOn portion in to and includingexcess of $ 1,000,000$ 1,000,000 If contract terminates on, or during the contract year prior to -- First anniversary of register date95%   97 1/2% Second anniversary of register date97    97 1/2% Third and subsequent anniversaries97 1/297 1/2% * * * * VI. OUTSTANDING SUPPLEMENTAL CERTIFICATES AT TERMINATION: Termination of this contract shall not affect any rights or privileges to which Employees have become entitled under Supplemental Certificates duly issued to them hereunder and which are then outstanding but on and after such termination the Equitable shall be under no obligation to the Employer or Employees of the Employer other than to carry out the obligations theretofore assumed by it pursuant to the terms hereof, and shall be under no obligation whatsoever by virtue of this contract to any Employees1951 U.S. Tax Ct. LEXIS 127">*161 who shall not have theretofore received a Supplemental Certificate and who do not then become entitled to receive a Supplemental Certificate, a Paid-up Non-Participating Annuity or Annuities, or a cash payment in lieu of such an Annuity or Annuities, under the terms of Section II of this provision. The contract has not yet terminated, either under the foregoing provisions or otherwise. The contract contains the following provisions as to "REVISION OF RATES": The Equitable reserves the right, by giving at least sixty days written notice to the Employer, to change the rates used as the bases of Tables V, VI, VII, VIII, IX and X and the rates of interest to be used in determining the amount of the Death Benefit and the cash payment on surrender under the Paid-up Deferred Annuities described in the provisions hereof entitled "benefit upon Employees' Separation from Service Prior to Retirement," "Employee's Election to Pay Premiums Direct to Equitable," and in Paragraph (1) of Section II of the provision 17 T.C. 27">*40 hereof entitled "Termination of Contract," from time to time on any anniversary of the Register date of this contract beginning with the fifth such anniversary with respect to1951 U.S. Tax Ct. LEXIS 127">*162 Annuities to be purchased for Employees entering or re-entering the Plan on or after such fifth anniversary. The Equitable also reserves the right, by giving at least sixty days written notice to the Employer, to change the rates used as the basis of Tables III and IV on any anniversary of the Register date of this contract beginning with the fifth such anniversary with respect to Annuities to be purchased hereunder on and after such fifth anniversary subject to the limitation that in any event the following Tables III-A and IV-A shall apply in lieu of Tables III and IV, respectively, to any Annuities purchased on and after such fifth anniversary with respect to Employees entering or re-entering the Plan before such fifth anniversary. Table III of the contract shows the single sum premium payment, based upon the attained age at the date of purchase, required to purchase an immediate life annuity with monthly annuity payments of $ 1 each, first payment one month after the respective attained ages stated. Table III-A is the same except that the rates set forth range from 3 per cent to 12 per cent higher. On April 23, 1936, the following modification of the plan was announced in a letter1951 U.S. Tax Ct. LEXIS 127">*163 to petitioner's employees, which was to be inserted between pages 14 and 15 of the booklet entitled "Contributory Plan for Annuities for the Employees of South Penn Oil Company." * * * This additional benefit is effective as of March 1, 1936, and will apply to all employees leaving service after that date who at time of termination have rendered five or more years of continuous service with the Company. The details of this additional benefit are as follows: 1. Such employees will on termination receive from the Equitable a paid-up annuity contract providing for annuity payments to commence at the employee's normal retirement date equal to the past service annuity credited to the employee for service rendered the Company before January, 1933. This amounts to 1 1/2% of the employee's regular salary or wages for the month of December, 1932, multiplied by the number of years of continuous service prior to January, 1933. 2. With respect to service rendered the Company after March 1, 1933, such employees may elect to receive the benefits heretofore provided under the Plan, that is, either a cash payment of his own contributions with interest or paid-up annuity to begin at normal retirement1951 U.S. Tax Ct. LEXIS 127">*164 date purchased with his own contributions and interest that can be cashed in for cash surrender value at any time before retirement. Such an employee may, however, elect to receive a special paid-up annuity in lieu of the withdrawal benefits heretofore provided under the Plan. This special paid-up annuity will provide at normal retirement date a life income equal to the annuity income purchased not only with the employee's contributions and interest but also a like annuity income purchased out of Company funds. * * * The contract was amended June 29, 1936, to effectuate as of March 1, 1936, the foregoing modification. Pursuant to the plan and contract petitioner made payments to or deposits with Equitable on account of past service annuity costs, in the years and amounts as follows: 17 T.C. 27">*41 YearAmount 1933$ 374,981.48 19341,592,755.65 1935695,866.78 1936197,274.54 1937134,845.93 Total$ 2,995,724.38 The following schedule shows (1) the total amount allocable to each year if each such payment is apportioned over a 10-year period beginning with the year in which the payment was made; (2) the amounts claimed as deductions in petitioner's income tax returns1951 U.S. Tax Ct. LEXIS 127">*165 on account of past service annuity costs; (3) the amounts allowed as deductions by respondent; and (4) the net income (or loss) set forth in petitioner's returns: 1234 Total amount allocable to each year if each such Yearpayment isAmounts claimedNet income or apportioned overas deductionsAmounts allowed(loss) set forth a 10-year periodin petitioner'sas deductionsin petitioner's beginning withincome taxby respondentreturns the year inreturns which the payment was made 1933$ 37,498.15$ 374,981.48$ 374,981.48($ 649,608.13) 1934196,773.71195,608.58195,608.58(415,424.11) 1935266,360.39273,238.26273,238.26(422,520.65) 1936286,087.85298,907.95286.087.851,360,737.45  1937299,572.44299,572.44299,572.442,131,837,34  1938299,572.44299,572.44299,572.44(387,545.50) 1939299,572.44299,572.44299,572.441,059,837.64  1940299,572.44299,572.44299,572.44644,943.37  1941299,572.44299,572.44299,572.442,372,993.81  1942299,572.44299,572.440   4,197,899.94  1943262,074.29265,569.630   2,798,135.19  1944102,798.7294,755.700   1,340,290.05  1951 U.S. Tax Ct. LEXIS 127">*166 Petitioner has never exercised the right, reserved in the plan and in the contract, to reduce interest rate for the computation of interest transfers to Premium Fund (A). On January 24, 1948, petitioner's directors resolved to continue the 4 per cent rate until March 1, 1953, and thereafter until further action by the board of directors. As of February 28, 1942, however, it was reasonable to assume that petitioner would exercise this right. In carrying out the provisions of the agreement to the effect that if an employee desires to make an election as to the type of annuity he wants, about five years prior to his eligibility for retirement petitioner mails to such employee a letter informing him of his rights under the plan and requesting him to make his election. Other than the booklet hereinbefore referred to, the employees do not, prior to retirement, obtain any certificate of any kind from 17 T.C. 27">*42 Equitable showing their benefits under the plan. Equitable does not know the identities of petitioner's employees prior to eligibility for retirement and notification thereof. Equitable does not keep any individual cards or records on the individual employees of petitioner. Petitioner1951 U.S. Tax Ct. LEXIS 127">*167 keeps all records with respect to its individual employees and maintains an individual record for each employee. The first notice Equitable has as to the identity of an employee of petitioner or that said employee is coming up for retirement is after the employee has elected the particular type of annuity he desires. The next communication to the employee is shortly before reaching the retirement age, anywhere from six to twelve weeks, when the employee is notified of his eligibility for retirement. Equitable is then notified that an employee is eligible for retirement and the amount of money to the employee's credit in the fund. Equitable is requested to specify what the employee's annuity will be. A form is furnished to Equitable, setting forth the information with respect to the particular employee. At this point Equitable purchases the annuity and the funds on deposit with Equitable are used for that purpose. Equitable then furnishes to such employee a certificate showing what annuity the employee will receive, the type of annuity and the employee's name and address. This agreement is then one between Equitable and the employee, and the deposits thereafter made by petitioner1951 U.S. Tax Ct. LEXIS 127">*168 to Equitable are unaffected by subsequent payments to the retiring employee. Petitioner has never exercised its right to remove the fund from Equitable and turn it over to another carrier or trustee. Beginning in 1933 and for all subsequent periods, Equitable kept records showing amounts on deposit at the end of each month in each of the funds, Premium Fund (A), the employee's fund, and Premium Fund(B), the employer's fund. Equitable furnished petitioner annually with statements showing the amount of funds theretofore deposited by petitioner and remaining on deposit with Equitable at the end of each month. Equitable likewise periodically furnished statements showing the funds in the employees' account, Premium Fund (A). The following amounts were on deposit with Equitable at the end of 1942, 1943 and 1944, before interest credits which were credited at the end of each year: In premiumIn premium Datefund (A) employees'fund (B) employer's fundfund Dec. 31, 1942$ 1,380,173.44$ 3,184,263.84 Dec. 31, 19431,509,510.263,152,515.46 Dec. 31, 19441,642,122.483,173,787.99 17 T.C. 27">*43 The following schedule shows the amount on deposit with Equitable in Premium1951 U.S. Tax Ct. LEXIS 127">*169 Fund (B) including interest, the liability for accrued future service benefits, the liability for past service benefits, and the surplus in that fund on the dates indicated: LiabilityLiability for DatePremiumfor accruedpast serviceSurplus fund (B)future servicebenefits benefits Dec. 31, 1941$ 3,254,233$ 1,143,549$ 2,023,620$ 87,064 Feb. 28, 19423,271,1221,169,8352,000,783100,504 Dec. 31, 19423,316,6891,289,0821,886,599141,008 Dec. 31, 19433,288,4951,402,3351,725,378160,782 The amounts paid by petitioner to Equitable during the respective taxable years in controversy on account of costs of the plan arising from services rendered subsequent to December 31, 1932, amounts with respect to such payments claimed by petitioner as deductions, and amounts allowed and disallowed by respondent are as follows: 194219431944 Paid$ 150,135.29 A$ 144,865.44$ 146,478.99 Claimed150,135.29    144,865.44146,478.99 Allowed150,135.29    0   136,222.43 Disallowed0       144,865.4410,256.56 (Total disallowed: $ 155,122). 1951 U.S. Tax Ct. LEXIS 127">*170 The normal cost of the plan for services rendered subsequent to December 31, 1932, without regard to gains of the preceding year, was as follows: YearNormal cost 1943$ 159,787 1944159,511 The gains of the preceding year were as follows: Gains of Yearpreceding year 1943$ 61,827 194425,125 Amounts paid to or deposited with Equitable by petitioner during the years 1933 to 1944, inclusive, on account of costs of the plan arising from services rendered both before and after January 1, 1933, when added to other amounts paid to employees as compensation for such services, do not exceed reasonable compensation for such services. Petitioner's employees numbered between 1,900 and 2,000 in the years 1942, 1943, and 1944, and 98 1/2 per cent of these employees were covered by the plan and the plan was not discriminatory. All employees were advised of the plan, and the contents of the agreement with Equitable, and continued to work thereunder and contribute in accordance therewith. 17 T.C. 27">*44 OPINION. The first issue is whether petitioner is entitled to deductions for the taxable years 1942, 1943, and 1944 in the amounts of $ 299,572.44, $ 262,074.29, and $ 102,798.72, 1951 U.S. Tax Ct. LEXIS 127">*171 respectively, on account of payments to or deposits with Equitable in the years 1933 to 1937, inclusive, with respect to services of petitioner's employees rendered prior to 1933. The amounts of these contested deductions are not in dispute. Nor is the right thereto contested if the payments of the amounts basing these deductions were made to a trust which was within the meaning of "trust" as used in section 1651 of the pertinent statutes. (See section 23 (p) (2) of the Internal Revenue Code hereinafter set out as footnote 3.) The crux of the case, therefore, is whether the agreement of petitioner and Equitable in 1933 and the payments thereunder in effectuating the provisions of the plan of petitioner created such a trust. 1951 U.S. Tax Ct. LEXIS 127">*172 The respondent argues that the agreement between petitioner and Equitable was not a trust, but created a mere debtor-creditor relationship or a simple contractual liability. In support of his position the respondent argues that no trust was created because there was no trust res; the payments made by petitioner to Equitable were commingled with other funds of Equitable; Equitable agreed to pay interest on the funds; the contract provided that the employees of petitioner could not bring any action against Equitable; that Equitable dealt with itself when it purchased annuities from itself, as petitioner agrees; and it has not been shown that Equitable, under its charter, could act as trustee. Under the agreement in question, Equitable was to "receive" certain payments denominated "premium payments," which consisted of contributions by petitioner and its eligible employees under the plan to provide pensions in the form of annuities when the employees reached the age of retirement. The payments were made to and received by Equitable for the purpose specifically set forth in the agreement, and Equitable was bound to keep them intact for the benefit and security 17 T.C. 27">*45 of petitioner's1951 U.S. Tax Ct. LEXIS 127">*173 employees. These payments so made constituted a res sufficient to meet the requirement that a trust must have a res. In the circumstances existing here, the fact that Equitable commingled these funds with its own funds did not destroy their identity as trust funds since these funds were segregated and identified on the books of Equitable. See cases cited at 54 Am. Jur., sec. 256, p. 199. The contention of the respondent that no trust was created because Equitable was required to pay interest is without merit. Equitable did not agree to pay "interest" to petitioner. The agreement is that the combined premium funds, (A) and (B), will produce an amount designated as "working amount of interest," which Equitable guaranteed would be not less than 3 1/2 per cent and which amount was to be credited annually to Fund (B). Any excessive earnings of Equitable, above a certain minimum, were to be treated likewise. Petitioner then agreed that an amount called "interest" would be periodically charged to Fund (B) and credited to Fund (A). Four per cent was the amount so charged and credited. Since the agreement between the parties otherwise evidences their intention that the fund1951 U.S. Tax Ct. LEXIS 127">*174 is to be held in trust, the fact that Equitable has contracted to pay a fixed income called "interest" is not controlling and does not preclude the existence of a trust relationship. Conley v. Johnson, 101 Mont. 376">101 Mont. 376, 54 P.2d 585; People v. Illinois Bank & Trust Co. of Benton, 290 Ill. App. 521">290 Ill. App. 521, 8 N.E.2d 953; Andrews v. Hood, Com. of Banks, 207 N. C. 499, 177 S.E. 636. The case of Pittsburgh National Bank of Commerce v. McMurray, 98 Pa. 538">98 Pa. 538, relied upon by the respondent, does not hold to the contrary. The contention of respondent that no trust was created because it was provided that employees of petitioner could not bring any action against Equitable is baseless. The agreement contains no general provision limiting the right of employees to sue Equitable. The respondent's argument is premised solely on a provision contained in paragraph VII, Sufficiency of Premium Funds, which provides, with respect to both Funds (A) and (B), in substance, that Equitable makes no representation and assumes1951 U.S. Tax Ct. LEXIS 127">*175 no liability as to the sufficiency of either Fund (A) or (B), to purchase the annuities provided by the agreement, etc., and that it is "the intention of the parties to this contract that no employee shall have any right against the Equitable with respect to any action or omission on its part hereunder." This limitation is applicable solely to the provision relating to the sufficiency of the funds. Equitable was merely to "receive" the funds and apply them to the purposes set forth. Since Equitable had not agreed to undertake that sufficient funds would be provided to carry out the plan as agreed between petitioner and its employees, it is obvious that it could not be held responsible for petitioner's failure to make sufficient payments. 17 T.C. 27">*46 We think it does not and was not intended to prevent an employee from enforcing in equity any right belonging to him under the contract. The argument that the fact that Equitable, in effect, purchased annuities from itself and was thus dealing with itself in such a manner as to contradict the existence or intended existence of a trust status, is not impressive. The general rule is, of course, that a trustee can not legally deal with itself. 1951 U.S. Tax Ct. LEXIS 127">*176 But this rule is not applicable where, as here, the contract creating the relationship specifically permitted such dealing. Worcester Bank & Trust Co. v. Nordblom, 285 Mass. 22">285 Mass. 22, 188 N.E. 492, 494. Moreover, the beneficiaries, employees, were advised of the contents of that contract and by continuing to work under that contract acquiesced in those terms. The final contention of the respondent that no trust has been established because it has not been shown that Equitable under its charter has the right to act as trustee, is also without merit. The general rule of law is that there is a presumption that an act of a corporation is not ultra vires. See cases cited in Fletcher on Corporations, vol. 6, sec. 2505, 1931 ed. In the absence of evidence to rebut the presumption, it prevails. Equitable is a New York corporation. An insurance company's right to hold funds in trust is clearly recognized in that state. See section 15, Personal Property Law, N. Y. The test as to whether a trust or a debt is created depends upon the intention of the parties. Restatement of the Law of Trusts, sec. 12. A trust has been authoritatively 1951 U.S. Tax Ct. LEXIS 127">*177 defined as a holding of property subject to the duty of employing it or applying its proceeds according to the directions given by the person from whom it was derived. Thus in Hibbard, Spencer, Bartlett & Co., 5 B. T. A. 464, we discussed at considerable length the elements necessary to constitute a valid trust. See also Elgin National Watch Co., 17 B. T. A. 339; Appeal of Rodgers, 361 Pa. 51">361 Pa. 51, 62 A.2d 900; Coparo v. Propati, 127 N. J. E. 419, citing with approval Kane v. Bloodgood, 7 Johns. Ch. 90">7 Johns. Ch. 90; 11 Am. Dec. 47">11 Am. Dec. 47. Section 165 (a) provides for a pension trust but does not define such term. In the recent case of Tavannes Watch Co. v. Commissioner, 176 F.2d 211, in considering the term "trust" as used in section 165 (a) the court said: * * * The issue thus distilled from the complicated collection of statutes involved is the meaning of the word "trust" in Section 165 (a). That section must, of course, be interpreted in the light of the whole1951 U.S. Tax Ct. LEXIS 127">*178 statutory scheme and of the purpose of Congress in enacting and amending the statute. "Trust" is not a term of art or of fixed content, and its meaning for the purposes of this section is not necessarily the same as under state law or as under other sections of the Internal Revenue Code. * * * See also 555, Inc., 15 T.C. 671; Crow-Burlingame Co., 15 T.C. 738. 17 T.C. 27">*47 Has petitioner established a pension trust within the meaning of section 165 of the pertinent statutes? This record establishes that in 1933 petitioner's board of directors, with the approval of its stockholders, resolved to put into effect a pension plan known as a "Contributing Annuity Plan." It advised its employees of the purposes of the plan, as to its operation, of the obligations of the employer and employees as to the contributions to be made thereunder, and the rights, interests, and privileges of the employees under the plan. On December 27, 1933, petitioner entered into an agreement with Equitable for the administration of the plan, which covers 98 1/2 per cent of petitioner's employees and does not discriminate in favor of any officer, stockholder1951 U.S. Tax Ct. LEXIS 127">*179 or employee. When an employee reaches the retirement age, Equitable is to apply sufficient of the funds to the purchase of an annuity for such retiring employee. Equitable, however, makes no commitment as to the sufficiency of the funds to purchase the annuities to be provided. Equitable keeps no records with respect to the individual employees and does not know the names or ages of the individual employees until immediately prior to their eligibility for retirement. Except in those instances where employees, about five years prior to retirement, have elected to have purchased for them a joint and survivor annuity, Equitable does not know the type of annuity which will be purchased for the employees until such employees are eligible for retirement. Equitable, from time to time, renders accounts to petitioner showing the amounts on deposit in the respective funds to purchase the annuities for the employees eligible for retirement, the amounts of interest credited, and the balance remaining in the funds. Pursuant to the agreement with Equitable, petitioner has made periodic payments to Equitable and, although it can at any time withdraw these funds and place them with another administrator1951 U.S. Tax Ct. LEXIS 127">*180 of the plan, no part of these payments or the income therefrom may be diverted for any purpose outside the plan or be recovered by petitioner prior to the satisfaction of all liabilities to the employees and their beneficiaries. We think it is clear that in executing the agreement here in question the parties intended to and did in fact create a fiduciary and not a mere debtor and creditor or simple contractual relationship. Our decision in Reginald H. Parsons, 15 T.C. 93, furnishes no authority for holding otherwise. We there held that sums paid by the taxpayer to provide paid-up annuities to certain employees in consideration of their past services were not deductible over a 10-year period as amounts transferred or paid into a pension trust within the meaning of section 23 (p) of the Internal Revenue Code. The facts basing that holding show that the taxpayer in 1940 paid the sum of 17 T.C. 27">*48 $ 11,592.37 for the purchase of paid-up annuities for 10 of his regular employees. Each employee personally made application for his own annuity and received a contract in his own name. It did not appear from the evidence that the taxpayer at any time prior1951 U.S. Tax Ct. LEXIS 127">*181 to the actual purchase of the paid-up annuities irrevocably set aside any funds for that purpose or had adopted any definite plan. The recited facts clearly distinguish that case from the instant case. Here petitioner had a definite, detailed, formal plan in writing, to provide pensions when its eligible employees were retired. It made irrevocable contributions which were to be used to purchase annuities when the employee reached the retirement age. No immediate purchase of paid-up annuity policies was made or contemplated. Under the contract the funds could have been withdrawn from Equitable at any time and delivered to another administrator of the plan. During the years 1934 to 1941, inclusive, petitioner claimed deductions on account of its payments to Equitable. Each such payment was apportioned over the following 10 years, pursuant to section 23 (p) of the Internal Revenue Code, and prior revenue acts. This treatment must have been on the ground that the contract we are now considering created such a pension trust. 2 1951 U.S. Tax Ct. LEXIS 127">*182 On the basis of the entire record, we conclude that petitioner has established the existence of a valid pension trust within section 165 (a) of the Internal Revenue Code as amended, and prior revenue acts. The parties have stipulated that if the amounts paid to Equitable in the years 1933 to 1937, inclusive, on account of costs arising from services rendered prior to 1933, are apportioned over 10-year periods, the amounts of $ 299,572.44, $ 262,074.29, and $ 102,798.72 are allocable to the respective taxable years 1942, 1943, and 1944. We hold that such amounts constitute proper deductions in those years, and, therefore, sustain petitioner on the first issue. The second issue is the respective amounts deductible by the petitioner in the taxable years 1943 and 1944 on account of deposits made with Equitable in accordance with its annuity plan, under the provisions of section 23 (p) as amended by the Revenue Act of 1942, section 162 (b). 3 1951 U.S. Tax Ct. LEXIS 127">*183 17 T.C. 27">*49 During the years 1943 and 1944 petitioner deposited with Equitable the respective amounts of $ 144,865.44 and $ 146,478.99, to cover the "normal cost" of the Equitable plan arising from services of petitioner's employees rendered subsequent to December 31, 1932. Petitioner claimed these respective amounts as deductions for those years under section 23 (p) (1) (A) (iii) (see footnote 3) and, as appears in the determinations of the deficiencies, respondent disallowed the entire deduction for 1943, and $ 10,256.56 of the amount thus claimed as a deduction for 1944. 4 The respondent argues only that petitioner's "normal cost" for each of those years, 1943 and 1944, is "the amount that is reasonably necessary to complete the funding of all liability under the Plan." In other words, his position is that the surplus in the trust fund which 17 T.C. 27">*50 1951 U.S. Tax Ct. LEXIS 127">*184 arose in years prior to the effective date of the 1942 amendments must first be applied in reducing the amount required for the annuities arising out of the service for 1943 in determining the amount of the deduction for "normal cost" for that year, and, similarly, for 1944. Part of the pending deficiencies resulted from such application of this surplus. 5 Petitioner contends that respondent erred in so using this surplus. That presents the only question for decision. We agree with petitioner. 1951 U.S. Tax Ct. LEXIS 127">*185 The issue is resolved by the meaning of "normal cost" as used in the controlling statute. 6 Also see Saalfield Publishing Co., 11 T.C. 756, for background and history of this section. The statute does not define "normal cost." The deductions under subsection 23 (p) (1) (A) (i) and (ii) are expressly restricted to the amount necessary to provide the remaining unfunded cost of liability under the plan. Petitioner, however, claims under subsection 23 (p) (1) (A) (iii). The deductions permitted under that subsection are "in lieu of" and are not limited by subsections (i) and (ii). Saalfield case, supra. And subsection (iii) contains no such limitation. There is no apparent reason why the term "normal cost" should not be given its ordinary meaning. Webster defines "normal" as "according to, constituting, or not deviating from, an established norm, rule or principle; conformed to a type, standard or regular form; performing the proper functions; regular; natural." 1951 U.S. Tax Ct. LEXIS 127">*186 This definition of the adjective was approved in Railroad Commissioner v. Konowa Operating Co., 174 S.W.2d 605, 609, in its holding that the term meant "according to, constituting, or not deviating from, an established norm, rule or principle." "Cost" is the amount of money or its equivalent paid or given or charged or engaged to be paid or given for anything bought or taken in barter or services rendered. Webster's New International Dictionary. So, applying these definitions, "normal cost" for any year would mean the amount of money charged or required to be paid normally (as contrasted with abnormally) to 17 T.C. 27">*51 Equitable by petitioner to meet its liability under the contract for annuities arising from services in such year. Section 23 (p) of the Internal Revenue Code as amended by the Revenue Act of 1942, as it appeared in the taxable years, was not retroactive. For 1942, petitioner seems to have claimed and was allowed to deduct 5 per cent of the aggregate compensation paid or accrued during that year for the benefit of all its employees under the plan, because this payment was made before September 1, 1942, and this payment is1951 U.S. Tax Ct. LEXIS 127">*187 not in dispute. Section 162 (d) (1) (C) (i), Revenue Act of 1942. Section 23 (p) (1) (A) (iii), under which the petitioner claims, permits the deduction, in the taxable year when paid, of "an amount equal to the normal cost of the plan, as determined under regulations prescribed by the Commissioner with the approval of the Secretary, plus, if past service or other supplementary pension or annuity credits are provided by the plan, an amount not in excess of 10 per centum of the cost which would be required to completely fund or purchase such pension or annuity credits as of the date when they are included in the plan, as determined under regulations prescribed by the Commissioner with the approval of the Secretary, except that in no case shall a deduction be allowed for any amount (other than the normal cost) paid in after such pension or annuity credits are completely funded or purchased. [Emphasis added.]" The statute thus places a limitation on the deduction for "past service or other supplementary pension or annuity credits" which were provided by the present plan, but explicitly excepts the "normal cost," 7 from the effect of that limitation. 1951 U.S. Tax Ct. LEXIS 127">*188 Regulations 111, section 29.23 (p)-7, 8 issued under the authority of 17 T.C. 27">*52 the statute, in defining "normal cost," as used in the statute, clearly supports the position of the petitioner. The regulation first provides that "* * * normal cost for any year is the amount actuarially determined * * *." This would seem to effectively exclude any adjustment to such "actuarially determined" figure unless allowed in some other language of the regulation, and assuming the requirement of such adjustment was within the authority granted to the respondent by the statute. It is the cost so determined "which would be required * * * in such year to maintain the plan if the plan had been in effect from the beginning of service of each then included employee and if such costs for prior years had been paid and all assumptions as to interest, mortality, time of payment, etc., had been fulfilled. * * *" That provision bars the Commissioner from adjusting this actuarially determined figure by any amount. 1951 U.S. Tax Ct. LEXIS 127">*189 We think, therefore, that neither the statute nor the regulation defining "normal cost" authorizes or permits the adjustment of the actuarially determined figure of "normal cost" under the plan by any amount. This construction of the law and regulations is supported by the Report of the Senate Finance Committee with respect to the bill which later became the Revenue Act of 1942. 9 In connection with the amendments of section 23 (p) this report contains, inter alia, the statement that "normal cost in any year is the amount required by the insurance company for the annuity arising out of that year's service. [Emphasis added.]" 1951 U.S. Tax Ct. LEXIS 127">*190 17 T.C. 27">*53 Respondent cites as authority for his contention the following excerpt from Regulations 111, section 29.23 (p)-5, as amended by T. D. 5666: Pension and Annuity Plans -- Limitations under Section 23 (p) (1) (A) (i). * * * * * * * the amount reasonably necessary to provide the remaining unfunded cost of past and current service credits of all employees under the plan * * * may be determined as the sum of (a) the unfunded past service cost as of the beginning of the year, and (b) the normal cost for the year, all determined by methods, factors, and assumptions appropriate as a basis of limitations under clause (iii). * * * It is to be noted, however, that this section of the regulation is construing subsection 23 (p) (1) (A) (i), whereas subsection (iii) is controlling here. Thus, aside from our doubt that the quoted regulation indicates an intention on the part of the respondent to lay down any such rule as that for which he now contends, no limitation of the deductions under subsection (i) can limit the deductions allowable under subsection (iii). Saalfield case, supra. The fallacy of the respondent's position is apparent. It is this. 1951 U.S. Tax Ct. LEXIS 127">*191 Despite the undoubted increase in risks, the liability of Equitable to meet which arose under the plan during 1943, he has determined that there was no "normal cost" for the assumption of these increased liabilities. It may be well at this point to consider just what constituted this "surplus" which respondent seeks to use in computing the "normal cost" for the years 1943 and 1944. In prior years, petitioner made contributions to the trust, as part of the plan. Deductions with respect to these contributions were legally computed, so far as the record reveals. They were allowed or are being allowed under the amortization provisions of section 23 (q) of the Revenue Act of 1932, and similar provisions of succeeding revenue acts. Section 23 (p) (2) of the Internal Revenue Code, as added by the Revenue Act of 1942. In some years the amounts of these contributions were proved by experience to exceed the cost of the risk maturing in such year. In other years such contributions were insufficient for that purpose. As a result, this book "surplus" arose. It is a variable figure. In future years it may be increased, decreased, or eliminated, and any part of such surplus which may be1951 U.S. Tax Ct. LEXIS 127">*192 later restored to petitioner upon the discontinuance of the pension plan and the payment of all its obligations would be an income-determining factor to petitioner in the year of that restoration. See White Bros. Co. v. Commissioner, 180 F.2d 451, certiorari denied 340 U.S. 825">340 U.S. 825. The meaning of "normal cost" as used in the statute is a question of law. The correct computation of "normal cost" within that meaning 17 T.C. 27">*54 is a question of fact. It is an actuarial computation resting on certain factors and assumptions. See Regulations 111, section 29.23 (p) -- 4. 10 These factors and assumptions may vary from year to year -- based on experience. 1951 U.S. Tax Ct. LEXIS 127">*193 In determining the deficiency, the respondent might have actuarially computed "normal cost" by using factors and assumptions other than those basing the computation of the petitioner. But, apparently, he did not do this. (See footnote 5, supra.) And he offered no evidence at the hearing as to any actuarial computation of "normal cost" for either of the taxable years 1943 and 1944. The uncontradicted testimony of a qualified insurance actuary at the trial, which was received without objection, was that, computed by the use of the assumptions and factors prescribed by the regulations, the normal cost of the plan for the year 1943 was $ 159,787, and for 1944 $ 159,511. Accordingly we have found the facts in accordance with that testimony. The amounts deposited by petitioner in those years to meet the respective costs of the plan for those years were each less than such respective normal costs. Therefore, under section 23 (p) (1) (A)17 T.C. 27">*55 (iii), supra, petitioner's deductions are limited to the amounts actually paid to the trust in the taxable years 1943 and 1944, to wit, for 1943, $ 144,865.44, and for 1944 $ 146,478.99. The respondent erred in disallowing deductions 1951 U.S. Tax Ct. LEXIS 127">*194 for the taxable years 1943 and 1944 in any part of such amounts. The parties have stipulated that the depletion deductions to which petitioner is entitled for the taxable years 1942, 1943, and 1944 are dependent on our decision as to the other issues presented. Therefore the amount of the depletion deductions will be computed in accordance herewith in the recomputations under Rule 50. Decision will be entered under Rule 50. Footnotes

2020-11-30 21:02:12.710685+00

http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/1%20CA-JV%2020-0153%20-%20Stephanie%20S.pdf

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. IN THE ARIZONA COURT OF APPEALS DIVISION ONE STEPHANIE S., Appellant, v. DEPARTMENT OF CHILD SAFETY, M.G., S.G., E.D., Appellees. No. 1 CA-JV 20-0153 FILED 11-24-2020 Appeal from the Superior Court in Maricopa County No. JD36277 The Honorable Pamela Hearn Svoboda, Judge AFFIRMED COUNSEL Stephanie S., Phoenix Appellant Arizona Attorney General’s Office, Mesa By Amanda Adams Counsel for Appellee Department of Child Safety MEMORANDUM DECISION Judge Maria Elena Cruz delivered the decision of the Court, in which Presiding Judge James B. Morse Jr. and Judge Paul J. McMurdie joined.  STEPHANIE S. v. DCS, et al. Decision of the Court C R U Z, Judge: ¶1 Stephanie S. appeals from the superior court’s ruling that she failed to demonstrate excusable neglect for the delay in filing her appeal from the court’s order denying her motion to intervene in the superior court proceedings concerning her grandchildren. For the following reasons, we affirm. FACTUAL AND PROCEDURAL HISTORY ¶2 Stephanie S. is the maternal grandmother of M.G., S.G., and E.D. (“the children”). In August 2018, while in the care of her parents Tiffani D. and Aaron D., two and one-half-year old E.D. suffered non- accidental blunt force trauma to and a severe laceration in her vagina. E.D.’s parents denied that either of them had caused E.D.’s injuries. ¶3 DCS removed the children, and in 2019, the superior court held a trial on DCS’ dependency and termination petitions. In October 2019, the superior court adjudicated the children dependent and terminated Tiffani D.’s parental rights to the children, Aaron D.’s parental rights to E.D., and the parental rights of S.G.’s and M.G.’s father. ¶4 In February 2020, Stephanie S. filed a motion to intervene, seeking custody of the children and to adopt them. DCS and the children’s guardian ad litem objected to the motion to intervene, and on April 21, 2020, the court denied it. The court found that Stephanie S.’ motion to intervene was untimely and that allowing her to intervene was not in the children’s best interests.1 ¶5 On May 7, 2020, sixteen days after the court filed its order, Stephanie S. filed an untimely notice of appeal. A week later, this court filed an order explaining that because the notice of appeal was untimely, we lacked jurisdiction except to dismiss the appeal. However, we stayed the appeal and remanded to the superior court to conduct proceedings to determine whether the untimely filing should be excused. Stephanie S. 1 Stephanie S. initially served as a safety monitor for the children but she violated the safety plan and they were removed from her care. Stephanie S. testified on behalf of Tiffani D. and Aaron D. at the trial and gave testimony the superior court characterized as “blatantly untruthful.” The court found, “It is clear [Stephanie S.’] untruthful testimony was solely offered to help the parents and not to protect [E.D.] whom one or both had abused.” 2  STEPHANIE S. v. DCS, et al. Decision of the Court then filed a pleading in the superior court acknowledging her notice of appeal was one day late and that she had received the April 21 order ten days before filing her notice of appeal on May 7. ¶6 At a hearing, Stephanie S. told the court that her notice of appeal was late because she had not been expecting the April 21 ruling, which she acknowledged receiving on April 23. In June 2020, the superior court ruled that Stephanie S. failed to demonstrate excusable neglect, finding a reasonably prudent person would not have delayed in filing the appeal, regardless of whether the court’s ruling was “unexpected.” Stephanie S. timely appealed from the June 2020 order. This court issued an order reinstating the appeal, noting that we lack jurisdiction to consider Stephanie S.’ appeal regarding her motion to intervene, and “[Stephanie S.’] appeal will . . . be limited to review of the superior court’s June [2020] ruling.” We have jurisdiction to consider the superior court’s June 2020 ruling pursuant to Arizona Revised Statutes (“A.R.S.”) section 12- 2101(A)(2), which permits an appeal “[f]rom any special order made after final judgment.” DISCUSSION ¶7 Stephanie S. argues the superior court erred by finding her late notice of appeal was not the result of excusable neglect. Arizona Rule of Procedure for the Juvenile Court (“Rule”) 104(A) provides that a notice of appeal in a superior court matter must be filed “no later than 15 days after the final order is filed with the clerk.” Rule 108(B) provides that the superior court may excuse a late notice of appeal if the failure to timely file resulted from excusable neglect. We review the denial of a motion to extend the deadline for the filing of an appeal for an abuse of discretion. Haroutunian v. Valueoptions, Inc., 218 Ariz. 541 , 544, ¶ 6 (App. 2008); see also Daou v. Harris, 139 Ariz. 353 , 360 (1984) (whether excusable neglect exists is a question directed to the sound discretion of the trial court). ¶8 Generally, neglect may be excusable if (1) a party did not receive notice of the order, (2) the party promptly filed a motion for relief, (3) the party exercised due diligence in attempting to be informed of the decision, and there is no prejudice to other parties. City of Phoenix v. Geyler, 144 Ariz. 323 , 328 (1985). To establish excusable neglect, a party seeking relief must demonstrate that the party’s actions were those of a reasonably prudent person under the circumstances. Searchtoppers.com, L.L.C. v. TrustCash LLC, 231 Ariz. 236 , 241, ¶ 22 (App. 2012). “[M]ere carelessness is not a sufficient reason.” Id. (internal quotations and citation omitted). 3  STEPHANIE S. v. DCS, et al. Decision of the Court ¶9 Stephanie S. acknowledges that she received the superior court’s April 21 order “several days” after it was mailed to her. She argues that the court should have found excusable neglect because she was “unrepresented by counsel and given an unexpected order.” Stephanie S. argues that she would have had fifteen days instead of twelve to file her notice of appeal had she been represented by counsel because an attorney would have received the order electronically. ¶10 We find no abuse of discretion. Although Stephanie S. claimed that she was surprised by the ruling, she admitted she had actual knowledge of the superior court’s order on April 23. She then waited until May 7 to file her notice of appeal. The only excuse Stephanie S. offered the superior court for failing to file the notice of appeal on time was that she did not expect the ruling, received it by mail instead of electronically, and “inadvertently misapplied the law thinking that she had the additional time to file based on the mailing of the order.” Unrepresented litigants are held to the same standard as represented parties and must also follow procedural rules. See Kelly v. NationsBanc Mortg. Co., 199 Ariz. 284 , 287, ¶ 16 (App. 2000). On this record, we cannot find that the superior court abused its discretion by finding that Stephanie S. failed to establish excusable neglect. CONCLUSION ¶11 For the foregoing reasons, we affirm. AMY M. WOOD • Clerk of the Court FILED: AA 4

2020-11-30 21:02:13.711782+00

http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/1%20CA-CR%2019-0654%20Gonzales%20Final.pdf

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. IN THE ARIZONA COURT OF APPEALS DIVISION ONE STATE OF ARIZONA, Appellee, v. RAUL RUDY GONZALES, Appellant. No. 1 CA-CR 19-0654 FILED 11-24-2020 Appeal from the Superior Court in Maricopa County No. CR2017-006214-001 The Honorable Kathleen H. Mead, Judge AFFIRMED COUNSEL Arizona Attorney General’s Office, Phoenix By Michael O’Toole Counsel for Appellee Maricopa County Public Defender’s Office, Phoenix By Thomas Baird Counsel for Appellant Raul Rudy Gonzales, Florence Appellant  STATE v. GONZALES Decision of the Court MEMORANDUM DECISION Judge David B. Gass delivered the decision of the Court, in which Presiding Judge Jennifer M. Perkins and Judge Michael J. Brown joined. G A S S, Judge: ¶1 Raul Rudy Gonzales appeals his conviction for one count of misconduct involving weapons. Gonzales’s counsel filed this appeal in accord with Anders v. California, 386 U.S. 738 (1967), and State v. Leon, 104 Ariz. 297 (1969). Gonzales’s counsel searched the record and identified no arguable, non-frivolous question of law. Counsel, therefore, asks this court to review the record for reversible error. Gonzales filed a supplemental brief in propria persona, which this court considered. Based on our review, we affirm Gonzales’s conviction and sentence but vacate the superior court’s order requiring him to pay for DNA testing. FACTUAL AND PROCEDURAL HISTORY ¶2 This court views the facts in the light most favorable to sustaining the jury’s verdict and resolves all reasonable inferences against Gonzales. See State v. Fontes, 195 Ariz. 229 , 230, ¶ 2 (App. 1998). ¶3 C.G. testified to sitting outside a house in Glendale during the early hours of May 17, 2016. Gonzales exited the house and walked down a pathway out of C.G.’s sight. When C.G. followed Gonzales, he told C.G. the police had arrived and directed C.G. to retrieve a handgun Gonzales had thrown under a white car. ¶4 Maricopa County Sheriff’s Office (MCSO) deputies were in the area responding to a welfare check for another person. When C.G. saw MCSO vehicles and flashlights, he went in another direction and did not retrieve the handgun. As the deputies returned to their vehicles, they found a black handgun under a white car. The deputies wore gloves as they secured the handgun for impounding at an MCSO facility. ¶5 Approximately a year later, a Glendale police officer was investigating a home invasion and questioned C.G., now in prison, about the handgun. C.G. recounted the incident in which Gonzales left the handgun under the white car. The Glendale officer suspected it was the same handgun used in the home invasion. The officer retrieved the 2  STATE v. GONZALES Decision of the Court handgun from the MCSO facility and transported it to a Glendale police station. The handgun was in a sealed bag when the Glendale officer picked it up. The Glendale police did not intermingle the handgun with other evidence associated with Gonzales. ¶6 Glendale police obtained a warrant for buccal swabs from Gonzales. A forensic scientist testified the DNA on the swabs matched the DNA found on the handgun. The likelihood of a DNA match happening at random is extremely low. Gonzales was then charged with one count of misconduct involving weapons. ¶7 Before trial, Gonzales’s counsel moved to suppress the buccal swabs, arguing the warrant was invalid because it listed potential crimes for which he had already been acquitted. The superior court denied the motion, noting the warrant listed other potential crimes, supported by the facts in the affidavit, for which the State could still charge Gonzales. ¶8 At trial, a probation officer testified Gonzales was on probation at the time of the alleged offense and was prohibited from possessing a firearm. Gonzales also stipulated the offense for which he was on probation was a felony. ¶9 When the State could not secure an MCSO facility manager’s attendance to testify to the handgun’s chain of custody, Gonzales’s counsel objected. The superior court invited Gonzales’s counsel to file a written motion. Gonzales’s counsel did not. Gonzales’s counsel moved for a Rule 20 judgment of acquittal after the State rested. The superior court denied the motion. Near the end of trial, Gonzales himself—though represented by counsel—orally moved for a mistrial based again on the handgun’s chain of custody. The superior court denied his oral motion. ¶10 The jury convicted Gonzales and found he was on probation at the time of the offense. The superior court found Gonzales had four historical prior felonies. The superior court imposed a ten-year sentence— the presumptive for category three offenders—to run consecutively to the sentence in his probation matter. The superior court also ordered Gonzales to undergo DNA testing at his own cost. ¶11 Gonzales timely appealed. This court has jurisdiction under Article 6, Section 9, of the Arizona Constitution, and A.R.S. §§ 13-4031, and -4033.A.1. 3  STATE v. GONZALES Decision of the Court ANALYSIS ¶12 This court reviews the entire record for reversible error. State v. Thompson, 229 Ariz. 43 , 45, ¶ 3 (App. 2012). After a diligent search of the entire record, Gonzales’s counsel found no arguable question of law. Yet, in his supplemental brief, Gonzales raises numerous issues he asks this court to address, including: (1) several instances of ineffective assistance of counsel; (2) witness tampering by the State; (3) the buccal swap evidence acquired by warrant should be suppressed; and (4) the State did not prove chain of custody of the handgun containing his DNA. ¶13 To begin, Gonzales may not raise ineffective assistance of counsel claims in his direct appeal. See State ex rel. Thomas v. Rayes, 214 Ariz. 411 , 415, ¶ 20 (2007). Instead, Gonzales must present them to the superior court in a post-conviction relief proceeding. Id. We, therefore, leave Gonzales to raise these claims in an appropriate proceeding. ¶14 Next, we turn to Gonzales’s witness-tampering claims. Gonzales presents no evidence the State tampered with witness testimony, procured witness absence, or committed other prosecutorial misconduct. He merely cites portions of the transcript and claims witness tampering at these instances with no factual or legal support. Gonzales does not meet his burden with mere citations to the record. See State v. Vargas, 249 Ariz. 186 , 190, ¶ 14 (2020) (defendants carry burden to prove multiple instances of prosecutorial misconduct, unobjected to at trial, deprived them of a fair trial). ¶15 Moving on to Gonzales’s challenge to the evidence from the buccal swab, we find no error. Gonzales claims the warrant was invalid because the potential charges were previously adjudicated. A jury acquitted Gonzales of several listed charges but not all, and the superior court correctly found probable cause of the other crimes based on the affidavit. The warrant sought evidence for ongoing investigations of crimes not yet charged or acquitted. The superior court, therefore, correctly denied Gonzales’s motion to suppress the DNA evidence. ¶16 Finally, Gonzales argues the State failed to prove an unbroken chain of custody for the handgun. The State’s failure to offer testimony from the MCSO facility manager regarding the handling and custody of the handgun did not doom the State’s chain-of-custody foundation. See State v. Hurles, 185 Ariz. 199 , 206 (1996) (“In setting up a chain of custody, the prosecution need not call every person who had an opportunity to come in 4  STATE v. GONZALES Decision of the Court contact with the evidence sought to be admitted.”). The handgun was in a sealed bag when Glendale police took custody of it and took it to the Glendale station. Though the State did not produce a witness for every link in the chain of custody, the State provided “evidence sufficient to support a finding” that the handgun and the DNA found on it are what the State claims they are. See State v. Steinle, 239 Ariz. 415 , 420, ¶ 25 (2016) (quoting Ariz. R. Evid. 901(a)). Further, any flaws in the chain of custody of evidence go to its weight, not to its admissibility. See State v. Gonzales, 181 Ariz. 502 , 511 (1995). Accordingly, no error occurred. ¶17 In addition to evaluating the arguments raised in Gonzales’s supplemental brief, we conducted an independent review of the record for reversible error. See Leon, 104 Ariz. at 300 ; State v. Flores, 227 Ariz. 509 , 512, ¶ 12 (App. 2011). The superior court conducted all other proceedings in compliance with the Arizona Rules of Criminal Procedure. Gonzales was present for, and represented by counsel at, all critical stages of the proceedings. See State v. Bohn, 116 Ariz. 500 , 503 (1977); State v. Conner, 163 Ariz. 97 , 104 (1990). The jury was properly comprised of eight jurors and three alternates. See A.R.S. § 21-102.B. The record shows no evidence of jury misconduct. The superior court properly instructed the jury on the elements of the charged offense, the State’s burden of proof, and Gonzales’s presumed innocence. Additionally, Gonzales was given an opportunity to speak at sentencing, and the sentence imposed was within the statutory guidelines. See Ariz. R. Crim. P. 26.9, 26.10(b)(1); A.R.S. §§ 13-703.J (sentencing range for category three repetitive offender), -708.C (requiring no less than the presumptive sentence if offence is committed while on probation for a felony offence), -708.E (requiring sentence to run consecutively to other sentence for which defendant was on release). ¶18 The superior court, however, did err by ordering Gonzales to pay the costs associated with his statutorily-required DNA testing. See A.R.S. § 13-610.A. Though Gonzales must undergo DNA testing, he is not required to pay for it. See State v. Reyes, 232 Ariz. 468 , 472, ¶ 14 (App. 2013) (“[B]ecause § 13-610 does not require a convicted defendant to be assessed the cost of his DNA testing, there was no basis for the provision to be imposed.”). We, therefore, vacate that portion of Gonzales’s sentence. CONCLUSION ¶19 The portion of the superior court’s order requiring Gonzales to pay for the DNA testing is vacated. In all other respects, Gonzales’s conviction and sentence are affirmed. 5  STATE v. GONZALES Decision of the Court ¶20 Defense counsel’s obligations pertaining to Gonzales’s representation in this appeal have ended. Counsel need only inform Gonzales of the outcome of this appeal and his future options, unless, upon review, counsel finds an issue appropriate for submission to our supreme court by petition for review. See State v. Shattuck, 140 Ariz. 582 , 584–85 (1984). ¶21 Gonzales has thirty days from the date of this decision to proceed, if he wishes, with an in propria persona petition for review. See Ariz. R. Crim. P. 31.21. This court, on its own motion, also grants Gonzales thirty days from the date of this decision to file an in propria persona motion for reconsideration. See Ariz. R. Crim. P. 31.20. AMY M. WOOD • Clerk of the Court FILED: AA 6

2020-11-30 21:02:14.643348+00

http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/1%20CA-CV%2020-0079%20-%20Self.pdf

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. IN THE ARIZONA COURT OF APPEALS DIVISION ONE MELISSA SELF, Plaintiff/Appellant, v. HIGHER LOGIC LLC, et al., Defendants/Appellees. No. 1 CA-CV 20-0079 FILED 11-24-2020 Appeal from the Superior Court in Maricopa County No. CV2018-002287 CV2018-096003 (Consolidated) The Honorable Daniel G. Martin, Judge AFFIRMED COUNSEL Melissa Self, Mesa Plaintiff/Appellant Coppersmith Brockelman PLC, Phoenix By Andrew S. Gordon, Roopali H. Desai, Koray J. Bulut Counsel for Defendants/Appellees  SELF v. HIGHER LOGIC, et al. Decision of the Court MEMORANDUM DECISION Acting Presiding Judge Maria Elena Cruz delivered the decision of the Court, in which Judge Paul J. McMurdie and Judge David B. Gass joined. C R U Z, Judge: ¶1 Melissa Self appeals from the superior court’s grant of summary judgment in favor of Higher Logic LLC (“Higher Logic”) and Socious, LLC (“Socious”) (collectively “appellees”) on her employment- related claims against them. For the following reasons, we affirm. FACTUAL AND PROCEDURAL HISTORY ¶2 Socious hired Self in 2016 as a business development representative. Socious paid Self commissions for locating potential customers and scheduling product demonstrations. In 2017, Higher Logic acquired Socious. Higher Logic then hired Self as a business development representative. Before the acquisition, Higher Logic and Socious were business competitors. ¶3 In February 2017, Self informed Higher Logic that she was having health problems and asked to be allowed to work from home due to a disability.1 Higher Logic sent Self its Americans with Disability Act (“ADA”) forms to complete, but she did not return them. Self resigned from Higher Logic in May 2017. ¶4 In March 2018, Self filed a complaint in superior court (cause no. CV2018-002287) against appellees alleging causes of action for breach of contract, unjust enrichment, and statutory violations. She filed an amended complaint in November 2018 alleging causes of action for breach of contract, unjust enrichment, breach of the implied covenant of good faith and fair dealing, and constructive discharge. ¶5 Meanwhile, in July 2018, Self filed a separate pro per complaint against appellees (cause no. CV2018-096003), alleging disability discrimination against Higher Logic. The superior court consolidated the 1 Self testified at her deposition that she suffered from a hematologic disorder that caused her to have flu-like symptoms and to be anemic. 2  SELF v. HIGHER LOGIC, et al. Decision of the Court cases in December 2018. Self’s attorney withdrew from the case, and she represented herself thereafter. ¶6 In September 2019, appellees filed a motion for summary judgment. Self failed to respond, and instead filed a pleading entitled “Motion to Schedule Emergency Hearing for Default Judgment for Fraud Upon Court.” In her motion, Self said she had not responded to the motion for summary judgment because it was “void.” ¶7 The superior court denied Self’s motion because Self failed to explain why she was entitled to relief. The court further stated, “[Self’s] apparent failure to have responded to a motion for summary judgment as required under the rules of civil procedure, [is] incompatible with her obligations as the plaintiff in this lawsuit.” Despite this warning, Self still did not respond to the summary judgment motion. Appellees subsequently requested a ruling on the summary judgment motion, which Self opposed. The superior court granted the motion for summary judgment, finding Self had failed to respond despite the court’s admonition, there were no genuine issues of material fact, and appellees were entitled to judgment as a matter of law. Self filed a premature motion for a new trial, and the superior court entered judgment in December 2019. ¶8 Self timely appealed. In August 2020, we issued an order denying Self’s motion to supplement the record on appeal with “many documents she contends are missing from the record,” including discovery matters and email communication. We said that our review is limited to the record before the superior court when it entered judgment. See GM Dev. Corp. v. Cmty. Am. Mortg. Corp., 165 Ariz. 1 , 4-5 (App. 1990). We have jurisdiction under Arizona Revised Statutes (“A.R.S.”) sections 12-120.21(A)(1), -2101(A)(1). DISCUSSION ¶9 Summary judgment is appropriate if “there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law.” Ariz. R. Civ. P. 56(a). “We review the grant of summary judgment on the basis of the record made in the trial court, but determine whether the entry of judgment was proper de novo.” Phx. Baptist Hosp. & Med. Ctr., Inc. v. Aiken, 179 Ariz. 289 , 292 (App. 1994). We view the evidence in the light most favorable to the party against whom summary judgment was entered. Espinoza v. Schulenburg, 212 Ariz. 215 , 216, ¶ 6 (2006). 3  SELF v. HIGHER LOGIC, et al. Decision of the Court ¶10 To begin, Self’s opening brief fails to comply with Arizona Rule of Civil Appellate Procedure (“ARCAP”) 13(a).2 Specifically, her statements of the procedural path of the case and facts fail to include appropriate references to the record. In addition, the argument section of the brief fails to provide the applicable standard of appellate review and appropriate citations to the record and legal authority. See ARCAP 13(a)(4), (5), (7). We may dismiss an appeal when the appellant fails to comply with the rules. Adams v. Valley Nat’l Bank of Ariz., 139 Ariz. 340 , 342-43 (App. 1984). ¶11 Even if we overlooked the deficiencies of the opening brief, we would still affirm. Self argues the superior court “only state[d] that [she] failed to contest the [appellee]’s Motion for Summary Judgment” in ruling on the summary judgment motion. Arizona Rule of Civil Procedure 56(e) provides that a party opposing a summary judgment motion “must, by affidavits or as otherwise provided in this rule, set forth specific facts showing a genuine issue for trial. If the opposing party does not so respond, summary judgment, if appropriate, shall be entered against that party.” ¶12 An opposing party’s failure to respond to a motion for summary judgment does not, by itself, entitle the moving party to summary judgment. Schwab v. Ames Constr., 207 Ariz. 56 , 59, ¶ 15 (App. 2004). But nonmoving parties act at their peril. Id. at 60, ¶ 16 . A court may “presume that any uncontroverted evidence favorable to the movant, and from which only one inference can be drawn, is true. If that uncontroverted evidence would entitle the movant to a judgment as a matter of law, then the trial court must grant the summary judgment motion.” Id. (internal citations omitted). Here, the superior court did not grant summary judgment solely because Self did not respond to appellees’ motion for summary judgment. Instead, the court found no disputed genuine issues of material fact and appellees were entitled to judgment as a matter of law. We agree. 2 Appellees argue we should dismiss this appeal because Self’s opening brief was untimely. See ARCAP 15(a)(1) (“If an appellant does not timely file an opening brief, the appellate court on motion of a party or on its own motion may dismiss the appeal.”). In April 2020 we sua sponte extended the deadline for Self to file her opening brief to May 11, 2020. Self filed her opening brief on May 12, 2020, one day late. ARCAP 15(a)(1) is permissive and we decline to dismiss this appeal on the basis that the opening brief was one day late. 4  SELF v. HIGHER LOGIC, et al. Decision of the Court ¶13 Self’s consolidated lawsuits involved claims that appellees breached their contractual obligations or were unjustly enriched by failing to pay Self for services and labor, and that Higher Logic breached the implied covenant of good faith and fair dealing, wrongfully constructively terminated Self’s employment, and wrongfully discriminated against her. ¶14 Self alleged appellees breached her employment contracts by “refusing to pay all funds owed” to her. “To bring an action for the breach of [a] contract, the plaintiff has the burden of proving the existence of [a] contract, its breach and the resulting damages.” Graham v. Asbury, 112 Ariz. 184 , 185 (1975). The interpretation of the contract is a question of law for the court. C & T Land & Dev. Co. v. Bushnell, 106 Ariz. 21 , 22 (1970). ¶15 Self admitted at her deposition that she received all of her lead commissions through December 2016 during her employment with Socious. Under Self’s commission agreement with Higher Logic, which governed the quota year from February 1, 2017 to December 31, 2017, Self was eligible to receive two types of commissions—commissions for completed demos and commissions for completed sales.3 ¶16 Between February and May 2017, Higher Logic paid Self $1400.00 for eleven quality demos. It paid her another $250.00 for two additional demos it determined not to be quality demos. No sales resulting from Self’s completed demos occurred before her resignation in May 2017. ¶17 The record supported Higher Logic’s assertion that it paid Self all commissions it owed to her—specifically the declaration of Higher 3 The commission for a completed demo was $100.00 for a demo with a prospect with an annual operating budget of $2.5 million (small prospect), and $150.00, $200.00, or $250.00 for a demo with a prospect with annual operating budget of over $2.5 million (large prospect), depending on how many demos were completed in a month. The commission for a completed sale resulting from a completed demo was .5 percent. An outside sales representative had to confirm each demo as a “quality” demo. The commission agreement stated that commission payments would be made “on the last pay period of the month for demos completed and approved by management in the previous month.” The agreement further provided that if the agreement was “terminated, commission payments will be made only for commissions due as of the date of your termination. You must be employed by Higher Logic in the month immediately following a month in which a sale is booked in order to receive payment of commissions for those sales.” 5  SELF v. HIGHER LOGIC, et al. Decision of the Court Logic’s Senior Human Resources Manager, Holly Keener, and the attached business records. Self did not contradict the evidence because she failed to respond to the motion for summary judgment. Accordingly, the superior court was free to accept it as true and grant summary judgment to appellees on Self’s contract claim. See Schwab, 207 Ariz. at 60, ¶ 16. ¶18 Self also claimed appellees were unjustly enriched when they failed to pay her for “services, labor, and other benefits received.” “Unjust enrichment occurs whenever a person has and retains money or benefits which in justice and equity belong to another.” City of Sierra Vista v. Cochise Enters., Inc., 144 Ariz. 375 , 381 (App. 1984). However, the doctrine of unjust enrichment has no application when there is a specific contract governing the relationship of the parties. Brooks v. Valley Nat’l Bank, 113 Ariz. 169 , 174 (1976). Here, Self’s right to commission payments and appellees’ obligation to pay them was governed by her employment contracts. Because those contracts controlled Self’s right to commission payments, her unjust enrichment claim is barred, and the superior court did not err by granting summary judgment. ¶19 Self further claimed that Higher Logic breached the implied covenant of good faith and fair dealing by failing to comply with the commission agreement. There is an implied covenant of good faith and fair dealing in every contract that neither party will do anything to injure the right of the other to receive the benefits of their agreement. Wagenseller v. Scottsdale Mem’l Hosp., 147 Ariz. 370 , 383 (1985), superseded by statute on other grounds as recognized by Powell v. Washburn, 211 Ariz. 553 , 560, ¶ 29 (2006). Because Higher Logic did not breach the implied covenant of good faith and fair dealing under the undisputed facts, summary judgment was warranted. ¶20 Self claimed that Higher Logic’s “extraordinary and egregious conduct and harassment” caused her to resign and constituted a wrongful constructive termination in violation of Arizona law and public policy, entitling her to punitive damages. Self’s complaint failed to state what public policy or Arizona law appellees allegedly violated. Self based her constructive discharge claim on Higher Logic’s alleged sabotage of her by hiding potential client contacts from her and its alleged denial of her request for a reasonable accommodation. ¶21 An employee may bring a claim for “constructive discharge based on an employer’s outrageous conduct or failure to remedy objectively difficult or unpleasant working conditions that would compel a reasonable employee to resign.” Peterson v. City of Surprise, 244 Ariz. 247 , 250, ¶ 9 (App. 6  SELF v. HIGHER LOGIC, et al. Decision of the Court 2018) (internal quotations omitted); A.R.S. § 23-1502. To bring a claim of constructive discharge based on “objectively difficult or unpleasant working conditions,” an employee must follow the notice procedures of A.R.S. § 23-1502(B). Self’s text message to her supervisor did not comply with the statutory notice requirements. Self sent her supervisor a text message stating, “Hi Ivor this is Melissa Self and Im giving my notice of constructive termination. My laptop will be with the security guard in the lobby of the Mesa office this week. No need to respond please.” Further, Self’s allegations did not rise to the level of outrageous conduct. See A.R.S. § 23-1502(A)(2). Constructive discharge may also be established if an employer engaged in outrageous conduct, such as “sexual assault, threats of violence directed at the employee, a continuous pattern of discriminatory harassment by the employer or by a managing agent of the employer or other similar kinds of conduct, if the conduct would cause a reasonable employee to feel compelled to resign.” Id. The superior court did not err by granting summary judgment on Self’s claim for wrongful constructive discharge. ¶22 Finally, Self claimed that Higher Logic discriminated against her after she told coworkers she had a disability. An ADA discrimination claim “requires proof that the plaintiff: (1) is disabled within the meaning of the ADA; (2) is qualified to perform the essential functions of the job with or without reasonable accommodation; and (3) was discriminated against or terminated by the employer because of the disability.” MacLean v. State Dep’t of Educ., 195 Ariz. 235 , 241, ¶ 23 (App. 1999). At her deposition, Self testified that she believed Higher Logic sabotaged her because she had a criminal background and the company wanted to be able to fire her for underperforming. Self also testified that the problems she experienced at work occurred before she disclosed her alleged disability in mid-February 2017. There was no evidence that Self was discriminated against because of a disability, and the superior court did not err by granting summary judgment on her claim of disability discrimination. ¶23 Appellees request attorneys’ fees and costs on appeal. However, they cite A.R.S. § 39-121.02(B), a statute that does not apply here. Section 39-121.02(B) allows the court to award attorneys’ fees and costs to a person who has substantially prevailed after seeking access to public records. We, therefore, decline to award attorneys’ fees. As the prevailing parties, we award appellees costs upon compliance with ARCAP 21. 7  SELF v. HIGHER LOGIC, et al. Decision of the Court CONCLUSION ¶24 For the foregoing reasons, we affirm. AMY M. WOOD • Clerk of the Court FILED: AA 8

2020-11-30 21:02:15.747081+00

http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/1-CA-JV%2020-0177%20Damian%20Panel%20Final.pdf

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. IN THE ARIZONA COURT OF APPEALS DIVISION ONE IN RE DAMIAN T. No. 1 CA-JV 20-0177 FILED 11-24-2020 Appeal from the Superior Court in Yuma County No. S1400JV20200091 The Honorable Kathryn E. Stocking-Tate, Judge Pro Tempore AFFIRMED COUNSEL E.M. Hale Law, Lakeside By Elizabeth M. Hale Counsel for Appellant Yuma County Attorney’s Office, Yuma By Chris Aaron Weede Counsel for Appellee State of Arizona  IN RE DAMIAN T. Decision of the Court MEMORANDUM DECISION Judge David B. Gass delivered the decision of the Court, in which Presiding Judge Jennifer M. Perkins and Judge Michael J. Brown joined. G A S S, Judge: ¶1 Damian T. appeals his commitment to the Arizona Department of Juvenile Corrections (ADJC). He argues the superior court failed to consider adequately the juvenile commitment guidelines. Because the record supports the superior court’s judgment, we affirm. ¶2 In March 2020, Damian was a passenger in a vehicle when Arizona Department of Public Safety officers stopped it. Following a K-9 alert, officers searched Damian and found more than one-pound of fentanyl pills with an estimated street-value of approximately $60,000. The officers arrested Damian and took him into custody. The State charged Damian with possession and transportation of narcotics for sale, both class 2 felonies. ¶3 Damian pled delinquent to a single count of attempted possession of narcotics for sale, a class three felony. The State, in return, dismissed the original charges with prejudice and stipulated to intensive probation. The superior court rejected the probation stipulation. The parties amended the plea agreement to remove the probation stipulation. The superior court accepted the amended agreement. ¶4 At Damian’s disposition hearing, the superior court committed him to ADJC until his eighteenth birthday. Damian timely appealed. This court has jurisdiction under Article 6, Section 9, of the Arizona Constitution, and A.R.S. §§ 8-235.A, 12-120.21.A.1, and Rule 103(A), Arizona Rules of Procedure for the Juvenile Court. ¶5 This court reviews the superior court’s disposition for an abuse of discretion. See In re Niky R., 203 Ariz. 387 , 390, ¶ 10 (App. 2002). Contrary to Damian’s argument, the superior court adequately considered the guidelines in subsection 6-304.C.1 of the Arizona Code of Judicial Administration. At Damian’s disposition hearing, the superior court said it “considered the Arizona Supreme Court guidelines regarding commitment of juveniles to [ADJC].” 2  IN RE DAMIAN T. Decision of the Court ¶6 Damian nonetheless argues the superior court failed to consider his “special circumstances,” whether less restrictive alternatives might be appropriate, or “conduct an adequate investigation into the facts relevant to sentencing.” He essentially asks us to reweigh the evidence, which we will not do. See Jesus M. v. Ariz. Dep’t of Econ. Sec., 203 Ariz. 278 , 282, ¶ 12 (App. 2002). This court assumes judges know and follow the law and has “long held that ‘in reviewing the evidence we are mindful of the fact that the trial court will be deemed to have made every finding necessary to support the judgment.’” See Niky R., 203 Ariz. at 392, ¶ 21 (quoting Maricopa Cnty. Juv. Action No. JS-3594, 133 Ariz. 582 , 585 (App. 1982)) (emphasis original). ¶7 Here, Damian admitted to transporting over one pound of fentanyl. Based on the quantity and the drug’s highly dangerous nature, the superior court found Damian posed a serious risk and no less-restrictive alternative was available to both hold him accountable and protect the community. We cannot, on this record, find an abuse of discretion in the superior court’s disposition. Accordingly, we affirm the order committing Damian to ADJC. AMY M. WOOD • Clerk of the Court FILED: AA 3

2020-11-30 21:02:16.744002+00

http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/1%20CA-CV%2019-0598%20Guirguis.pdf

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. IN THE ARIZONA COURT OF APPEALS DIVISION ONE AMIR GUIRGUIS, et al., Plaintiffs/Appellants, v. DIPESH PATEL, et al., Defendants/Appellees. No. 1 CA-CV 19-0598 FILED 11-24-2020 Appeal from the Superior Court in Maricopa County No. CV2016-090480 The Honorable Janice K. Crawford, Judge AFFIRMED COUNSEL Abram & Meell PA, Phoenix By Gregory J. Meell Counsel for Plaintiffs/Appellants Polsinelli PC, Phoenix By John R. Clemency, Lindsi M. Weber Counsel for Defendants/Appellees  GUIRGUIS, et al. v. PATEL, et al. Decision of the Court MEMORANDUM DECISION Judge Cynthia J. Bailey delivered the decision of the Court, in which Presiding Judge Randall M. Howe and Judge Kent E. Cattani joined. B A I L E Y, Judge: ¶1 Amir and Nancy Guirguis (collectively “Guirguis”) appeal a judgment against them for fraudulent transfer, equitable indemnity, breach of contract, and attorneys’ fees. For the reasons stated below, we affirm. FACTS AND PROCEDURAL HISTORY ¶2 This case involves the purchase of two limited liability companies (“LLCs”), each of which owned a hotel. The sellers eventually took back the hotels through deeds in lieu of foreclosure, and the parties asserted multiple claims against each other for the business failures and related damages. Plaintiffs, Remon Hanna (“Hanna”) and Amir Guirguis (collectively “Plaintiffs”), purchased the two LLCs. In the first transaction, Plaintiffs and Raied Francis (“Francis”), one of the defendants, purchased Bell Hotel LLC (“Bell Hotel”) from defendants Dipesh Patel, Nilay Patel, and Mark Ross, Jr. Bell Hotel’s primary asset was a Super 8 Motel. The parties entered into a purchase agreement for Bell Hotel on September 10, 2014, for $3.2 million. Amir Guirguis, Hanna, and Francis each paid $100,000 cash, assumed the existing $2.6 million loan, and executed a $300,000 promissory note secured by a deed of trust on the hotel property. Plaintiffs and their wives personally guaranteed the $300,000 promissory note. ¶3 In the second transaction, on June 15, 2015, Plaintiffs, along with Francis, and Nilay Patel purchased A&D Hospitality LLC (“A&D”) from Dipesh Patel for $3,618,734.55. A&D’s primary asset was a Travelodge/Knights Inn. Like the first purchase, the buyers assumed the existing loan and executed a promissory note secured by a deed of trust on the property for the balance. ¶4 Hanna managed the Bell Hotel and the Super 8 Motel; Nilay Patel managed the A&D and its hotel properties; Francis worked the front desk at the Super 8; and Amir Guirguis delivered supplies to the hotels as needed. Problems arose in the hotel operations and despite paying the first 2  GUIRGUIS, et al. v. PATEL, et al. Decision of the Court mortgages on both properties, Plaintiffs fell behind on other obligations. Plaintiffs also failed to pay the promissory notes when they became due. On January 7, 2016, Nilay Patel, as manager of A&D, signed a deed in lieu of foreclosure on the A&D deed of trust and promissory note, thereby returning the A&D property to Dipesh Patel and surrendering and cancelling the promissory note. On February 2, 2016, Francis, on behalf of Bell Hotel, signed a deed in lieu of foreclosure on the Bell Hotel deed of trust and promissory note, returning the property to the original sellers, Dipesh Patel, Nilay Patel, and Mark Ross, Jr., and surrendering and cancelling the promissory note. ¶5 Plaintiffs asserted claims for conversion, breach of contract, tortious interference with business relations, and fraud against the defendants/counterclaimants, Bell Hotel, A&D, Dipesh Patel, Nilay Patel, Mark Ross, Jr., and Francis (collectively “Defendants”). The jury found Francis in breach of contract but awarded no damages. Plaintiffs prevailed on the tortious interference with business relations claim against Dipesh Patel and were awarded $48,000. The jury found for Defendants on all other claims. ¶6 Defendants asserted fourteen counterclaims against Plaintiffs. The jury found for Defendants but awarded no damages on the counterclaims for breach of fiduciary duty, conversion, breach of the A&D purchase agreement, and breach of the Bell Hotel purchase agreement. The jury awarded $9,000 to Defendants on the fraudulent transfer counterclaim; $169,761 for the equitable indemnity counterclaim; and $75,000 on the counterclaim for breach of the September 10, 2014 Bell Hotel promissory note. The jury rejected the remaining seven counterclaims. This resulted in a net $205,761 judgment for Defendants. The superior court awarded Defendants $204,332.54 in attorneys’ fees and costs. ¶7 The superior court denied Plaintiffs’ motion for new trial without comment in an unsigned minute entry order. For the next year, the parties engaged in garnishment litigation. The court entered a final, appealable judgment on July 12, 2019, from which Guirguis timely appealed. We have jurisdiction pursuant to Article 6, Section 9, of the Arizona Constitution and A.R.S. § 12-2101(A)(1), (5)(a). DISCUSSION I. The Evidence Supports the Fraudulent Transfer Verdict. ¶8 The basis of Defendants’ fraudulent transfer counterclaim is that while acting as manager of Bell Hotel, Hanna withdrew all funds in the 3  GUIRGUIS, et al. v. PATEL, et al. Decision of the Court company bank account while failing to pay Bell Hotel’s outstanding bills and obligations, specifically the past due promissory note. The jury awarded Defendants $9,000 on the counterclaim. A fraudulent transfer “occurs when an exchange lacks reasonably equivalent value and ‘the debtor was insolvent . . . as a result of the transfer.’ No proof of intent is required . . . .” Hullett v. Cousin, 204 Ariz. 292 , 295, ¶ 13 (2003) (quoting A.R.S. § 44-1005). ¶9 On appeal from a jury verdict, we view the evidence in the light most favorable to sustaining the verdict and will affirm if reasonable evidence supports the verdict. Gonzales v. City of Phoenix, 203 Ariz. 152 , 153, ¶ 2 (2002). Here, Guirguis alleges there was no evidence that Bell Hotel was insolvent. Insolvency is defined as “[a] debtor who is generally not paying his debts as they become due.” A.R.S. § 44-1002(B); see also In re Viscount Air Servs., Inc., 232 B.R. 416 , 437 (Bankr. D. Ariz. 1998) (holding that under A.R.S. § 44-1002, “[i]nsolvency can be either ‘balance sheet’ (assets less liabilities) or ‘equitable’ (generally not paying debts as they become due)”). ¶10 Defendants’ forensic accountant testified that on January 27, 2016, Hanna withdrew $9,000 from the Bell Hotel bank account, leaving a balance of $28.02 in that account and a negative balance in the other Bell Hotel account, which caused some checks written on those accounts to bounce. The evidence also showed that Hanna failed to pay several bills in a timely manner, resulting in emails, late notices, and disconnect notices from several vendors. The accountant testified that at the time Hanna withdrew nearly all of the funds in the account, both LLCs owed $169,761 in unpaid obligations. ¶11 This evidence supports the finding that Plaintiffs were insolvent at the time of the transfer. Accordingly, we affirm the judgment on the fraudulent transfer counterclaim. II. Appellants Waived the Equitable Defense of Unclean Hands. ¶12 The jury found in favor of Defendants on the equitable indemnity counterclaim and awarded $169,761 in damages. Guirguis argues that because the jury found Dipesh Patel liable for tortious interference with business relations, his negligent conduct constitutes unclean hands and bars the equitable indemnity counterclaim. See Evans Withycombe, Inc. v. W. Innovations, Inc., 215 Ariz. 237 , 241–42, ¶¶ 19–20 (App. 2006) (holding that a party seeking equitable indemnity must be free from negligence). “The doctrine of ‘unclean hands’ is an equitable defense to a 4  GUIRGUIS, et al. v. PATEL, et al. Decision of the Court claim seeking equitable relief.” Tripati v. State, Ariz. Dep't of Corrections, 199 Ariz. 222 , 225, ¶ 8 (App. 2000) (emphasis omitted). ¶13 Guirguis did not properly assert the equitable defense of unclean hands in the superior court. They did not raise this defense in answering the counterclaims, nor did they request a jury instruction on this defense. Failure to specifically plead an affirmative defense results in waiver. City of Phoenix v. Fields, 219 Ariz. 568 , 574, ¶ 27 (2009); Wineman v. Roysden, 166 Ariz. 281 , 286 (App. 1990). ¶14 Additionally, Guirguis waived any argument that the tortious interference and equitable indemnity verdicts are inconsistent, defective, or nonresponsive by failing to raise any such objections before the jury was dismissed. See Ariz. R. Civ. P. 49(f)(1) (any reformation of a defective verdict should take place before the jury is discharged); see also Trustmark Ins. Co. v. Bank One, Ariz., N.A., 202 Ariz. 535 , 543, ¶¶ 39–40 (App. 2002). Accordingly, we affirm the judgment for equitable indemnity. III. The Deed in Lieu of Foreclosure Does Not Preclude Recovery on the Breach of the September 10, 2014 Promissory Note Counterclaim. ¶15 On September 10, 2014, Bell Hotel signed a $300,000 promissory note secured by a deed of trust on the property. Amir Guirguis, Hanna, Francis and their wives (collectively “Guarantors”) all personally guaranteed the note. A&D signed a similar promissory note secured by a deed of trust on its property in the amount of $1,180,063.15, related to the A&D purchase. ¶16 On February 2, 2016, Francis, on behalf of Bell Hotel, signed a deed in lieu of foreclosure (“DLF”), returning the property to Dipesh Patel, Nilay Patel, and Mark Ross, Jr. The consideration for the DLF consisted of a “[f]ull reconveyance” of the September 10, 2014 deed of trust “and the surrender and cancellation” of the promissory note or notes or other evidence of debt secured by said deed of trust. The DLF provided the full and absolute release of [Bell Hotel] from all liability on any and all promissory notes, debts, obligations, costs or changes, the payment of which was secured either by the deed of trust [executed by Bell Hotel on September 10, 2014] or by any other deed of trust or encumbrance on the same property which may have been assumed or created by [Bell Hotel] . . . with the debts and obligations thereby secured, [Dipesh Patel, Nilay Patel, and Ross] ha[ve] assumed and 5  GUIRGUIS, et al. v. PATEL, et al. Decision of the Court agreed to pay by specific provisions herein before set forth in this deed[.] The parties executed an identical DLF on the A&D promissory note. Only the Bell Hotel promissory note and DLF are relevant to this appeal, however, because the jury found Plaintiffs breached the Bell Hotel (September 10, 2014) 1 promissory note but not the A&D promissory note. ¶17 Guirguis argues that because Defendants regained ownership of Bell Hotel and its hotel property through the DLF, they could not also recover damages for the alleged breach of the promissory note. The jury awarded Defendants $75,000 in damages for breach of the September 10, 2014 Bell Hotel promissory note. We presume this represents the difference between the $3.2 million Plaintiffs paid for Bell Hotel and the $3,125,000 Dipesh Patel later sold it for. However, Defendants argued that their damages for this breach included this $75,000 loss plus $300,000 in unpaid principal on the note. ¶18 The Bell Hotel promissory note was personally guaranteed by the Guarantors. The personal guaranty provided: “The obligations of [Guarantors] under this Guaranty are joint and several and independent of the obligations of [Bell Hotel], and a separate action or actions may be brought and prosecuted against [Guarantors].” By signing the Guaranty, Guarantors also agreed their obligations “shall be in addition to any . . . obligations of [Bell Hotel].” Furthermore, the Guaranty expressly states “[t]his Guaranty is a guaranty of payment and not of collection.” ¶19 “A guaranty contract is separately enforceable and independent of the obligation of the principal debtor.” Provident Nat’l Assurance Co. v. Sbrocca, 180 Ariz. 464 , 466 (App. 1994). The guaranty may permit greater liability than that of the principal debtor. Id. Because the Guarantors agreed their obligations were joint and several and independent of Bell Hotel’s obligations and waived any requirement that Dipesh Patel, Nilay Patel, and Ross first proceed against Bell Hotel or any other person, any rights Dipesh Patel, Nilay Patel, and Ross had against Bell Hotel did not determine the rights Dipesh Patel, Nilay Patel, and Ross had against the Guarantors. See id. (determining based on similar contract language “any rights that Provident may or may not have had against RCL 1 The minute entry mistakenly lists Claim 13 as “Breach of Contract – September 17, [sic] 2014 Promissory Note” but then cites the correct contract date (September 10, 2014) in the verdict. 6  GUIRGUIS, et al. v. PATEL, et al. Decision of the Court did not necessarily determine the rights that Provident had against the Sbroccas”). ¶20 Moreover, this was a guaranty of payment, not of collection, meaning that Guarantors promised to pay the Bell Hotel promissory note if Bell Hotel failed to do so. Tenet Healthsystem TGH, Inc. v. Silver, 203 Ariz. 217 , 220, ¶ 10 (App. 2002) (citing cases). Thus, although the DLF provided Bell Hotel with a full and absolute release from liability, it did not have the same effect on the personal guaranty. Nowhere in the DLF was the personal guaranty addressed, modified, or revoked. Because the personal guaranty remained intact, the breach of contract claim was not barred, and the jury could properly find in favor of the Defendants. IV. Attorneys’ Fees in the Trial Court. ¶21 The superior court awarded Defendants a reduced amount of attorneys’ fees. 2 Under A.R.S. § 12-341.01, the court may award reasonable attorneys’ fees to the successful party in any contested action arising out of a contract. ¶22 Defendants successfully defended Plaintiffs’ breach of contract claim because the jury awarded no damages. See Trustmark, 202 Ariz. at 543, ¶ 38 (holding that jury could not have found in plaintiff’s favor on negligence claim when it awarded zero damages because actual damages are an element of the claim); Chartone, Inc. v. Bernini (Ronald D. Mercaldo, Ltd., et al.), 207 Ariz. 162 , 170, ¶ 30 (App. 2004) (holding that breach of contract claim includes the element of damages). Thus, Defendants were eligible to receive an award of fees for successfully defending against the Plaintiffs’ breach of contract claim. The superior court has discretion to determine the successful party where there are multiple claims with varied success and to determine the amount of any fee award. See Lee v. ING Inv. Mgmt., LLC, 240 Ariz. 158 , 161, ¶ 8 (App. 2016); Schwartz v. Farmers Ins. Co. of Ariz., 166 Ariz. 33 , 38 (App. 1990). ¶23 Although the parties set forth various methods of mathematically determining whether, on balance, Defendants were more successful than Plaintiffs, the court need not determine the degree of Defendants’ success with mathematical precision. “‘Partial success does not preclude a party from “prevailing” and receiving a discretionary award 2Defendants requested $216,654 in attorneys’ fees and $37,678.54 in costs, and the court awarded a combined total of $204,332.54 in fees and costs. 7  GUIRGUIS, et al. v. PATEL, et al. Decision of the Court of attorneys’ fees’; the superior court may find that a party is the successful party even when the recovery it obtains is ‘significantly reduced.’” Lee, 240 Ariz. at 161, ¶ 10 (quoting Berry v. 352 E. Virginia, L.L.C., 228 Ariz. 9 , 14, ¶¶ 23–24 (App. 2011)). The trial court did not abuse its discretion by determining Defendants were the prevailing party. ¶24 Finally, Appellants contend the superior court improperly awarded fees for “distinct” claims. The court may properly award attorneys’ fees under § 12-341.01 for non-contract claims that are interwoven with contract claims. ML Servicing Co., Inc. v. Coles, 235 Ariz. 562 , 570, ¶¶ 30–31 (App. 2014). Appellants do not identify which claims are distinct from the contract claims. Moreover, the purchase agreements setting forth the parties’ obligations are at the core of the claims and counterclaims. The existence of the interwoven non-contract claims, alone, is not a basis to remand for reconsideration of attorneys’ fees. Finding no error, we affirm the award of attorneys’ fees. V. Attorneys’ Fees and Costs on Appeal. ¶25 Both parties request attorneys’ fees on appeal under A.R.S. § 12-341.01. Because Guirguis is not the successful party on appeal, its request is denied. Appellees’ request is granted contingent upon their compliance with Arizona Rule of Civil Appellate Procedure 21. Appellees are also entitled to an award of costs on appeal under A.R.S. § 12-342(A) because the overall judgment against Appellants remained the same on appeal. CONCLUSION ¶26 We affirm the judgment against Appellants. AMY M. WOOD • Clerk of the Court FILED: AA 8

2020-11-30 21:02:17.743965+00

http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/1%20CA-CV%2019-0610%20DRH%20Enterprises%20Final.pdf

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. IN THE ARIZONA COURT OF APPEALS DIVISION ONE DRH ENTERPRISES LLC, Plaintiff/Appellant, v. NOLAN RYAN, Defendant/Appellee. No. 1 CA-CV 19-0610 FILED 11-24-2020 Appeal from the Superior Court in Maricopa County No. CV2019-000127 The Honorable Pamela S. Gates, Judge VACATED AND REMANDED COUNSEL Cohen Dowd Quigley P.C., Phoenix By Daniel P. Quigley, Gabriel R. Aragon, Jenna L. Brownlee Counsel for Plaintiff/Appellant May, Potenza, Baran & Gillespie, P.C., Phoenix By Jesse R. Callahan, Julia M. Kolsrud, Andrew S. Lishko Counsel for Defendant/Appellee  DRH ENTERPRISES v. RYAN Decision of the Court MEMORANDUM DECISION Judge David B. Gass delivered the decision of the Court, in which Presiding Judge Jennifer M. Perkins and Judge Michael J. Brown joined. G A S S, Judge: ¶1 DRH Enterprises LLC appeals a superior court order granting attorney fees and costs to Nolan Ryan. Because Ryan did not make a proper request for his fees, he did not preserve the claim. Accordingly, we vacate the superior court’s award regarding fees and remand to the superior court to enter appropriate orders. FACTUAL AND PROCEDURAL HISTORY ¶2 On January 10, 2019, DRH simultaneously filed a complaint and an application for a temporary restraining order (TRO) to prevent Ryan from making DRH a party to pending arbitration proceedings. On January 22, Ryan moved to re-assign the case to the judge who presided over previous litigation between DRH and Ryan. On the same day, Ryan filed an opposition to DRH’s application. Ryan did not request his fees in these two filings. He also never filed an answer or a motion under Rule 12, Arizona Rules of Civil Procedure. ¶3 Ryan first requested attorney fees and costs in his February 6 pre-hearing memorandum. The superior court held an evidentiary hearing on DRH’s TRO application on February 13. On February 21, the superior court denied DRH’s application. ¶4 On March 27, DRH filed a notice of voluntary dismissal. On April 9, the superior court filed a signed minute entry dismissing the case. Twenty days later, Ryan filed his application for attorney fees and statement of costs. The superior court found the requests for fees and costs appropriate and timely under Arizona Rules of Civil Procedure 54(f) and 54(g)(3)(B), and A.R.S. § 12-341.01. Accordingly, the superior court awarded Ryan $47,300.00 in attorney fees and $2,215.85 in taxable costs. ¶5 DRH timely appealed the award of fees. This court has jurisdiction with respect to the superior court’s award of fees, under Article 6, Section 9, of the Arizona Constitution, and A.R.S. § 12-2101.A.1. 2  DRH ENTERPRISES v. RYAN Decision of the Court ANALYSIS ¶6 Arizona allows the superior court to award attorney fees to a successful party in an action arising out of a contract. A.R.S. § 12-341.01.A. But a party must request fees “in the pleadings or in a Rule 12 motion filed before the movant’s responsive pleading.” Ariz. R. Civ. P. 54(g)(1). ¶7 DRH argues Rule 54(g)(1) precludes the superior court from awarding Ryan his attorney fees because he did not request them in a pleading or a Rule 12 motion. Ryan counters he did not need to request his fees in a pleading or Rule 12 motion because he was not required to file either document in response to the TRO application. Accordingly, he argues, he validly requested his attorney fees in his pre-hearing memorandum. ¶8 This court reviews an award of attorney fees for abuse of discretion but interprets statutes and court rules de novo as issues of law. King v. Titsworth, 221 Ariz. 597 , 598, ¶ 8 (App. 2009). The same canons of statutory construction apply when interpreting a court rule as when interpreting a statute. See City of Phoenix v. Johnson, 220 Ariz. 189 , 191, ¶ 9 (App. 2009). When interpreting a court rule, this court’s primary objective is to discern and give effect to the supreme court’s intent in promulgating the rule, which is most reliably shown by the rule’s language. See King, 221 Ariz. at 599, ¶ 11. “In construing a rule, we apply the usual, ordinary meaning of its words unless doing so creates an absurd result.” Sholem v. Gass, 248 Ariz. 281 , 285, ¶ 9 (2020) (quotation omitted). ¶9 This court has once before held a defendant may recover attorney fees under Rule 54(g)(1) when not in compliance with its strict language. See Balestrieri v. Balestrieri, 232 Ariz. 25 , 27, ¶ 8 (App. 2013). When Balestrieri was decided, Rule 54(g) required a party to include a request for fees in the pleadings but was silent as to Rule 12 motions. Id. at 26–27, ¶ 4. In Balestrieri, the defendant filed a Rule 12 motion, seeking to dismiss an adverse breach of contract claim for lack of personal jurisdiction. Id. at 26, ¶ 2. The superior court granted the defendant’s motion, after which he filed a request for fees. Id. The Balestrieri panel recognized a Rule 12 motion may effectively take the place of a pleading, and it would make “little sense” to bar a litigant from recovering fees simply because they prevailed at an earlier stage of the litigation. Id. at 27, ¶ 6. “Consistent with the purpose of promoting settlement of disputes,” the Balestrieri panel held a Rule 12 motion could validly contain a party’s request for fees because it “puts the opposing party on immediate notice that he or she risks a fees award if the 3  DRH ENTERPRISES v. RYAN Decision of the Court case is not settled before the court decides the motion.” Id. at ¶ 8 (emphasis added). ¶10 Balestrieri’s deviation from Rule 54(g)’s plain language, however, is unique in the context of this court’s other cases. See, e.g., King, 221 Ariz. at 598, ¶ 7; In re Restated Tr. of Crystal H. West, 249 Ariz. 355 , 358, ¶ 8 (App. 2020). In Balestrieri, the Rule 12 motion was dispositive and eliminated the need to file an answer. See 232 Ariz. at 27, ¶ 4. Ryan’s opposition here is not analogous—his success in opposing the TRO was not dispositive. The action continued until DRH voluntarily dismissed it. In short, the opposition here did not stand in place of an answer the way the Rule 12 motion did in Balestrieri. See id. ¶11 In Crystal H., the plaintiffs made their first attorney fees request after prevailing at trial. 249 Ariz. at 357, ¶¶ 4–5. That panel noted Balestrieri declined to follow Rule 54(g)(1)’s plain language only to avoid the absurdity of denying the prevailing party “any opportunity to claim attorney fees.” Id. at 360, ¶ 18 (emphasis added). Because the Crystal H. plaintiffs could have requested fees in their petition, strict application of the rule did not prevent them from making a timely request. Id. ¶12 Here, as in Crystal H., we apply Rule 54(g)(1)’s plain language. See id. at 358, ¶ 10. Ryan first put DRH on notice he was seeking fees in his February 6 pre-hearing memorandum. He made no fee request in his prior January 22 opposition to DRH’s TRO, a filing he was not required to make but did anyway. See Ariz. R. Civ. P. 65 (not requiring a party to file an opposition to a TRO request). Nothing before us demonstrates Ryan was prevented from filing, for example, a brief answer of general denial to preserve his right to attorney fees. Ryan argues nothing required him to file a pleading or Rule 12 motion in this case. But nothing required him to file an opposition to DRH’s application either, yet he did and still failed to request his fees. We accordingly hold Ryan’s non-compliance forfeits his attorney fees award. ¶13 Our holding comports with this court’s prior application of Rule 54(g)(1)’s plain language and the policy rationales behind the rule. “Unless each party is on notice before each stage of the lawsuit that its opponent intends to ask for attorneys’ fees,” the underlying policy of promoting settlement of disputes between parties is not furthered. See Balestrieri, 232 Ariz. at 27, ¶ 7 (quoting King, 221 Ariz. at 598, ¶ 8) (emphasis original). Because Ryan did not request fees in a pleading or Rule 12 motion, as mandated by Rule 54(g)(1), his inclusion of a request for fees in his pre- hearing memorandum did not preserve his statutory right. Just as in Crystal 4  DRH ENTERPRISES v. RYAN Decision of the Court H., “the circumstance here that precludes [Ryan] from receiving attorney fees was within [his] control.” See 249 Ariz. at 360, ¶ 18. ¶14 Because we conclude Ryan’s Rule 54(g) non-compliance is dispositive, we need not address the other issues DRH raised in its briefing. See Sw. Barricades, L.L.C. v. Traffic Mgmt., Inc., 240 Ariz. 139 , 142, ¶ 17 n.3 (App. 2016). ¶15 We will not consider an appeal of the award of costs. See ARCAP 13(a)(7)(A) (opening brief must contain arguments with “citations of legal authorities and appropriate references to the portions of the record on which the appellant relies”); Schabel v. Deer Valley Unified Sch. Dist. No. 97, 186 Ariz. 161 , 167 (App. 1996) (“Issues not clearly raised and argued in a party’s appellate brief are waived.”) (emphasis added). We do not read DRH’s appeal to include the award of costs. Though DRH asks this court to “reverse the trial court’s grant of the Application and award of attorneys’ fees and costs,” both of the items in its Opening Brief’s “issues presented for review” section focus solely on the issue of fees. Indeed, the first heading under its “argument” section reads “Ryan’s Application was Improper and Untimely Under Rule 54 and the Trial Court Accordingly Erred in Awarding Ryan Fees.” DRH does not cite the applicable costs statute— A.R.S. § 12-341—anywhere in its brief. DRH did file a separate objection to Ryan’s application of costs in the superior court, but DRH briefed none of those issues on appeal. To the extent we infer DRH seeks to appeal the superior court’s award of costs to Ryan, DRH waived this issue. CONCLUSION ¶16 For the foregoing reasons, we vacate the superior court’s order awarding Ryan his attorney fees. Our decision does not affect the superior court’s award of taxable costs. We, therefore, remand to the superior court to enter orders consistent with this decision. In our discretion, we decline to award DRH its attorney fees incurred in this appeal but award DRH taxable costs upon compliance with ARCAP 21. AMY M. WOOD • Clerk of the Court FILED: AA 5

2020-11-30 21:02:35.462793+00

https://www.courts.ca.gov/opinions/nonpub/B294269.PDF

Filed 11/30/20 Zagorovskaya v. B & V Enterprises CA2/1 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION ONE TATIANA ZAGOROVSKAYA, B294269 Plaintiff and Appellant, (Los Angeles County Super. Ct. No. LC104715) v. B & V ENTERPRISES, INC., et al., Defendants and Respondents. APPEAL from a judgment of the Superior Court of Los Angeles County, Virginia C. Keeny, Judge. Affirmed. ____________________________ Tatiana Zagorovskaya, in pro. per., for Plaintiff and Appellant. Fisher & Phillips, Todd B. Scherwin and Sarina Saluja for Defendants and Respondents. ____________________________  Plaintiff and appellant Tatiana Zagorovskaya challenges the trial court’s grant of summary judgment in favor of defendants and respondents B & V Enterprises, Inc. (dba Super King Market) (B & V), Vartan Gulasarian, and Meldis Shaverdian (collectively, defendants). Zagorovskaya, who worked at a Super King Market (Super King) owned by B & V, claimed that Shaverdian sexually harassed, assaulted, and battered her at work. She also claims that B & V violated the California Occupational Safety and Health Act (Lab. Code, § 6300 et seq.) (OSHA) by requiring her to do her job without proper safety equipment, leading her to injure her hand while cutting salami at a meat-slicing machine. We affirm. FACTS AND PROCEEDINGS BELOW Because this is an appeal of a grant of summary judgment in favor of defendants, we describe the evidence “in the light most favorable to the opposing party,” Zagorovskaya. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826 , 843 (Aguilar).) Zagorovskaya began working as a deli clerk at Super King in November 2015. Shaverdian worked at the deli counter as well and showed Zagorovskaya how to use the deli equipment; Zagorovskaya viewed Shaverdian as a supervisor. Beginning in late January 2016, Zagorovskaya had a number of encounters with Shaverdian that made her feel uncomfortable. On two occasions, Shaverdian touched Zagorovskaya on the backside. On a third occasion, Shaverdian grabbed Zagorovskaya’s face “in a fit of passion,” in a way Zagorovskaya perceived as sexual. Zagorovskaya believed Shaverdian wanted to have a closer relationship with her, but Zagorovskaya kept her distance. On a fourth occasion, on February 19, 2016, Shaverdian sprayed cleaning solution directly at Zagorovskaya’s face. After a while, 2 Shaverdian began walking away and told Zagorovskaya, “Leave.” On February 21, Shaverdian assigned Zagorovskaya excessive cleaning duties to perform that she did not normally have to do. The next day, February 22, 2016, Zagorovskaya injured her fingers while cutting salami on a meat-slicing machine. She was not using a hand guard or wearing protective gloves at the time of the injury because Super King required employees to cut meats at an angle, which precluded using a hand guard. As a result of the injury and Shaverdian’s conduct, Zagorovskaya suffered emotional distress and was unable to continue working. Gulasarian is the store manager of Super King, to whom Zagorovskaya reported her injury. Gulasarian refused to call 911 for approximately 40 minutes after the injury, then asked another employee to drive Zagorovskaya to the hospital. Zagorovskaya did not report Shaverdian’s conduct to management at Super King. Nor did she complain about any OSHA violations regarding the meat-slicing equipment. Following her injury, Zagorovskaya filed a workers’ compensation claim and took a workers’ compensation related leave of absence. On October 5, 2016, Zagorovskaya filed suit against B & V, Shaverdian, and Gulasarian. She alleged causes of action for sex and gender based harassment under the California Fair Employment and Housing Act (FEHA) (Gov. Code, § 12900 et seq.), assault, battery, failure to provide safe working conditions pursuant to OSHA, and intentional infliction of emotional distress. Defendants filed motions for summary judgment or summary adjudication.1 The trial court granted 1 Unlike the other two defendants, who filed motions for summary judgment, Shaverdian moved for summary 3 the motions, finding that Zagorovskaya failed to demonstrate a triable issue of material fact as to any of the causes of action in question. DISCUSSION Zagorovskaya contends that the trial court abused its discretion by rejecting certain evidence she offered. She also contends that the trial court erred on the merits by granting summary judgment in favor of defendants. We disagree and affirm. A. Evidentiary Objections Zagorovskaya contends that the trial court erred by refusing to consider evidence relevant to the summary judgment motion. We review the trial court’s evidentiary rulings for abuse of discretion. (Carnes v. Superior Court (2005) 126 Cal.App.4th 688 , 694.) We consider each of these evidentiary questions in turn. 1. Declaration of Meri Aroutioinuan Zagorovskaya contends that the trial court erred by refusing to consider a declaration of Zagorovskaya’s coworker Meri Aroutioinuan. In the declaration, Aroutioinuan corroborated Zagorovskaya’s allegations that employees at Super King were required to cut deli meats at an angle, and that this precluded the use of a safeguard. She also stated that the deli-counter employees wore thin, nonprotective gloves while cutting meat. In addition, she stated that Shaverdian was adjudication on two of the four causes of action alleged against her, but not for the claims of assault and battery. 4 an assistant manager at the deli department and delegated duties to employees. This contradicted a declaration by a representative of B & V that Shaverdian was merely a coworker. The trial court rejected the declaration because it was not made under penalty of perjury. In any declaration submitted in court, the declarant must state that the declaration “is certified or declared by him or her to be true under penalty of perjury.” (Code Civ. Proc., § 2015.5.) The trial court excluded Aroutioinuan’s declaration on the ground that it did not comply with this requirement. Instead, Aroutioinuan stated, “I declare under the laws of the State of California that the foregoing is true and correct.” (Italics added.) We need not decide whether the court erred by refusing to consider the declaration because any error would be harmless. The question of whether Shaverdian was Zagorovskaya’s supervisor was relevant to Zagorovskaya’s sex and gender harassment claim, but its resolution would not have affected the decision on summary judgment. In claims under FEHA, an employer is strictly liable for sexual harassment by a supervisor. (State Dept. of Health Services v. Superior Court (2003) 31 Cal.4th 1026 , 1040–1041.) When the misconduct is committed by coworkers or others, by contrast, the plaintiff must show that management knew or should have known of the harassment. (Ibid.) But in this case, the trial court correctly determined as a matter of law that Shaverdian’s alleged actions were insufficiently severe or continuous to create a hostile work environment. We explain this issue in more detail in the Discussion part B.2, post. Zagorovskaya claims that Shaverdian’s status as her supervisor was also relevant to B & V’s liability for assault 5 and battery under a doctrine of respondeat superior, but this is incorrect. The doctrine of respondeat superior makes an employer “vicariously liable for the torts of its employees committed within the scope of the employment.” (Lisa M. v. Henry Mayo Newhall Memorial Hospital (1995) 12 Cal.4th 291 , 296.) In this case, the assault and battery Zagorovskaya alleges that Shaverdian committed against her were personal in nature and had nothing to do with Shaverdian’s duties on the job. “[W]here the undisputed facts would not support an inference that the employee was acting within the scope of his employment,” the court may find the doctrine inapplicable as a matter of law. (John R. v. Oakland Unified School Dist. (1989) 48 Cal.3d 438 , 447.) The trial court did not err by making such a determination in this case. Zagorovskaya cites Meyer v. Graphic Arts International Union (1979) 88 Cal.App.3d 176 for the proposition that an employer may be vicariously liable for intentional torts committed by an employee, but in that case, the plaintiff alleged that the employees who attacked her were acting within the scope of their employment. (Id. at p. 178.) Zagorovskaya has produced no such evidence in this case. 2. Video Evidence Zagorovskaya contends that the trial court erred by stating that Zagorovskaya “was told there were video cameras recording the incidents but she is unable to provide any such evidence.” Zagorovskaya notes that she provided a video showing that there are video cameras installed at the deli department of Super King. That may be so, but Zagorovskaya has failed to produce any relevant recordings from the video cameras, and she has failed to show that B & V obstructed her from obtaining the recordings. 6  B. Summary Judgment Zagorovskaya raises a number of other challenges to the trial court’s grant of summary judgment. We first describe the law applicable to summary judgment in general, then address each of Zagorovskaya’s claims individually. 1. Basic Principles of Law Summary judgment is proper when there are no triable issues of material fact and the moving party is entitled to judgment as a matter of law. (Nealy v. City of Santa Monica (2015) 234 Cal.App.4th 359 , 370; Aguilar, supra, 25 Cal.4th at p. 843; Code Civ. Proc., § 437c, subd. (c).) A defendant moving for summary judgment bears an initial burden of showing that one or more elements of the plaintiff ’s cause of action cannot be established or that there is a complete defense to that cause of action. (Nealy v. City of Santa Monica, supra, 234 Cal.App.4th at p. 370; Aguilar, supra, 25 Cal.4th at p. 849.) If the defendant meets this burden, the plaintiff has the burden to demonstrate one or more triable issues of material fact as to the cause of action or defense. (Aguilar, supra, at p. 849 .) A triable issue of material fact exists “if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Id. at p. 850.) In reviewing summary judgment, “[w]e review the trial court’s decision de novo, liberally construing the evidence in support of the party opposing summary judgment and resolving doubts concerning the evidence in favor of that party.” (State of California v. Allstate Ins. Co. (2009) 45 Cal.4th 1008 , 1017–1018.) 7  2. Sexual Harassment Claim We agree with the trial court that Shaverdian’s conduct as Zagorovskaya describes it was “not sufficiently severe or pervasive to constitute a hostile work environment under the FEHA.” In her deposition, Zagorovskaya alleged that Shaverdian touched her bottom on two occasions, and that on a third occasion, she grabbed Zagorovskaya’s face in a fit of passion. When Zagorovskaya kept her distance, Shaverdian retaliated by spraying her in the face with cleaning fluid and by assigning her extra cleaning tasks. As the trial court noted, the facts in this case are similar to two others in which courts found that harassment allegations were insufficient as a matter of law. In Mokler v. County of Orange (2007) 157 Cal.App.4th 121 , a supervisor made two sexual comments to the plaintiff, and on a third occasion, he put his arm around her and rubbed against her breast. (Id. at p. 144.) The court reasoned that the supervisor’s actions “demonstrate[d] rude, inappropriate, and offensive behavior. To be actionable, however, a workplace must be ‘ “permeated with ‘discriminatory intimidation, ridicule and insult,’ [citation] that is ‘sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive working environment.’ ” ’ ” (Id. at p. 145.) The supervisor’s actions simply did not meet that threshold. (Ibid.) Similarly, in Haberman v. Cengage Learning, Inc. (2009) 180 Cal.App.4th 365 , the court affirmed a grant of summary judgment in favor of a defendant on a sexual harassment claim. One of the defendants made a number of sexual comments to the victim over a period of months, but the court held that these were too isolated, sporadic, and trivial to make for a hostile workplace. (Id. at p. 385.) In 8 this case, Zagorovskaya testified that “it wasn’t clear to” her at first what Shaverdian meant by touching her bottom. Furthermore, Zagorovskaya acknowledged that Shaverdian never made any comments to her about her gender. These actions are not sufficiently severe to make for a hostile workplace. Zagorovskaya contends that the trial court erred by concluding that there were discrepancies regarding Zagorovskaya’s allegations of Shaverdian’s conduct between the testimony in her deposition and in a declaration she later filed. We disagree. We have reviewed the trial court’s opinion, as well as Zagorovskaya’s deposition testimony and declaration, and we do not find that the trial court materially misrepresented Zagorovskaya’s statements. 3. Workers’ Compensation Exclusivity The trial court denied Zagorovskaya’s causes of action for failure to provide safe working conditions (see Lab. Code, §§ 6401, 6403) and for intentional infliction of emotional distress on the ground that workers’ compensation provides “the sole and exclusive remedy of the employee or his or her dependents against the employer” for injuries suffered on the job. (Lab. Code, § 3602, subd. (a).) Zagorovskaya contends that this was error on the ground that claims of intentional misconduct are not subject to the workers’ compensation exclusivity doctrine. We disagree. Our Supreme Court has established “a tripartite system for classifying injuries arising in the course of employment. First, there are injuries caused by employer negligence or without employer fault that are compensated at the normal rate under the workers' compensation system. Second, there are injuries 9 caused by ordinary employer conduct that intentionally, knowingly or recklessly harms an employee, for which the employee may be entitled to extra compensation under [Labor Code] section 4553. Third, there are certain types of intentional employer conduct which bring the employer beyond the boundaries of the compensation bargain, for which a civil action may be brought.” (Fermino v. Fedco, Inc. (1994) 7 Cal.4th 701 , 713–714.) The injury Zagorovskaya suffered at the meat-slicing machine was at most in the second category. Even if B & V intentionally exposed her to dangerous working conditions by requiring her to work without necessary safety equipment, the conduct was within the boundaries of the compensation bargain, and Zagorovskaya’s sole remedy was workers’ compensation. (See Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal.3d 148 , 160.) The situations in which a civil action may be brought for injuries suffered on the job are not at all like those Zagorovskaya alleges she experienced. (See Miklosy v. Regents of University of California (2008) 44 Cal.4th 876 , 902.) Zagorovskaya also argues that B & V may be liable for civil damages for her injury at the meat slicer under two sections of the Labor Code. Section 4553 provides for increased damages “where the employee is injured by reason of the serious and willful misconduct” of the employer. (Lab. Code, § 4553.) But that statute applies exclusively to workers’ compensation claims. (Arendell v. Auto Parts Club, Inc. (1994) 29 Cal.App.4th 1261 , 1264.) Similarly, Labor Code section 4558 allows employees to file suit against employers who cause injury or death by removing or failing to install safety guards on power presses. But the statute defines power press as “any material-forming machine that utilizes a die which is designed for use in the manufacture 10 of other products.” (Lab. Code, § 4558, subd. (a)(4).) The meat-slicing machine Zagorovskaya operated does not fit this definition. Nor does Solus Industrial Innovations, LLC v. Superior Court (2018) 4 Cal.5th 316 (Solus) provide Zagorovskaya with a private right of action for the injury she suffered at the meat-slicing machine, contrary to Zagorovskaya’s claim. In Solus, the Court held that the federal OSHA did not preempt California’s unfair competition law with respect to claims based on workplace safety and health violations. Zagorovskaya did not bring a claim under the unfair competition law. 4. Intentional Infliction of Emotional Distress against Gulasarian Zagorovskaya contends that the trial court erred by granting summary judgment in favor of Gulasarian, the store manager at Super King, on Zagorovskaya’s cause of action for intentional infliction of emotional distress. We disagree. “A cause of action for [intentional infliction of emotional distress] requires proof of: (1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff suffered severe emotional distress; and (3) the defendant’s extreme and outrageous conduct was the actual and proximate cause of the severe emotional distress. (Hughes v. Pair (2009) 46 Cal.4th 1035 , 1050 . . . .) “A defendant’s conduct is considered to be outrageous if ‘it is so “ ‘ “extreme as to exceed all bounds of that usually tolerated in a civilized community.” ’ ” ’ ” (Crouch v. Trinity Christian Center of Santa Ana, Inc. (2019) 39 Cal.App.5th 995 , 1007 (Crouch).) Another explanation of the relevant standard 11 comes from a comment to the Restatement Second of Torts, section 46: “ ‘Liability has been found only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community. Generally, the case is one in which the recitation of the facts to an average member of the community would arouse his resentment against the actor, and lead him to exclaim, “Outrageous!” ’ (Rest.2d Torts, § 46, com. d, p. 73.)” (Crouch, supra, 39 Cal.App.5th at p. 1007.) Gulasarian’s actions with respect to Zagorovskaya simply do not rise to this level. Zagorovskaya declared that when she reported her finger injury to Gulasarian, he refused to call 911 and told Zagorovskaya to drive herself to the hospital. Approximately 40 minutes later, Gulasarian asked an employee to drive Zagorovskaya to the hospital. Her evidence, however, does not show that her injuries were so severe that she needed to be taken to the hospital in an ambulance. Further, there is insufficient evidence in the record to support an inference that Gulasarian knew of Shaverdian’s alleged misconduct toward Zagorovskaya. 12  DISPOSITION The judgment of the trial court is affirmed. Respondents are awarded their costs on appeal. NOT TO BE PUBLISHED. ROTHSCHILD, P. J. We concur: BENDIX, J. FEDERMAN, J.* * Judge of the San Luis Obispo County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. 13

2020-11-30 21:02:36.008002+00

https://www.courts.ca.gov/opinions/nonpub/B296593.PDF

Filed 11/30/20 Shirvanyan v. Los Angeles Community College etc. CA2/1 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION ONE ANAHIT SHIRVANYAN, B296593, B297419 Plaintiff and Respondent, (Los Angeles County Super. Ct. No. BC633224) v. LOS ANGELES COMMUNITY COLLEGE DISTRICT, Defendant and Appellant. APPEALS from the judgment and an order of the Superior Court of Los Angeles County, Stephanie M. Bowick, Judge. Reversed with directions. Carlson & Messer, Charles R. Messer; Greines, Martin, Stein & Richland and Robert A. Olson for Defendant and Appellant. Shegerian & Associates, Carney R. Shegerian and Jill McDonell for Plaintiff and Respondent.  Defendant Los Angeles Community College District (the District) appeals from a judgment following a jury verdict in favor of plaintiff Anahit Shirvanyan, a former employee of the District, on her Fair Employment and Housing Act (FEHA) claims against it. These claims were based on the District’s alleged failure to provide reasonable accommodations for and/or engage in an interactive process to identify reasonable accommodations for two injuries, each of which was sufficient to render Shirvanyan disabled for the purposes of FEHA. Shirvanyan offered evidence regarding the District’s response to both injuries—a wrist condition that began sometime in 2014, and a shoulder injury that occurred in December 2015—but she did not, either in her complaint or the evidence she presented, differentiate between them as bases for liability. The District argues that a necessary element of a FEHA interactive process claim under Government Code1 section 12940, subdivision (n) is the availability of a reasonable accommodation at the time an interactive process should have taken place, such that engaging in the process would not have been futile. We agree with the District that a section 12940, subdivision (n) plaintiff must prove an available reasonable accommodation. We further conclude that the evidence presented is sufficient to establish only that a reasonable accommodation of Shirvanyan’s wrist injury, not her shoulder injury, was available. The jury did not indicate whether it relied on the District’s response to one or both of these disabilities in reaching its verdict, and the record does not permit us to make such a 1 Unless otherwise indicated, all further unspecified statutory references are to the Government Code. 2 determination. We therefore reverse with instructions that the trial court conduct a new trial on Shirvanyan’s failure to accommodate and interactive process claims based solely on the District’s handling of Shirvanyan’s wrist injury. We further conclude, in response to the District’s second primary argument on appeal, that the Workers’ Compensation Act (Lab. Code, § 3200 et seq.) (the WCA) does not bar such claims, as they seek recovery for a harm that is distinct from the harms for which the Workers’ Compensation Act provides a remedy. The District also appeals from the order granting Shirvanyan attorney fees, which we also reverse. To the extent Shirvanyan prevails on the limited retrial set forth below, the court must reassess whether and to what extent she is entitled to attorney fees. FACTUAL AND PROCEDURAL BACKGROUND A. FEHA Concepts of Reasonable Accommodation and the Interactive Process To assist in understanding the factual and procedural background of this matter, we provide an initial overview of some of the FEHA concepts involved in the litigation below. FEHA identifies several “unlawful employment practice[s].” (§ 12940.) Through these definitions, FEHA seeks to assure “those employees with a disability who can perform the essential duties of the employment position with reasonable accommodation” have the opportunity to do so and are not discriminated against based on their disability. (Green v. State of California (2007) 42 Cal.4th 254 , 264 (Green).) A “reasonable accommodation” is “ ‘ a modification or adjustment to the workplace that enables the employee to perform the essential functions of the job 3 held or desired.’ ” (Furtado v. State Personnel Bd. (2013) 212 Cal.App.4th 729 , 745 (italics omitted), quoting Nadaf–Rahrov v. Neiman Marcus Group, Inc. (2008) 166 Cal.App.4th 952 , 974 (Nadaf–Rahrov).) A reasonable accommodation may include “[j]ob restructuring, part-time or modified work schedules, [or] reassignment to a vacant position.” (§ 12926, subd. (p)(2).) “A finite leave of absence [also] may be a reasonable accommodation to allow an employee time to recover.” (Nealy v. City of Santa Monica (2015) 234 Cal.App.4th 359 , 377–378 (Nealy).) FEHA imposes an “affirmative duty” (Soria v. Univision Radio Los Angeles, Inc. (2016) 5 Cal.App.5th 570 , 598, quoting Cal. Code Regs., tit. 2, § 11068, subd. (a)) on employers “to make [a] reasonable accommodation for the known disability of an employee unless doing so would produce undue hardship to the employer’s operation.” (Nealy, supra, 234 Cal.App.4th at p. 373, citing § 12940, subd. (m).) Because the normal course of an employee’s job may not make her aware of all available and effective reasonable accommodations, FEHA also requires that “in response to a request for reasonable accommodation by an employee or applicant with a known physical or mental disability or known medical condition,” an employer “engage in a timely, good faith, interactive process with the employee or applicant to determine effective reasonable accommodations, if any.” (§ 12940, subd. (n).) An employer’s failure to make a reasonable accommodation for an employee with a known disability— regardless of whether an employer has engaged in the interactive process or not (see Nadaf-Rahrov, supra, 166 Cal.App.4th at p. 984)—is unlawful (§ 12940, subd. (m)(1)), and the disabled employee may sue to recover harm suffered as a result. An employer’s failure to engage in the interactive process that causes 4 harm to a disabled employee or former employee is also independently actionable. (Swanson v. Morongo Unified School Dist. (2014) 232 Cal.App.4th 954 , 971.) For the purposes of a FEHA claim, the cause of an employee’s disability is irrelevant; the focus is on the employer’s efforts to reasonably accommodate the disability, regardless of its cause. We discuss these concepts in greater detail in our analysis below. B. Factual Background2 1. Shirvanyan’s employment at the child development center The Child Development Center (the center) at Los Angeles Valley College, a part of the District, employed Shirvanyan for approximately eight years, beginning in 2007. The District has three classifications for its employees—classified, unclassified, and academic. At the center, unclassified assistants may be assigned to roles in the kitchen, yard, or classroom. Shirvanyan was a level three unclassified assistant employee assigned to the kitchen. Her personnel record lists her job title as “Kitchen 2 We review sufficiency of the evidence issues raised on appeal for substantial evidence. (See Western States Petroleum Assn. v. Superior Court (1995) 9 Cal.4th 559 , 571 (Western States Petroleum) [“when a [finding] is attacked as being unsupported, the power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the [finding]”].) As such, we must consider the evidence in the light most favorable to the challenged verdict, and resolve all conflicts of evidence in Shirvanyan’s favor. (See ibid.) 5 Coordinator,” and in her complaint identifies her position as “kitchen worker.” When employed at the center, Shirvanyan was the only unclassified assistant assigned exclusively to the kitchen. While working at the center, Shirvanyan prepared breakfast and lunch (e.g., washed and cut fruit, opened large heavy cans, poured cereal), brought meals in large bowls and milk/juice to classrooms using a large cart, retrieved and cleaned dishes, washed five-pound pots, did laundry, and cleaned the kitchen. Shirvanyan’s “essential job functions” included “repetitive use of her hands to cut foods, load[ing] and unload[ing] the dishwasher, and hand wash[ing] large and heavy pots and pans” and required “prolonged standing, repetitive bending, repetitive lifting, repetitive pulling, repetitive pushing, repetitive use of her hands” and the ability “to lift up to about 50 pounds.” 2. Shirvanyan’s carpal tunnel syndrome and resulting difficulties at work In 2014, Shirvanyan was diagnosed with nerve damage and carpal tunnel in her arm and wrist. She began wearing a brace daily and needed help in the kitchen because of her injuries. Also in 2014, Shirvanyan reduced her hours due to pain. In May 2015, Shirvanyan consulted her primary care physician, Dr. Armine Nazaryan, about the pain in her wrist. Dr. Nazaryan diagnosed her with “moderate to severe right carpal tunnel syndrome” of the “right upper extremity” with “pain, numbness and weakness in her right hand.” It is undisputed that carpal tunnel syndrome is a recognized disability under FEHA. Dr. Nazaryan prescribed wrist support and physical therapy. 6  Shirvanyan told her supervisors about her carpal tunnel syndrome and wrist pain. She frequently asked coworkers for help with more strenuous tasks, such as lifting heavy pots or moving large bags of fruit. Her coworkers were sometimes able to assist her. Shirvanyan also began participating in physical therapy, which somewhat improved her condition. Nevertheless, Shirvanyan was often in tears by the end of her shift due to the pain, complained of pain daily to her coworkers, and winced or favored one arm while completing her job duties. Although not identifying them as such, Shirvanyan requested various accommodations for her wrist conditions at various times. She repeatedly asked her supervisors for additional help in the kitchen, which she did not receive. She requested an electric can opener, but she was denied that request. When the large industrial dishwasher broke, she asked for assistance hand washing dishes, or to be allowed to use paper plates, and was again denied. Shirvanyan also asked her supervisor whether she could help teachers supervise children instead of working in the kitchen, and was informed that she did not have the required skills for such work. Testimony of the District’s employees at trial reflected their lack of understanding of both the District’s policies regarding reasonable accommodation and the obligations FEHA imposes on an employer, once the employer becomes aware of an employee’s disability. Although Shirvanyan’s supervisors were aware of Shirvanyan’s carpal tunnel syndrome and her difficulties performing her job, they never discussed changing Shirvanyan’s kitchen duties or giving Shirvanyan time off to address the injury in her wrist. 7  3. Shirvanyan’s shoulder injury and cessation of work at the center On December 18, 2015, Shirvanyan injured herself when opening the door of a heavy industrial dishwasher and left her shift early due to the resulting pain. She saw Dr. Nazaryan, complaining of pain that prevented Shirvanyan from moving her right arm, shoulder, and neck. Based on this appointment, Dr. Nazaryan provided Shirvanyan with a medical release form stating that Shirvanyan could not return to work until March 7, 2016. Dr. Nazaryan chose this length of time based on her “experience [that] this is the average time needed at least for even partial recovery of nerve injury or nerve problem.” Dr. Nazaryan wrote no further medical release notes for Shirvanyan. In early January 2016, Shirvanyan’s daughter delivered the medical release form to the center, dropping it off at the sheriff ’s station as instructed by the center’s staff. Shirvanyan’s supervisor received the form. Shirvanyan never returned to work after leaving the day of her shoulder injury, nor did she provide any additional medical leave forms or requests to the center extending the length of her desired leave beyond March 7, 2016. Resolving all conflicts in the evidence in Shirvanyan’s favor, no one at the center contacted Shirvanyan or her daughter (who often served as a translator for Shirvanyan in communications with the center) about whether, when, or under what conditions Shirvanyan would be returning to work after her shoulder injury.3 There is no information in the record 3 The District offered testimony from one of its employees that he had reached out to Shirvanyan’s daughter following 8 suggesting that Shirvanyan was fired, or that anyone at the center instructed or encouraged her not to return to work following her shoulder injury.4 According to her daughter, however, Shirvanyan also never mentioned returning to work at the center after leaving in December 2015. The center’s interrogatory responses indicate that Shirvanyan stopped being employed at the center “approximately at the end of 2015,” which is consistent with the last time she performed work there, but the response does not indicate why her employment ended. Shirvanyan’s shoulder injury to let her know the center would hold Shirvanyan’s job open for her while she recovered, and that Shirvanyan’s daughter indicated Shirvanyan did not intend to return to work. Shirvanyan’s daughter, however, testified that no one from the District contacted her following the shoulder injury, and Shirvanyan likewise testified to never having heard from her employer after she left work early on December 18, 2015. Because we resolve all conflicts in the evidence in Shirvanyan’s favor, for purposes of this appeal, we must and do accept Shirvanyan’s version of these facts. (See Crawford v. Southern Pac. Co. (1935) 3 Cal.2d 427 , 429 [in reviewing for substantial evidence, “[w]hen two or more inferences can be reasonably deduced from the facts, the reviewing court is without power to substitute its deductions for those of the trial court”].) 4 Approximately four months before Shirvanyan’s shoulder injury and resulting cessation of work, Shirvanyan’s former supervisor—who had recently retired—saw Shirvanyan in the hallway, and when Shirvanyan complained of pain, the former supervisor stated she was herself retired and stated “you could retire, too.” Shirvanyan does not argue, nor would the record support, that she understood this comment from a former supervisor four months before she hurt her shoulder and left work as an instruction not to return to work following the expiration of her medical leave note in March 2016. 9  4. Shirvanyan’s condition following her cessation of work at the center Both parties acknowledge in their respective briefing on appeal that Shirvanyan made a workers’ compensation claim following her December 2015 shoulder injury, although no evidence regarding the claim was permitted at trial, and thus no details about the claim are included in the record. In connection with this claim, Shirvanyan began seeing physician Dr. Emmett Berg on January 14, 2016. Dr. Berg initially diagnosed Shirvanyan with severe carpal tunnel syndrome of the right extremity, cervical sprain, epicondylitis of the right elbow, and shoulder tendinitis in the right shoulder. Based on additional diagnostics thereafter, Dr. Berg supplemented his diagnosis to include “severe pathology in the shoulder . . . including findings of a completely torn [right] supraspinatus tendon, which is one of the four rotator cuff muscles in the shoulder,” as well as “multilevel degenerative disc disease of the cervical spine.” The “major complaint for which [Dr. Berg] was seeing Shirvanyan” was the torn rotator cuff in her shoulder. Dr. Berg’s treatment of Shirvanyan was still ongoing at the time of trial in 2018. At that time, Dr. Berg was still instructing Shirvanyan not to return to work. Nothing in the record suggests that Berg provided Shirvanyan with a medical leave note or that Dr. Berg or Shirvanyan otherwise communicated Dr. Berg’s instructions to the center. Also as of the time of trial, Shirvanyan still had significantly limited mobility in her right arm/hand, and used her left hand to brush her teeth, shower and to put on shoes. Shirvanyan’s daughter testified to the differences in her mother’s emotional state following her cessation of work at the center. Specifically, her daughter noted that “[b]efore when 10 [Shirvanyan] would work [at the center], even though she was in a lot of pain, she was happy. She would go to work, but now she is just really sad, depressed. She feels like she wasn’t treated fairly, and so that’s all causing her emotional and mental—like, she is just hurt from all of that.” Dr. Anthony Reading, a psychological expert, opined based on his review of Shirvanyan’s medical records and an extended face-to-face interview of Shirvanyan in October 2018, that she suffered from moderate to severe major depressive disorder. Dr. Reading explained that Shirvanyan’s “perception that the college wasn’t helping her” had “an aggravating impact” on her pain, and that her work at the center had given her a sense of self-worth which had helped offset her pain. Dr. Reading further opined that, if Shirvanyan had been “helped by the college, that would [have been] a positive and the removal of a negative. And even if she stopped working, there wouldn’t [have been] the sense of feeling injured arising from the . . . college’s failure. So that would alter her mental landscape in a very significant way.” “[T]he fact that . . . Shirvanyan thought that [her] [shoulder] injury was avoidable” “increase[d] the severity of her depression and her pain. The sense that something is avoidable . . . is an aggravating factor.” When asked his opinion as to whether Shirvanyan’s perception of being treated unfairly and “experiences at her work at the college led to any sort of depressive disorder,” he explained: “[I]t’s an unfortunate confluence of events, that she developed pain while working and claimed to have reported that, requested assistance. None was forthcoming, according to . . . Shirvanyan. And over time, her pain became more pronounced, ultimately leading to her being taken off work and not returning. And she maintained that 11 once she lost her job, her depression set in and her pain become worse.” Dr. Reading further testified that, in terms of a prognosis, “with aggressive treatment, the best I think there can be hope for at this point is a partial remission” meaning “she’ll be encumbered with at least a partial depression for the rest of her life.” C. Procedural Background 1. Shirvanyan’s complaint Shirvanyan sued the District, alleging three causes of action under FEHA: (1) disability discrimination; (2) failure to engage in the interactive process; and (3) failure to provide a reasonable accommodation. Shirvanyan’s theory of the case was that, as a result of these violations, she developed major depressive disorder, resulting in both emotional distress and economic loss in the form of lost wages beginning April 1, 2016. The case ultimately proceeded to a jury trial. 2. Shirvanyan’s motion in limine regarding workers’ compensation evidence At trial, Shirvanyan clarified that she was not seeking any damages for physical pain or medical bills from on-the-job injuries. Rather, her theory was that the center’s failure to treat her in the manner FEHA requires—not her injuries or her cessation of work—caused her depression. Shirvanyan moved to preclude any evidence of her receipt of workers’ compensation benefits based on Shirvanyan’s shoulder injury, as well as any reference to her workers’ compensation lawsuit. The court granted the motion, deeming such evidence to be unduly prejudicial and without probative value. Shirvanyan proceeded 12 to trial claiming only emotional distress damages and lost wages due to her emotional distress/depression. 3. Motion for nonsuit and jury instructions regarding availability of reasonable accommodation At the close of Shirvanyan’s case-in-chief, the District moved for nonsuit, arguing that Shirvanyan failed to prove a key element of her claims—that there was an available and effective reasonable accommodation that could have been made at the times Shirvanyan alleged the District failed to engage in the interactive process. The court rejected the District’s motion, based on its view that the availability of a reasonable accommodation is not an element of an interactive process claim. Based on this same logic, the trial court rejected the following special instruction proffered by the District on this point: “Reasonable Accommodation Available. [¶] To prove her claim that [the] District failed to engage in the interactive process, [p]laintiff must identify a reasonable accommodation that would have been available at the time the interactive process should have started.” The trial court reasoned that it did not matter whether a reasonable accommodation “was available at the time of the interactive process, because there was no interactive process,” and so it “cannot be known whether an alternative job would have been found.” The trial court instead instructed the jury using the jointly proposed instruction CACI No. 2546, which does not expressly require the jury to find that a reasonable accommodation was available. Rather, it required Shirvanyan prove: (1) “[t]hat . . . Shirvanyan had a physical disability that was known to [the] District”; (2) “[t]hat . . . Shirvanyan requested that [the] 13 District make [a] reasonable accommodation for her physical disability so that she would be able to perform essential job requirements”; (3) “[t]hat . . . Shirvanyan was willing to participate in an interactive process to determine whether reasonable accommodation could be made so that she would be able to perform the essential job requirements”; (4) “[t]hat [the] District failed to participate in a timely good-faith interactive process with . . . Shirvanyan to determine whether reasonable accommodation could be made”; (5) “[t]hat . . . Shirvanyan was harmed”; and (6) “[t]hat [the] District’s failure to engage in a good-faith interactive process was a substantial factor in causing . . . Shirvanyan’s harm.” The jury was also instructed on the elements of Shirvanyan’s reasonable accommodation claim using the jointly proposed instruction CACI No. 2541, which listed the following elements: (1) “[t]hat . . . Shirvanyan had a physical disability”; (2) “[t]hat [the] District knew of . . . Shirvanyan’s physical disability”; (3) “[t]hat . . . Shirvanyan was able to perform the essential job duties with reasonable accommodation for her physical disability”; (4) “[t]hat [the] District failed to provide reasonable accommodation for . . . Shirvanyan’s physical disability”; (5) “[t]hat . . . Shirvanyan was harmed”; and (6) “[t]hat [the] District’s failure to provide [a] reasonable accommodation was a substantial factor in causing . . . Shirvanyan’s harm.” 14  4. The jury verdict In the agreed-upon general verdict form, the jury rejected Shirvanyan’s disability discrimination claim but found in her favor on her reasonable accommodation and interactive process claims. The jury awarded $124,670 in past and future economic damages and $2,775,000 in noneconomic damages (comprised of $1,400,000 for past noneconomic damages and $1,375,000 for future noneconomic damages), for a total of $2,899,670. The economic damages figures are consistent with the testimony of Shirvanyan’s economic damages expert, who used a time frame from April 1, 2016 to December 3, 2018, the date of Shirvanyan’s likely retirement, and assumed Shirvanyan would be permanently unable to work. 5. The district’s motion for judgment notwithstanding the verdict or new trial The District moved for a judgment notwithstanding the verdict on several grounds, two of which form the basis for the District’s arguments in the instant appeal.5 First, the District argued that the evidence presented did not support the availability of a reasonable accommodation during the relevant time frame. The trial court rejected this argument, based on its view that the availability of a reasonable accommodation is not an element of an interactive process claim. Second, the District 5 The District’s motion also raised arguments that there was insufficient evidence to support that Shirvanyan’s claimed injuries resulted from the FEHA violations, as opposed to Shirvanyan’s cessation of work, and that the amount of emotional distress damages were excessive and unsupported by the evidence. The court likewise rejected these arguments. 15 argued Shirvanyan’s claimed damages arose from injuries at work, and were thus recoverable exclusively through the workers’ compensation law, given that law’s exclusivity provisions. (Lab. Code, § 3600, subd. (a) [“[l]iability for the compensation provided by this division” is “in lieu of any other liability whatsoever to any person”].) The court concluded that Shirvanyan had presented sufficient evidence that her damages arose not from her physical injuries, but from the District’s failure to engage in the interactive process and failure to provide a reasonable accommodation. The court denied the motion, and judgment was entered on January 25, 2019. The District appealed from the judgment and, separately, from a postjudgment order awarding Shirvanyan $503,273.50 in attorney fees pursuant to section 12965, subdivision (b). We consolidated the two appeals for all purposes. DISCUSSION A. Arguments Related to the Availability of a Reasonable Accommodation On appeal, the District argues that the availability of a reasonable accommodation is an essential element of an interactive process claim, that the trial court committed reversible error in denying a jury instruction to this effect, and that the evidence does not support a finding that a reasonable accommodation was available. For reasons we discuss below, we agree with the District as to the law and agree in part as to the sufficiency of the evidence. 16  1. Availability of a reasonable accommodation is an element of an interactive process claim Well-reasoned precedent supports the District’s argument that, in order to succeed on a cause of action for failure to engage in an interactive process, “an employee must identify a reasonable accommodation that would have been available at the time the interactive process should have occurred.” (Scotch v. Art Institute of California (2009) 173 Cal.App.4th 986 , 1018 (Scotch); Nadaf-Rahrov, supra, 166 Cal.App.4th at p. 981 [“section 12940[, subdivision] (n) imposes liability only if a reasonable accommodation was possible”].) Shirvanyan argues that “authority is split” on this point, relying primarily on Wysinger v. Automobile Club of Southern California (2007) 157 Cal.App.4th 413 (Wysinger), and Claudio v. Regents of University of California (2005) 134 Cal.App.4th 224 , as well as the CACI No. 2546 use instructions that these cases create such a split. But these cases can be “synthesize[d]” with cases requiring an available accommodation to support liability, as set forth in the thorough discussion of this issue in Scotch, supra, 173 Cal.App.4th at p. 1018. In Scotch, the Fourth Appellate District explained that “[a]n employee cannot necessarily be expected to identify and request all possible accommodations during the interactive process itself because ‘ “ ‘[e]mployees do not have at their disposal the extensive information concerning possible alternative positions or possible accommodations which employers have. . . .’ ” ’ (Wysinger, supra, 157 Cal.App.4th at p. 425.) However, . . . once the parties have engaged in the litigation process, to prevail, the employee must be able to identify an available accommodation the interactive process 17 should have produced: ‘Section 12940[, subdivision ](n), which requires proof of failure to engage in the interactive process, is the appropriate cause of action where the employee is unable to identify a specific, available reasonable accommodation while in the workplace and the employer fails to engage in a good faith interactive process to help identify one, but the employee is able to identify a specific, available reasonable accommodation through the litigation process.’ (Nadaf–Rahrov, supra, 166 Cal.App.4th at p. 984.)”6 (Scotch, supra, 173 Cal.App.4th at pp. 1018–1019.) In arguing to the contrary, Shirvanyan also makes a statutory interpretation argument that interpreting section 12940, subdivision (n) (deeming a failure to engage in the interactive process unlawful) as requiring an available reasonable accommodation renders subdivision (m) (deeming a failure to provide a reasonable accommodation unlawful) superfluous. This does not logically follow, however, as an employer might engage in the interactive process and still refuse to offer a reasonable accommodation. Moreover, even assuming that this language in section 12940 defines as an unlawful employment practice an employer’s failure to engage in an interactive process with 6 Tothe extent it reaches a contrary conclusion, we disagree with Bagatti v. Department of Rehabilitation (2002) 97 Cal.App.4th 344 , 360–362, as did the court in Nadaf-Rahrov. (See Nadaf-Rahrov, supra, 166 Cal.App.4th at p. 972 [“We disagree with Bagatti because it fails to fully grapple with the meaning of ‘reasonable accommodation’ in section 12940[, subdivision] (m).”].) 18 an employee for whom no reasonable accommodation existed, this would not mean that the employee has a cognizable FEHA cause of action. Under such circumstances, had the employer engaged in an interactive process, that process could not have benefited the employee. (See Scotch, supra, 173 Cal.App.4th at p. 1019 [“Put another way, if this case were presented to a jury, what remedy could it provide? How was [the plaintiff employee] damaged by any failure by [his employer] to engage in the interactive process in good faith? The FEHA has a remedial rather than punitive purpose.”].) A necessary corollary to this is that the failure to engage in such process could not have negatively impacted her ability to work. Permitting a FEHA cause of action on such facts thus would allow recovery for harm resulting solely from an employee’s perception that she was not permitted a fair chance to perform her job—as opposed to her actually having been denied such a fair chance. Only recovery based on the latter is consistent with FEHA’s goal of “protect[ing] and safeguard[ing] the right and opportunity of all persons to seek, obtain, and hold employment without discrimination or abridgment on account of . . . physical disability [or] mental disability.” (§ 12920; see Salas v. Sierra Chemical Co. (2014) 59 Cal.4th 407 , 430 [same]; Mendoza v. Town of Ross (2005) 128 Cal.App.4th 625 , 637 [in amending FEHA, “the Legislature made note of the important public goal that, by providing reasonable accommodations for disabled employees, employers were helping to strengthen our economy by keeping people working who would otherwise require public assistance”].) Indeed, such a result would serve no purpose at all, let alone the anti-discrimination purpose of FEHA. 19  The District also argues the trial court erred in not giving an instruction on this point. We need not decide whether this failure was error or prejudicial, however, as we reverse on other grounds set forth below. 2. Substantial evidence supports that a reasonable accommodation was available to accommodate only Shirvanyan’s wrist injury We next consider the District’s arguments that there is insufficient evidence to support a finding that a reasonable accommodation was available at the time the District should have engaged in the interactive process with Shirvanyan. When reviewing the sufficiency of the evidence on appeal, “ ‘all conflicts must be resolved in favor of the [prevailing party], and all legitimate and reasonable inferences indulged in to uphold the [finding] if possible. . . . [T]he power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the [finding]. When two or more inferences can be reasonably deduced from the facts, the reviewing court is without power to substitute its deductions for those of the [trier of fact].’ ” (Western States Petroleum, supra, 9 Cal.4th at p. 571.) “Substantial evidence” is evidence “of ponderable legal significance[,] . . . reasonable in nature, credible, and of solid value.” (Estate of Teed (1952) 112 Cal.App.2d 638 , 644.) Shirvanyan’s theory at trial and on appeal is that three types of reasonable accommodation of Shirvanyan’s disability were available: “restructuring” her position, “preferential reassignment” to another position, and a finite leave of absence. Shirvanyan presented evidence regarding her requests for 20 accommodation of her wrist condition and her subsequent request for accommodation of her shoulder injury. Shirvanyan argues the center failed to engage in an interactive process in response to any of these requests. We address the evidence regarding the availability of an accommodation for each of her two injuries in turn below. a. Availability of reasonable accommodation for Shirvanyan’s wrist injury We conclude that, viewing the record in the light most favorable to Shirvanyan, substantial evidence supports that finite medical leave was an available reasonable accommodation for Shirvanyan’s carpal tunnel/wrist injury at the time she requested such accommodation. As the jury was instructed, a finite period of leave constitutes a reasonable accommodation, “provided it is likely that at the end of the leave, the employee would be able to perform his or her duties” (Hanson v. Lucky Stores, Inc. (1999) 74 Cal.App.4th 215 , 226), and that the leave does not cause the employer undue hardship. (§ 12940, subd. (m)(1).) Dr. Berg testified that temporarily stopping the repetitive actions that cause a cumulative trauma injury like carpal tunnel syndrome, at least early on, can eliminate the pain of such injury, allowing the patient to engage in rehabilitation therapy exercises and “sometimes . . . restore proper motion to the joint strength and get back to the activity they were doing in the first place.” Dr. Nazaryan estimated that approximately two months “is the average time needed at least for even partial recovery of nerve injury or nerve problem[s]. During that period of time, [the] patient is supposed to get rest, treatment, appropriate medications, physical therapy, in this particular case, until she’s getting better and she’s able to go back to her customary work.” 21 Before additional diagnostics revealed that Shirvanyan suffered from a torn rotator cuff in addition to nerve-related injuries, Dr. Nazaryan anticipated this was the length of time Shirvanyan would need to recover from those nerve injuries and be able to return to work. From this, the jury could have reasonably inferred that, before Shirvanyan injured her shoulder in December 2015, a finite leave of absence of this length (or less) could have permitted Shirvanyan’s wrist to recover to such an extent that Shirvanyan could “go back to her customary work.” b. Reasonable accommodation of Shirvanyan’s shoulder injury No evidence suggests a finite leave would have been a reasonable accommodation for Shirvanyan’s shoulder injury, however. When Dr. Nazaryan initially wrote Shirvanyan’s medical leave note suggesting Shirvanyan could return to work in a matter of months, Dr. Nazaryan was unaware of the extent of Shirvanyan’s shoulder injury. Dr. Berg later concluded, based on additional diagnostics, that this injury still prevented Shirvanyan from returning to work at the time of trial, over two years later. Neither Dr. Berg nor any other witness offered any specific time by which Shirvanyan’s shoulder injury would no longer prevent her from returning to her work at the center. Thus, the evidence does not support that a “finite” term of leave was an available accommodation. Nor could medical leave of many years be a reasonable accommodation, as it “would produce undue hardship to the employer’s operation.” (Nealy, supra, 234 Cal.App.4th at p. 373; § 12940, subd. (m)(1).) A restructuring of job duties may constitute a reasonable accommodation if it “ ‘enables the employee to perform the essential functions of the job.’ ” (Scotch, supra, 173 Cal.App.4th 22 at p. 1010, quoting Nadaf-Rahrov, supra, 166 Cal.App.4th at p. 974.) Shirvanyan’s essential job functions, as defined by her complaint, included “repetitive use of her hands to cut foods, load and unload the dishwasher, and hand wash large and heavy pots and pans.” The complaint’s allegations are “ ‘a judicial admission’ ” that concede “ ‘the truth of [the] matter’ ” and have “ ‘the effect of removing it from the issues.’ ” (Castillo v. Barrera (2007) 146 Cal.App.4th 1317 , 1324; Uhrich v. State Farm Fire & Casualty Co. (2003) 109 Cal.App.4th 598 , 613 [“a judicial admission cannot be rebutted: [i]t estops the maker”]; Kurinij v. Hanna & Morton (1997) 55 Cal.App.4th 853 , 871 [judicial admissions in a complaint overcome evidence even if the opposing party seeks to contradict the prior admission].) Uncontradicted testimony of Shirvanyan’s own physician similarly characterized Shirvanyan’s essential job functions as including the ability “to lift up to about 50 pounds,” as well as “prolonged standing, repetitive bending, repetitive lifting, repetitive pulling, repetitive pushing, [and] repetitive use of her hands.” It is not in dispute that, years after Shirvanyan’s shoulder injury, she was still unable to lift her right arm. Shirvanyan thus could not have engaged in many of the essential job duties both she herself and her physician identified. As such, restructuring Shirvanyan’s duties as a kitchen assistant was not a reasonable accommodation that was available for Shirvanyan’s shoulder injury. (See Nadaf-Rahrov, supra, 166 Cal.App.4th at p. 974.) As to the possibility of Shirvanyan being reassigned, she failed to offer any evidence that any position, the essential functions of which she could perform (with or without accommodation), was vacant at the relevant time. FEHA “does 23 not require reassignment if there is no vacant position the employee is qualified to fill.” (Atkins v. City of Los Angeles (2017) 8 Cal.App.5th 696 , 721.) Shirvanyan appears to suggest that other unclassified assistant level job assignments were vacant in the sense that, the job assignments and duties of employees at the unclassified level could be and often were rotated. She points in particular to testimony that her former director could have transferred Shirvanyan to other unclassified positions. Rotating the duties of other unclassified employees in the manner Shirvanyan posits—that is, letting Shirvanyan take over other employees’ duties that Shirvanyan was capable of performing, and requiring those other employees to take over Shirvanyan’s previous duties in the kitchen instead—would necessarily involve redefining another employee’s job duties, potentially in a very significant way. But FEHA does not require this, as “[t]he responsibility to reassign a disabled employee who cannot be otherwise accommodated does ‘not require . . . moving another employee.’ ” (Spitzer v. Good Guys, Inc. (2000) 80 Cal.App.4th 1376 , 1389.) We thus need not reach the issue, extensively briefed by the parties, as to whether the evidence supports that Shirvanyan could perform and/or was qualified to perform the essential job functions of other assistant level positions at the center. For these reasons, the record does not contain substantial evidence that there was an available reasonable accommodation for Shirvanyan’s shoulder injury. There is thus insufficient evidence to support the jury’s verdict in Shirvanyan’s favor on her reasonable accommodation and interactive process claims, to the extent that these claims rely on a failure to accommodate or 24 engage in the interactive process regarding Shirvanyan’s shoulder injury. B. Sufficiency of the Evidence to Support a Failure to Accommodate Shirvanyan’s Shoulder Injury The evidence is insufficient to support Shirvanyan’s interactive process and reasonable accommodation claims to the extent they are based on the District’s handling of Shirvanyan’s shoulder injury for the additional reason that the evidence does not reflect any failure to provide reasonable accommodation of that injury. This is because nothing in the record supports that Shirvanyan stopped working as a result of any action by the District. Rather, even viewing the evidence in the light most favorable to Shirvanyan, it establishes that, following Shirvanyan’s shoulder injury, Shirvanyan indicated to the District that she would not be able to return to work until March 2016, that the District did not respond positively or negatively, and that Shirvanyan did not return to work at any time thereafter. Nothing in the record suggests the District denied Shirvanyan the leave she requested by providing Dr. Nazaryan’s medical release form indicating Shirvanyan would need to be off work until March 2016. Nothing in the record suggests the District fired Shirvanyan or told her not to return to work after her shoulder healed. And Shirvanyan does not argue that she quit because of the District’s failure to accommodate any of her injuries—to the contrary, on appeal, she denies that she quit. The only evidence in the record bearing on why Shirvanyan did not return to work is testimony from Dr. Berg that he continued to view her shoulder injury as preventing such a return to work in late 2018. Thus, nothing 25 suggests that, when Shirvanyan requested an accommodation for her shoulder injury—namely, medical leave until March 2016—the District refused. As a result, the evidence also does not support that the District had occasion to engage in the interactive process with Shirvanyan regarding her shoulder (given that nothing in the record suggests the District had denied her request for a reasonable accommodation in the form of temporary medical leave). On this basis as well, the evidence does not support Shirvanyan’s interactive process and reasonable accommodation claims to the extent they stem from the District’s handling of Shirvanyan’s shoulder injury. C. Retrial Is Necessary to Determine Whether the District’s Response to Shirvanyan’s Wrist Injury Supports a Failure to Accommodate and/or Reasonable Accommodation Claim For the reasons discussed above, sufficient evidence does not support the jury’s verdict on her failure to accommodate and interactive process claims to the extent those claims involve the District’s response to her shoulder injury. But it does not necessarily follow that the jury’s verdict entitles Shirvanyan to recover based on the District’s response to her wrist injury. Shirvanyan offered evidence regarding the District’s response to both injuries, and the verdict form did not require the jury to indicate the factual basis for its verdict. Responding to either injury in a manner that violates FEHA would have been sufficient to support a verdict in Shirvanyan’s favor. Thus, although the jury’s verdict in Shirvanyan’s favor on these claims certainly could have been based on the jury concluding that both the District’s handling of Shirvanyan’s wrist injury and its handling of her shoulder injury violated FEHA, it likewise could 26 have been based on a conclusion that the District’s response to just one of these two injuries violated FEHA. The record does not provide any basis on which to determine which is the case. Thus, our conclusion that Shirvanyan should not recover based on the District’s response to her shoulder injury requires a retrial to allow the jury to determine whether the District’s response to her wrist injury, standing alone, constituted a failure to accommodate and/or failure to engage in the interactive process in violation of FEHA and, if so, what damages, if any, Shirvanyan suffered as a result. (See Woodcock v. Fontana Scaffolding & Equipment Co. (1968) 69 Cal.2d 452 , 457 (Woodcock) [“[i]f the verdict is hopelessly ambiguous, a reversal [and retrial] is required”].) We disagree with Shirvanyan that such retrial should be limited to the issue of damages. Appellate courts certainly may, under appropriate circumstances, order such a limited issue retrial. (Woodcock, supra, 69 Cal.2d at p. 457 [retrial following ambiguous verdict “may be limited to the issue of damages”]; Torres v. Automobile Club of So. California (1997) 15 Cal.4th 771 , 776 [“ ‘appellate courts have power to order a retrial on a limited issue, if that issue can be separately tried without such confusion or uncertainty as would amount to a denial of a fair trial’ ”].) But doing so here would require us to assume the jury found (or would find) liability based solely on the District’s response to Shirvanyan’s wrist injury, which, given the manner in which Shirvanyan chose to try her case, we cannot do. A new trial limited to damages “ ‘should be granted . . . only if it is clear that no injustice will result’ ” and “ ‘should be considered with the utmost caution,’ ” with “ ‘any doubts’ ” resolved “ ‘in favor of granting a complete new trial.’ ” (Liodas v. Sahadi (1977) 19 27 Cal.3d 278 , 285–286.) A full retrial of Shirvanyan’s reasonable accommodation and interactive process claims based on the District’s response to her wrist injury is thus appropriate. D. Such Limited Retrial Would Not Be Futile The District argues that any retrial—whether or not limited to damages—would be futile, because the evidence presented could not support a finding of damages from the District’s response to Shirvanyan’s wrist injuries in any event. We disagree. It is certainly true that the vast majority of the damages evidence Shirvanyan presented at trial involved how the District’s response to her shoulder injury affected Shirvanyan. Shirvanyan’s damages expert calculated economic damages (specifically, lost wages as a result of her depression) from April 2016, several months after Shirvanyan had stopped working due to her shoulder injury. Shirvanyan concedes that these economic damages are not recoverable if liability is based solely on FEHA violations involving her wrist injury. The bulk of the noneconomic damages evidence involved Shirvanyan’s depression, which all evidence suggests began only after she stopped working at the center following her shoulder injury. Shirvanyan does not argue that the District’s handling of her wrist injury directly or indirectly caused this depression. Nor could she. Shirvanyan has disavowed (as she must on the evidence presented) any claim that the District’s handling of her wrist condition caused the shoulder injury that rendered her unable to work—indeed, according to Shirvanyan, she is “not attempting to prove the medical cause of any physical injury.” And Dr. Reading’s testimony does not provide a link between the District’s handling of Shirvanyan’s wrist injury and 28 Shirvanyan’s depression in the way his testimony linked the District’s handling of her shoulder injury and her depression. Specifically, Dr. Reading opined that “adverse events stemming from the action or inaction of others” lead to a “potential for injury [that] is greater both in severity and duration,” and that Shirvanyan’s perception that her shoulder injury and resulting inability to work was “avoidable” was “an aggravating factor” that “increase[d] the severity of her depression and her pain,” transforming distress from her inability to work into a debilitating life-long depressive disorder. The same logic does not apply to the District’s handling of her wrist injury. The evidence regarding Shirvanyan’s major depressive disorder thus could not support a finding of damages from the District’s response to Shirvanyan’s wrist injury, as Shirvanyan’s counsel acknowledged at the hearing before this court. But the record does contain some evidence from which the jury could conclude on retrial that the District’s response to Shirvanyan’s wrist injury caused Shirvanyan noneconomic harm—namely, emotional distress. Emotional distress damages may compensate a plaintiff “ ‘for . . . grief, anxiety, worry, mortification . . . humiliation, [or] indignity,’ ” and a plaintiff may prove such experiences solely through her own testimony. (Rodriguez v. Bethlehem Steel Corp. (1974) 12 Cal.3d 382 , 401.) Shirvanyan testified she experienced such feelings when the District’s employees denied her requests for accommodations of her wrist condition. Specifically, Shirvanyan testified to being upset and crying in response to comments her former supervisor made when Shirvanyan complained of pain from her wrist condition in 2015, to being upset when her supervisor refused Shirvanyan’s repeated requests for accommodation of her wrist 29 condition, and that she worried she would never get better because they refused to assist. There is no fixed standard for the evidence needed to support a finding of emotional distress damages. (See Agarwal v. Johnson (1979) 25 Cal.3d 932 , 953 [“[I]t is the members of the jury who, when properly instructed, are in the best position to assess the degree of the harm suffered and to fix a monetary amount as just compensation therefor.”].) It is thus possible Shirvanyan’s testimony could provide a sufficient basis for a jury to calculate a damages award, should they conclude that the District is liable based on its handling of Shirvanyan’s wrist injury. (See Rony v. Costa (2012) 210 Cal.App.4th 746 , 756 [a jury evaluating “hard-to-quantify injuries, such as emotional and reputational ones . . . [is] free to place any dollar amount” on the harm so long as the award does not shock the moral sense and is not influenced by passion or prejudice].) The limited retrial of Shirvanyan’s reasonable accommodation and interactive process claims we describe above thus would not be futile. In sum, substantial evidence does not support the jury’s verdict on Shirvanyan’s failure to accommodate and interactive process FEHA claims to the extent they are based on the District’s handling of Shirvanyan’s shoulder injury. Because the verdict is ambiguous as to whether the jury found for Shirvanyan based in any part on the District’s response to her wrist injury, we reverse the judgment and remand for a retrial only on Shirvanyan’s reasonable accommodation and interactive process claims, and solely to the extent those claims seek recovery for the District’s response to Shirvanyan’s wrist injury. 30  E. The Workers’ Compensation Act Does Not Bar the Portion of Shirvanyan’s FEHA Claims to Be Retried The District argued in its initial briefing that the WCA (Lab. Code, § 3200 et seq.) bars recovery for Shirvanyan’s depressive disorder, because that disorder is derivative of Shirvanyan’s shoulder injury, a harm compensable only under the WCA. As noted, nothing in the evidence connects the District’s handling of her wrist injury to Shirvanyan’s depression, and Shirvanyan has acknowledged that no such connection exists. The District’s WCA exclusivity arguments regarding Shirvanyan’s depressive disorder are therefore moot. To assist the court on retrial, however, we briefly address whether WCA exclusivity bars the limited version of Shirvanyan’s claims to be retried. We conclude that it does not. The WCA provides the exclusive remedy for an injury sustained by an employee in the course and scope of employment. (Lab. Code, §§ 3600, subd. (a), 3602, subd. (a); Charles J. Vacanti, M.D., Inc. v. State Comp. Ins. Fund (2001) 24 Cal.4th 800 , 813 (Vacanti).) The workers’ compensation exclusivity rule is based on the “presumed ‘compensation bargain’ ” in which, in exchange for limitations on the amount of liability, the employer assumes liability regardless of fault for injury arising out of and in the course of employment. (Shoemaker v. Myers (1990) 52 Cal.3d 1 , 16.) The compensation bargain encompasses both psychological and physical injury arising out of and in the course of the employment. (Lab. Code, §§ 3600, subd. (a), 3208.3.) The compensation bargain—and thus workers’ compensation exclusivity—also encompasses injury “collateral to or derivative of a compensable workplace injury” (Vacanti, supra, 24 Cal.4th at pp. 814), such as emotional distress 31 stemming from the experience of a physical injury at work. (See id. at pp. 814–815; Miklosy v. Regents of University of California (2008) 44 Cal.4th 876 , 902; Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal.3d 148 , 160.) This serves the goal of providing a “single recovery of benefits on account of a single injury or disability.” (Sea-Land Service, Inc. v. Workers’ Comp. Appeals Bd. (1996) 14 Cal.4th 76 , 82.) Shirvanyan’s reasonable accommodation and interactive process claims based on the District’s handling of her wrist condition involve an injury that might fall within the compensation bargain (her carpal tunnel syndrome), but the harm for which she seeks to recover is not “derivative of ” or “on account of ” that injury. Shirvanyan does not claim she suffered emotional distress because her wrist was injured, or because her wrist injury was painful, or because her wrist injury prevented her from working. Rather, she claims she suffered emotional distress because the District repeatedly denied her the reasonable accommodations to which FEHA entitled her and failed to engage in the process FEHA requires for identifying such accommodations. Her FEHA causes of action seeking compensation for such distress thus do not seek to recover on account of her wrist injury and disability, but rather on account of the way the District treated her because of those limitations. This is a separate harm and not derivative of anything falling within the compensation bargain. The general rule of workers’ compensation exclusivity “applies only if the risks resulting in the injury were encompassed within the ‘compensation bargain’ [citation] . . . [which] does not encompass conduct that contravenes a fundamental public policy or exceeds the risks inherent in the 32 employment relationship.” (Singh v. Southland Stone, U.S.A., Inc. (2010) 186 Cal.App.4th 338 , 366; accord, Vacanti, supra, 24 Cal.4th at pp. 811–812.) Thus, “some claims, including those based on . . . discrimination or other conduct contrary to fundamental public policy, are not subject to the exclusivity provisions of the workers’ compensation law. [Citation.] Thus, such claims may be the subject of both workers’ compensation proceedings and civil actions.” (Claxton v. Waters (2004) 34 Cal.4th 367 , 373, citing City of Moorpark v. Superior Court (1998) 18 Cal.4th 1143 , 1155 (Moorpark).) A failure to provide reasonable accommodations to a disabled employee in violation of FEHA, or to engage in the statutorily required steps to identify such accommodation, violates the fundamental public policy underlying all of FEHA: “to promote equal employment opportunity.” (Cal. Code Regs., tit. 2, § 11006; see Gov. Code, § 12920.) For these reasons as well, Shirvanyan’s FEHA claims based on the District’s handling of her wrist injury are not barred by WCA exclusivity. Our conclusion in this regard is consistent with the California Supreme Court’s conclusion in Moorpark that FEHA discrimination claims under Labor Code section 132a are not barred by the WCA exclusivity rule. The Court in Moorpark relied in part on the statutory language of Labor Code section 132a, which is applicable only to discrimination claims. But the Court further concluded that disability discrimination “falls outside the compensation bargain, and workers’ compensation is not the exclusive remedy” based on the broader goals and generally applicable provisions of FEHA as well. (Moorpark, supra, 18 Cal.4th at p. 1155; id. at p. 1156 [“[t]he provisions of the FEHA, and our decisions interpreting it, further 33 support our conclusion that section 132a is not exclusive”]; see also id. at pp. 1156–1158.) The Court’s discussion in this regard equally supports the conclusion that non-discrimination FEHA causes of action are outside the compensation bargain (accord, Bagatti v. Department of Rehabilitation, supra, 97 Cal.App.4th at p. 366 [applying reasoning of Moorpark to conclude workers’ compensation exclusivity did not bar reasonable accommodation claim]), particularly given the Legislature’s decision to place disability discrimination, failure to provide reasonable accommodations, and failure to engage in the interactive process on equal footing as unlawful employment practices under section 12940. (See § 12940, subds. (a), (c), (m)(1) & (n); see also § 12920 [“It is the purpose of this part [which includes sections 12940, subdivisions (m)(1) and (n)] to provide effective remedies that will eliminate these discriminatory [employment] practices.”].) The WCA thus does not bar Shirvanyan’s wrist- related reasonable accommodation and interactive process claims. F. Attorney Fees Appeal Because we reverse the judgment in Shirvanyan’s favor, it necessarily follows that she is not presently entitled to any award of attorney fees. The trial court’s attorney fees order is therefore reversed. (Merced County Taxpayers’ Assn. v. Cardella (1990) 218 Cal.App.3d 396 , 402 [an order awarding attorney fees “falls with a reversal of the judgment on which it is based”].) Should Shirvanyan prevail on retrial, the trial court will need to reassess the appropriate amount of attorney fees, taking into consideration the outcome of this appeal. (See Chavez v. City of Los Angeles (2010) 47 Cal.4th 970 , 989–990 [degree of success a factor in fee calculation].) 34  DISPOSITION The judgment of the court is reversed. Upon remand, the court is instructed to conduct a new trial only on Shirvanyan’s reasonable accommodation and interactive process claims based on the District’s response to Shirvanyan’s wrist condition and carpal tunnel syndrome in 2014 and 2015. The order awarding Shirvanyan attorney fees is reversed. The parties shall bear their own costs on appeal. NOT TO BE PUBLISHED. ROTHSCHILD, P. J. We concur: CHANEY, J. BENDIX, J. 35

2020-11-30 21:02:36.285583+00

https://www.courts.ca.gov/opinions/nonpub/G058882.PDF

Filed 11/30/20 Reddi v. Reddi CA4/3 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 THREE SATYA V. REDDI, Plaintiff and Appellant, G058882 v. (Super. Ct. No. 30-2019-01056049) SRIDHAR REDDI, OPINION Defendant and Respondent. Appeal from an order of the Superior Court of Orange County, Theodore R. Howard, Judge. Affirmed. Request for judicial notice granted. Satya V. Reddi in pro per. Donna Bader for Defendant and Respondent.  Satya V. Reddi appeals from the order dismissing his complaint against his adult son, Sridhar Reddi, for actions undertaken while Sridhar was acting as the guardian ad litem for his mother, Satya’s former wife, Lakshmi Reddi.1 The court granted Sridhar’s special motion to strike the complaint as a strategic lawsuit against public participation (anti-SLAPP motion). (Code Civ. Proc., § 425.16.)2 On appeal, Satya raises over 14 issues, none of which have merit. We affirm the order. FACTS I. Background This is Satya’s sixth appeal relating to the dissolution of his marriage. Three of the prior appeals are from judgments and orders made in the dissolution action itself. Lakshmi’s trial counsel, Hughes & Hughes, represented her in each of those family law appeals in her individual capacity and through her court-appointed guardian ad litem (GAL), Sridhar. The other appeals are from actions Satya filed against his prior attorneys as well as Hughes & Hughes. The five prior appeals are as follows: (1) In re Marriage of Reddi (July 31, 2003, G029401) [nonpub. opn.] (Reddi I); In re Marriage of Reddi (Dec. 30, 2009, G040864) [nonpub. opn.] (Reddi II); Reddi v. Zwick (July 7, 2011, G044385) [nonpub. opn.] (Reddi III); In re Marriage of Reddi (Mar. 13, 2012, G044888) [nonpub. opn.] (Reddi IV); and Reddi v. Hughes & Hughes (Oct. 23, 2013, G047637) [nonpub. opn.] (Reddi V). We grant Sridhar’s request to take judicial notice of our prior opinions and other filings and documents considered by the trial court. (Evid. Code, §§ 452, 459.) 1 We refer to the family members by their first names to avoid confusion. We intend no disrespect. 2 All further statutory references are to the Code of Civil Procedure, unless otherwise indicated. 2  The opinions in Reddi IV and Reddi V cogently set forth pertinent background regarding these actions: “Satya and Lakshmi have been divorced since 2000, when they obtained a dissolution of the status of their marriage. The property and support issues were tried in 2001. The trial resulted in an order for permanent spousal support set at $3,000 a month. Since that time, Satya has complained vociferously on many occasions that the initial $3,000 support order was erroneous as a matter of law because it did not reflect the ‘marital standard of living.’ Significantly, though, Satya did not appeal from the judgment awarding his ex-wife $3,000. His first appeal, Reddi I, raised just one issue, and that only concerned the absence of a written tentative decision. (Reddi I, supra, G029401.) Thus, whether the support order was [an] abuse of discretion or not, Satya was stuck with a final judgment providing for $3,000 a month spousal support award. This court has no power to undo that final judgment. “Reddi I was decided in 2003. In the ensuing seven years Satya launched no less than three separate [orders to show cause (OSC)] seeking to terminate or reduce his spousal support — in December 2004, May 2006, and June 2009 . . . . “Each time Satya has tried to change the spousal support award he has had about as much luck as Don Quixote had in charging the windmills he mistook for giants. But each time Satya’s lack of success would precipitate several rounds of collateral litigation, usually in the form of secondary requests by Lakshmi for attorney fees, followed by tertiary counterattacks from Satya in the form of requests to set aside or reconsider the inevitably ensuing attorney fee orders. In one case, the secondary and tertiary proceedings engendered the appeal which resulted in Reddi II [in which Satya obtained a reversal of two orders only because of unfortunate comments by the original trial judge indicating bias and not because of the merits]. All the while, the fees which Lakshmi incurred as a result of Satya’s efforts would mount up. 3  “Satya also sued, for malpractice, the lawyers who handled his 2001 trial. Ironically, he obtained what this court noted in Reddi III as ‘some significant relief’ in that suit in the form of having his own legal fees of over $100,000 forgiven, plus receiving an extra $160,000 in a malpractice settlement. (Reddi III, supra, G044385.) And yet, dissatisfied with that ‘significant relief,’ he sued the lawyers for malpractice who obtained that relief for him. As we characterized his efforts in Reddi III, the case was ‘literally, a malpractice action based on a previous malpractice action.’ [Citation.]” (Reddi IV, supra, G044888, typed opn. at pp. 4-6, fns. omitted.) “Reddi IV, supra, G044888, concerned proceedings surrounding Satya’s third OSC to terminate Lakshmi’s spousal support. Satya and his new wife resisted all Lakshmi’s attempts at obtaining discovery related to the OSC. The trial court appointed a discovery referee. The discovery referee vigorously condemned Satya’s obstreperous behavior describing it as follows: ‘“Grabbing a greased pig, wrestling an octopus, catching an eel, or finding the proverbial needle would be easier than obtaining discovery compliance from [Satya].”’ [Citation.] ‘[The discovery referee] not only recommended the striking of Satya’s [OSC] pleadings and payment of attorney fees to Lakshmi, he went so far as to propose criminal proceedings [against Satya] for disobedience to court orders.’ [Citation.]” (Reddi V, supra, G047637, typed opn. at pp. 4-5.) “The trial court ultimately implemented most of the discovery referee’s recommendations entering orders that, among other things: dismissed Satya’s OSC to modify spousal support; awarded Lakshmi $50,000 as sanctions under Family Code section 271; and awarded Lakshmi a total of $216,000 in accumulated attorney fees. [Citation.] On appeal, this court affirmed the trial court’s order rejecting Satya’s arguments, which were generally premised upon ‘fundamental misunderstanding[s] of the litigation process.’ [Citation.] Of note, we observed Satya’s challenge to the attorney fees award ‘amount[ed] to little more than ad hominem attacks on Lakshmi’s counsel 4 [Hughes & Hughes], attributing to [it] a Rasputin-like influence on the trial judge.’ [Citation.]” (Reddi V, supra, G047637, typed opn. at p. 5.) “Having failed in all attempts to undo the spousal support order in the family law proceeding, Satya devised a different strategy. On July 27, 2012, he filed his pro. per. complaint against Hughes & Hughes. The monolithic pleading, filled with redundant hyperbole and invective, expands on the theme this court identified in Reddi IV, supra, G044888, i.e., he accuses Hughes & Hughes of improperly influencing or misleading every trial judge who has ruled in the family law action (and the various panels of this court that have affirmed the trial court orders), to rule against him.” (Reddi V, supra, G047637 typed opn. at pp. 5-6.) As described in Reddi V, supra, G047637, one of Satya’s many contentions discussed Lakshami’s role as GAL. “Hughes & Hughes withdrew as Lakshmi’s attorney of record in 2005, but continued to litigate on her behalf, without demonstrating it had authority from her to do so. Instead, Hughes & Hughes filed a substitution of attorneys signed by Lakshmi’s [GAL], the couple’s adult son Sridhar, misleading the trial judges to believe Lakshmi was incompetent. Hughes & Hughes later filed a substitution of attorney signed by the GAL and Lakshmi, thus interfering with Satya’s ‘statutory right not to recognize them as [Lakshmi’s] attorneys of record . . . .’” (Reddi V, supra, G047637 typed opn. at p. 6.)3 “Satya alleged Hughes & Hughes assigned Sridhar ‘the role of fake [GAL] to act like a genuine court appointed [GAL] to maintain the litigation against Satya and extended credit line for legal fees far beyond what Sridhar can afford to pay.’ He alleged 3 This court in Reddi V explained, “Documents submitted in support of the [law firm’s] special motion to strike included the 2000 order appointing Sridhar, a medical doctor, as Lakshmi’s GAL because she ‘has been determined to have a reading comprehension level which demands assistance in this proceeding’ as determined in a professional vocational examination and evaluation. Satya was unsuccessful in his motions in the family law proceeding to have the GAL removed.” (Reddi V, supra, G047637 typed opn. at p. 6, fn. 4.) 5 Hughes & Hughes ‘knew that Lakshmi was a competent person to understand the court proceedings and testify. However, they deliberately, intentionally, and maliciously lied to every judge that Lakshmi was an incompetent person and presented the fake [GAL] to act like a court appointed genuine [GAL] to defeat the due administration of justice.’ Satya alleged various facts pertaining to Lakshmi’s education and ability to read and understand English that he contended undermined the family court’s appointment of a GAL for her.” (Reddi V, supra, G047637 typed opn. at pp. 6-7.) In Reddi V, supra, G047637, we affirmed the trial court’s determination that all 12 causes of action (in the 77-page complaint) arose from protected activity and Satya could not demonstrate a probability of prevailing because the alleged misconduct was absolutely protected by the litigation privilege of Civil Code section 47, subdivision (b). Thereafter, the California Supreme Court denied Satya’s petition for review. Undeterred, Satya filed and lost (1) his malpractice action against Hughes & Hughes filed in a federal district court, (2) his appeal before the United States Court of Appeals, Ninth Circuit, and (3) his petition for a writ of certiorari before the United States Supreme Court. II. The Current Action Having failed to undo the spousal support order in family law proceedings and legal malpractice lawsuits, Satya next set his sights on his son. Specifically, Satya’s current lawsuit asserted Sridhar’s actions as a fake GAL were grounds to set aside the support orders. The allegations regarding Sridhar are the same ones raised in his unsuccessful lawsuit against Hughes & Hughes. Satya’s complaint requested equitable relief due to void spousal support and attorney fee orders entered while Sridhar was acting as his mother’s GAL. Satya maintained Sridhar must pay him for the “alimony” and legal fees paid to Lakshmi. The complaint alleged Sridhar was a “substantial factor” in causing Satya harm by “obtaining legal standing through intentional misrepresentation directed to the trial court judges[.]” 6 The complaint alleged there was “no court record” of Lakshmi’s incompetency or Sridhar’ appointment as Lakshmi’s GAL. Sridhar filed an anti-SLAPP motion alleging “the gravamen of Satya’s complaint stem directly from the communicative actions taken by [Sridhar] during the dissolution of marriage litigation by way of the pleadings prepared and filed in that litigation and the arguments made therein.” Sridhar asserted a lawsuit essentially attacking the validity of court orders was nonsensical because Sridhar lacked authority to make or change court orders. Moreover, he maintained Satya’s lawsuit had procedural issues because it was not filed in the same court that made the purportedly void order. In support of this motion, Sridhar filed a request for judicial notice of the court’s order appointing him as GAL and other documents relevant to his motion. Satya filed an opposition supported by his declaration and a lengthy request for judicial notice (over 200 pages). He argued Sridhar could not file an anti-SLAPP motion because he lacked the right to petition. Satya set forth multiple reasons why he had a probability of prevailing, primarily based on the premise the court’s orders were void as a matter of law. He also objected to Sridhar’s request for judicial notice. The court granted the motion, applying the two prong test set forth in section 425.16. It concluded Sridhar was being sued for protective activity. (§ 425.16, subds. (b)(1), (e)(1), (e)(2).) It reasoned as follows: “[Satya] is suing [Sridhar], [Satya’s] son, for acting as the guardian ad litem . . . in a prior marital dissolution case between [Satya] and Lakshmi. [Citation.] [Sridhar] is accused of acting as the GAL, when he should not have been . . . . [Sridhar] allegedly made misrepresentations to the family court, which led the court to issue orders against [Satya] regarding spousal support and regarding payment of attorney fees, which caused financial harm to [Satya]. [Citation.] [¶] This appears to be a classic situation of a defendant being sued for participating in a prior litigation. [Citations.] [¶] There is no known requirement that the person have been the real-party-in-interest in the prior litigation, to be able to invoke the protection of the 7 anti-SLAPP statute. While a [GAL] is not technically the party to a case, he is the representative of the party. He appears of record in the case, and represents the interests of his ward, the party, in the legal proceeding. [Citation.] The GAL is appointed to prosecute or defend the suit and has the power to assent to procedural steps that facilitate a determination of the ward’s litigation. The GẠL actively represents the interests of the party in legal proceedings. [Citation.] [¶] This is analogous to a lawyer acting for a party in the litigation. When the lawyer is sued for his communicative acts in representing the client, it is well settled that the lawyer enjoys the protection of the anti-SLAPP statute. By its terms, the statute applies to ‘a[ny] person.’ [Citations.]” The trial court rejected Satya’s attempt to apply the illegality exception to the anti-SLAPP remedy. It reasoned as follows: “[Satya] advocates that . . . anti-SLAPP doesn’t apply because [Sridhar’s] actions were ‘illegal’ here. [Citation.] But it is not enough to merely allege that acts were ‘illegal’ to maneuver around the reach of the statute. There is a high threshold that must be met to come within this exception. [Sridhar’s] ‘conduct must be illegal as a matter of law’ and something akin to a crime. Неre that [was] not shown to be the case, there [was] no crime involved. [Citation.] Further, the illegality must be conceded by [Sridhar], and this too is not present here. [Citation.] The illegality exception does not apply. [Sridhar] can properly invoke the protection of the anti-SLAPP statute.” As for the second prong, the court ruled as follows: “[Satya] does not demonstrate the suit has minimal merit, for the action to proceed. [¶] The [l]itigation [p]rivilege [w]ould [b]ar the [s]uit. [¶] The litigation privilege precludes liability arising from a publication or broadcast made in a judicial proceeding or other official proceeding. [Citation.] It applies to any communication made in the course of judicial proceedings where the statements are made to achieve the objects of the litigation and have some connection or logical relation to the action. It is not limited to statements made during a trial or other proceeding, but extends to steps taken prior thereto, or 8 afterwards. [Citation.] Its purpose is to afford litigants free access to the courts without fear of being harassed subsequently by derivative tort actions, to encourage open channels of communication and zealous advocacy, to promote complete and truthful testimony, to give finality to judgments, and to avoid unending litigation. To effectuate these purposes, the privilege is absolute and applies regardless of malice. In furtherance of the public policy it serves, the privilege has been given broad application. [Citation.] [¶] The litigation privilege is often co-extensive with the application of subdivision (e)(1) and (e)(2) of the anti-SLAPP statute. Pleadings, process, and communications to a court, are exercises of litigation rights and privilege. [Citations.] [¶] Just as the lawsuit is attacking [Sridhar’s ] actions and participation in the family-court proceedings [citations] so too, does the litigation privilege protect [Sridhar] from any subsequent effort to impose liability upon him for his participation in that suit.” The court noted Satya also has no probability of prevailing because either the issues had already been litigated or it was too late to raise them now. It ruled as follows: “[Satya’s] suit does not appear to withstand scrutiny because of the prior opportunities he has enjoyed to raise these and similar challenges. [¶] First, in April 2010, [Satya] filed a petition in the family case to remove [Sridhar] as the [GAL]. He outlined reasons why the appointment was believed to be improper including that [Satya’s] former spouse was allegedly deceiving the court about her alleged incompetence, that she had testified competently in a prior lawsuit concerning the marital real estate . . . . [F]urther, the GAL had been appointed only for trial, and could not continue to act especially in post [j]udgment matters that were happening in the case, which were extensive. [Citations.] [¶] Similar allegations are made in the [c]omplaint here too. [Citation.] [¶] [Satya] received an opportunity to litigate that matter, in the family court, with a motion, an opposition, and a hearing before the judicial officer. The court denied the request to remove the GAL, by an order issued October of 2010. [Citation.]” 9  The court noted Satya had a second opportunity to litigate the issue in the trial court because in September 2010 he “filed another motion which in some sense, was a motion for reconsideration of the prior decision not to remove [Sridhar] as GAL.” The court explained Satya filed a motion “‘for fraud on the court,’” where he “continued to question the alleged ‘incompetence’ of his former spouse and the necessity for a GAL.” The court recalled that Satya again asserted, “the initial appointment, and the continued service of, and the denial of the prior motion to remove the GAL, were the result of fraud and misinformation to the court, including by the GAL himself, by the former spouse, and by their attorneys. [Citations.]” The court concluded Satya raised these same allegations in his lawsuit against Sridhar despite being considered and rejected in November 2010. It noted Satya’s appeal from the family law judgment did not challenge the rulings concerning the GAL. The court discussed Satya’s state and federal lawsuits against Lakshmi’s lawyers, which also alleged Sridhar was a “‘fake’” GAL, whose actions were unnecessary and fraudulent. The court stated, “This suggests that many years ago, as early as [July 20, 2012, Satya] suspected, or had reason to suspect the challenges he is making now, which resonate with allegations that he has made in past cases. [Citations.]” After discussing case law regarding what facts will typically trigger the applicable statute of limitations, the court discussed the doctrine of claim preclusion. The court concluded that even if the claim was not time barred the doctrine of claim preclusion would apply because “[t]he primary right that [Satya] was litigating in the family court, in 2010, was the right not to have [Sridhar] serve as the GAL, so that [his] efforts to correct ‘excess’ spousal support obligations could be presented without unnecessary challenge.” Therefore, Satya sought to remove the GAL to stop him from interfering in Satya’s efforts to modify spousal support. Similarly, in his lawsuit against the GAL, “the same injury appears to be resurfacing” because Satya is seeking to set 10 aside support orders influenced by the GAL. “The new theory for attacking the orders is that they are void.” The court concluded Satya had the opportunity to raise this challenge in 2010, “whether it is labeled as a ‘fraud’ on the court or ‘void’ orders that issued.” The court noted in the final section of its minute order, titled “Other Observations” that the correct forum for presenting a request to set aside the support order would be in family court “within the underlying family case.” It concluded the Family Code provisions and section 473, subdivision (b), “‘preempt traditional common law principles governing equitable relief from judgments’” and serve to preclude Satya’s civil suit. And finally, the court awarded Sridhar attorney fees ($4,060) as the prevailing party. DISCUSSION I. Anti-SLAPP Law and the Standard of Review “Subdivision (b)(1) of . . . section 425.16 provides that ‘[a] cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.’ Subdivision (e) of section 425.16 elaborates the four types of acts within the ambit of SLAPP. [¶] . . . [¶] ‘A two-step process is used for determining whether an action is a SLAPP. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity, that is, by demonstrating that the facts underlying the plaintiff’s complaint fit one of the categories spelled out in section 425.16, subdivision (e). If the court finds that such a showing has been made, it must then determine the second step, whether the plaintiff has demonstrated a probability of prevailing on the claim. [Citation.]’” (Cross v. Facebook, Inc. (2017) 14 Cal.App.5th 190 , 198, fn. omitted (Cross).) 11  “‘“The Legislature enacted section 425.16 to prevent and deter ‘lawsuits [referred to as SLAPP’s] brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances.’ [Citation.] Because these meritless lawsuits seek to deplete ‘the defendant’s energy’ and drain ‘his or her resources’ [citation], the Legislature sought ‘“to prevent SLAPPs by ending them early and without great cost to the SLAPP target”’ [citation]. Section 425.16 therefore establishes a procedure where the trial court evaluates the merits of the lawsuit using a summary-judgment-like procedure at an early stage of the litigation.” [Citation.] [¶] ‘Finally, and as subdivision (a) of section 425.16 expressly mandates, the section “shall be construed broadly.” [¶] ‘With these principles in mind, we turn to a review of the issues before us, a review that is de novo. [Citation.]’” (Cross, supra, 14 Cal.App.5th at pp. 198-199.) II. First Prong “Section 425.16, subdivision (e) identifies the categories of conduct that are protected under the anti-SLAPP statute and that may support a motion to strike if a plaintiff’s claim arises from such conduct. One category of such protected conduct is ‘any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law.’ (§ 425.16, subd. (e)(2).) A claim arises from protected activity when it is ‘based on’ such activity. [Citations.]” (Bel Air Internet, LLC v. Morales (2018) 20 Cal.App.5th 924 , 934.) Satya’s equitable relief action against Sridhar is subject to a special motion to strike under the plain, unambiguous language of the anti-SLAPP statute. Satya’s cause of action, based upon Sridhar’s oral and written statements acting as a GAL, were made “in connection with an issue under consideration or review by a . . . judicial body . . . .” (§ 425.16, subd. (e)(2).) As aptly stated by the trial court, “This appears to be a classic situation of a defendant being sued for participating in a prior litigation.” 12  Satya asserts there are four reasons why his compliant was “not subject to” section 425.16. We conclude each contention lacks merit. A. Federal Preemption First, Satya maintains the anti-SLAPP statute is bound by “obstacle preemption” as stated by the supremacy clause of the United States Constitution. He reasons the family law case was a dispute between himself and Lakshmi and, therefore, the trial court owed a duty “to keep others out of such litigation.” He construes Family Code section 142, as creating a “firewall” in addition to a constitutional right giving parties the freedom to litigate without outside interference. He believes the family law court had a duty to balance his constitutional rights against Sridhar’s rights, when Sridhar “broke the firewall.” The next section of Satya’s legal argument is difficult to decipher. We have done our best. Satya maintains the family law court failed to follow “proper judicial protocols” by letting Sridhar act as his mother’s GAL. Satya argues he has the “constitutional right to file a complaint to redress the court’s victimization under the state and federal constitutions.” He concludes the trial court cannot use the anti-SLAPP statute “to deny [this] judicial remedy,” and therefore, the state statute is preempted by the supremacy clause. He adds the anti-SLAPP statute “must be preempted by the [p]etition clause allowing Satya to exercise his right to petition under [the] [United States] Constitution to redress [the] court’s victimization.” To summarize, it appears Satya believes that because he has a constitutional right to remedy the family law court’s procedural mistake, a civil trial judge cannot use this state’s anti-SLAPP statute to block his lawsuit. As was the case with Satay’s allegations in Reddi V, supra, G047637, this argument is premised on a fundamental misunderstanding of the litigation process. Not surprisingly, Satya provides no case authority to support his theory Family Code section 142 “is the firewall to keep others out” of litigation and should be construed as the basis for multiple constitutional rights and protections. The statutory 13 provision simply defines “‘spousal support’” as meaning “support of the spouse of the obligor.” (Fam. Code, § 142.) Satya also fails to provide legal authority to support his assertion there is an absolute, constitutionally guaranteed right to “redress [a family law] court’s victimization” following a purported procedural error. Moreover, he cites no authority suggesting the alleged constitutional right to remedy a court’s mistake should be expanded to include an unconstrained right to sue a court-appointed GAL. Satya does not appear to understand a nonparty cannot correct or overturn a court order. In light of the above, we conclude Satya forfeited his preemption argument by failing to present an adequate legal analysis or relevant case authority. (Badie v. Bank of America (1998) 67 Cal.App.4th 779 , 784-785 (Badie) [appellant must present reasoned argument]; Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974 , 979; In re Marriage of Nichols (1994) 27 Cal.App.4th 661 , 672-673, fn. 3 [reviewing court may disregard contentions unsupported by legal or factual analysis].) B. Actions Seeking Equitable Relief Against Judgment Satya’s second argument is section 425.16 “can’t be invoked when [a] complaint seeks relief from void orders.” (Bold omitted.) He argues “the main issue of the present litigation is subject matter jurisdiction to appoint [a GAL] on the basis of English ‘reading comprehension’ skills . . . .” He contends that if the court lacked jurisdiction to appoint Sridhar the GAL “then any dismissal of the complaint amounts to breathing life into void orders . . . [and] the order dismissing the complaint itself will be void as a matter of law.” We interpret Satya’s argument as asserting he has an absolute right to sue anyone who benefitted from a void court order. He is wrong for several reasons. First, the appropriate procedures for seeking relief from void orders are well settled. (See 8 Witkin, Cal. Procedure (5th ed. 2020 supp.) Attack on Judgment in Trial Court, §§ 207, p. 203 [judgment void on its face], 208, 209, p. 204 [judgment valid on its face].) As discussed above, the family law court has already rejected Satya’s 14 multiple attempts to vacate the allegedly void spousal support order using these procedures. Second, we appreciate that a party may also seek equitable relief against a void judgment. (8 Witkin, supra, § 218, at p. 825 [relief by action].) This remedy “is ordinarily given in an independent action by the losing party against the successful party to prevent the latter from making use of the benefits of the judgment” or “defensively in the course of an action by the successful party on the judgment.” (Ibid., italics added.) Satya cites to no case authority, and we found none, holding an independent equitable action against a void judgment may be brought against someone other than the successful party, which in this case was the supported spouse Lakshmi. Satya fails to appreciate Lakshmi, not the GAL, benefitted from the spousal support order and attorney fee awards. To the extent Satya’s lawsuit also seeks to overturn the court’s GAL appointment order, Satya fails to suggest how Sridhar personally benefitted in his role as guardian. Third, Satya relies on inapplicable case authority. For example, in State Farm General Ins. Co. v. Majorino (2002) 99 Cal.App.4th 974 (Majorino), an insurer brought a declaratory relief action against the parties in an underlying lawsuit, seeking a judicial determination that the insurer had no duty to defend and indemnify the underlying defendants (its insureds). (Id. at p. 976.) The underlying plaintiffs filed an anti-SLAPP motion in the insurer’s action. (Ibid.) The trial court and appellate court agreed the declaratory relief action did not arise from the underlying action. (Id. at p. 977.) The appellate court held that “an insurance company’s declaratory relief action to resolve coverage issues does not qualify as a SLAPP suit” because although the personal injury suit triggered the chain of events that caused the insurer to seek a judicial declaration, the action “arose from the tender of defense and the terms of an insurance policy issued well before the underlying litigation commenced, not from the litigation process itself. [Citation.]” (Id. at pp. 975, 977.) “Treating [the insurer’s] declaratory 15 relief action as a SLAPP suit would be inconsistent with the fundamental purpose of section 425.16, namely, to stem the flow of ‘lawsuits brought primarily to chill the valid exercise of . . . constitutional rights.’ [Citations.]” (Id. at p. 978.) In short, the Majorino case concerned the unique situation where a nonparty filed an action related to ongoing litigation and after protective activity took place. The court resolved the limited issue of whether the nonparty’s lawsuit arose from the protected activity for the purposes of the anti-SLAPP statute. (Majorino, supra, 99 Cal.App.4th at pp. 977-978.) The case is factually distinguishable because Satya is not similarly situated to the insurer because Satya is a party in the underlying lawsuit. His lawsuit seeks to overturn allegedly void orders issued against him in the ongoing litigation and challenges the opposing party’s GAL’s litigation tactics. Unlike the insurer, Satay’s equitable claim is directly based on the “litigation process itself.” (Id. at pp. 975, 977.) We note Satya cites to several other inapplicable cases concerning outsiders seeking equitable relief by intervening or requesting declaratory relief related to ongoing litigation. (See Episcopal Church Cases (2009) 45 Cal.4th 467 , 477 [national church sought leave to intervene in ongoing dispute between local church members about church property]; San Ramon Valley Fire Protection Dist. v. Contra Costa County Employees’ Retirement Assn. (2004) 125 Cal.App.4th 343 , 346 [litigation seeking judicial review of public entity’s decision]; City of Cotati v. Cashman (2002) 29 Cal.4th 69 , 76 [city’s declaratory relief action was not one “arising from” mobile home park owners’ federal declaratory relief action concerning same statute and thus owners’ anti-SLAPP motion meritless].) As explained by our Supreme Court, “[T]he mere fact that an action was filed after protected activity took place does not mean the action arose from that activity for the purposes of the anti-SLAPP statute. [Citation.] Moreover, that a cause of action arguably may have been ‘triggered’ by protected activity does not entail that it is one arising from such. [Citation.] In the anti-SLAPP context, the critical consideration is 16 whether the cause of action is based on the defendant’s protected free speech or petitioning activity.’ [Citation.]” (Episcopal Church Cases, supra, 45 Cal.4th at p. 477.) Legal authority deciding when a nonparty’s equitable claim arises out of protected activity does not assist Satya who is a party seeking to overturn orders issued in his own lawsuit. Satya fails to appreciate the critical consideration is not whether he has framed his complaint as being “equitable” in nature, but rather whether or not his claim was based on protected activity. In this case, it is clear Satya sued Sridhar for his participation in the marital dissolution action, and for no other reason. The trial court correctly determined Satya based his complaint on protected activity. C. Sridhar’s Standing to Utilize the Anti-SLAPP Statute Satya asserts “it is legally impossible for Sridhar to show he had legal standing to exercise his mother’s right of petition and invoke [the] anti-SLAPP act.” He adds, “Sridhar’s involvement is an anomaly, which is not covered by [section] 425.16 and should not be allowed.” He concludes the Legislature did not intend for section 425.16 to protect a third “party’s intrusion into pending litigation between divorced spouses without statutory judicial protocols.” (Bold omitted.) Satya appears to confuse and merge the issues of Sridhar’s standing in the dissolution action to act as the GAL and his standing as a defendant in the civil action to file an anti-SLAPP motion. Turning first to Satya’s claim Sridhar lacked standing in the dissolution action, we understand the reasons why Satya’s believes Sridhar was not authorized to act on Lakshmi’s behalf. However, even if we were to assume (only for the sake of argument) the court did not follow the proper procedures in appointing Sridhar as the GAL, Satya does not explain why the court’s error impacts Sridhar’s standing as a defendant in this civil action. Sridhar used the anti-SLAPP statute as the Legislature intended by moving to strike claims arising from conduct “made in connection with an issue under consideration or review by a . . . judicial body[.]” (§ 425.16, subd. (e)(2).) The only “anomaly” in this case is the theory that a court-appointed GAL should be held 17 personally liable for financial losses related to support orders issued by a family law court. Moreover, the issue of Sridhar’s standing in the dissolution action was decided long ago. As the trial court discussed at length in its minute order, Satya had multiple opportunities to dispute the GAL’s appointment, but he did not timely appeal the appointment order. Satya fails to cite any legal authority permitting him to challenge the appointment order 20 years after the fact. His argument anti-SLAPP cannot be used to protect against third party intrusion is nonsensical because Sridhar did not file an anti- SLAPP motion in the dissolution action. In summary, we are unconvinced by Satya’s logic (unsupported by any legal authority) that Sridhar’s actions as GAL in the dissolution action put the anti- SLAPP statute out of his reach in this civil action. (See Badie, supra, 67 Cal.App.4th at pp. 784-785 [appellant must present reasoned argument].) D. Application of the Illegality Exception Satya asserts Sridhar’s conduct of improperly acting as GAL amounted to “impersonation as an officer of the court under [Penal Code section 529].” Citing Evidence Code sections 412 and 413, Satya contends we must infer Sridhar lacked legal standing to act as the GAL due to his failure to present sufficient evidence supporting his appointment because Lakshmi was not incompetent. Based on this premise, Satya leaps to the conclusion Sridhar was “not entitled to protection under [section 425.16] because his conduct is illegal as a matter of law in each and every special proceeding.” To support this theory, Satya cites to Flatley v. Mauro (2006) 39 Cal.4th 299 , 320 (Flatley). Satya misapprehends the scope of the illegality exception set forth in the Flatley case. Our Supreme Court held, “where a defendant brings a motion to strike under section 425.16 based on a claim that the plaintiff’s action arises from activity by the defendant in furtherance of the defendant’s exercise of protected speech or petition rights, but either the defendant concedes, or the evidence conclusively establishes, that 18 the assertedly protected speech or petition activity was illegal as a matter of law, the defendant is precluded from using the anti-SLAPP statute to strike the plaintiff’s action.” (Flatley, supra, 39 Cal.4th at p. 320, italics added.) This is because a defendant whose assertedly protected activity is “illegal as a matter of law” is not protected by constitutional guarantees of free speech and petition. (Id. at p. 317.) “‘“‘[I]llegal’” in this context refers to criminal conduct; merely violating a statute is not sufficient because the broad protection the anti-SLAPP statute provides for constitutional rights would be significantly undermined if all statutory violations were exempt from the statute. [Citation.] In establishing this exclusion from the anti-SLAPP statute, the Supreme Court [in Flatley] “‘emphasize[d] that the question of whether the defendant’s underlying conduct was illegal as a matter of law is preliminary, and unrelated to the second prong question of whether the plaintiff has demonstrated a probability of prevailing, and [that] the showing required to establish conduct illegal as a matter of law—either through [the] defendant’s concession or by uncontroverted and conclusive evidence—is not the same showing as the plaintiff’s second prong showing of probability of prevailing.’” [Citation.]’ [Citation.]” (Aron v. WIB Holdings (2018) 21 Cal.App.5th 1069 , 1083-1084 [jury’s answers on special verdict form created questions of fact precluding court from concluding party’s conduct violated harassment ordinance as a matter of law]; Collier v. Harris (2015) 240 Cal.App.4th 41 , 55 (Collier) [insufficient evidence of criminal impersonation of another under Penal Code section 529].)4 In Flatley, the court concluded that “based on the specific and extreme circumstances of this case,” the defendant’s conduct therein, which amounted to criminal 4 Because “illegal” clearly refers to criminal conduct, we are unpersuaded by Satya’s alternative argument that intentional misrepresentations to a court would be sufficient to apply the illegality exception. The case he cites, Sosa v. DIRECTV, Inc. (9th Cir. 2006) 437 F.3d 923 , does not address application of the illegality exception to section 425.16. Rather, the case refers to application of the Noerr–Pennington doctrine, which provides that those who petition any department of the government for redress are generally immune from statutory liability for their petitioning conduct. (Id. at p. 929.) 19 extortion as a matter of law, was not entitled to the protection of the anti-SLAPP. (Flatley, supra, 39 Cal.4th at pp. 328, 332-333 & fn. 16.) In our case, Satya contends the illegality exception applies because Sridhar criminally impersonated “as an officer of the court” under Penal Code section 529.” “That statute makes it a crime for a person to falsely impersonate another and in that assumed identity do any ‘act whereby, if done by the person falsely personated, he might, in any event, become liable to any suit or prosecution, or to pay any sum of money, or to incur any charge, forfeiture, or penalty, or whereby any benefit might accrue to the party personating, or to any other person.’ (Pen. Code, § 529, subd. (a)(3).) A person therefore must commit two acts to violate Penal Code section 529. He or she first must falsely impersonate another person and, while doing so, commit an additional act that ‘“is something beyond, or compounding, the initial false personation.”’ [Citation.] [¶] . . . ‘[T]he offense of false personation requires a deliberate effort to pass oneself off as another.’ [Citation.] For example, in People v. Maurin (1888) 77 Cal.436, the Supreme Court reversed a conviction under Penal Code section 529 because the defendant had not represented himself to be another person when he signed a doctor’s name to a death certificate.” (Collier, supra, 240 Cal.App.4th at pp. 55-56.) We conclude the illegality exception does not apply because (1) Sridhar does not concede illegality, and (2) the evidence does not conclusively establish illegality “as a matter of law.” There is no evidence Sridhar falsely represented himself to be Lakshmi’s GAL. To the contrary, all parties were aware of his petition to serve as the GAL. After obtaining the court’s approval, there was no need to impersonate or falsely represent his authority to act on his mother’s behalf. As determined by the trial court, Satya failed his burden of showing the GAL committed any crime bringing Sridhar’s litigation-related activities within the ambit of Flatley. 20 III. The Second Prong “Because of the conclusions we have reached regarding the first prong of the anti-SLAPP analysis, we need not proceed to evaluate whether [Satya] adequately showed a probability of prevailing in the action. (§ 425.16, subd. (b)(1).)” (Wang v. Wal-Mart Real Estate Business Trust (2007) 153 Cal.App.4th 790 , 811.) DISPOSITION We affirm the order and grant respondent’s request for judicial notice. Respondent shall recover his costs on appeal. O’LEARY, P. J. WE CONCUR: ARONSON, J. FYBEL, J. 21

2020-11-30 21:02:36.957477+00

https://www.courts.ca.gov/opinions/nonpub/C090198.PDF

Filed 11/30/20 P. v. Rocha CA3 NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Calaveras) ---- THE PEOPLE, C090198 Plaintiff and Respondent, (Super. Ct. No. F3428A) v. DANIEL MAURICE LESSIUE ROCHA, Defendant and Appellant. In 2007, defendant Daniel Maurice Rocha was convicted of first degree murder. In 2019, defendant filed a petition for resentencing under newly enacted Penal Code1 section 1170.95, which was enacted as part of Senate Bill No. 1437 (2017-2018 Reg. Sess.) (Stats. 2018, ch. 1015) (Senate Bill No. 1437). The trial court denied defendant’s petition on the basis that Senate Bill No. 1437 unconstitutionally amended Proposition 115 (Prop. 115, as approved by voters, Primary 1 Further undesignated statutory references are to the Penal Code. 1 Elec. (June 5, 1990)) and Proposition 7 (Gen. Elec. (Nov. 7, 1978) text of Prop. 7) and violated Marsy’s Law. On appeal, defendant argues the trial court should have reached the merits of his petition because Senate Bill No. 1437 is constitutional. Consistent with our recent decision, People v. Superior Court (Ferraro) (2020) 51 Cal.App.5th 896 (Ferraro), and the unanimous conclusion of other appellate courts that have addressed the issue, we conclude Senate Bill No. 1437 is not an invalid amendment of either Proposition 7 or Proposition 115, and did not violate the separation of powers doctrine, or the provisions of the Victims’ Bill of Rights Act of 2008, also known as Marsy’s Law (Prop. 9, as approved by voters, Gen. Elec. (Nov. 4, 2008). (See, e.g., People v. Bucio (2020) 48 Cal.App.5th 300 (Bucio); People v. Cruz (2020) 46 Cal.App.5th 740 (Cruz); People v. Solis (2020) 46 Cal.App.5th 762 (Solis); People v. Lamoureux (2019) 42 Cal.App.5th 241 (Lamoureux); People v. Superior Court (Gooden) (2019) 42 Cal.App.5th 270 (Gooden); People v. Johns (2020) 50 Cal.App.5th 46 (Johns).) We reverse the trial court’s order and remand for further proceedings. PROCEDURAL AND FACTUAL BACKGROUND Defendant and another man broke into a home and shot and killed one of the residents. Following a jury trial, defendant was convicted of first degree murder. We affirmed the conviction, and the judgment became final in 2010. In 2019, defendant filed a petition for resentencing under newly enacted section 1170.95. The district attorney opposed the petition, arguing Senate Bill No. 1437, and, consequently, section 1170.95, was unconstitutional. In particular, the district attorney argued Senate Bill No. 1437 unconstitutionally amended Proposition 7 and Proposition 115, and violated the separation of powers doctrine and Marsy’s Law. Defendant filed opposition arguing Senate Bill No. 1437 was constitutional and the trial court should resolve the petition on the merits. After considering the briefs of the parties and oral argument, the trial court concluded Senate Bill No 1437 did not violate Marsy’s Law, but was unconstitutional as a violation of separation of powers, and improperly 2 amended both Propositions 7 and 115. Accordingly, the trial court denied defendant’s section 1170.95 petition. DISCUSSION The district attorney argues Senate Bill No. 1437 is unconstitutional because it (1) unlawfully amended Propositions 7 and 115; (2) violates the separation of powers doctrine; and (3) violates Marsy’s Law. We recently addressed, and rejected, virtually identical claims regarding amending Propositions 7 and 115. (Ferraro, supra, 51 Cal.App.5th at p. 896.) Moreover, as to each of the additional issues raised in this appeal, virtually identical issues, arguments, and authorities have been raised and unanimously rejected by numerous appellate districts. (See, e.g., Gooden, supra, 42 Cal.App.5th at p. 270; Lamoureux, supra, 42 Cal.App.5th at p. 241; Johns, supra, 50 Cal.App.5th at pp. 69-70; Bucio, supra, 48 Cal.App.5th at p. 300.) We agree fully with Ferraro, Bucio, Gooden, Johns, and Lamoureux and adopt their analyses here. We briefly outline their core holdings, which apply fully here.2 “We review de novo questions of statutory construction and the determination of a statute’s constitutionality.” (Stennett v. Miller (2019) 34 Cal.App.5th 284 , 290; People v. Armogeda (2015) 233 Cal.App.4th 428 , 435.) We begin “ ‘with the presumption that the Legislature acted within its authority.’ ” (People v. DeLeon (2017) 3 Cal.5th 640 , 651.) “[O]ne of the fundamental principles of our constitutional system of government is that a statute, once duly enacted, ‘is presumed to be constitutional. Unconstitutionality must be clearly shown, and doubts will be resolved in favor of its validity.’ ” (Lockyer v. City and County of San Francisco (2004) 33 Cal.4th 1055 , 1086.) “ ‘Unless conflict with a 2 The district attorney requests we take judicial notice of our records in the prior appeal of this case, People v. Rocha C057538/C057715, September 1, 2009, and that nonpublished opinion, the ballot materials for Proposition 7 and Proposition 115, and legislative history materials of Senate Bill No. 1437. We deny the request. (People v. Perskie (1977) 70 Cal.App.3d 486 , 493.) 3 provision of the state or federal Constitution is clear and unquestionable, we must uphold the [statute].’ ” (Amwest Surety Ins. Co. v. Wilson (1995) 11 Cal.4th 1243 , 1252.) Effective January 1, 2019, Senate Bill No. 1437 was enacted to “amend the felony murder rule and the natural and probable consequences doctrine, as it relates to murder, to ensure that murder liability is not imposed on a person who is not the actual killer, did not act with the intent to kill, or was not a major participant in the underlying felony who acted with reckless indifference to human life.” (Stats. 2018, ch. 1015, § 1, subd. (f).) It accomplished this by amending section 188, which defines malice, to add a requirement that all principals to a murder must act with express or implied malice to be convicted of that crime. (Stats. 2018, ch. 1015, § 2.) It also amended section 189, which defines the degrees of murder, by adding a condition to the felony-murder rule. Thus, in order to be convicted of felony murder, a defendant who was neither the actual killer nor a direct aider and abettor to the murder must have been a major participant in the underlying felony who acted with reckless indifference to human life. (Stats. 2018, ch. 1015, § 3; see People v. Martinez (2019) 31 Cal.App.5th 719 , 723.) As relevant here, Senate Bill No. 1437 also established a procedure for the defendants previously convicted of murder to seek resentencing if they believe they could not currently be convicted of that crime under the newly amended provisions of sections 188 and 189. (Senate Bill No. 1437, § 4 [enacting newly codified § 1170.95].) Section 1170.95 thereby allows those “convicted of felony murder or murder under a natural and probable consequences theory . . . [to] file a petition with the court that sentenced the petitioner to have the petitioner’s murder conviction vacated and to be resentenced on any remaining counts . . . .” (§ 1170.95, subd. (a).) I Propositions 7 And 115 Proposition 7 “was approved by voters in a statewide election in November 1978. The statutory changes it made can be grouped into two categories: (1) it increased the 4 penalties for first and second degree murder by amending section 190 [citation]; and (2) it sought to strengthen and expand California’s death penalty with amendments to sections 190.1 through 190.5 [citation]. [¶] Prior to the passage of Proposition 7, a first degree murder conviction was punishable by life imprisonment with the possibility of parole after seven years. A defendant convicted of second degree murder could be sentenced to five, six, or seven years in prison. Proposition 7 increased the punishment for first degree murder to life imprisonment with the possibility of parole after 25 years, and the penalty for second degree murder was increased to life imprisonment with the possibility of parole after 15 years.” (Cruz, supra, 46 Cal.App.5th at pp. 753-754.) Proposition 115 “made several changes to criminal law and procedure when passed by voters in 1990. [Citation.] Pertinent here is its amendment to section 189, wherein it added five more serious felonies (kidnapping, train wrecking, and three sex offenses [§§ 286, 288a, 289]) to the list of felonies for first degree felony-murder liability. [Citation.] The ‘Analysis by the Legislative Analyst’ informed voters that among the ‘numerous significant and complex changes’ Proposition 115 would make to criminal law, it would expand ‘the definition of first-degree murder to include murder committed during the commission or attempted commission of additional serious crimes.’ ” (Cruz, supra, 46 Cal.App.5th at p. 759.) Proposition 115 also “ ‘revised the scope of capital liability for aiding and abetting felony murders’ by amending section 190.2 to indicate that for first degree felony murder ‘ “every person, not the actual killer, who, with reckless indifference to human life and as a major participant’ ” aids or abets the crime may be convicted of special circumstance murder.” (Cruz, supra, 46 Cal.App.5th at p. 759.) Article II, section 10, subdivision (c) of the California Constitution prohibits the Legislature from amending a statute enacted through voter initiative without “approval of the electorate unless the initiative measure itself permits amendment or repeal without voter approval.” (People v. Cooper (2002) 27 Cal.4th 38 , 44.) “[A]n amendment [is] ‘a 5 legislative act designed to change an existing initiative statute by adding or taking from it some particular provision.’ ” (People v. Superior Court (Pearson) (2010) 48 Cal.4th 564 , 571.) Even so, not all new legislation that “concerns the same subject matter as an initiative” is necessarily an amendment. (Ibid.) “[T]he Legislature remains free to enact laws addressing the general subject matter of an initiative, or a ‘related but distinct area’ of law that an initiative measure ‘does not specifically authorize or prohibit.’ ” (People v. Kelly (2010) 47 Cal.4th 1008 , 1026, fn. 19; accord, Pearson, at p. 571.) “This is the principle that guides the outcome in this proceeding. As the appellate court in Gooden explained, ‘Senate Bill 1437 presents a classic example of legislation that addresses a subject related to, but distinct from, an area addressed by an initiative.’ (Gooden, supra, 42 Cal.App.5th at p. 282; accord Cruz, supra, 46 Cal.App.5th at p. 756.) Senate Bill 1437 does not alter the punishment for murder, but the offense.” (Ferraro, supra, 51 Cal.App.5th at pp. 910-911.) Senate Bill No. 1437 did not amend Proposition 7 because it did not “address the same subject matter.” (Gooden, supra, 42 Cal.App.5th at p. 282.) Senate Bill No. 1437 does not speak to the penalties for murder; rather, it amends the mental state required for murder. The definition of a criminal offense is a distinct concept from the punishment for that offense. (Ferraro, supra, 51 Cal.App.5th at p. 911.) While the changes introduced by Proposition 7 “increased the punishment for murder” by amending section 190, Senate Bill No. 1437 “neither sets nor prohibits a punishment for any type of murder. The punishment applicable to a murder conviction remains the same.” (Ferraro, at pp. 909, 911; see also Cruz, supra, 46 Cal.App.5th p. 754.) That is, Senate Bill No. 1437 does not prohibit what Proposition 7 authorizes, nor does it authorize what Proposition 7 prohibits. (Gooden, at p. 282, citing Appendix v. New Jersey (2000) 530 U.S. 466 [ 147 L.Ed.2d 435 ]; Ferraro, at p. 911.) Neither does Proposition 7 prevent any amendment of sections 187, 188, or 189. (Ferraro, supra, 51 Cal.App.5th at pp. 912-914.) The language of Proposition 7 refers 6 generally to “persons found guilty of first degree and second degree murder”; it does not make “specific reference to the provisions of sections 187, 188, or 189.” (Ferraro, at p. 912.) “A reference to persons found guilty of first degree and second degree murder is not a specific reference to the provisions of sections 187, 188, or 189 but a general reference to a body of laws. (Gooden, supra, 42 Cal.App.5th at pp. 282-284.)” (Ferraro, at p. 912.) “[T]he concepts of first and second degree murder are broader than sections 187 through 189 and even statutory law in general. Thus, a reference to persons found guilty of first degree and second degree murder is a general reference and includes any later changes to the law.” (Ferraro, at p. 912.) As it did with respect to Proposition 7, “the Legislature has acted in an area related, but distinct from the one addressed in Proposition 115.” (Ferraro, supra, 51 Cal.App.5th at p. 916.) “Proposition 115 amended section 189 to add select crimes to the list of predicate offenses for first degree felony-murder liability.” (Bucio, supra, 48 Cal.App.5th at p. 311.) Senate Bill No. 1437 “did not augment or restrict the list of predicate felonies on which felony murder may be based. Rather, it amended the mental state necessary for murder, which is ‘a distinct topic not addressed by Proposition 115’s text or ballot materials.’ (Gooden, at p. 287.)” (Bucio, at p. 312; see also Cruz, supra, 46 Cal.App.5th at p. 760 [“While the Legislature cannot remove Proposition 115’s five felonies from the list for first degree felony-murder liability, it can limit liability for accomplices under the felony-murder rule”].) The Legislature is not prohibited from addressing accomplice liability for felony murder in Senate Bill No. 1437 merely because accomplice liability in capital cases was addressed in Proposition 115. (Cruz, at pp. 759- 760.) Senate Bill No. 1437’s limitations on accomplice liability “in section 189 is an area of law related to but distinct from accomplice liability in special circumstance murder in section 190.2” and “Senate Bill 1437 did not improperly amend Proposition 115 by adding such restrictions to felony murder in section 189.” (Cruz, at p. 760.) 7  “[T]he Legislature’s enactment of Senate Bill 1437 has not undone what the voters accomplished with Proposition 7 or Proposition 115 and therefore the legislation does not violate the [C]onstitution. Senate Bill 1437 addresses the elements of murder, an area related to but distinct from the penalty for murder set by voters in Proposition 7. Nothing in the language of Proposition 7 nor its ballot materials evidences an intent by the voters to prohibit the Legislature from refining the elements of murder, namely limiting accomplice liability under the natural and probable consequences doctrine or felony- murder rule. Nor did the voters so limit the Legislature with the passage of Proposition 115.” (Cruz, supra, 46 Cal.App.5th at p. 747; cf. People v. Powell (2018) 5 Cal.5th 921 , 943 [the power to define crimes is vested in the Legislature].) Senate Bill No. 1437 does not authorize anything prohibited by Propositions 7 or 115, nor prohibit anything authorized by the voters in these two initiatives. (Solis, supra, 46 Cal.App.5th at p. 769.) After reviewing the text and ballot materials for Proposition 7 and Proposition 115, we joined the other appellate courts that have addressed this issue and concluded “that Senate Bill 1437 is not an invalid amendment of either Proposition 7 or 115 because the legislation did not add to or take away from any provision in either initiative.” (Ferraro, supra, 51 Cal.App.5th at p. 902, citing Bucio, supra, 48 Cal.App.5th at pp. 311-312; Cruz, supra, 46 Cal.App.5th at p. 747; Solis, at p. 769; Lamoureux, supra, 42 Cal.App.5th at p. 251; Gooden, supra, 42 Cal.App.5th at p. 275.) The district attorney offers nothing to persuade us to change these conclusions. II Separation Of Powers The district attorney also argues section 1170.95 impairs a core function of the judiciary because it provides for the retroactive reopening of final judgments. Specifically, the district attorney argues by failing to distinguish between prisoners serving final and nonfinal sentences, and permitting prisoners serving final sentences to seek relief, the Legislature impaired the judiciary’s core function of resolving 8 controversies between parties. This argument was rejected in Bucio and Lamoureux. We agree with the analysis on this point as well. “ ‘The California Constitution establishes a system of state government in which power is divided among three coequal branches (Cal. Const., art. IV, § 1 [legislative power]; Cal. Const., art. V, § 1 [executive power]; Cal. Const., art. VI, § 1 [judicial power]), and further states that those charged with the exercise of one power may not exercise any other (Cal. Const., art. III, § 3).’ (People v. Bunn (2002) 27 Cal.4th 1 , 14 . . . (Bunn).)” (Lamoureux, supra, 42 Cal.App.5th at p. 252.) Each branch is vested “with certain essential or core functions that ‘may not be usurped by another branch.’ (Bunn, at p. 14) ‘Protection of those core functions is guarded by the separation of powers doctrine and is embodied in a constitutional provision, which states that one branch of state government may not exercise the powers belonging to another branch.’ (Perez v. Roe 1 (2006) 146 Cal.App.4th 171 , 176-177 . . . ; Cal. Const., art. III, § 3.)” (Johns, supra, 50 Cal.App.5th at p. 66.) A determination of whether one branch of government has misappropriated a core or essential function of another requires we consider the pertinent roles of the branches at issue. “ ‘A core function of the Legislature is to make statutory law, which includes weighing competing interests and determining social policy.’ ” (Johns, supra, 50 Cal.App.5th at p. 66). Encompassed within that core function is the responsibility of defining crimes and prescribing punishments. (Lamoureux, supra, 42 Cal.App.5th at p. 252) “ ‘A core function of the judiciary is to resolve specific controversies between parties.’ [Citation.] In performing this function, ‘courts interpret and apply existing laws.’ ” (Johns, at pp. 66-67.) “The function of resolving specific controversies between parties includes the power to dispose of criminal charges filed by and on behalf of the People.” (Lamoureux, at p. 253.) Because the powers of the branches are interrelated and interdependent, the actions of one may significantly affect those of another. Accordingly, separation of powers is violated only “ ‘when the actions of a branch of 9 government defeat or materially impair the inherent functions of another branch.’ ” (Ibid.) The district attorney is correct that under section 1170.95, petitioners may obtain relief irrespective of whether their murder convictions were final as of January 1, 2019. (Lamoureux, supra, 42 Cal.App.5th at p. 257.) But the bill does not intrude on a core function of the judiciary by allowing prisoners serving final sentences to seek relief. “[W]here legislation reopening a final judgment of conviction is no ‘risk to individual liberty interests’ and provides ‘potentially ameliorative benefits to the only individuals whose individual liberty interests are at stake in a criminal prosecution,’ such legislation is permissible. ([Lamoureux, supra, at p. 261] [citing to several cases recognizing that reopening of final judgments do not violate the separation of powers]; compare ibid. with People v. Bunn (2002) 27 Cal.4th 1 . . . and People v. King (2002) 27 Cal.4th 29 . . . [where legislation authorized the refiling of charges against a previously acquitted defendant].)” (Bucio, supra, 48 Cal.App.5th at p. 314.) Thus, to the extent retroactive reopening of final judgments implicates individual liberty interests, section 1170.95 does not present any risk to those interests. (Lamoureux, at p. 261.) “On the contrary, it provides potentially ameliorative benefits to the only individuals whose individual liberty interests are at stake in a criminal prosecution,” the criminal defendant. (Ibid.) Also, the legal landscape is rife with legislation allowing petitioners to reopen final judgments of conviction without regard to their finality as of the effective date of the legislation, for example, Propositions 36 and 47. (Lamoureux, at pp. 262-263.) The “ ‘prevalence of such legislation . . . confirms there is nothing especially unique about section 1170.95, which appears . . . to constitute a legitimate and ordinary exercise of legislative authority.’ (Lamoureux, at p. 263.)” (Bucio, at p. 314; see also Johns, supra, 50 Cal.App.5th at p. 68.) III 10  Marsy’s Law The district attorney contends the resentencing provisions of Senate Bill No. 1437 directly conflict with Marsy’s Law. The district attorney argues Senate Bill No. 1437 violates victims’ rights to finality of judgments, as protected in Marsy's Law, and deprives victims of their right to safety by failing “ ‘to have the safety of the victim, the victim’s family, and the general public considered before any parole or other post- judgment release decision is made.’ ” “Marsy’s Law strengthened ‘a “broad spectrum of victims’ rights” ’ by amending the California Constitution and adding provisions to the Penal Code. [Citation.] The initiative added numerous specific victims’ rights to the Constitution, including (relevant here) the rights ‘[t]o a speedy trial and a prompt and final conclusion of the case and any related post-judgment proceedings’ and ‘[t]o have the safety of the victim, the victim’s family, and the general public considered before any parole or other post-judgment release decision is made.’ (Cal. Const., art. I, § 28, subd. (b)(9), (b)(16).)” (Johns, supra, 50 Cal.App.5th at p. 68.) Article I, section 28, subdivision (a)(6) of the California Constitution provides that “ ‘[v]ictims of crime are entitled to finality in their criminal cases. Lengthy appeals and other [postjudgment] proceedings that challenge criminal convictions . . . and the ongoing threat that the sentences of criminal wrongdoers will be reduced, prolong the suffering of crime victims for many years after the crimes themselves have been perpetrated. This prolonged suffering . . . must come to an end.” (Bucio, supra, 48 Cal.App.5th at pp. 312-313.) To promote finality, Marsy’s Law “substantially amended Penal Code provisions pertaining to parole.” (Lamoureux, supra, 42 Cal.App.5th at p. 264; see Voter Information Guide, Gen. Elec., supra, text of Prop. 9, §§ 5.1-5.3, pp. 130-132, amending Pen. Code, §§ 3041.5, 3043, 3044.) However, Marsy's Law “did not foreclose post-judgment proceedings altogether.” (Lamoureux, at p. 264.) Instead, it “expressly contemplated the availability of such postjudgment proceedings,” by referring to “ ‘parole [and] other post-conviction release proceedings,’ ” 11 and to “ ‘post-conviction release decision[s],’ ” in general. (Id. at pp. 264-265; see Cal. Const., art. I, § 28, subd. (b)(7) & (8).) The Bucio, Lamoureux and Johns courts also addressed and rejected the additional claim that section 1170.95 conflicts with the victims’ rights provisions of “Marsy’s Law.” (Cal. Const, art. I, § 28, subd. (a)(6).) (Bucio, supra, 48 Cal.App.5th at p. 312; Lamoureux, supra, 42 Cal.App.5th at pp. 264-265; Johns, supra, 50 Cal.App.5th at pp. 68-69.) We agree with the reasoning and analysis in those cases. Marsy’s Law established a victim’s right to prompt and final conclusion to postjudgment proceedings; it did not foreclose postjudgment proceedings altogether. (Lamoureux, supra, 42 Cal.App.5th at p. 265.) “Although we recognize we should, as a general matter, afford Marsy’s Law ‘a broad interpretation protective of victims’ rights’ [citation], we decline to interpret the law so broadly to find that voters intended to impede the Legislature from creating new postjudgment proceedings.” (Johns, supra, 50 Cal.App.5th at p. 69.) “It would be anomalous and untenable for us to conclude, as the [district attorney] impliedly suggest[s], that the voters intended to categorically foreclose the creation of any new postjudgment proceedings not in existence at the time Marsy’s Law was approved simply because the voters granted crime victims a right to a ‘prompt and final conclusion’ of criminal cases.” (Lamoureux, at p. 265.) Nor does Senate Bill No. 1437 deprive victims of safety-related rights because trial courts may consider that factor when resentencing the defendant on any remaining counts. (Lamoureux, supra, 42 Cal.App.5th at pp. 265-266.) Even assuming the disposition of resentencing petition under Senate Bill No. 1437 is a postjudgment release decision, if the trial court concludes a petitioner is entitled to have his or her murder conviction vacated and the sentence recalled, it must “then resentence the petitioner on any remaining counts. (§ 1170.95, subd. (d)(1).) Upon resentencing, the court may weigh the same sentencing factors it considers when initially sentencing a defendant, including whether the defendant presents ‘ “a serious danger to society” and “[a]ny other 12 factors [that] reasonably relate to the defendant or the circumstances under which the crime was committed.” [Citation.]’ (Lamoureux, supra, 42 Cal.App.5th at p. 266; see Cal. Rules of Court, rule 4.421(b)(1), (c).) The trial court’s ability to consider these factors ‘ensures the safety of the victim, the victim’s family, and the general public are “considered,” as required by Marsy’s Law.’ (Ibid.)” (Bucio, supra, 48 Cal.App.5th at p. 313; see also Johns, supra, 50 Cal.App.5th at p. 69.) In the end, the arguments advanced by the district attorney in this case are identical to those that have been rejected in Ferraro, Bucio, Cruz, Solis, Lamoureux, Gooden, and Johns. The district attorney has offered nothing to convince us those decisions are incorrect, and we see no reason to depart their analyses and conclusion that Senate Bill No. 1437 is constitutional. Therefore, we conclude the trial court erred by denying defendant’s section 1170.95 petition. DISPOSITION The order denying defendant’s petition for resentencing is reversed and the matter is remanded for further proceedings under section 1170.95. We express no opinion how the court should rule at those proceedings. /s/ Robie, J. We concur: /s/ Raye, P. J. /s/ Hull, J. 13

2020-11-30 21:02:37.413349+00

https://www.courts.ca.gov/opinions/nonpub/G058133.PDF

Filed 11/30/20 P. v. Porpora CA4/3 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 THREE THE PEOPLE, Plaintiff and Respondent, G058133 v. (Super. Ct. No. 18CF1949) MICHAEL JOSEPH PORPORA, OPINION Defendant and Appellant. Appeal from a judgment of the Superior Court of Orange County, Julian W. Bailey, Judge. Affirmed. Kevin Smith, under appointment by the Court of Appeal, for Defendant and Appellant. Xavier Becerra, Attorney General, Julie L. Garland, Assistant Attorney General, Melissa Mandel and Adrian R. Contreras, Deputy Attorneys General, for Plaintiff and Respondent. * * *  Defendant Michael Joseph Porpora was charged with felony receipt of stolen property under Penal Code section 496, subdivision (a), after a firearm, storage 1 bag, and laptop reported as stolen were found in his car. Following trial, he was convicted of a misdemeanor violation, as the jury found the stolen property he possessed was worth less than $950. On appeal, defendant maintains his conviction should be reversed for two reasons. Primarily, he argues there was insufficient evidence to establish that he knew the firearm was stolen. He also asserts there was insufficient evidence that the storage bag and laptop found in his car were the items that were reported stolen. We disagree and affirm the judgment. As to the first argument, there is sufficient evidence that defendant knew the firearm was stolen. When asked by the police, defendant gave contradicting stories about the gun’s owner. Initially, he claimed the gun belonged to another person and that he was thinking about purchasing it. After further questioning by the police, he confessed to purchasing the gun two months prior for $700. He admitted to lying because “if anything comes back on [the firearm after a record’s check], it’s not me. That’s why I did that.” Defendant’s contradictory statements, along with his failure to register the gun after possessing it for four months, are sufficient evidence that he knew the gun was stolen. Because the conviction can be sustained based on the stolen firearm, we do not address defendant’s second argument. I FACTS AND PROCEDURAL HISTORY A. The Underlying Theft Behrod G. and Peter H. were acquaintances from work. They met around 2012 and socialized two or three times outside their jobs. Behrod G. told Peter H. that he 1 All further statutory references are to the Penal Code unless otherwise specified. 2 owned firearms and explained where he kept them in his condominium. Behrod G. also invited Peter H. over to his residence in early 2013. Around September 2013, Peter H. showed up at Behrod G.’s home in the morning, unannounced and uninvited, and began looking through his windows. When confronted by Behrod G., Peter H. claimed he was considering buying a place down the street. Behrod G. invited him inside the condominium. Once inside, he asked about a webcam that Behrod G. had set up inside his house. Behrod G. believed Peter H. was casing his home for a burglary. In early October 2013, Behrod G. returned from a weekend trip to find his condominium had been burglarized. Among the items stolen were a Springfield Armory XD .45-caliber handgun with the serial number XD625588 (XD), a silver Apple MacBook Pro laptop, and a black range bag (used to store ammunition, magazines, 2 holsters, cleaning utensils, and ear and eye protection), which had held the XD. Behrod G. described the laptop to the investigating police officer as a 15-inch MacBook Pro. After Behrod G. discovered that his home had been broken into, he set up an alert through Apple to locate his laptop. Soon after, he received a notification that his laptop was connected to the Wi-Fi network at the Costa Mesa Apple Store. Behrod G. reviewed video surveillance from that Apple Store and recognized Peter H. as the man holding the laptop. A police officer searched Peter H.’s residence in December 2013. None of the items described as stolen by Behrod G. were found. While Peter H. had possession of an 11-inch MacBook Air, the officer did not seize it since it was smaller than the laptop described as stolen by Behrod G. Nothing in the record shows that Peter H. was charged with any crime in connection with the theft. 2 Other stolen items included a watch, a camera, and one or two other handguns that were also inside the range bag. 3 B. Search of Defendant’s Car In February 2014, police officers were doing a compliance check for a parolee at a condominium in Orange, which was unrelated to the burglary of Behrod G.’s home. The parolee was not at the unit, so officers visited another unit where they believed the parolee might be. Defendant happened to be in that unit when the officers arrived. Though defendant was not the focus of their investigation, the police asked for permission to search his vehicle. Defendant consented, and he walked with the officers to his car. Prior to the search, defendant told the police that there was a gun in a locked box in the passenger compartment. The police located the gun in their search, which was a Beretta nine-millimeter that belonged to defendant. The police then asked defendant to open his trunk, and he expressed concern about a black bag in there that he claimed belonged to Peter H.: “[Officer 1]: Would you mind . . . popping your trunk open? “[Officer 2]: Hey hold on, he wants to tell you something. [¶] . . . [¶] “[Defendant]: I don’t know if he took it out or not. That’s why I . . . . “[Officer 1]: What? [¶] . . . [¶] “[Defendant]: It’s a, a black bag, a duffle bag. “[Officer 1]: In [the trunk]? “[Defendant]: Yeah, it’s uh . . . “[Officer 1]: Who does it belong to? “[Defendant]: Peter.” After opening the trunk, the officers found a black range bag containing vinyl gear, a gun cleaning kit, and the XD. They also found a silver MacBook laptop in the trunk. The police again asked defendant about the black range bag. And he again stated that it and its contents belonged to Peter H., but defendant also stated that he was planning to buy the XD from Peter H.: “[Officer 1]: So this other black bag belongs to Peter? 4  “[Defendant]: Yeah. “[Officer 1]: Peter who? [3] “[Defendant]: I don’t know his last name. [¶] . . . [¶] “[Defendant]: We were gonna go to drink Saturday. Didn’t work out. “[Officer 1]: Okay, but you got a guy named Peter . . . [¶] . . . [¶] “[Officer 1]: Some guy named Peter leaves an [XD] . . . “[Defendant]: I was gonna buy it from him. . . .” One of the officers then asked defendant that if he ran a search for the XD, “is that gun gonna come back stolen?” To which defendant replied, “I, I hope not.” The police officers and defendant returned to the condominium and the police continued to question defendant about the XD. Defendant then admitted that he had already purchased the gun from Peter H. for $700 around two months ago and that he did not get a receipt or bill of sale. He also admitted to knowing that he was supposed to go to a gun store to transfer ownership after the purchase. The officers then confronted defendant with his contradictory prior statement that the XD belonged to Peter H.: “[Officer 1]: So what’s the truth? “[Defendant]: I did purchase it, but if anything comes back on [the XD], it’s not me. That’s why I did that.” An officer ran record checks on both firearms. The Beretta was registered to defendant. The XD showed up as being registered to Behrod G. but was not listed as stolen due to a typographical error in the serial number when the XD was initially entered as stolen. The police officers contacted Behrod G. and told him that they were in possession of a firearm registered in his name. He informed the police that the XD had been stolen from him and also told them about the other items that had been stolen from his home, including a silver 15-inch MacBook Pro laptop. 3 Defendant later clarified to the officers that “Peter” was Peter H. 5  The police confiscated the XD, laptop, and range bag from defendant. Behrod G. later retrieved the items and identified them as his. The laptop, however, was damaged and would not turn on, so defendant ended up discarding it after the police returned it to him. Behrod G. estimated the combined value of these items to be over $1,500. When asked about the value of each item individually, Behrod G. stated that he had purchased the handgun for $400 to $600, he estimated the range bag to be worth $100, and stated that he had purchased the laptop used in 2012 for roughly $900 to $1,000. On April 10, 2014, the People filed a complaint, charging defendant with one count of receiving stolen property in violation of section 496, subdivision (a). That case was apparently dismissed for lack of witnesses on June 20, 2018, and a complaint was refiled on June 21, 2018. An information was filed on March 25, 2019, alleging defendant had committed one count of a felony violation of section 496, subdivision (a), based on his possession of the XD, the laptop, and the gun range bag. The information further alleged the combined value of these items was over $950. C. Defendant’s Case at Trial At trial, defendant argued that the laptop taken from his trunk was not the same one that Behrod G. reported stolen. Among other things, he argued that the laptop recovered from his trunk was an 11-inch MacBook Air, while the laptop reported stolen was a 15-inch MacBook Pro laptop. While the police report stated a silver 15-inch MacBook Pro laptop had been recovered from defendant’s trunk, the property receipt listed the recovered laptop as a MacBook Air, not a MacBook Pro. Also, photographs that purportedly depicted the recovered laptop showed an 11-inch mid-2012 MacBook Air, not a 15-inch MacBook Pro. This also created a discrepancy with Behrod G.’s testimony that he had purchased the laptop in 2011. Behrod G. also gave conflicting testimony at trial, claiming that the laptop stolen from his home was an 11-inch MacBook 6 Air but also recognizing that he had also previously testified in 2016 that a 15-inch MacBook Pro was stolen from his home. As to the XD, defendant testified he had met Peter H. through a mutual friend, Josh H., in September 2013. He next saw Peter H. about a month later when Josh H. coordinated a firearm sale between defendant and Peter H. The three men met at a storage facility in Costa Mesa, where Peter H. sold defendant the XD for $700. Defendant paid the total in two installments. The first installment was made at the storage facility, and the second one was made two days later. Defendant claimed to have purchased the black bag found in his trunk from Peter H. when he made the second installment payment. Defendant further testified that a few days after he purchased the XD from Peter H., he also purchased an AR-15 rifle from his neighbor. The two men went to a gun store to register the AR-15 in defendant’s name, and defendant also brought along the XD for registration. But the gun store worker refused to register the XD and told defendant that he needed the seller of the firearm to be present. This was the first time defendant learned that for private firearm sales, the actual seller needs to be present at the gun store to register a firearm. Defendant claimed to have made several subsequent attempts to contact Peter H. to accompany him to a gun store to register the XD, but they were unable to do so because of conflicting schedules. Defendant asserted that he did not know the XD was stolen until the police told him so after searching his trunk. Neither Peter H. nor Josh H. testified during trial. During closing statements, defense counsel stated that Peter H. could not be located. Defendant also testified that Josh H. had been involved in a serious motorcycle accident that affected his memory and no longer remembers the relevant events. 7 D. Jury Deliberation and Verdict Prior to deliberation, the jury was given an instruction on unanimity, stating that “[t]he people have presented evidence of more than one act to prove that the defendant committed [the offense of receipt of stolen property]. You must not find the defendant guilty unless you all agree that the People have proved that the defendant committed at least one of these acts and you all agree on which act he committed.” During jury deliberations, the jury submitted a question to the trial court: “[i]s it true that if any one of the items is considered not stolen that the defendant is not guilty?” The trial court referred them back to the unanimity jury instruction. Following deliberation, the jury found defendant guilty. But it also found untrue the allegation that the value of the property received was more than $950, thus reducing the offense to a misdemeanor. Defendant was sentenced to three years of probation. Defendant makes two arguments on appeal. First, there was insufficient evidence to establish that defendant knew the XD was stolen. Second, there was insufficient evidence at trial that the laptop and bag found in his trunk were the ones stolen from Behrod G. We disagree with defendant’s first contention, which obviates the need to address the second argument. II DISCUSSION A. Standard of Review We must affirm defendant’s conviction if it is supported by substantial evidence. (People v. Grant (2003) 113 Cal.App.4th 579 , 595-596.) “‘Our role in considering an insufficiency of the evidence claim is quite limited. We do not reassess the credibility of witnesses . . . , and we review the record in the light most favorable to the judgment, . . . drawing all inferences from the evidence which supports the [fact finder’s] verdict . . . . By this process we endeavor to determine whether “‘any rational 8 trier of fact’” could have been persuaded of the defendant’s guilt.’” (People v. Manriquez (1999) 72 Cal.App.4th 1486 , 1490 (Manriquez).) “In assessing the sufficiency of the evidence, we review the entire record in the light most favorable to the judgment to determine whether it discloses evidence that is reasonable, credible, and of solid value such that a reasonable trier of fact could find the defendant guilty beyond a reasonable doubt. [Citations.] Reversal on this ground is unwarranted unless it appears ‘that upon no hypothesis whatever is there sufficient substantial evidence to support [the conviction].’” (People v. Bolin (1998) 18 Cal.4th 297 , 331-332.) Further, in conducting our review, “[w]e must accept logical inferences that the jury might have drawn from the evidence although we would have concluded otherwise. [Citations.] ‘If the circumstances reasonably justify the trier of fact’s findings, reversal of the judgment is not warranted simply because the circumstances might also reasonably be reconciled with a contrary finding.’” (People v. Vasquez (2015) 239 Cal.App.4th 1512 , 1516–1517, italics added (Vasquez).) Due to its limited focus, “[t]he substantial evidence standard of review is generally considered the most difficult standard of review to meet, as it should be, because it is not the function of the reviewing court to determine the facts.” (In re Michael G. (2012) 203 Cal.App.4th 580 , 589.) B. Sufficiency of the Evidence “[T]he elements of receiving stolen property are: (1) that the particular property was stolen; (2) that the accused received, concealed or withheld it from the owner thereof; and (3) that the accused knew that the property was stolen.” (People v. Johnson (1980) 104 Cal.App.3d 598 , 605.) Based on defendant’s conviction of misdemeanor receipt of stolen property and the jury’s question during deliberation, it appears the jury did not find all three elements had been met for the three items listed in the information. Defendant agrees, concluding “it is likely that the jury focused on the 9 handgun, which matched the one reported stolen.” Thus, we begin our review with the XD, for which defendant only contests the existence of the third element – knowledge. “Knowledge that property was stolen seldom can be proved by direct evidence, and resort often must be made to circumstantial evidence. [Citations.] ‘[P]ossession of stolen property, accompanied by no explanation or unsatisfactory explanation, or by suspicious circumstances, will justify an inference that the goods were received with knowledge that they had been stolen. Corroboration need only be slight and may be furnished by conduct of the defendant tending to show his guilt.’” (In re Richard T. (1978) 79 Cal.App.3d 382 , 388, italics added.) “False or evasive answers to material questions with reference to the ownership of stolen property tend to prove such knowledge.” (People v. Reynolds (1957) 149 Cal.App.2d 290 , 294-295.) Indeed, “‘[a] defendant’s “. . . admissions and contradictory statements coupled with his possession of the stolen property alone are sufficient to support a finding of guilt.”’” (In re Richard T. (1978) 79 Cal.App.3d 382 , 388-389.) For example, in People v. Grant, supra, 113 Cal.App.4th at pages 584-585, police found computer equipment in the defendant’s garage in 2001 that had been stolen from a high school in 1998. When questioned about the equipment, the defendant stated he had purchased it in 1995 for $100. Because there was evidence the defendant had lied about purchasing the equipment, there was a reasonable inference that he knew the equipment was stolen. (Id. at p. 596.) Similarly, here, there is sufficient evidence to support the verdict. As explained below, defendant’s lies that the XD belonged to Peter H. constitute substantial evidence of his knowledge that the XD was stolen. To begin, defendant made contradictory statements to the police when they searched his vehicle in February 2014. There was evidence that defendant hesitated when one of the officers asked him if there was anything illegal in the car. Defendant then said to the officers, “I don’t know if he took [the black bag] out [of the trunk] or not.” When officers initially asked him to identify the owner of the black bag, defendant 10 said it belonged to Peter H. And when the police found the XD in the bag, defendant again claimed it belonged to Peter H. and that he “was gonna buy it from [Peter H.]” But upon further questioning, defendant provided a different story. He admitted to buying the gun from Peter H. two months prior for $700. Moreover, when confronted with his contradictory stories, defendant admitted that he had purchased the gun, “but if anything comes back on [the XD], it’s not me. That’s why I did that.” Defendant admittedly chose to lie about the ownership of the XD to insulate himself from any unlawful act associated with it. From this admission and defendant’s contradictory stories, the jury could logically infer that defendant knew the XD had been stolen. And we must accept this inference on appeal. (Vasquez, supra, 239 Cal.App.4th at pp. 1516-1517.) In response, defendant points to his trial testimony that he was concerned about the police finding the XD because he had not yet transferred the registration from Peter H. to himself, not because he believed the XD was stolen. But the jury apparently found this explanation to be untrue, and, on appeal, we will not question their credibility findings. (Manriquez, supra, 72 Cal.App.4th at pp. 1490-1491.) Also, this testimony does not explain why defendant expressed concern that a records check might reveal something unlawful about the XD. Such concern would be unnecessary if defendant believed he had lawfully purchased the firearm from Peter H. Next, the jury could reasonably find that defendant’s failure to register the XD constituted a suspicious circumstance. He knew he needed to register it in his name. And he also knew that to do so, he had to visit a gun store with the lawful owner of the XD. The jury could reasonably infer that defendant did not attempt to register the XD with Peter H. during the four months that he possessed it because he knew the gun was stolen. While defendant testified that scheduling conflicts prevented him from going to the gun store with Peter H. to register the XD, based on the verdict, it appears the jury did not find this testimony credible. And we will not review this finding on appeal. 11 (Manriquez, supra, 72 Cal.App.4th at pp. 1490-1491; Vasquez, supra, 239 Cal.App.4th at pp. 1516-1517.) Likewise, the jury could reasonably infer defendant knew the gun had been stolen because neither defendant nor Peter H. prepared a receipt or memorialized the transaction in writing. As to this evidence, defendant asserts that it is “inconceivable that [he] would take the gun into a legitimate shop to register it in his name shortly after buying it if he knew it to be stolen[.]” But defendant did not learn that the actual seller of the gun needed to be present to transfer registration until he asked the gun shop to register the XD in his name. So, the jury could reasonably infer that once defendant learned the actual seller needed to be present, he stopped attempting to register the XD because he knew Peter H. was not its actual owner. We accept this latter inference on appeal. (Vasquez, supra, 239 Cal.App.4th at pp. 1516-1517; Manriquez, supra, 72 Cal.App.4th at pp. 1490- 1491.) Defendant also compares this case to People v. Kunkin (1973) 9 Cal.3d 245 (Kunkin), which we find unpersuasive. In Kunkin, a newspaper was indicted for receiving stolen property after it obtained a confidential list of undercover narcotics officers from a former employee of the California Attorney General’s office. (Id. at pp. 247-248.) The former employee testified that he had only given the newspaper the roster temporarily for review and that he never intended to relinquish the document. (Id. at p. 254.) But the Attorney General argued the newspaper knew the roster had been stolen due to “[t]he sensitive nature of the information, [the employee’s] appearance and desire to remain anonymous, defendants’ awareness that the publication might cause trouble, defendants’ willingness to pay a small sum for the roster and refusal to surrender the same . . . .” (Id. at pp. 254-255.) The Supreme Court found the former employee’s testimony was not contradicted by the circumstantial evidence produced by the Attorney General: “[t]he Attorney General’s list of suspicious circumstances confuses circumstances which might 12 well serve to put a publisher on notice that official displeasure would result from publication of information released to him without authorization, with circumstances which should signal that the property tendered has been taken by theft by larceny.” (Kunkin, supra, 9 Cal.3d at p. 255.) Further, the newspaper’s offer to pay was insignificant since they offered “similar amounts for information whether lawfully or unlawfully come by.” (Ibid.) Given that the former employee’s testimony was uncontroverted, the Supreme Court found there was insufficient “evidence to support the jury’s finding that [the newspaper] knew the roster was stolen.” (Id. at pp. 255-256.) Defendant contends that like the former employee in Kunkin, his testimony was uncontradicted and so the jury wrongly determined he knew the XD was stolen. We are not persuaded. Defendant’s testimony was contradicted by the circumstantial evidence set forth above. Among other things, unlike Kunkin, defendant intentionally tried to mislead police officers into believing that the XD was not his and belonged to Peter H. He admittedly did so to distance himself from the XD in case anything unlawful came back on the gun after a records search. This circumstantial evidence, along with defendant’s failure to register the XD, is sufficient to affirm the jury’s verdict. Defendant also relies on People v. Dupre (1968) 262 Cal.App.2d 56 , 57, in which the appellate court reversed the defendant’s conviction of receiving two stolen television sets. But as defendant explicitly acknowledges in his brief, Dupre was not a case where the defendant “‘[gave] a false explanation regarding [her] possession or remain[ed] silent under circumstances indicating a consciousness of guilt.’” (Id. at p. 59.) That is not true here. Defendant gave contradictory statements to the police regarding the ownership of the black bag and the XD. Finally, defendant makes much of the fact that he and Behrod G. did not know each other at the time of the robbery and were separated by two layers of people (Peter H. and Josh H.). Similarly, he contends that he barely knew Peter H. when he bought the XD. But it is unnecessary for defendant to be told directly that the property is 13 stolen. Nor is it required that the defendant have any connection to the theft victim or a relationship to the alleged thief outside of buyer and seller. “‘Knowledge may be circumstantial and deductive.’” (See People v. Lodge (1961) 190 Cal.App.2d 865 , 872.) Despite defendant’s lack of relationships with the Behrod G. or Peter H., there is enough evidence in the record for the jury to reasonably infer that defendant knew the XD was stolen. Given this conclusion, we need not address defendant’s argument that there is insufficient evidence that the laptop and bag found in his car were the ones stolen from Behrod G. The result will not change even if defendant is correct. “‘Where the jury considers both a factually sufficient and a factually insufficient ground for conviction, and it cannot be determined on which ground the jury relied, we affirm the conviction unless there is an affirmative indication that the jury relied on the invalid ground.’” (People v. Thompson (2010) 49 Cal.4th 79 , 119; People v. Giron-Chamul (2016) 245 Cal.App.4th 932 , 957 [“‘[W]hen a prosecutor argues two theories to the jury, one of which is factually sufficient and one of which is not, . . . the reviewing court must assume that the jury based its conviction on the theory supported by the evidence’”].) For example, in People v. Giron-Chamul, supra, 245 Cal.App.4th 932 , the prosecution identified two different sex acts under which the defendant could be convicted of oral copulation with a child aged 10 years or younger. The jury was given an unanimity instruction as to the two acts and ultimately found the defendant guilty. The appellate court ruled there was sufficient evidence supporting the occurrence of one of the acts. As such, it did not need to examine the sufficiency of the evidence as to the other act. (Id. at pp. 956-957.) Likewise, here, defendant’s misdemeanor conviction of receipt of stolen property can be affirmed based solely on the XD. Nothing in the record indicates the jury based its verdict on either the laptop or the bag. Thus, we need not determine whether there is sufficient evidence to support a conviction based on those items. 14  III DISPOSITION The judgment is affirmed. MOORE, J. WE CONCUR: BEDSWORTH, ACTING P. J. GOETHALS, J. 15

2020-11-30 21:02:37.83348+00

https://www.courts.ca.gov/opinions/nonpub/B306022.PDF

Filed 11/30/20 P. v. Macias CA2/3 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION THREE THE PEOPLE, B306022 Plaintiff and Respondent, (Los Angeles County Super. Ct. No. KA110524) v. FLAVIO MACIAS, JR., Defendant and Appellant. APPEAL from a judgment of the Superior Court of Los Angeles County, Bruce F. Marrs, Judge. Affirmed with direction. Kathy R. Moreno, under appointment by the Court of Appeal, for Defendant and Appellant. Xavier Becerra, Attorney General, Lance E. Winters, Chief Assistant Attorney General, Susan Sullivan Pithey, Assistant Attorney General, Noah P. Hill and Kathy S. Pomerantz, Deputy Attorneys General, for Plaintiff and Respondent. ——————————  A jury found Flavio Macias, Jr., guilty of first degree murder. He appealed the judgment of conviction, and we remanded for resentencing under Senate Bill No. 1393. On remand, the trial court declined to strike a five-year prior. Macias appeals again, this time contending that the trial court abused its discretion by refusing to strike the five-year prior. We disagree. BACKGROUND1 In 2015, Maria Camargo and her husband Luis Segura lived next door to Flavio Macias and his brother. Late on the night of August 23, 2015, Camargo heard the Macias family dog barking. She then heard a wail and a brick falling. The dog stopped barking. Not long thereafter, Macias knocked on Camargo and Segura’s door. When they answered, Macias said he did not want anything and left. The next day, Macias, with his brother acting as a lookout, beat Segura with a cement paver and hammer, killing Segura. Law enforcement found the dog’s body in a spa. The dog had been stabbed and had suffered blunt force trauma. A jury found Macias guilty of first degree murder (Pen. Code,2 § 187, subd. (a)) and found true the allegation he used a deadly and dangerous weapon (§ 12022, subd. (b)(1)). The jury acquitted Macias of cruelty to an animal. On July 5, 2018, the 1 The background is from People v. Macias (Sept. 23, 2019, B291144) [nonpub. opn.]. We take judicial notice of that opinion. (Evid. Code, § 451, subd. (a).) 2 All further undesignated statutory references are to the Penal Code. 2 trial court sentenced Macias to 25 years to life, doubled under the “Three Strikes” law to 50 years to life. The trial court also imposed a five-year term (§ 667, subd. (a)(1)), a one-year term (§ 12022, subd. (b)(1)), and 2 one-year priors (§ 667.5, subd. (b)). Thereafter, Senate Bill No. 1393 went into effect on January 1, 2019. (Sen. Bill No. 1393 (2017–2018 Reg. Sess.).) That bill amended sections 667, subdivision (a), and 1385, subdivision (b), to allow a court to exercise its discretion to strike or to dismiss a serious-felony prior for sentencing purposes. (Stats. 2018, ch. 1013, §§ 1–2.) Macias appealed. Based on Senate Bill No. 1393, we remanded the matter for resentencing but otherwise affirmed the judgment of conviction. (People v. Macias, supra, B291144.) At the resentencing hearing on March 11, 2020, Macias’s counsel asked the trial court to strike the five-year prior because there was evidence Macias’s drug use played a role in the crime. The trial court noted that the murder involved “an extremely brutal situation” in which Segura had been killed with a hammer and concrete blocks, notwithstanding that Segura and Macias had a neighborly relationship. Further, a dog had been killed. The trial court said, “I won’t say there’s no way I would have stricken the 5-year prior, but it’s extremely remote that I would have at the time. The prior was a crime of violence. So I’m going to decline to exercise discretion under the circumstances of this particular case.”3 When Macias’s counsel pointed out that his client had been acquitted of animal cruelty, the trial court said, “But the animal was there, was dead, was beaten up with the 3 Macias’s prior strike was for corporal injury to a spouse with infliction of great bodily injury (§§ 273.5, subd. (a), 12022.7). 3 same type of situation that the victim was, which suggested circumstantial [sic]. It’s a factor I can take into consideration for sentencing purposes.” Although the trial court declined to strike the five-year prior, it struck the one-year prison priors because those could no longer be imposed under Senate Bill No. 136.4 Macias’s sentence therefore was 50 years to life plus a determinate term of six years.5 DISCUSSION We review the trial court’s decision not to strike the five- year prior for an abuse of discretion. (See People v. Carmony (2004) 33 Cal.4th 367 , 371, 375.) Here, Macias contends that the trial court abused its discretion for two reasons. First, the trial court merely rubberstamped its earlier sentence. Second, the trial court considered an impermissible factor. Macias’s first argument is based on the trial court’s statement it would not have struck the five-year prior at the 4 That bill amended section 667.5, subdivision (b) to apply where the prior prison term was served for a sexually violent offense as defined in Welfare and Institutions Code section 6600, subdivision (b). 5 The minute order from the sentencing hearing mistakenly states that the trial court struck 3 one-year priors; however, the jury only found true two. The minute order also mistakenly states that the total sentence was 55 years to life, when it should be 50 years to life plus six years. The abstract of judgment also does not reflect the one year imposed for the weapon enhancement, incorrectly states that the total term is 55 years to life, and incorrectly states that the resentencing happened on July 5, 2018 rather than March 11, 2020. Accordingly, we order the minute order and abstract of judgment to be corrected. 4 original sentencing hearing if it had the discretion to do so then. From this, Macias speculates that the trial court did not consider his postsentencing conduct. Even if the trial court may consider such conduct (see People v. Warren (1986) 179 Cal.App.3d 676 , 689–690), the trial court’s lone statement fails to establish that it did not do so. Rather, the trial court was merely commenting that given the brutality of the murder, it would not have struck the five-year prior even if it could have. This was entirely proper. A resentencing court may consider the same factors it considered when issuing the original sentence. (People v. Pearson (2019) 38 Cal.App.5th 112 , 117.) Those factors include that the crime involved great violence or other acts disclosing a high degree of cruelty, viciousness, or callousness. (Cal. Rules of Court, rule 4.421(a)(1); Pearson, at p. 117.) In any event, Macias does not specify what postsentencing conduct the trial court failed to consider. Second, Macias contends that the trial court abused its discretion by considering the dog’s killing. In exercising its sentencing discretion, a trial court may consider counts on which a defendant has been acquitted so long as it finds that the evidence established such conduct by a preponderance of the evidence. (In re Coley (2012) 55 Cal.4th 524 , 557.) Macias, however, points out that People v. Towne (2008) 44 Cal.4th 63 , 88 states that a trial court may consider only counts on which a defendant is acquitted that are “part of a single series of events and involved a single victim.” Towne made that statement in the context of distinguishing another case, People v. Richards (1976) 17 Cal.3d 614 . The defendant in Richards was acquitted of one count of grand theft but convicted on a second. The count on which he was acquitted was a separate transaction involving a 5 different victim. Richards, at pages 620 to 622, held that it was improper to order restitution to the victim of the acquitted count as a condition of probation because the order was not designed to achieve the proper goal of making the actual victim whole. Towne, at page 88, thus distinguished Richards because Towne involved a single series of events involving a single victim. Towne, however, did not state that this distinction constituted a wholesale limitation on the underlying principle that counts on which a defendant has been acquitted may be considered for sentencing purposes. In any event, we will set aside a sentence only if it is reasonably probable that the trial court would have chosen a lesser sentence had it known some of its reasons for imposing the sentence were improper. (People v. Price (1991) 1 Cal.4th 324 , 492.) As we have said, the trial court cited a compelling reason for refusing to strike the five-year prior: the extreme brutality of the murder of a person with whom Macias had a neighborly relationship. Moreover, substantial evidence supports the trial court’s finding that there was a connection between the dog’s murder and Segura’s murder. (See generally People v. Buford (2016) 4 Cal.App.5th 886 , 901 [substantial evidence must support preponderance of evidence finding].) The night before Macias killed Segura, Camargo heard a dog barking, a wail, and then a brick falling. The dog stopped barking. Just minutes later, Macias knocked on Segura’s door. The next day, Macias used a brick or heavy planter to kill Segura. The dog had similarly suffered blunt force trauma. The dog and Segura therefore suffered similar injuries, inflicted, the evidence shows, with a similar instrument. 6  DISPOSITION The judgment is affirmed with the direction to the trial court to amend the March 11, 2020 minute order and abstract of judgment to reflect the total term of 50 years to life plus six years and to further amend the abstract of judgment to reflect the one year imposed for the weapon enhancement and the resentencing hearing was on March 11, 2020. The trial court shall forward the amended abstract of judgment to the Department of Corrections and Rehabilitation. NOT TO BE PUBLISHED. DHANIDINA, J. We concur: LAVIN, Acting P. J. EGERTON, J. 7

2020-11-30 21:02:38.562859+00

https://www.courts.ca.gov/opinions/nonpub/A156715.PDF

Filed 11/30/20 P. v. Jaimes-Mendoza CA1/2 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 FIRST APPELLATE DISTRICT DIVISION TWO THE PEOPLE, Plaintiff and Respondent, A156715 v. JUAN GABRIEL JAIMES- (Solano County MENDOZA, Super. Ct. No. FCR276110) Defendant and Appellant. In 2012, defendant Juan Gabriel Jaimes-Mendoza was found not guilty of murder by reason of insanity for killing his wife in 2010 and committed to a state hospital. In 2018, the director of the state hospital recommended conditional outpatient treatment for defendant as provided under Penal Code section 1600, et seq.,1 and, pursuant to that statutory scheme, the trial court held an evidentiary hearing to consider the recommendation. The state hospital doctors who treated defendant and the representative of the county conditional release program who interviewed him and developed an outpatient treatment plan for him testified that defendant had no current symptoms of mental illness and was suitable for outpatient treatment with supervision. The People questioned the state hospital doctors’ diagnosis of 1 Further undesignated statutory references are to the Penal Code. 1 amphetamine-induced psychotic disorder and presented witnesses who had reached different diagnoses of defendant when they evaluated him in 2011 in connection with the proceedings that resulted in a finding that defendant was not guilty by reason of insanity. But the People’s witnesses had not seen defendant since 2011, and the People did not dispute that defendant had been symptom-free and a cooperative patient for the length of his commitment and that he never exhibited any violence or behavioral problems. At the conclusion of the hearing, the trial court denied defendant outpatient status, apparently on the ground that it could not accept the state hospital doctors’ current diagnosis in light of the different diagnoses defendant had received in 2011. This appeal followed. We shall now reverse and remand because, although the trial court may have had nonarbitrary reasons for questioning defendant’s current diagnosis, it does not appear that the court considered whether defendant would be dangerous under supervised outpatient treatment, an inquiry it was required to make. (People v. McDonough (2011) 196 Cal.App.4th 1472 , 1493 (McDonough); see § 1603, subd. (a).) STATUTORY OVERVIEW We begin with a brief discussion of the statutory framework that governs outpatient treatment of persons found not guilty by reason of insanity. When a defendant is found not guilty by reason of insanity, the trial court may order the defendant committed to a state hospital or other appropriate facility unless it appears the sanity of the defendant has been fully restored. (§ 1026, subd. (a); People v. Cross (2005) 127 Cal.App.4th 63 , 72 (Cross).) A defendant so committed to a state hospital may be released in one of three ways: “(1) upon restoration of sanity pursuant to the provisions 2 of section 1026.2, (2) upon expiration of the maximum term of commitment under section 1026.5 [citation], or (3) upon approval of outpatient status pursuant to the provisions of section 1600 et seq. (§ 1026.1.)” (People v. Sword (1994) 29 Cal.App.4th 614 , 620 (Sword).) Under the third procedure (which was invoked in this case), a defendant “may be placed on outpatient status upon the recommendation of the state hospital director and the community program director with the court’s approval after a hearing.” (Cross, supra, 127 Cal.App.4th at p. 72, citing § 1603 and Sword, supra, 29 Cal.App.4th at p. 620.) In deciding whether to grant outpatient status, the trial court must consider whether the director of the state hospital or other treatment facility “advises . . . that the defendant would no longer be a danger to the health and safety of others, including himself or herself, while under supervision and treatment in the community, and will benefit from that status” and “[w]hether the community program director advises the court that the defendant will benefit from that status, and identifies an appropriate program of supervision and treatment.” (§ 1603, subds. (a)(1), (2).) The court also “shall consider the circumstances and nature of the criminal offense leading to commitment” and the defendant’s prior criminal history. (§ 1604, subd. (c).) The defendant has the burden to prove by a preponderance of the evidence that he “is ‘either no longer mentally ill or not dangerous.’ ” (McDonough, supra, 196 Cal.App.4th at p. 1491.) Upon carrying that burden, “[a] patient has a right to outpatient treatment.” (Id. at p. 1475.) 3  FACTUAL AND PROCEDURAL BACKGROUND Underlying Offense, NGI Verdict, and Commitment On May 9, 2010, defendant killed his wife. In February 2012, defendant pleaded no contest to murder (§ 187, subd. (a)) and admitted to discharging a rifle causing death (§ 12022.53, subd. (d)). The issue whether defendant was not guilty by reason of insanity (NGI) was submitted to the trial court on the psychological evaluations of three psychologists, including Drs. Nakagawa and Winkel. Each psychologist’s report was prepared in September 2011. Nakagawa concluded defendant met the diagnostic criteria for a psychotic disorder not otherwise specified (NOS) or a delusional disorder NOS. Winkel observed defendant was hallucinating and delusional and concluded he met the diagnostic criteria for paranoid schizophrenia.2 The trial court found defendant not guilty by reason of insanity. In March 2012, the trial court committed defendant to Napa State Hospital (NSH) for a maximum term of commitment of 50 years to life. Recommendation for Conditional Outpatient Treatment On February 20, 2018, the medical director of NSH notified the trial court of the hospital’s recommendation that defendant be released for conditional outpatient treatment. A seven-page report prepared by NSH staff psychiatrist Muhammad Tariq (2018 NSH report) was filed with the notice. Defendant was reported to have been symptom-free from the start of his hospitalization. Defendant’s participation in treatment was excellent, and his risk of violence if placed in the community with supervision was assessed as low because he was likely to remain treatment adherent with supervision. 2A third psychologist, Stephen Pittavino, also prepared a psychological evaluation of defendant. 4  In May 2018, the community program director of the conditional release program (CONREP) for Solano County, Christie Vice, filed an 11-page placement recommendation report (2018 CONREP report) detailing defendant’s forensic profile, his social, medical, substance abuse, criminal and psychiatric history, the results of a clinical interview with defendant, and the CONREP treatment program. The report concluded that defendant could safely and effectively be treated in the community. Section 1604 Hearing In January 2019, the trial court conducted a three-day hearing on NSH’s recommendation for conditional outpatient treatment pursuant to section 1604. Defendant called five witnesses. Dr. Tariq Tariq, who testified as an expert in psychiatry, was defendant’s current treating psychiatrist at NSH and had been treating him for about two years. Tariq met with defendant for monthly visits of 10 to 20 minutes and saw him daily in common areas. About every six months, he would meet with defendant for one to two hours before writing the semiannual court report required under section 1026, subdivision (f) (§ 1026(f)).3 When Tariq began treating defendant, he would meet him with the help of a Spanish interpreter. But defendant had been taking English classes at the hospital and “now he converses fairly well in English,” so Tariq no longer used an interpreter.4 3 When a defendant found NGI is committed to a state hospital, section 1026(f) requires the medical director to submit “a report in writing to the court and the community program director of the county of commitment . . ., setting forth the status and progress of the defendant” at six-month intervals. 4 A Spanish interpreter assisted defendant at the section 1604 hearing. 5  Tariq diagnosed defendant with amphetamine-induced psychotic disorder with onset during intoxication, amphetamine-use disorder, and alcohol-use disorder. Defendant had not taken antipsychotic medications or any medications for these disorders during the time he was under Tariq’s care. Tariq testified defendant was cooperative with all people in his unit and in the hospital and generally did “[w]hatever he’s supposed to be doing.” Tariq testified defendant was suitable for supervised treatment in the community based on the following: defendant was not showing signs or symptoms of mental illness and was stable in that regard; he had not had any incidents of aggression or other concerning behaviors since he had been hospitalized; he participated in groups and substance-use-disorder-related meetings; he was willing to work with CONREP and do whatever was required of him in the community; and recently, defendant had been in touch with his family, who could provide some emotional support in the community.5 Others NSH professionals who interacted with defendant included a psychologist, a social worker, a rehabilitation therapist, and nursing staff, and Tariq was not aware of anyone on defendant’s treatment team who disagreed with the recommendation that defendant was ready for community supervision. In cross-examination, the prosecutor asked whether defendant had more insight into his offense than he previously had, and Tariq responded that defendant still did not remember killing his wife but he now 5Tariq knew that defendant’s father, cousin, and at least one of his sons had been visiting defendant. 6 acknowledged that he killed her.6 Tariq testified defendant might never remember the offense because of dissociation, meaning “he could not make any memory of that event.” Tariq testified that the dissociation “was due to his drug use, so it’s not like he has a dissociative disorder or anything like that.” Tariq believed there would be “a risk again if [defendant] does drugs.” Tariq explained the diagnosis of “amphetamine-induced psychotic disorder with onset during intoxication” did not mean defendant was intoxicated at the time of the killing. “The onset during intoxication mean[s] that maybe less than one month before that event, he was doing meth. And that made him psychotic. That . . . psychosis can go for months and years, but the diagnosis would still be the onset during intoxication.” Tariq testified that usually drug- or alcohol-induced psychosis “clears up within days to weeks, months. It’s rare that it would go on for many months or years.” Asked about Dr. Winkel’s and Dr. Nakagawa’s NGI evaluations of defendant from September 2011, Tariq testified the psychologists “[c]ould be” wrong in their diagnoses.7 Tariq agreed with the statement in DSM-5 (as stated by the prosecutor) that “it may be difficult to distinguish a substance-abuse-induced psychotic disorder . . . from the independent psychotic disorder.” On questioning from the trial court, he agreed that it was common for people with a psychotic disorder, schizophrenia, or delusional disorder to self-medicate with alcohol or illegal drugs. Tariq is not a forensic psychiatrist. 6In redirect, Tariq testified that defendant did have insight into the disorders that he was diagnosed with in that he acknowledged that he had them. 7 In redirect, Tariq agreed it was a possibility that when the original forensic evaluations were done, defendant was still experiencing drug- induced psychosis. 7  Tariq has treated patients with paranoid schizophrenia and is familiar with their symptoms when they are not medicated. Such symptoms could be auditory or visual hallucinations, delusional thinking (which would be having false fixed beliefs or paranoia), and disorganized thoughts. In his two years interacting with defendant, Tariq was not aware of defendant exhibiting any of these symptoms and was not aware of any staff at NSH reporting defendant had any of these symptoms. He testified that a patient diagnosed with psychosis NOS, who is not medicated, could display symptoms of hallucinations, delusional thinking, and disorganized thoughts, but “[t]here’s a possibility that they could be very stable without any of those symptoms, even though they make the criteria of the disorder in the past.” Tariq was not aware of defendant having any symptoms associated with psychosis NOS in the two years he had been treating defendant. Tariq had looked at Winkel’s evaluation from September 2011 and knew he conducted psychological tests.8 He was not aware of any psychological testing done at NSH. He agreed in general that someone with a depersonalization disorder is more dangerous than a person who does not have the disorder. Dr. Pretkel NSH psychologist Peter Pretkel testified as an expert in clinical psychology. At NSH, his duties include providing violence risk assessments, court reports, treatment planning, and group therapy. Dr. Pretkel became defendant’s psychologist in February 2014 when defendant was transferred to unit T12, a dual diagnosis specialized substance treatment unit; he treated 8Tariq testified he looked at the reports by Drs. Nakagawa and Winkel “mostly for the parts that were interesting or relevant to me. I have not looked at those reports, every page, every line, or every paragraph.” 8 defendant until the fall of 2016 when defendant was transferred to Dr. Steward. Pretkel would see defendant on an almost daily basis because his office was in the unit, and he interacted with defendant at group therapy and for treatment conferences. He also prepared a violence risk assessment of defendant which he completed in January 2017. The violence risk assessment used the HCR20, an instrument that considers historical factors and current dynamic factors. Dynamic factors include “insight, behavioral, cognitive, and affective stability, violent ideation, treatment response, . . . current symptoms,” and “ability to handle stress.” Defendant’s English was good enough that Pretkel was able to review the violence risk assessment with defendant in detail.9 Pretkel concluded (as reported in the 2018 NSH report) that defendant’s violence risk in the hospital and in the community under CONREP supervision was low and his risk in the community without supervision was moderate/high. For treatment in the community, Pretkel testified defendant generally “just needs substance disorder treatment.” At NSH, defendant never evidenced any delusions like those reported by his family members at the time of the offense. Pretkel never saw defendant respond to internal stimuli (which would indicate auditory hallucinations), and there were no reports of disorganized speech or behavior. Also, defendant was not diagnosed with antisocial personality disorder, which was “a positive for his violence risk.” 9 Pretkel did note that defendant had worked with a Spanish-speaking therapist since around 2014 or 2015, but he could not confirm that she was still working with defendant. Defendant also attended Spanish-language groups. 9  Pretkel was asked how he reconciled the 2011 diagnoses (paranoid schizophrenia, psychotic disorder NOS) with his current diagnosis of methamphetamine-induced psychotic disorder. He responded, “[I]t’s a matter of time.” “[A]t the time of his reports for not guilty by reason of insanity, one investigator said that he was really clear-thinking, although he had some thought-blocking and some residual symptoms, I believe . . . . And the other investigator, I think, did say that he showed signs of schizophrenia.[10] [¶] And that was a matter of time. So if those assessments were done three months after his offense, or even six months—and some cases, you know, up to a year, but that’s relatively rare[,] . . . it still may be methamphetamine- induced . . . psychotic disorder. He has to go for a period of a year without use of amphetamines to really finalize the diagnosis of amphetamine-induced psychotic disorder.” At the time of the hearing, defendant had been at NSH and in T12 for more than four years, and Pretkel testified, “We’d certainly see psychosis in those years.” Defense counsel noted that Pretkel’s violence risk assessment indicated dissociative amnesia and depersonalization disorder were “a risk factor of insight” and asked Pretkel to explain this. Pretkel responded that he started with Dr. Winkel’s NGI evaluation, which stated defendant had a tendency for dissociative symptoms. Pretkel looked for additional evidence of these symptoms in the record and asked defendant’s therapist about it. Defendant “has reported that he can feel unreal in times of family stress or financial stress.” Pretkel testified that the diagnoses of dissociative amnesia and 10 Without going into detail on the evaluators’ confidential reports from 2011, which are part of the record in this appeal, we note that Pretkel’s recollection of the evaluators’ descriptions of defendant’s current state at the time of the interviews was generally correct. 10 depersonalization disorder helped explain why defendant could not remember killing his wife. He testified that dissociative amnesia and depersonalization disorder are often caused by prior experiences of trauma and defendant had significant trauma.11 Pretkel testified the depersonalization disorder diagnosis means “in trauma or in memory of trauma or under stress, [defendant] can sometimes feel the world as unreal or . . . him lacking in connection.” Even with these diagnoses, Pretkel assessed defendant as a low risk for violence under community supervision. He explained the diagnoses were “descriptive for what his experience looked like and what his experience is,” but “they’re not causal factors.” Pretkel testified people are less prone to violence “if they have stable family relationships and, in addition, if the family participates in some way in their plan for success in the community,” and defendant had improved his relations with this family. Pretkel also testified about two incidents in T12 he found noteworthy. In one incident, defendant was assaulted by another patient and suffered minor injuries, and defendant reacted appropriately. He did not “return any punches” and was cooperative with staff. The other incident was that defendant tested positive for Tramadol. About the second incident, Pretkel testified, “I don’t know what to make of this. . . . I can’t say he did or didn’t use Tramadol. What I can say is that we did have a lot of problems on the unit with anomalous results.” He recalled another patient whose test results showed exactly a different patient’s medications, so it seemed there had been 11 Pretkel referred to childhood trauma of defendant witnessing someone killed with a machete when he was eight years old and seeing someone killed by a bullet at a rodeo when he was a child. He further testified that there are no medications prescribed for these disorders, which are “more along the lines of post-traumatic stress disorder.” 11 some mix-up of samples. Pretkel testified that was the only time defendant ever tested positive for anything. Since he completed his violence risk assessment in 2017, Pretkel has not learned of anything that would increase defendant’s risk in the community. In cross-examination, Pretkel agreed one would “kind of get high” from Tramadol. If the positive test for Tramadol were accurate, defendant may have gotten the drug from another patient. That concerned Pretkel “a bit,” but he testified, “even if he had relapsed, in a sense, on Tramadol for a brief high, you have to look at the overall picture of his behavior and treatment adherence.” This was “one possible relapse over five years,” and it did not change Pretkel’s risk assessment. He believed CONREP would provide frequent testing, which would manage defendant’s risk in the community. Pretkel also testified that in his experience, after patients realize they had psychosis due to methamphetamine, “they’re more able to know why they shouldn’t use methamphetamine.” Pretkel did not conduct any psychological testing of defendant. He testified that testing is “only an adjunct for diagnosis. [¶] . . . [D]iagnosis can almost always be done by looking at history and a clinical interview and so forth. . . . I’ve worked for the state hospital system for ten years, and I’ve seen . . . testing on this and that, and I’ve done testing on this and that. And . . . the utility of testing is . . . in my estimation, marginal at best.” The prosecutor then asked Pretkel a series of questions about Winkel’s NGI evaluation from September 2011. He reminded Pretkel of his testimony that symptoms of methamphetamine-induced psychosis do not last more than a year after last drug use and pointed out that Winkel observed defendant still showing psychotic symptoms a year and a half after killing his wife. 12 Pretkel responded, “I read [Winkel’s] report really thoroughly, and so I would have had to have gone through the thinking that I’m pondering right now. But I don’t recall my thought process around that, because I don’t have access to the report right now.” Nonetheless, Pretkel stood by his own diagnosis: “Dr. Wink[el] may have used the Rorschach and the MMPI, and he may have come up with conclusions that there’s an underlying severe psychosis. But he hasn’t observed Mr. Mendoza on a unit for over two-and-a-half years. [¶] And the thing about a psychotic disorder is that you see it. You see it in front of you. And, otherwise, a person doesn’t have the diagnosis. [¶] So, I would actually push back on Dr. Wink[el] and say that he didn’t have the information he needed. He had a one-time assessment in front of the patient. He did some tests that . . . can support a diagnosis, but . . . I’ve actually seen Mr. Mendoza on the unit and have synthesized . . . all my knowledge about his behaviors, . . . documents about his behaviors, chart notes, police reports,[12] and my own interactions with him. And I stand by my diagnosis.” Pretkel speculated that defendant may have used methamphetamine in jail, which, in turn, could have continued “propelling him into psychosis.” Pretkel had no knowledge of defendant using drugs in jail, but he testified there needed to be an explanation for defendant’s psychosis at the time of his assessment by Winkel. 12 Pretkel recounted that defendant’s family started noticing strange behavior around the time of his mother’s death about a year before the killing, that defendant reported he increased his drug use at that time, that defendant’s father knew defendant was taking drugs, and that a coworker said defendant used methamphetamine the day of or the day before the killing. 13  Pretkel disagreed with the statement in Winkel’s NGI evaluation that it was common for a first serious schizophrenic break to occur at defendant’s age. Pretkel testified that first schizophrenic breaks commonly occur between the ages of 17 and 22, but defendant was about 33 years old when he killed his wife. “That’s really uncommon. It’s really unusual.” Pretkel agreed with the prosecutor’s statement “if someone has been using methamphetamine, and they also have an underlying psychotic disorder, they can blend together a little bit.” But, he explained, the hospital “does a good job” of disentangling drug use from underlying psychotic disorders. At NSH, defendant was not taking anti-psychotic medications, he was not using methamphetamine, and he had no symptoms for five years. This, he testified, “really shows that the correct diagnosis is methamphetamine-induced psychosis.” Pretkel noted that methamphetamine “does get into the hospital sometimes,” but they saw no methamphetamine use by defendant.13 In redirect, Pretkel acknowledged that Winkel reported that defendant presented “with rather florid psychosis, both in an interview and in testing,” but his own experience with defendant and defendant’s history at NSH were completely different. Pretkel reiterated that no NSH staff reported defendant had psychotic symptoms. In morning meetings with clinicians and in monthly psychiatric assessments, “no one mentioned any psychotic symptoms or the need to intervene for psychotic symptoms. I mean, that’s our basic job. It’s a psychiatric hospital, and most of what we see are patients with schizophrenia and schizoaffective disorder and other psychotic After defendant reached the highest privilege level at T12, he was 13 randomly drug-tested monthly. 14 disorders. And the primary treatment is medication, anti-psychotic medication.” Dr. Steward NSH psychologist John Steward, who also testified as an expert in clinical psychology, worked in T12 and replaced Pretkel as defendant’s supervising psychologist. He interacted with defendant in English. In March 2018, Dr. Steward prepared a violence risk assessment for defendant like the one Dr. Pretkel prepared in January 2017. He diagnosed defendant with methamphetamine-induced psychosis, dissociative amnesia, and depersonalization disorder. Steward testified defendant’s risk for violence was very low in the hospital, low in the community under CONREP, and moderate to high, “tending toward the high range,” without supervision. He concluded defendant’s risk in the community with supervision was low based on his behavior in the hospital: “Juan doesn’t create any problems on the unit. He does everything he’s supposed to do. He goes to groups. He’s involved. He’s motivated. He’s responsible. If he needs to talk with me about something, he’ll come up and initiate with me. When I’ve spoken with him, he has been attentive and has sought to understand the topic of discussion. So given the fact that he’s done so well in a treatment environment, the assumption is that he’ll do well in a treatment environment on the outside, with supervision.” Steward testified that during defendant’s time as his patient, he “has had an ongoing and improving relationship with his family” and reconnecting with his family made defendant happier. Steward was not aware of any family members participating in defendant’s treatment planning. Steward 15 testified that no new information had changed his violence risk assessment since he prepared his report in March 2018. In cross-examination, the prosecutor focused on demonstrating that Steward improperly copied Pretkel’s January 2017 violence risk assessment. He asked if Steward “copied a lot of” Pretkel’s report when writing his own. Steward answered that he used “[t]he parts that were relevant” and “there’s no sense in redoing it.” He testified it was still his own independent evaluation “because I am the one who is doing the interviewing and who is then making sure that the report is accurate.” The prosecutor asked if he recalled copying Pretkel’s report “word-for-word except for the last three bullet points.” Steward initially disputed this characterization, but later reviewed the two reports and agreed the only difference between them was the bullet points at the end. The prosecutor asked why Steward did not use psychological testing when making risk assessments. Steward began his answer by noting it was “very, very difficult to predict violent behavior, future behavior. The best predictor of future behavior is past behavior.” He testified that objective psychological tests “are poor predictors of behavior; otherwise, we could give those. That’s why there’s been . . . a whole area of research, where people have tried to come up with, develop these kinds of tests or assessments, evaluations, to try to increase the validity and reliability of predicting violence. So it’s a tough area, an area of psychology, and so that’s why they come up with this kind of a—it’s—it’s the—objective—looking at the facts, plus the evaluator’s judgment and opinion.” Steward testified that because “the best predictor of future behavior is past behavior,” “drug treatment is so important; how they are—that they develop an awareness of their triggers and warning signs; that they are committed to living drug-free lives; that 16 they have insight. I mean, these are the factors that really contribute to one being able to make an educated assessment as to the likelihood or probability of them either tending to be violent or not violent.” Christie Vice Vice previously held position of community program director of the Solano County CONREP14 and wrote the 2018 CONREP report for defendant. Vice began interviewing defendant in 2016 and met him at least six times. She explained that when a state hospital notifies Solano County CONREP they have a patient who may be ready for outpatient treatment, CONREP interviews the patient for appropriateness, consults regularly with the patient’s treatment team through liaison visits, and evaluates whether the patient is ready for outpatient care. CONREP does not always agree with the state hospital’s recommendation. In May 2018, Vice determined defendant was appropriate for outpatient treatment. She noted that defendant had been asymptomatic for his entire hospital stay, had no behavioral issues, and was “considered a model patient, by most standards.” Vice knew defendant’s diagnosis was amphetamine-induced psychosis. She was not aware of his prior diagnoses although she did review Nakagawa’s and Winkel’s evaluations. Vice explained that if a patient is not doing well on community supervision, “whether it’s noncompliance with the program, a relapse in substance use or an increase in psychiatric symptoms,” CONREP can rehospitalize the patient under section 1610. 14 She left the position in December 2018. 17  In cross-examination, Vice testified she was not aware of defendant’s diagnoses of amnesia and depersonalization disorder, but she did know that defendant did not have memory of the offense itself. Vice believed defendant “has the appropriate amount of insight, given the consideration.” She explained, “If he has a dissociative amnesia disorder, there’s going to be things that he doesn’t remember. When confronted with physical evidence showing otherwise, he’s been very accepting of his culpability in that, and very remorseful.” Dr. Brown At the time of the hearing, Dr. Molly Brown was the acting community program director of Solano County CONREP and would be partially responsible for implementing the outpatient treatment plan for defendant. Brown was not familiar with defendant and did not write his treatment plan (Vice did), but she had implemented outpatient treatment for other patients for whom she had not authored the treatment plan in the past. In cross- examination, she agreed that she “would feel much more comfortable making [her] own independent evaluation and [her] own independent treatment plan, before anything was implemented for the defendant.” The People opposed outpatient status and called two psychologists who had evaluated defendant in 2011. Dr. Nakagawa Dr. Janice Nakagawa was appointed by the court to evaluate defendant for his NGI trial in 2011. At that time, she reviewed records provided by defense counsel, summary reports by the investigators in the case, interviews by detectives, jail mental health records, and psychological testing completed in August and September 2011 by Dr. Winkel, who had been privately 18 retained by defense counsel. She also interviewed defendant once in August 2011 for about two or three hours. When Nakagawa interviewed defendant, he acknowledged using methamphetamines but indicated he had not used it in the days prior to the offense. She testified that defendant reported he had increased his methamphetamine use “in the few months before” the offense. Nakagawa asked him about “whether he was seeing things and had mental health issues even before he increased his methamphetamine use,” and defendant said he saw things in the sky and described “an array of symptoms that conveyed delusional, as well as visual, a lot of visual hallucinations.” Defendant told her “he felt some ‘strange phenomenons,’ . . . even when he was not using drugs.” Nakagawa had never heard a psychological expert say (as Pretkel did) that psychological testing was of marginal value. She believed “psychological testing can play a very critical, if not prominent, role in assessments. I’d liken it to the physician, who may order a battery of testing, and it can be for purposes confirming, ruling out or even pointing to other possible symptoms, that were not clearly noted . . . by the clinician . . . .” In 2011, Nakagawa concluded defendant met the diagnostic criteria for psychotic disorder NOS or delusional disorder NOS. She testified defendant exhibited symptoms 15 months after the offense: “By the time I saw him in August, he continued to evidence delusional thinking, talked about evil spirits, talked as if it were still true for him at that point.” Nakagawa testified defendant did not want to talk about his mental health issues and her impression was that he did not want to present as having serious mental health symptoms. She testified he was “not trying to fake them or trying to exaggerate them, which is critical in this kind of assessment in particular.” 19  Nakagawa testified it was her experience that psychotic disorder NOS and delusional disorder do not just go away over time but added “anything can happen.” She agreed that defendant’s diagnoses of dissociative amnesia and depersonalization disordered based on his lack of memory of the offense would be cause for concern. “In a dissociative state, one is not aware of what’s happening. If the argument is that this individual was experiencing, if any, dissociative amnesia or dissociative episodes at the time of the instant matter, in which that individual acted out in a very unpredictable violent manner, there certainly is cause for concern that that potentially may happen in the future; but who knows?” In cross-examination, Nakagawa testified she had not seen defendant since August 2011 and did not review any of his NSH records regarding his treatment. She has treated patients in state prison hospitals and agreed some were misdiagnosed. She observed that in the prison system, once a person receives an initial diagnosis, it may be repeated in a rote fashion. Asked whether she would expect to see symptoms in an unmedicated psychotic person within two months, Nakagawa responded, “It’s not clear, . . . for example, with a delusional disorder—and that’s what I said in this case . . . —there are individuals who can present as very rational, can complete day-to-day tasks, can respond to directives, can look ‘normal,’ in quotes, but may . . . evidence delusions, and unless that’s actively discussed or probed or the focus of discussion, that may never come—become known even by the clinician.” She testified an unmedicated delusional person could hide it for a year or two years. (She was not asked about longer periods of time.) Presented with the hypothetical of “an unmedicated person, with a psychotic disorder, who does not manifest any dangerous behavior [for] six years,” Nakagawa could not say the person was “likely a low risk.” 20  Nakagawa testified she had no opinion about defendant’s current situation and it would be unethical for her to speculate. She agreed “the literature indicates that drug-induced psychosis can impact people, over a year, up to two years.” She agreed that it was possible that when she met defendant, he could have been suffering drug-induced psychosis 15 months after using methamphetamine. She testified that, in that case, “I would have been wrong” “in my opinion.” Dr. Winkel Dr. Ricardo Winkel, a clinical and forensic psychologist, was hired by the defendant’s attorneys (the public defender’s office) in 2011 to give “a general impression of the defendant’s psychological functioning, particularly at the time of the alleged offense.” After reviewing police records on the investigation, he met with defendant twice (in August and September of 2011) to conduct a clinical diagnostic interview and administer psychological tests.15 Winkel is fluent in Spanish, and he interacted with defendant in Spanish. Winkel testified that at the time of the clinical interview, defendant “was completely psychotic . . . . He was hallucinating. He was delusional. At times, his thinking was disorganized.” He noted that defendant “was not uncomfortable with the fact that he was having delusions.” In contrast to patients who are distracted by their hallucinations, “defendant was not distressed. Another way to put it is he was far too gone to realize at the time 15Winkel gave the following tests: the Beck’s Depression Inventory, 2nd edition; dissociative experience scale; Miller Forensic Assessment of Symptoms; Minnesota Multiphasic Personality Inventory, 2nd edition; Neurobehavioral Cognitive Status Examination; the Personality Assessment Inventory; the Rogers Criminal Responsibility Assessment; Rorschach Inkblot test; and the Trail test. 21 that he was having psychotic symptoms. Winkel’s impression was that defendant “exercised very poor judgment based on . . . a severely distorted perception of reality.” Winkel’s testing showed “some indications of cognitive dysfunction” and “very clearly indicated the presence of a psychotic condition, possibly and most likely, schizophrenia.” Winkel testified the test results were consistent with defendant’s reported mental condition and with clinical observation, and he diagnosed defendant with paranoid schizophrenia. Winkel concluded defendant suffered from a lifelong schizophrenic condition. He testified schizophrenia typically starts in the late teens into the 30s. He stated it was “rather common” for schizophrenic patients to use drugs “partly in an effort to self[-]medicate, to soothe the inner turmoil, to calm down ideas and emotions.” Winkel testified at length about how to differentiate between substance-induced psychosis and schizophrenia: “[T]here are typical markers or signs or symptoms that guide or drive the diagnosis. I relied on them to determine that the defendant was suffering from paranoid schizophrenia, not from any other condition. There are specific markers that would have driven a different diagnosis. There are neurological signs that help differentiate amphetamine-induced psychosis from other conditions, including schizophrenia. “Those are what they call stereotype, involuntary movement, which is rubbing the fingers or rubbing the face; facial twitches; dyskinesia, or gross movement disorders, usually [a]ffects gait. There is an increase in norepinephrine, and that can be tested. There are neuropsychological or cognitive signs under the heading of non[-]age-related cognitive decline. The reason is that that type of drug is favored, or liked, by certain parts of the 22 brain. Mostly the frontal striatal lobes, the parts of the frontal lobes and the limbic system that’s part of the so-called pleasure circuit, and factual in terms of actual measurable behavior that can be seen as decreases in episodic memory, processing speed and mostly [a]ffecting functioning. This is the ability to do things. [¶] That’s very observable, People that are seriously [a]ffected by methamphetamine addiction have more trouble doing the things . . ., more than they would have had if they were not addicted or using large amounts of amphetamines. There was no indication that that was the case. “They’re also purely psychological signs. The presentation initially can be very similar in one condition and the other. Drug induced versus schizophrenia. [¶] In both cases, your likely to see delusions and hallucinations. Persecutory delusions such as was the case with the defendant . . . . You have to have a narrative that someone is after you and intent on causing harm. [¶] In schizophrenia, . . . there’s an additional phenomena that those are bizarre delusions, unorganized, and there was plenty of evidence that the defendant had bizarre delusions dating back to his late childhood, early adolescence, and that’s not a marker of amphetamine- induced psychosis.” Winkel also testified that a symptom unique to amphetamine-induced psychosis is tactile hallucinations such as a feeling of “insects crawling under your skin,” which is often accompanied by “sores all over the body.” Defendant did not complain about such sensations, and Winkel did not observe sores on his skin. He concluded that “all the signs pointed uniformly in the direction of paranoid schizophrenia and none in the direction of a drug- induced condition.” Winkel testified that schizophrenia does not go away and cannot be cured; it can only be treated. He testified that, if defendant had paranoid 23 schizophrenia but he was only treated for drug abuse, then “the underlying psychosis would be left untouched and untreated.” He further testified that “the more restrictive the environment, the less likely you are to see observable signs of schizophrenia,” suggesting this could explain how NSH staff did not observe symptoms in defendant for years. Asked whether Steward behaved appropriately in copying Pretkel’s report, Winkel suggested that Steward’s conduct was of the type that “would compromise [his] license, most likely lead to . . . probation or loss of [his] license, suspension or loss.” He also testified it was a violation of the American Psychological Association’s code of ethics. In cross-examination, Winkel acknowledged that he had not seen defendant since the meetings in 2011 and that he had not reviewed his NSH records. He agreed that defendant’s psychotic delusions during the 2011 interviews were so pervasive that defendant did not recognize they were psychotic. But Winkel did not agree with the suggestion that defendant’s type of severe mental illness would necessarily be difficult to hide from psychological professionals. He noted that there are high functioning people who suffer from chronic schizophrenia who have learned to keep their symptoms private. On the other hand, Winkel did agree that he observed defendant’s psychosis and did not see any indication that defendant “was trying to cover up or hide or dissimulate his symptoms.” He testified that a person is not dangerous just because he is a paranoid schizophrenic and that the “most dangerous situation is an angry paranoid schizophrenic that has delusions of persecution.” Winkel could not say whether a patient who is unmedicated and asymptomatic is likely to be less dangerous. “That would require a thorough evaluation,” and he would not make such a determination without “a 24 thorough psychological evaluation with forensic indicated and validated tests, beyond the smaller tests that are oftentimes used in the state hospital, like the HR-20.” Winkel did not have an opinion about defendant’s current level of dangerousness. He testified that, without assessing defendant, it would be unethical to opine on whether defendant was ready for community supervision. The trial court asked Winkel how old defendant was when he reported his early visions or hallucinations. Winkel recalled that defendant reported he “saw a female figure at the tip of his penis,” among other visions, “in his late adolescence.” Winkel testified defendant “reported what we, as clinicians, would consider bizarre hallucinations, which are different from what you would get with a drug-induced psychosis. Those are more typical of a schizophrenic process.” In addition to hearing the foregoing testimony, the trial court reviewed defendant’s mental health records from NSH and heard counsels’ argument. Defense counsel acknowledged the NSH witnesses were “not as impressive as Dr. Winkel in their testimony, in their report preparation,” but she urged that the medical records nonetheless showed defendant had no symptoms of mental illness or behavioral problems. The prosecutor suggested Dr. Pretkel’s opinion was questionable because he did not believe in psychological testing and argued Steward’s violence risk assessment should be disregarded because “[h]e just plagiarized it.” He argued Tariq’s recommendation was only as reliable as Pretkel’s since he was “really relying on Dr. Pretkel’s report from 2017.” 25 Trial Court Ruling The trial court denied defendant outpatient status. The court stated its reasoning on the record as follows: “I’m going to start with some comments before I tell you what my ruling is. And just recite some of the evidence that I heard. So Dr. Pretkel testified in front of me that if you see symptoms of psychosis persist for over a year following cessation of meth use, that’s more an indication of an actual psychotic disorder. . . . [¶] Dr. Tariq testified that he briefly reviewed the reports of Dr. Nakagawa and Dr. Winkel and Dr. Pittavino from the 1026 process. . . . “Really difficult for the Court to place any reliance on what Dr. Steward testified to. I went through his written report, compared it to Dr. Pretkel’s report from a year-and-a-half or so earlier. He’s got just identical wording. I mean, not even a few words different for some of these paragraphs that start with the phrase: At his interview for this report, referring to Dr. Steward’s interview the time he spent with Mr. Jaimes-Mendoza. [¶] He denied under oath that he copied Dr. Pretkel’s report. So he testified under oath: I didn’t copy his report. I’m sorry, I think that was untrue. That was untrue testimony by Dr. Steward. His whole report is primarily a cut and paste job from Dr. Pretkel’s earlier report. [¶] So the People saying he plagiarized Dr. Pretkel’s report, I agree with that. But more to my point, I think he was untruthful when he testified in front of me. After being sworn to tell the truth. I frankly was just appalled by all of that. “Dr. Nakagawa testified that people with delusional disorders can present as normal. “Dr. Winkel, I think, did the most thorough workup of all of the doctors that testified, past or present, in front of me in this hearing. He did his 26 testing, malingering testing, other tests. He spoke Spanish with the defendant. One of the things he said is he didn’t observe any tactile dyskinesia back in 2011 meth-induced or substance use psychosis that’s often a sign of that. “Something—and this isn’t fundamental to my decision today, but I went through a June 2017 CONREP liaison report, there’s a program that the defendant has to actively participate in. It’s called the ISRU program. It’s designed to help patients understand how their history of alcohol and drug use lead to their crimes or led to their crimes. There’s an oral component, verbal component and a written component, but the workbooks are only in English, so they’ve waived the requirement that Mr. Jaimes- Mendoza participate in a written form of that. “Is that a big issue? Probably not, since he’s programming in the oral part of it, but is that good practice when you’re assessing risk to the community and even your own hospital that has diagnosed him with the prominent risk related to substance use and not some other independent health condition? This is . . . in an era where Hispanic individuals . . ., they’re the most populace racial or ethnic group in our state right now. Even our schools have materials in Spanish, written materials in Spanish. [¶] Now, I’m not saying that all Spanish speaking individuals can’t also read and write English, I’m sure the majority of them can, that’s not what I’m saying, I just found that disturbing, that as of 2017, for Spanish speaking patients at the hospital, at least in that program, there’s no written materials. “What am I to make of this evidence from—so May of 2010 is the defendant’s arrest. August, September—July, I think Dr. Nakagawa interviewed him. So July, August, September of 2011, the forensic interviews 27 for the NGI plea, 15, 16 months, 14, 15 months after, arguably, all meth use has ceased, and yet both Dr. Nakagawa and Dr. Winkel testified that they observed the defendant being floridly psychotic in 2011. “I think all of the testifying doctors, both from Napa and those two doctors said that that’s a real stretch to believe that psychotic symptoms in August and September of 2011 would relate to methamphetamine use, if the meth use stopped in 2010, in May of 2010. “I have no evidence before me that Mr. Jaimes-Mendoza was using methamphetamine or other substances in the jail setting. [¶] So am I to conclude that he just flat out lied to Dr. Winkel, Dr. Nakagawa, and Dr. Pittavino, and that he was such a good liar that he could fake those symptoms to three different doctors, pass the anti-malingering test, complete the Rorschach test in a way that demonstrated psychosis, when in fact he had no psychosis? [¶] And if that’s the Court’s conclusion, what does that say about the current risk assessment? Because if those reports are only briefly reviewed and that possible explanation for the 2011 observations by the doctor is not accounted for, how can I have any confidence that the Napa folks have accurately, reasonably assessed the defendant’s current risk to the community? I really don’t think I can. “And then the flipside of it is, they haven’t been treating him for a psychotic disorder. So if they haven’t been treating him for a psychotic disorder because they don’t believe he has one, but in fact he does have one, as diagnosed by Dr. Nakagawa and Dr. Winkel, and, to some extent, Dr. Pittavino, then, again, the risk hasn’t been accurately or adequately assessed. “So either way, . . . I don’t think the current risk assessment is accurate. And frankly, I just don’t believe the testimony I heard from the Napa doctors. I found it shocking that if that’s your diagnosis, 28 methamphetamine-induced disorder, you’re telling the Court the defendant was never legally insane, wasn’t legally insane at the time of the crime, that’s the l[i]nchpin of your argument for release, and you’ve only briefly reviewed those diagnostic reports from 2011. I just . . . can’t come to closure with that. “So I appreciate that he hasn’t received psychotropic or antipsychotic medications in the jail, but I just am not satisfied that the burden of proof has been met, the preponderance that it is, not beyond a reasonable doubt. There’s just some really disturbing things here that I just can’t reconcile without denying the petition. So that’s the Court’s ruling.” DISCUSSION Defendant contends the trial court abused its discretion in denying him outpatient status because there was no evidence he would be dangerous as a result of a mental disorder if he were conditionally released for supervised treatment. A. Standard of Review We review the trial court’s denial of outpatient status for abuse of discretion. (Cross, supra, 127 Cal.App.4th at p. 73.) “[I]t is not sufficient to show facts affording an opportunity for a difference of opinion” (ibid.), and a trial court has the discretion to “disregard [doctors’] recommendations for nonarbitrary reasons” (Sword, supra, 29 Cal.App.4th at p. 629). The court’s role “is not to rubber-stamp the recommendations of the [state hospital] doctors and the community release program staff experts,” (id. at p. 628); rather, the court is “entitled to consider the validity of the opinions presented to it in determining whether defendant met his burden of proving that he [is no longer] dangerous” (id. at p. 630). Still, the abuse of discretion standard is deferential, not empty. (People v. Giordano (2007) 42 Cal.4th 644 , 663.) “A court can abuse its discretion by 29 applying an erroneous legal standard or by making a ruling unsupported by substantial evidence.” (People v. Armstrong (2019) 6 Cal.5th 735 , 756.) B. Analysis Here, as defendant observes, the trial court “share[d] its thought process in great detail” in stating its ruling. In short, the court was not persuaded by defendant’s witnesses that the appropriate diagnosis was methamphetamine-induced psychosis. The trial court appears to have found Dr. Winkel, who diagnosed defendant in 2011 with paranoid schizophrenia, to be the most impressive and reliable witness. Indeed, defendant recognizes, “the court clearly found [Winkel] to be the most convincing expert.” The trial court noted that Winkel did “the most thorough workup of all the doctors that testified,” that he spoke Spanish with defendant, and that he did not observe any tactile dyskinesia in defendant, which would have indicated methamphetamine-induced psychosis. These observations are supported by the record. And the court offered reasons for questioning the NSH doctors’ current diagnosis of methamphetamine-induced psychosis. The court discounted Dr. Steward’s testimony because it appeared that he copied Dr. Pretkel’s violence risk assessment and then lied about having done so at the hearing. Appellate counsel does not take issue with the court’s credibility finding in this regard. The court noted that Dr. Tariq only “briefly reviewed” the 2011 NGI evaluation, indicating the court questioned Tariq’s conclusions because the doctor failed to take Winkel’s evaluation fully into account in reaching his own diagnosis. As for Dr. Pretkel’s testimony, the court correctly noted that Pretkel testified psychotic symptoms from methamphetamine-induced psychosis last no more than a year. This made it difficult for him to explain how Winkel observed psychotic symptoms in defendant in August and 30 September 2011 when defendant had been in custody since May 2010. Pretkel speculated that defendant used drugs in jail as this was the only explanation he could come up with for the psychotic symptoms lasting so long. But the court correctly noted no evidence was presented that defendant used drugs in jail. Thus, the trial court gave reasons for crediting Winkel’s diagnosis from 2011 and for questioning the different current diagnosis of the NSH doctors, and at least some of those reasons find support in the record.16 The issue before the trial court, however, was not solely defendant’s diagnosis but also whether supervised outpatient treatment would benefit defendant “ ‘and cause no undue hazard to the community.’ ” (Sword, supra, 29 Cal.App.4th at p. 620; see § 1603, subd. (a)(1) [the court shall consider whether the director of the state hospital advises “the defendant would no longer be a danger to the health and safety of others, including himself or 16 Defendant points out that not every statement in the trial court’s ruling is supported by the record. The trial court stated, “all of the testifying doctors, both from Napa and those two doctors said that that’s a real stretch to believe that psychotic symptoms in August and September of 2011 would relate to methamphetamine use, if the meth use stopped in 2010, in May of 2010.” (Italics added.) The Attorney General concedes the record only partially supports this finding. In fact, only two NSH doctors testified that drug-induced psychosis rarely or never causes psychotic symptoms that last over a year, and the remaining witnesses did not so testify. Dr. Nakagawa, to the contrary, testified drug-induced psychosis can last “over a year, up to two years.” Dr. Winkel was not asked how long drug-induced psychotic symptoms may continue after last drug use. And it does not appear Dr. Steward testified on this question either. The trial court also stated the 2011 NGI evaluations were “only briefly reviewed” by the NSH doctors. The record supports this observation as to Dr. Tariq, but Dr. Pretkel testified he read Winkel’s report “really thoroughly.” Defendant argues, “it appears the trial court improperly discredited Dr. Pretkel’s testimony by mistakenly conflating his diligent efforts with the less meticulous efforts of Dr. Tariq.” 31 herself, while under supervision and treatment in the community, and will benefit from that status”].) “One who had been found to be not guilty by reason of insanity ‘may be held as long as he is both mentally ill and dangerous, but no longer.’ ” (McDonough, supra, 196 Cal.App.4th at p. 1493, quoting Foucha v. Louisiana (1992) 504 U.S. 71 , 77, italics added.) In McDonough, a trial court denied an appellant outpatient status on the ground she had not identified an appropriate program of supervision and treatment. (Id. at p. 1492.) The Court of Appeal found the trial court overstepped its authority explaining, “absent a determination the committed person is mentally ill and dangerous, flaws found in the proposed outpatient treatment plan . . ., do not justify denying outpatient status.” (Id. at p. 1493.) The McDonough court reversed the lower court’s denial order “because the trial court did not find appellant is currently mentally ill and dangerous . . . .” (Ibid.) Similarly, in the present case, the trial court did not appear to find that defendant would be a danger while under supervision in the community; it stated only that it could not accept NSH doctors’ current diagnosis.17 17 The Attorney General argues the court “implicitly found that as of January 2019 appellant was still mentally ill or dangerous.” (Italics added.) Clearly, the trial court could not deny outpatient status based solely on defendant’s current mental illness if defendant was not also dangerous. (See Cross, supra, 127 Cal.App.4th at p. 74 [“the persistence of [defendant]’s mental illness was not alone sufficient to deny him outpatient status if he was no longer dangerous”].) Assuming the Attorney General meant to say the trial court implicitly found defendant was currently mentally ill and dangerous, we are not convinced. Rather, we agree with defendant, who posits, “the absence of even an implied finding in this regard—when the trial court offered such a detailed oral statement of reasons for refusing [to] place appellant on outpatient status—is a telling omission in this case given the lack of any expert opinion from either side’s witnesses suggesting appellant 32 Because the trial court denied outpatient status without making a finding on dangerousness, we reverse. Here, there was strong evidence defendant would not be dangerous in supervised outpatient treatment. It was not disputed that defendant never had an incident of aggression or concerning behavior since he entered NSH in May 2012. Nor was it disputed that defendant was on no medication yet exhibited no symptoms of mental illness during his commitment. Dr. Tariq testified defendant was cooperative and was “willing to work with CONREP in the community and willing to do whatever they require him to do in the community.” Vice testified defendant “met all of the discharge criteria, that both his hospital team has requested and the CONREP has requested. He’s been asymptomatic for his entire length of his hospital stay. He’s not on medication, although he has agreed to medication if it’s clinically indicated. He has had no behavioral issues since his time in the state hospital. He’s been considered a model patient, by most standards.” Dr. Pretkel testified about a recent incident in which defendant was assaulted by another patient and defendant reacted appropriately and was cooperative with staff.18 And although Dr. Winkel could not opine on defendant’s current level of dangerousness (having not assessed him since 2011), he did testify that a person is not dangerous just because he is a paranoid schizophrenic. Rather, was dangerous. Appellant had the burden of proving that he would not be dangerous in a supervised outpatient setting, yet in denying the conditional release petition the trial court made no mention of dangerousness and did not make a single comment that indicated appellant was in fact dangerous.” 18Dr. Steward testified defendant was “involved,” “motivated,” and “responsible.” Of course, the trial court discounted Steward’s testimony because of his apparent ethical lapse in copying Dr. Pretkel’s report. Nonetheless, we note Steward’s observations are consistent with all the witnesses who have interacted with defendant since his commitment. 33 a person is most dangerous if “angry” with “delusions of persecution.” The record does not reflect that defendant displayed anger or delusions of persecution at the time of the 2019 hearing. We reverse and remand for the trial court to determine whether defendant has established by a preponderance of the evidence that he is either no longer mentally ill or not dangerous under supervised outpatient treatment. On remand, the court shall consider the evidence already submitted and any other relevant evidence offered by the parties. (See McDonough, supra, 196 Cal.App.4th at p. 1493; Cross, supra, 127 Cal.App.4th at p. 75.) DISPOSITION The order denying outpatient status is reversed. The matter is remanded to the trial court for further proceedings consistent with this opinion. 34  _________________________ Miller, J. WE CONCUR: _________________________ Kline, P.J. _________________________ Stewart, J. A156715, People v. Jaimes-Mendoza 35

2020-11-30 21:02:39.341213+00

https://www.courts.ca.gov/opinions/nonpub/G057358.PDF

Filed 11/30/20 P. v. Chapin CA4/3 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 THREE THE PEOPLE, Plaintiff and Respondent, G057358 v. (Super. Ct. No. 16HF0810) EDWARD DWIGHT CHAPIN, OPINION Defendant and Appellant. Appeal from a judgment of the Superior Court of Orange County, Michael F. Murray, Judge. Affirmed in part and remanded with directions. Johanna Pirko, under appointment by the Court of Appeal, for Defendant and Appellant. Xavier Becerra, Attorney General, Lance E. Winters, Chief Assistant Attorney General, Susan Sullivan Pithey, Senior Assistant Attorney General, Noah P. Hill and Stephanie C. Santoro, Deputy Attorneys General, for Plaintiff and Respondent.  INTRODUCTION Edward Chapin appeals from the imposition of two assessments imposed in 2016 in connection with his guilty plea to a receiving stolen property charge. The first is the $300 mandatory state restitution fine, which he contends was not mentioned when he was sentenced to jail in 2019 after he violated his probation. The second is the $70 per count conviction fee, which he contends should not have been imposed without a hearing on his ability to pay. In making this second contention, he relies on People v. Dueñas (2019) 30 Cal.App.5th 1157 (Dueñas), a controversial case holding that an indigent woman was entitled to a hearing on her ability to pay multiple and serial impositions of fines for not paying fines. We affirm both assessments. Chapin agreed to pay the $300 restitution fine when he pleaded guilty in 2016. It was not necessary for the court to impose this fine again in 2019, when he went to jail. As for not getting a hearing on his ability to pay $140 in conviction fees, nothing in the record remotely suggests that Chapin’s circumstances resemble those of the appellant in Dueñas. He agreed in 2016 to pay the fees as part of his plea bargain, and nothing indicates he was being punished, as was the Dueñas appellant, for being poor. He was not entitled to a hearing in 2019 on his ability to pay fees he had already agreed to pay. However, because the abstract of judgment does not reflect the conviction fees, we return the matter to the trial court to correct the abstract to add any fees or fines that were inadvertently omitted. FACTS In June 2016, Chapin was charged with second degree burglary, felony receiving stolen property, and misdemeanor vandalism. He was also charged with four prior prison conviction enhancements. Representing himself, he entered into a plea bargain whereby the burglary count and the priors were dismissed and he pled guilty to receiving stolen property and vandalism. As part of the plea bargain, he agreed the court 2 could order him to pay a mandatory state restitution fine of between $300 and $10,000 and could order him to pay a mandatory fee of $70 for each count convicted. He also agreed to a separate, suspended, restitution fine of $300, payable only if he violated the terms of his probation. Payment of a restitution fine of $300 and the $70 fee for each conviction was a condition of his felony probation, as was the suspended probation violation restitution fine. Chapin’s sentence was suspended, and he was placed on probation for three years and ordered to serve 180 days in jail, with credit for 60 days. 1 The plea was entered into the record on July 15, 2016. In October 2016, Chapin’s probation was revoked because he failed a drug test and failed to report. A warrant was issued for his arrest. At a hearing in August 2017, Chapin admitted that he had violated his probation, and he was ordered to serve 90 days in jail. His probation was reinstated. In December 2017 and February 2018, Chapin served more time for admitted probation violations. His probation was reinstated after he served his sentences. In May 2018, the court issued another arrest warrant for a probation violation. This time, Chapin disputed the violation. He again represented himself. After several continuances, a hearing took place on January 3, 2019. Chapin’s main concern at the January hearing was getting into a drug rehabilitation program. He admitted he had violated his probation. The court continued the hearing to allow him to find an acceptable program. If he did not, the court was prepared to impose a two-year sentence. The court also issued a stipulated victim restitution order and abstract of judgment for $2,158 plus interest from date of loss. 1 At the July 15 hearing, Chapin asked the court what the mandatory fines were. The court responded that “[t]here’s the $300 state restitution fine, $70 per count conviction fee.” Chapin asked ,”Any way I can get that waived with concurrent time?” The court: “No.” Chapin: “All that matters, okay.” The court specifically mentioned the $300 state restitution fine and the $70 per count conviction fee when reciting the other terms of the plea bargain. 3  The next hearing took place on February 5, 2019. Chapin had not found a rehabilitation program, so the court sentenced him to two years under Penal Code section 1170, subdivision (h). The court also imposed “any previously stayed fines or fees. They’ll be due through probation if not already paid.” The abstract of judgment, dated February 8, 2019, includes the $300 restitution fine. It does not include an additional parole violation restitution fine or the $70 per count court fee. DISCUSSION Chapin has identified two issues on appeal. First, he claims the $300 mandatory restitution fee must be stricken because the court did not specifically mention it at the February 5 hearing. He does not argue that he does not have to pay this fine. Instead, he asserts that the matter must be returned to the trial court to decide whether to impose it. Second, he says his due process rights were violated because the court did not hold a hearing about his ability to pay before imposing the $70 per count court fee. He also notes, correctly, that the abstract of judgment does not include these fees. As part of his 2016 plea bargain, Chapin agreed to pay the $300 mandatory restitution fine and the $70 per count court fee. Payment of these assessments was also a term and condition of receiving probation. The plea bargain became an order of the court on July 15, 2016. The court granted Chapin probation on that basis. Nothing in the record indicates that payment of the fine and fee was suspended or stayed. So the trial court had already decided to impose it and did not need to revisit this decision. The case upon which Chapin relies, People v. Zachery (2007) 147 Cal.App.4th 380 (Zachery), does not support his argument. In Zachery, the clerk added items to the sentencing minute order – including fines – that did not correspond to the court’s pronouncements from the bench in the defendant’s presence. (Id. at pp. 387-388.) The case was sent back so that the trial court could decide whether to impose restitution fines. (Id. at p. 394.) 4  In this case, however, the court had already imposed the fines on Chapin in his presence during the July 2016 hearing on Chapin’s plea bargain. Chapin was obviously aware of them because he asked the court to waive them. All that happened in February 2019 was that the court lifted any previous stays on payment of the fines and fees. But the mandatory state restitution fine was not stayed. The only fine that was arguably stayed was the $300 probation violation restitution fine, which was suspended until Chapin violated his probation, as he did several times. Chapin bases his second argument on Dueñas. He asserts the court should not have imposed the per count $40 court operations fee and the $30 facilities fee on him 2 back in 2016 without a hearing on his ability to pay. He wants us to remand the case to the trial court for a hearing on his ability to pay $140. Inasmuch as Chapin stipulated in January 2019 to the payment of $2,158 plus interest at 10 percent from June 2016 in victim restitution and has not challenged the amount of the $300 mandatory state restitution fine, we think it is safe to conclude without another trial court hearing that Chapin has the ability to pay $140. Comparing himself to the appellant in Dueñas – an indigent, disabled woman who was repeatedly fined for being unable to pay a prior fine – borders on the frivolous. Chapin was not assessed court fees because he could not pay prior court fees. He was assessed as part of a plea bargain whereby he was allowed to substitute probation for a jail sentence for committing a felony. Nothing in the record suggests he could not pay these fees in 2016, 2019 or now. 2 Chapin was allowed to file a supplemental opening brief on the Dueñas issue, even though the case came down in January 2019, a month before his sentencing hearing. He filed a reply brief and a supplemental reply brief, after the Attorney General filed two respondent’s briefs, one for each issue. Both reply briefs, however, dealt with Dueñas; neither one addressed the first issue. 5  DISPOSITION The matter is remanded to the trial court to amend the abstract of judgment to incorporate any fees or fines that were inadvertently omitted, if necessary. In all other respects, the judgment is affirmed. BEDSWORTH, ACTING P. J. WE CONCUR: THOMPSON, J. GOETHALS, J. 6

2020-11-30 21:02:39.658446+00

https://www.courts.ca.gov/opinions/nonpub/G058563.PDF

Filed 11/30/20 P. v. Burnett CA4/3 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 THREE THE PEOPLE, Plaintiff and Respondent, G058563 v. (Super. Ct. No. C-94692) ALLEN DEAN BURNETT II, OPINION Defendant and Appellant. Appeal from a postjudgment order of the Superior Court of Orange County, Cheri T. Pham, Judge. Reversed. Richard Power, under appointment by the Court of Appeal, for Defendant and Appellant. No appearance for Plaintiff and Respondent.  Allen Dean Burnett II, appeals from a postjudgment order after the trial 1 court denied his petition pursuant to Penal Code section 1170.95, which the Legislature enacted in Senate Bill No. 1437 (S.B. 1437). Burnett argues the trial court erred by concluding S.B. 1437 was unconstitutional because it impermissibly amended two voter initiatives. We agree and reverse the order. FACTS In 1994, a jury convicted Burnett of first degree murder (§ 187, subd. (a)), second degree robbery (§§ 211), kidnapping (§ 207, subd (a)), kidnapping for robbery (§ 209, subd. (b)), and several special circumstances. The trial court sentenced Burnett to life without possibility of parole. We affirmed the judgment. (People v. Burnett (Sept. 17, 1996, G016443) [nonpub. opn.].) In 2019, Burnett filed a section 1170.95 petition to vacate his murder conviction and be resentenced. The Orange County District Attorney filed an opposition and Burnett filed a reply brief. The trial court denied the petition, concluding S.B. 1437 (Stats. 2018, ch. 1015, §§ 2-4), was unconstitutional because it impermissibly amended Propositions 7 and 115. DISCUSSION “Legislation unconstitutionally amends an initiative statute if it changes that statute ‘“‘by adding or taking from it some particular provision.’”’ [Citations.] Legislation may address the same subject matter as an initiative, and may even augment the provisions of an initiative, without amending it. The key to our analysis is determining ‘“whether [the legislation] prohibits what the initiative authorizes, or authorizes what the initiative prohibits.”’ [Citation.]” (People v. Solis (2020) 46 Cal.App.5th 762 , 769 (Solis).) Although our review is de novo, we presume the Legislature acted within its authority. (Id. at p. 771.) 1 All further statutory references are to the Penal Code, unless otherwise indicated. 2  An actual killer may be convicted of murder. (People v. Cruz (2020) 46 Cal.App.5th 740 , 751 (Cruz).) Additionally, an accomplice of the actual killer can be convicted of murder pursuant to vicarious liability theories, including the natural and probable consequences doctrine and the felony-murder rule. (Id. at pp. 751-752.) Under both theories, the accomplice’s intent to kill is irrelevant. (Id. at p. 752.) In 1978, the electorate adopted Proposition 7 (Prop. 7, as approved by voters, Gen. Elec. (Nov. 7, 1978)), which increased the penalties for first and second degree murder and strengthened California’s death penalty law. (Solis, supra, 46 Cal.App.5th at pp. 772-773.) Twelve years later, in 1990, the electorate adopted Proposition 115 (Prop. 115, as approved by voters, Primary Elec. (June 5, 1990)), which as relevant here, added five felonies to the list of felonies for the felony-murder rule and revised the scope of capital liability. (Solis, supra, 46 Cal.App.5th at p. 773.) In 2018, S.B. 1437 amended the natural and probable consequences doctrine and the felony-murder rule to ensure “‘[a] person’s culpability for murder [is] premised upon that person’s own actions and subjective mens rea.’ [Citation.]” (Cruz, supra, 46 Cal.App.5th at p. 752.) S.B. 1437 amended sections 188 and 189. Specifically, section 188, subdivision (a)(3), now states that “to be convicted of murder, a principal in a crime shall act with malice aforethought[]” and “[m]alice shall not be imputed to a person based solely on his or her participation in a crime.” Section 189 now provides that a person can only be found guilty of murder if that person (1) was the actual killer, or (2) aided, abetted, or otherwise assisted the actual killer and had the intent to kill, or (3) was a major participant in an underlying felony and acted with reckless indifference to human life. (§ 189, subd. (e).) Additionally, S.B. 1437 added section 1170.95, which allows defendants previously convicted of murder under a natural and probable consequences or felony murder theory to petition the trial court to vacate their murder convictions. Section 1170.95 also allows for resentencing if defendants could not be convicted of murder now 3 based on the amendments to sections 188 and 189. The court reviews the petition and if it determines the petitioner made a prima facie showing he or she is entitled to relief, the court must issue an order to show cause. (§ 1170.95, subd. (c).) The court next holds a hearing to determine whether to vacate the petitioner’s murder conviction and resentence the petitioner. (§ 1170.95, subd. (d)(1).) If the court determines the petitioner is entitled to relief, his or her murder conviction “shall be redesignated as the target offense or underlying felony for resentencing purposes.” (§ 1170.95, subd. (e).) Burnett contends S.B. 1437 did not amend Propositions 7 and 115. All published opinions addressing this issue, from appellate courts throughout the state, have 2 concluded that S.B. 1437 did not unconstitutionally amend either initiative. This long list of cases includes two published opinions from this court (Solis, supra, 46 Cal.App.5th at p. 769; Cruz, supra, 46 Cal.App.5th at p. 747). We find the reasoning in these cases persuasive and follow them here. In light of the district attorney’s decision not to file a respondent’s brief, and the growing body of comprehensive case authority analyzing the arguments raised, we need not belabor the contentions asserted in this appeal. Consistent with the decisions of the preceding cases, we conclude S.B. 1437 did not unconstitutionally amend Proposition 7 or Proposition 115. (Solis, supra, 46 Cal.App.5th at pp. 779, 781; Cruz, supra, 46 Cal.App.5th at pp. 747, 754, 757-760.) Thus, the trial court erred by concluding S.B. 1437 was unconstitutional and denying the petition. 2 Published opinions include People v. Lippert (2020) 53 Cal.App.5th 304 , People v. Lopez (2020) 51 Cal.App.5th 589 , People v. Alaybue (2020) 51 Cal.App.5th 207 , People v. Johns (2020) 50 Cal.App.5th 46 , and People v. Bucio (2020) 48 Cal.App.5th 300 . Previously, Division One of this court in People v. Lamoureux (2019) 42 Cal.App.5th 241 , review denied February 19, 2020, S259835, and People v. Superior Court (Gooden) (2019) 42 Cal.App.5th 270 , review denied February 19, 2020, S259700, concluded S.B. 1437 did not invalidly amend Proposition 7 and/or Proposition 115. 4  DISPOSITION The postjudgment order is reversed and the matter is remanded for further proceedings on the merits of Burnett’s petition. O’LEARY, P. J. WE CONCUR: BEDSWORTH, J. THOMPSON, J. 5

2020-11-30 21:03:08.319058+00

http://courts.delaware.gov/Opinions/Download.aspx?id=313610

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE PIVOTAL PAYMENTS DIRECT CORP., ) ) Plaintiff/Counterclaim- ) Defendant, ) ) C.A. No. N15C-02-059 EMD CCLD v. ) ) PLANET PAYMENT, INC., ) ) Defendant/Counterclaim-Plaintiff, ) Submitted: September 23, 2020 Decided: November 30, 2020 Upon Consideration of Defendant’s Motion for Partial Summary Judgment GRANTED in part and DENIED in part P. Clarkson Collins, Jr, Esquire, Patricia A. Winston, Esquire, Morris James, Wilmington, Delaware, Richard L. Crisona, Esquire, Alexander E. Ehrlich, Esquire, Allegaert Berger & Vogel, New York, New York. Attorneys for the Defendant/Counterclaim-Plaintiff. James S. Green, Sr., Esquire, Seitz, Van Ogtrop & Green, Wilmington, Delaware, Derek W. Edwards, Esquire, Todd R. Hambridge, Esquire, Waller Lansden Dortch & Davis, Nashville, Tennessee. Attorneys for the Plaintiff/Counterclaim-Defendant. DAVIS, J. I. INTRODUCTION This is a civil action assigned to the Complex Commercial Litigation Division of the Court. This action involves the breach of contract and fraudulent inducement claims brought by Plaintiff Pivotal Payments Direct Corp. (“Pivotal”) against Defendant Planet Payment, Inc. (“Planet”). Pivotal alleges that Planet fraudulently induced Pivotal into entering the Multi-Currency Processing Agreement (“MCPA”) and, then, subsequently breached the MCPA by failing to perform. Pivotal claims that Planet knew at all times that it could not provide the services required under the MCPA. Pivotal filed its Complaint against Planet on February 6, 2015.1 Planet filed a motion to dismiss on March 17, 2015.2 Pivotal filed an Amended Complaint on April 14, 2015.3 Planet filed a motion to dismiss the Amended Complaint on May 5, 2015.4 The Court denied the motion to dismiss on December 29, 2015.5 Planet filed an answer and counterclaim against Plaintiff/Counterclaim Defendant Pivotal on February 3, 2016.6 Pivotal answered Planet’s counterclaim on February 23, 2016.7 Planet moved (the “Motion”) for partial summary judgment on Counts 1-24 and Counts 26-27 on March 6, 2020.8 Pivotal opposed the Motion. The Court held a hearing on the Motion on September 23, 2020.9 At the conclusion of the hearing, the Court took the matter under advisement. For the reasons set forth below, the Court GRANTS the Motion as to Counts 1-24 and DENIES the Motion as to Counts 26-27. II. BACKGROUND Pivotal is a Canadian company offering credit and debit card payment processing services to merchants throughout Canada.10 Planet is a Delaware corporation with its principal place of 1 D.I. No. 1 2 D.I. No. 14 3 D.I. No. 20. 4 D.I. No 23. 5 Pivotal Payments Direct Corp. v. Planet Payment, Inc., 2015 WL 11120934 , at *10 (Del. Super. Dec. 29, 2015). 6 D.I. No. 49. 7 D.I. No. 51. 8 D.I. No. 134. 9 D.I. No. 194. 10 Decl. of Philip Fayer in Supp. of Pl.’s Answer. Br. (hereinafter “Fayer Decl.”) ¶ 3. 2 business located in Long Beach, New York.11 Planet provides international payment processing and multi-currency processing services to merchant service providers, such as Pivotal.12 A. THE PARTIES NEGOTIATE AND ENTER INTO THE MCPA. In September 2009, Tangarine Payment Solutions, Corp., Pivotal’s predecessor, and Planet entered into negotiations regarding credit card processing services.13 Planet provided a “Global Multi-Currency Processing Capabilities” document to Pivotal on or about August 23, 2009.14 Pivotal alleges that Planet made material misrepresentations about Planet’s available services and capabilities in this document.15 On or around April 7, 2010, Pivotal and Planet entered the MCPA.16 The MCPA is a multi-part agreement with several separate schedules and exhibits incorporated by reference. The MCPA contains a choice of law provision: (a) Governing Law. This Agreement shall be construed in accordance with the laws of the State of New York, without regards to the conflict of laws provisions thereof. Each party hereby submits to the exclusive jurisdiction of and consents to suit in the courts, Federal and State, located in the State of Delaware.17 Under Schedule 3 ¶ 8(a) of the MCPA, the parties agreed that New York law governed the agreement and that Delaware courts would have exclusive jurisdiction. Planet’s executives involved with business development and marketing worked out of Planet’s Long Beach, New York office.18 11 Answer to Amend. Compl. and Countercl. (hereinafter “Answer”) ¶ 7. 12 Id. 13 Id. ¶ 9. 14 Id. ¶ 12. 15 Amend. Compl. ¶ 12. 16 Ex. A to Transmittal Affidavit of Meghan A. Adams, Esquire, Multi-Currency Processing Agreement (hereafter “MCPA”). 17 MCPA Schedule 3 ¶ 8(a). 18 See e.g. Decl. of Patricia A. Winston, Esq. in Supp. of Def.-Countercl. Pl. Planet Payment Inc’s Op. Br. in Supp. of its Mot. for Partial Summ. J. (hereinafter “Def.”) Def.’s Ex. 62 39:6-18 (Planet’s headquarters “where marketing was handled . . . where general counsel existed” was located in Long Beach, New York); Def.’s Ex. 63 30:8-14 3  Pivotal alleges that during negotiations Planet held out that it was able to provide specific services and products, including three-tier billing, dynamic currency conversion, accounting and reporting services, effective risk monitoring, reliable point-of-sale terminal hardware, and debit transaction services.19 Pivotal alleges that Planet could not deliver the promised services and products.20 Pivotal’s CEO, Philip Fayer, testified that by June 2010, Pivotal concluded that they “were lied to, misrepresented, recklessly and selfishly induced into entering an agreement where [Planet] couldn’t fulfil on their end of the bargain.”21 Pivotal learned between October 2010 and August 2012 that “Planet’s capabilities were not as represented” with respect to various aspects of its promised services.22 Pivotal claims that it “reasonably relied” on Planet’s assurances that problems with the services would be fixed.23 Planet denies the allegations or admits only that there were occasional service interruptions.24 Despite Pivotal’s issues with Planet’s services, the relationship proved to be profitable.25 Pivotal engaged The Strawhecker Group (“TSG”) to calculate damage incurred by deficiencies with Planet’s services.26 TSG produced a report (the “TSG Report”) summarizing net profit loss caused by Planet’s deficient services.27 (Planet’s executives that supervised business development operated from Long Island, New York); Def.’s Ex. 68 45:4-7 (Planet’s general counsel Graham Arad “who . . . would have been involved, swapping e-mails and things, as the contract was being worked on” operated out of Long Beach, New York). 19 Amend. Compl. ¶ 3. 20 Id. 21 Def. Ex. 4 268:22-24. 22 Def. Ex. 8, 4-8 (Interrogatory Responses). 23 Amend. Compl. ¶¶ 4, 16-19, 30, 34, 49, 58, 65, 78, 92, 102, 110, 119, 131, 137, 160. 24 Answer. ¶¶ 4, 16-19, 30, 34, 49, 58, 65, 78, 92, 102, 110, 119, 131, 137, 160. 25 See Def. Ex. 9 79-80 (Interrogatory Resp. 15 detailing profits Pivotal recorded onboarding merchants with Planet’s services). 26 Def. Ex. 51 3. 27 See e.g. Def. Ex. 51 6, 8, 32. 4  B. PROCEDURAL BACKGROUND Pivotal commenced this action on February 6, 2015. Planet filed a motion to dismiss on March 17, 2015. On April 14, 2015, Pivotal filed its Amended Complaint seeking recovery for (i) fraudulent inducement (Counts 1-24) and (ii) breach of the MCPA (Counts 25-27). On May 5, 2015, Planet filed a motion to dismiss Counts 1-24 and Counts 26 and 27 of Pivotal’s Amended Complaint. The Court ruled on several issues and denied Pivotal’s motion to dismiss.28 First, the Court ruled Delaware’s three-year statute of limitations for all counts applied.29 Second, the Court found that there were questions of fact as to when Counts 26 and 27 accrued.30 Finally, the Court held that New York substantive law applied to Pivotal’s fraudulent inducement claim.31 Planet filed the Motion on March 6, 2020. The Court held a hearing on the Motion on September 23, 2020. The Motion seeks summary judgment on Counts 1-24 (the “Fraudulent Inducement Claims”) and Counts 26 and 27 (The “Breach of Contract Claims”) of Pivotal’s Amended Complaint. III. PARTIES’ CONTENTIONS A. PLANET’S CONTENTIONS. Planet moves for summary judgment on the Fraudulent Inducement Claims and the Breach of Contract Claims. Planet contends that Pivotal’s claims are barred by the statute of limitations. Planet argues that any tolling theory could have applied only until Pivotal had actual or inquiry notice of their claims regardless of any alleged post-notice conduct by Planet. In 28 See Pivotal Payments Direct Corp., 2015 WL 11120934 , at *3-*5, *10 (Del. Super. Dec. 29, 2015). 29 Id. at *3. 30 Id. at *4. 31 Id. at *5. 5 addition, Planet claims that even if the Fraudulent Inducement Claims were timely, Pivotal has not suffered any damages. Planet relies on New York law that holds that only actual losses are recoverable as damages. Planet contends that the factual record shows that Pivotal earned a profit from its relationship with Planet under the MCPA. Pivotal, therefore, argues that Pivotal is not entitled to any damages as it did not suffer any losses. B. PIVOTAL’S CONTENTIONS Pivotal opposes the Motion. Pivotal states that its claims are timely under two tolling theories: fraudulent concealment and equitable tolling. Pivotal also claims that Planet is barred from asserting the statute of limitations under the doctrines of quasi-estoppel and equitable estoppel. Pivotal contends that Planet’s post-contracting “assurances” that it could provide agreed-upon services prevented Pivotal from investigating its fraudulent inducement claims. According to Pivotal, Planet’s assurances tolled the statute of limitations as to the fraudulent inducement claims. Additionally, Pivotal argues that its contract claims are timely because the claims are based on multiple breaches within three years the filing the action. Pivotal maintains that Delaware substantive law applies to the Fraudulent Inducement Claims. Pivotal contends that Delaware law applies to these claims because Delaware has the most significant relationship to the case. According to Pivotal, Delaware recognizes the profit Pivotal lost because of Planet’s alleged fraudulent inducement as damages. Therefore, Planet argues that it may recover on the Fraudulent Inducement Claims. IV. STANDARD OF REVIEW The standard of review on a motion for summary judgment is well-settled. The Court’s principal function when considering a motion for summary judgment is to examine the record to 6 determine whether genuine issues of material fact exist, “but not to decide such issues.”32 Summary judgment will be granted if, after viewing the record in a light most favorable to a nonmoving party, no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law.33 If, however, the record reveals that material facts are in dispute, or if the factual record has not been developed thoroughly enough to allow the Court to apply the law to the factual record, then summary judgment will not be granted.34 The moving party bears the initial burden of demonstrating that the undisputed facts support his claims or defenses.35 If the motion is properly supported, then the burden shifts to the non-moving party to demonstrate that there are material issues of fact for the resolution by the ultimate fact-finder.36 V. DISCUSSION A. THE COURT WILL GRANT SUMMARY JUDGMENT ON THE FRAUDULENT INDUCEMENT CLAIMS 1. No theory bars Planet from asserting the Statute of Limitations. Pivotal argues that the theories of quasi-estoppel and equitable estoppel bar Planet from asserting the statute of limitations. The Court finds, that on this record, the theories of quasi- estoppel and equitable estoppel do not bar Planet from asserting applicable statutes of limitations. 32 Merrill v. Crothall-American Inc., 606 A.2d 96 , 99-100 (Del. 1992) (internal citations omitted); Oliver B. Cannon& Sons, Inc. v. Dorr-Oliver, Inc., 312 A.2d 322 , 325 (Del. Super. 1973). 33 Id. 34 Ebersole v. Lowengrub, 180 A.2d 467 , 470 (Del. 1962); see also Cook v. City of Harrington, 1990 WL 35244 at *3 (Del. Super. Feb. 22, 1990) (citing Ebersole, 180 A.2d at 467 ) (“Summary judgment will not be granted under any circumstances when the record indicates . . . that it is desirable to inquire more thoroughly into the facts in order to clarify the application of law to the circumstances.”). 35 Moore v. Sizemore, 405 A.2d 679 , 680 (Del. 1970) (citing Ebersole, 180 A.2d at 470 ). 36 See Brzoska v. Olsen, 668 A.2d 1355 , 1364 (Del. 1995). 7  a. Quasi-estoppel Quasi-estoppel “precludes a party from asserting, to another’s disadvantage, a right inconsistent with a position it has previously taken.”37 “Quasi-estoppel applies when it would be unconscionable to allow a person to maintain a position inconsistent with one to which he acquiesced, or from which he accepted a benefit.”38 “A party does not need to show reliance for quasi-estoppel to apply.”39 The party to be estopped needs only to “[gain] some advantage for himself or [produce] some disadvantage to another.”40 The Court finds that quasi-estoppel does not apply because Planet did not take inconsistent positions. Pivotal claims that Planet first qualified any issues as “Minor Problems that Planet was fixing.”41 Pivotal then contends this is inconsistent with Planet’s present position that those issues were “clear evidence that Planet lacked the capability to provide the Services.”42 Planet, however, argues that Pivotal had actual or inquiry notice of its claims by 2010.43 It is not inconsistent to assert that Pivotal had notice of its claims but that Planet was capable of fixing the underlying problems upon which the claims were based. Therefore, Planet did not take an inconsistent position and quasi-estoppel does not bar Planet from asserting the statute of limitations. b. Equitable Estoppel The Court also finds that equitable estoppel does not bar Planet from asserting the statute of limitations. Unlike quasi-estoppel, equitable estoppel involves a party that “by his conduct 37 In re Rural/Metro Corp. Stockholder’s Litigation, 102 A.3d 205 , 247 (Del. Ch. 2014). 38 Id. (citing Pers. Decisions, Inc. v. Bus. Planning Sys., 2008 WL 1932404 , at *6 (Del. Ch. May 5, 2008). 39 Barton v. Club Ventures Invs. LLC, 2013 WL 6072249 , at *6 (Del. Ch. Nov. 19, 2013). 40 Pers. Decision, Inc., 2008 WL 1932404 , at *6 (Del. Ch. May 5, 2008). 41 Pl.’s Answer. Br. in Opp’n. to Def.’s Mot. for Partial Summ. J. 22. (Hereinafter “Answer. Br.”). 42 Id. 43 Def. Planet Payment Inc.’s Opening. Br. in Supp. of its Mot. for Partial Summ. J. 25, 27 (Hereinafter “Opening Br.”). 8 intentionally or unintentionally leads another” to change position to his detriment in reliance upon that conduct.44 The party claiming estoppel must show that it (1) lacked knowledge or the means of obtaining knowledge of the truth of the facts in question, (2) relied on the conduct of the party against whom estoppel is claimed and (3) suffered a prejudicial change of position because of its reliance.45 Reliance on misleading conduct tolls the statute of limitations.46 Pivotal seeks to estop Planet from asserting the statute of limitations because Pivotal allegedly relied upon Planet’s misleading conduct to not bring its fraudulent inducement claims until the limitations period passed. The factual record does not support Pivotal’s position. The record demonstrates that Pivotal believed that Planet had misrepresented its service capabilities by 2010.47 Thus, Pivotal knew or had the means of obtaining knowledge of the basis for their fraudulent inducement claims by 2010. The theory of equitable estoppel, therefore, does not bar Planet from asserting the statute of limitations. c. The Fraudulent Inducement Claims are time-barred. The Court previously held that Delaware’s statute of limitations applied to Pivotal’s claims.48 Delaware’s statute of limitations for these claims is three years.49 Pivotal’s fraudulent inducement claims (Counts 1-24) accrued on April 7, 2010.50 Pivotal filed this action on February 6, 2015. Therefore, unless some theory tolls the statute of limitations, Pivotal’s fraudulent inducement claims are time-barred. 44 Nevins v. Bryan, 885 A.2d 233 , 249 (Del. Ch. 2005). 45 See Bantum v. New Castle County Vo-Tech Educ. Ass’n, 21 A.2d 44 , 51 (Del. 2011). 46 See Redzewicz v. Neuberger, 490 A.2d 588 , 592093 (Del. Super. 1985) (“The doctrine of estoppel, as it applies to the actions of an insurer, consists of misleading conduct by or on behalf of the insurer which is relied upon by the insured to his detriment . . . . Such misleading conduct and reliance theron, when proved by the party invoking the doctrine, tolls the statute of limitations”). 47 See e.g., Ex. 4 268:22-24; Def. Ex. 8, 4 (“Pivotal learned, with respect to Count 3, that Planet’s capabilities were not as represented, in the last week of April 2010”); see also Def. Ex. 8, 5; Def. Ex. 8, 7; Def. Ex. 8, 8; Def. Ex. 8, 9; 48 See Pivotal Payments Direct Corp., 2015 WL 11120934 , at *3. 49 See id. at *4 (citing 10 DEL. C. § 8106). 50 See id. at *5. 9  When the cause of action accrues outside the statute of limitations, the burden is on the plaintiff to show that a tolling doctrine adopted by Delaware courts applies.51 On a motion for summary judgment, however, the Court must view the evidence in the light most favorable to the non-moving party and draw all rational inferences that favor the non-moving party.52 Therefore, unless the evidence, viewed in the light most favorable to Pivotal, shows that a tolling doctrine applies, the Court should grant summary judgment. Pivotal argues that its claims are timely under the theories of fraudulent concealment and equitable tolling.53 Under any tolling doctrine, the statute of limitations is only tolled until the plaintiff is “objectively aware of the facts giving rise to the wrong i.e. on inquiry notice.”54 A party is on inquiry notice when they are discover facts “‘constituting the basis of the cause of action or the existence of facts sufficient to put a person of ordinary intelligence and prudence on inquiry, which if pursued, would lead to the discover’ of such facts.”55 “Inquiry notice does not require that a plaintiff be aware ‘of all aspects of the alleged wrongful conduct.”56 “Rather, ‘the statute of limitations begins to run when plaintiffs should have discovered the general fraudulent scheme.’”57 Once the plaintiff is on inquiry notice, “no theory will toll the statute further.”58 Pivotal was on inquiry notice of their fraudulent inducement claims by 2010. Pivotal’s CEO, Philip Fayer, testified that by June 2010, Pivotal concluded that they “were lied to, misrepresented, recklessly and selfishly induced into entering an agreement where [Planet] 51 See Winner Acceptance Corp. v. Return on Capital Corp., 2008 WL 5352063 , at *14 (Del. Ch. Dec. 23, 2008). 52 See Merrill, 606 A.2d at 99 (Del. 1992). 53 Answer Br. 18. 54 Weiss v. Swanson, 948 A.2d 433 , 451 (Del. Ch. 2008). 55 Coleman v. Pricewaterhousecoopers, LLC, 854 A.2d 838 , 842 (Del. 2004) (citing Becker v. Hamada, Inc., 455 A.2d 353 , 356 (Del. 1982). 56 Ocimum Biosolutions (India) Ltd. v. AstraZeneca UK Ltd., 2019 WL 672836 , at *9 (Del. Super Dec. 4, 2019). 57 Id. 58 In re Tyson Foods, Inc., 919 A.2d 563 , 585 (Del. Ch. 2007). 10 couldn’t fulfil on their end of the bargain.”59 Pivotal’s interrogatory responses also indicate that Pivotal was aware of the basis of its claims by 2010.60 For example, “Pivotal learned, with respect to Count 1, that Planet’s capabilities were not as represented, in October 2010.”61 This shows that Pivotal knew facts that formed the basis of its claims against Planet, or that should have led them to discover those claims, by 2010. Therefore, the statute of limitations began to run in 2010 when Pivotal was on inquiry notice. Pivotal argues that it relied upon Planet’s “assurances” that Planet “could and would provide such Services” under the MCPA.62 Pivotal argues that under Washington House Condominium Association of Unit Owners v. Daystar Sills, Inc.,63 such assurances constitute fraudulent concealment.64 Washington House does not apply. The Washington House defendant provided assurances and temporary solutions for the plaintiff condominium tenants’ issues with their individual units.65 The tenants then brought claims related to the condominium’s “common elements.”66 The Washington House court ruled that those assurances related to the individual units could be construed as affirmative conduct intended to lead the plaintiffs off the trail of inquiry for claims related to the condominium’s common elements.67 In other words, the Washington House defendant’s conduct prevented the plaintiffs from discovering the basis for their claim. 59 Def. Ex. 4 268:22-24. 60 See e.g. Def Ex. 8, 4-8. 61 Def. Ex. 8, 4. 62 Answer. Br. 5. 63 2017 WL 3412079 , at *20 (Del. Super. Aug. 8, 2017). 64 Answer. Br. 18. This allegation of fraudulent concealment also supports Pivotal’s equitable tolling argument. Answer. Br. 19 (“Equitable tolling is appropriate where . . . ‘the plaintiff can show it was ignorant of the wrong due to the defendant’s fraud or fraudulent concealment . . .’”) (citing Cincinnati Bell Cellular Sys. Co. v. Ameritech Mobile Phone Serv., 1996 WL 506906 , at *16 (Del. Ch. Sep. 3, 1996). 65 Wash. House Condo. Ass’n., 2017 WL 3412079 , at *20 (Del. Super. Aug. 8, 2017). 66 Id. 67 Id. 11  The factual record demonstrates that Pivotal discovered the basis for its fraudulent inducement claims in 2010. Planet’s post-2010 assurances are irrelevant to tolling the statute of limitations, under any theory because once Pivotal discovered that basis, it had inquiry notice of its claims. No theory tolls the statute of limitations further once the plaintiff is on inquiry notice.68 Thus, any tolling period ended when Pivotal had inquiry notice in 2010. Pivotal brought this claim in 2015, past the limitations period.69 Therefore, the Court grants summary judgment on the Fraudulent Inducement Claims as time-barred. 2. Planet is also Entitled to Summary Judgement on the Fraudulent Inducement Claims as Pivotal is not Entitled to Damages under Controlling New York law. In the decision on the motion to dismiss, the Court applied New York law to hold that the MCPA Disclaimer Provision did not bar Pivotal’s fraudulent inducement claims.70 If “the Court has already applied a particular’s [sic] states substantive law at one stage of the case, it may be required under the law of the case doctrine to apply that same state’s substantive law in subsequent stages.”71 The law of the case doctrine requires that “once a matter has been addressed in a procedurally appropriate way by a court, it is generally held to be the law of that case and will be not be disturbed by that court unless compelling reason to do so appears.”72 “[A] prior legal ruling based on a constant set of facts should be reconsidered only if it is ‘clearly wrong, produces an injustice or should be revisited because of changed circumstances.’”73 68 See In re Tyson Foods Inc., 919 A.2d at 585 (Del. Ch. 2007). 69 D.I. No. 1 70 See Pivotal Payments Direct Corp., 2015 WL 11120934 , at *5-*6. The Court notes that Pivotal argued that New York substantive law applied to its fraudulent inducement claims at the motion to dismiss, despite now arguing that Delaware substantive law applies. See Pl.’s Answer. Br. in Opp’n to Def.’s Mot. to Dismiss 14. 71 Verizon Commc’ns Inc. v. Ill. Nat’l Ins. Co., 2018 WL 2317821 , at *5 (Del. Super. May 16, 2018), rev’d on other grounds, 222 A.3d 566 . 72 May v. Bigmar, Inc., 838 A.2d 285 , 287 n.8 (Del. Ch. 2003). 73 Hudak v. Procek, 806 A.2d 140 , 154 (Del. 2002). 12  The Court has reviewed its earlier determination that New York law applied. The Court earlier ruling that New York law applied was not clearly wrong. Under Delaware choice of law analysis, the Court continues to find that New York substantive law applies to Planet’s fraudulent inducement claims. Delaware law is contractarian and the “parties’ contractual choices are respected.”74 This preference for the parties’ contractual choice is particularly strong in disputes over rights created by the agreement.75 “Delaware courts seek to ensure freedom of contract and promote clarity in the law” to facilitate commerce.76 “Parties operating in interstate and international commerce seek, by a choice of law provision, certainty as to the rules that govern their relationship.”77 Contracting parties seek to avoid uncertainty through choice of law provisions.78 Thus, Delaware courts “are bound to respect the chosen law of contracting parties, so long as that law has a material relationship to the transaction” in fraud cases.79 “A material relationship exists where a party’s principal place of business is located within the foreign jurisdiction, a majority of the activity underlying the action occurred within the foreign jurisdiction, and where parties to a contract performed most of their services in the foreign state.”80 New York has a material relationship to the transaction. The dispute arises because Planet, a Delaware corporation with its principal place of business in New York, allegedly fraudulently induced Pivotal, a Canadian corporation, into entering the MCPA. Planet’s alleged pre-contractual misrepresentations underlie the action. The record shows that the underlying 74 GRT, Inc. v. Marathon GTF Tech., Ltd., 2011 WL 2682898 , at *12 (Del. Ch. Jul. 11, 2011). 75 See Transdigm Inc. v. Alcoa Global Fasteners, Inc., 2013 WL 2326881 , at *5 (Del. Ch. May 29, 2013) (“. . . this is a dispute over ‘rights created [by the Purchase Agreement]’ and the parties’ choice of law should govern”). 76 Akorn, Inc. v. Fresenius Kabi AG, 2018 WL 4719347 , at *60 (Del. Ch. Oct. 1, 2018). 77 Abry Partners V, L.P. v. F&W Acquisition LLC, 891 A.2d 1032 , 1048 (Del Ch. 2006). 78 See id. (“To hold that their choice is only effective as to the determination of contract claims, but not as to tort claims . . . would create uncertainty of precisely the kind that the parties’ choice of law provision sought to avoid”). 79 Abry Partners V, L.P. v. F&W Acquisition LLC, 891 A.2d 1032 , 1046 (Del Ch. 2006). 80 Deuly v. DynCorp. Intern., Inc., 8 A.3d 1156 , 1161 (Del. 2010) (Internal citations omitted). 13 conduct happened in New York.81 Therefore, even if the law of the case doctrine did not apply, the Court would honor the parties’ choice of law provision. Applying New York law in this case also encourages certainty in commercial transactions. The parties, operating transnationally, “sought ‘a reliable body of law to govern their relationship.’”82 “Parties operating in . . . international commerce seek, by a choice of law provision, certainty as to the rules that govern their relationship.”83 The parties thus chose New York law to govern their agreement.84 The Court will apply New York law to avoid “uncertainty of precisely the kind that the parties’ choice of law provision sought to avoid.”85 A New York fraudulent inducement claim must prove: “1) a false representation of material fact, 2) known by the utterer to be untrue, 3) made with the intention of inducing reliance and forbearance from further inquiry, 4) that is justifiably relied upon, and 5) results in damages.”86 When measuring damages in fraud actions, New York follows the “out-of-pocket” rule.87 Damages are “calculated to compensate plaintiffs for what they lost because of the fraud . . . not to compensate them for what they might have gained.”88 Thus, the out-of-pocket rule “excludes expected profit.”89 81 See e.g. Def.’s Ex. 62 39:6-18 (Planet’s headquarters “where marketing was handled . . . where general counsel existed” was located in Long Beach, New York); Def.’s Ex. 63 30:8-14 (Planet’s executives that supervised business development operated from Long Island, New York); Def.’s Ex. 68 45:4-7 (Planet’s general counsel Graham Arad “who . . . would have been involved, swapping e-mails and things, as the contract was being worked on” operated out of Long Beach, New York). 82 Greetham v. Sogima L-A Manager, LLC, 2008 WL 4767722 , at *14 (Del. Ch. Nov. 3, 2008) (citing Abry, 891 A.2d at 1047 (Del. Ch. 2006). 83 Abry, 891 A.2d at 1048 (Del. Ch. 2006). 84 Pl.’s Ex. 24 Planet 0084625 (MCPA Schedule 3 § 8(a)). 85 Abry, 891 A.2d at 1048 (Del. Ch. 2006). 86 MBIA Ins. Corp. v. Credit Suisse Securities (USA) LLC, 927 N.Y.S.2d 517 , 531 (N.Y. Sup. Ct. 2011). 87 Lama Holding Co. v. Smith Barney Inc., 668 N.E.2d 1370 , 1373 (N.Y. 1996). 88 Id. 89 In re Eugenia VI Venture Holdings, Ltd. Litigation, 649 F. Supp.2d 105 , 121 (S.D.N.Y. 2008). 14  Pivotal stated that, from April 2010 to March 2016, it profited by boarding merchants with Planet.90 Furthermore, Pivotal’s expert TSG calculated damages in this case as loss in “Net Profit.”91 Ray Sobczyk, who participated in the TSG Report, agreed that “the net profits are the bottom line figure.”92 Therefore, the record shows that Pivotal earned a profit from its relationship with Planet under the MCPA. No facts remain in dispute regarding Pivotal’s profits from its relationship with Planet. Under controlling New York law, Pivotal is only entitled to actual losses for a fraudulent inducement claim. Therefore, the Court grants the Motion with respect to the Fraudulent Inducement Claims on this alternative theory. B. WHETHER THE BREACH OF CONTRACT CLAIMS ARE TIMELY IS A QUESTION OF FACT. The Court could not determine the accrual dates for the Breach of Contract Claims in connection with the motion to dismiss.93 In Delaware, parties have a “reasonable” amount of time to perform the contract when the contract does not fix a time for its performance.94 A reasonable time for performance “is ordinarily a question of fact.”95 Delaware courts can, however, decide reasonableness “on summary judgment in appropriate cases.”96 The party asserting a right based on a reasonable time period must provide evidence of what is a reasonable 90 Def. Ex. 9 79-80 (Interrogatory Resp. 15). 91 See e.g. Def. Ex. 51 6 (“TSG calculated that Pivotal incurred Financial Damages of $0.61 million CAD from the loss in Net Profit due to the lack of a viable Dynamic Currency Conversion product.”); Def. Ex. 51 8, 32 92 Def. Ex. 55 43:5-7. 93 See Pivotal Payments Direct Corp., 2015 WL 11120934 , at *4. 94 Salisbury v. Credit Service, 199 A. 674 , 683 (Del. Super. 1937). 95 HIFN, Inc. v. Intel Corp., 2007 WL 1309376 , at *11 (Del. Ch. May 2, 2007) (“Whether a party to a contract performed within a reasonable time is ordinarily a question of fact and thus often inappropriate for resolution at the summary judgment stage”). 96 Id. (Citations omitted). 15 time to perform under the contract.97 For example, evidence of an oral agreement could be “evidence of what the parties considered would be a reasonable time for performance.”98 The Court finds that neither party provided evidence with respect to what the parties considered a reasonable time for Planet to perform Sections 2.5 and 2.7 of the MCPA. The parties merely reassert their arguments from the motion to dismiss. Pivotal argues that it filed suit within the limitations period because Planet continuously breached the contract.99 Planet argues that the reasonable time for Planet to perform ran until the time that Pivotal admitted that it knew Planet failed to fulfill its obligations under the MCPA.100 Therefore, the Court will not grant summary judgment as to the statute of limitations and the Breach of Contract Claims because there is a genuine issue of material fact. V. CONCLUSION For the reasons set forth above, the Court GRANTS the Motion in part and DENIES the motion in part. Dated: November 30, 2020 Wilmington, Delaware /s/ Eric M. Davis Eric M. Davis, Judge cc: File&ServeXpress 97 See id. (“The issue is whether [the plaintiff] has satisfied its burden of presenting evidence from which a rational trier of fact could conclude that it performed within a reasonable time”). 98 Gluckman v. Holzman, 51 A.2d 458 , 467 (Del. Ch. 1947). 99 See Answer. Br. 24 (Pivotal maintains its position that Planet breached MCPA § 2.5 (Count 26) each time Planet failed to process a debit transaction and that Planet breached MCPA § 2.7 (Count 27) each time Planet failed to provide a newly boarded Pivotal merchant with an external pinpad). 100 Opening Br. 34-35. 16

2020-11-30 21:03:56.383376+00

http://www.illinoiscourts.gov/Opinions/AppellateCourt/2020/1stDistrict/1191953.pdf

2020 IL App (1st) 191953 Nos. 1-19-1953 & 1-19-1973 (consol.) Opinion filed November 30, 2020 First Division ______________________________________________________________________________ IN THE APPELLATE COURT OF ILLINOIS FIRST DISTRICT ______________________________________________________________________________ SUBURBAN REAL ESTATE SERVICES, INC., and ) BRYAN BARUS, ) Appeal from the ) Circuit Court of Plaintiffs-Appellants, ) Cook County. v. ) ) No. 16 L 5295 WILLIAM ROGER CARLSON JR. and CARLSON ) PARTNERS, LTD., ) Honorable ) Diane M. Shelley, Defendants-Appellees. ) Judge, presiding. JUSTICE HYMAN delivered the judgment of the court, with opinion. Justice Pierce concurred in the judgment and opinion. Justice Griffin dissented, with opinion. OPINION ¶1 Suburban Real Estate Services, Inc., and Bryan Barus retained defendants William Roger Carlson Jr. and his law firm, Carlson Partners, Ltd., for legal advice in dissolving a company they co-owned with ROC, Inc. (Plaintiffs will be collectively referred to as “Barus” and defendants as “Carlson.”) After Barus followed Carlson’s advice, ROC, Inc. (ROC), sued Barus alleging breach of his fiduciary duties. Barus retained new attorneys. They informed him that he likely had a legal malpractice claim against Carlson but that he should wait until the claims by ROC were resolved Nos. 1-19-1953 & 1-19-1973 before pursuing it. After settling his claims with ROC, Barus filed a legal malpractice complaint against Carlson. ¶2 Carlson moved for summary judgment on the grounds that the two-year statute of limitations for legal malpractice claims barred Barus’s claims. The trial court granted Carlson’s motion, finding that Barus’s legal malpractice claims began to accrue when his new attorneys advised him he may have a legal malpractice claim against Carlson. The court concluded Barus knew or should have known when he paid attorney’s fees to the new law firm that he had a legal malpractice claim against Carlson. ¶3 Barus argues he timely filed his malpractice complaint within two years of the judgment against him, at which time he first knew he had been injured by Carlson’s purported negligence. Barus asserts that filing a malpractice claim before then would have been premature because, had he prevailed in the underlying lawsuit, he would have had no injury. We agree. As the defendant in the underlying lawsuit, Barus was not injured for the purposes of triggering the statute of limitations until entry of the adverse judgment in the underlying lawsuit. ¶4 We reverse the trial court order granting summary judgment and remand for further proceedings. ¶5 Background ¶6 Bryan Barus is the principal and sole owner of Suburban Real Estate Services, Inc., a commercial real estate management company. In February 2006, Suburban Real Estate and another company, ROC, formed a joint company, ROC/Suburban LLC. Suburban Real Estate and ROC each owned a 50% interest in the new company, which acted as a vendor to Suburban Real Estate in supplying commercial property management services. (Michael Siurek, the sole shareholder of ROC, is not a party to the appeal.) -2- Nos. 1-19-1953 & 1-19-1973 ¶7 In 2010, Barus decided to end Suburban Real Estate’s involvement in ROC/Suburban LLC and retained Carlson and his law firm to represent his company in unwinding the business relationship. On the advice of Carlson, Barus sent a “break-up” letter to Siurek, notifying him of the steps he planned to take to terminate his company’s relationship with ROC/Suburban LLC, including no longer using ROC/Suburban LLC as a vendor and taking most of ROC/Suburban LLC’s employees. ¶8 On the advice of Carlson, Barus implemented the steps described in the letter. About a month later, in August 2010, ROC sued Barus in Du Page County alleging breach of fiduciary duty. Carlson continued as Barus’s attorney for a while; Barus eventually retained new attorneys, Gaspero & Gaspero Attorneys at Law, P.C. (Gaspero), to represent him. At a pretrial conference in April 2013, the trial judge told Gaspero he would likely find that Barus’s conduct constituted a breach of fiduciary duty if the case proceeded to trial. The judge further said that, to the extent Barus’s conduct was recommended by Carlson, the advice constituted legal malpractice and a malpractice claim was “a hundred percent” certainty. ¶9 Gaspero told Barus about the trial judge’s comments and discussed the possibility of a legal malpractice claim against Carlson. Gaspero also contacted an attorney who specializes in legal malpractice to assess the viability of a malpractice claim against Carlson. ¶ 10 After a bench trial, the trial court entered judgment for ROC on June 17, 2015. Barus reached a settlement with ROC and filed this legal malpractice case on May 26, 2016, alleging that, as a result of Carlson’s legal advice, he had to pay more than $500,000 in claims and attorney’s fees to ROC. ¶ 11 Carlson moved for summary judgment, arguing that Barus knew or should have known about his alleged negligence in 2011, when Barus retained and started paying attorney’s fees to -3- Nos. 1-19-1953 & 1-19-1973 Gaspero or by 2013 at the latest, when the trial judge told Gaspero that a malpractice claim was a certainty. Carlson argued that the applicable two-year statute of limitations barred Barus’s malpractice complaint. In response, Barus argued that the statute of limitations began to run on the entry of the adverse judgment in the ROC litigation in 2015 and, thus, his complaint was timely. ¶ 12 The trial court entered a written order granting Carlson’s motion for summary judgment, finding that Barus had notice of his malpractice claim as early as 2010, when ROC filed the underlying lawsuit, and no later than April 2013, when the judge told his new attorney, Gaspero, that a malpractice action against Carlson was a “one-hundred percent certainty” and Gaspero sought advice from another attorney about when a malpractice claim needed to be filed. ¶ 13 The court noted that a legal malpractice claim usually does not begin to accrue until the plaintiff has suffered an adverse judgment, settlement, or dismissal in the underlying action. But, citing this court’s decisions in Construction Systems, Inc. v. FagelHaber, LLC, 2019 IL App (1st) 172430 , and Nelson v. Padgitt, 2016 IL App (1st) 160571 , the trial court stated that a legal malpractice claim can accrue before an adverse judgment where a client has to pay legal fees as a result of attorney neglect. The trial court found Barus’s claim barred. It concluded that Barus discovered or should have discovered the defective legal advice at least as of April 2013, when Gaspero began investigating a potential malpractice claim and Barus incurred attorney’s fees “as a direct result of defendants’ allegedly-negligent legal advice.” (The trial court also entered summary judgment in favor of Gaspero on Carlson’s third-party complaint for contribution. Carlson separately appealed that order in appeal No. 1-19-1973, which has been consolidated with appeal No. 1-19-1953 but stayed pending the resolution of this appeal.) ¶ 14 Analysis ¶ 15 Standard of Review -4- Nos. 1-19-1953 & 1-19-1973 ¶ 16 Summary judgment should be applied where no genuine issues of material fact remain and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2018). The trial court may grant summary judgment after considering “the pleadings, depositions, admissions, exhibits, and affidavits on file in the case” and construing that evidence in favor of the nonmoving party. Purtill v. Hess, 111 Ill. 2d 229 , 240 (1986). Summary judgment aids in the expeditious disposition of a lawsuit, but it is a drastic measure that should be allowed only “when the right of the moving party is clear and free from doubt.” Id. We review the trial court’s grant of summary judgment de novo. Williams v. Manchester, 228 Ill. 2d 404 , 417 (2008). ¶ 17 Statute of Limitations ¶ 18 An action for legal malpractice must be filed within two years from the time the plaintiff “knew or reasonably should have known of the injury for which damages are sought.” 735 ILCS 5/13-214.3(b) (West 2018). To trigger the limitations period, the plaintiff must have a reasonable belief that the injury was caused by the lawyer’s wrongful conduct and the plaintiff, therefore, has an obligation to inquire further. Dancor International, Ltd. v. Friedman, Goldberg & Mintz, 288 Ill. App. 3d 666 , 673 (1997). But “[k]nowledge that an injury has been wrongfully caused does not mean knowledge of a specific defendant’s negligent conduct or knowledge of the existence of a cause of action,” and thus the statute of limitations may run despite the lack of actual knowledge of wrongful conduct. (Internal quotation marks omitted.) Janousek v. Katten Muchin Rosenman LLP, 2015 IL App (1st) 142989 , ¶ 13 (citing Castello v. Kalis, 352 Ill. App. 3d 736 , 744 (2004)). ¶ 19 “Injury” requires a legal client suffer a loss for which he or she may seek monetary damages. Northern Illinois Emergency Physicians v. Landau, Omahana & Kopka, Ltd., 216 Ill. 2d 294 , 306 (2005). Generally, a plaintiff does not sustain an injury until an adverse judgment, settlement, or dismissal in the underlying action. Nelson, 2016 IL App (1st) 160571 , ¶ 13. But “a -5- Nos. 1-19-1953 & 1-19-1973 malpractice action may accrue before the trial court enters an adverse judgment if it is plainly obvious that the plaintiff has been injured as the result of professional negligence or where an attorney’s neglect is a direct cause of the legal expense incurred by the plaintiff.” (Internal quotation marks omitted.) FagelHaber, 2019 IL App (1st) 172430 , ¶ 20; Nelson, 2016 IL App (1st) 160571 , ¶ 14; see also Goran v. Glieberman, 276 Ill. App. 3d 590 , 595-96 (1995) (client’s cause of action for legal malpractice accrued when client retained and paid fees to successor attorneys to duplicate initial attorney’s efforts). ¶ 20 Like the trial court, Carlson relies on FagelHaber and Nelson to argue that the statute of limitations began as early as October 2010, when Barus retained Gaspero, incurring legal expenses related to Carlson’s purportedly negligent legal advice, and no later than April 2013, when Gaspero advised Barus he likely had a legal malpractice claim. Carlson contends the two-year statute of limitations had expired when Barus filed the legal malpractice case in May 2016. ¶ 21 Barus asserts, however, that attorney’s fees he paid Gaspero were not actionable for attorney malpractice, as no clear finding of attorney neglect had been shown in the underlying case. Rather, at that time, his malpractice claim against Carlson amounted to speculation. Then, in June 2015, on the entry of the adverse judgment, his cause of action accrued. For support, Barus relies on Lucey v. Law Offices of Pretzel & Stouffer, Chartered, 301 Ill. App. 3d 349 (1998), and Warnock v. Karm Winand & Patterson, 376 Ill. App. 3d 364 (2007). ¶ 22 In Lucey, the plaintiff, relying on his attorney’s advice, solicited clients from his employer before resigning to start his own company. Lucey, 301 Ill. App. 3d at 351. The plaintiff’s former employer sued him. Id. at 352. While the lawsuit by the former employer was pending, the plaintiff sued his attorney for malpractice. Id. The trial court dismissed the malpractice complaint, finding it premature because the plaintiff had not yet sustained damages, as the underlying lawsuit by the -6- Nos. 1-19-1953 & 1-19-1973 former employer remained pending. Id. The appellate court affirmed, holding that the legal malpractice action accrued when the former employer’s lawsuit against the plaintiff concluded. Id. at 355. The plaintiff could possibly prevail against the former employer, so the damages were “entirely speculative until a judgment is entered against the former client or he is forced to settle.” Id. “[A] cause of action for legal malpractice will rarely accrue prior to the entry of an adverse judgment, settlement, or dismissal of the underlying action in which plaintiff has become entangled due to the purportedly negligent advice of his attorney.” Id. at 356. The court explained that requiring a client to bring a provisional malpractice suit would undermine judicial economy and the attorney-client relationship. Id. at 357. ¶ 23 In Warnock, defendants-attorneys represented the sellers in a real estate transaction. Warnock, 376 Ill. App. 3d at 365. Before closing, the purchasers asked for more time to obtain financing. Id. at 366. The defendants drafted a letter to the purchasers’ attorney agreeing to extend the closing date should the purchasers deposit money in an escrow account. Id. The letter agreement also contained a liquidated damages clause stating that the earnest money would be forfeited if the closing did not occur. Id. When the purchasers failed to secure the necessary financing before closing, the earnest money was released to the sellers, who refused to return it to the purchasers. Id. ¶ 24 The purchasers sued the sellers alleging unjust enrichment. Id. The sellers retained another law firm to represent them in the purchasers’ lawsuit. The trial court held that the letter agreements defendants drafted were unenforceable and entered judgment against the sellers. Id. at 367. The sellers then filed a legal malpractice action against the defendants, who moved for summary judgment. The defendants argued the two-year statute of limitations began to accrue when the sellers retained another law firm to defend them against the purchasers. Id. The sellers countered -7- Nos. 1-19-1953 & 1-19-1973 that the statute of limitations began to run when the judgment was entered against them in the underlying action. Id. The trial court granted summary judgment for the defendants. Id. ¶ 25 The appellate court reversed, reasoning that, when the purchasers filed the underlying action, the sellers did not know whether the purchasers would or would not recover the earnest money held in escrow. Id. at 370. The appellate court stated that “a cause of action for legal malpractice will not accrue prior to the entry of an adverse judgment, settlement, or dismissal of the underlying action in which plaintiff has become entangled due to the purportedly negligent advice of his attorney.” Id. at 372. Until the trial court entered judgment in the purchasers’ favor, the sellers did not actually discover and reasonably could not have discovered that the letter agreements were negligently prepared. Id. Thus, the entry of the adverse judgment marked the date on which the statute of limitations period commenced. Id. ¶ 26 Lucey and Warnock are directly on point. As in those cases, Barus did not suffer a realized injury until the trial court entered the judgment against him on June 17, 2015. Before then, Barus’s damages were “entirely speculative,” because he might have prevailed in the underlying case. Although Barus paid attorney’s fees to Gaspero before the judgment, there had not yet been a clear finding of attorney neglect. If Barus had filed a malpractice complaint against Carlson and prevailed in the underlying lawsuit, the malpractice complaint would have been pointless and, as this court found in Lucey, would undermine judicial economy and the attorney-client relationship. Lucey, 301 Ill. App. 3d at 357. ¶ 27 We reject defendant’s reliance on FagelHaber and Nelson for the proposition that the payment of attorney’s fees here constituted a “plainly obvious” injury triggering a claim of legal malpractice. -8- Nos. 1-19-1953 & 1-19-1973 ¶ 28 In Nelson, the attorney negotiated an employment agreement on the plaintiff’s behalf, which stipulated a loss of salary and commission on termination for cause. Nelson, 2016 Il App (1st) 160571 , ¶ 15. After the plaintiff was terminated for cause, he brought a malpractice action against his former attorney for failing to negotiate an employment contract that was in his best interests. Id. ¶¶ 4, 7. There, an adverse judgment was unnecessary for the plaintiff to discover injury—its existence was established when the client filed the underlying suit alleging he had already sustained injury. Id. ¶ 16. The court differentiated the case from Lucey “where ‘actionable damages were a mere potentiality’ until there was an adverse judgment.” Id. ¶ 21 (quoting Lucey, 301 Ill. App. 3d at 359). The court explained that, because the client in Lucey was the defendant in the underlying suit, he did not know of his injury “until after the adverse judgment because he was not the one to pursue legal action.” Id. ¶ 22. ¶ 29 In FagelHaber, the plaintiff, a steel fabricator, retained the defendant-lawyer to prepare and record a mechanic’s lien. FagelHaber, 2019 IL App (1st) 172430 , ¶ 4. The lawyer filed the mechanic’s lien but failed to provide notice to a bank, which later filed a mortgage against the property. Id. When litigation over the liens ensued, the client retained a different attorney and learned that the previous attorney had not provided proper notice of the mechanic’s lien to the bank. Id. ¶ 6. The plaintiff sued the attorney for legal malpractice, asserting that failure to perfect the mechanic’s lien resulted in its lien being subordinate to the bank’s mortgage lien. Id. ¶ 8. The attorney moved for summary judgment, asserting that the statute of limitations barred the plaintiff’s legal malpractice action because, when plaintiff retained new counsel, the plaintiff knew or should have known about the failure to serve the required statutory notice of its mechanic’s lien on the bank. Id. ¶ 9. -9- Nos. 1-19-1953 & 1-19-1973 ¶ 30 The trial court granted the motion for summary judgment, and the appellate court affirmed. Relying on Nelson, the court found that the plaintiff’s legal malpractice action against the law firm for failing to perfect its mechanic’s lien accrued when it paid attorney’s fees to replacement counsel. Id. ¶ 24. The court noted that replacement counsel sent a letter to the original attorney asking for his cooperation in addressing the “problematic situation” in regard to priority of the plaintiff’s mechanic’s lien. Id. The letter demonstrated (i) the replacement attorney knew of the law firm’s error in perfecting the mechanic’s lien, (ii) the error caused injury to the plaintiff, and (iii) the plaintiff paid the replacement attorney for services to minimize the law firm’s negligence. Id. ¶ 29. ¶ 31 The court distinguished Warnock and similar cases that have “reiterated the admonishment against provisional or prophylactic legal malpractice cases.” Id. ¶ 29. Those “cases all have the common thread that the attorney’s negligence could not have reasonably been discovered before the trial court entered an adverse judgment.” Id. Conversely, the court found that an adverse judgment was unnecessary for discovering the negligence “because the negligence was obvious *** when substitute counsel discovered the defect in the lien and began researching and developing alternative theories regarding its unperfected mechanic’s lien.” Id. ¶ 27. ¶ 32 We agree with the holdings in FagelHaber and Nelson, but neither applies here. In both cases, the clients were the plaintiffs in the underlying suits, and their injuries were established before a judgment in the underlying suit. Hence, the clients knew when they retained new counsel and began paying attorney’s fees that they had likely been injured by the attorney’s negligence. Conversely, as in Lucey and Warnock, Barus, as the defendant in the underlying lawsuit, could not have known he had been injured until entry of the judgment against him. As noted, had Barus prevailed in the underlying lawsuit and the trial court found that he did not breach his fiduciary - 10 - Nos. 1-19-1953 & 1-19-1973 duties by following Carlson’s legal advice, he would have no claim for legal malpractice against Carlson. So, filing a complaint before the judgment would have been premature and pointless. ¶ 33 The judge’s comments before trial in the underlying case that a legal malpractice claim against Carlson was “a hundred percent” certainty are misplaced. As noted, with limited exceptions not relevant here, a plaintiff does not sustain an injury until suffering an adverse judgment, settlement, or dismissal in the underlying action. Nelson, 2016 IL App (1st) 160571 , ¶ 13. The judge’s comments may have been made for any number of reasons, and they do not and cannot substitute for adverse judgment, settlement, or dismissal. ¶ 34 The dissent contends Barus suffered an adverse disposition triggering the statute of limitation when the trial court entered a temporary restraining order (TRO) in the underlying lawsuit. Not so. A TRO preserves the status quo until the case can be decided on its merits. Stocker Hinge Manufacturing Co. v. Darnel Industries, Inc., 94 Ill. 2d 535 , 542 (1983). The TRO prohibited Barus from denying ROC access to company documents and information and from taking steps to further dissolve the company. It does not constitute a judgment adverse to Barus, as it merely required him to maintain the company’s status quo while the case was pending. Further, a party may later seek to modify a TRO for any number of reasons, and nothing either indicates or suggests that the trial court or any party considered the TRO as an adverse ruling. ¶ 35 Also without basis is the dissent’s contention that the trial court order dissolving the company was an adverse judgment. Indeed, Barus wanted to dissolve the company and, as noted, took steps to unwind the business relationship with ROC. Again, only the trial court’s June 2015 finding that Barus breached his fiduciary duties to ROC in trying to dissolve the company constitutes an adverse judgment. - 11 - Nos. 1-19-1953 & 1-19-1973 ¶ 36 The dissent then asserts that Barus’s claim accrued when he incurred attorney’s fees in defending against ROC claims. Usually, defendants in a lawsuit pay an attorney to represent their interests, which is exactly what Barus did here. Not until the trial court found he had breached his fiduciary duties did Barus have knowledge that he had been injured by Carlson’s legal advice, and filing a legal malpractice lawsuit before then would have been premature. Under the dissent’s theory, whenever a legal client follows an attorney’s advice and is later sued, the client would need to sue the attorney within two years to preserve his or her malpractice claim, likely long before the outcome of the underlying lawsuit is known and regardless of whether the client believes he or she will prevail in the underlying suit. Not only is this not the law, but it also would unnecessarily place lawyers in an untenable position whenever a client is sued as a result of legal advice. ¶ 37 The statute of limitations on Barus’s legal malpractice claim began to accrue when the trial court in the underlying case entered judgment against him, June 17, 2015. He timely filed his complaint less than a year later, May 26, 2016. ¶ 38 We reverse the trial court’s summary judgment order and remand for further proceedings. ¶ 39 Reversed and remanded. ¶ 40 JUSTICE GRIFFIN, dissenting: ¶ 41 The majority applies the general rule that a client does not have a legal malpractice claim until the client suffers an adverse judgment caused by the attorney’s negligence. That rule is generally applicable because, in most cases, we do not know if the client has actually been harmed by the attorney’s negligence until the client is found liable to a third party or suffered some other adverse consequence. That general rule does not apply here. ¶ 42 There are two grounds for my disagreement with the majority’s decision. First, the discovery rule states that a cause of action is tolled only until the point that a plaintiff knows she - 12 - Nos. 1-19-1953 & 1-19-1973 was injured and knows that the injury was wrongfully caused. The plaintiffs here clearly knew both of those facts more than two years before filing this suit. And plaintiffs, in fact, had a sufficient legal injury because they incurred legal fees directly caused by their former attorney’s negligence. Second, plaintiffs suffered a legally cognizable injury that was in existence before the legal claims were even brought against them by a third party. The “underlying” judgment for breach of fiduciary duty in this case makes up only a part of the plaintiffs’ total malpractice claim. Therefore, I would find that plaintiffs’ malpractice claim accrued more than two years before this case was filed, and I would affirm the circuit court’s judgment that plaintiffs’ claims are time barred. ¶ 43 Application of the Discovery Rule ¶ 44 In legal malpractice cases, the discovery rule operates to postpone the start of the period of limitations until the injured party knows or reasonably should know of the injury and knows or reasonably should know that the injury was wrongfully caused. Steinmetz v. Wolgamot, 2013 IL App (1st) 121375 , ¶ 30. There is no real dispute that plaintiffs knew about the negligence more than two years before filing this case. Plaintiffs’ position, which the majority adopts, is that the “injury” did not exist until the judgment for breach of fiduciary duty was entered. Our precedent establishes that plaintiffs indeed had an injury before that judgment was entered. ¶ 45 We have previously set forth two circumstances in which a legal malpractice claim accrues before an adverse judgment is entered against the client: (1) if it is plainly obvious that the client has been injured as the result of professional negligence; or (2) where an attorney’s neglect is a direct cause of the legal expense incurred by the client. FagelHaber, 2019 IL App (1st) 172430 , ¶ 20. The majority has eliminated the disjunctive “or” from the criteria we have previously recognized. See supra ¶¶ 26-27. The majority holds that just incurring otherwise-unnecessary legal - 13 - Nos. 1-19-1953 & 1-19-1973 fees as a result of an attorney’s malpractice is not enough. Instead, the majority states that the payment of attorney fees itself must constitute “a plainly obvious” injury. Supra ¶ 27. ¶ 46 A legal malpractice claim accrues, regardless of an adverse judgment being entered against the client, when the attorney’s neglect is a direct cause of legal expenses incurred by the plaintiff. FagelHaber, 2019 IL App (1st) 172430 , ¶ 20. Thus, a client’s claim for malpractice accrues, prior to an adverse judgment being entered against the client, once the client knows about the negligence and incurs legal expenses that stem from the attorney’s negligence. Id. ¶ 25. In this case, plaintiffs knew about the negligence more than two years before filing this case. Likewise, plaintiffs incurred legal expenses stemming directly from the negligence more than two years before filing this case. ¶ 47 The record demonstrates that plaintiffs had actual knowledge of defendants’ negligent provision of legal services at least as early as April 2013, when a pretrial conference was held in the ROC lawsuit. At the pretrial conference, the trial judge in that case “made it clear that it was his belief that the [Carlson defendants] committed malpractice.” Plaintiffs’ attorney testified that the trial judge in the underlying case did not suggest that there was just a possibility of a viable malpractice claim against defendants but, rather, that the trial judge indicated at the pretrial conference that “it was one hundred percent true that there was a malpractice case.” While the trial judge’s comments at a pretrial conference would not necessarily constitute an incontrovertible indication of plaintiffs’ knowledge of the malpractice, plaintiffs’ words and conduct after that conference do establish their knowledge that they had a viable claim for malpractice at that time. ¶ 48 The effect that the trial judge’s comments had on the plaintiffs was that, following the pretrial conference, plaintiffs’ attorneys were convinced that malpractice had been committed and they began to search for attorneys to handle a malpractice case for plaintiffs. In April 2013, plaintiffs paid legal fees to the Gaspero firm to investigate and prepare for a malpractice claim - 14 - Nos. 1-19-1953 & 1-19-1973 against defendants. The Gaspero firm contacted another attorney, Rebecca Rothman, indicating that it represented someone that was “the victim of fairly grave negligence.” The record makes clear that plaintiffs themselves were informed about the existence of the negligence and discussed it with their attorney. Plaintiffs had knowledge about the viability of a malpractice case, such that, within a couple days of the pretrial conference, plaintiff Bryan Barus searched for and retrieved records of his correspondence with defendants for the purposes of evaluating a malpractice case against defendants. ¶ 49 The foregoing demonstrates that plaintiffs obviously knew about the negligence at least as early as 2013 and probably much sooner. Plaintiffs do not contest on appeal that they knew about defendants’ negligence by 2013. They simply argue that they did not have an injury yet. However, there is significant evidence that plaintiffs incurred attorney fees directly as a result of the negligence. Those fees are sufficient to constitute an “injury” for purposes of the statute of limitations and the discovery rule. ¶ 50 “Payment of attorney fees is a monetary loss sufficient to constitute damages if the additional fees are directly attributable to former counsel’s neglect.” FagelHaber, 2019 IL App (1st) 172430 , ¶ 25. Nearly every legal fee incurred by plaintiffs from the Gaspero firm from 2011 forward was incurred because of the negligent legal services defendants performed. Moreover, plaintiffs incurred fees directly as a result of preparing for a malpractice case. Plaintiff paid fees to the Gaspero firm to investigate and prepare for a malpractice claims against defendants in April 2013. The Gaspero firm collected and reviewed e-mail correspondence between plaintiffs and defendants, and it conferred with malpractice counsel concerning a malpractice case. It is inescapable that those fees constituted a cognizable injury to plaintiffs. Those fees were incurred - 15 - Nos. 1-19-1953 & 1-19-1973 as a direct result of defendants’ negligence and would not have been necessary absent defendants’ negligence. ¶ 51 Plaintiffs’ “payment of the additional legal fees constituted actual damages and, coupled with [their] knowledge of [defendants’] negligence, commenced the running of the statute of limitations.” FagelHaber, 2019 IL App (1st) 172430 , ¶ 25; see also Nelson v. Padgitt, 2016 IL App (1st) 160571 , ¶ 23. Our precedent establishes that the incurrence of attorney fees started the limitations clock in this case at least as early as April 2013. ¶ 52 Breach of Fiduciary Duty Is Only Part of the Injury ¶ 53 Defendants represented plaintiffs from May 2010 until October or November of 2010. The Gaspero firm took over representing plaintiffs in October or November 2010, and the Gaspero firm represented plaintiffs for the next four-plus years thereafter. On January 26, 2011, the trial court in the equitable action brought by ROC against plaintiffs entered an order dissolving the business entity. It was not until after the trial court dissolved ROC/Suburban LLC that ROC asserted claims against plaintiffs for breach of fiduciary duty. At the time the claims for breach of fiduciary duty were asserted, defendants’ representation of plaintiffs had concluded months earlier, and plaintiffs had already incurred and paid legal fees from Gaspero. Plaintiffs had already suffered harm from the negligence and set about incurring legal fees such that they were “injured” before the “underlying” claims had even been filed. ¶ 54 The whole scope of the Gaspero firm’s representation of plaintiffs in this matter was to mitigate the damage caused by defendants’ negligent representation. Immediately upon taking over representation of plaintiffs, the Gaspero firm began attempting to ameliorate the damage done to plaintiffs by defendants’ negligence. In November 2010, the Gaspero firm filed a motion to modify the temporary restraining order that the trial court entered in the underlying case. The - 16 - Nos. 1-19-1953 & 1-19-1973 temporary restraining order was only entered because of defendants’ negligence. Plaintiffs were billed for and paid fees to the Gaspero firm in an attempt to modify the temporary restraining order, an order that was directly occasioned by the negligent advice provided by defendants. See Goran v. Glieberman, 276 Ill. App. 3d 590 , 595-96 (1995) (a client’s cause of action for legal malpractice accrued when her successor attorneys were required to duplicate her initial attorney’s efforts). The Gaspero firm continued to represent plaintiffs at the court proceedings that led up to the court dissolving the business. All of those fees were generated before the “underlying” breach of fiduciary duty claims had even been asserted, and the incurrence of those preceding fees had nothing to do with defending against the claims for breach of fiduciary duty. Thus, the outcome of the breach of fiduciary duty claims did not control whether plaintiffs were “injured.” ¶ 55 Before ROC was even seeking money damages from plaintiffs for breach of fiduciary duty, plaintiffs suffered an adverse disposition. The court ruled against plaintiffs on ROC’s claim for injunctive relief. While temporary injunctive relief was entered while defendants were still plaintiffs’ attorneys, the conclusion on the equitable claims came after defendants were replaced by the Gaspero firm and after the Gaspero firm was already generating fees on plaintiffs’ behalf. Plaintiffs had new counsel before the equitable claims had been fully adjudicated, and they suffered an adverse disposition that was directly caused by defendants’ negligence—an order dissolving the company. ¶ 56 The majority states that the dissolution of the company was not an adverse ruling. The trial court dissolved the company under section 35-1 of the Limited Liability Company Act (805 ILCS 180/35-1(a)(4)(B)-(C) (West 2018)), finding that plaintiffs’ conduct made the company’s activities unlawful or made it such that it became otherwise impractical to carry on the company’s business in accordance with the operating agreement. Plaintiffs’ actions, which they took as a result of - 17 - Nos. 1-19-1953 & 1-19-1973 following defendants’ advice, clearly made it impossible for the business to carry on in accordance with the company’s business purpose. So to the extent the majority demands an adverse disposition, plaintiffs suffered one in 2011. Plaintiffs obviously considered the rulings to be adverse because they contested the entry of the orders and even tried to modify one of them after it was entered. But it is not the adverse rulings that caused the claims to accrue; it was the incurrence of additional fees in those proceedings—fees directly caused by defendants’ negligence. The adverse ruling in the equitable portion of the case just further demonstrates that plaintiffs knew of their injury long before this case was brought and even before the fiduciary duty claims were filed. When plaintiffs were ultimately unsuccessful in defeating ROC’s claims in equity, plaintiffs had already incurred fees from the Gaspero firm, but the claims for breach of fiduciary duty had not even been asserted. ¶ 57 Plaintiffs had a legal injury for which they would be entitled to seek redress from defendants that predates and was not dependent upon the outcome of the breach of fiduciary duty claims. The existence of plaintiffs’ legal malpractice claim was never dependent on outcome of the breach of fiduciary duty claims asserted by ROC. Plaintiffs had a sufficient injury for legal malpractice purposes regardless of the outcome of the breach of fiduciary duty case. Plaintiffs simply did not know the extent of their damages yet, i.e., would the damages additionally include amounts assessed for a breach of fiduciary duties. But under the discovery rule, the statute of limitations is not tolled to the point that a party knows the full extent of the injury. Kadlec v. Sumner, 2013 IL App (1st) 122802 , ¶¶ 27, 29. Instead, the limitations period is tolled only until the point that the party knows it was injured and that the injury was wrongfully caused. Id.; see also Khan v. Deutsche Bank AG, 2012 IL 112219 , ¶ 45 (“ ‘our cases adhere to the general rule that the limitations period commences when the plaintiff is injured, rather than when the plaintiff - 18 - Nos. 1-19-1953 & 1-19-1973 realizes the consequences of the injury or the full extent of her injuries’ ” (quoting Golla v. General Motors Corp., 167 Ill. 2d 353 , 364 (1995))). Before the claims for breach of fiduciary duty were asserted against plaintiffs, plaintiffs knew about the negligence and began paying attorney fees to try to mitigate the harm caused by their prior counsel, meaning that they were legally “injured” by the attorney’s negligence. They just did not know how badly they were injured yet. ¶ 58 The majority states that, if plaintiffs had first filed a malpractice claim against defendants and then later prevailed in defending the breach of fiduciary duty claims against them, then the malpractice case would have been “pointless.” Supra ¶¶ 26, 32. The majority’s holding implies that plaintiffs would not have any claim for legal malpractice absent plaintiffs being found liable in the breach of fiduciary duty case. But plaintiffs already had all the elements for a judiciable malpractice claim before they were even accused of breaching their fiduciary duties by ROC. In fact, plaintiffs are seeking fees in this case for matters wholly outside that breach of fiduciary duty case, such as fees charged by the Gaspero firm for the equitable portion of the case against plaintiffs in which they incurred fees in an attempt to modify the temporary restraining order and prevent the imposition of permanent injunctive relief. Plaintiffs suffered a cognizable legal injury long before the adverse judgment on the breach of fiduciary duty claims, and the extent of the injury simply increased when plaintiffs were found liable for breaching their fiduciary duties. ¶ 59 Even if plaintiffs had somehow succeeded in avoiding an adverse judgment against the breach of fiduciary duty claims, they still would have had a legal injury for the fees that they incurred from the Gaspero firm unrelated to the breach of fiduciary duty claims. The additional fees brought about by the breach of fiduciary duty claims only enhanced the financial loss attributable to defendants. Those additional fees did not create the legal injury in the first place. Plaintiffs had a fully formed malpractice claim, and they could have sought recovery from - 19 - Nos. 1-19-1953 & 1-19-1973 defendants even if they were never sued for breach of fiduciary duty or if they had successfully defended against the action. ¶ 60 It is not at all uncommon that a party aggrieved by malpractice files a lawsuit before the underlying case is fully resolved. In FagelHaber, we discussed the common practice of a party filing a malpractice case and then having that case stayed until the full extent of damages is known. FagelHaber, 2019 IL App (1st) 172430 , ¶ 31. Frequently, the filing of a suit at this stage gives the malpractice insurance carrier and the other parties an opportunity to plot a more efficient resolution of the disputes. ¶ 61 Like in FagelHaber, it is clear that plaintiffs knew about defendants’ negligence, incurred and paid legal fees because of that negligence, and therefore suffered an actual and actionable injury before an adverse judgment was ever entered against them in the underlying action. FagelHaber, 2019 IL App (1st) 172430 , ¶ 30. Once plaintiffs knew that defendants were negligent and incurred fees from successor counsel to mitigate the negligence committed by defendants, plaintiffs had a viable malpractice claim against defendants, and the statutory period began to run. Goran, 276 Ill. App. 3d at 596. ¶ 62 Conclusion ¶ 63 Because the legal malpractice claim plaintiffs assert against defendants accrued more than two years before this case was filed, I would hold that plaintiffs’ claims are barred by the two-year statute of limitations for claims against attorneys. I would affirm the trial court’s judgment, and therefore, I respectfully dissent. - 20 - Nos. 1-19-1953 & 1-19-1973 No. 1-19-1953 Cite as: Suburban Real Estate Services, Inc. v. Carlson, 2020 IL App (1st) 191953 Decision Under Review: Appeal from the Circuit Court of Cook County, No. 16-L- 5295; the Hon. Diane M. Shelley, Judge, presiding. Attorneys John W. Moynihan, of Downers Grove, for appellants for Suburban Real Estate Services, Inc. and Bryan E. Barus. Appellant: Attorneys John J. D’Attomo, of Nisen & Elliott, LLC, of Chicago, for for appellees William Roger Carlson Jr. and Carlson Partners, Ltd. Appellee: Rebecca M. Rothmann, of Wilson Elser Moskowitz Edelman & Dicker LLP, of Chicago, for other appellees. - 21 -

2020-11-30 21:03:57.17949+00

http://www.illinoiscourts.gov/Opinions/AppellateCourt/2020/1stDistrict/1172706.pdf

2020 IL App (1st) 172706 No. 1-17-2706 Opinion filed November 30, 2020 First Division ______________________________________________________________________________ IN THE APPELLATE COURT OF ILLINOIS FIRST DISTRICT ______________________________________________________________________________ THE PEOPLE OF THE STATE OF ILLINOIS, ) Appeal from the ) Circuit Court of Plaintiff-Appellee, ) Cook County. ) v. ) No. 17 CR 6783 ) JONETTA SHEPHERD, ) Honorable ) James B. Linn, Defendant-Appellant. ) Judge, presiding. JUSTICE HYMAN delivered the judgment of the court, with opinion. Justice Griffin concurred in the judgment and opinion. Justice Pierce dissented, with opinion. OPINION ¶1 The trial court found defendant Jonetta Shepherd guilty of unlawful use or possession of a weapon by a felon (UUWF) and sentenced her to 42 months’ imprisonment. On appeal, Shepherd contends that the State failed to prove beyond a reasonable doubt that her possession of the firearm was not justifiable by reason of necessity. The State correctly argues that Shepherd’s trial counsel forfeited the affirmative defense of necessity by failing to raise it in an answer to the State’s request for discovery. Anticipating that argument, Shepherd asserts her trial counsel was ineffective for failing to raise the necessity defense. We agree, reverse her conviction, and remand for a new trial. No. 1-17-2706 ¶2 Background ¶3 The State charged Shepherd with four counts of UUWF and six counts of aggravated unlawful use of a weapon. Before trial, Shepherd’s counsel told the court and the State that Shepherd would file a written answer to discovery. Counsel never filed an answer. ¶4 In opening statements, Shepherd’s theory was that the State would not meet its burden to prove Shepherd’s knowledge and intent to possess a firearm. Counsel highlighted expected testimony that police officers found a gun in a purse allegedly belonging to Shepherd and that Shepherd had not put the gun there. ¶5 Officer Graylin Watson testified that he and his partner responded to a call reporting a woman in sunglasses and black clothing with a gun in her purse. When they arrived, they saw a woman, identified in court as Shepherd, who matched the call’s description. The caller also described a man in a green shirt and pants who was grabbing for the gun in the woman’s purse. When Watson’s partner got out of their car, Shepherd dropped her purse to the ground. Watson explained that he saw her holding the purse for four to six seconds before dropping it. Watson looked in the open purse and saw a 9-millimeter firearm with an extended clip loaded with 18 rounds in the magazine and one in the chamber. He did not find in the purse either a Firearm Owners Identification Card or a Concealed Carry License. ¶6 Watson arrested Shepherd. At the police station, he heard her say, “I’m stupid. I’m on parole. I messed up my life.” He did not record this statement in any of his reports but did provide it to the person assigned to felony review of the incident. Watson never spoke to the man in the green shirt and pants, nor did he speak to any of the other six people in the vicinity of where he found the purse. -2- No. 1-17-2706 ¶7 The State introduced a certified copy of Shepherd’s 2016 conviction for aggravated battery of a peace officer. ¶8 Shepherd testified that she and some friends, including Von Civils, were hanging out with others she was not familiar with. Shepherd left the group to use the restroom located inside a nearby “neighborhood candy store.” Before leaving, Shepherd handed her purse to Von Civils, who had on a green shirt and jeans, because she did not want the store owner to think she was going to steal anything. Shepherd used the restroom, bringing only her cell phone with her, and was gone for roughly five to seven minutes. ¶9 When Shepherd came back, her purse was on the ground next to Von Civils. Shepherd picked it up and saw a gun inside, which she denied putting there. She testified, “I was scared. I was shocked. I didn’t know what to do. I was just stuck.” Shepherd tried to get someone to remove the gun from her purse for her because she did not want to touch it, but nobody did. Shepherd did not personally take the gun out of her purse because she did not want her fingerprints on it, did not empty her purse because she was “in shock,” and knew the firearm was in her purse when she dropped it. Shepherd did not learn to whom the firearm belonged until after she was incarcerated. ¶ 10 In closing, Shepherd’s counsel argued that Watson never testified that he saw Shepherd with a weapon and that Shepherd’s testimony that she found the firearm in her purse and did not want to touch it for fear she would get her fingerprints on it was credible. ¶ 11 Based on this evidence, the trial court found Shepherd guilty of UUWF. In announcing its decision, the trial court stated: “I do find Officer Watson to be very credible. As to the defendant, *** her story is that she was innocently trying to use the washroom at someone’s informal candy -3- No. 1-17-2706 store in their home and left a purse outside so she wouldn’t get accused of stealing something ***. She realized immediately upon coming out that there was a gun and did nothing about it until the police came, at which point when she saw that the police were there, at that point she abandoned the gun, but she had it for a period of time before that. Even *** if I were to believe her, I’m not so certain that I do, but if I were to believe her, possession always has to be a voluntary act and *** if it’s a situation where it’s really not yours, but somehow it ends up in your lap or in your purse, you have to terminate the possession in a reasonable time, like, right away, and that didn’t happen. All that happened was that she abandoned the purse with the contraband when she saw the police and did nothing about abandoning it either.” ¶ 12 After a hearing where the parties presented arguments in aggravation and mitigation, the trial court sentenced Shepherd to 42 months’ imprisonment. ¶ 13 Analysis ¶ 14 Neither party disputes that Shepherd’s conduct satisfies the elements of UUWF—a person knowingly possessing a firearm having been convicted of a felony. 720 ILCS 5/24-1.1(a) (West 2016). Shepherd’s testimony showed the gun was in her purse, which was in her possession, and she knew it was there. The State also introduced a certified copy of her conviction for aggravated battery of a peace officer, which constitutes a felony. Id. § 12-3.05(d)(4), (h). The State proved the elements of UUWF. ¶ 15 Affirmative Defense of Necessity -4- No. 1-17-2706 ¶ 16 Rather, Shepherd argues the State failed to prove her guilty of UUWF because it failed to prove, beyond a reasonable doubt, that her possession of the firearm amounted to justifiable necessity. The State responds that Shepherd forfeited this argument because necessity constitutes an affirmative defense and counsel failed to put the State on notice of the defense by failing to file an answer. We agree with the State. ¶ 17 Necessity gives rise to an affirmative defense. See People v. Jackson, 2013 IL 113986 , ¶ 23 (listing necessity as example of affirmative defense). A defendant forfeits an affirmative defense by failing to make it in the trial court. People v. Bardsley, 2017 IL App (2d) 150209 , ¶ 1. We hold defendants to their forfeiture of affirmative defenses because once an affirmative defense has been presented, the State must provide evidence to rebut the defense beyond a reasonable doubt. Id. ¶ 17. Where a defendant fails to properly raise an affirmative defense, the State loses its ability to determine what it must rebut and “would have to disprove every affirmative defense of which even ‘slight evidence’ exists or risk *** new potential defenses on appeal.” (Emphasis in original.) Id. ¶ 22. The typical method for alerting the State of a defense involves the answer to discovery. See Ill. S. Ct. R. 413(d) (eff. July 1, 1982). Here, the parties do not dispute trial counsel’s failure to file an answer at all, let alone an answer raising the defense of necessity. ¶ 18 That said, Bardsley left open the possible mechanisms by which a defendant could make an affirmative defense. See Bardsley, 2017 IL App (2d) 150209 , ¶ 23 (“we have not addressed what [defendant] would have needed to do [to raise the affirmative defense] or when he would have needed to do it”). Maybe explicitly raising it in a closing argument would be enough; maybe raising it for the first time in a motion for a new trial would even be enough, allowing the State to argue against it based on the facts in the record. Like Bardsley, however, we need not answer the -5- No. 1-17-2706 question. Shepherd’s counsel never mentioned the affirmative defense of necessity at any time during any argument before the trial court. By any measure, trial counsel forfeited the defense. ¶ 19 Ineffectiveness of Counsel ¶ 20 Anticipating the State’s claim of forfeiture, Shepherd also argues that counsel provided ineffective assistance by foregoing reliance on the affirmative defense of necessity. Specifically, she argues that counsel’s failure to serve notice on the State of the use of the necessity defense constitutes deficient performance and that performance prejudiced her because trial evidence supported the defense. We evaluate claims of ineffective assistance of counsel under the familiar standard set out in Strickland v. Washington, 466 U.S. 668 (1984). See People v. Utley, 2019 IL App (1st) 152112 , ¶ 36. To demonstrate ineffective assistance, a defendant must show that (i) his or her counsel’s performance was deficient and (ii) any deficient performance prejudiced him or her. Id. We review claims of ineffective assistance of counsel de novo. Id. ¶ 37. ¶ 21 The State presented no argument about deficient performance. Ill. S. Ct. R. 341(h)(7) (eff. May 25, 2018) (“[p]oints not argued are forfeited”). Because the State forfeited any argument about counsel’s deficiency we assume, without deciding, that counsel rendered deficient performance. See People v. Cruz, 2013 IL 113399 , ¶ 19 (declining to decide issue on merits where State forfeited it). Instead, the State asks us to affirm because, in its view, the purportedly overwhelming evidence of Shepherd’s guilt discredits prejudice. We disagree. ¶ 22 To show prejudice from counsel’s deficient performance, Shepherd must demonstrate a reasonable probability that the result of the trial would have been different had counsel performed adequately, meaning “ ‘ “a probability sufficient to undermine confidence in the outcome.” ’ ” People v. Gonzalez, 385 Ill. App. 3d 15 , 19 (2008). This is not a high burden. See People v. -6- No. 1-17-2706 Lucious, 2016 IL App (1st) 141127 , ¶ 45 (“prejudice may be found even when the chance that minimally competent counsel would have won an acquittal is significantly less than 50 percent as long as a verdict of not guilty would be reasonable” (internal quotation marks omitted)). Shepherd has met that burden here. ¶ 23 Where a defendant claims ineffective assistance for failing to assert a defense, the record must contain enough evidence to support the theory. See People v. Tenner, 175 Ill. 2d 372 , 391 (1997) (finding lack of prejudice where judge’s ruling on affirmative defense was based on “inadequacy of the evidence offered in support of the theory”). In the specific context of affirmative defenses, it takes only “very slight evidence” supporting the defense to submit it to the factfinder. See Gonzalez, 385 Ill. App. 3d at 19. ¶ 24 Necessity has three basic elements: (i) defendant must be “without blame in occasioning or developing the situation” leading to criminal conduct, (ii) defendant must reasonably believe that his or her conduct was necessary to avoid a public or private injury, and (iii) the public or private injury must be greater than the injury caused by the defendant’s own conduct. 720 ILCS 5/7-13 (West 2016). We find “very slight evidence” supporting the necessity defense. ¶ 25 There is direct evidence of the first element. Shepherd testified that she did not put the gun in her purse and found it there after leaving it with others when she went to the restroom. ¶ 26 Also, direct evidence establishes that Shepherd believed her conduct as necessary to avoid a private injury. Shepherd testified that she did not want to touch the gun for fear of getting her fingerprints on it, leading to and implying that she owned the gun. We also find some evidence that Shepherd’s temporary possession was necessary to avoid a public injury. Shepherd’s -7- No. 1-17-2706 temporary possession of the gun, while she attempted to find the rightful owner, kept the gun securely in the purse instead of out on the street. ¶ 27 As to the final element—the balance of harms—the State posits that a reasonable alternative would have been dumping the purse’s contents on the sidewalk. We do not agree that this would be a reasonable alternative. Shepherd’s temporary possession of the gun while she tried to get rid of it—in her purse, obstructed from public view, not being brandished by anyone—offers a better alternative to leaving the gun in plain view on the ground where anyone could find it, take it, and use it. Moreover, because the police charged Shepherd with only a possessory offense, the relative harm caused by her momentary possession of the gun was small. ¶ 28 Because some evidence supports the necessity defense, we must consider whether Shepherd’s counsel’s failure to present the defense prejudiced the trial’s outcome. We find it did. ¶ 29 Trial counsel’s opening statement focused on the State’s inability “to meet their burden to prove knowledge and intent to possess a firearm” primarily because “[Shepherd] did not put that gun in her purse.” Two things stand out from counsel’s statement: (i) counsel appeared to be laboring under a mistaken impression that Shepherd would not be guilty of possession as long as she was not the one who put the gun in her purse or otherwise did not intend to possess it and (ii) counsel conceded that officers found the gun in her purse, essentially admitting possession. Then, during Shepherd’s testimony, counsel elicited an admission that she had the gun in her purse and knew it was there—the precise elements counsel told the court the State would not be able to prove. ¶ 30 Counsel repeated similar errors in closing argument, asking the court to find Shepherd not guilty because she did not touch the gun, all while admitting (again) that the gun was in her purse. In finding Shepherd guilty, the trial court rejected this argument: “[I]f it’s a situation where it’s -8- No. 1-17-2706 really not yours, but somehow ends up in your lap or in your purse, you have to terminate the possession in a reasonable time.” The court did not consider necessity in its findings. We presume the trial court (here, quite able) knows the law, including the law of affirmative defenses, but the court is not obligated to consider a defense that counsel does not put before it. Bardsley, 2017 IL App (2d) 150209 , ¶ 22. We cannot expect the trial court to look at the evidence through the lens of the necessity defense unless that defense was presented. See id. Counsel’s failure to put the State on notice of the necessity defense and to put that defense before the trial court undermines our confidence in the outcome. See Gonzalez, 385 Ill. App. 3d at 19. ¶ 31 The dissent rejects any claim of prejudice, finding it clear that counsel asserted and the trial court considered a necessity defense. Not even the State reads the record that way, repeatedly arguing in its brief before us that “the defense in this case was reasonable doubt,” that “defense counsel never attempted to elicit any type of ‘necessity defense,’ ” and that “there was no claim of necessity.” Even in the section of its brief arguing against Shepherd’s claim of ineffective assistance of counsel, the State resists any implication that the record (either through testimony or argument) presented a necessity defense to the trial court. The State claims that “there was no evidence to amount to a necessity defense” and “there was overwhelming evidence that [Shepherd] did not *** present any evidence to support the necessity defense.” This seems like a position we should take seriously, given it is the State’s burden to rebut an affirmative defense beyond a reasonable doubt. See Bardsley, 2017 IL App (2d) 150209 , ¶ 22. ¶ 32 As for the dissent’s suggestion that defense counsel in criminal proceedings will intentionally sit on their hands instead of raising a viable affirmative defense at the earliest opportunity, our supreme court has roundly rejected that kind of supposition. In the plain error -9- No. 1-17-2706 context, our supreme court described as “fanciful and denigratory to the defense bar” the State’s argument that defense attorneys would have “ ‘an improper incentive to “sit on their hands” and allow errors to unfold without objection.’ ” People v. Sebby, 2017 IL 119445 , ¶¶ 70-71. As with forfeited claims raised as plain error, so to with forfeited claims raised as ineffective assistance of counsel. It is “fanciful and denigratory” to assume that counsel who intends to raise an affirmative defense will intentionally fail to put the State and the court on notice of that defense before trial. Instead we treat the forfeiture as what it is—a mistake (a/k/a ineffective assistance of counsel). ¶ 33 The dissent is entitled to its view of the factual merits of the necessity defense; we need not further rehash our conclusion on that score. We reiterate that Shepherd need only establish prejudice sufficient to undermine confidence in the outcome—a “significantly less than 50 percent” chance that the outcome of trial would have been different. (Internal quotation marks omitted.) Lucious, 2016 IL App (1st) 141127 , ¶ 45. With that understanding of Strickland prejudice, we reverse and remand for a new trial. ¶ 34 Reversed and remanded. ¶ 35 JUSTICE PIERCE, dissenting: ¶ 36 The majority in this case finds that defense counsel was ineffective for failing to serve notice on the State of the intent to assert the defense of necessity because it resulted in prejudice to defendant where the evidence supported the defense. I respectfully disagree. The defendant suffered zero prejudice in this case, since defense counsel early in the proceedings put the court and the prosecution on notice of the reliance on a necessity defense. Defendant’s testimony, that she relies on in support of her appeal, encompassed what she considered to be sufficient evidence - 10 - No. 1-17-2706 to establish the defense of necessity, and, critically, her testimony setting forth her claimed necessity defense was considered and rejected by the trial court in her bench trial. ¶ 37 As set forth in her appellant’s brief, defendant’s sole contention on appeal is that the State failed to prove illegal possession of a weapon “because the defense at trial nevertheless conformed with the necessity defense described in 720 ILCS 5/7-13, and the State and the [trial] court treated it accordingly.” Defendant readily concedes that “[T]he State cross-examined Shepherd as to why she did not immediately remove the gun from her purse, and the trial court considered whether she terminated her possession in a reasonable enough time to justify her conduct.” In other words, according to the defendant, the State did not meet its burden because defendant’s testimony should have been accepted as credible and her testimony was sufficient to establish a necessity defense. ¶ 38 Because no formal answer to discovery was filed, defendant offers the alternative appellate argument of ineffective assistance of counsel in anticipation that either this court or the State would raise the issue of forfeiture. True to form, the State argues forfeiture because the necessity defense argument is being raised for the first time on appeal because no notice of an affirmative defense was filed during discovery and the term “necessity” was never mentioned at trial or in defense counsel’s closing argument. The majority takes the bait. In doing so, the majority creates a new strategy for the defense bar: do not file pretrial discovery asserting an affirmative defense, but present evidence in the nature of an applicable affirmative defense. If convicted, a defendant has a built-in appellate issue of ineffective assistance of counsel for failing to file a notice of an affirmative defense. Contrary to the majority’s assertion, the creation of this “built-in appellate issue” is not a reflection on the defense bar; rather, it is a commentary on what will result from unsound appellate reasoning in the review of this appeal. - 11 - No. 1-17-2706 ¶ 39 I would find that, in this case, defendant was found guilty beyond a reasonable doubt where the defendant unsuccessfully presented evidence in the nature of a necessity defense, without objection or limitation from the State; where the trial court considered and rejected defendant’s testimony; and where the trial court correctly found the defendant guilty. Further, I would find that there was no prejudice where defense counsel failed to file notice of an affirmative defense but introduced evidence of an affirmative defense that was rejected by the trial court. ¶ 40 Defendant readily admits that defense counsel never specifically put the State on formal notice that it intended to assert the defense of necessity. If any complaint lies in this regard, it lies with the State. However, defendant nevertheless presented testimony containing all the “facts” that established a defense of necessity. Thus, admitting that she presented an affirmative defense, defendant seeks a new trial because either her affirmative defense was not overcome beyond a reasonable doubt, which it was, or her counsel did not file an answer in discovery disclosing the exact defense that was presented, and rejected, during her bench trial. Under the facts of this case, granting a new trial is absurd. ¶ 41 The defense of necessity involves the following elements: (1) the person claiming the defense was without blame in occasioning or developing the situation and (2) the person reasonably believed that his conduct was necessary to avoid a greater public or private injury than what reasonably might have resulted from his own conduct. 720 ILCS 5/7-13 (West 2016). The burden of proving the defendant’s guilt beyond a reasonable doubt always rests on the State (People v. Abadia, 328 Ill. App. 3d 669 , 679 (2001)), and once an affirmative defense has been raised, the State has the burden of proving the defendant guilty beyond a reasonable doubt as to that issue (People v. Guja, 2016 IL App (1st) 140046 , ¶ 46). - 12 - No. 1-17-2706 ¶ 42 This was a bench trial where the arresting officer testified to the elements of the charge and to defendant’s voluntary admissions made after her arrest that “I’m stupid,” “I’m on parole,” and “I messed up my life.” In her defense, defendant testified that she was with friends and left her purse with Von Civils while she went to use the bathroom. When she returned, her purse was on the ground next to Civils. She picked up her purse, opened it, and discovered there was a gun inside. The gun was not in her purse when she left it with Civils. She testified that she was scared and shocked and did not know what to do. Because she was a felon, if she were caught with the gun, she would be arrested. She spent several minutes trying to figure out who the gun belonged to and trying to get someone to remove the gun from her purse before the police arrived. She dropped her purse on the ground when the police arrived. Notably, she did not deny her admissions to the arresting officer. ¶ 43 Defendant’s testimony was clearly an attempt to assert the elements of a necessity defense. Her testimony demonstrates that her counsel presented a defense of necessity unrestrained and unimpeded in any manner by objection from the State or by any comment from the trial court. Because her testimony was rejected, defendant basically claims that her testimony should have been accepted and, should this court reject her reasonable doubt argument, she throws in a Strickland claim in hopes of obtaining a retrial. Clever work by appellate counsel; however, not clever enough in my estimation to warrant a new trial. ¶ 44 Defendant testified and admitted to possessing the gun but denied knowing how it got into her purse. See People v. Pickett, 217 Ill. App. 3d 426 , 428 (1991) (for the defense of necessity to be available, defendant must admit she committed the offense). She also testified that she attempted to locate the gun’s owner. By her temporary possession of the gun while she attempted to find the gun’s owner, she kept the gun securely in her purse instead of out on the street. - 13 - No. 1-17-2706 Defendant testified on cross-examination that she did not take the gun out of her purse because she did not want to touch the gun and leave her fingerprints on it. She further testified that she did not merely empty her purse onto the ground because she was “in shock.” See People v. Janik, 127 Ill. 2d 390 , 399 (1989) (The defense of necessity “is viewed as involving the choice between two admitted evils where other optional courses of action are unavailable [citations], and the conduct chosen must promote some higher value than the value of literal compliance with the law [citation].”) Clearly, no testimony was offered on the greater evil she sought to avoid or that her conduct promoted some higher value than the conduct she engaged in. Even if such testimony had been offered, it did not have to be accepted by the trial court. The trial court found defendant’s testimony unconvincing, and its credibility determination must be respected. People v. Brown, 2013 IL 114196 , ¶ 48. ¶ 45 Once evidence of a necessity defense is presented, the trier of fact determines whether the defendant’s actions were objectively reasonable under the circumstances presented and whether the defendant’s reasonable belief has been held to encompass an objective factor. See People v. Kucavik, 367 Ill. App. 3d 176 , 180 (2006). The factors involved in determining the validity of a necessity defense inherently go to the weight and credibility of the evidence. See People v. Kite, 153 Ill. 2d 40 , 46 (1992). It is clear from the record that defendant presented a necessity defense. The court considered and rejected defendant’s necessity defense because it simply did not find defendant’s version of the events to be credible, and the court therefore rejected defendant’s testimony that, in defendant’s words, “nevertheless conformed with the necessity defense.” Indeed, when the court remarked that it found Officer Watson to be “very credible,” this must have included his testimony of defendant’s admissions. With respect to defendant’s version of the events, the court remarked, “her story is that she was innocently trying to use the washroom” (the - 14 - No. 1-17-2706 first element of the defense: she was without blame in developing the situation) and “I’m not so certain that I [believe her].” The court later stated that “all that happened was that she abandoned the purse with the contraband when she saw the police and did nothing about abandoning it either [sic]. And that’s if I even agree with her story. So there’s a finding of guilty.” 1 The experienced trial judge is presumed to know the law, and he was in a superior position to judge defendant’s credibility. We should defer to the trial court’s credibility determinations and affirm this conviction. ¶ 46 Defense counsel did not specifically indicate that a necessity defense would be asserted. However, this court may review this claim because, as the defendant admits in her appellate brief, “the defense at trial nevertheless conformed with the necessity defense described in 720 ILCS 5/7- 13, and the State and the court treated it accordingly.” How the majority can ignore this statement and claim counsel was ineffective is beyond comprehension. See People v. Crowder, 2018 IL App (1st) 161226 , ¶¶ 34-35 (finding State failed to negate evidence supporting necessity defense where defendant argued he “had no choice but to grab the gun,” though counsel did not explicitly assert necessity as a defense at trial). The State never objected to this testimony, and Shepherd was cross- examined as to why she did not immediately remove the gun from her purse. The trial court considered whether she reasonably terminated her possession to justify her conduct. The court also remarked that even if Sheppard was in possession of the gun through no fault of her own, she did not take adequate steps to rid herself of the gun within a “reasonable time” (the second element of the defense: a reasonable belief her conduct was necessary to avoid a greater public or private injury.) 1 I presume the court said or meant to say “and did nothing about abandoning it earlier.” - 15 - No. 1-17-2706 ¶ 47 Again, defense counsel presented a defense of necessity that was ultimately rejected by the trier of fact. For this reason, I would find that defendant suffered no prejudice and that counsel’s performance was not even close to meeting the Strickland standard for a showing ineffective assistance of counsel. Defendant suffered no prejudice from defense counsel’s failure to formally serve notice on the State of an intent to assert the defense of necessity because the defense was asserted. ¶ 48 The majority’s conclusion results in a second trial where the defendant may or may not choose to testify. The State will offer the same testimony in support of the charge. If defendant does not testify, she will likely be convicted again. If she does testify, she presumably will offer the same testimony she presented in this trial to advance the affirmative defense of necessity, her testimony presumably will be rejected, and she will be convicted. The term “second bite at the apple” does not do justice to the gift the majority is bestowing upon the defendant. If the majority is sincere in its complimentary remarks about the trial judge, it would acknowledge that (1) the trial judge, admittedly not perfect, is presumed to know the law, (2) he has likely prosecuted and presided over more criminal trials than the entirety of the justices in this appellate district, and (3) he enjoys an excellent reputation for fairness, understanding of the law, and a keen appreciation for assessing credibility and according appropriate weight to the evidence, such that the procedural failure to file a formal notice of an affirmative defense would not impair his ability to render a fair and just verdict where the elements of the affirmative defense are offered. In short, had a formal notice of an affirmative defense of necessity been filed, the defendant’s testimony would have been the same, the trial court’s rejection of defendant’s testimony because it “didn’t believe her” would have been the same, and the finding of guilt would have been the same. - 16 - No. 1-17-2706 ¶ 49 The defendant was not prejudiced in any regard. Defendant claims on appeal that her testimony established that her affirmative defense was sufficient to defeat the State’s burden of proof beyond a reasonable doubt. But that testimony was rejected. The State proved her guilt beyond a reasonable doubt. There was no ineffective assistance by her trial counsel where defendant presented the defense she wanted. ¶ 50 Lastly, the majority takes me to task for not following the State’s argument that “the defense in this case was reasonable doubt,” that “defense counsel never attempted to elicit any type of ‘necessity defense,’ ” and that “there was no claim of necessity.” Supra ¶ 31. They go on to admonish that “we should take [the State’ position] seriously given it is the State’s burden to rebut an affirmative defense beyond a reasonable doubt.” Supra ¶ 31. First, we are under no compulsion to accept the State’s argument, especially where it is flat out wrong. It is an argument that is obviously advanced to defeat defendant’s claim that a necessity defense was asserted at trial, which the defense undoubtedly did. Second, the State’s position in this regard is so incorrect that even the majority rejects the argument when it finds evidence of each element of a necessity defense in the record (supra ¶¶ 25-27) and makes its finding that “some evidence supports the necessity defense” (supra ¶ 28). If the majority is so enamored with the State’s position, it should “take it seriously,” adopt it, and affirm the conviction. ¶ 51 I respectfully dissent. - 17 - No. 1-17-2706 No. 1-17-2706 Cite as: People v. Shepherd, 2020 IL App (1st) 172706 Decision Under Review: Appeal from the Circuit Court of Cook County, No. 17-CR-6783; the Hon. James B. Linn, Judge, presiding. Attorneys James E. Chadd, Patricia Mysza, and Katherine M. Donahoe, of for State Appellate Defender’s Office, of Chicago, for appellant. Appellant: Attorneys Kimberly M. Foxx, State’s Attorney, of Chicago (Alan J. for Spellberg, Iris G. Ferosie, and Christine Cook, Assistant State’s Appellee: Attorneys, of counsel), for the People. - 18 -

2020-11-30 21:03:58.085273+00

http://www.illinoiscourts.gov/Opinions/AppellateCourt/2020/2ndDistrict/2190475.pdf

2020 IL App (2d) 190475 No. 2-19-0475 Opinion filed November 30, 2020 ______________________________________________________________________________ IN THE APPELLATE COURT OF ILLINOIS SECOND DISTRICT ______________________________________________________________________________ THE PEOPLE OF THE STATE ) Appeal from the Circuit Court OF ILLINOIS, ) of Du Page County. ) Plaintiff-Appellee, ) ) v. ) No. 95-CF-2075 ) WILLIAM E. AMOR, ) Honorable ) Robert A. Miller, Defendant-Appellant. ) Judge, Presiding. ______________________________________________________________________________ JUSTICE McLAREN delivered the judgment of the court, with opinion. Justices Zenoff and Hudson concurred in the judgment and opinion. OPINION ¶1 Defendant, William E. Amor, appeals the trial court’s order denying his petition for a certificate of innocence under section 2-702 of the Code of Civil Procedure (735 ILCS 5/2-702 (West 2016)). We affirm. ¶2 I. BACKGROUND ¶3 On September 10, 1995, Marianne Miceli died of carbon monoxide intoxication from inhaling smoke and soot during a fire in her apartment. Defendant and his wife, Tina, who was also Miceli’s daughter, lived in Miceli’s apartment but had gone out for the evening shortly before the fire started. Defendant was questioned about the matter several times in the next several weeks.  2020 IL App (2d) 190475 He denied having any information about the fire or any knowledge regarding any life insurance that Miceli had. Gradually, his story began to change, as he remembered spilling some vodka and possibly leaving a lit cigarette in a nearby ashtray. Immediately upon his release from a two-week stint in jail on a traffic warrant, detectives extensively questioned defendant again. During this questioning, detectives allowed a process server to serve defendant with Tina’s petition for divorce. They also told defendant that Tina believed that he started the fire and was responsible for her mother’s death. Eventually, defendant put his head on the table and said that the fire was his fault. Defendant stated that he had knocked a lit cigarette onto a pile of newspapers onto which he had previously spilled some vodka; he heard it sizzle and saw it smolder. He deliberately left the pile to smolder while he and Tina left to go to the movies. Defendant gave audiotaped statements to both the police and an assistant state’s attorney. He eventually said that he had intentionally knocked a lit cigarette onto vodka-sodden newspapers because he wanted to get Miceli’s insurance proceeds due to the apartment’s unbearable living arrangements. ¶4 The State charged defendant with one count of first-degree murder (720 ILCS 5/9-1(a)(3) (West 1994)) and one count of aggravated arson (id. § 20-1.1(a)(1)). The court denied defendant’s motion to suppress statements and quash his arrest. A jury subsequently found him guilty of both counts. We affirmed defendant’s conviction for first-degree murder, specifically finding, among other things, that (1) the trial court’s determination that defendant’s inculpatory statements were voluntary was not against the manifest weight of the evidence and (2) defendant was proven guilty beyond a reasonable doubt. See People v. Amor, No. 2-97-1189 (1999) (unpublished order pursuant to Illinois Supreme Court Rule 23). 1 1 This court reversed defendant’s conviction of and sentence for aggravated arson, pursuant -2-  2020 IL App (2d) 190475 ¶5 Defendant filed a petition for postconviction relief under the Post-Conviction Hearing Act (725 ILCS 5/122-1 et seq. (West 2000)). The petition raised issues of ineffective assistance by both trial and appellate counsels. The court dismissed the petition at the second stage, and we affirmed the dismissal. See People v. Amor, No. 2-01-0962 (2002) (unpublished order pursuant to Illinois Supreme Court Rule 23). ¶6 Defendant then filed a successive petition for postconviction relief in 2015, raising an issue of actual innocence. This petition proceeded to a third-stage evidentiary hearing, after which the trial court held: “In the instant case there was evidence of motive and intent: consider, for example, the need for money to obtain a new residence and start a new life; knowledge of at least some insurance; and the disabling of the fire detector. There was also evidence of consciousness of guilt: consider, for example, defendant’s lies about insurance, denial of drinking, denials concerning Tina and the lighter fluid, and the evolution of his statements generally. But all that being said, there can be no question that the lynchpin of the State’s case at trial was the defendant’s confession, which the State and Defense experts today agree is scientifically impossible. Whatever the reasons for the Defendant’s scientifically impossible confession, the new evidence places the evidence presented at trial in a different light and undercuts this Court’s confidence in the factual correctness of the guilty verdict.” The court then vacated defendant’s conviction and continued the matter for further proceedings. ¶7 The case proceeded to a bench trial. While most of the testimony was identical to that at the first trial, there was new testimony regarding the fire’s cause and origin. Defendant presented to the “one act, one crime” doctrine. -3-  2020 IL App (2d) 190475 three experts on that issue. One opined that a smoldering cigarette left in a recliner caused the fire. Another testified that a smoldering cigarette was unlikely to have ignited the fire and believed that investigators should have classified the fire as “undetermined.” The third also opined that the fire’s cause classification should have been “undetermined.” All three experts agreed—defendant could not have started the fire in the manner described in his confession. The State presented further expert testimony that the fire’s point of origin was near where defendant had confessed to starting the fire. However, the expert concluded that the cause of the fire was open flame ignition by human hands. This testimony indicates an intentionally set fire—not an accidentally set fire. ¶8 The trial court found defendant not guilty on all charges. In its extensive written order, the trial court addressed the issue of defendant’s confession: “But there are also the defendant’s statements over time to Officers Cross, Gurrerri, Carlson, Cunningham and [Assistant State’s Attorney] Nigohosian. The defendant’s version of events evolved over time: starting with outright denials; moving to suggestions of accident; and ultimately ending with an admission to setting the fire for insurance proceeds. The problem with the defendant’s ultimate admission, of course, is that he confesses to a scenario that both defense and state experts agree is scientifically impossible. Clearly the defendant’s vodka soaked newspaper/cigarette story, believed by the investigating officers and fire experts who testified in 1997, cannot serve as a basis for a finding of guilt with the advances in modern fire science knowledge. That having been said, it must nevertheless be determined [sic] the import of defendant’s confession that he started the fire, notwithstanding that he admitted doing so in an impossible manner.” ¶9 Defendant then filed a petition for a Certificate of Innocence under section 2-702 of the Code of Civil Procedure (735 ILCS 5/2-702 (West 2016)), seeking a certificate of innocence along -4-  2020 IL App (2d) 190475 with the expungement and impounding of his criminal records. The State filed a motion to dismiss the petition, which the trial court granted. This appeal followed. ¶ 10 II. ANALYSIS ¶ 11 Defendant now contends that the trial court erred in dismissing his petition for a certificate of innocence. To obtain a certificate of innocence under section 2-702, a defendant must prove by a preponderance of the evidence that (1) he was convicted of one or more felonies by the State of Illinois and subsequently sentenced to a term of imprisonment, and has served all or any part of the sentence; (2) the judgment of conviction was reversed or vacated, and the indictment or information dismissed or, if a new trial was ordered, either the petitioner was found not guilty at the new trial or the petitioner was not retried and the indictment or information dismissed; (3) he is innocent of the offenses charged in the indictment or information or his acts or omissions charged in the indictment or information did not constitute a felony or misdemeanor against the State; and (4) the petitioner did not by his own conduct voluntarily cause or bring about his conviction. Id. § 2-702(g); People v. Dumas, 2013 IL App (2d) 120561 , ¶ 15. Generally, granting a certificate of innocence is within the sound discretion of the court. Dumas, 2013 IL App (2d) 120561 , ¶ 17. ¶ 12 In dismissing defendant’s petition, the trial court ruled as follows: THE COURT: All right. I’ve considered the filings of the parties. I’ve considered the applicable case and statutory law and the relevant portions of the Illinois Criminal Code. I have reviewed the exhibits that were provided, and I have taken a look at the file in so much as—I’ve looked at Judge Brennan’s decision regarding the bench trial that occurred. -5-  2020 IL App (2d) 190475 Certainly there are issues in this case that are somewhat unique. For example, having the defendant served with divorce papers during the course of a homicide interrogation isn’t something I’ve ever seen before, heard of, read about, or even seen on fictional TV. Yet, that was considered by the appellate court, and the appellate court took a look at the defendant’s education, the fact that he was provided with sustenance and, otherwise, apparently, treated fairly, according to the appellate court, and they found that his statements to the police were freely and voluntarily given. I agree with the defendants [sic] that it’s an unreliable confession, but that doesn’t seem to equate with the defendant involuntarily providing a confession, so I’m not ruling on the first three paragraphs of the defendant’s burden. I am taking a look at whether or not the petition[er] did or did not by [his own] conduct voluntarily cause or bring about his conviction, and I believe that the defendant did act in such a manner voluntarily to bring about his or her own conviction. I’m only focusing on that. It appears the defendant did give a statement—gave a statement to the police. It wasn’t the effect—wasn’t the product of any physical abuse or such verbal conduct or sleep deprivation or any other type of interrogation tactic that would bring about an involuntary confession. Although it certainly has issues, as the appellate court noted, I can’t find anything about the confession, despite [its] unreliability, that would make it the product of either illegal police conduct or some other activity that would cause the statement to be something other than a voluntary statement; and, therefore, I do find that the defendant brought about his conviction through his own conduct; and, therefore, I’m granting the State’s motion to dismiss. -6-  2020 IL App (2d) 190475 Sorry, sir.” ¶ 13 Defendant first argues that we must review de novo instead of reviewing the trial court’s decision for an abuse of discretion. According to defendant, because the trial court’s dismissal of his petition “was based on an erroneous interpretation of the statute and the legal determination that [defendant’s] confession barred him from relief,” we must review de novo the dismissal. See, e.g., People v. Fields, 2011 IL App (1st) 100169 , ¶ 18. According to defendant, the trial court misinterpreted the certificate of innocence statute and committed legal error by determining that, “because a movant gave a confession deemed ‘voluntary’ for Fifth Amendment purposes[,] he is not entitled to a certificate of innocence.” ¶ 14 We disagree. Our review of the trial court’s ruling does not show either legal misinterpretation or improper legal conclusion. The trial court did not rule that the statute requires, in all cases, that a voluntary confession prohibits the issuance of a certificate of innocence. Instead, the court looked at “whether or not the petition[er] did or did not by [his own] conduct voluntarily cause or bring about his conviction, and I believe that the defendant did act in such a manner voluntarily to bring about his or her own conviction.” The trial court did not show any misunderstanding of the statute and tailored its decision per the statutory requirements. We will still review its decision under an abuse-of-discretion standard. ¶ 15 Defendant next argues that he proved by a preponderance of the evidence that he is innocent of the offenses charged in the indictment. See 735 ILCS 5/2-702(g) (West 2016). However, this element of the cause of action for a certificate of innocence is not at issue before us. The trial court specifically stated, “I’m not ruling on the first three paragraphs of the defendant’s burden.” These paragraphs included the element of defendant’s innocence. Defendant asserts that the trial court “likely ignored this issue in making its ruling because the record could not be clearer -7-  2020 IL App (2d) 190475 that Amor has proven his innocence by more than a preponderance of the evidence.” Such speculation is unnecessary; what is abundantly clear is that the only basis upon which the trial court dismissed defendant’s petition was that defendant brought about his conviction by his conduct. The trial court did not make any findings of fact or conclusions of law on the “innocence” element, nor did it make any ruling on it that was detrimental to defendant’s cause. If anything, we will assume—in the absence of such findings, conclusions, and rulings—that defendant did prove those other elements by a preponderance of the evidence. ¶ 16 Defendant then argues that the trial court erred in determining that defendant voluntarily brought about his conviction. “ ‘[B]efore the petitioner can be said to have caused or brought about his prosecution *** he must have acted or failed to act in such a way as to mislead the authorities into thinking he had committed an offense.’ ” Dumas, 2013 IL App (2d) 120561 , ¶ 18 (quoting Betts v. United States, 10 F.3d 1278 , 1285 (7th Cir. 1993), citing 28 U.S.C. § 2513 (a)(2) (1988)). “[T]here must be either an affirmative act or an omission by the petitioner that misleads the authorities as to his culpability.” Betts, 10 F.3d at 1285 . Betts suggests that “[t]he clearest example would be the defendant who either falsely confesses to a crime or intentionally withholds exculpatory evidence—in common parlance, one who ‘takes the fall’ for someone else.” Id. It then quotes from United States v. Keegan, 71 F. Supp. 623 , 638 (S.D.N.Y. 1947) for additional examples of such acts or omissions, including an attempt to flee, a false confession, 2 the removal of evidence, an attempt to induce a witness or an expert to give false testimony or a false opinion, and an attempt to suppress such testimony or opinion. 2 Inexplicably, defendant omits this example when citing this very same passage in Betts. -8-  2020 IL App (2d) 190475 ¶ 17 Defendant notes that the trial court’s determination that he voluntarily brought about his conviction was based on his giving a statement to the police admitting his culpability for the crime. Relying on the cases of People v. Simon, 2017 IL App (1st) 152173 , and People v. Glenn, 2018 IL App (1st) 161331 , defendant then makes the following bold assertion: “This is wrong as a matter of law, as every Illinois court who [sic] has considered this issue has held. A confession, regardless of whether it is ever suppressed, and even in circumstances where a defendant goes on to plead guilty after proper and constitutional admonishments by the court, is not enough to demonstrate that a petitioner voluntarily brought about his own conviction.” ¶ 18 This assertion is patently false, and the cases upon which defendant relies do not in any way support such a broad assertion. In Simon, the defendant alleged that he was either duped or coerced by attorneys to provide a filmed confession and eventually pleaded guilty to charges of murder and voluntary manslaughter in the attorneys’ attempt to get the man already convicted of the murders (and facing execution) out of prison. After the defendant’s convictions were subsequently vacated, he sought a certificate of innocence. The trial court denied the defendant’s petition because he did not establish that he did not voluntarily cause his conviction and that his claim did not involve any allegations of misconduct on behalf of the State. Simon, 2017 IL App (1st) 152173 , ¶ 21. The appellate court vacated the denial and remanded the cause for further proceedings because (1) the trial court erroneously relied on inadmissible evidence, outside the evidentiary record, in denying the petition (id. ¶ 23) and (2) the appellate court disagreed with the trial court’s determination that, because the State was not involved in the wrongdoing that led to the defendant’s wrongful incarceration, the defendant could not obtain relief in the court of claims (id. ¶ 28). The court held: -9-  2020 IL App (2d) 190475 “Notably, we are not making any determination regarding the merits of petitioner’s petition, and our ruling does not mean that, after conducting the hearing, the court cannot deny the certificate of innocence for the reason that petitioner failed to establish that he caused his own conviction based on admissible, probative evidence.” Id. ¶ 27. ¶ 19 In Glenn, the defendant pleaded guilty to narcotics charges fraudulently brought by the police. The defendant was later pardoned by Governor Pat Quinn, although the governor did not expressly find the defendant’s innocence as the pardon’s basis. Glenn, 2018 IL App (1st) 161331 , ¶ 10. The trial court vacated the convictions and the guilty pleas and ordered the defendant’s criminal record expunged. The trial court subsequently denied the defendant’s petition for a certificate of innocence because she was sentenced to probation, not a term of imprisonment. Id. ¶ 11. The appellate court disagreed and interpreted the section 2-702 requirement that the petitioner be sentenced to a term of imprisonment to include petitioners sentenced to probation; accordingly, on appeal, the trial court’s judgment was reversed, and the cause was remanded with directions to grant the certificate of innocence. Id. ¶ 24. ¶ 20 Contrary to defendant’s claim, neither of those cases stands for the proposition that “[a] confession, ***, is not enough to demonstrate that a petitioner voluntarily brought about his own conviction.” Simon explicitly held that its ruling “does not mean that, after conducting the hearing, the court cannot deny the certificate of innocence for the reason that petitioner failed to establish that he caused his own conviction based on admissible, probative evidence.” Glenn did not involve the issue of a confession or the defendant voluntarily causing or bringing about her conviction by her conduct. Defendant’s presentation of, and reliance on, these cases for the claim that he makes is not well-taken. - 10 -  2020 IL App (2d) 190475 ¶ 21 Defendant spends much time on anecdotal circuit court rulings in other certificate-of- innocence cases. First, we note that trial court decisions are not binding precedent. See People v. Mann, 397 Ill. App. 3d 767 , 769 (2010). Further, these cases are sui generis; just because some other defendant’s confession was held not to have brought about his conviction does not influence us here. We decide cases on their unique facts and circumstances. ¶ 22 Defendant next argues that using a fifth-amendment-voluntariness standard is improper in determining whether a defendant voluntarily caused or brought about his conviction. According to defendant, a finding that one did not voluntarily contribute to one’s conviction “does not require a legal finding that a confession should be excluded or suppressed.” ¶ 23 Defendant again cites Dumas and Betts and their list of possible acts or omissions that could mislead the authorities as to a defendant’s culpability, again failing to include, let alone address, these cases’ listing of a false confession as such a possible act. Defendant even accuses the State of “blatantly” misrepresenting the holding in Betts and “conveniently” stopping short of providing a full quotation from the case. However, it is defendant who misreads and misrepresents Betts. Betts makes two separate references to false confessions in its list: first, the “clearest example,” which it refers to as taking the fall for someone, and, second, within its quote from Keegan, which is not modified or explained as anything beyond “a false confession.” See Betts, 10 F.3d at 1285 . Contrary to defendant’s argument, Betts does not bar relief only “for the wrongfully convicted who intentionally take the fall for another to mislead authorities.” ¶ 24 We agree with defendant that prior rulings on a statement’s voluntariness are not dispositive and of res judicata effect. However, this argument is a straw man; there is no indication that the trial court viewed the prior rulings regarding defendant’s confession as dispositive or as res judicata. The trial court’s ruling acknowledged our holding on defendant’s direct appeal that - 11 -  2020 IL App (2d) 190475 the trial court’s finding that defendant made voluntary inculpatory statements was not against the manifest weight of the evidence. However, the court did not just assert this as the basis for dismissing defendant’s petition. The court detailed its own investigation, stating that it considered the filings, statutory and case law, exhibits, and the decision rendered after defendant’s retrial. The court acknowledged the “unique” issues in this case, including the serving of divorce papers during the questioning and the later-determined unreliability of the confession. Even considering these issues, the court concluded: “I can’t find anything about the confession *** that would make it the product of either illegal police conduct or some other activity that would cause the statement to be something other than a voluntary statement; and, therefore, I do find that the defendant brought about his conviction through his own conduct; and, therefore, I’m granting the State’s motion to dismiss.” “A court abuses its discretion only if it acts arbitrarily, without the employment of conscientious judgment, exceeds the bounds of reason and ignores recognized principles of law; or if no reasonable person would take the position adopted by the court.” Payne v. Hall, 2013 IL App (1st) 113519 , ¶ 12. This trial court did not surrender its discretion; it exercised its discretion after investigating the facts and law, and it made a decision. This decision was not an abuse of discretion. We find no error here. ¶ 25 III. CONCLUSION ¶ 26 For these reasons, the judgment of the circuit court of Du Page County is affirmed. ¶ 27 Affirmed. - 12 -  2020 IL App (2d) 190475 No. 2-19-0475 Cite as: People v. Amor, 2020 IL App (2d) 190475 Decision Under Review: Appeal from the Circuit Court of Du Page County, No. 95-CF- 2075; the Hon. Robert A. Miller, Judge, presiding. Attorneys Jon Loevy, Tara Thompson, and Lauren Myerscough-Mueller, of for The Exoneration Project at the University of Chicago Law Appellant: School, of Chicago, for appellant. Attorneys Robert B. Berlin, State’s Attorney, of Wheaton (Lisa Anne for Hoffman and Steven J. Lupa, Assistant State’s Attorneys, of Appellee: counsel), for the People. - 13 -

2020-09-04 18:00:19.893043+00

http://www.ca5.uscourts.gov/opinions/unpub/20/20-60178.0.pdf

Case: 20-60178 Document: 00515553257 Page: 1 Date Filed: 09/04/2020 United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit FILED September 4, 2020 No. 20-60178 Lyle W. Cayce Clerk Manuel F. Nkoumou Ondo, Petitioner, versus William P. Barr, U.S. Attorney General, Respondent. Petition for Review of an Order of the Board of Immigration Appeals Agency No. A201 426 809 Before Willett, Ho, and Duncan, Circuit Judges. Per Curiam:* Manuel F. Nkoumou Ondo, a native and citizen of the Republic of Cameroon, petitions for review of the decision of the Board of Immigration Appeals (“BIA”), which adopted and affirmed the decision of the Immigration Judge (“IJ”) to deny his application for asylum and withholding of removal. Because Ondo failed to exhaust his administrative remedies with * Pursuant to 5th Circuit Rule 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Circuit Rule 47.5.4. Case: 20-60178 Document: 00515553257 Page: 2 Date Filed: 09/04/2020 No. 20-60178 respect to one of his claims, we lack jurisdiction to consider it. With respect to his remaining claim, we deny his petition for review as meritless. I. Ondo was a “gendarme” 1 in the Cameroonian military and asserts that others in his unit committed human rights abuses. He testified that on one occasion, a military general asked him how many soldiers were stationed with him. Answering honestly, he provided a number much lower than that reported by his lieutenant, who had apparently inflated the number to receive increased food rations. According to Ondo, the lieutenant retaliated against him by assigning him longer guard duty shifts. He also testified that the same lieutenant gave orders for Ondo’s cousin to be killed after an unrelated altercation. After that, Ondo stated, the lieutenant approached him and said, “One is gone and the other will follow soon.” Ondo interpreted this as a threat that he would meet the same fate as his cousin. An IJ denied Ondo’s application for asylum, withholding of removal, and protection under the Convention Against Torture (“CAT”). Ondo appealed to the BIA, raising only his claim for asylum and withholding of removal. He contended the IJ had erred in denying his application because “[b]y practically any definition offered, Respondent has established persecution on account of hi[s] being a gendarme officer who was threatened for disclosing the corruption of Lieutenant Wonso.” Ondo’s argument before the BIA was essentially that the IJ’s opinion was “internally inconsistent” because it had found Ondo’s testimony credible but, despite a “mountain of evidence,” had disagreed that he was entitled to relief. 1 In Cameroon, a gendarme is a member of the military police force. Ondo testified that the gendarmes were sent to maintain order in areas of unrest. 2 Case: 20-60178 Document: 00515553257 Page: 3 Date Filed: 09/04/2020 No. 20-60178 The BIA adopted and affirmed the IJ’s decision. First, it noted that on appeal, Ondo did not challenge the denial of his claim under the CAT. It then explained that he had failed to show either past persecution or a well-founded fear of future persecution. See 8 C.F.R. § 208.13(b); Gjetani v. Barr, 968 F.3d 393 , 396 (5th Cir. 2020) (“To establish eligibility for asylum, Gjetani was required to demonstrate either past persecution or a well-founded fear of future persecution.”). His experiences did not rise to the “extreme” level required to be considered persecution. Moreover, Ondo had not demonstrated that a protected ground had been or will be “one central reason” for any mistreatment, past or future. 2 Mr. Ondo now petitions for our review of the BIA’s decision. He contends that the BIA erred by combining its analyses of past persecution and fear of future persecution. He also maintains that he belongs to a particular social group of “whistleblowers within the Gendarme force that have exposed corruption and protested human rights abuses,” and who thus face “persecution.” In addition, he raises for the first time the argument that he fears persecution based on imputed political opinion. He asserts that after calling attention to the lieutenant’s corrupt behavior, he was labeled as having an “anti-government or separatist political opinion.” He also cites his testimony that the military sent him a message accusing him of training rebels and threatening to execute him on return. Further, Ondo explains that he testified to humanitarian organizations about human rights abuses by gendarmes, arguing that this “shows that [he] engaged in activities that could be perceived as expressions of anti-corruption beliefs.” 2 The Immigration and Nationality Act places the burden of proof on the applicant to show that she is a refugee, that is, to “establish that race, religion, nationality, membership in a particular social group, or political opinion was or will be at least one central reason for persecuting the applicant.” 8 U.S.C. § 1158(b)(1)(B)(i). 3 Case: 20-60178 Document: 00515553257 Page: 4 Date Filed: 09/04/2020 No. 20-60178 In response, the Government moves to dismiss the petition for lack of jurisdiction on the grounds that Ondo failed to exhaust administrative remedies. See 8 U.S.C. § 1252(d)(1) (requiring exhaustion of available administrative remedies). In its view, Ondo’s arguments on appeal are different from those argued before the BIA, and are therefore unexhausted. In the alternative, the Government moves for summary denial. Summary disposition “is appropriate if ‘the position of one of the parties is clearly right as a matter of law so that there can be no substantial question as to the outcome of the case.’” United States v. Arambula, 950 F.3d 909 , 909 (5th Cir. 2020) (quoting Groendyke Transp., Inc. v. Davis, 406 F.2d 1158 , 1162) (5th Cir. 1969)). II. As a threshold matter, we must determine whether we have jurisdiction to review Ondo’s petition. A court “may review a final order of removal only if . . . the alien has exhausted all administrative remedies available to the alien as of right.” § 1252(d). Because our jurisdiction is limited by statute, the failure to exhaust administrative remedies “serves as a jurisdictional bar to our consideration of the issue.” Wang v. Ashcroft, 260 F.3d 448 , 452 (5th Cir. 2001). The exhaustion requirement applies when a petitioner could have raised the issue before the BIA, and the issue was one the BIA “has adequate mechanisms to address and remedy.” Omari v. Holder, 562 F.3d 314 , 318–19 (5th Cir. 2009). While a petitioner must take “some affirmative action” to present an issue to the BIA, the arguments before the BIA and on appeal need not be identical. Vazquez v. Sessions, 885 F.3d 862 , 868 (5th Cir. 2018). The exhaustion requirement does not bar “subsequent variations in analysis or changes in the scope of an argument” but rather ensures that the petitioner has “presented an issue in some concrete way in order to put the BIA on notice of his claim.” Id. 4 Case: 20-60178 Document: 00515553257 Page: 5 Date Filed: 09/04/2020 No. 20-60178 Ondo’s failure to exhaust administrative remedies precludes our review of his claim that he fears future persecution based on imputed political opinion. Before the BIA, he maintained that he belonged to a particular social group of whistleblowers in the gendarmes who exposed corruption. He did not contend that he would be in danger due to a perception that he held an anti-government or separatist political opinion. Because Ondo neglected to properly raise this argument before the BIA, we cannot consider it on appeal. See § 1252(d). Therefore, we dismiss for lack of jurisdiction Ondo’s claim based on imputed political opinion. III. Ondo also contends the BIA erred by considering and rejecting his claim of past persecution and well-founded fear of future persecution as a package, rather than evaluating each separately. The Government answers that 8 U.S.C. § 1252(d) bars review of this claim as well because Ondo did not raise the claim in a motion to reconsider. “A motion for reconsideration is ‘not generally required’ to challenge an error in the BIA’s opinion.” Dale v. Holder, 610 F.3d 294 , 298 (5th Cir. 2010) (quoting Omari, 562 F.3d at 320 ). “But where the BIA’s decision itself results in a new issue and the BIA has an available and adequate means for addressing that issue, a party must first bring it to the BIA’s attention through a motion for reconsideration.” Omari, 562 F.3d at 320 . For instance, when a petitioner alleged on appeal that the BIA impermissibly engaged in factfinding, we determined that this was a new issue that “must first be brought to the BIA in a motion for reconsideration.” Id. By contrast, a petitioner need not file a motion for consideration when he asserts that the BIA erred “in regard to the same ground for relief already presented to the BIA.” Dale, 610 F.3d at 299 . We agree with Ondo that § 1252(d) does not preclude our consideration of this claim, which is part and parcel of his claim based on 5 Case: 20-60178 Document: 00515553257 Page: 6 Date Filed: 09/04/2020 No. 20-60178 purported membership in a particular social group. This claim is not a “new issue” that was never presented before the BIA, as in Omari. It is closer to Dale, where the petitioner on appeal “dispute[d] only the BIA’s answer to the issue he previously raised before it.” Id. at 300. Like the petitioner in Dale, Ondo’s “ground for relief . . . ha[s] remained logically consistent throughout.” Id. He sufficiently presented this claim to the BIA, exhausting his administrative remedies. Nonetheless, we agree with the Government that summary disposition is appropriate. Ondo has waived a crucial component of his claim by failing to challenge the BIA’s conclusion that he had not established membership in a particular social group. A petitioner who declines to challenge the BIA’s conclusion regarding his claim abandons that claim on appeal. Sharma v. Holder, 729 F.3d 407 , 411 n.1 (5th Cir. 2013) (explaining that a petitioner “abandoned his claim for humanitarian asylum by failing to raise any challenge to the BIA’s conclusion that he is not entitled to humanitarian asylum”). Because he does not contest the BIA’s contrary conclusion, Ondo has abandoned his argument that he belongs to a particular social group. The IJ stated that the group Ondo described might meet the definition of a particular social group but determined that Ondo had not shown he was a part of such a group. The IJ noted that a whistleblower is someone “who seeks to uncover or bring light to corruptive activity,” but Ondo was not aware of the corruption when he acted. Instead, “the general . . . asked him a question and he gave an honest answer.” The BIA explained it was thus “not clear on this record that [Ondo] is a whistle blower who ‘exposed corruption’ based on a single conversation with a general, or ‘protested’ human rights abuses by refusing to participate in military missions.” Rather than challenging those adverse determinations, Ondo mischaracterizes the opinions, contending that “[t]he IJ recognized that this was a cognizable 6 Case: 20-60178 Document: 00515553257 Page: 7 Date Filed: 09/04/2020 No. 20-60178 particular social group, and the BIA adopted and affirmed the IJ’s decision.” By refusing to acknowledge the BIA’s holding, Ondo has abandoned any argument that it was erroneous. Because Ondo cannot demonstrate that a protected ground was “one central reason” for past or future persecution, he cannot show that he is entitled to relief. See Gonzales-Veliz v. Barr, 938 F.3d 219 , 224 (5th Cir. 2019) (“For both asylum and withholding-of-removal claims . . . an alien must show that a protected ground (e.g., membership in a particular social group) was ‘at least one central reason for persecuting the applicant.’”) (quoting 8 U.S.C. § 1158(b)(1)(B)(i)). Accordingly, we will summarily deny his petition on that claim. IV. In sum, we DISMISS for lack of jurisdiction Ondo’s claim that he is entitled to relief because he faces persecution on the basis of imputed political opinion. We otherwise DENY the petition for review. All other pending motions are DENIED AS MOOT. 7

2020-11-30 21:03:58.659108+00

http://www.illinoiscourts.gov/Opinions/AppellateCourt/2020/3rdDistrict/3190397.pdf

2020 IL App (3d) 190397 Opinion filed November 30, 2020 _____________________________________________________________________________ IN THE APPELLATE COURT OF ILLINOIS THIRD DISTRICT 2020 EDWARD SIMS JR. TRUST, ) Appeal from the Circuit Court ) of the 14th Judicial Circuit, Plaintiff-Appellant, ) Henry County, Illinois. ) v. ) ) Appeal No. 3-19-0397 THE HENRY COUNTY BOARD OF ) Circuit No. 18-MR-158 REVIEW, THE ILLINOIS PROPERTY ) TAX APPEAL BOARD, and TAMRA S. ) The Honorable DYNES, ) Jeffrey W. O’Connor, ) Judge, presiding. Defendants-Appellees. ____________________________________________________________________________ JUSTICE CARTER delivered the judgment of the court, with opinion. Presiding Justice Lytton and Justice Schmidt concurred in the judgment and opinion. _____________________________________________________________________________ OPINION ¶1 Plaintiff, the Edward Sims Jr. Trust (Trust), filed a property tax appeal with defendant, the Illinois Property Tax Appeal Board (PTAB), seeking a reduction in the 2012 assessed value of certain farm property owned by the Trust. The Trust asserted in the tax appeal that one of the improvements on the property, a farm building, had been given too high of an assessed value by the local assessor. After conducting an evidentiary hearing, during which both sides submitted appraisals of the property, the PTAB denied the Trust’s request for a reduction. The Trust filed a  complaint for administrative review, and the trial court affirmed the PTAB’s ruling. The Trust appeals. We affirm the PTAB’s decision. ¶2 I. BACKGROUND ¶3 The Trust owned an approximately 224-acre parcel of farmland in Western Township, Henry County, Illinois. Located on that farmland were two improvements: a large pole barn/farm building and a grain bin. The farm building, which is the subject of this appeal, was built in 2011. It was approximately 20,700 square feet in size, had walls that were 20 feet high, had steel siding and a steel roof, and had electrical and water service. The farm building was divided into two sections. The first section was approximately 7700 square feet in size, was insulated and heated, had concrete floors, and contained a workshop area and an office area. The second section was approximately 13,000 square feet in size, was unheated, had gravel floors, and was used to store farm machinery. Both sections had multiple overhead doors and one or two walk-in doors. ¶4 The farm building was assessed for the first time by the local assessor in 2012. For that year, the assessor assigned the entire property (the farmland and the improvements) a total assessed value of $164,170, which consisted of an assessed value of $67,760 for the farmland and $96,410 for the two improvements ($93,831 for the farm building and $2579 for the grain bin). 1 As indicated by the assessed value that had been assigned, the farm building had been given a contributory value of $281,520 for property tax purposes. See 35 ILCS 200/10-140 (West 2012) (indicating that the assessed value of improvements on farmland is 33⅓% of their contributory value). 1 Although the assessment information initially provided in the record did not show a separate assessed value for each of the improvements on the property, that information was later provided in the hearing before the PTAB. 2 ¶5 After the 2012 assessed values were assigned to the property, the Trust filed a property tax appeal with the Henry County Board of Review (Board) seeking a reduction. The Board denied the Trust’s request. ¶6 In February or March 2013, the Trust appealed the Board’s ruling to the PTAB and again sought a reduction in the assessed value of the property. In its appeal, the Trust again asserted that the farm building had been overvalued by the local assessor. The Board opposed the Trust’s request for a reduction and asserted that the farm building had been properly assessed. Both sides submitted appraisal reports in support of their positions. ¶7 The Trust’s appraisal was conducted by Michael Blean, an Illinois certified general real estate appraiser with 30 years of farming experience. To determine the contributory value of the farm building, Blean used the cost approach, which consisted of estimating the replacement cost new of the building and subtracting depreciation from that amount. Using a standard cost guide, Blean estimated the replacement cost of the Trust’s farm building to be $406,944, not including the cost of site improvements. ¶8 To determine the amount of depreciation, Blean looked for comparable sales. Blean found one sale in a different county that he thought was a good comparison because it involved a farm building of similar size, age, and structure, although the sale had been court-ordered and the property had been sold through an online auction to one of the owner’s relatives. Using certain known information from the comparable sale and elsewhere, Blean calculated or estimated the value of the comparable property’s farmland, the contributory value of the comparable property’s farm building (the total consideration paid for the comparable property as a whole minus what Blean had calculated to be the value of the comparable property’s farmland), and the replacement cost of the comparable property’s farm building. From that information, Blean 3  estimated that the comparable farm building had 87% depreciation (the replacement cost of the comparable farm building minus what Blean had estimated to be the contributory value of the comparable farm building with the answer converted to a percentage). Blean allocated that percentage into the following three categories: 24% physical obsolescence, 40% functional obsolescence, and 23% external obsolescence. 2 Blean did not state in his report, however, how he had determined what allocation percentages were appropriate or how he had estimated the replacement cost of the comparable farm building. ¶9 After determining the depreciation percentages for all three categories of depreciation with regard to the comparable farm building, Blean used that information to estimate the depreciation percentages for the Trust’s farm building. Blean estimated that the Trust’s farm building had 0% depreciation for physical obsolescence because the Trust’s farm building was new; 40% depreciation for functional obsolescence, mirroring the percentage that Blean had assigned to the comparable farm building, because the Trust’s farm building was super-adequate or overbuilt for the size of the parcel and was specifically designed for the current owner’s operations; and 20% depreciation for external obsolescence, consistent with the percentage that Blean had assigned to the comparable farm building. Blean converted the depreciation percentages for the Trust’s farm building to dollar amounts ($162,778 or 40% for functional obsolescence and $81,389 or 20% for external obsolescence) and subtracted those amounts from the replacement cost to determine the contributory value, which Blean concluded was $162,778 for the Trust’s farm building. That contributory value represented an assessed value of $54,260 (33⅓% of the contributory value rounded up). 2 The terms, physical obsolescence or physical deterioration, functional obsolescence, and external obsolescence, have been defined later in this opinion. 4 ¶ 10 The Board’s appraisal was conducted by Joyce Webb, who, like Blean, was an Illinois certified general real estate appraiser. Similar to Blean, Webb used a cost approach to determine the contributory value of the Trust’s farm building. Using the same cost guide as Blean, Webb estimated the reproduction cost of the Trust’s farm building to be $375,316, not including the cost of site improvements. Unlike Blean, however, Webb decided that there was no depreciation to subtract from the replacement cost of the building. Webb concluded, therefore, that the contributory value of the farm building was $375,000 (rounded down), which represented an assessed value of $125,000 (33⅓% of the contributory value). ¶ 11 More specifically as to depreciation, Webb determined that there was no physical depreciation because the Trust’s farm building was new; that there was no functional obsolescence because the Trust’s farm building did not have any functional inadequacies, inefficiencies, or super-adequacies; and that there was no external obsolescence because economic conditions in the local farm market were reasonably strong and the value of farmland was appreciating at the time. In making her determination on functional obsolescence, Webb commented in her report that Sims had told her that he had built the farm building with 20-foot- high walls so that he could store larger farm equipment when he purchased that equipment. Webb noted that the assessor’s records indicated that Sims and his wife owned several other parcels of farmland in Henry County and indicated in her report that it appeared from the amount of machinery in the farm building that the farm building was built to serve more than just the parcel on which the building was located. ¶ 12 In April 2017, a hearing was held before the PTAB on the Trust’s property tax appeal. At the PTAB hearing, Blean and Webb both testified as to their qualifications and as to the conclusions and opinions contained in their reports. Blean explained that he applied 40% 5  functional obsolescence to the Trust’s farm building because the building was an over- improvement for the size of the parcel and because it was unfair to assume that a person buying the property would not already have a building of his or her own or would be willing to pay full value for the Trust’s farm building as it was constructed. When Blean was asked during his testimony whether farmers would typically build one building per farm or build one building to incorporate several farms, Blean responded that it could vary, but typically larger farming operations had a “base of operations.” As for the comparable sale he used to calculate functional and external obsolescence, Blean acknowledged that it was a court-ordered sale and agreed that court-ordered sales were not usually viewed as arm’s-length transactions but commented that he had very limited information available to develop the cost approach in this case. Blean insisted that from a buyer’s perspective, the comparable sale he had used had full exposure to the market because the comparable property was available for inspection and the sale was advertised online. ¶ 13 Webb testified that in conducting her appraisal, she found there was no functional obsolescence for the Trust’s farm building because the building had been built to suit the needs of a typical farm in Henry County. In reaching that conclusion, Webb noted that Sims had told her that he had built the farm building to accommodate his future purchase of a bigger combine and to store the big equipment that was necessary for “a good-size[d] farm operation.” During her testimony, Webb confirmed that in conducting her appraisal, she considered that Sims owned other farm property. Webb commented that it would be “rather narrow sighted” for her to ignore Sims’s other farm parcels when determining the farm building’s contributory value because most farmers used a single storage facility to store equipment that serviced multiple parcels. Webb testified further that she found that there was no external obsolescence for the Trust’s farm building because there was a good, strong economy in the agricultural sector. When asked about 6  the comparable sale that Blean had used in his appraisal, Webb opined that Blean’s court-ordered sale was not useful in determining obsolescence because it was not an arm’s-length transaction and did not have a typically motivated seller. ¶ 14 After all of the evidence had been presented, the parties made their closing arguments. The Trust argued that the farm building was overbuilt and that the PTAB should not consider the farm building’s contributory value to Sims’s entire farming operation. In making that argument, the Trust conceded that the comparable sale Blean had used to calculate obsolescence was “not a perfect sale” and “maybe not the best comparable” but asserted that it was the only data available. ¶ 15 The Board argued that the PTAB should consider the farm building’s value to Sims’s entire farming operation in evaluating the building’s contributory value. The Board also argued that Webb’s decision to apply no functional obsolescence was supported by the evidence that the farm building housed larger equipment to service Sims’s entire farming operation in the area. ¶ 16 In May 2017, the PTAB issued a written decision denying the Trust’s request for a reduction in the 2012 assessed value assigned to the farm building. In its ruling, the PTAB found that the Trust had failed to demonstrate by a preponderance of the evidence that a reduction in the assessed value of the farm building was warranted. In reaching that conclusion, the PTAB indicated in its order that it had given little weight to Blean’s estimate of the contributory value of the farm building for several reasons, including that Blean had relied on an invalid comparable sale (not an arm’s-length transaction) and that Blean had used an overinflated land value for the comparable property’s farmland that caused the contributory value of the comparable farm building to be artificially low. The PTAB also noted that Blean did not include in his appraisal report his calculations for determining the replacement cost of the comparable farm building and 7  that he did not adequately explain or support the depreciation percentages that he had used. The PTAB indicated further in its order that it had found that the best evidence of the contributory value of the farm building was Webb’s appraisal that had been submitted by the Board and commented that the cost approach developed by Webb was more detailed than Blean’s and better reflected all of the individual components that made up the subject property. ¶ 17 Over a year later (the Trust was apparently not properly notified of the PTAB’s decision), the Trust filed a complaint for administrative review in the trial court. A hearing was held on the matter. After considering the arguments of the parties, the trial court affirmed the PTAB’s decision. In so doing, the trial court indicated that it viewed the issue presented as being more of a legal issue, rather than a factual issue, as to whether the phrase, “contribution to the productivity of the farm,” contained in section 10-140 of the Property Tax Code (35 ILCS 200/10-140 (West 2012)) referred only to the parcel in question or to multiple parcels that were all a part of a taxpayer’s farming operation. The trial court ultimately ruled in the PTAB’s favor, concluding that the PTAB’s decision was not against the manifest weight of the evidence, “short of a legal definition of how this applies.” The Trust appealed. ¶ 18 II. ANALYSIS ¶ 19 On appeal, the Trust argues that the PTAB erred in finding that the Trust failed to meet its burden of proof to show by a preponderance of the evidence that the farm building had been given too high of an assessed value for the 2012 tax year and in denying the Trust’s request for a reduction on that basis. 3 The Trust asserts that the PTAB’s ruling was erroneous as a matter of 3 At various times in its argument, the Trust refers to errors that were allegedly made by the trial court. Because on administrative review, we review the ruling of the PTAB and not the trial court (see Marconi v. Chicago Heights Police Pension Board, 225 Ill. 2d 497 , 531 (2006); Senachwine Club v. Putnam County Board of Review, 362 Ill. App. 3d 566 , 568 (2005)), we will consider those arguments as being directed at the PTAB’s ruling where it is appropriate to do so. 8  law because in determining the contributory value of the farm building, the PTAB relied entirely upon the flawed appraisal of the Board’s appraiser, Webb, who, contrary to section 10-140 of the Property Tax Code and the relevant case law, failed to consider obsolescence and improperly considered the value of the farm building to Sims’s other farm property that was not part of the farm parcel in question. The Trust also asserts that the manner in which the farm building was assessed in this case violated the equal protection clause of both the United States and Illinois Constitutions. For all of the reasons stated, the Trust asks, although somewhat implicitly, that we reverse the PTAB’s ruling. ¶ 20 Defendants (the PTAB, the Board, and the Board’s chairperson) argue that the PTAB’s ruling was proper and should be upheld. In support of that argument, defendants make numerous assertions. 4 First, defendants assert that the main issue before this court is a factual issue and that the PTAB’s ruling should be affirmed because the PTAB’s factual determinations—its underlying factual findings, its assessment that Blean’s appraisal had numerous flaws and was entitled to much less weight than the Webb’s appraisal in determining the contributory value of the farm building, its determination that the Trust had failed in its burden of proof to show by a preponderance of the evidence that the assessed value of the farm building was too high, its finding as to the farm building’s contributory value, and its ultimate determination that a reduction in the assessed value of the farm building was unwarranted—were all well supported by the evidence. In making that assertion, defendants point out that despite the Trust’s contention to the contrary, the record here shows that Webb considered obsolescence and that she decided that it did not apply under the circumstances of the present case. Second, and in the alternative, 4 For the convenience of the reader and because it does not affect the outcome of this case, we have addressed defendants’ arguments collectively here, rather than specifying what each defendant argued individually. 9  defendants assert that even if we assume for argument’s sake that an issue of statutory interpretation exists, that the Trust’s interpretation of the statute is correct, and that the Board’s appraisal was flawed in that Webb should not have considered Sims’s other farm property, the PTAB’s ruling must still be upheld because the Trust failed to present any reliable evidence to establish that the farm building’s assessed value was excessive since the Trust’s appraisal was also flawed and because Webb’s appraisal contained another reason for not applying functional obsolescence in this case (that the farm building was built to accommodate Sims’s future purchase of larger farming equipment and was designed to suit the needs of a typical farm in Henry County), aside from a consideration of Sims’s other farm properties, that the PTAB could have properly relied upon in making its decision. Third, and also in the alternative, defendants assert that even if this court rules upon the merits of the Trust’s statutory interpretation argument, that argument fails because it contradicts the plain language of the Property Tax Code, precedential authority, and common sense. Fourth and finally, defendants assert that any claim by the Trust of a constitutional violation has been forfeited on appeal or is otherwise without merit. For all of the reasons set forth, defendants ask that we affirm the PTAB’s ruling. ¶ 21 In reply to defendants’ assertions, the Trust maintains its statutory interpretation argument. The Trust also argues, in the alternative, that even if this appeal is decided based upon the manifest weight of the evidence that was before the PTAB, the Trust should still prevail because Blean’s estimate of contributory value was credible, despite a few limited shortcomings; Webb’s estimate was not credible; the Trust satisfied its burden of proof; and the Board submitted no credible evidence of the contributory value of the farm building. As for its constitutional claims, the Trust asserts that defendants’ forfeiture argument should not be followed here because this court has a duty to maintain a sound body of precedent. For those 10  reasons and the reasons initially stated, the Trust asks this court to reverse the PTAB’s judgment, although the Trust again does so somewhat implicitly by asking for a reversal of the trial court’s ruling. ¶ 22 A. Standard of Review ¶ 23 Before we address the merits of the parties’ arguments on appeal, we must first determine the appropriate standard of review. The Trust asserts that the key issue presented in this appeal is a question of law involving a matter of statutory interpretation, as the trial court indicated, regarding the manner in which farm buildings are valued for property tax purposes—whether the contributory value of a farm building should be based upon what the building contributes to the specific farm parcel in question or based upon what the building contributes to the entire farming operation, if a multiple-parcel farming operation is involved. Thus, the Trust contends that the appropriate standard of review for that issue is de novo. As for its constitutional claim, the Trust argues that de novo review is appropriate for that claim as well. ¶ 24 Defendants argue that the main issue in this appeal primarily involves factual questions regarding the application of the cost method of valuing the farm building and the appropriate amount of depreciation to be applied. Thus, defendants contend that the appropriate standard of review for that issue is the manifest weight standard—that the PTAB’s findings on those factual questions should not be disturbed on appeal unless they are against the manifest weight of the evidence. 5 In making that argument, defendants point out that the PTAB did not interpret any statutory provisions when it ruled upon the Trust’s tax appeal. Defendants acknowledge, however, that a de novo standard of review would apply to the extent that this court is required to 5 As with defendants’ arguments on the merits, for the convenience of the reader and because it does not affect the outcome of this case, we have presented defendants’ arguments on the standard of review collectively here, rather than individually. 11  interpret the language of the relevant statute in resolving the Trust’s arguments here. Finally, with regard to the Trust’s constitutional claim, defendants argue that if this court reaches the merits of that claim, either a de novo standard of review or a mixed standard of review should be applied. ¶ 25 In cases involving administrative review, the appellate court reviews the decision of the administrative agency—in this case, the PTAB—not the determination of the trial court. Marconi, 225 Ill. 2d at 531; Senachwine Club, 362 Ill. App. 3d at 568. Judicial review of a decision of the PTAB is governed by the Administrative Review Law (735 ILCS 5/3-101 et seq. (West 2016)) and extends to all questions of fact and law presented by the entire record. See 35 ILCS 200/16-195 (West 2016); 735 ILCS 5/3-110 (West 2016); Marconi, 225 Ill. 2d at 532 (discussing the standard of review and legal principles that applied to administrative review cases in general and not in the context of a property tax appeal case); John J. Moroney & Co. v. Illinois Property Tax Appeal Board, 2013 IL App (1st) 120493 , ¶ 35. The standard of review that applies on appeal is determined by whether the question presented is one of fact, one of law, or a mixed question of fact and law. Marconi, 225 Ill. 2d at 532; Moroney, 2013 IL App (1st) 120493 , ¶ 36. As to questions of fact, the PTAB’s decision will not be reversed on appeal unless it is against the manifest weight of the evidence (the manifest weight standard). Marconi, 225 Ill. 2d at 532; Moroney, 2013 IL App (1st) 120493 , ¶ 36. Questions of law, however, are subject to de novo review, and mixed questions of fact and law are reviewed under the clearly erroneous standard. Marconi, 225 Ill. 2d at 532; Moroney, 2013 IL App (1st) 120493 , ¶ 36. ¶ 26 Having considered the parties’ arguments on the standard of review in the present case, we find that the appropriate standard to be applied to the key issue here is the manifest weight standard. In making that determination, we note that the Trust has not asserted in this case that 12  the appraisers or the PTAB used an inappropriate method of valuation in determining the value of the farm building. See Kraft Foods, Inc. v. Illinois Property Tax Appeal Board, 2013 IL App (2d) 121031 , ¶ 44 (recognizing that a de novo standard of review applied when the issue presented on appeal was whether an inappropriate valuation methodology was used in determining the value of the property). To the contrary, all of the parties agree, and it is has been specifically expressed by the Department of Revenue, that the appropriate method for valuing a farm building is the cost method. See Ill. Dep’t of Revenue, Publication 122 Instructions for Farmland Assessments, at 37 (Jan. 2020), https://www2.illinois.gov/rev/research/ publications/pubs/Documents/pub-122.pdf [https://perma.cc/TDZ4-BL3G]. 6, 7 Indeed, both of the appraisals that were submitted in the present case used the cost method to estimate the contributory value of the Trust’s farm building. ¶ 27 In applying the manifest weight standard in this case, we must be mindful of the following legal principles. The PTAB’s findings and conclusions on questions of fact are deemed to be prima facie true and correct. See 735 ILCS 5/3-110 (West 2016); Marconi, 225 Ill. 2d at 534; Moroney, 2013 IL App (1st) 120493 , ¶ 35; Senachwine Club, 362 Ill. App. 3d at 568. For a reversal to be warranted under the manifest weight standard, it must be clearly evident from the record that the PTAB should have reached the opposite conclusion. Marconi, 225 Ill. 2d at 534; 6 It is generally accepted that a court may take judicial notice of the information on a government website. See, e.g., Ashley v. Pierson, 339 Ill. App. 3d 733 , 739-40 (2003) (taking judicial notice, although somewhat implicitly, of information on the Illinois Department of Corrections website); see also Ill. R. Evid. 201(b) (eff. Jan. 1, 2011) (indicating that a judicially noticed fact must be one that is not subject to reasonable dispute because it is either generally known within the territorial jurisdiction of the trial court or capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned). 7 A copy of Publication 122 with an effective date of January 2010 (the 2010 version) was submitted by the Board at the PTAB hearing. The current version of Publication 122 cited here is essentially the same as the 2010 version with regard to the matters that are relevant in this appeal. 13  Moroney, 2013 IL App (1st) 120493 , ¶ 36. That the opposite conclusion is reasonable or that the reviewing court might have ruled differently if it were the trier of fact is not enough to justify a reversal. Marconi, 225 Ill. 2d at 534. Thus, if the record contains some competent evidence to support the PTAB’s decision, the PTAB’s decision should be affirmed. See Marconi, 225 Ill. 2d at 534; Moroney, 2013 IL App (1st) 120493 , ¶ 36. Furthermore, determining the credibility of witnesses and weighing the evidence are the responsibilities of the PTAB, not the reviewing court. See Kraft Foods, 2013 IL App (2d) 121031 , ¶ 51. When examining the PTAB’s factual findings on administrative review, therefore, the reviewing court will not reweigh the evidence presented in the PTAB hearing, reassess the credibility of the witnesses, make an independent determination of the facts, or substitute its judgment for that of the PTAB. See Marconi, 225 Ill. 2d at 534; Moroney, 2013 IL App (1st) 120493 , ¶ 35; Kraft Foods, 2013 IL App (2d) 121031 , ¶ 51. Nor will the appellate court intervene when there is simply a difference of opinion as to the actual value of the property. Kraft Foods, 2013 IL App (2d) 121031 , ¶ 51. ¶ 28 B. Whether the PTAB’s Ruling Was Against the Manifest Weight of the Evidence ¶ 29 Turning to the merits of the parties’ arguments on appeal, we note that under Illinois law, as a general rule, real property is assessed for property tax purposes based upon its fair market value (also referred to more simply as market value)—the price the property would bring in a fair and voluntary sale. See 35 ILCS 200/1-50, 9-145 (West 2012); 86 Ill. Adm. Code 1910.5(b)(5) (2014); Kraft Foods, 2013 IL App (2d) 121031 , ¶ 43. Farm improvements, however, such as the building in the present case, are an exception to that general rule and are assessed based upon their contributory value to the farm rather than based upon their market value. See 35 ILCS 200/10-140 (West 2012); O’Connor v. A&P Enterprises, 81 Ill. 2d 260 , 267, 275 (1980). Specifically, section 10-140 of the Property Tax Code provides that improvements on farm 14  property, other than a dwelling, “shall have an equalized assessed value of 33⅓% of their value, based upon the current use of those buildings and the contribution to the productivity of the farm.” 35 ILCS 200/10-140 (West 2012). Section 10-140 thus reflects the legislature’s recognition that certain farm structures may have become obsolete due to changes in farming methods or practices and may have a greatly diminished value, or no value, in connection with the farming operation. See O’Connor, 81 Ill. 2d at 267 (discussing a prior version of the statute). ¶ 30 Although there are different methods for estimating the value of real property, the Department of Revenue, which is responsible for issuing guidelines and recommendations for valuing farmland, has clarified that the contributory value of a farm building (or other farm improvement) should be determined using the cost approach or cost method of valuation. Publication 122, supra at 37. Under the cost approach, contributory value is calculated by first estimating the reproduction or replacement cost new of the building in question and then subtracting depreciation from the replacement cost amount. See id. at 38. There are three types of depreciation that must be considered when using the cost approach: physical deterioration (a loss in the physical ability of a building to withstand normal use due to wear and tear, structural defects, and/or decay), functional obsolescence (a loss in value due to the characteristics of the building—such as poor design, surplus capacity, and/or changes in farming techniques—that cause a failure of the building to serve its intended purpose), and economic obsolescence (a loss in value due to changes in the economic environment of the farm, which results from external influences, such as land-use changes, government regulations, and/or farm market conditions). Id. at 37. ¶ 31 In a hearing before the PTAB, the PTAB’s role is to determine the correct assessed value of the property based upon the facts, evidence, exhibits, and briefs that have been submitted to 15  the PTAB. 86 Ill. Adm. Code 1910.10(b) (1997); 1411 North State Condominium Ass’n v. Illinois Property Tax Appeal Board, 2016 IL App (1st) 143757 , ¶ 6 (1411 North State). A taxpayer who appeals an assessment to the PTAB has the initial burden of going forward—the burden of production—and must present substantive documentary evidence or legal argument that is sufficient to challenge the correctness of the assessment. See 86 Ill. Adm. Code 1910.63(a), (b) (2000); 1411 North State, 2016 IL App (1st) 143757 , ¶ 8; Peacock v. Property Tax Appeal Board, 339 Ill. App. 3d 1060 , 1068 (2003). If the taxpayer satisfies that burden, the burden of production shifts to the county board of review to present substantive documentary evidence or legal argument to support the assessed value that the board of review assigned to the property (or an alternative value). See 86 Ill. Adm. Code 1910.63(c) (2000); 1411 North State, 2016 IL App (1st) 143757 , ¶ 8; Peacock, 339 Ill. App. 3d at 1068. Although the burden of production may shift between the taxpayer and the board of review, the ultimate burden of persuasion throughout the proceedings remains on the taxpayer to prove by a preponderance of the evidence that the assessed value assigned to the property is excessive. See 86 Ill. Adm. Code 1910.63(e) (2000); 1411 North State, 2016 IL App (1st) 143757 , ¶ 9; Peacock, 339 Ill. App. 3d at 1071. ¶ 32 In the present case, the PTAB ultimately found following an evidentiary hearing that the Trust had failed in its burden of proof to show by a preponderance of the evidence that the farm building had been given too high of an assessed value for the 2012 tax year. After having reviewed the record of the PTAB proceedings, we conclude that the PTAB’s finding on the Trust’s failure to satisfy its burden of proof was not against the manifest weight of the evidence. See Marconi, 225 Ill. 2d at 532-34; Moroney, 2013 IL App (1st) 120493 , ¶ 36. At the heart of the PTAB’s decision was its determination that the appraisal submitted by the Trust in support of its 16  position (Blean’s appraisal) was flawed and that it was entitled to little weight. That credibility determination was in the PTAB’s province to make (see Kraft Foods, 2013 IL App (2d) 121031 , ¶ 51 (recognizing that determining the credibility of witnesses and weighing the evidence are the responsibilities of the PTAB, not the reviewing court)) and was well supported by the evidence. Most notably, Blean’s written appraisal report and his testimony before the PTAB established that Blean had relied on only one comparable sale in determining the amount of functional and external obsolescence to apply to the Trust’s farm building and that the comparable sale that Blean had used was invalid for comparison purposes because it did not involve an arm’s-length transaction. The PTAB also noted and documented in its written order other flaws that it had found in Blean’s appraisal/opinion as to the contributory value of the farm building, including, among other things, that Blean had used an overinflated value for the farmland of the comparable property, which resulted in a higher level of depreciation being attributed to the comparable farm building and to the Trust’s farm building by extrapolation; that Blean had failed to set forth in his appraisal his calculations for determining the replacement cost of the comparable farm building; and that Blean had failed to specify in his appraisal why he allocated the depreciation percentages in the manner that he did for the comparable farm building. ¶ 33 By contrast, the PTAB found that the Board’s appraisal (Webb’s appraisal) was the best evidence of the contributory value of the farm building, noting that the cost approach developed by Webb was more detailed than Blean’s and better reflected all of the individual components that made up the subject property. Although the Trust attacks that finding here, claiming that Webb failed to consider obsolescence, the record does not support that claim. To the contrary, the record shows that Webb considered obsolescence and that she determined that it did not apply in this case. Webb explained the reasons for her decision in that regard in both her written 17  appraisal report and her testimony. Therefore, based upon the PTAB’s factual findings as to the credibility/weight to be given to each of the two appraisals—findings that were not against the manifest weight of the evidence—we must conclude that the PTAB correctly determined that the Trust failed to satisfy its burden of proof to show that a reduction in the assessment was warranted. See 86 Ill. Adm. Code 1910.63(e) (2000); 1411 North State, 2016 IL App (1st) 143757 , ¶ 9; Peacock, 339 Ill. App. 3d at 1071. ¶ 34 C. The Trust’s Statutory Interpretation Argument ¶ 35 Having concluded that the PTAB’s ruling was not against the manifest weight of the evidence and must be affirmed, we find is unnecessary to rule upon the merits of the Trust’s statutory interpretation argument. As defendants correctly point out in this appeal, even if the Trust’s statutory interpretation argument was correct and Webb’s appraisal was flawed, we would still have to uphold the PTAB’s determination because the Trust failed to present any credible evidence to establish that the Trust’s farm building had been over-assessed. See 86 Ill. Adm. Code 1910.63(e) (2000) (indicating that the taxpayer/contesting party has the burden to prove by a preponderance of the evidence that the property has been over-assessed); 1411 North State, 2016 IL App (1st) 143757 , ¶ 9 (same); Peacock, 339 Ill. App. 3d at 1071 (same). As we indicated above, the PTAB’s specific factual finding—that Blean’s appraisal was flawed and was entitled to little weight—was not against the manifest weight of the evidence and must be upheld here. See Marconi, 225 Ill. 2d at 534; Moroney, 2013 IL App (1st) 120493 , ¶ 36. ¶ 36 D. The Trust’s Constitutional Claim ¶ 37 Finally, with regard to the Trust’s claim that the assessment method used in this case constituted a violation of the Trust’s equal protection rights, we believe that the Trust’s claim in that regard has been forfeited since the Trust did not assert that claim when the matter was before 18  the PTAB. See Board of Education, Joliet Township High School District No. 204 v. Board of Education, Lincoln Way Community High School District No. 210, 231 Ill. 2d 184 , 205 (2008) (stating that any issue not raised before the administrative agency, even constitutional issues that the agency lacks authority to decide, will be forfeited). Furthermore, because our decision in this appeal turns upon the PTAB’s factual findings and the applicable standard of review, we do not agree with the Trust’s assertion that the Trust’s forfeiture should be ignored in this case to maintain a sound body of precedent. ¶ 38 III. CONCLUSION ¶ 39 For the foregoing reasons, we affirm the judgment of the PTAB. ¶ 40 Affirmed. 19  No. 3-19-0397 Cite as: Edward Sims Jr. Trust v. Henry County Board of Review, 2020 IL App (3d) 190397 Decision Under Review: Appeal from the Circuit Court of Henry County, No. 18-MR-158; the Hon. Jeffrey W. O’Connor, Judge, presiding. Attorneys Jerry J. Pepping and Jennifer L. Kincaid, of Pepping, Balk, for Kincaid & Olson, Ltd., of Silvis, for appellant. Appellant: Attorneys Matthew Schutte, State’s Attorney, of Cambridge (Stephanie for Barrick, Assistant State’s Attorney, of counsel), for appellees Appellee: Henry County Board of Review and Tamra S. Dynes. Kwame Raoul, Attorney General, of Chicago (Jane Elinor Notz, Solicitor General, and Carson R. Griffis, Assistant Attorney General, of counsel), for other appellee. 20

2020-11-30 21:03:59.326607+00

http://www.illinoiscourts.gov/Opinions/AppellateCourt/2020/1stDistrict/1190697.pdf

2020 IL App (1st) 190697 No. 1-19-0697 November 30, 2020 FIRST DIVISION IN THE APPELLATE COURT OF ILLINOIS FIRST DISTRICT BETTER GOVERNMENT ASSOCIATION, ) Appeal from the Circuit Court ) Of Cook County. Plaintiff-Appellee and Cross-Appellant, ) ) v. ) No. 14 CH 10364 ) THE METROPOLITAN PIER AND ) EXPOSITION AUTHORITY and NAVY ) The Honorable PIER, INC., ) Thomas R. Allen, ) Judge Presiding. Defendants-Appellants and ) Cross-Appellees. ) PRESIDING JUSTICE WALKER delivered the judgment of the court, with opinion. Justices Hyman and Coghlan concurred in the judgment and opinion. OPINION ¶1 In 2014, the Better Government Association (BGA) sued the Metropolitan Pier and Exposition Authority (MPEA) and Navy Pier, Inc. (NPI) under the Freedom of Information Act (FOIA) (5 ILCS 140/1 et seq. (West 2014)), seeking records pertaining to the operation of Navy Pier. The trial court granted summary judgment in favor of BGA on its claim against MPEA, but after a bench trial, the court entered judgment in favor of NPI on BGA’s claims  No. 1-19-0697 directed against NPI. MPEA and NPI appeal from the summary judgment entered on the count against MPEA, and BGA cross-appeals from the judgment entered on the counts naming NPI as defendant. ¶2 We find that NPI performs a governmental function on the behalf of MPEA and that the documents requested relate directly to that governmental function. Therefore, we affirm the summary judgment entered against MPEA. We also affirm the entry of judgment against BGA on the other counts because the court’s finding that NPI did not operate as a subsidiary body of MPEA, within the meaning of the FOIA, is not contrary to the manifest weight of the evidence. ¶3 BACKGROUND ¶4 In July 1989, the Illinois General Assembly created MPEA to promote and operate expositions and conventions in Chicago and “[t]o carry out or otherwise provide for the recreational, cultural, commercial, or residential development of Navy Pier.” 70 ILCS 210/4(b) (West 2014). In May 2010, the General Assembly directed MPEA’s trustee, James Reilly, to report to the General Assembly his findings on the issue of whether Navy Pier should remain within the control of the MPEA or serve as an entity independent from the MPEA. Reilly recommended that MPEA should transfer operation of Navy Pier to a private corporation “governed by a civically oriented not-for-profit board.” ¶5 Some employees and directors of MPEA, along with others, incorporated NPI in 2011 “to support and sustain the operation of Navy Pier, a Chicago Landmark, so as to facilitate the ongoing recreational, cultural and other development of Navy Pier for the benefit of the general public, and all activities incidental or related thereto, including, in particular, maintaining and 2  No. 1-19-0697 operating the grounds, buildings, and facilities of Navy Pier.” NPI’s bylaws further elaborate its purpose: “The Corporation is organized and shall be operated exclusively for civic and charitable purposes, including (a) supporting, sustaining, investing its funds in and for, and lessening the burdens of government related to the operation of Navy Pier, so as to facilitate the ongoing recreational, educational, cultural and other development of Navy Pier for the benefit of the general public, and all activities incidental or related thereto; (b) maintaining, repairing, operating, designing, financing, subleasing, facilities, developing, redeveloping, and/or demolishing the grounds, buildings, facilities, and/or improvements of, and located on, Navy Pier and Gateway Park; and (c) supporting and benefiting the [MPEA] through the development and operation of Navy Pier.” ¶6 MPEA leased Navy Pier to NPI for 25 years at $1 per year. The lease required NPI to “offer to the general public free admission to the public portions” of Navy Pier and to operate in accord with a “Framework Plan” that MPEA and NPI would develop together to further the objective of making Navy Pier “a world-class public place that celebrate[s] and showcases the vitality of Chicago, and provides for the enjoyment of Chicago-area residents and visitors, by creating an eclectic mix of public, cultural, recreational, retail, dining, entertainment and other compatible uses attracting a broad-range of visitors, and managed within a business framework that provides for the long-term financial sustainability of Navy Pier.” 3  No. 1-19-0697 ¶7 MPEA granted NPI $220,000 and loaned it $5 million for start-up expenses, and it gave NPI $115 million to use for improvements to the property. MPEA also gave NPI other assets including a number of vehicles. ¶8 In 2014, BGA, invoking the FOIA, requested from MPEA and NPI various records relating to the operation of Navy Pier. MPEA supplied some of the documents and said it did not have others in its possession. NPI denied the request claiming that it is not subject to the FOIA. ¶9 On June 14, 2014, BGA filed a complaint accusing MPEA and NPI of violating the FOIA. In counts I and III, BGA sought a judgment declaring that NPI served as a public body obliged to respond directly to FOIA requests. In count II, BGA charged MPEA with violating the FOIA on the alternative theory that NPI performed a governmental function on the MPEA’s behalf and therefore MPEA had a duty to produce public records in NPI’s possession that relate directly to that governmental function. ¶ 10 BGA and MPEA filed motions for summary judgment on count II. In response to MPEA’s motion for summary judgment, BGA presented reports that led to the creation of NPI, NPI’s tax returns claiming exemption because of its public purpose, hundreds of e-mails between MPEA personnel and NPI personnel, and a letter from the Attorney General concerning BGA’s request for NPI documents. The Attorney General said: “Navy Pier is a publicly-owned property. MPEA has contracted with NPI to operate Navy Pier for the benefit of the public. It is clear that if Navy Pier was currently being operated by MPEA or by the trustee, all records relating to its operation would ‘pertain to public business,’ for purposes of FOIA, and would be subject to disclosure. The fact that a non-profit entity created for that purpose 4  No. 1-19-0697 operates Navy Pier pursuant to contract with MPEA does not change the nature of the operation. Accordingly, the records prepared by or used by NPI in connection with the operation of Navy Pier unequivocally pertain to public business of MPEA, a public entity. *** The operation of Navy Pier—including its beer garden and other facilities—is clearly for the benefit of the public as a tourist attraction, and is therefore a ‘governmental function’ of MPEA. Thus, the requested records directly relate to that governmental function, which NPI has contracted to perform. Accordingly, we conclude that records in the possession of NPI which are responsive [to] FOIA request[s] must be produced by MPEA under section 7(2) of FOIA.” ¶ 11 The trial court held that MPEA hired NPI to perform a governmental function and therefore MPEA had a duty to produce all documents related to NPI’s performance of that function. The court then considered the particular documents BGA requested. BGA alleged that MPEA violated the FOIA by refusing BGA’s request for: “1. A list of NPI’s employees, titles and salaries since the date NPI was created ***. 2. A list of all contracts to which NPI is a party, showing the name of the counterparty, the amount of the contract, the date of the contract, and the goods or services purchased ***. 3. A list of all leases at Navy Pier showing the owners of each business, the date the lease began and the date the lease ended or will end, and the revenue generated ***. 4. NPI’s annual budgets and financial statements since NPI was created. 5. The results of all audits of NPI. 6. Minutes of all NPI 5  No. 1-19-0697 board meetings since NPI was created. 7. All employment contracts governing the employment of any NPI employees. 8. All settlement agreements and employment termination or severance agreements involving NPI. 9. NPI’s articles of incorporation and by-laws, including all amendments. 10. All emails sent or received *** by NPI’s president/CEO, chief operating officer, board chair, board vice-chair, and/or director of external communications on March 21 or March 22, 2014. 11. All expense reimbursement requests and statements for any credit card, debit card, procurement cards, or other payment mechanisms issued in whole or in part to NPI or MPEA, for NPI’s president/CEO dated January 1, 2014 to present. 12. All conflict-of-interest disclosures by any NPI employees or directors. 13. All NPI policies and procedures. 14. All documents related to the $34,490 transaction involving Patrick Gardner reported on Schedule L of NPI’s 2011 IRS Form 990.” ¶ 12 The trial court held that all the requested documents related to NPI’s performance of a governmental function. The court granted summary judgment in favor of BGA for the relief requested in count II of the complaint. ¶ 13 The court then heard evidence on BGA’s assertion that NPI counted as a public body. The FOIA defines “ ‘[p]ublic bod[ies]’ ” as “all legislative, executive, administrative, or advisory bodies of the State, state universities and colleges, counties, townships, cities, villages, incorporated towns, school districts and all other municipal corporations, boards, bureaus, committees, or commissions of this State, any subsidiary bodies of any of the foregoing 6  No. 1-19-0697 including but not limited to committees and subcommittees thereof, and a School Finance Authority created under Article 1E of the School Code.” 5 ILCS 140/2(a) (West 2014). ¶ 14 The parties agreed that NPI met the definition of “public body” only if it qualified as a “subsidiary bod[y]” of MPEA. ¶ 15 Marilynn Gardner, president of NPI, testified that NPI’s board has more than 30 members, and only 3 of those members work for MPEA. After NPI’s board approves its budget, the board presents the budget to MPEA. Some items in the budget might require MPEA approval, but MPEA did not generally retain veto power over NPI’s decisions. NPI mostly funds its operations from its revenues. Gardner detailed some of the capital improvements NPI made with the $115 million it obtained from MPEA. NPI repaid in full the $5 million MPEA loaned to NPI. ¶ 16 The trial court entered a judgment in favor of NPI on counts I and III of the complaint, holding that NPI did not act as a subsidiary body of MPEA. MPEA and NPI filed an appeal from the summary judgment entered on count II, and BGA filed a cross-appeal from the judgments entered on counts I and III. ¶ 17 ANALYSIS ¶ 18 We address the appeal of MPEA and NPI first. We review de novo the trial court’s grant of summary judgment. Big Sky Excavating, Inc. v. Illinois Bell Telephone Co., 217 Ill. 2d 221 , 234 (2005). MPEA and NPI contend that NPI does not perform a governmental function within the meaning of the FOIA, and the documents requested do not directly relate to any governmental function NPI might perform. 7  No. 1-19-0697 ¶ 19 A. Governmental Function ¶ 20 Section 7(2) of the FOIA provides: “A public record that is not in the possession of a public body but is in the possession of a party with whom the agency has contracted to perform a governmental function on behalf of the public body, and that directly relates to the governmental function and is not otherwise exempt under this Act, shall be considered a public record of the public body, for purposes of this Act.” 5 ILCS 140/7(2) (West 2014). ¶ 21 Our supreme court, interpreting the FOIA, defined “governmental function” as “a government agency’s conduct that is expressly or impliedly mandated or authorized by constitution, statute, or other law and that is carried out for the benefit of the general public.” (Internal quotation marks omitted.) Better Government Ass’n v. Illinois High School Ass’n, 2017 IL 121124 , ¶ 63 (IHSA). ¶ 22 The General Assembly expressly imposed on MPEA the duty “[t]o carry out or otherwise provide for the recreational, cultural, commercial, or residential development of Navy Pier.” 70 ILCS 210/4(b) (West2014). MPEA delegated to NPI its responsibility for development of Navy Pier. NPI, in its bylaws, asserts that it “shall be operated exclusively for civic and charitable purposes, including (a) supporting,sustaining, investing its funds in and for, and lessening the burdens of government relatedto the operation of Navy Pier, so as to facilitate the ongoing recreational, educational, cultural and other development of Navy Pier for the benefit of the general public, and all activities incidental or related thereto; (b) 8  No. 1-19-0697 maintaining, repairing, operating, designing, financing, subleasing, facilities, developing, redeveloping, and/or demolishing the grounds, buildings, facilities, and/or improvements of, and located on, Navy Pier and Gateway Park; and (c) supporting and benefiting the [MPEA] through the development and operation of Navy Pier.” ¶ 23 Insofar as NPI fulfills the duties the General Assembly assigned to MPEA, by “carry[ing] out or otherwise provid[ing] for the recreational, cultural, commercial or residential development of Navy Pier” (70 ILCS 210/5(c) (West 2014)), NPI performs a governmental function. See IHSA, 2017 IL 121124 , ¶ 63. ¶ 24 MPEA and NPI argue—at astounding length—that our supreme court did not intend to define “governmental function” in IHSA where the court found, “ ‘governmental function’ is defined as ‘a government agency’s conduct that is expressly or impliedly mandated or authorized by constitution, statute, or other law and that is carried out for the benefit of the general public.’ ” IHSA, 2017 IL 121124 , ¶ 63 (quoting Black’s Law Dictionary (10th ed. 2014)). If MPEA and NPI mean to argue on policy grounds that courts should not so define “governmental function,” they should present the argument to the General Assembly. We apply the definition our supreme court set out in IHSA. Because NPI fulfills the duties the General Assembly assigned by statute to MPEA, NPI performs a governmental function. ¶ 25 B. Directly Related ¶ 26 MPEA and NPI contend that the documents requested do not directly relate to NPI’s governmental function. For documents “in the possession of a party with whom the agency has contracted to perform a governmental function on behalf of the public body,” section 7(2) of 9  No. 1-19-0697 the FOIA limits the FOIA’s reach to documents “directly relate[d] to the governmental function [which are] not otherwise exempt under this Act.” 5 ILCS 140/7(2) (West 2014). The FOIA does not explain what documents directly relate to a governmental function. Rushton v. Department of Corrections, 2019 IL 124552 , ¶ 28. “[T]he meaning of ‘directly relates’ must be considered in light of FOIA’s policy ***, and also the specific policy and purpose behind section 7(2). *** [S]ection 7(2) was the legislature’s response to the privatization of government responsibilities and its impact on the right of public information access and transparency and *** this section ensures that governmental entities must not be permitted to avoid their disclosure obligations by contractually delegating their responsibility to a private entity.” (Internal quotation marks omitted.) Rushton, 2019 IL 124552 , ¶ 28. ¶ 27 If MPEA had itself entered into the employment contracts, vendor contracts, and leases BGA seeks, MPEA would have had a duty to disclose them. See, e.g., Stern v. Wheaton- Warrenville Community Unit School District 200, 233 Ill. 2d 396 , 405-06 (2009) (employment contracts); People ex rel. Ulrich v. Stukel, 294 Ill. App. 3d 193 , 204 (1997) (expenditure of public funds); Mid-America Television Co. v. Peoria Housing Authority, 93 Ill. App. 3d 314 , 316-17 (1981) (leases). Budgets, audit reports, and the other documents requested apparently fall under the general presumption of accessibility for public records, as all the documents relate to NPI operations. NPI established in its bylaws that all its operations fulfill functions assigned to MPEA by statute. See Baudin v. City of Crystal Lake, 192 Ill. App. 3d 530 , 534- 35 (1989). The Attorney General persuasively argued that MPEA could not use the arrangement with NPI to avoid disclosure of the documents BGA requested. 10  No. 1-19-0697 ¶ 28 Finally, MPEA and NPI assert that the trial court erred by ordering MPEA to produce all the requested documents “Without Consideration Of Whether The Documents Were Otherwise Exempt From FOIA.” Both in the trial court and on appeal, MPEA and NPI have not identified any exemptions applicable to the requested documents. MPEA, as a public body, bears the burden of proving that records requested fall within an exemption. Chicago Alliance for Neighborhood Safety v. City of Chicago, 348 Ill. App. 3d 188 , 198 (2004). MPEA has not attempted to meet that burden. We affirm the trial court’s order granting summary judgment in favor of BGA on count II of the complaint. ¶ 29 C. Subsidiary Body ¶ 30 BGA contends in its cross-appeal that the trial court erred when it entered judgment in favor of NPI on counts I and III of the complaint, which accused NPI itself of violating the FOIA and which asked the court for a judgment declaring that NPI served as a public body. We will not disturb the trial court’s findings of fact unless they are against the manifest weight of the evidence. Fox v. Heimann, 375 Ill. App. 3d 35 , 46 (2007). ¶ 31 The FOIA statute does not define “subsidiary body.” Our supreme court in IHSA held that, to determine whether the FOIA applied to an entity as a subsidiary body, the court should consider four factors: “(1) the extent to which the entity has a legal existence independent of government resolution, (2) the degree of government control exerted over the entity, (3) the extent to which the entity is publicly funded, and (4) the nature of the functions performed by the entity.” IHSA, 2017 IL 121124 , ¶ 26. The IHSA court added, “no single factor is determinative or conclusive, but as the definition indicates, the key distinguishing factors are government creation and control.” IHSA, 2017 IL 121124 , ¶ 26. 11  No. 1-19-0697 ¶ 32 1. Independent Legal Identity ¶ 33 The trial court found that Reilly’s recommendation to the legislature led to the creation of NPI as a spinoff from MPEA. The trial court said MPEA put “training wheels on the bike” to get NPI started. The court concluded that NPI had a separate legal identity from MPEA as a formally independent corporation, divorced from MPEA in accord with Reilly’s recommendation. The trial court’s finding that NPI has an independent legal identity was not against the manifest weight of the evidence. ¶ 34 2. Control ¶ 35 With respect to the second factor, BGA argues that the restrictions in the lease regarding how NPI can operate Navy Pier amount to governmental control. The testimony of Gardner and the documentary evidence show that MPEA exercised only general supervision under the framework plan. “Such general supervision does not transform the supervised company into a subsidiary of the government.” Rockford Newspapers, Inc. v. Northern Illinois Council on Alcoholism & Drug Dependence, 64 Ill. App. 3d 94 , 97 (1978); see Hopf v. Topcorp, Inc., 256 Ill. App. 3d 887 (1993). ¶ 36 We find useful guidance in O’Toole v. Chicago Zoological Society, 2015 IL 118254 . The Chicago Zoological Society (Society) was a private nonprofit corporation that controlled the operation of the Brookfield Zoo, a publicly owned property, just as NPI controls daily operations of Navy Pier. NPI, like the Society, purchased its own insurance and made its own employment decisions. The O’Toole court said, “The Society’s private, nonprofit corporate structure effectively insulates its officers from [the Forest Preserve District of Cook County (District)] control over management decisions. The officers, who handle the zoo’s day-to-day 12  No. 1-19-0697 operations, owe their positions to the trustees and, indirectly, to the governing members. Among these latter two groups the District enjoys only nominal representation.” (Internal quotation marks omitted.) O’Toole, 2015 IL 118254 , ¶ 28. The court concluded that the District, a unit of local government, did not maintain operational control over the Society, and therefore the Society did not count as a public entity. O’Toole, 2015 IL 118254 , ¶ 30. Following the reasoning of O’Toole, we find that MPEA does not maintain operational control of NPI. ¶ 37 BGA argues that NPI’s assertions of tort immunity in other lawsuits count as admissions of government control. However, “ ‘[a] party is not bound by admissions regarding conclusions of law because the courts determine the legal effect of the facts adduced.’ ” IHSA, 2017 IL 121124 , ¶ 47 (quoting JPMorgan Chase Bank, N.A. v. Earth Foods, Inc., 238 Ill. 2d 455 , 475 (2010)). Courts conclude as a matter of law that tort immunity applies or does not apply. See Vesey v. Chicago Housing Authority, 145 Ill. 2d 404 , 412 (1991). The assertion of tort immunity does not amount to an admission of fact. BGA presented no evidence that NPI ever asserted that MPEA controlled its operations. The trial court’s finding that MPEA does not control NPI accords with the manifest weight of the evidence. ¶ 38 3. Public Funding ¶ 39 MPEA gave NPI $220,000 in seed money to cover start-up costs. MPEA loaned NPI $5 million at 0% interest, leased Navy Pier to NPI for $1 per year, and gave NPI property that included vehicles, worth about $2.5 million. MPEA also gave NPI $115 million for capital improvements at Navy Pier. The trial court held that public funding did not count as a factor in favor of finding that NPI operated as a subsidiary body of MPEA. 13  No. 1-19-0697 ¶ 40 Apart from the funding for capital improvements, MPEA’s contributions did not form a large part of NPI’s funding. Most of NPI’s funds for daily operations came from its revenues from operations and charitable donations it raised without MPEA’s assistance. BGA emphasizes the $115 million MPEA gave NPI. We find this case similar to Hopf, in which the City of Evanston gave Topcorp funds as part of a plan for Topcorp to develop real estate in Evanston. The Hopf court noted that “the majority of the funds that the City has expended were not used to operate [the properties], but instead were used to make infrastructure improvements to the area where the research park is located.” Hopf, 256 Ill. App. 3d at 896-897. The Hopf court found that the public funding did not count as grounds for treating the private corporation as a subsidiary body. Likewise, where the $115 million served to improve the value of MPEA’s property, and not to fund NPI’s operations, we do not construe the contribution as public funding of NPI. The trial court’s finding concerning the public funding factor is not against the manifest weight of the evidence. ¶ 41 4. Nature of the Functions Performed ¶ 42 The trial court found that NPI performs a governmental function on the MPEA’s behalf and that the final factor weighed in favor of finding that NPI acted as a subsidiary body of MPEA. However, the court held that this factor did not outweigh the other factors, which all presented grounds for finding that NPI did not operate as a subsidiary of MPEA. We hold that the manifest weight of the evidence sufficiently supports the trial court’s finding that NPI is not a subsidiary body of MPEA within the meaning of the FOIA. 14  No. 1-19-0697 ¶ 43 CONCLUSION ¶ 44 NPI performs a governmental function on behalf of the MPEA, and the records BGA requested directly relate to NPI’s performance of that governmental function. Accordingly, we affirm the trial court’s order granting BGA’s motion for summary judgment on count II of the complaint. Because NPI is not a subsidiary body of the MPEA, we affirm the trial court’s judgment in favor of NPI on counts I and III of the complaint. ¶ 45 Affirmed. 15 No. 1-19-0697 No. 1-19-0697 Cite as: Better Government Ass’n v. Metropolitan Pier & Exposition Authority, 2020 IL App (1st) 190697 Decision Under Review: Appeal from the Circuit Court of Cook County, No. 14-CH- 10364; the Hon. Thomas R. Allen, Judge, presiding. Attorneys Michele Odorizzi and Joseph M. Callaghan, of Mayer Brown LLP, for of Chicago, for appellant Metropolitan Pier & Exposition Appellant: Authority. Daniel P. Blondin, of Navy Pier, Inc., William R. Pokorny, of Franczek P.C., and Vincent D. Pinelli and Martin T. Burns, of Burke Burns & Pinelli, Ltd., all of Chicago, for other appellant. Attorneys Matthew Topic, Joshua Burday, and Merrick Wayne, for of Loevy & Loevy, of Chicago, for appellee. Appellee: 16

2020-11-30 21:03:59.892483+00

http://www.illinoiscourts.gov/Opinions/AppellateCourt/2020/1stDistrict/1191868.pdf

2020 IL App (1st) 191868 No. 1-19-1868 September 30, 2020 First Division ______________________________________________________________________________ IN THE APPELLATE COURT OF ILLINOIS FIRST DISTRICT ______________________________________________________________________________ 21 KRISTIN CONDOMINIUM ASSOCIATON, by ) Appeal from the Its Board of Managers, ) Circuit Court of ) Cook County. Plaintiff-Appellant, ) ) No. 17 L 5193 v. ) ) Honorable PIONEER ENGINEERING & ENVIRONMENTAL ) Brigid Mary McGrath, SERVICES, LLC, and ERIC TERMUEHLEN, ) Judge Presiding. ) ) Defendants-Appellees. PRESIDING JUSTICE WALKER delivered the judgment of the court, with opinion. Justices Pierce and Coghlan concurred in the judgment and opinion. OPINION ¶1 Owners of condominiums at 21 Kristin Drive in Schaumburg, Illinois, sued Pioneer Engineering & Environmental Services, LLC (Pioneer), and Eric Termuehlen, an engineer who worked for Pioneer, for negligently misrepresenting the condition of the condominium building. September 30, 2020 The circuit court dismissed the complaint for failure to state a cause of action. We hold that the owners adequately alleged that Pioneer had a duty to prospective purchasers of condominium units in the building and that Pioneer negligently misrepresented the condition of the building in its report. We reverse the circuit court’s judgment and remand for further proceedings on the complaint. ¶2 I. BACKGROUND ¶3 21 Kristin Developers, LLC (Developers), hired Pioneer Engineering & Environmental Services, Inc., to complete a Property Condition Assessment (PCA) for the 12-story residential structure located at 21 Kristin Drive. Pioneer delivered the PCA, dated October 2006, in which it identified physical deficiencies in the building, in accord with standards set by the American Society for Testing and Materials (ASTM). Pioneer stated: “The ASTM standard was developed to provide current owners, prospective buyers, lending institutions or other interested parties with qualified professional judgments concerning the presence or likely presence of conspicuous defects or material deferred maintenance of a subject property’s material systems components or equipment. The scope of this PCA includes a review of documents associated with the subject property, interviews with persons knowledgeable about the physical condition of the subject property, and a visual inspection of the site and any associated structures and other improvements. *** [T]he information contained within this PCA has been compiled in such a manner that meets or exceeds the recommended practices established by ASTM Standard Practice E 2018-99. The purpose of this report is to assist the Client in -2- September 30, 2020 determining the condition of the building, in addition to establishing an estimate of replacement costs for the common areas of the subject property.” ¶4 Pioneer informed Developers of its findings: “The garage shows evidence of extensive recent concrete repairs to the deck topping and the ‘twin-tee’ [structural deck] panels. The garage structure still indicates evidence of some water infiltration on the underside of the ‘twin-tee’ panels. The structural condition of the garage is generally fair. Additional concrete repairs will be necessary in an on-going basis to provide a waterproof parking environment and prevent further degradation to the structure. *** *** *** The approximate age of the roofing membrane is estimated to be 10 years. *** Some evidence of ponding water is present in the form of algae on the ballast. *** Some small areas of ballast removal are present around the perimeter of the building where potential historical repairs have been made. The general condition of the roofing system is good. *** With proper maintenance, the Remaining Useful Life (RUL) of the roofing membrane is estimated to be 15 years. *** Pioneer warrants that the findings and conclusions contained herein have been promulgated in accordance with ASTM Standard Practice ***. No assessment can eliminate the uncertainty regarding the potential for physical deficiencies in connection with a property. The PCA is designed to reduce, but not eliminate, -3- September 30, 2020 uncertainty regarding the potential for physical deficiencies in connection with a property. *** Any cost estimates associated with this PCA are intended to be opinions of probable costs. These costs should be construed as preliminary budgets. Actual costs will vary depending on the type and design of the suggested remedy, the quality of materials and installation, the type of equipment or manufacturer selected, the quality and scheduling of the actual work performed, market conditions at the time the work is performed, and various other factors. This report has been prepared for the sole use of the Client identified in the report and cannot be relied upon by other persons or entities without the permission of Pioneer. The observations and conclusions contained herein are limited by the scope and intent of the work mutually agreed upon by the Client and Pioneer, and the work actually performed. Pioneer believes the findings and conclusions provided in this report are reasonable. However, no warranties are implied or expressed. Pioneer appreciates the opportunity to be of service to you on this project. We hope this information meets your needs at this time.” ¶5 Developers sold many residential units, and the purchasers formed the 21 Kristin Condominium Association (Association). In May 2017 the Association filed a complaint against Pioneer, alleging that Pioneer operated as a successor liable for the torts of Pioneer Engineering & Environmental Services, Inc., and Pioneer Engineering & Environmental Services, Inc., negligently misrepresented the condition of the building. The Association alleged: -4- September 30, 2020 “Developers and Kristin provided a condominium disclosure statement that contained a copy of the Property Condition Assessment to prospective purchasers of units in the Condominium to comply with various laws including [the Condominium Property Act (Act),] 765 ILCS 605/22 [(West 2006)]. *** Pioneer and Termuehlen knew that the Property Condition Assessment was being provided in connection with a conversion of the property by Kristin Developers into a condominium. *** Pioneer and Termuehlen provided information in the Property Condition Assessment for the specific use of prospective buyers to rely on in the purchase of units in the Condominium. *** Pioneer and Termuehlen negligently made the following false statements and omissions concerning the condition of the property in the Property Condition Assessment: *** Pioneer and Termuehlen stated that the Roofing had an Expected Life of 25 years and a Remaining Useful Life of 15 years when the condition of the roofing was such that the roofing required remediation in the amount of $626,535. *** Pioneer and Termuehlen stated that the Elevator Modernization had an Expected Life of 20 years and a Remaining Useful Life of 20 years when condition of the elevators was such that the elevators required remediation in an amount in excess of $600,000 ***. *** Pioneer and Termuehlen stated that the parking structure concrete had a Remaining Useful Life of 5 years, when the condition of the parking structure -5- September 30, 2020 concrete was such that the parking structure concrete required remediation in the amount of $336,592.” ¶6 On May 9, 2019, the circuit court dismissed the complaint with prejudice for failure to state a claim for relief. See 735 ILCS 5/2-615 (West 2018). The Association filed a timely notice of appeal. ¶7 II. ANALYSIS ¶8 We review de novo the dismissal of a complaint for failure to state a cause of action. Marshall v. Burger King Corp., 222 Ill. 2d 422 , 429 (2006). We assume the truth of all well- pleaded allegations of the complaint, and we construe those allegations in the light most favorable to the plaintiff. King v. First Capital Financial Services Corp., 215 Ill. 2d 1 , 11-12 (2005). “[A] cause of action should not be dismissed pursuant to section 2-615 unless it is clearly apparent that no set of facts can be proved that would entitle the plaintiff to recovery.” Marshall, 222 Ill. 2d at 429 . ¶9 On appeal, the Association contends that it stated a cause of action for negligent misrepresentation. To state a claim for negligent misrepresentation, the Association must allege facts that could support findings that “(1) defendant is in the business of supplying information for the guidance of others in their business dealings; (2) defendant provided information that constitutes a misrepresentation; and (3) defendant supplied the information for guidance in the plaintiff’s business dealings.” Tolan & Son, Inc. v. KLLM Architects, Inc., 308 Ill. App. 3d 18 , 27 (1999). ¶ 10 Pioneer does not contest the adequacy of allegations that it supplies information for the guidance of others in business dealings. Pioneer contends that it had no duty to the Association or -6- September 30, 2020 its members because it did not sell the units. The Association relies on section 552 of the Restatement (Second) of Torts as authority for finding that Pioneer had a duty to prospective purchasers of units in the condominium even though Pioneer did not itself sell the units. Restatement (Second) of Torts § 552 (1977); Harkala v. Wildwood Realty, Inc., 200 Ill. App. 3d 447 , 456 (1990). Section 552 provides: “One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.” Restatement (Second) of Torts § 552(1) (1977). ¶ 11 The section limits liability to losses suffered “(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it.” Restatement (Second) of Torts § 552(2)(a) (1977). ¶ 12 Comments to section 552 show the intention to reach transactions similar to the transaction at issue here: “[I]t is not required that the person who is to become the plaintiff be identified or known to the defendant as an individual when the information is supplied. It is enough that the maker of the representation intends it to reach and influence *** a group or class of persons, distinct from the much larger class who might reasonably be expected sooner or later to have access to the information and foreseeably to take some action in reliance upon it. It is enough, likewise, that the maker of the -7- September 30, 2020 representation knows that his recipient intends to transmit the information to a similar person, persons or group.” Restatement (Second) of Torts § 552 cmt. h (1977). ¶ 13 Pioneer argues that the circuit court correctly dismissed the complaint because the Association seeks to hold Pioneer liable for a violation of the Act, and the Act provides only for causes of action against developers. The Association cited section 22 of the Act in support of its claim that Pioneer knew Developers would use the report to persuade prospective purchasers to buy units in the condominium. Section 22 required Developers to present to prospective purchasers “an engineer’s report furnished by the developer as to the present condition of all structural components and major utility installations in the condominium, which statement shall include the approximate dates of construction, installation, major repairs and the expected useful life of such items, together with the estimated cost (in current dollars) of replacing such items.” 765 ILCS 605/22(e)(4) (West 2006). The Association does not ask the court to find Pioneer liable for violating the Act. It asks the court to hold Pioneer liable for breaching its common law duties, as established in section 552 of the Restatement (Second) of Torts, to the prospective purchasers who relied on Pioneer’s report when deciding whether to purchase units in the condominium. ¶ 14 Pioneer argues that the members of the Association could not reasonably rely on Pioneer’s report because Pioneer wrote in the report, “This report has been prepared for the sole use of the Client identified in the report and cannot be relied upon by other persons or entities without the permission of Pioneer.” But Pioneer allegedly knew Developers intended to use the report to inform prospective purchasers about the condition of the building. A prospective purchaser reading -8- September 30, 2020 the clause in Pioneer’s report, supplied by Developers to all prospective purchasers, would reasonably conclude that the prospective purchaser had Pioneer’s permission to rely on their report. See Kelley v. Carbone, 361 Ill. App. 3d 477 , 480 (2005). We find that the complaint adequately alleges facts that could support a finding that Pioneer knew Developers would use its report for sales of condominium units to the purchasers who became members of the Association, and therefore, in accord with section 552, the complaint adequately alleges that Pioneer supplied the report to provide guidance to the prospective purchasers in their business dealings. ¶ 15 For the remaining element of the cause of action, Pioneer argues that its statements cannot qualify as misrepresentations because it only expressed its opinion about the condition of the property. See Neptuno Treuhand-Und Verwaltungsgesellschaft MBH v. Arbor, 295 Ill. App. 3d 567 (1998). The court in Schrager v. North Community Bank, 328 Ill. App. 3d 696 , 704 (2002), explained that a court may find that an ostensible opinion constitutes an actionable misrepresentation: “As a general rule, the law will not support a misrepresentation claim predicated on an opinion; however, an exception exists where the circumstances suggest that a plaintiff may have justifiably relied on the opinion as though it was a statement of fact. [Citation.] ‘ “Wherever a party states a matter which might otherwise be only an opinion but does not state it as the expression of the opinion of his own but as an affirmative fact material to the transaction, *** the statement clearly becomes an affirmation of the fact within the meaning of the rule against fraudulent misrepresentation.’ ” Heider v. Leewards Creative Crafts, Inc., 245 Ill. App. 3d 258 , 266 (1993), quoting Perlman v. Time, Inc., 64 Ill. App. 3d 190 , 197 -9- September 30, 2020 (1978). ‘Thus, the general rule is that it is not “the form of the statement which is important or controlling, but the sense in which it is reasonably understood.” ’ West v. Western Casualty & Surety Co., 846 F.2d 387 , 394 (7th Cir. 1988), quoting W. Keeton, Prosser & Keeton on Torts § 109, at 755 (5th ed. 1984). ‘Whether a statement is one of fact or of opinion depends on all the facts and circumstances of a particular case.’ ” ¶ 16 The court in Power v. Smith, 337 Ill. App. 3d 827 , 832-33 (2003), considered the question of what circumstances justify a plaintiff in relying on a defendant’s assertions as statements of fact: “Sometimes *** the expression of an opinion may carry with it an implied assertion that the speaker knows facts that justify it. Such an assertion is to be implied where the defendant holds himself out or is understood as having special knowledge of the matter that is not available to the plaintiff, so that his opinion becomes in effect an assertion summarizing his knowledge. ‘ “Thus the ordinary man is free to deal in reliance upon the opinion of an expert jeweler as to the value of a diamond.” ’ Duhl [v. Nash Realty, Inc.], 102 Ill. App. 3d [483,] 490 [(1981)], quoting W. Prosser, Handbook of the Law of Torts § 109, at 726 (4th ed. 1971). In Duhl, the court upheld a fraud count complaining about a real estate broker’s opinion, following an appraisal, of the value of certain real estate. [Citation.] *** Although there is broad language in some of the cases, assurances as to future events are generally not considered misrepresentations of fact. [Citation.] The - 10 - September 30, 2020 exceptions are limited to recognized situations such as where a realtor appraises a house.” ¶ 17 The Power court used several questions to help determine whether assertions count as actionable misrepresentations: “Were [the] representations here similar to representations of value made by a realtor after an appraisal? Or were they more similar to the representations one partner makes to another in deciding to take on a new client or product line ***? *** Did [the defendant] have special knowledge of the matter that was not available to [the plaintiff]?” Power, 337 Ill. App. 3d at 833. ¶ 18 Applying the Power questions here, we find Pioneer’s representations similar to a realtor’s representations of the value of real estate and not at all like representations one partner makes to another about an idea for new business. Pioneer reported on the building’s condition from an engineering perspective, using its special knowledge not shared by prospective purchasers. Under Schrager and Power, the report includes actionable statements of fact and not mere opinions. ¶ 19 Pioneer contends that qualifications it put into its report relieve it of any possible liability. It said in its report: “Any cost estimates associated with this PCA are intended to be opinions of probable costs. These costs should be construed as preliminary budgets. Actual costs will vary ***. No assessment can eliminate the uncertainty regarding the potential for physical deficiencies in connection with a property. The PCA is designed to reduce, - 11 - September 30, 2020 but not eliminate, uncertainty regarding the potential for physical deficiencies in connection with a property. *** Due to the limited nature of the work, there is a possibility that conditions may exist which could not be identified within the scope of the assessment, or which were not apparent at the time of report preparation.” ¶ 20 Pioneer did not guarantee any exact price for repairs to the roof and the parking garage. Pioneer did, however, make representations about the physical state of the building in 2006, and nothing in the cited clauses relieves it of liability if it made those representations negligently. The fact that Pioneer expressed its observations about the building by referring to the remaining useful life of the structure does not shield Pioneer from liability. See Arlington Pebble Creek, LLC v. Campus Edge Condominium Ass’n, 232 So. 3d 502 , 505 (Fla. Dist. Ct. App. 2017). ¶ 21 III. CONCLUSION ¶ 22 The Association made a claim in 2017 that Pioneer made negligent misrepresentations in a 2006 report. The Association adequately alleged that Pioneer had a duty to prospective purchasers because Pioneer knew Developers would use its report to persuade prospective purchasers to buy units in the building. The Association stated a cause of action by adequately alleging facts that could support a finding that Pioneer negligently misrepresented the condition of the building. We reverse the dismissal of the complaint and remand for proceedings in accord with this order. ¶ 23 Reversed and remanded. - 12 - September 30, 2020 No. 1-19-1868 Cite as: 21 Kristin Condominium Ass’n v. Pioneer Engineering & Environmental Services, LLC, 2020 IL App (1st) 191868 Decision Under Review: Appeal from the Circuit Court of Cook County, No. 17-L-5193; the Hon. Brigid Mary McGrath, Judge, presiding. Attorneys Jeffrey S. Youngerman, Stephen D. Sharp, and Christopher L. for Gallinari, of Flaherty & Youngerman, P.C., of Chicago, for Appellant: appellant. Attorneys Jeremy P. Kreger and Joseph R. Delehanty, of Stahl Cowen for Crowley Addis LLC, of Chicago, for appellees. Appellee: - 13 -

2020-11-30 21:13:20.41084+00

http://www.tsc.state.tn.us/sites/default/files/stateoftennesseeexrel.kimberlyc.opn_.pdf

11/30/2020 IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE Assigned on Briefs June 1, 2020 STATE OF TENNESSEE EX REL. KIMBERLY C. v. GORDON S.1 Appeal from the Juvenile Court for Sumner County No. 83SCJ-2018-JV-455 David Howard, Judge ___________________________________ No. M2019-01499-COA-R3-JV ___________________________________ A legal parent appeals a child support award. He claims his voluntary acknowledgment of paternity for the child should be rescinded due to a material mistake of fact. He also claims that requiring him to pay child support would violate public policy because he is not the biological father of the child. Upon our review, we conclude that the legal parent failed to prove the existence of a material mistake of fact that would warrant rescission of the voluntary acknowledgement of paternity. We also conclude that ordering a legal parent to pay child support is consistent with public policy. So we affirm. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Juvenile Court Affirmed W. NEAL MCBRAYER, J., delivered the opinion of the court, in which J. STEVEN STAFFORD, P.J., W.S., and THOMAS R. FRIERSON II, J., joined. Russell E. Edwards, Hendersonville, Tennessee, for the appellant, Gordon S. Herbert H. Slatery III, Attorney General and Reporter, and Amber L. Seymour, Assistant Attorney General, for the appellees, Kimberly C. and the State of Tennessee. 1 This Court has a policy of protecting the identity of children by initializing the last names of the parties.  OPINION I. Kimberly C. (“Mother”) and Gordon S. (“Father”) began their relationship while Mother was pregnant with A. (“Child”). Father was present at Child’s birth in October 2010, and the couple lived together with Child as a family for several years. Although he was not the biological father, on April 14, 2014, Father, along with Mother, signed a form in which Father voluntarily acknowledged paternity of Child (the “VAP”). See Tenn. Code Ann. § 68-3-305 (b)(2) (2013) (providing for the creation of a form for the voluntary acknowledgment of paternity). Father “felt it was something right to do.” In signing, Father acknowledged not only that he was the legal father, but that he had “been orally advised of [his] rights and responsibilities,” that he understood “all of the information on th[e] form,” and that he was signing “freely and voluntarily.” On July 24, 2018, the State of Tennessee, on behalf of Mother, filed a petition to set child support for Child, naming Father as respondent. By this point, Mother and Father had gone their separate ways. Father filed a response requesting that the petition be dismissed. He alleged that “Mother and [Father] knew that he was not the biological father of Child at the time the purported VAP was executed” and that “[t]here was a material mistake of fact.” Father also requested DNA testing and asked that the VAP be rescinded or set aside and declared void ab initio. The juvenile court held a hearing at which Mother and Father testified. With respect to the VAP, Mother acknowledged that she always knew that Father was not the biological father of Child. She also testified that Father was not exercising any parenting time with Child. For his part, Father admitted signing the VAP. He claimed that it was Mother’s idea for him to sign but acknowledged that he signed it voluntarily. He also disclaimed many of the representations in the VAP. He testified that, before signing, he did not read the VAP and that no one verbally explained his rights and responsibilities. When asked if he appreciated the consequences of signing the VAP, Father replied, “No.” But Father conceded that he knew what he was signing; he “pretty much knew what [he] was doing.” The court determined that Father had “failed to carry the burden to show that there was a substantial likelihood that any of the three requisite [statutory] factors were present in this cause to allow the Court to order DNA parentage testing and, ultimately, to set aside the VAP.” So the court ordered Father to pay child support of $396.00 per month. 2  II. On appeal, Father raises two issues for our review. First, Father contends that requiring him to pay child support to Mother “would violate the public policy of this [S]tate.” Second, Father contends that the evidence at the hearing supported a finding that there was a material mistake of fact in the execution of the VAP and, as a result, the VAP should be rescinded. We address Father’s second contention first. A. Tennessee Code Annotated § 24-7-113 governs the legal effect of a VAP and the methods for rescinding it. A VAP “constitute[s] a legal finding of paternity on the individual named as the father of the child.” Tenn. Code Ann. § 24-7-113 (a) (2017). Unless rescinded within sixty days of its completion and submission by either a signatory or an “administrative or judicial tribunal,” a VAP is “conclusive of that father’s paternity without further order of the court.” Id. §§ 24-7-113(a), (c). Here, the VAP was not rescinded within 60 days of its completion and submission. So it could “only be challenged [within five years of its execution] on the basis of fraud, whether extrinsic or intrinsic, duress, or material mistake of fact.” Id. §§ 24-7- 113(e)(1),(2). The burden of proof falls on the party challenging the VAP. Id. § 24-7- 113(e)(4). Because this was a bench trial, our review is de novo on the record with a presumption that the juvenile court’s factual findings are correct, unless the evidence preponderates against those findings. Tenn. R. App. P. 13(d). Evidence preponderates against a finding of fact if the evidence “support[s] another finding of fact with greater convincing effect.” Rawlings v. John Hancock Mut. Life Ins. Co., 78 S.W.3d 291 , 296 (Tenn. Ct. App. 2001). Conclusions of law are reviewed de novo with no presumption of correctness. Kaplan v. Bugalla, 188 S.W.3d 632 , 635 (Tenn. 2006). Father claims that he proved a material mistake of fact. Specifically, the “material mistake of fact [wa]s that [Father] did not know or appreciate the consequences of executing the VAP.” One of those consequences was the obligation to support Child, and he complains that “the VAP does not clearly explain that by signing . . . the person will be obligated to pay child support.” Father invites this “Court [to] review the VAP to determine how small the print actually is” and to see that “the VAP did not adequately warn him that he would have to pay support for [Child] simply by signing it.” Unfortunately for Father’s appeal, we did read the VAP. On its second page, the page that he signed, the VAP provides that “[a]s the legal father you will have . . . [t]he responsibility of providing financial and medical support.” The VAP also provides that “[t]he court may enter an order, which will direct you to provide money for the financial 3 support of your child and to provide for your child’s medical care.” So we find no merit to Father’s contention that the VAP did not adequately warn him of the consequences of signing. But even were we to accept Father’s claim that he did not appreciate the consequences of signing the VAP, this would not amount to a material mistake of fact. Father’s claim that he did not appreciate the consequences of his actions refers to legal consequences. Ignorance of legal consequences constitutes a mistake of law. Haas v. Haas, No. 02A01-9709-CV-00241, 1998 WL 599529 , *4 (Tenn. Ct. App. Sept. 11, 1998). So Father failed to present a statutory basis for rescinding the VAP. B. Father bases his policy argument on the fact that he is not the biological father of Child and on a prior decision of this Court. In In re C.A.F., we stated that the voluntary acknowledgment of paternity statute “was not meant to allow a non-parent to obtain parental rights over a child without having to go through an adoption proceeding” and “its use for such a purpose is in violation of the public policy of this state, as unequivocally stated in the adoption statutes.” 114 S.W.3d 524 , 530 (Tenn. Ct. App. 2003). Father contends that ordering him to support Child likewise “would circumvent the adoption statutes and create an adoption by estoppel, which is not permissible by law.” We find Father’s reliance on In re C.A.F. misplaced. In that case, the Tennessee Department of Children’s Services (“DCS”) sought to terminate the parental rights of a mother, a biological father, and a putative father who had executed a voluntary acknowledgment of paternity and cared for the child while Mother was incarcerated. Id. at 525-26 . In considering the putative father’s parental rights, we determined that DCS had standing to challenge the voluntary acknowledgment of paternity. Id. at 529 . We also noted that two grounds for rescission of the acknowledgment might be applicable: fraud or material mistake of fact. Id. at 529-30 . Fraud was suggested by the mother’s efforts to avoid DCS’s involvement in her child’s life by having the putative father listed on the child’s birth certificate. Id. at 525- 26. The mother and the putative father also signed a voluntary acknowledgment of paternity, even though the putative father had denied being the biological father and did not testify to being intimate with the mother. Id. at 526, 529 . Even if fraud was not present, we suggested that the mother and the putative father could be mistaken as to paternity, which would “indicate a material (and mutual) mistake of fact.” Id. at 529-30 . 4  Here, the facts are distinguishable from In re C.A.F.2 Father has not argued that the VAP was executed for a fraudulent purpose. And there was no mistake of fact concerning paternity. Both Mother and Father acknowledge that they always knew that Father was not the biological father of Child. The State has an interest in seeing that children are supported by their parents. A “legal parent” is defined as, among other things, “a man . . . who has signed . . . an unrevoked and sworn acknowledgment of paternity under the provisions of Tennessee law.” Tenn. Code Ann. § 36-1-102 (29)(A)(iv) (Supp. 2020). If “a man executes a VAP, he acknowledges that he accepts responsibility of being a parent to the child.” State ex rel. Robinson v. Glenn, No. W2006-00557-COA-R3-JV, 2007 WL 1227377 , at *4 (Tenn. Ct. App. Apr. 26, 2007). Upholding child support obligations imposed on men who voluntarily legitimated a child knowing that they were not the biological father “‘does not violate this state’s public policy of ensuring that children are supported by their parents’ where a parent voluntarily undertook the legal responsibility to parent the child.” Pruitt v. Pruitt, No. W2018-00453-COA-R3-CV, 2019 WL 450416 , at *9 (Tenn. Ct. App. Feb. 5, 2019) (quoting Welch v. Welch, 195 S.W.3d 72 , 78 (Tenn. Ct. App. 2005)); see also Coyle v. Erickson, No. E2010-02585-COA-R9-CV, 2011 WL 3689157 , at *8 (Tenn. Ct. App. Aug. 24, 2011). III. Father failed to prove a basis for rescinding his acknowledgment of paternity. Given that acknowledgment, public policy supports imposing a child support obligation on Father. So we affirm the judgment of the juvenile court. _________________________________ W. NEAL MCBRAYER, JUDGE 2 The facts are also distinguishable from another case relied on by Father. In Braun v. Braun, we concluded that a stepfather had no obligation to support his wife’s child from a prior relationship when he had not adopted the child and had contested the imposition of a child support obligation in the parties’ divorce proceeding. No. E2012-00823-COA-R3CV, 2012 WL 4563551 , at *3-4 (Tenn. Ct. App. Oct. 2, 2012). The case did not involve a voluntary acknowledgement of paternity. 5

2020-11-30 21:16:44.780079+00

http://www.courts.wa.gov/opinions/pdf/800558.pdf

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIANE PERILLO and TED PERILLO, ) No. 80055-8-I Trustees of the Diane Perillo Living ) Trust, dated September 28, 2011, ) DIVISION ONE ) Petitioners, ) ) v. ) ) ISLAND COUNTY, a political ) subdivision of the State of Washington, ) PUBLISHED OPINION ) Respondent, ) ) VIEW SUN INVESTMENTS, LLC, a ) limited liability company, ) ) Defendant. ) BOWMAN, J. — Diane and Ted Perillo bought a home on Camano Island. As they prepared to move into their new home, neighbors informed them it had a long history as a “drug house.” Testing revealed levels of methamphetamine contamination so high that the house was not habitable and needed to be demolished. The Perillos learned that the Island County Sheriff’s Office and Island County Public Health were aware of drug activity at the home for years. The Perillos filed a negligence claim against Island County for failure to inspect the property for hazardous chemical contamination as required under RCW 64.44.020. The Perillos appeal the trial court’s determination that the public duty doctrine barred their claim and the order granting summary judgment for Island Citations and pin cites are based on the Westlaw online version of the cited material. No. 80055-8-I/2 County. We conclude that the legislative intent exception to the public duty doctrine applies to the Perillos’ negligence claim and that sufficient evidence of a legal duty precludes summary judgment. We reverse and remand. FACTS The house at 505 Michelle Drive on Camano Island sat derelict for many years after its owner went to prison in 2010. The house became a hub of criminal activity, illegal drug use, and garbage dumping. In May 2015, title to the property transferred back to the lender bank. Later that year, a real estate preservation and maintenance company began efforts to restore the property, hiring successive contractors for the massive undertaking to clean the property. In 2016, the lender sold the restored property to View Sun Investments LLC, who listed the property for sale. On February 24, 2017, Diane and Ted Perillo bought the newly renovated house for $479,000. As they prepared to move in, service providers and neighbors warned them of the property’s dubious history. Both the Frontier phone and Internet installer and the DISH Network installer were familiar with the property and told the Perillos the house was “well known on the island as a drug house.” Through conversations with neighbors, the Perillos learned of extensive law enforcement activity on the property and of multiple complaints to law enforcement and the local health department about the property. The Perillos’ real estate agent contacted Island County Public Health (ICPH) and filed a public records request for “[a]ll information on the property,” including “police records pertaining to drugs, shootings, [and] criminal activity in 2 No. 80055-8-I/3 [the] last 10 years.” The records from ICPH and the Island County Sheriff’s Office (ICSO) revealed years of reports of drug activity on the property, including suspected manufacturing of methamphetamine. In June 2014, neighbor Jewel Enger contacted ICSO to report “a constant stream of people coming and going from the location,” including many teens. According to Enger, “[S]ometimes they are so messed up that they have to hold each other up while standing at the bus stop.” The ICSO report states Enger said it was an “ ‘obvious drug house.’ ” In October 2014, ICSO received specific information about methamphetamine on the premises. A caller who had been squatting at the home reported methamphetamine trafficking.1 She reported that the house was “ ‘polluting the island, it is saturated with meth.’ ” She also said that deputies had done nothing despite knowing it was a “drug house.” A month later, the president of the homeowners association (HOA) that includes the 505 Michelle Drive property contacted ICPH to complain about “suspected drug activity” and to ask “why the drug task force was not doing anything about it.” ICPH told the HOA president to contact the ICSO, but the ICSO had referred him to ICPH. In March 2015, an ICPH environmental health specialist and solid waste coordinator wrote an e-mail to other ICPH employees, describing the property as “very complex” and “not a safe place.” The coordinator had taken photographs but “was only able to capture half of the property due to safety measures.” She also stated that the Island County Planning Department posted “a cease and 1 She also told the ICSO that there was stolen property at the house and a “chop shop in the garage.” 3 No. 80055-8-I/4 desist order” on the property “because the occupants were tearing down the metal shop,” leaving “large amounts of garbage.” ICPH and ICSO report logs show multiple calls to the agencies about the property, including complaints about strong chemical smells and drug manufacturing. In April 2015, a nearby property owner called ICPH because he “believes meth is being cooked” at the house. The same day, neighbor Enger again reported a “strong chemical smell for over a week. The last 5 days it is worse so when she goes outside her eyes water, she can’t breathe and gets wheezy.” In her report to the ICSO, Enger described “the smell of chemicals being used to make drugs.” The ICSO explained to Enger its “limitation in entering a private home” and recommended she report “a public health/nuisance violation” to the county.2 In October 2015, a contractor working to clean up the property contacted ICPH to ask whether “there was any prior history of Meth manufacturing for the property.” He joked, “Sounds like this place is pretty familiar to about everyone in that office!! (lol).”3 While working at the property, “several neighbors” warned him that there was a “significant history” of methamphetamine manufacturing in the interior of the home and in a trailer parked in the driveway. The contractor told ICPH: After learning a little about the signs and symptoms for meth labs, I immediat[e]ly stopped working and felt it necessary to contact you guys or the Sheriff[’]s department for any insight. There were nearly 50 gas cans, countless plastic bottles, short lengths of hose 2 Enger made a report to ICPH two days later. 3 In this context, “lol” likely means “laugh out loud” or “laughing out loud.” 4 No. 80055-8-I/5 (everywhere), 15 or 20 propane tanks, many antifreeze bottles, e[tc.] . . . . .... I also uncovered MANY needles. The contractor said that when he stopped working, he experienced dizziness, “severe headache, rapidly developing sore[ ]throat,” and overall fogginess. The contractor asked ICHP whether there was information on “any possible hazard” on the property and a way to test the interior and exterior of the home for contamination before he continued working on the property. ICPH told him the property had an established history of “drug activity” but no record of drug “manufacturing.” ICPH referred the contractor to the ICSO for more information and suggested he contact the Washington State Department of Health (DOH) Anonymous Meth Hotline to report a possible lab site. Also in October, another contractor cleaning the property reported to ICSO that she found “ ‘[thousand]s of needles,’ several baggies appearing to contain . . . controlled substances,” and a gun. After discovering the long history of drug activity on their property, the Perillos contacted a DOH certified drug-lab-cleanup contractor to test the house for contamination. They received the results in an April 2017 assessment report. Samples throughout the house showed methamphetamine residue in excess of legal limits. For example, the kitchen cabinets had a contamination level of 24 micrograms per 100 square centimeters, well above the Washington State methamphetamine cleanup guideline of no more than 1.5 micrograms per 100 5 No. 80055-8-I/6 square centimeters.4 Due to these high levels of residue, the assessment report recommended the house remain unoccupied until after proper decontamination. The report recommended ripping the house down to the studs to remediate the contamination at a cost of about $110,000. Further testing in February 2018 revealed methamphetamine residue in the living room wood framing, roof sheeting, and concrete floor near the hot water tank. The second assessment report concluded that because of the contamination found in the framing and roof, remediation might not achieve habitable levels. Given this concern, the Perillos chose to demolish the house at a cost of $85,610. The Perillos sued View Sun Investments LLC, the seller of the property, for breach of contract, fraud, and violation of the Consumer Protection Act, chapter 19.86 RCW.5 The Perillos also brought a claim for negligence against Island County for breaching its statutory duty to inspect the property and inform potential occupants of hazardous chemical contamination. Island County moved for summary judgment, arguing the public duty doctrine barred the Perillos’ claim. The trial court granted Island County’s motion and dismissed the claim with prejudice. The Perillos filed a motion for discretionary review. A commissioner of this court granted discretionary review under the RAP 2.3(b)(1) obvious error standard. 4 See WAC 246-205-541(1). 5 The claims against seller View Sun Investments are not at issue in this appeal. 6 No. 80055-8-I/7 ANALYSIS We review orders on summary judgment de novo and consider all evidence and reasonable inferences in the light most favorable to the nonmoving party. Kim v. Lakeside Adult Family Home, 185 Wn.2d 532 , 547, 374 P.3d 121 (2016). “Summary judgment is properly granted when the pleadings, affidavits, depositions, and admissions on file demonstrate there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.” Folsom v. Burger King, 135 Wn.2d 658 , 663, 958 P.2d 301 (1998) (citing CR 56(c)). The moving party bears the burden of proving there are no issues of material fact. Kim, 185 Wn.2d at 547 . The nonmoving party must then “make a showing sufficient to establish the existence of an element essential to [their] case” to avoid summary judgment. Atherton Condo. Apt.-Owners Ass’n Bd. of Dirs. v. Blume Dev. Co., 115 Wn.2d 506 , 516, 799 P.2d 250 (1990). The Perillos filed a negligence claim against Island County.6 To establish negligence, a plaintiff must show (1) the existence of a duty, (2) breach of that duty, (3) resulting injury, and (4) proximate cause. Ranger Ins. Co. v. Pierce County, 164 Wn.2d 545 , 552, 192 P.3d 886 (2008). Summary judgment is proper if a plaintiff cannot meet any one of these elements. Ranger Ins., 164 Wn.2d at 552-53 . In a negligence action, “the threshold question is whether the defendant owes a duty of care to the injured plaintiff.” Schooley v. Pinch’s Deli Mkt., Inc., 134 Wn.2d 468 , 474, 951 P.2d 749 (1998). The existence of a legal 6 Island County argues that we should dismiss ICPH from the Perillos’ negligence claim because it is immune from liability under RCW 64.44.080 and had no duty to act under RCW 64.44.020 without a report of contamination from ICSO. Because ICPH is not a named party to the Perillos’ lawsuit, we decline to address these arguments. 7 No. 80055-8-I/8 duty is a question of law. Schooley, 134 Wn.2d at 474 . But “summary judgment is inappropriate where the existence of a legal duty depends on disputed material facts.” Afoa v. Port of Seattle, 176 Wn.2d 460 , 466, 296 P.3d 800 (2013). Duty of Care The Perillos claim that Island County owed them a duty to inspect the house at 505 Michelle Drive for hazardous chemical contamination when ICSO became aware of possible methamphetamine use and manufacturing on the property. The Perillos argue that Island County’s duty of care to them arises under RCW 64.44.020, which provides, in pertinent part: Whenever a law enforcement agency becomes aware that property has been contaminated by hazardous chemicals, that agency shall report the contamination to the local health officer. The local health officer shall cause a posting of a written warning on the premises within one working day of notification of the contamination and shall inspect the property within fourteen days after receiving the notice of contamination. . . . . A local health officer may enter, inspect, and survey at reasonable times any properties for which there are reasonable grounds to believe that the property has become contaminated. If the property is contaminated, the local health officer shall post a written notice declaring that the officer intends to issue an order prohibiting use of the property as long as the property is contaminated. Island County argues that under the plain language of the statute, law enforcement must have “actual knowledge of contamination” to trigger its mandatory duty to report to a local health officer. Island County asserts: RCW 64.44.020 does not require law enforcement agencies to report potential contamination [to local health officers], nor are law enforcement agencies required - on pain of tort liability - to follow up on all complaints of drug activity that might lead to knowledge of contamination. 8 No. 80055-8-I/9 We interpret a statute “to ascertain and carry out the Legislature’s intent, and if the statute’s meaning is plain on its face, then [we] must give effect to that plain meaning as an expression of legislative intent.” Dep’t of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1 , 9-10, 43 P.3d 4 (2002). Plain meaning “is discerned from all that the Legislature has said in the statute and related statutes which disclose legislative intent about the provision in question.” Dep’t of Ecology, 146 Wn.2d at 11. We avoid a literal reading of the statute that results in unlikely, absurd, or strained consequences. Thurston County ex. rel. Snaza v. City of Olympia, 193 Wn.2d 102 , 108, 440 P.3d 988 (2019). And we must interpret the language so that no portion of the statute is meaningless or superfluous. Rivard v. State, 168 Wn.2d 775 , 783, 231 P.3d 186 (2010). RCW 64.44.020 mandates the ICSO to report contamination to a local health officer “[w]henever [it] becomes aware that property has been contaminated by hazardous chemicals.” The statute defines “contaminated” as “polluted by hazardous chemicals so that the property is unfit for human habitation or use due to immediate or long-term hazards.” RCW 64.44.010(2).7 The statute does not define the term “becomes aware.” When the legislature has not defined a term, “we may look to dictionary definitions, as well as the statute’s context, to determine the plain meaning of the term.” In re Det. of J.N., 200 Wn. App. 279 , 286, 402 P.3d 380 (2017) (citing Buchheit v. Geiger, 192 Wn. App. 691 , 696, 368 P.3d 509 (2016). The dictionary definition of “become” is “to come to exist or occur.” WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 195 (2002). 7 RCW 64.44.010(4)(b) expressly defines “hazardous chemicals” to include the controlled substance methamphetamine and manufacturing methamphetamine. 9 No. 80055-8-I/10 The dictionary defines “aware” as “marked by realization, perception, or knowledge : conscious, sensible, cognizant.” WEBSTER’S, at 152. Thus, the plain meaning of the statute does not demand “actual knowledge” of contamination to trigger law enforcement’s duty to report the contamination to local health officers. Instead, RCW 64.44.020 mandates that once law enforcement comes to the realization or perception that hazardous chemicals are polluting a property, it must report the contamination to local health officers. Island County’s interpretation of RCW 64.44.020 confuses the role of law enforcement with the role of public health officers and creates a threshold for law enforcement action that is impossible to satisfy. Chapter 64.44 RCW and the WACs establish law enforcement’s role as reporting potential hazardous chemical contamination to local health officials. See RCW 64.44.020. The role of local health officials is to inspect property that may be contaminated and determine whether the property is actually contaminated by hazardous chemicals. See RCW 64.44.020, .070. The WACs govern that process, including acquiring data from the property and using analytical results obtained through sampling as a method to determine contamination. See WAC 246-205- 510, -530, -531. The statutory division of duties properly assigns the role of inspecting the property to public health—the organization with the resources and expertise necessary to sample and test air, surfaces, and soil to assess whether the property is actually “polluted by hazardous chemicals so that [it] is unfit for human habitation or use.” RCW 64.44.010(2). Confusing the two agencies’ roles leads to a meaningless statute because law enforcement does not have the 10 No. 80055-8-I/11 resources and expertise to acquire “actual knowledge” that a property is contaminated at unhealthy levels. Island County’s interpretation of RCW 66.44.020 also eliminates the role of the local health officer. The statute states that once the local health officer receives a report of potentially contaminated property from law enforcement, it “shall cause a posting of a written warning on the premises within one working day of notification of the contamination and shall inspect the property within fourteen days after receiving the notice of contamination.” RCW 64.44.020. The initial warning by the local health officer—not law enforcement—“inform[s] the potential occupants that hazardous chemicals may exist on, or have been removed from, the premises and that entry is unsafe.” RCW 64.44.020. After inspection and a finding of contamination, the local health officer must issue an order “declaring the property unfit and prohibiting its use.” RCW 64.44.030(1). The health officer must serve the order on all occupants and interested parties, as well as post the order “in a conspicuous place on the property.” RCW 64.44.030(1). The health officer must then report the property to DOH, who maintains a list of contaminated properties made available to the public. RCW 64.44.020. If the statute required law enforcement to report contamination to health officers only when they have “actual knowledge” that the property is contaminated by hazardous chemicals, the statutory role and responsibilities of the local health officer would be superfluous. Other WAC provisions pertaining to contaminated properties also support our conclusion that the plain meaning of RCW 64.44.020 does not require actual 11 No. 80055-8-I/12 knowledge of contamination to trigger a report to local health officers. Under WAC 246-205-520(1), a local health officer must post a written warning on a property within one working day of notification from law enforcement of “potential contamination.” And WAC 246-205-530 requires that the local health officer inspect “potential property contamination” within “fourteen days after a law enforcement agency” notification. We conclude that the plain meaning of RCW 64.44.020 imposes a duty on law enforcement to report to local health officers when it has information that causes it to realize or perceive that hazardous chemicals are polluting a property. Whether ICSO had sufficient information to trigger its duty here is a question for the trier of fact. Afoa, 176 Wn.2d at 466 . In their opposition to Island County’s motion for summary judgment, the Perillos produced evidence that neighbor Enger informed ICSO in June 2014 that 505 Michelle Drive was an “ ‘obvious drug house’ ” with a “constant stream” of clearly intoxicated visitors. Enger again reported in April 2015 a “strong chemical smell” emanating from the house for a week, that the smell was like chemicals “used to make drugs,” and that it was “so strong” she “could not open the window to [her] residence.”8 A squatter on the property also told the ICSO of methamphetamine trafficking at the house and that the property was “ ‘saturated with meth.’ ” And in October 2015, a contractor cleaning the property reported that she found thousands of needles on the property, along with a gun and several baggies that looked to contain or once contain drugs. Viewing this evidence in the light most favorable 8 Enger and other neighbors reported similar complaints to ICPH. 12 No. 80055-8-I/13 to the Perillos, they have made a sufficient showing to avoid summary judgment on the question of whether law enforcement owed them a duty under RCW 64.44.020. Public Duty Doctrine Island County contends that any duty of care it owes under RCW 64.44.020 is solely to the public at large, “not individual occupants of property.” Accordingly, it asserts that the public duty doctrine bars the Perillos’ claim. The Perillos argue that the legislative intent exception to the public duty doctrine applies to their claim because they are among the class of people chapter 64.44 RCW protects. We agree with the Perillos. No matter if the defendant is a private individual or government entity, the existence of a duty to the plaintiff is the threshold issue in a negligence claim. Babcock v. Mason County Fire Dist. No. 6, 144 Wn.2d 774 , 784-85, 30 P.3d 1261 (2001). But “[t]o establish a duty in tort against a governmental entity, a plaintiff must show that the duty breached was owed to an individual and was not merely a general obligation owed to the public.” Beltran-Serrano v. City of Tacoma, 193 Wn.2d 537 , 549, 442 P.3d 608 (2019). The public duty doctrine provides “a tool to analyze whether a mandated government duty was owed to the public in general or to a particular class of individuals.” Munich v. Skagit Emergency Commc’n Ctr. d/b/a Skagit 911, 175 Wn.2d 871 , 888, 288 P.3d 328 (2012) (Chambers, J., concurring). Four named exceptions to the public duty doctrine provide for liability of a government entity even in the face of performing otherwise public duties. Ehrhart 13 No. 80055-8-I/14 v. King County, 195 Wn.2d 388 , 400, 460 P.3d 612 (2020). The exceptions are (1) legislative intent, (2) failure to enforce, (3) the rescue doctrine, and (4) special relationship. Ehrhart, 195 Wn.2d at 400. “A determination that an exception to the public duty doctrine applies is tantamount to a conclusion that [a government entity] owed a duty to the plaintiff.” Yonker v. Dep’t of Soc. & Health Servs., 85 Wn. App. 71 , 77, 930 P.2d 958 (1997). “The legislative intent exception [to the public duty doctrine] recognizes that the legislature may impose legal duties on persons or other entities by proscribing or mandating certain conduct.” Washburn v. City of Fed. Way, 178 Wn.2d 732 , 754-55, 310 P.3d 1275 (2013). The exception applies when the terms of a statute show “a clear legislative intent to identify and protect a particular class of persons.” Weaver v. Spokane County, 168 Wn. App. 127 , 139, 275 P.3d 1184 (2012). A member of a statutorily identified class may bring a tort action against a governmental entity for violating the statute. Honcoop v. State, 111 Wn.2d 182 , 188, 759 P.2d 1188 (1988). The intended class must be “particular and circumscribed.” Ravenscroft v. Wash. Water Power Co., 136 Wn.2d 911 , 929, 969 P.2d 75 (1998). And the provision must clearly express legislative intent. Ravenscroft, 136 Wn.2d at 930. We typically look to the legislature’s statement of purpose to determine the statute’s intent. Washburn, 178 Wn.2d at 754-55 . RCW 64.44.005 articulates the legislative intent behind the statutes pertaining to contaminated properties: The legislature finds that some properties are being contaminated by hazardous chemicals used in unsafe or illegal ways in the 14 No. 80055-8-I/15 manufacture of illegal drugs or by hazardous drugs contaminating transient accommodations regulated by [DOH]. Innocent members of the public may be harmed by the residue left by these chemicals when the properties are subsequently rented or sold without having been decontaminated. RCW 64.44.005 clearly identifies “members of the public” who “subsequently” rent or purchase contaminated properties as the “particular and circumscribed” class of people protected by the statute. See Ravenscroft, 136 Wn.2d at 929. To facilitate the legislature’s intent, RCW 64.44.020 mandates posted warnings to notify potential occupants of the safety hazard. Additionally, the statute specifically identifies “landlord and realtor organizations” among the groups to whom DOH can provide a list of contaminated properties. RCW 64.44.020. This serves the legislative purpose of chapter 64.44 RCW to notify and protect potential occupants of contaminated properties. See RCW 64.44.005. Finally, legislative history also articulates an intent to prevent harm to the particular class of people at issue in this appeal: The legislature finds that the contamination of properties used for illegal drug manufacturing poses a threat to public health. The toxic chemicals left behind by the illegal drug manufacturing must be cleaned up to prevent harm to subsequent occupants of the properties. It is the intent of the legislature that properties are decontaminated in a manner that is efficient, prompt, and that makes them safe to reoccupy. LAWS OF 1999, ch. 292, § 1. The Perillos are innocent purchasers of a contaminated property and clearly within the class of people that chapter 64.44 RCW protects. The public 15 No. 80055-8-I/16 duty doctrine does not bar their negligence claim. Reversed and remanded for further proceedings. WE CONCUR: 16

2020-11-30 21:16:47.008655+00

http://www.courts.wa.gov/opinions/pdf/795350.pdf

IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON TERRY LONGLAND, No. 79535-0-I Appellant, v. DIVISION ONE WILLIAMS SCOTSMAN, INC. and UNPUBLISHED OPINION THE DEPARTMENT OF LABOR AND INDUSTRIES, Respondents. LEACH, J. —Terry Longland appeals the trial court’s findings of fact and conclusions of law affirming a Board of Industrial Insurance Appeals decision. This decision suspended Longland’s industrial insurance benefits based on his failure to participate in the vocational process. We find no error warranting appellate relief and affirm. 1 FACTS Williams Scotsman, Inc. (Scotsman) employed Terry Longland as a truck driver. In July 2002, Longland suffered a workplace injury while loading tires onto a truck. He received surgery, chiropractic care, and other medical treatments for neck and right shoulder injuries. Longland opened a claim with the Department of Labor and Industries (Department) for the July 2002 incident. Longland also opened a claim with the Department in 2003 for carpal tunnel syndrome caused by his job at Scotsman. 1 The September 20, 2019 motion to strike and stay briefing schedule is denied. Citations and pin cites are based on the Westlaw online version of the cited material. No. 79535-0-I/2 After his first injury, Longland met with a vocational counselor seven times to evaluate his ability to work again and to assist with a vocational training plan “to give [him] the necessary skills to seek reasonably continuous gainful employment.” Longland was determined eligible for vocational services on January 2, 2014. Longland disputed the eligibility determination. The Vocational Dispute Resolution office upheld the determination. Longland indicated he was only interested in becoming an airline pilot and “refused to consider or identify other areas of even potential interest.” He also refused any assessment activity or occupation that would involve computer use. In March 2014, Longland agreed to retake the College Placement Assessment test (Compass) to assess his proficiency and to determine which college courses would be most beneficial. When Longland took the Compass test in 2008, he hand-wrote his answers. When he went to retake the test in 2014, he refused to proceed because it was only administered on a computer. He stated he did not take the test because he is “not a computer person…never [has] been and… [has] no computer skills… [and has] no desire to be a computer skill expert.” It also caused him increased hand pain. On April 2, 2014, Longland returned to take the Compass test. A testing center staff member set up the test for him, showed him how to use the mouse, and told him there was a tutorial. He entered his name but did not answer any questions. Longland then left the testing center stating he could not do the test. On April 25, 2014, Sedgwick, Scotsman’s claims management service, sent Longland a non-cooperation letter pursuant to WAC 296-14-410. It stated he failed to provide academic placement test information to his vocational counselor. Sedgwick requested a written response within 30 days explaining why he failed to provide the test 2 No. 79535-0-I/3 scores. On May 9, 2014, Longland responded. He explained he attempted to take the Compass test twice but found it too difficult to use the computer because he could not work the mouse, and it caused him increased hand pain. On August 20, 2015, the Department notified Longland it was suspending his benefits for failing to cooperate with vocational services. On October 12, 2015, Longland sent a written formal protest of the Department’s notice and order. The letter stated Longland’s long-time treating physician opined that Longland is “physically, functionally, and emotionally disabled from the perspective of the various conditions affecting his bilateral upper extremities. In my view he needs to be pensioned out after assessment by a disability expert about how much function he has lost.” On December 21, 2015, the Department affirmed the order and notice suspending his benefits. Longland appealed to the Board of Industrial Insurance Appeals (BIIA). Shortly before the BIIA hearing, Longland’s attorney Teri Rideout retired. Rideout referred Longland to John E. Wallace. After Longland and Wallace had a falling out, Wallace withdrew effective September 15, 2016. Longland retained David B. Vail on November 2, 2016. In a non-recorded phone conference, with all parties participating on November 14, 2016, Judge Dannen asked Vail how much time he needed to continue a conference set for November 14, 2016. Vail did not request a specific date or time and did not state how much time he needed to prepare. Judge Dannen would not “agree to 3 No. 79535-0-I/4 an open ended continuance” but did provide additional time and scheduled a more formal scheduling conference for December 1, 2016. Vail withdrew as counsel on November 23, 2016. Longland did not object. Longland proceeded pro se. After three fact-finding hearings between March 9, 2017, and April 12, 2017, the BIIA affirmed the Department’s decision. The BIIA noted that Longland’s 2008 Compass test provided unproductive results because his tone was that of “one who was done working.” For example, he selected “dislike very much” for 167 of the 168 questions on one of the questionnaires. Longland never submitted a medical opinion saying he was unable to use a computer to complete the 2014 Compass test. The BIIA noted Longland’s vocational counselor determined a security guard position would be a viable option for Longland, but due to Longland’s behavior and “the fact that he wouldn’t sign a plan, the employer was never able to submit a vocational plan.” His counselor “recommended suspension of benefits.” Longland “admitted that from August 20, 2014, through August 20, 2015, no doctor provided an opinion that he couldn’t participate in the vocational process.” The BIIA noted that Joseph L. Dumovic, Longland’s chiropractor, “admitted that he never rendered an opinion that Mr. Longland could not participate in vocational plan development,” and “his medical records noted no objective evidence of abnormal upper extremities or swollen hands.” Bryan James Marchant, a medical specialist in orthopedic surgery, concluded that “Longland could have fully participated in his vocational plan and from 2013 through December 21, 2015, could have participated in vocational testing, complete paperwork, 4 No. 79535-0-I/5 learn how to use computers, perform handwriting, participate in activities to identify interests and work values, and participate in vocational plan development.” Longland requested review of the BIIA decision in King County Superior Court. Vail represented him in superior court. He asserted the suspension order was invalid because Scotsman failed to serve a subsequent notice as required by WAC 296-14-410. He also asserted the BIIA violated Longland’s due process rights by “failing to allow [Vail’s office] sufficient time to analyze and prepare case in potential representation of Terry Longland.” The trial court affirmed the BIIA’s October 23, 2017 order. Longland appeals. STANDARD OF REVIEW The administrative procedure act does not govern judicial review of Board decisions. Instead, Title 51 RCW generally applies “the practice in civil cases” to appeals, and expressly provides that “[a]ppeal shall lie from the judgment of the superior court as in other civil cases.” 2 So, this court reviews the superior court’s decision and not the BIIA’s decision. 3 This court reviews only “whether substantial evidence supports the trial court’s factual findings and then . . . whether the trial court’s conclusions of law flow from the findings.” 4 We review the trial court’s conclusions of law de novo. 5 2 RCW 51.52.140. 3 Dep’t of Labor & Indus. v. Slaugh, 177 Wn. App. 439 , 444, 312 P.3d 676 (2013); RCW 51.52.110. 4 Hendrickson v. Dep’t of Labor & Indus., 2 Wn. App. 2d 343, 351, 409 P.3d 1162 , rev. denied, 190 Wn.2d 1030 , 421 P.3d 450 (2018). 5 Sunnyside Valley Irr. Dist. v. Dickie, 149 Wn.2d 873 , 880, 73 P.3d 369 (2003). 5 No. 79535-0-I/6 ANALYSIS Waiver Longland claims Scotsman waived its right to object to Longland’s good cause explanation for non-cooperation by waiting until 16 months after he refused to take the 2014 test before seeking to suspend benefits. RCW 51.32.110 provides that when a worker refuses to submit to a medical examination, obstructs evaluation or examination for the purpose of vocational rehabilitation, or does not cooperate in reasonable efforts at rehabilitation, the Department or the self-insurer, with notice to the worker, may suspend benefits. WAC 296-14-410 details the procedural requirements for how the Department or the self-insurer can suspend benefits for non-cooperation. The Department or the self- insurer must first send a letter to the worker stating benefits may be suspended and request an explanation for the non-cooperation. 6 The worker has 30 days to respond in writing explaining their reason for non-cooperation. 7 Neither RCW 51.32.110 nor WAC 296-14-410 require the Department or the self-insurer to act on the response within a certain amount of time. Waiver is an equitable doctrine. 8 The appropriateness of equitable relief is a question of law. 9 Equitable relief may be granted in industrial insurance cases under very limited circumstances. 10 Two requirements must be met before equitable relief may be 6 WAC 296-14-410(4)(a). 7 WAC 296-14-410(4)(b). 8 McLain v. Kent Sch. Dist., No. 415, 178 Wn. App. 366 , 378, 314 P.3d 435 (2013). 9 Niemann v. Vaughn Cmty. Church, 154 Wn.2d 365 , 374, 113 P.3d 463 (2005). 10 Rabey v. Dep’t of Labor & Indus., 101 Wn. App. 390 , 395, 3 P.3d 217 , rev. granted, 142 Wn.2 1007, 16 P.3d 1266 (2000), rev. dismissed (Wash. May 8, 2001) (No. 18709–8). 6 No. 79535-0-I/7 granted: (1) circumstances justifying equity's intervention must be present and (2) the claimant must diligently pursue his or her rights. 11 A waiver is the intentional and voluntary relinquishment of a known right. 12 It may be express or inferred from circumstances indicating an intent to waive. 13 To constitute implied waiver, there must be unequivocal acts or conduct evidencing an intent to waive; waiver will not be inferred from doubtful or ambiguous factors. 14 The party claiming waiver has burden to prove it. 15 Longland claims the 16 months “falls well outside the general time requirements for asserting challenges found in the IIA,” and that by continuing to pay benefits to Longland, Scotsman’s conduct “put Longland at ease that the non-cooperation issue was behind him and that Scotsman did not intend to raise it again.” First, neither RCW 51.32.110 nor WAC 296-14-410 states a time within which the Department or the self-insured must act. Each only includes deadlines for the worker. Neither RCW 51.32.110 nor WAC 296-14-410 is ambiguous about a deadline for the Department or the self-insured to act on a worker’s non-cooperation. Second, after Longland failed to take the Compass test, his vocational counselor developed a security guard training plan, which Longland declined on September 25, 11 Kingery v. Dep’t of Labor & Indus., 132 Wn.2d 162 , 177–78, 937 P.2d 565 (1997); Dep't of Labor & Indus. v. Fields Corp., 112 Wn. App. 450 , 459–60, 45 P.3d 1121 (2002). 12 Pellino v. Brink’s Inc., 164 Wn. App. 668 , 697, 267 P.3d 383 (2011) (citing to Jones v. Best, 134 Wn.2d 232 , 241, 950 P.2d 1 (1998)). 13 Pellino, 164 Wn. App. at 697 (citing to Bowman v. Webster, 44 Wn.2d 667 , 669, 269 P.2d 960 (1954)). 14 Pellino, 164 Wn. App. at 697 (citing Cent. Wash. Bank v. Mendelson–Zeller, Inc., 113 Wn.2d 346 , 354, 779 P.2d 697 (1989)). 15 Jones, 134 Wn.2d at 242. 7 No. 79535-0-I/8 2014. On November 25, 2014, Longland submitted to an Independent Medical Examination (IME) with Dr. Bryant Marchant for “evaluative purposes” nearly six months after his good cause response letter. Dr. Marchant found he was “relatively capable.” His vocational counselor again tried to get Longland to reconsider his refusal to participate in security guard training on March 17, 2015. On March 26, 2015, Longland again declined. The record clearly shows that between the time Scotsman sent the non-cooperation letter and when the Department suspended his benefits, numerous attempts were made to assist Longland in vocational training. These ongoing efforts to help Longland contributed to the 16 month delay. Finally, Longland fails to show the 16 month delay harmed him. He received benefit payments that he would not have received if the Department had suspended his benefits earlier. His only assertion is that the delay put him at “ease.” Because Longland fails to show how the “circumstances [justify] equity's intervention” here, the first requirement for this court to grant equitable relief is not present. Scotsman did not waive its right to object to Longland’s good cause explanation. Formal Notice Requirements Longland claims the trial court should have found the suspension order invalid because it did not comply with the mandatory formal notice requirements of RCW 51.32.110 and WAC 296-14-410. Specifically, he claims that if Scotsman believed Longland was non-cooperative at other points during the life of the claim, it had a duty to send a non-cooperation letter that described those too. He claims he was entitled to formal notice of these other allegations with the opportunity to explain his alleged non- cooperation in writing and that the BIIA and trial court erred in relying on these irrelevant 8 No. 79535-0-I/9 events. 16 As stated above, WAC 296-14-410 requires that the Department or the self-insured must send a letter advising a worker that benefits may be suspended while asking for an explanation for the non-cooperation. 17 The worker has 30 days to provide a written response explaining the reasoning for non-cooperation. 18 We find Longland’s claim unpersuasive. His refusal to complete the 2014 Compass testing was not an isolated event. His failure to adequately provide substantive answers in the 2008 test affected his vocational plan and provided the basis for Scotsman to ask for a retest. Longland refused to complete the test but provided no medical evidence that he was unable to complete the Compass test in 2014. The non-cooperation letter stated he was “not cooperating with the request that [he] provide academic placement test information to [his] vocational counselor” and he was “required to fully participate and cooperate in the vocational assessment process.” Neither RCW 51.32.110 nor WAC 296-14-410 required Scotsman to list every instance of non-cooperation. But, Longland’s prior acts of non-cooperation were relevant to explain the need for Compass test results in 2014. Without Longland’s cooperation for security guard training and without any substantive helpful answers in the 2008 test, Scotsman needed new Compass test results to help Longland with vocational training. Ultimately, in affirming the BIIA’s decision, the court found that Longland did not establish good cause, within the meaning of RCW 51.32.110, for failing to comply with 16 Longland asserts the same considerations were both irrelevant and required additional notices. Both contentions are analyzed together in this section even though they were asserted separately. 17 WAC 296-14-410(4)(a). 18 WAC 296-14-410(4)(b). 9 No. 79535-0-I/10 the Compass test as part of vocational training and that he refused or obstructed evaluation for purposes of vocational rehabilitation. Longland does not show Scotsman failed to follow formal notice requirements or that his earlier non-cooperation was irrelevant to the trial court’s decision. Good Cause Longland next challenges the trial court’s determination that he did not cooperate with the Compass test and did not act with good cause. If a worker fails to show good cause for obstructing any evaluation, examination, treatment or practice as required, the self-insurer can suspend or deny compensation. 19 Whether a worker has good cause to refuse to attend an IME is a mixed question of fact and law. 20 This court first reviews whether substantial evidence supports the superior court’s factual findings and then determines, de novo, whether those factual findings support the superior court’s legal conclusion that a worker did not have good cause. 21 The worker has the burden to demonstrate good cause for not appearing for a medical examination requested by a self-insured employer. 22 Longland first asserts he was willing but unable to take the Compass test that he had taken it in 2008. The record does not support Longland’s assertion. First, the record shows that Longland was not willing to take the Compass test, even though the testing center staff member set up the test for him, showed him how to 19 RCW 51.32.110. 20 Garcia v. Dep’t of Labor & Indus., 86 Wn. App. 748 , 751, 939 P.2d 704 (1997). 21 Young v. Dep’t of Labor & Indus., 81 Wn. App. 123 , 128, 913 P.2d 402 (1996); Garcia, 86 Wn. App. at 751. 22 RCW 51.32.110(2); Andersen v. Dep’t of Labor & Indus., 93 Wn. App. 60 , 61, 967 P.2d 11 (1998). 10 No. 79535-0-I/11 use the mouse, and told him there was a tutorial. He left the testing center stating he could not do it. He entered his name but did not answer any questions. He could have asked for further assistance from the staff member but chose not to and left instead. Longland fails to show he made a good faith effort to take the computerized test. Longland also admitted that from August 20, 2014 to August 20, 2015, no doctor provided an opinion that he could not participate in the vocational process. After Marchant conducted a November 2015 IME on Longland, he stated that Longland could have participated in vocational development from 2013 through December 21, 2015 including computer use. Besides his own statements, Longland fails to show he was unable to take the computerized Compass test. Second, his statement that he was willing to complete the Compass test because he had completed it in 2008 is misleading. While he finished the test by hand in 2008, he failed to answer any questions in a meaningful way as his tests “bore similarly unproductive results.” Substantial evidence supports the trial court’s conclusion of law that Longland failed to show good cause for failing to comply with the vocational testing. Failure to Grant Continuance Longland next claims the BIIA denied him his due process by refusing to grant him a continuance, and the trial court further abused its discretion in finding the BIIA did not abuse its discretion by denying a continuance. We review constitutional claims de novo as questions of law. 23 But, we review a trial court’s decision to grant or deny a request for continuance for abuse of 23 State v. Jones, 168 Wn.2d 713 , 719, 230 P.3d 576 (2010). 11 No. 79535-0-I/12 discretion. 24 We use the same standard to review a trial court's decision to restrict counsel's argument. 25 A court abuses its discretion when it makes a manifestly unreasonable decision or bases its decision upon untenable grounds or reasons. 26 A court bases its decision on untenable grounds or reasons when it applies the wrong legal standard or relies on unsupported facts. 27 “[T]he decision to grant or deny a motion for a continuance rests within the sound discretion of the trial court.” 28 An appellate court will disturb a decision to deny a request for a continuance only if he or she shows that he or she was prejudiced or that the result would have likely been different had the motion been granted. 29 No mechanical test exists for determining “when the denial of a continuance violates due process, inhibits a defense, or conceivably projects a different result.” 30 The court must decide on a case- by-case basis. 31 Appellate courts look at the totality of the circumstances particularly the reasons presented to the judge at the time the request is denied. 32 In exercising its discretion, the court may properly consider the necessity of reasonably prompt disposition of the litigation; the needs of the moving party; the possible prejudice to the adverse party; the prior history of the litigation, including prior continuances granted to the moving party; 24 State v. Downing, 151 Wn.2d 265 , 272, 87 P.3d 1169 (2004). 25 State v. Perez–Cervantes, 141 Wn.2d 468 , 475, 6 P.3d 1160 (2000). 26 State v. Gunderson, 181 Wn.2d 916 , 921–22, 337 P.3d 1090 (2014). 27 In re Det. of Duncan, 167 Wn.2d 398 , 403, 219 P.3d 666 (2009). 28 Downing, 151 Wn.2d at 272 . 29 State v. Eller, 84 Wn.2d 90 , 95, 524 P.2d 242 (1974); State v. Tatum, 74 Wn. App. 81 , 86, 871 P.2d 1123 (1994); State v. Kelly, 32 Wn. App. 112 , 114, 645 P.2d 1146 (1982). 30 Eller, 84 Wn.2d at 96 . 31 Eller, 84 Wn.2d at 96 . 32 Kelly, 32 Wn. App. at 114-15. 12 No. 79535-0-I/13 any conditions imposed in the continuances previously granted; and any other matters that have a material bearing upon the exercise of the discretion vested in the court. 33 In accordance with Mathews v. Eldridge, we weigh the following factors to determine what process is due in a particular situation: (1) the private interest at stake in the governmental action; (2) the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and (3) the government interest, including the additional burdens that added procedural safeguards would entail. 34 RCW 51.52.102 allows for a continuance of fact-finding hearings only to “a time and place certain.” On November 16, 2016, during a phone conference between all the parties, Vail did not make a request to continue the proceedings to a time and place and expressed his plan to file a written notice of intent to withdraw as counsel. Judge Dannen did not grant a continuance on November 16, 2016. She scheduled the fact-finding hearing for March 9, 2017. Longland claims that because he represented himself pro se, he had trouble understanding how to secure the witnesses necessary to defend his position. He also claims that the BIIA and the trial court faulted Longland for not making “relevancy objections” about “evidence of non-cooperation beyond just the Compass test.” Finally, he claims he lacked basic understanding of the two claims addressed at the hearing. Longland does not explain how he was prejudiced or how the result would have likely been different had the fact finding hearing been further delayed. 33 Balandzich v. Demeroto, 10 Wn. App. 718 , 721, 519 P.2d 994 (1974). 34 424 U.S. 319 , 321, 96 S. Ct. 893 , 47 L. Ed. 2d 18 (1976). 13 No. 79535-0-I/14 Applying the Mathews factors, his claim is unpersuasive. While Longland had a property interest in his disability claim, the risk of erroneous deprivation by failing to grant the continuance was not high. He did not object to Vail’s motion to withdrawal. And, he had approximately three months to obtain new counsel before the fact-finding hearings, which he failed to do. Finally, the Department had a strong interest here in denying the continuance. Vail failed to request a specific time for the continuance as required by RCW 51.52.102. Without the ability or desire to grant an indefinite continuance, the Department had an interest in resolving the claim in a reasonable time-frame. In reviewing the record and weighing the Mathews factors, we conclude that Longland’s due process rights were not violated and that the trial court did not abuse its discretion here. Longland’s Request for Attorney Fees Longland requests attorney fees “if the BIIA’s decision and order are reversed or modified on appeal to the trial court or this Court” under RCW 51.52.130. Since we affirm, Longland is not entitled to attorney fees. CONCLUSION We affirm. Scotsman informed Longland of his non-cooperation for failing to retake the Compass exam, and the BIIA and trial court affirmed the Department’s suspension of his benefits for this reason. Substantial evidence supports the trial court’s finding that Longland failed to show good cause when refusing to take the Compass test. Finally, his 14 No. 79535-0-I/15 due process right was not violated when his counsel failed to request a certain place and time for the continuance and was then denied a continuance. WE CONCUR: 15

2020-11-30 21:16:47.26912+00

http://www.courts.wa.gov/opinions/pdf/802364.pdf

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON STATE OF WASHINGTON, No. 80236-4-I Respondent, DIVISION ONE v. UNPUBLISHED OPINION BARAKA ASABA, Appellant. SMITH, J. — Baraka Asaba and his codefendant were charged with first degree robbery. At trial, Asaba contended that the complaining witness did not accurately identify him as the robber. During her testimony at trial, the investigating detective misidentified Asaba based on photographs attached to an inadmissible e-mail exhibit. The prosecutor referenced and mischaracterized the e-mail exhibit and discussed reasonable doubt in a context not material to the issues at trial. The jury acquitted Asaba’s codefendant but found Asaba guilty of second degree robbery. On appeal, Asaba contends that the prosecutor’s statements constituted misconduct and deprived him of his right to a fair trial. While we agree that the prosecutor’s comments were improper, Asaba failed to show prejudice. Accordingly, we conclude that the trial court did not err when it denied his motion for a mistrial, and we affirm his conviction. FACTS On May 15, 2017, at around 10:00 p.m., Nabil Madih met with a high Citations and pin cites are based on the Westlaw online version of the cited material. No. 80236-4-I/2 school acquaintance, Seid, at Seid’s house.1 The two left Seid’s house to meet with another former high school classmate, Abdou Darboe. Seid asked Madih if he could drive Madih’s car, and Madih agreed, although he found the request odd. The two arrived across the street from Darboe’s apartment in Lynnwood, Washington, and Darboe got into Madih’s vehicle with Seid and Madih. They listened to music, talked, and smoked marijuana. Seid and Darboe suggested that the three of them meet with another classmate whom Madih did not recognize at first. In showing Madih a Facebook profile of “Bongo Lion” to jar his memory, Madih recognized the profile as Asaba’s, although he did not know his name. Asaba had been Madih’s peer in English class during high school. Thus, Madih, who had graduated high school in 2014, had seen Asaba in class around four times per month for an hour and a half each time and for around three months. When Madih expressed a desire to leave, Darboe and Seid insisted that they stay. Eventually, two men arrived in an orange Infiniti SUV. Madih testified that Asaba was in the driver’s seat of the SUV. Madih spoke with Asaba through the vehicles’ windows. Madih later testified that the man spoke as if he had been Madih’s classmate and that he was one “hundred percent sure” that the SUV’s driver was the person that he had English class with, i.e., Asaba. Seid and Darboe exited Madih’s vehicle and entered the back of the SUV. Madih remained in the passenger seat of his vehicle. Around 15 minutes later, 1 Seid’s first name is used throughout this opinion, consistent with the parties’ briefs and references to him during trial. 2 No. 80236-4-I/3 Seid and Darboe got out of the SUV, and Seid returned to Madih’s vehicle. Darboe returned to his apartment. Asaba thereafter exited the SUV and stood outside of Madih’s passenger side window, next to Madih. The SUV’s passenger (passenger) exited the vehicle and got into the back of Madih’s car. “[T]hey” asked for Madih’s phone. Madih asked them, “[W]hy?” In response, the passenger and Asaba became aggressive and threatened to shoot Madih or steal his car. Madih believed the passenger had a gun because the passenger held his hand inside his jacket at his beltline. But Madih never saw a weapon. Asaba took Madih’s wallet, discarding some cards back into the vehicle that he believed were expired. Asaba looked at Madih’s identification and told Madih, “I know where you live, like don’t think about going to the cops.” The passenger and Asaba took Madih’s vaporizer, phone, car keys, and wallet. At this point, Madih told the passenger and Asaba to let him and Seid leave. Madih put the car into drive and told Seid to step on the gas. Seid drove around 20 feet but stopped. The passenger exited, and Madih and Seid drove away. Madih asked Seid to call 911, but Seid said that “he didn’t want anything to do with it.” Madih made Seid pull over at a gas station so that he could drive, and then Madih dropped off Seid at his home. Madih drove to the Mill Creek police station. An officer there told Madih that he needed to go to the Lynnwood police station, as the incident occurred in its jurisdiction. Madih drove to his sister’s home and used her phone to call the Lynnwood police. The Lynnwood police responded, and Madih recounted the events. At trial, Madih could not remember whether or not he told the responding officer that 3 No. 80236-4-I/4 he had smoked marijuana prior to the incident. After discussing the incident with the officer, Madih drove to the police station, where he gave Detective Jaqueline Arnett his initial statement. Madih identified Asaba as the individual who stood outside his window. However, he asked Darboe and Seid for photographs of the passenger. After receiving two photographs, Madih later testified that he believed that he had sent the photographs to Detective Arnett via e-mail. At trial, Detective Arnett testified from memory that Madih had sent two images, one of Asaba and one of Ousman Faye. In response, the State introduced the e-mail exchange between Detective Arnett and Madih and the attached pictures to refresh Detective Arnett’s recollection; the e-mails and pictures were not admitted as evidence. After reviewing the e-mails, Detective Arnett said that the e-mails included two photographs “of the same person,” which she contended “look[ed] like Baraka Asaba.” However, she reviewed the e-mails again and stated that “[t]he only subject [Madih] refers to in the emails is Mr. Darboe,” concluding that the photographs must be of Darboe. During Detective Arnett’s investigation, Madih provided her with the Facebook profile for “Bongo Lion.” Detective Arnett thereafter created a photo montage wherein she included a photograph of Asaba, whom she knew to be Bongo Lion. The second montage she created included a photograph of another individual who owned an orange Infiniti SUV. The final montage included a photograph of Faye. When shown the montages, Madih selected Asaba and Faye as the two individuals who had robbed him. Madih testified at trial that he was 100 percent sure that Asaba was the individual that stood at his window 4 No. 80236-4-I/5 because they had English class together. Referencing exhibit 9, which was not admitted as evidence, defense counsel made the following statement during closing arguments: And so is it possible that Mr. Madih could have been looking [at] the picture shortly before he saw my client and shortly after and still confuse that it was actually my client who was there? I think you saw, during the trial, with your own eyes that it was. You saw Detective Arnett on the stand. You saw her looking at an email that was provided to her by Nabil. You saw her looking at two pictures and confidently saying that that person was Baraka Asaba. And you saw Mr. Hunter asking her, are you sure? Are you sure that’s who that is? And you saw her looking. Does the content of the email in front of it give you any other indication of who that is? She’s right there, pictures in front of her. And my client, Mr. Asaba, is standing -- sitting right here in front of her. Oh. Looking at the email, it appears that these are actually pictures of Abdou Darboe. So you can see how that works. How it works, that somebody can misidentify somebody even in those circumstances. During rebuttal argument, the State argued: [PROSECUTOR:] With respect to Detective Arnett misidentifying the picture on the attached to the email exhibit that I was showing her, I suggest it’s not so clear whether she misidentified the person or used the wrong name, but assume, since I’ve got the burden, that she misidentified the person -- you don’t get to see in the picture that was attached to that email. You don’t know how large or small it was, whether it was a photocopy of a fax of a photocopy, and so I’m just saying don’t make assumptions on that point. .... [PROSECUTOR:] Lastly, I think I just want to give you one contrasting example with respect to reasonable doubt. There have been suggestions that Seid and Abdou set Nabil up, which also there are suggestions that somehow set the defendant up too. That’s a good example of reasonable doubt. And you heard the evidence. Yeah, one of those guys, if not both, probably were in on this. But if I were standing here, asking you to convict them [with] 5 No. 80236-4-I/6 proof beyond a reasonable doubt -- [DEFENSE:] Objection, your Honor. This is an improper question, there is no testimony, they are not on trial, there was no investigation about this. [THE COURT:] Overruled. [PROSECUTOR:] I’m just saying, it’s a good contrast between -- or it’s a good example of reasonable doubt. Certainly nobody is going to convict those two with the information they have -- [DEFENSE:] I’m going to renew my objection, your Honor, I’m sorry. [THE COURT:] Overruled. [PROSECUTOR:] Even though just about everybody probably suspects they were setting him up. So that’s all I have to say. Again, thank you for your time and attention. I appreciate the work you will put into this, and I’m asking to you return guilty verdicts on both for first degree. Thank you. The next day, Asaba moved for a mistrial as the jury continued to deliberate. Asaba argued that the inadmissible photographs attached to the e- mail were large and clear and, thus, the prosecutor’s argument was untrue and improper. The trial court denied Asaba’s motion. During deliberations, the jury sent an inquiry to the court requesting to view the e-mails Madih had sent to Detective Arnett, “including photos.” The court could not and did not provide the e-mails to the jury. The jury found Asaba guilty of the lesser included crime of second degree robbery. Asaba appeals. ANALYSIS Asaba contends that reversal is required due to prosecutorial misconduct. Although we agree with Asaba that the prosecutor’s comments during trial were 6 No. 80236-4-I/7 improper, we conclude that those comments do not warrant reversal. Prosecutorial misconduct may deprive a defendant of their guaranty to a fair trial under the Sixth and Fourteenth Amendments to the United States Constitution and article I, section 22 of the Washington State Constitution. In re Pers. Restraint of Glasmann, 175 Wn.2d 696 , 703-04, 286 P.3d 673 (2012) (plurality opinion). To prevail on a prosecutorial misconduct claim, a defendant must first show that the prosecutor’s statements were improper. State v. Emery, 174 Wn.2d 741 , 759, 278 P.3d 653 (2012). “Once a defendant establishes that a prosecutor’s statements are improper, we determine whether the defendant was prejudiced under one of two standards of review.” Emery, 174 Wn.2d at 760 . First, “[i]f the defendant objected at trial, the defendant must show that the prosecutor’s misconduct resulted in prejudice that had a substantial likelihood of affecting the jury’s verdict.” Emery, 174 Wn.2d at 760 . A motion for a mistrial based on prosecutorial misconduct constitutes an objection and preserves the issue for appeal. State v. Lindsay, 180 Wn.2d 423 , 430-31, 326 P.3d 125 (2014). We review claims of prosecutorial misconduct for an abuse of discretion because “[t]he trial judge is generally in the best position to determine whether the prosecutor’s actions were improper and whether, under the circumstances, they were prejudicial.” State v. Ish, 170 Wn.2d 189 , 195-96, 241 P.3d 389 (2010). Asaba contends that the prosecutor made two improper comments. We address each below. 7 No. 80236-4-I/8 Reference to E-mail Exhibit Asaba first contends that the prosecutor committed misconduct when he referenced exhibit 9, the inadmissible exhibit containing photographs of Darboe. He asserts that the statement was improper because it was false and misleading, it interjected matters into the proceeding that were not probative of Asaba’s guilt, and it vouched for Madih. We agree that the statement was improper but conclude that Asaba failed to show actual prejudice. State v. Thorgerson, 172 Wn.2d 438 , 258 P.3d 43 (2011), is instructive. There, Thorgerson challenged the prosecutor’s statements during closing argument regarding what the victim had said to others and regarding how the hearsay rules prevented the State’s production of those statements. Thorgerson, 172 Wn.2d at 445 . Our Supreme Court determined that “the prosecutor’s references to the victim having made additional out-of-court statements consistent with her in-court testimony, while advising the jury those statements were not admissible as evidence, possibly bolstered her credibility to some degree.” Thorgerson, 172 Wn.2d at 447 . It noted that it did not condone the prosecutor’s comments. Thorgerson, 172 Wn.2d at 445 . However, it concluded that in the context of the trial and because “the defense theory was the focus of the prosecutor’s references,” Thorgerson failed to show prejudice. Thorgerson, 172 Wn.2d at 450, 455 . Here, the prosecutor’s statement regarding the e-mail exhibit was improper. The prosecutor stated, “[A]ssume, since I’ve got the burden, that she misidentified the person -- you don’t get to see in the picture that was attached to 8 No. 80236-4-I/9 that email. You don’t know how large or small it was, whether it was a photocopy of a fax of a photocopy.” Like in Thorgerson, the prosecutor was referencing evidence that was inadmissible. And because the prosecutor knowingly mischaracterized the photographs as potentially unclear, we conclude that the statement was improper. However, with regard to the prejudicial effect of the prosecutor’s comment, the references to, and any mischaracterization of, the inadmissible evidence “did not provide any additional ground for finding the defendant guilty.” Thorgerson, 172 Wn.2d at 450 . Specifically, Detective Arnett’s identification of Asaba did not decide Asaba’s guilt; Madih’s identification—which he provided in certain terms based off of his prior personal knowledge of Asaba from high school and not the pictures contained in the e-mail exhibits—did. Therefore, whether or not Detective Arnett misidentified Asaba did not provide additional grounds for finding Asaba guilty and did not provide direct support for Asaba’s theory that Madih misidentified him. Also like in Thorgerson, the statement was in response to Asaba’s reliance on Detective Arnett’s misidentification. Accordingly, Asaba fails to show prejudice. Discussion of Seid, Darboe, and Reasonable Doubt Asaba next contends that the prosecutor committed misconduct when it compared the reasonable doubt associated with the theory that Seid and Darboe set up Madih to the reasonable doubt that Asaba robbed Madih. We agree that the statement was improper but conclude that Asaba failed to make a showing of prejudice. 9 No. 80236-4-I/10 In Emery, Anthony Marquise Emery Jr. and his codefendant, Aaron Edward Olson, appealed their convictions for, among other charges, first degree kidnapping and first degree robbery. 174 Wn.2d at 746 . They contended that the prosecutor committed misconduct when it presented the jury with a “‘fill in the blank’” statement with regard to reasonable doubt. Emery, 174 Wn.2d at 759 . Specifically, the prosecutor told the jury that “‘to find the defendant not guilty,’” it must fill in the blank with a reason why doubt exists. Emery, 174 Wn.2d at 759- 60. The court concluded that the statement “subtly shift[ed] the burden [of proof] to the defense.” Emery, 174 Wn.2d at 760 . It nonetheless held that Emery and Olson failed to show prejudice. Emery, 174 Wn.2d 760 -61. Here, like in Emery, the prosecutor misstated the reasonable doubt standard; the prosecutor used an inappropriate comparison when, in discussing reasonable doubt, he interjected an argument regarding two individuals not on trial. Furthermore, the prosecutor potentially lessened the State’s burden of proof. Specifically, by contending that there existed less doubt in the case of Asaba’s guilt than in the case of Seid’s or Darboe’s, the prosecutor potentially conflated having less doubt with having proof beyond a reasonable doubt. Thus, the prosecutor’s comparison was improper. However, we cannot conclude that the trial court abused its discretion because there is not a substantial likelihood that the argument affected the jury’s determination. In particular, the relevant evidence—i.e., the testimony of Madih—established that Asaba committed the crime, and Madih based his identification on his prior knowledge of Asaba. In addition, an instruction could 10 No. 80236-4-I/11 have cured this issue, and to that end, the court instructed the jury regarding the proper reasonable doubt standard. And we presume that juries “‘follow instructions absent evidence to the contrary.’” State v. Lamar, 180 Wn.2d 576 , 586, 327 P.3d 46 (2014) (quoting State v. Dye, 178 Wn.2d 541 , 556, 309 P.3d 1192 (2013)). Accordingly, Asaba failed to show prejudice on his second theory of prosecutorial misconduct. Asaba relies on State v. Thierry, 190 Wn. App. 680 , 360 P.3d 940 (2015), for the proposition that “[c]reating straw man arguments does not comport with the prosecutor’s duty to seek convictions based on probative evidence and sound reason.” In Thierry, the prosecutor argued that if the jury accepted defense counsel’s argument and did not believe the complaining witness, the State would be unable to prosecute child rape cases, and the jury would be “‘declaring open season on children,’” allowing anyone to touch children inappropriately. 190 Wn. App. at 690-91 (quoting State v. Powell, 62 Wn. App. 914 , 918 n.4, 816 P.2d 86 (1991)). On appeal, the court held that the prosecutor’s statements were improper and “misrepresented [defense counsel’s] argument in a way that exacerbated the prejudice flowing from the misconduct,” and “created a substantial risk that the jury [would] credit [the victim’s] testimony for improper reasons.” Thierry, 190 Wn. App. at 692, 694. The court reversed Thierry’s conviction on this basis. Thierry, 190 Wn. App. at 695. Here, the prosecutor’s comments did not pose a similar risk of inflaming the jury against Asaba. Accordingly, Thierry does not control. Because Asaba failed to establish that either instance of the prosecutor’s 11 No. 80236-4-I/12 improper conduct affected the outcome of trial, we do not apply a cumulative error analysis. See, e.g., Thorgerson, 172 Wn.2d at 442-44, 454 (reviewing multiple claims of prosecutorial misconduct individually and, despite finding some improper, declining to apply the cumulative error doctrine). We affirm. WE CONCUR: 12

2020-11-20 19:32:56.431111+00

LEATRICE GERMAN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent German v. Commissioner Docket No. 7077-84. United States Tax Court T.C. Memo 1986-370; 1986 Tax Ct. Memo LEXIS 243; 52 T.C.M. (CCH) 170; T.C.M. (RIA) 86370; August 11, 1986. *243 Petitioner, a guidance counselor, participated in a fashion study course that involved traveling to Israel, Egypt and Spain. Petitioner claimed a deduction for the expenses she incurred from participating in the course, which respondent disallowed. Held, petitioner is not entitled to a deduction for these expenses because she failed to establish that such expenses were incurred to maintain or improve her skills as a guidance counselor. Carl Noah German, for the petitioner. Maureen C. Kopko and H. Karl Zeswitz, for the respondent. STERRETT MEMORANDUM FINDINGS OF FACT AND OPINION STERRETT, Chief Judge: By notice of deficiency dated December 20, 1983, respondent determined a deficiency in petitioner's Federal income tax for the taxable year ended December 31, 1980 in the amount of $910.44. After concessions, the sole issue before us is whether petitioner is entitled to deduct certain expenditures as educational expenses under section 162(a). 1 FINDINGS OF FACT Some of the facts have *244 been stipulated and are so found. The stipulation of facts, together with the exhibits attached thereto, is incorporated herein by this reference. Petitioner, Leatrice German, resided in Wynnewood, Pennsylvania when the petition was filed in this case. Petitioner timely filed her Federal income tax return for the taxable year 1980 with the Internal Revenue Service Center in Philadelphia, Pennsylvania. During 1980, petitioner was employed as a guidance counselor by the Philadelphia School District. As a counselor, petitioner's job responsibilities included providing counseling and guidance services for students with respect to personal, social, educational and career development matters. While on summer break from her employment, petitioner participated in a 3-week fashion study course that involved traveling to Israel, Egypt and Spain. Petitioner did not receive any credit for her participation in this course, which was offered by Temple University. In deciding whether to take this course, petitioner did not examine any syllabus, itinerary or curriculum that described the course. Petitioner also did not keep a diary or journal of her activities while in Israel, Egypt and Spain. *245 Petitioner's employer did not require her to take this course, and she was not reimbursed for her expenses. On her Federal income tax return filed for the taxable year 1980, petitioner deducted $1,502 for expenses incurred in taking this fashion study course. In his notice of deficiency, respondent disallowed this claimed deduction. Respondent's disallowance was based on his determination that the expenses were not incurred to maintain or improve skills required in her employment but rather were incurred for personal reasons. OPINION We must determine whether the expenses petitioner incurred from her participation in the fashion study course are deductible under section 162(a). Section 162(a) allows a taxpayer a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. Section 262 expressly disallows a deduction for "personal, living, or family expenses," and section 1.262-1(b)(9), Income Tax Regs., provides that "Expenditures made by a taxpayer in obtaining an education or in furthering his education are not deductible unless they qualify under section 162 and § 1.162-5 * * *." Section 1.162-5, Income Tax Regs., *246 sets forth objective criteria for distinguishing between those expenses which are business expenses and those which are personal expenditures. This regulation, with certain exceptions not relevant here, 2 provides that educational expenses are deductible as ordinary and necessary business expenses if the education (1) maintains or improves skills required by the individual in his employment or other trade or business, or (2) meets the express requirements of the individual's employer. Sec. 1.162-5(a), Income Tax Regs.3*247 Whether education maintains or improves skills required by the taxpayer's employment is a question of fact. Baker v. Commissioner,51 T.C. 243">51 T.C. 243, 247 (1968). The burden of proof is on the taxpayer. Welch v. Helvering,290 U.S. 111">290 U.S. 111 (1933); Boser v. Commissioner,77 T.C. 1124">77 T.C. 1124, 1131 (1981); Rule 142(a). In order to meet such burden, petitioner must demonstrate that there was a direct and proximate relationship with respect to the fashion study course and the skills required in her employment as a guidance counselor. Kornhauser v. United States,276 U.S. 145">276 U.S. 145, 153 (1928); Takahashi v. Commissioner, 87 T.C.     (July 21, 1986); Boser v. Commissioner,supra at 1131. The record clearly shows that the travel undertaken pursuant to the course offered by Temple University was *248 not required by her employer. Therefore, in order for these expenses to be deductible, petitioner must establish that the expenditures were made for education which maintained or improved the skills required in her employment as a guidance counselor. This petitioner has failed to do. There is nothing in the record that shows that petitioner's skills as a guidance counselor were maintained or improved by virtue of her travel pursuant to the fashion study course. The fact that petitioner signed up for the course without first examining a syllabus, itinerary or curriculum that described the course suggests to us that her travels were undertaken for personal, not business, purposes. Had petitioner truly intended to obtain information or experiences useful in her job, she would have done some advance investigation and planning to assure that her participation in the fashion study course would maintain or improve her skills as a guidance counselor. Petitioner testified that her skills as a guidance counselor were enhanced by traveling to Israel, Egypt and Spain because she was in a better position to present a picture of the outside world. She introduced no evidence, however, to demonstrate *249 that she used any materials obtained or knowledge gained from such travel in counseling the students. Petitioner also testified that she visited a few colleges and vocational schools and attended lectures given by professors at the University of Israel. With respect to the lectures petitioner allegedly attended, we note that she could not remember the names of the lecturers or the specific nature of the lecture topics. This does not surprise us given the fact that petitioner did not keep a diary or journal of her activities while in Israel, Egypt and Spain. We find that petitioner has fallen way short of establishing that her participation in the fashion study course maintained or improved her skills as a guidance counselor. While traveling is broadening, culturally enriching, and may add to one's sensitivity to, and understanding of, others, 4*250 there simply was no showing that the travel undertaken pursuant to the fashion study course bore a direct and proximate relationship to petitioner's activities as a guidance counselor to convert what normally is a personal expense into a business expense. 5 To reflect the parties' concessions and the foregoing, Decision will be entered under Rule 155. Footnotes

2020-11-30 21:16:47.477133+00

http://www.courts.wa.gov/opinions/pdf/803654.pdf

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE STATE OF WASHINGTON, No. 80365-4-I Respondent, v. UNPUBLISHED OPINION BARRAGAN, ALFREDO MARTINEZ, DOB: 04/09/1963, Appellant. BOWMAN, J. — A jury convicted Alfredo Martinez Barragan of 14 separate sex offenses involving his biological daughter that occurred over a span of more than 15 years. Barragan claims the trial court erred by admitting evidence of his Internet searches related to “father plus daughter” pornography as evidence of lustful disposition toward his daughter. He also claims the prosecutor’s mischaracterization of the evidence in closing remarks and his counsel’s failure to object to the argument deprived him of a fair trial, and he challenges a condition of community custody. Because the evidence related to Barragan’s Internet browsing history was directed toward “daughters” or minors in general but not toward the specific victim in the case, the trial court abused its discretion by admitting the evidence to show his lustful disposition toward the victim. But Citations and pin cites are based on the Westlaw online version of the cited material. No. 80365-4-I/2 given the strength of the State’s evidence, the error was harmless, and Barragan otherwise fails to establish reversible error.1 We affirm. FACTS After Barragan’s adult daughter disclosed longstanding sexual abuse, Barragan faced a jury trial on multiple charges. Witnesses at Barragan’s trial testified about the following events. Georgina Rocha Herrera (Rocha) and Barragan married in 1993 in Mexico. The couple’s only child in common, G., was born the year after. When G. was less than a year old, the family moved to Everett, where Barragan had temporary work in the lumber industry. The move was difficult for Rocha because of the language barrier. When G. was around seven years old, the family moved to Arlington. The couple worked opposite schedules and took turns caring for G. Rocha worked nightshifts while Barragan was home with G. in the evening. After they moved to Arlington, the couple started a bakery business out of their home. When G. was around 10 years old, they opened a freestanding bakery in downtown Everett. At first, Rocha continued to work another job in the mornings. Barragan took G. home in the afternoon while Rocha stayed at the bakery or worked late in a makeshift home office, often until 1:00 or 2:00 a.m. Around the time that G. was in the third grade, Barragan began a “nighttime routine” that consisted of gradually escalating sexual abuse. At first, Barragan would read a story to G. and then appear to fall asleep next to her 1 Because we apply a harmless error analysis, we must engage in a detailed discussion of witness testimony and the substantial evidence supporting the convictions. 2 No. 80365-4-I/3 while exposing his penis to G. Barragan cut “large hole[s]” in the front of all his underwear “exactly where [his] penis” is, explaining that it made his underwear more comfortable. Barragan allowed G. to touch his penis and started encouraging her to “play with it.” Soon after, Barragan placed G.’s fingers on her vagina and showed her how to move them to stimulate herself. After a short period of either stimulating G. or watching her stimulate herself, Barragan began to penetrate her with his finger or perform oral sex on her. The sexual abuse usually occurred in Barragan and Rocha’s bedroom in their bed. If Barragan heard Rocha approach, he told G. to run to her room and pretend to be asleep, saying, “This is our game. This is our secret.” Barragan made it “very clear” to G. that she could not tell her mother. Barragan sometimes bathed with G. and touched her genitals in the bath. Other times, Barragan put G. in the bath by herself and directed her to stimulate herself while he watched. Barragan sometimes placed his computer on the outside of the tub and played animated pornography for G. to watch. One video portrayed two children raping and torturing their babysitter. Barragan did not allow G. to watch any other “normal” cartoons or television. When G. was young, Barragan called his penis “rubber ducky” and often told her that the rubber ducky “wanted some playing time” or was “missing” her. The sexual abuse started occurring when G. accompanied Barragan during bakery deliveries as well. He would ask her to “pet the rubber ducky,” and sometimes G. would either perform oral sex on Barragan or masturbate him while he drove. The types of sexual acts Barragan engaged in with G. expanded 3 No. 80365-4-I/4 over time, and at some point, he began to have anal and vaginal intercourse with her. Barragan had regular sexual contact with G. about four or five times a week for several years. At first, G. felt “very special” to have a secret with her father, and she was unaware that what they were doing was anything but “fun and games.” But over time, the relationship became “more complicated.” G. had limited exposure to television and friends as a child. But by the time she was in sixth grade, she saw more television and sometimes visited friends’ houses when her parents were busy with the bakery business. G. began “questioning what was going on” and became more “uncomfortable” and unwilling to engage in sexual contact voluntarily. In response to G.’s increasing unwillingness, Barragan began to use a system of bribery that he called “paying time.” “Time would be sexual performances.” For instance, to spend time with friends or have new basketball shoes or clothing, G. would have to agree to engage in sexual activity with Barragan for a certain number of minutes. “Chores didn’t count for it. . . . Time was its own thing.” They used the timer on Barragan’s cell phone and he kept a running tally of G.’s debt in the “notes” section of his phone. Barragan required G. to “pay time” throughout middle and high school. He provided G. with “Plan B” birth control every time he ejaculated inside her. G. testified that “ejaculating inside of me . . . always came with Plan B afterwards, always.” G. could not avoid sexual contact with her father by asking her mother for things like money for the movies because Rocha would consult with Barragan as 4 No. 80365-4-I/5 to any request. Rocha testified that she tried to make unified parenting decisions but Barragan would overrule her. Rocha described Barragan as “very strict.” G. changed schools often, including five times during high school. Barragan generally advocated for these changes, claiming that a different school had a better sports team or explaining to Rocha that G. needed to be steered away from “friends who [were] a bad influence.” And although Rocha believed that friendship was important, especially because G. was an only child, Barragan did not generally allow G.’s friends to come to the house when she was a child and never allowed boys in the house. Barragan told G. that boys her own age were “losers” and forbade her from having outside sexual relationships because she had to “protect him” from contracting a sexually transmitted disease. Over time, Barragan ceased to respect the “boundaries” of the “pay time” arrangement. Barragan was unaffected by G.’s complaints or whether she cried throughout the sexual acts. G. physically resisted by positioning her body in a manner that made sexual intercourse uncomfortable for Barragan or intentionally tried to hurt him. But Barragan would “call [her] out for doing it” and “restart the time.” Drugs began to play a major role in securing G.’s submission during her high-school years. When G. was around 15 years old, Barragan discovered her smoking marijuana with two friends. After that, Barragan began to take G. to marijuana stores to purchase hallucinogenic and potent strains of marijuana for her. By using drugs, G. could “numb” and “distract[ ]” herself “from the abuse 5 No. 80365-4-I/6 that was going on at home.” And Barragan preferred G. to be intoxicated because it prevented her from being “emotional, crying,” or resisting. G. and Barragan continued to have sexual contact outside the home. They would tell Rocha they were going to the gym and would instead drive to a secluded location, smoke marijuana, and G. would “pay him time” by performing sexual acts in the vehicle. On occasion, G. would also agree to sexual acts in exchange for having a few female friends over. Barragan supplied G. and her friends with alcohol and drugs, including marijuana, ecstasy, acid, or cocaine. For about six months when G. was still in high school, Rocha went to Mexico to take culinary courses to help the struggling bakery business. Barragan “was supportive” of her leaving. During the time Rocha was in Mexico, Barragan and G. settled into a routine after work, school, and sports of consuming drugs. When she was “numb enough,” she would perform the sex acts she “owed” Barragan “because there was no one to stop us.” Rocha and Barragan separated when G. was around 17 years old. Barragan moved into an apartment. G. lived with Barragan following the separation because Barragan told her that she was “a disgraceful daughter,” and she felt ashamed and believed that she “did not deserve” to live with her mother. After graduating from high school, G. often avoided going home. She also ignored Barragan’s text messages and phone calls “to come home.” When she did go home, she would be in “a lot of trouble” and would “always have to pay time.” When they discussed their sexual relationship during this period, Barragan told G. that “it was [her] fault,” that she “was like his heroin,” and that she “made 6 No. 80365-4-I/7 him sick” and “addicted” because she “approached” him sexually when she was a child. In late 2015, Barragan and Rocha travelled to Mexico together to obtain medical treatment and to explore repairing their marriage. However, Rocha suspected Barragan was involved in another romantic relationship and the couple fought. As a result, when they returned to Washington, Rocha demanded that Barragan return an Apple iPhone he was using that belonged to the bakery business. When he did so, Rocha examined the phone, looking for evidence of Barragan’s relationship. Instead, Rocha found several videos in a deleted items folder, taken on different days, showing close-up images of G.’s genitalia while she was alone in the bathroom in Barragan’s apartment. The videos appeared to have been taken from the other side of a “vent” in the bathroom and showed the “slats.” Rocha recognized G.’s hands and clothing as well as a pair of colored tweezers she bought for G. At the end of one of the videos, the camera direction turns around briefly and shows Barragan’s face as he records the video. Rocha saved the items to a folder and kept the cell phone but did not confront Barragan or discuss what she found with G. Rocha explained that she felt she needed to protect G., who was in a “fragile state.” Rocha contacted the Everett Police Department and an officer informed her that if the person in the videos is an adult, that person has to make the report. After Rocha found the videos, she asked G. to move in with her. G., who had spent much time away from Barragan that year during two long trips, “finally felt safe enough to leave” and agreed to move in with Rocha. 7 No. 80365-4-I/8 After moving in with her mother, G. did not plan to see Barragan. But she changed her mind after Barragan assured her that he could change, told her that “he was going to help himself” so they could have a normal “father-daughter relationship,” and made her feel “guilty” about not visiting. G. began to visit Barragan on Sunday evenings. They would eat dinner together, watch the Game of Thrones on television, and G. would sleep on the sofa. Barragan always lent G. the same pajama pants, which were blue with beige stripes. Although Barragan sometimes jokingly asked G. to “pay time,” she refused to have sexual contact. Barragan always offered G. marijuana and a margarita, but at first, G. declined alcohol. “[I]t was a while for [her] to feel comfortable accepting a drink from him.” Eventually, she accepted his offer of a margarita. Barragan made the drinks out of G’s sight in the kitchen and used a small blender and cups that made only individual servings. Although she had a “pretty high” tolerance for alcohol, G. noticed that after drinking a single margarita at her father’s home, she always fell asleep very early, often before the end of the television program. And sometimes when she woke up, her pajama pants were untied, loosened, or the knot differed from the one she had tied the night before. One time, she had a vague recollection of waking up in the middle of the night because she felt “body heat” on her chest and “the pressure of cold lips” on her lips. When she opened her eyes, Barragan was there and moved away very quickly. She then “faded back away into unconsciousness.” When she woke up that morning, her pants were “loosely tied” and she “felt pain” in her vaginal area. One evening after several instances 8 No. 80365-4-I/9 of having only one margarita and falling asleep, G. switched her drink with Barragan’s while he was not looking. That night, Barragan “passed out early” on the couch and she stayed awake until 4:00 a.m. Barragan travelled to Mexico in 2018. While he was away, he asked Rocha to help him pay his rent. With his permission, Rocha went to Barragan’s apartment to find his checkbook and found a Samsung cell phone in the same nightstand where she found the checkbook. When she picked up the phone, it immediately began to play a video of G. having sexual intercourse with “someone” she was at first unable to identify. Rocha searched the phone to replay the video and eventually accessed an outside data storage account where she found more sexually explicit videos. She found 10 videos of a woman who was either naked from the waist down or wearing striped drawstring pajama pants pulled partway down. The woman’s face and torso were covered and she did not move. The videos showed someone touching the woman’s vagina and having sexual intercourse with her, by both digital and penile penetration. Variations in the appearance of the pubic hair in the videos showed that the videos were recorded on different dates. Rocha recognized G. as the woman and Barragan as the person penetrating her based on distinctive physical features and scarring. She also recognized the pajama pants and the location of the videos as the couch in Barragan’s apartment. The first video Rocha found was of G. having sexual intercourse with her boyfriend. The original video was not recorded on the Samsung Rocha found; it 9 No. 80365-4-I/10 was recorded on G.’s phone, which had a distinctive crack in the screen. The Samsung “video of a video” showed that distinctive crack. Rocha tried to download and save the videos but when she was unable to do so, she recorded them with her own phone. When Barragan returned from Mexico, Rocha confronted him about the videos. Barragan at first suggested that someone else might have placed videos on his phone when he had it repaired. After Rocha insisted that she knew that he and G. were the people in the videos, he was silent and “didn’t say any more words after that. He ke[pt] quiet.” Rocha told Barragan to stay away from G. and left. She then told G. about the videos she found. G. “broke into tears,” showed a combination of “panic” and relief, and disclosed the sexual abuse to Rocha. G. later said she thought she “was going to die” with her secret but felt emboldened to disclose it because there was concrete evidence of the abuse and it was no longer “he said she said.” G. and Rocha contacted the police. Rocha provided the police with three cell phones—the bakery’s iPhone Barragan returned to her after their trip to Mexico, the Samsung cell phone she found in his apartment nightstand, and her own phone that she used to record the videos she viewed on Barragan’s phone. G. confirmed that she and Barragan were the people depicted in the couch videos. Police officers arrested Barragan. In a custodial interview recorded after his arrest, Barragan admitted that he took some videos of himself having sexual contact with “a friend of [his]” named “Lori.” He denied that the woman was G. 10 No. 80365-4-I/11 Barragan refused to reveal Lori’s identity because he did not “want to expose her.” During a search of Barragan’s bedroom, police found a bandana covering a hole that led to a nonfunctioning heater vent in the bathroom that tracked the angle and framing of the photographs taken of G. The State charged Barragan with 14 sexual offenses against G., alleging crimes that occurred between 2001 and 2018. The charges included first degree rape of a child, first degree child molestation, first degree incest, third degree rape of a child, multiple counts of second degree rape based on inability to consent, and multiple counts of first degree voyeurism. The State alleged domestic violence as to each count. The primary witnesses during the two-week jury trial were G., Rocha, and the lead detective. The jury viewed the videos taken in Barragan’s bathroom in 2015 and the videos taken on Barragan’s couch after G. moved in with Rocha. The jury convicted Barragan of all 14 counts and returned a special verdict of domestic violence. Barragan’s offender score was 39, which yielded a standard sentencing range of 240 to 318 months. The defense requested a mid-range sentence within the standard range. The State requested an indeterminate exceptional sentence of 840 months. The court determined that an exceptional sentence was appropriate because a standard-range sentence would lead to 10 of Barragan’s offenses going unpunished as “free crimes” under RCW 9.94A.535(2). The court imposed an indeterminate sentence of 564 months to life on count 1, domestic violence rape of a child in the first degree, and ran the remaining sentences concurrently. Barragan appeals. 11 No. 80365-4-I/12 ANALYSIS ER 404(b) Evidence Barragan challenges the trial court’s decision to admit evidence of the Internet browsing history on the cell phone in his possession at the time of arrest. We review the interpretation of an evidentiary rule de novo as a question of law. State v. DeVincentis, 150 Wn.2d 11 , 17, 74 P.3d 119 (2003). If the trial court’s interpretation is correct, we review the court’s admission of evidence under ER 404(b) for an abuse of discretion. DeVincentis, 150 Wn.2d at 17 ; State v. Foxhoven, 161 Wn.2d 168 , 174, 163 P.3d 786 (2007). “Failure to adhere to the requirements of an evidentiary rule can be considered an abuse of discretion.” Foxhoven, 161 Wn.2d at 174 . Evidence of prior bad acts is presumed inadmissible, and any doubts as to admissibility are resolved in favor of exclusion. DeVincentis, 150 Wn.2d at 17 ; State v. Thang, 145 Wn.2d 630 , 642, 41 P.3d 1159 (2002). When police searched the cell phone found on Barragan after his arrest, they found evidence of the recent use of the search term “father plus daughter” on a prominent pornography website. The evidence showed that someone used Barragan’s cell phone to access the pornography website and search for videos with titles such as "[t]een siblings fuck in front of Stepmom" and “[f]ather arrives drunk at his house and fucks his teenage daughter with big ass.” Pretrial, the State conveyed its intent to admit the Internet searches as evidence to show Barragan’s “lustful disposition” toward G. Barragan opposed admission, arguing there was “no direct link” between the search and G., the 12 No. 80365-4-I/13 alleged victim, and because the evidence was more prejudicial than probative. The trial court ruled that while the Internet browsing was directed toward daughters in general and not toward G. in particular, it was admissible to show Barragan’s lustful disposition toward G. because of the “similarity of the relationship” and because the probative value of the evidence outweighed the prejudice. ER 404(b) prohibits admission of “evidence offered to ‘show the character of a person to prove the person acted in conformity’ with that character at the time of the crime.” Foxhoven, 161 Wn.2d at 174-75 (quoting State v. Everybodytalksabout, 145 Wn.2d 456 , 466, 39 P.3d 294 (2002)). But ER 404(b) does not prohibit evidence of the defendant’s prior misconduct for other purposes, such as proving motive, intent, a common scheme or plan, or lack of mistake or accident. State v. Gresham, 173 Wn.2d 405 , 420, 269 P.3d 207 (2012). One accepted “other purpose” under ER 404(b) is to show the defendant’s motive and intent in cases involving sex offenses. Gresham, 173 Wn.2d at 430 n.4. Our courts have consistently recognized that courts may admit evidence of collateral sexual misconduct under ER 404(b) when it shows the defendant’s “lustful disposition” directed toward the victim. State v. Ray, 116 Wn.2d 531 , 547, 806 P.2d 1220 (1991); State v. Camarillo, 115 Wn.2d 60 , 70, 794 P.2d 850 (1990); State v. Ferguson, 100 Wn.2d 131 , 133-34, 667 P.2d 68 (1983); State v. Medcalf, 58 Wn. App. 817 , 823, 795 P.2d 158 (1990). 13 No. 80365-4-I/14 To be admissible to show lustful disposition, the evidence must be “directly connected” to the alleged victim. Ray, 116 Wn.2d at 547 (citing Medcalf, 58 Wn. App. at 822-23 ). The Washington Supreme Court has emphasized: “Such evidence is admitted for the purpose of showing the lustful inclination of the defendant toward the offended female, which in turn makes it more probable that the defendant committed the offense charged. . . . The important thing is whether it can be said that it evidences a sexual desire for the particular female. . . . The kind of conduct receivable to prove this desire at such . . . subsequent time is whatever would naturally be interpretable as the expression of sexual desire.” Ferguson, 100 Wn.2d at 1342 (quoting State v. Thorne, 43 Wn.2d 47 , 60-61, 260 P.2d 331 (1953)). Here, the court admitted the evidence because Barragan’s Internet browsing reflected a sexual interest connected to a particular relationship, which is the same relationship he has with G. But this is not evidence that reveals a sexual desire for a particular individual. See Ferguson, 100 Wn.2d at 134 . And it is not sufficient for the evidence to “just reveal [a] defendant’s general sexual proclivities”; the fact that evidence shows “ ‘a sexual desire’ ” for a “ ‘particular’ ” individual is what makes it more likely that the defendant committed the charged offense against that particular individual. Ray, 116 Wn.2d at 547 (citing Medcalf, 58 Wn. App. at 822-23 ) (quoting Ferguson, 100 Wn.2d at 134 ). It is simply not enough that the evidence of sexual misconduct shares a common feature with the charged crimes. 2 Emphasis omitted; first and third alteration in original; internal quotation marks omitted. 14 No. 80365-4-I/15 Here, there is no evidence to suggest that Barragan was searching for depictions of G. Barragan directed his conduct at “daughters” or minors in general but not at G. in particular. Evidence of general lustful disposition toward minors is generally inadmissible. State v. Sutherby, 165 Wn.2d 870 , 886, 204 P.3d 916 (2009) (evidence of child pornography not admissible in trial regarding child molestation because it would show only defendant’s general predisposition and not his sexual desire for the specific victim). Washington courts recognize a significant distinction between a purpose of “showing [one’s] character and action in conformity with that character,” and a purpose of showing one’s sexual desire for a specific individual and action in conformity with that individualized sexual desire. Gresham, 173 Wn.2d at 425 . The admission of Barragan’s Internet searches served only the purpose of revealing his proclivities and action in conformity. Because the evidence did not reflect Barragan’s lustful disposition toward G. specifically, the court abused its discretion in admitting it. But error in admitting ER 404(b) evidence “is harmless ‘unless, within reasonable probabilities, had the error not occurred, the outcome of the trial would have been materially affected.’ ” Gresham, 173 Wn.2d at 4253 (quoting State v. Smith, 106 Wn.2d 772 , 780, 725 P.2d 951 (1986)); see State v. Gunderson, 181 Wn.2d 916 , 926, 337 P.3d 1090 (2014) (nonconstitutional harmless error standard applies to evidentiary error). Barragan argues that as in Gresham, 173 Wn.2d at 433-34 , the evidentiary error here was not harmless because the jury’s verdict would have 3 Internal quotation marks omitted. 15 No. 80365-4-I/16 been different but for the admission of the “highly prejudicial” Internet search evidence. There, the trial court erroneously admitted evidence of the defendant’s prior conviction for first degree rape of a child in his later trial on four counts of child molestation in the first degree involving a different victim. Gresham, 173 Wn.2d at 417-18 . Our Supreme Court held that the error was not harmless because “[m]uch of the testimony at trial was predicated on the fact of Gresham’s prior conviction including all of [the first degree child rape victim]’s testimony and much of the [child molestation victim]’s parents’ testimony.” Gresham, 173 Wn.2d at 433 . Without the erroneously admitted evidence, minimal evidence showed that the defendant committed the offense. Gresham, 173 Wn.2d at 433- 34. Barragan also relies on Sutherby. The State charged Sutherby with child rape and molestation involving the same child as well as multiple counts of possession of child pornography. Sutherby, 165 Wn.2d at 875-76 . The question before the court was whether defense counsel’s failure to move for a severance of the child rape and molestation charges from the pornography charges deprived Sutherby of effective assistance of counsel. Sutherby, 165 Wn.2d at 883 . In concluding that Sutherby showed ineffective assistance of counsel, the court relied on, among other things, the fact that the pornography evidence was much stronger than the rape and molestation evidence and that the State consistently relied on the defendant’s possession of child pornography to prove that he molested his grandchild. Sutherby, 165 Wn.2d. at 885-86. 16 No. 80365-4-I/17 Barragan’s reliance on Gresham and Sutherby is unavailing. Here, the State’s evidence supporting each count was overwhelming and the prosecutor only mentioned the Internet browsing history evidence in closing remarks as “corroboration.” G.’s extensive and detailed testimony about the abuse, along with the corroborating and highly incriminating video evidence found on the phones that had been in Barragan’s possession, persuades us that the effect of the brief testimony about Barragan’s Internet browsing history was minimal. The jury had a chance to assess G.’s credibility and weigh all of the evidence. See Camarillo, 115 Wn.2d at 71 (we defer to the trier of fact on issues of conflicting testimony, the credibility of witnesses, and the persuasiveness of the evidence). There is no reasonable probability that the result would have been any different if the court had excluded the Internet browsing history evidence.4 Prosecutorial Misconduct Barragan contends that the prosecutor misstated the evidence during closing remarks and thereby deprived him of a fair trial. Prosecutorial misconduct may deprive a defendant of his guaranty to a fair trial under the Sixth and Fourteenth Amendments to the United States Constitution and article I, section 22 of the Washington State Constitution. In re Pers. Restraint of Glasmann, 175 Wn.2d 696 , 703-04, 286 P.3d 673 (2012). 4 It does not appear that Barragan requested or the court provided a limiting instruction related to the Internet browsing history evidence. Barragan does not rely on this omission as a basis for his claim of error. In any event, the failure to provide an appropriate limiting instruction upon request is subject to harmless error analysis. See Gresham, 173 Wn.2d at 425 . Here, as explained, any error was harmless in view of the strength and nature of the admissible evidence supporting the charges and the relatively minor significance of the browsing history evidence. 17 No. 80365-4-I/18 To prevail on a claim of prosecutorial misconduct, a defendant must establish that conduct was both improper and prejudicial in the context of the entire case. State v. Magers, 164 Wn.2d 174 , 191, 189 P.3d 126 (2008). When, as here, the defendant fails to object at trial, the error is waived absent misconduct so flagrant and ill intentioned that an instruction could not have cured the resulting prejudice. State v. Emery, 174 Wn.2d 741 , 760-61, 278 P.3d 653 (2012). To show this level of misconduct, the defendant must show “(1) ‘no curative instruction would have obviated any prejudicial effect on the jury’ and (2) the misconduct resulted in prejudice that ‘had a substantial likelihood of affecting the jury verdict.’ ” Emery, 174 Wn.2d at 761 (quoting State v. Thorgerson, 172 Wn.2d 438 , 455, 258 P.3d 43 (2011)). We review statements in a prosecutor’s closing arguments in the context of the issues in the case, the total argument, the evidence addressed in the argument, and the jury instructions. State v. Boehning, 127 Wn. App. 511 , 519, 111 P.3d 899 (2005). A prosecutor has wide latitude to draw reasonable inferences from the evidence during closing argument “and to express such inferences to the jury.” Boehning, 127 Wn. App. at 519. “However, a prosecutor may not make statements that are unsupported by the evidence and prejudice the defendant.” Boehning, 127 Wn. App. at 519. Here, defense counsel argued in closing argument, among other things, that G.’s demeanor when testifying raised questions about her credibility. Counsel asserted that if Barragan had raped G. repeatedly since childhood, she likely would have become pregnant. Defense counsel also suggested that the 18 No. 80365-4-I/19 theory that Barragan slipped drugs into G.’s drinks to rape her conflicted with her testimony that she could get up for work the next day. In rebuttal, the prosecutor reviewed the details of G.’s testimony and the evidence corroborating those details. The prosecutor also asserted that the evidence showed Barragan exerted control over the family’s life in a manner that facilitated the abuse: Ultimately, ladies and gentlemen, [Barragan] orchestrated a life for himself, for his wife, for his daughter that was designed to effectuate his sexual abuse of her. Specifically, the prosecutor pointed out that Barragan was the driving force behind G.’s frequent changes in schools, which had the effect of limiting her “solid” connections outside the family. The prosecutor also argued that Barragan made sure that Rocha was consistently “busy” with the bakery and “encouraged” her to pursue school and culinary training that took her away from the home. Barragan claims that this argument was “incendiary and utterly unsupported” by the evidence at trial. He contends the evidence does not show that he unilaterally decided to start the family business, that he influenced Rocha to take classes, or that he “pushed” her to return to Mexico for an extended period to take culinary classes. But the evidence as a whole supports a reasonable inference that Barragan used his control over the family dynamics to facilitate his abuse of G. According to both G.’s and Rocha’s testimony, Barragan was “very strict” and largely made the decisions affecting G., including those about her privileges, schooling, and having friends over at their house. This furthered Barragan’s 19 No. 80365-4-I/20 ability to force G. to submit to his sexual demands using a system of bribery and ensured that she lacked strong connections outside the household. The testimony also suggested that Barragan kept G. close to him and, at the same time, drove a wedge between G. and Rocha during G.’s childhood and adolescence. G. testified that the “games” and “secret[s]” Barragan designed during her childhood made her feel closer “with my father. He gave me a false sense of security.” As she got older and tried to resist Barragan’s sexual advances, he told her that she was a “disgraceful daughter” who “didn’t deserve” to live with Rocha. He also provided drugs to G. to “numb” her resistance. And, according to the record, the impetus behind opening a bakery came from Barragan. Rocha testified that after a friend suggested that they open a bakery in their home, Barragan came home from work one day and “told me that he quit . . . the lumber [job] and he will start to put everything to open the bakery.” Further, the bakery business created an opportunity for abuse that Barragan could capitalize on. When G. was a child, she was alone with Barragan while Rocha worked late, and he took only G. with him during deliveries so he could sexually assault her in the van. The evidence supported the State’s argument and the remarks were not improper.5 Community Custody Condition Barragan argues that the court imposed a vague and ambiguous condition of community custody. “A trial court necessarily abuses its discretion if it 5 Barragan also claims that his counsel performed deficiently by failing to object to the prosecutor’s remarks. However, because the challenged remarks were not improper, defense counsel was not deficient for failing to object. 20 No. 80365-4-I/21 imposes an unconstitutional community custody condition, and we review constitutional questions de novo.” State v. Wallmuller, 194 Wn.2d 234 , 238, 449 P.3d 619 (2019). A community custody condition is unconstitutionally vague under due process principles of the Fourteenth Amendment to the United States Constitution and article I, section 3, of the Washington Constitution if a reasonable person would not understand what conduct the condition prohibits or if it lacks ascertainable standards that prevent arbitrary enforcement. State v. Wallmuller, 194 Wn.2d 234 , 238-39, 449 P.3d 619 (2019); State v. Casimiro, 8 Wn. App. 2d 245, 250, 438 P.3d 137 , review denied, 193 Wn.2d 1029 , 445 P.3d 561 (2019). The challenged condition bans Barragan from locations where “children’s activities regularly occur or are occurring” and provides: Stay out of areas where children’s activities regularly occur or are occurring. This includes, but is not limited to: parks used for youth activities, schools, daycare facilities, playgrounds, wading pools, swimming pools being used for youth activities, play areas (indoor or outdoor), sports fields being used for youth sports, arcades, church services, restaurants, and any specific location identified in advance by [the Department of Corrections] or [community corrections officer]. Our Supreme Court determined that a similar community custody condition was not unconstitutionally vague in Wallmuller, 94 Wn.2d at 245. That condition provided, “ ‘The defendant shall not loiter in nor frequent places where children congregate such as parks, video arcades, campgrounds, and shopping malls.’ ” Wallmuller, 194 Wn.2d at 237. The court reasoned that 21 No. 80365-4-I/22 “ ‘commonsense’ restrictions, including those that use nonexclusive lists to elucidate general phrases like ‘where children congregate,’ ” provide fair notice of prohibited conduct. Wallmuller, 194 Wn.2d at 242-43. Much like the condition in Wallmuller, the condition here uses a nonexclusive list to illustrate the general phrase “areas where children’s activities regularly occur or are occurring.” The phrase “areas where children’s activities regularly occur” is no less precise than “places where children congregate” as addressed in Wallmuller. The language here is specific enough that a person of ordinary intelligence can understand the scope of its prohibition. Barragan asserts that the “illustrative list” is “confusing” because it includes some “child-specific” locations like schools and some “mixed-use” locations like parks, but only some of the “mixed-use” locations are expressly modified with the language “used for youth activities.” But the first sentence modifies the entire illustrative list and eliminates any ambiguity—the locations are limited to “areas where children’s activities regularly occur or are occurring.” Furthermore, the condition the Supreme Court upheld in Wallmuller also included areas not exclusively used for children’s activities, such as shopping malls. Wallmuller, 194 Wn.2d at 237. The condition here is not unconstitutionally vague. Barragan also suggests that the condition is flawed because it implicates “fundamental constitutional rights.” In making this argument, we assume he refers to the right to the free exercise of religion. A community custody condition that burdens the free exercise of religion must withstand strict scrutiny. State v. 22 No. 80365-4-I/23 Balzer, 91 Wn. App. 44 , 53, 954 P.2d 931 (1998). “Under this standard, the complaining party must first prove the government action has a coercive effect on his or her practice of religion.” Balzer, 91 Wn. App. at 53. Barragan did not object to the condition below. And while he maintains that it “potentially affects essential human needs and rights,” Barragan does not argue or point to any evidence that the condition has a coercive effect on his practice of religion. Because of the limited briefing and undeveloped record, we conclude that the question of whether this condition unconstitutionally burdens Barragan’s freedom of religion is not squarely before us.6 We affirm Barragan’s jury conviction of 14 sex offenses against his biological daughter. WE CONCUR: 6 Barragan asserts without elaboration that the condition is also not crime-related. But he agreed to the community custody condition without objection, inviting any resulting error, and cannot argue for the first time on appeal that it is not crime-related. See Casimiro, 8 Wn. App. 2d at 248-49; RAP 2.5(a)(3); see also State v. Peters, 10 Wn. App. 2d 574, 591, 455 P.3d 141 (2019) (declining to consider an argument that a sentencing condition is not crime-related when the defendant raised the issue for the first time on appeal). 23

2020-11-30 21:16:47.657221+00

http://www.courts.wa.gov/opinions/pdf/810553.pdf

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON MELISSA NEWMAN, nka MELISSA ) No. 81055-3-I POSTYENI, ) ) DIVISION ONE Respondent, ) ) UNPUBLISHED OPINION v. ) ) MICHAEL MARTINEK, ) ) Appellant. ) ) HAZELRIGG, J. — Michael Martinek appeals the trial court’s denial of his motion to revise a commissioner’s order. The commissioner confirmed the arbitrator’s decision entering a long-distance parenting plan after Martinek moved to Texas with the parties’ daughter. He contends that the superior court erred by concluding that the arbitrator did not exceed her authority under the parties’ agreement when she entered the long distance parenting plan. We affirm the superior court’s order and deny the mother’s request for attorney fees on appeal. FACTS Michael Martinek and Melissa Postyeni (formerly known as Melissa Newman) are the parents of a 13-year old daughter. In 2010, the court signed a divorce decree and entered a parenting plan. In 2013, the parties agreed that Martinek would be the primary residential parent. On July 29, 2017, Martinek No. 81055-3-I/2 served Postyeni with a notice of intended relocation with their daughter from Seattle to Texas. Postyeni successfully moved for a temporary order denying the move pending trial. The parties subsequently filed a notice of settlement striking the trial date. On July 19, 2018, the superior court entered an agreed order granting relocation to Texas and an agreed parenting plan. The parenting plan designated Martinek as the custodial parent, established joint decision making authority for both parents, and includes a finding that Martinek has a limiting factor under RCW 26.09.191 for abusive use of conflict. The parenting plan granted Postyeni residential time every Thursday after school until Friday morning, every other weekend from Thursday after school until the following Tuesday morning, half the summer, and certain holidays. The parenting plan further provided that if Postyeni did not move to the same area of Texas before August 31, 2018, “the parties will engage in mediation/arbitration to determine a long distance Parenting Plan.” Postyeni obtained an apartment in Texas and traveled there to exercise her residential time pursuant to the parenting plan while maintaining her residence in Washington. On August 22, 2018, the parties entered into an agreement to continue their mediation until November 2, 2018. Postyeni expressed “serious reservations” about moving to Texas and wanted more time to determine whether to commit to the move. On November 2, 2018, the parties again continued mediation until December 6, 2018. Postyeni eventually chose not to relocate to Texas. Thus, at the December 6, 2019 mediation, Postyeni proposed changes to 2 No. 81055-3-I/3 the current residential schedule that would facilitate her ability to live in Seattle and travel to Texas to exercise her residential time. Martinek rejected her proposal. On February 1, 2019, Postyeni initiated arbitration of a long-distance parenting plan. On May 17, 2019, Martinek filed a motion and declaration to decline jurisdiction in Washington pursuant to the Uniform Child Custody Jurisdiction and Enforcement Act (UCCJEA), chapter 26.27 RCW. Martinek argued that Postyeni had relocated to Texas during autumn 2018 and that he had already served her with registration of the parenting plan at her Texas address. He also requested a stay of the arbitration proceeding pending the court’s decision regarding jurisdiction. Postyeni responded with a motion to stay proceedings in Texas pending the Washington court’s decision regarding jurisdiction, which the Texas court granted on May 23, 2019. On July 29, 2019, the superior court in Washington denied Martinek’s motion and ruled that Washington has continuing exclusive jurisdiction over the matter. Of particular note, the court found: The Petitioner has resided in Washington during the pendency of the action and presently resides in the state of Washington and has an apartment in Texas to exercise her residential time pursuant to the parenting plan. The Petitioner did not leave Washington to live elsewhere. Martinek did not appeal the order. Following entry of the jurisdictional order, Postyeni resubmitted her request for arbitration of a long distance parenting plan. In response, Martinek proposed his own long distance parenting plan. 3 No. 81055-3-I/4 On November 1, 2019, the arbitrator issued her decision. Martinek was dissatisfied with the arbitration outcome, and on November 5, 2019 he moved for reconsideration. On November 12, 2019, the arbitrator issued her decision on reconsideration, which confirmed and clarified her original decision and included a parenting plan based on that decision. On November 21, 2019, Martinek filed a motion for de novo review of the arbitration decision in superior court. He asserted that the court should vacate the entire arbitration decision because, among other reasons, the new parenting plan was not in the child’s best interest and the arbitrator exceeded her authority by modifying the terms of the July 2018 parenting plan. On December 6, 2019, a superior court commissioner ruled that the arbitrator did not exceed her authority to enter a long distance parenting plan and denied Martinek’s motion to vacate the arbitration decision. The commissioner also ruled that Martinek had not acted in bad faith and denied Postyeni’s request for attorney fees. Martinek then moved to revise and vacate the commissioner’s ruling regarding the parenting plan, and Postyeni moved to revise the commissioner’s ruling regarding attorney fees. On January 10, 2020, after conducting a de novo review of all documents submitted to the arbitrator, the superior court affirmed the commissioner’s order. In its oral ruling, which was incorporated into the order, the court stated: The parties agreed to the arbitration provision. The parties’ actions indicate there was no strict horizon on the arbitration provision, and I’m finding that [the arbitrator] did not exceed her authority in her decision given that she was—given that she needed to decide a long distance parenting plan and that that necessarily involves new elements to manage the long distance between the parties. 4 No. 81055-3-I/5 This court also does a de novo review, which I have done here. I’m finding that her parenting plan was not in error and that it was—it is reasonable under the circumstances of this case. The court also stated that Martinek “was certainly in his right to come to court on this issue” and accordingly denied Postyeni’s request for attorney’s fees. The court entered the final parenting plan based on the arbitrator’s decision. Martinek appealed. ANALYSIS I. Arbitration Provision Martinek argues that the trial court erred by denying his motion to revise the commissioner’s ruling confirming the arbitration decision. “Generally, a trial court’s rulings dealing with the provisions of a parenting plan are reviewed for abuse of discretion.” In re Marriage of Christel and Blanchard, 101 Wn. App. 13 , 21-22, 1 P.3d 600 (2000). We also review a trial court’s denial of a motion for revision of a commissioner’s order for abuse of discretion. River House Dev., Inc. v. Integrus Architecture, P.S., 167 Wn. App. 221 , 231, 272 P.3d 289 (2012). A trial court abuses its discretion if its decision is manifestly unreasonable or based on untenable grounds or untenable reasons. In re Marriage of Littlefield, 133 Wn.2d 39 , 46-47, 940 P.2d 1362 (1997). “On appeal, this court reviews the superior court’s ruling, not the commissioner’s.” Maldonaldo v. Maldonaldo, 197 Wn. App. 779 , 789, 391 P.3d 546 (2017). The trial court’s interpretation of the arbitration 5 No. 81055-3-I/6 statute and the parenting plan are questions of law reviewed de novo. In re Smith- Bartlett, 95 Wn. App. 633 , 636, 976 P.2d 173 (1999).1 Here, the parties’ final parenting plan and RCW 26.09.184(4) govern the dispute resolution process. That statute provides: (4) DISPUTE RESOLUTION. A process for resolving disputes, other than court action, shall be provided unless precluded or limited by RCW 26.09.187 or 26.09.191. A dispute resolution process may include counseling, mediation, or arbitration by a specified individual or agency, or court action. In the dispute resolution process: (a) Preference shall be given to carrying out the parenting plan; (b) The parents shall use the designated process to resolve disputes relating to implementation of the plan, except those related to financial support, unless an emergency exists; (c) A written record shall be prepared of any agreement reached in counseling or mediation and of each arbitration award and shall be provided to each party; (d) If the court finds that a parent has used or frustrated the dispute resolution process without good reason, the court shall award attorney’s fees and sanctions to the prevailing parent; (e) The parties have the right of review from the dispute resolution process to the superior court; and (f) The provisions of (a) through (e) of this subsection shall be set forth in the decree. The parenting plan provided the following dispute resolution provision: Agreed Relocation of Both Parties to Dallas Area. The parties agree that if the father moves to Waxahachie or Midlothian, Texas, during the summer of 2018 . . . the mother will not object to relocation of the child. The mother plans to move to the same area . . . . If the mother does not move to the same area before August 31, 2018, the parties will engage in mediation/arbitration to determine a long distance Parenting Plan. Both sides will accomplish this before the end of Summer 2018. 1 Our decision is the same under either standard of review. 6 No. 81055-3-I/7 The parenting plan defines “mediation/arbitration” as “mediation followed by arbitration by the mediator if the parties cannot reach agreement within a reasonable amount of time.” Martinek contends that the arbitrator exceeded her authority by entering the long distance parenting plan. He contends that the arbitrator’s decision constituted an improper modification of the parenting plan. We disagree. “A permanent parenting plan may be changed by an agreement, by petition to modify, and by temporary order.” In re Marriage of Watson, 132 Wn. App. 222 , 235, 130 P.3d 915 (2006). A modification occurs when the effect of the court’s ruling causes a party’s rights to be “either extended beyond or reduced from those originally intended in the decree” and requires a statutory modification procedure to be followed. Christel, 101 Wn. App at 22. Because a trial court cannot delegate its authority to modify a parenting plan, “[a]ny modification, no matter how slight, requires an independent inquiry by the trial court.” In re Marriage of Coy, 160 Wn. App. 797 , 804, 248 P.3d 1101 (2011). “In contrast, a trial court can delegate its responsibility of interpreting the parenting plan, as long as the parties retain a right of review by the trial court.” Id. at 804 n. 5 (emphasis omitted) (citing In re Parentage of Schroeder, 106 Wn. App. 343 , 353 n. 8, 22 P.3d 1280 (2001); Smith- Bartlett, 95 Wn. App. at 640). Martinek, relying primarily on In re Marriage of Christel and Blanchard, argues that the long distance parenting plan amounted to an impermissible modification of the existing parenting plan. 101 Wn. App. 13 . His reliance on Christel is misplaced. There, the parenting plan contained a dispute resolution 7 No. 81055-3-I/8 provision stating that requiring the parties to go mediation and, if that failed, to family law court “[i]f [they] are unable to agree on a Major Decision.” Id. at 21-22 . The trial court entered an order that included new provisions for dispute resolution, even though neither party had sought to change or clarify the dispute resolution process. Id. at 23 . This court held that the order improperly modified the parenting plan because it went beyond explaining the provisions of the existing plan and imposed new limits on the rights of the parents. Id. at 23-24 . Here, in contrast, the agreed parenting plan expressly and unambiguously provided for arbitration of a long distance parenting plan in the event that Postyeni did not move to Texas. In so doing, the arbitrator properly implemented the agreed parenting plan. Martinek asserts that the arbitration provision expired at the end of summer 2018 because Postyeni failed to initiate arbitration of a long-distance parenting plan prior to the end of summer 2018, even though she moved to Texas. He asserts that the long distance parenting plan was unnecessary because Postyeni proved herself capable of following the existing parenting plan from July 2018 through November 2019. But the UCCJEA order, which Martinek did not appeal, expressly found that Postyeni never moved to Texas. Rather, she followed the existing parenting plan while maintaining a residence in Washington while she was deciding whether she was able to commit to moving to Texas. The parties entered several agreements to continue arbitration to a later date in order to allow Postyeni time to make this important decision. We agree with the trial court that these actions indicate the parties agreed not to enforce a strict deadline for implementing the arbitration provision. 8 No. 81055-3-I/9 Martinek also appears to argue that the arbitration provision in the existing parenting plan amounts to an unenforceable delegation of the court’s modification authority to the arbitrator. But the agreed parenting plan did not purport to prevent the trial court from conducting an independent de novo review of the arbitration decision pursuant to RCW 26.09.184(4)(e). The trial court did so. The fact that Martinek dislikes the result does not render the arbitrator’s decision improper. II. Attorney Fees Postyeni requests an award of attorney fees and costs incurred on appeal under RAP 18.1(a), which authorizes such an award if provided by other applicable law. Postyeni cites CR 11 as legal authority supporting such an award. Under CR 11, a trial court may sanction a party or representative for filing a pleading, motion, or memorandum that is frivolous or interposed for an improper purpose. “An appeal is frivolous if, considering the whole record, this court is convinced there are no debatable issues on which reasonable minds may differ and it is totally devoid of merit.” In re Recall of Boldt, 187 Wn.2d 542 , 556, 386 P.3d 1104 (2017). Martinek’s appeal was not frivolous. We decline to award fees to Postyeni on this basis. Affirmed. WE CONCUR: 9

2020-11-30 21:16:47.857361+00

http://www.courts.wa.gov/opinions/pdf/802836.pdf

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON MARY DOMBROWSKI, No. 80283-6-I Appellant, DIVISION ONE v. CORPORATION OF THE CATHOLIC UNPUBLISHED OPINION ARCHBISHOP OF SEATTLE, Respondent. CHUN, J. — During a mid-day recess for students, Mary Dombrowski walked through a church courtyard to attend her book group. A basketball hit her in the back of her ankles, causing her to fall and injure her knee. Dombrowski sued the Corporation of the Catholic Archbishop of Seattle (Church) under a premises liability theory. The trial court granted the Church’s motion for summary judgment. We affirm. BACKGROUND In March 2017, Dombrowski went to St. Cecilia’s Catholic Church to attend her book group. She parked, walked past the church’s main entrance, and used a well-worn footpath to traverse the courtyard towards a side entrance. Dombrowski had often used the footpath and had seen others use it. Church staff knew that people used the side entrance, and most people used the main entrance—though, in the winter of 2014, church staff had Citations and pin cites are based on the Westlaw online version of the cited material. No. 80283-6-I/2 encouraged parishioners not to use the main entrance because repeatedly opening the main door made the church secretary’s office cold. The courtyard includes a basketball court with a hard surface and two hoops. Dombrowski noticed children from the church’s school playing at recess in the courtyard and walked past a boy standing still and holding a basketball. After she passed, a basketball hit the back of her ankles, causing her to fall and injure her left knee. Dombrowski brought a premises liability action against the Church. The Church moved for summary judgment dismissal. The trial court granted the motion. Dombrowski appeals. ANALYSIS Dombrowski says the trial court improperly granted the Church’s motion for summary judgment because she raised a genuine issue of material fact as to whether the Church should have anticipated her harm.1 The Church responds that Dombrowski has not presented a genuine issue of material fact as to whether recess presented an unreasonable risk of harm. We agree with the Church. We review de novo summary judgments. Messenger v. Whitemarsh, 13 Wn. App. 2d 206, 210, 462 P.3d 861 (2020). “Summary judgment is appropriate 1 Dombrowski also assigns error to the trial court’s request for supplemental briefing on the issue of anticipation before ruling on summary judgment. But her briefing lacks any argument on this issue, so she has waived this assignment of error. See Cowiche Canyon Conservancy v. Bosley, 118 Wn.2d 801 , 809, 828 P.2d 549 (1992) (holding a party waived its assignment of error after making no argument supporting it in briefing). 2 No. 80283-6-I/3 when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law.” Id. (quoting Strauss v. Premera Blue Cross, 194 Wn.2d 296 , 300, 449 P.3d 640 (2019)); CR 56(c). On such review, like the trial court, we construe all facts and inferences in favor of the non-moving party. See Messenger, 13 Wn. App. 2d at 210. “A genuine issue of material fact exists when reasonable minds could differ on the facts controlling the outcome of the litigation.” Id. (quoting Dowler v. Clover Park Sch. Dist. No. 400, 172 Wn.2d 471 , 484, 258 P.3d 676 (2011)). “In premises liability actions, a person’s status, based on the common law classifications of persons entering upon real property (invitee, licensee, or trespasser) determines the scope of the duty of care owed by the possessor (owner or occupier) of that property.” Tincani v. Inland Empire Zoological Soc’y, 124 Wn.2d 121 , 128, 875 P.2d 621 (1994). “Generally, a landowner owes trespassers and licensees only the duty to refrain from willfully or wantonly injuring them, whereas to invitees the landowner owes an affirmative duty to use ordinary care to keep the premises in a reasonably safe condition.” Degel v. Majestic Mobile Manor, Inc., 129 Wn.2d 43 , 49, 914 P.2d 728 (1996). “Once the issue of legal duty is determined, it is the function of the trier of fact to decide whether the particular harm should have been anticipated and whether reasonable care was taken to protect against the harm.” Id. at 54; Lettengarver v. Port of Edmonds, 40 Wn. App. 577 , 581, 699 P.2d 793 (1985). But a court may decide issues of foreseeability as a matter of law where reasonable minds 3 No. 80283-6-I/4 cannot differ. Christen v. Lee, 113 Wn.2d 479 , 492, 780 P.2d 1307 (1989). “[F]oreseeability is a matter of what the actor knew or should have known under the circumstances; it turns on what a reasonable person would have anticipated.” Ayers v. Johnson & Johnson Baby Prod. Co., 117 Wn.2d 747 , 764, 818 P.2d 1337 , 1346 (1991). Under Washington law, the Restatement (Second) of Torts sections 343 and 343A describe a land possessor’s duty to invitees.2 See Tincani, 124 Wn.2d at 138–39. Section 343 states: A possessor of land is subject to liability for physical harm caused to [their] invitees by a condition on the land if, but only if, [they] (a) [know] or by the exercise of reasonable care would discover the condition, and should realize that it involves an unreasonable risk of harm to such invitees, and (b) should expect that [the invitees] will not discover or realize the danger, or will fail to protect themselves against it, and (c) [fail] to exercise reasonable care to protect them against the danger. RESTATEMENT (SECOND) OF TORTS § 343 (1965). Section 343A states, in part: A possessor of land is not liable to [their] invitees for physical harm caused to them by any activity or condition on the land whose danger is known or obvious to them, unless the possessor should anticipate the harm despite such knowledge or obviousness. RESTATEMENT (SECOND) OF TORTS § 343A(1) (1965). Under these sections, an invitee may “‘expect that the possessor will exercise reasonable care to make the land safe for his [or her] entry.’ Reasonable care requires the landowner to inspect for dangerous conditions, ‘followed by such repair, safeguards, or 2 The trial court indicated that it considered Dombrowski an invitee. At the summary judgment hearing, the Church disputed whether Dombrowski was an invitee; but on appeal, it agrees she was an invitee. The Church also does not dispute whether it knew or should have known of Dombrowski’s presence. 4 No. 80283-6-I/5 warning as may be reasonably necessary for [the invitee’s] protection under the circumstances.’” Tincani, 124 Wn.2d at 138 (alteration in original) (internal citation omitted) (quoting RESTATEMENT (SECOND) OF TORTS § 343 cmt. b (1965)). Comment a to section 343 states that the two sections should be read together. Section 343 refers only to conditions on the land, while section 343A refers to activities or conditions on the land.3 The parties dispute these issues: (1) whether allowing recess in an area where people walk into the church posed an unreasonable risk of harm; and (2) if it did, whether the harm was open and obvious to Dombrowski such that the Church should not have anticipated her harm. We conclude as a matter of law 3 Dombrowski says that Potts v. Amis, not the Restatement, defines the Church’s duty towards her. 62 Wn.2d 777 , 384 P.2d 825 (1963). In Potts, the defendant landowner struck his social guest in the jaw with a golf club. Id. at 778 . But Potts applies only when the defendant is actively negligent and does not address injuries occurring because of a condition on the land. See id. at 779–86 (reviewing cases to determine what duty a landowner holds if they injure a person on their property through active conduct). Our review of cases applying Potts and the Restatement supports this view. Compare Barker v. Skagit Speedway, Inc., 119 Wn. App. 807 , 809–10, 82 P.3d 244 (2003) (applying Restatement where car at racetrack ran over plaintiff’s foot) and Leek v. Tacoma Baseball Club, 38 Wn.2d 362 , 363, 229 P.2d 329 (1951) (applying Restatement where a falling foul ball at a baseball stadium hit plaintiff) with Laudermilk v. Carpenter, 78 Wn.2d 92 , 96, 457 P.2d 1004 (1969) (citing Potts where defendant operated an incinerator in his backyard that burned the plaintiff). Here, as in Barker and Leek, the land possessor allowed third persons to conduct an activity on their land and through those activities an injury occurred. Unlike in Potts and Laudermilk, no “activities of the defendant are involved.” Potts, 62 Wn.2d at 783 . While Dombrowski claims section 343 does not apply because it refers only to conditions on land and recess is not a condition, as required, we read section 343 in conjunction with section 343A, which refers to conditions and activities. Dombrowski also characterizes the injury-causing occurrence as a child’s “careless ball-throwing” over which the Church was responsible. But Dombrowski cites no law establishing such responsibility. In each of the cases she cites for this proposition, the court addressed a school’s duty to prevent harm to students, not a school’s duty to prevent students from harming third parties. 5 No. 80283-6-I/6 that there was no unreasonable risk of harm. We also conclude that Dombrowski has not raised a genuine issue of material fact as to anticipation. A. Unreasonable Risk of Harm Section 343(a) subjects a land possessor to liability for physical harm caused to invitees by a condition on the land if they know of the condition, or by exercise of reasonable care would discover it, and should realize that it involves an unreasonable risk of harm to their invitees. The Church says that allowing recess for students in an area where people sometimes walk into the church did not present an unreasonable risk of harm. We agree. As in Leek v. Tacoma Baseball Club, nothing in the record4 shows that children playing in the courtyard “cause[s] serious injuries with sufficient frequency to be considered an unreasonable risk.” 38 Wn.2d 362 , 366, 229 P.2d 329 (1951)). Certainly, Dombrowski’s accident alone does not establish such frequency. Granted, Williamson v. Allied Grp., Inc. establishes that earlier incidents are unnecessary to establish an unreasonable risk of harm. 117 Wn. App. 451 , 461–62, 72 P.3d 230 (2003). There, the court ruled that a grassy slope on which the plaintiff had to ascend to reach her apartment created an unreasonable risk of harm. Id. at 462. The court stated, “We do not read Leek as standing for the proposition that a dangerous situation can be proved only if there is evidence of 4 The Pastoral Assistant declared, “I am not aware of any other incidents where parishioners or visitors have been injured by students at recess.” 6 No. 80283-6-I/7 prior mishaps. Common experience indicates that slips will occur when the only entry to a building is an unimproved grassy slope.” Id. at 461–62 (emphasis added). But by Dombrowski’s admission and unlike Williamson, she need not have taken the path through the courtyard where she saw the children playing at recess to reach her book group inside the church. While church staff had encouraged parishioners not to use the main entrance in the winter of 2014, Dombrowski admitted that she could have used the main entrance. Dombrowski cites Laudermilk v. Carpenter for the proposition that “children are heedless, impulsive, and impetuous,” but the case does not establish that children, on their own, necessarily present an unreasonable risk of harm. 78 Wn.2d 92 , 101, 457 P.2d 1004 (1969). Considering these facts, neither earlier incidents nor common experience indicates that recess in the courtyard created an unreasonable risk of harm.5 Thus, we conclude that the trial court properly granted the Church’s motion for summary judgment. 5 Dombrowski asserts that in Leek, a case tried without a jury, the court stated that whether the lack of overhead protection in the baseball stadium involved an unreasonable risk of harm would normally be a jury question, so the trial court here should have allowed a jury to decide the issue. See 38 Wn.2d at 366 (“This would seem to be a jury question, had there been a jury.”). But a court may decide, as a matter of law, whether a condition created an unreasonable risk of harm. Charlton v. Toys “R” Us—Delaware, Inc., 158 Wn. App. 906 , 915, 246 P.3d 199 (2010) (holding as a matter of law that a wet floor did not present an unreasonable risk of harm). 7 No. 80283-6-I/8 B. Anticipation of Harm Even if the recess created an unreasonable risk of harm, the Church should not have reasonably anticipated Dombrowski’s harm despite any known and obvious danger of recess. Under section 343A(1), a land possessor is not liable to their invitees for physical harm caused to them by any activity or condition on the land whose danger is known or obvious to them, unless the possessor should anticipate the harm despite such knowledge or obviousness. Comment e to section 343A states: In the ordinary case, an invitee who enters land is entitled to nothing more than knowledge of the conditions and dangers [they] will encounter if [they come]. If [they know] the actual conditions, and the activities carried on, and the dangers involved in either, [they are] free to make an intelligent choice as to whether the advantage to be gained is sufficient to justify [them] in incurring the risk by entering or remaining on the land. The possessor of the land may reasonably assume that [they] will protect [themselves] by the exercise of ordinary care, or that [they] will voluntarily assume the risk of harm if [they do] not succeed in doing so. Reasonable care on the part of the possessor therefore does not ordinarily require precautions, or even warning, against dangers which are known to the visitor, or so obvious to [them] that [they] may be expected to discover them. Comment f to section 343A further states: Such reason to expect harm to the visitor from known or obvious dangers may arise, for example, where the possessor has reason to expect that the invitee’s attention may be distracted, so that [they] will not discover what is obvious, or will forget what [they have] discovered, or fail to protect [themselves] against it. Such reason may also arise where the possessor has reason to expect that the invitee will proceed to encounter the known or obvious danger because to a reasonable [person] in [their] position the advantages of doing so would outweigh the apparent risk. In such cases the fact that the danger is known, or is obvious, is important in determining whether the invitee is to be charged with contributory negligence, or assumption of risk. . . . It is not, however, conclusive in determining 8 No. 80283-6-I/9 the duty of the possessor, or whether [they have] acted reasonably under the circumstances. Dombrowski relies on Mucsi v. Graoch Assoc. Ltd. P’ship No. 12, 144 Wn.2d 847 , 852–53, 31 P.3d 684 (2001). There, the plaintiff slipped on ice and injured himself after leaving the side exit of his apartment complex’s clubhouse. The plaintiff often used the side exit when leaving the clubhouse and could see the snow- and ice-covered area outside the door before he exited. Id. at 853. In ruling that the plaintiff had presented evidence sufficient for a jury to hear his claim, the court cited section 343A comment f, and reasoned that a landowner has a duty of reasonable care when they should expect invitees will fail to protect themselves for an unreasonable risk of harm. Id. at 860, 863. Notably, it also observed that the defendant had not corrected the condition of ice and snow outside the door after two to three days, suggesting that the defendant had neglected their duty to maintain common areas. Id. at 862. Dickinson v. Tesia, decided on section 343A(1) principles, addresses a situation more similar to the case here. 2 Wn. App. 262 , 263, 467 P.2d 356 (1970). There, the plaintiff paid two dollars to enter a picnic in a park owned by the defendants. Id. at 262–63. One of the plaintiff’s legs was shorter than the other, and he used crutches to walk. Id. at 263. The ground at the park was rough and others at the park had “become somewhat boisterous due to consumption of beer from a keg supplied by [the defendants].” Id. After resting at the park for a short while, the plaintiff decided to return to his car because of these conditions. Id. On his way back, a child or some other person knocked out 9 No. 80283-6-I/10 one of his crutches, causing the plaintiff to fall and injure himself. Id. The plaintiff sued the defendant park owners and the trial court ruled for the defendants on summary judgment. Id. at 262. This court affirmed, reasoning that (1) the defendants had no duty to warn the plaintiff of conditions of which he was aware; (2) in his condition, the plaintiff was the best judge to decide if he was unable to traverse the rough nature of the defendant’s park; and (3) the presence of the children and activities at the park were known and accepted by the plaintiff. Id. at 264. Similar to the plaintiff in Dickinson, Dombrowski saw children at play in the courtyard playground including a boy with a ball, and still chose to traverse it. Under comment e to section 343A, and as in Dickinson, she was free to make an intelligent choice about whether the advantage to be gained by using the courtyard entrance to the church outweighed the risk of traversing the courtyard. Consistent with comment e, the law allowed the Church to reasonably assume that Dombrowski would protect herself by the exercise of ordinary care.6 No evidence supports the notion that under these circumstances, the Church should have anticipated Dombrowski’s injury. Thus, she has not 6 By contrast, in Mucsi, the court’s decision rested on a landowner’s duty to keep common areas free of snow and ice. 144 Wn.2d at 856. It recognizes that, depending on the circumstances, a landowner should reasonably anticipate persons might traverse areas expected to be free of snow and ice. Id. The court reasoned that a plaintiff, in a section 343 claim, must present some evidence that the landowner failed to act reasonably under the circumstances. Id. at 862. The plaintiff there did so by presenting evidence that the landowner waited two to three days after snowfall to clear snow and ice on community walkways, even though they had snow- and ice-melting granules during that time. Id. Dombrowski presents no evidence—other than the fact that recess occurred near the walkway—suggesting that the Church failed to act reasonably under the circumstances. Id. at 856. And unlike accumulated snow and ice, children at play presented no unreasonable risk of harm. 10 No. 80283-6-I/11 presented a genuine issue of material fact as to whether the Church should have anticipated her harm despite the known and obvious nature of recess. We affirm. WE CONCUR: 11

2020-11-30 21:16:48.009105+00

http://www.courts.wa.gov/opinions/pdf/800027.pdf

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON ANTHONY YOUNG and JOSEPH ) No. 80002-7-I MULCAHY, in their individual capacities ) and as a marital community, ) ) Appellants, ) ) DIVISION ONE v. ) ) CITY OF ANACORTES, a Washington ) Municipal Corporation; TODD J. ) UNPUBLISHED OPINION WELLIVER and ERINN D.L., ) WELLIVER, in their individual capacities ) and as a marital community, ) ) Respondents. ) ) MANN, C.J. — Anthony Young and Joseph Mulcahy appeal the trial court’s order granting summary judgment and dismissing their action against the City of Anacortes (City). Young and Mulcahy argue that there are genuine issues of material fact whether the City had a common law duty to maintain a drainage ditch located on its right-of-way, and if not, whether the “special relationship” exception to the public duty doctrine applies. We agree and vacate the order granting summary judgment and remand for further proceedings. Citations and pin cites are based on the Westlaw online version of the cited material. No. 80002-7-I/2 I. FACTS In 1890, the City accepted the plat of the Pleasant Slope Addition. The 1890 plat subdivided property into multiple city blocks and lots, including 80-foot wide public rights of way. One of the right-of-ways was E Avenue. A portion of the 1890 plat was replatted in 2005 as the Plat of Pleasant View. The 2005 plat vacated the east half (40 feet) of E Avenue. The west half of E Avenue remained a public right-of-way. In 2004, Todd and Erinn Welliver (the Wellivers) purchased property immediately west of E Avenue. Young and Mulcahy purchased the property (Young-Mulcahy property) immediately east of E Avenue and east of the Wellivers in 2009. The Young- Mulcahy property includes the vacated, east half of E Avenue. The land slopes generally downhill from the Welliver property to the Young-Mulcahy property. At the time Young and Mulcahy moved in, drainage from the Welliver property was captured by a drainage ditch located on the City-owned portion of E Avenue. The ditch channeled drainage away from the Young and Mulcahy property northward into a native growth protection easement area (NGPE). As they were moving in, Young and Mulcahy observed Todd Welliver, on multiple occasions, using heavy equipment to excavate, move, grade, and fill land in the area between his home site and theirs. Concerned with the land modifications, Young contacted the City’s planning department, including its planning director Ryan Larson, and assistant planning director Don Measamer. In an e-mail exchange beginning September 10, 2009, Young expressed the concerns he and Mulcahy had regarding the grading on E Avenue. On October 1, 2009, Measamer e-mailed Young, informing him that he had spoken with Welliver, who -2- No. 80002-7-I/3 would need to obtain a right-of-way permit for modifications on City property. Measamer stated: I have been in contact by phone with your neighbor, Mr. Todd Welliver, regarding the grading next door and will meet on site with Todd on Friday. Mr. Welliver will need to acquire a right of way permit and provide drainage control per Public Works and Building Department approval. We are not certain what drainage methods will be needed until the site visit and consultation with the Public Works Department. Measamer conducted the site visit and reported that when he arrived at E Avenue, nothing was happening on the property. Based on Young’s request, Measamer asked Welliver to remediate the drainage ditch on E Avenue. Welliver indicated that he did so. Young and Mulcahy contend that Welliver continued his grading activities on his land and within the E Avenue right-of-way between 2011 and 2015. Young and Mulcahy claim that following Welliver’s work, “all the water that previously flowed through the E Avenue drainage ditch and onto the NGPE instead diverted across the E Avenue right-of-way and directly onto our property.” As their issues continued, Young reported that although there were no additional e-mails, there were “a lot of face-to-[face] conversations” where Measamer repeatedly told Young and Mulcahy that “the City would work out a solution that would work for everyone.” In June of 2015, Young and Mulcahy applied for a temporary encroachment permit into E Avenue in order to address their drainage concerns. The Wellivers simultaneously submitted their own permit application. Each application was tentatively approved, but the Wellivers objected to the splitting of E Avenue, citing the replatting of -3- No. 80002-7-I/4 Pleasant Slope and vacatur of half of the former E Avenue to the Young-Mulcahy property. Welliver argued that the earlier vacatur gave Young and Mulcahy half of the right-of-way, so the remainder should be his to develop. After a public hearing, the City ultimately determined that both encroachment applications were inconsistent with the City’s policy regarding right-of-ways, and did not issue permits. Young and Mulcahy assert that the change in flow caused “significant and ongoing damage to our home and property, including land movement, settling in various parts of our home, walls cracking and separating, settling/cracking of our entry patio and walkway, and water collecting in our basement.” A March 23, 2017, City investigation concluded that the damage to the Young-Mulcahy property was a result of subsurface aquifer flow. In May 2018, Young and Mulcahy sued the Wellivers and the City in Skagit County Superior Court. After answering the complaint, the City moved for summary judgment and dismissal, arguing that Young and Mulcahy’s claims were barred by the public duty doctrine. The trial court agreed and dismissed the complaint. The trial court then granted Young and Mulcahy’s motion under CR 54(b) that the judgment against the City was an appealable final order. Young and Mulcahy appeal. 1 II. ANALYSIS A. Standard of Review We review summary judgment decisions de novo. Int’l Marine Underwriters v. ABCD Marine, LLC, 179 Wn.2d 274 , 281, 313 P.3d 395 (2013). “Summary judgment is 1 The underlying lawsuit against the Wellivers was subsequently dismissed pursuant to a settlement agreement. -4- No. 80002-7-I/5 proper only where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.” Int’l Marine Underwriters, 179 Wn.2d at 281. We consider “the facts submitted and all reasonable inferences therefrom in the light most favorable to the nonmoving party.” Chelan County Deputy Sheriffs’ Ass’n v. Chelan County, 109 Wn.2d 282 , 294, 745 P.2d 1 (1987). “Even where the evidentiary facts are undisputed, if reasonable minds could draw different conclusions from those facts, then summary judgment is not proper.” Chelan County, 109 Wn.2d at 295 . B. Did the City have a Duty to Maintain the Drainage Ditch? In a negligence action, the threshold determination is whether the defendant owes a duty of care to the plaintiff. Taylor v. Stevens County, 111 Wn.2d 159 , 163, 759 P.2d 447 (1988). Regardless of the identity of the defendant, a duty must be one owed to the injured plaintiff, not the public in general, to be actionable. Chambers-Castanes v. King County, 100 Wn.2d 275 , 284, 669 P.2d 451 (1983). This principle of negligence law is known as the public duty doctrine. Under this doctrine, no liability may be imposed for a public official’s negligent conduct unless it is shown that the duty breached was owed to the injured person as an individual and was not merely the breach of an obligation owed to the public in general (“a duty to all is a duty to no one”). Osborn v. Mason County, 157 Wn.2d 18 , 27, 134 P.2d 197 (2006). The public duty doctrine, however, is not applicable in all circumstances, such as where the public entity has a common law duty to maintain its own property. Washington courts have long-recognized that when a municipality uses its discretionary power to construct a drainage system, the municipality must exercise reasonable care in maintaining the system. In Ronkosky v. City of Tacoma, 71 Wash. -5- No. 80002-7-I/6 148, 128 P.2 (1912), the City of Tacoma graded a street across from a deep gulch by cribbing and filling the street, and installing a culvert. The gulch traditionally carried large amounts of water during the rainy season. Ronkosky, 71 Wash. at 149. Following the modification of the street, John Hannam constructed a small house, barn, and woodshed a short distance above the street fill. F. W. Ronkosky and his family occupied the house. Ronkosky, 71 Wash. at 149. Over time the culvert, either through decay or neglect, was no longer properly functioning to divert water flow. Ronkosky, 71 Wash. at 149, 150. One night copious rainfall flooded the culvert and the home, leaving barely enough time for Ronkosky and his family to escape. Ronkosky, 71 Wash. at 150. The court held that, while Tacoma had no primary obligation to construct the drainage system, it did have the duty to maintain it once the system was constructed. Ronkosky, 71 Wash. at 153. Similarly, in Howe v. Douglas County, 146 Wn.2d 183 , 186, 43 P.3d 1240 (2002), Douglas County took responsibility for the maintenance of a subdivision’s roads and drainage system. The Howes built a home in the subdivision, which suffered floods partially due to sand that had accumulated in the drainage system. Howe, 146 Wn.2d at 187 . The Howes sued Douglas County for negligent maintenance. The Supreme Court, recognizing that a failure to maintain a drainage system has historically resulted in municipal liability, held that the Howes may pursue their claim of negligent -6- No. 80002-7-I/7 maintenance against the County. Howe, 146 Wn.2d at 192 (citing Sigurdson v. City of Seattle, 48 Wn.2d 155 , 162, 292 P.2d 214 (1956)). 2 Here, Young and Mulcahy presented evidence that there was historically a ditch on E Avenue within the City’s right-of-way and that after the 2005 plat of Pleasant Slope, the ditch carried water north toward the NGPE. Young and Mulcahy also presented evidence that the ditch was subsequently filled and resulted in damage to their property. At oral argument, the City conceded the existence of the ditch, claiming that they were unsure of its origin and purpose. The origin and purpose of the ditch, and whether the City had a duty to maintain it, are issues of material fact and not amenable to summary judgment. C. Is the Special Relationship Exception to the Public Duty Doctrine Applicable? If at trial it is determined that the City did not have a duty to maintain the ditch, then the court must address whether the City is shielded from liability under the public duty doctrine for its failure to require the Wellivers to repair the ditch. Young and Mulcahy argue there is a genuine issue of material fact whether the “special relationship” exception to the public duty doctrine applies. We agree. Again, under the public duty doctrine, a plaintiff cannot recover against a municipal corporation in tort unless the plaintiff can show that the duty breached was owed to an individual and “not merely a general obligation owed to the public.” Babcock v. Mason County Fire Dist. No. 6, 144 Wn.2d 774 , 785, 30 P.3d 1261 (2001). 2In Phillips v. King County, our Supreme Court recognized, in dicta, that situations could arise where a municipality may be liable for a failure to maintain a public drainage system, and the use of county controlled property for the building of part of a drainage system may give rise to liability on the part of a municipality. 136 Wn.2d 946 , 966-69, 968 P.2d 871 (1998). -7- No. 80002-7-I/8 There are four recognized exceptions to the public duty doctrine under which the government acquires a duty of care owed to a particular individual (1) where there is a legislative intent to impose a duty of care, (2) where a “special relationship” exists between plaintiff and the public entity, (3) where the government has engaged in volunteer rescue efforts, or (4) where the government is guilty of a “failure to enforce” a specific statute. Babcock, 144 Wn.2d at 785-86 . A “special relationship” arises when (1) there is privity or direct contact between the public official and the plaintiff, (2) the official, in response to a specific inquiry, provides express assurances, and (3) the plaintiff justifiably relies on the representations of the official. Taylor, 111 Wn.2d at 166 . The creation of a “special relationship” between the plaintiff and the public official gives rise to a duty to use reasonable care when furnishing information. Once the existence of duty is established, the plaintiff may proceed in tort against the local government. Taylor, 111 Wn.2d at 163 . Washington courts recognize that the “special relationship” exception to the public duty doctrine is a question of fact. See, e.g., Beal v. City of Seattle 134 Wn.2d 769 , 786 954 P.2d 237 (1998) (holding that the “special relationship” exception to the public duty doctrine applied when a 911 caller justifiably relied on communication from a public official, and that justifiable reliance is a question of fact generally not amenable to summary judgment). Washington courts also recognize this question of fact in the context of drainage system maintenance. For example, in Lakeview Boulevard Condominium Ass’n v. Apartment Sales Corp., 146 Wn.2d 194 , 196, 43 P.3d 1233 (2002), homeowners sued the City of Seattle -8- No. 80002-7-I/9 for negligence in maintaining storm drains and granting permits. The Supreme Court explained that “alleged negligent permitting alone cannot be the basis of a negligence claim against local government, absent a recognized exception;” the homeowners did not establish that they fell within a recognized exception. Lakeview, 146 Wn.2d at 205. However, the court held that an affidavit from a resident stating she relied on assurances from the city that it would maintain the storm drains was sufficient to defeat a claim for summary judgment. Lakeview, 146 Wn.2d at 206 . Finding that the homeowner fell with the “special relationship” exception, the court affirmed and allowed the homeowner to pursue negligence claims. Lakeview, 146 Wn.2d at 206 . Here, Young and Mulcahy argue that a “special relationship” was created with the City based on the e-mail and subsequent face-to-face interactions with Don Measamer. Young and Mulcahy assert that (1) there was contact with Measamer, (2) he gave express assurances regarding E Avenue when stating that the Wellivers would need a permit, and (3) Young and Mulcahy relied on these assurances. Viewed in a light most favorable to Young and Mulcahy, the e-mail exchanges and face-to-face interactions between Young and Measamer, as well as Young’s declaration that he and Mulcahy relied on these assurances, appears sufficient to create the (1) contact, (2) express assurances, and (3) reliance necessary to fulfill the “special relationship” exception to the public duty doctrine. The accuracy of these claims is an issue of material fact and not amenable to summary judgment. We vacate the order granting summary judgment and remand for further proceedings. -9- No. 80002-7-I/10 WE CONCUR: -10-

2020-11-30 22:00:29.104864+00

http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2020/D11-30/C:19-3110:J:PerCuriam:aut:T:npDp:N:2619959:S:0

NONPRECEDENTIAL DISPOSITION To be cited only in accordance with Fed. R. App. P. 32.1 United States Court of Appeals For the Seventh Circuit Chicago, Illinois 60604 Argued October 6, 2020 Decided November 30, 2020 Before DIANE P. WOOD, Circuit Judge MICHAEL B. BRENNAN, Circuit Judge MICHAEL Y. SCUDDER, Circuit Judge No. 19-3110 HEIDE NOONAN, Appeal from the United States District Plaintiff-Appellant, Court for the Eastern District of Wisconsin. v. No. 18-CV-641 ANDREW M. SAUL, Commissioner of Nancy Joseph, Social Security, Magistrate Judge. Defendant-Appellee. ORDER Heide Noonan applied for disability insurance benefits based on a variety of health problems, including diabetes, neuropathy, lupus, and depression. An administrative law judge denied her application on the ground that Noonan remained able to perform sedentary work with certain limitations. The district court upheld the determination, and Noonan now appeals. Although our review proceeds under the deferential substantial evidence standard, we conclude a remand is warranted to allow the ALJ to more fully consider whether the effects and limitations of Noonan’s neuropathy leave her unable even to perform sedentary work. The ALJ’s prior determination took little to no stock of Noonan’s own account of her No. 19-3110 Page 2 neuropathy-related conditions and that deficiency leaves us with insufficient confidence that the denial of benefits rooted itself in substantial evidence. I Noonan applied for disability insurance benefits in late 2013 based on a litany of ailments, including diabetes, diabetic neuropathy, lupus, and depression. She had worked as a mortgage-loan processor for about five years until her employer eliminated her position in September 2013. Noonan contends she became disabled at approximately that same time. Noonan suffers from type 1 (or insulin-dependent) diabetes and related neuropathy. Diabetic neuropathy is a form of nerve damage caused by diabetes and often manifests itself in pain, especially in the legs and feet. Noonan underwent periods of hospitalization in 2013 and again in 2015 for diabetic ketoacidosis, a life-threatening complication of diabetes that occurs when the body lacks insulin and starts to break down fat, producing ketones that can poison the body. During this time period, her doctors regularly observed her struggling to control her diabetes. Circumstances improved when Noonan adjusted her insulin intake and received more guidance on how better to manage her diabetes. In time Noonan experienced increased nerve pain, especially in her legs and feet, leading her doctors to prescribe Gabapentin to ease the discomfort. Noonan saw a pain-management specialist in late 2016, and her medical records from this general time period record her reporting severe pain in her legs and feet, especially when trying to perform household chores and otherwise go about her daily living. Along the way, in late 2013, Noonan learned she also suffered from lupus. Her doctors put her on Plaquenil, which stabilized her condition. Indeed, by July 2014, her primary care doctor noted that Noonan exhibited “[n]o clinical evidence of [lupus].” Noonan stopped taking Plaquenil in August 2016, when an eye scan showed ocular toxicity, a side effect of the medication. Three months later, however, her doctor noted that the lupus remained stable, with Noonan reporting no further flare-ups of the disease. No. 19-3110 Page 3 Noonan also has experienced mental illness, primarily anxiety and depression, which has inhibited her ability to manage her diabetes. During the relevant period, including twice in 2014 and again starting in April 2016, she received therapy. Upon Noonan’s applying for disability benefits, three state-agency consultants reviewed her medical records and concluded that she could perform light work with additional limitations. First, in May 2014, Dr. Ronald Shaw opined that Noonan could perform light work but limited her to what in the Social Security lexicon is called “frequent fingering.” SSR 85-15, 1985 WL 56857 (Jan. 1, 1985) (defining fingering as “involv[ing] picking, pinching, or otherwise working primarily with the fingers”); see also Selected Characteristics of the Occupations Defined in the Revised Dictionary of Occupational Titles, App. C, Physical Demands at C–3 (1993) (defining “frequently” as an “[a]ctivity or condition [that] exists from 1/3 to 2/3 of the time.”). That same month, Dr. Beth Jennings, a state-agency psychologist, opined that Noonan’s depression was stable with medication and not a severe mental impairment. A third state-agency physician, Dr. Mina Khorshidi, reviewed Noonan’s medical records in January 2015 and concurred that Noonan could perform light work with only frequent fingering. After the agency denied Noonan’s application, a hearing ensued before an ALJ in January 2017. Noonan testified and focused on how the pain resulting from her neuropathy affects her daily activities. She explained that the pain in her feet, legs, hips, shoulders, and arms affects her ability to walk, sit, and even get out of bed, adding that she spends four days a week lying down almost all day. Noonan stated that she can dress herself and, with the assistance of a chair, shower on her own. She testified that she lives with her husband and mother-in-law and relies on them to do most of the household chores, including cooking. Noonan further explained that her carpal tunnel syndrome prevents her from grabbing and gripping many things. The ALJ also received testimony from a vocational expert. The VE addressed whether jobs existed for someone like Noonan who could perform light or sedentary work with certain accompanying limitations. The limitations included performing only simple, routine tasks and making simple decisions, a workplace with few changes and no fast-paced productivity requirements, and restrictions on climbing and using her fingers. Although Noonan’s past work as a mortgage-loan processor is considered sedentary work, the VE opined that someone requiring additional postural and mental limitations would not be able to perform this past work. But from there the VE stated that a person restricted to sedentary work with the additional functional limitations could work as an order clerk, a final assembler, or a check weigher. When asked if an No. 19-3110 Page 4 individual who missed more than two days of work unscheduled per month could perform any of those same jobs (or others), the VE answered no. Applying the agency’s familiar five-step analysis, see 20 C.F.R. § 404.1520 (a), the ALJ found that Noonan was not disabled. The ALJ determined that Noonan had not engaged in substantial gainful activity since the alleged onset date in September 2013 (step one) and that she suffers from the severe impairments of degenerative disc disease, lumbar radiculopathy, lupus, osteoarthritis, depression, diabetes mellitus, hypertension, and bilateral carpal tunnel syndrome (step two). The ALJ then added that Noonan did not have an impairment or combination of impairments that met or equaled a listed impairment (step three). Next, the ALJ found that Noonan had the residual functional capacity to perform sedentary work, see 20 C.F.R. § 404.1567 (a), with additional postural limitations, including no more than frequent fingering and avoiding work requiring climbing. From there the ALJ further limited Noonan to simple, routine tasks in a workplace with minimal changes and free of fast-paced requirements. Based on this RFC, the ALJ determined that Noonan, while not able to work as she had in the past as a mortgage-loan processor (step four), could work in the positions identified by the VE at the hearing (step five). In landing on this RFC determination, the ALJ seemed to place near exclusive reliance on Noonan’s medical records. Noonan’s “statements concerning the intensity, persistence, and limiting effects of [her reported] symptoms,” the ALJ reasoned, “are not entirely consistent with the medical evidence and other evidence in the record” and “d[o] not support the extent of her allegations.” The ALJ’s ensuing analysis rooted itself primarily in observations of Noonan’s lupus stabilizing during the relevant period. The ALJ likewise underscored that the medical records showed that Noonan had received successful treatment for her mental impairments. Noteworthy too is the ALJ’s disagreement with the state-agency consultants’ opinions that Noonan could perform light work. The ALJ concluded that the medical record suggested otherwise and therefore, in determining the RFC, restricted Noonan only to sedentary work in jobs limited to frequent bilateral fingering and defined by simple, routine tasks, no fast-paced productivity requirements, and few workplace changes. After the Appeals Council denied review, Noonan sought review in the district court, which affirmed the ALJ’s denial of benefits. This appeal followed. No. 19-3110 Page 5 II Our review concentrates on whether substantial evidence supports the ALJ’s decision. See Biestek v. Berryhill, 139 S. Ct. 1148 , 1152 (2009) (citing 42 U.S.C. § 405 (g)). While the standard is deferential, we will not “scour the record for supportive evidence.” Moon v. Colvin, 763 F.3d 718 , 721 (7th Cir. 2014). Rather, it is up to the ALJ to articulate the relevant evidence and explain how that evidence supports her ultimate determination. Id. Part of doing so is accounting for an applicant’s own account of her limitations or, at the very least, explaining why the applicant’s description of her limitations is not reliable or accurate. See Murphy v. Colvin, 759 F.3d 811 , 817 (7th Cir. 2014); see also Steele v. Barnhart, 290 F.3d 936 , 941–42 (7th Cir. 2002) (explaining an ALJ must provide sufficient reasons for discounting applicant’s testimony about limitations). We have no reservation with the ALJ’s consideration of Noonan’s lupus or mental impairments. The ALJ’s analysis on those fronts was well-rooted in the record, soundly reasoned, and supported by substantial evidence. Where we have reservation, however, is with the ALJ’s sparing consideration of Noonan’s neuropathy. The ALJ seemed to focus the lion’s share of her analysis on lupus. Even more, the ALJ seemed to discredit, or at the very least severely discount, Noonan’s account of the limitations caused by the neuropathy—most specifically, her difficulty standing and even sitting for meaningful periods of time. The ALJ’s failure to expressly address these limitations concerns us because restricting Noonan to sedentary work may be insufficient. The agency’s regulations define “sedentary work” as work that involves “sitting” and “occasionally” requires “walking and standing.” 20 C.F.R. § 404.1567 (a). Agency guidance further defines “occasionally” in this context as “occurring from very little up to one- third of the time, and would generally total no more than about 2 hours of an 8-hour workday.” SSR 96-9p, 1996 WL 347185 (July 2, 1996). On the record before us, we cannot conclude that Noonan is able to work a job that requires standing or walking for up to two hours during a single work shift. Noonan’s own testimony strongly suggests she cannot, while the medical record to our eye is less than clear on the point. Perhaps some evidence somewhere in the record addresses the question, yet it is not our responsibility to “scour the record for supporting evidence.” Moon, 763 F.3d at 721. That responsibility falls to the ALJ in the first instance, and the analysis on this front fell short. All of this leads us to conclude the No. 19-3110 Page 6 ALJ’s denial of benefits is not supported by substantial evidence. The proper course in this circumstance is to remand to allow the ALJ to revisit the RFC and, more specifically, whether Noonan can work a sedentary job that nonetheless may put her on her feet for up to two hours a day. For these reasons, we VACATE the agency decision and REMAND for further proceedings consistent with this Order.

2020-11-30 21:00:33.587527+00

https://cdn.ca9.uscourts.gov/datastore/memoranda/2020/11/30/20-15756.pdf

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS NOV 30 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT INDEPENDENT TECHNOLOGIES, LLC, No. 20-15756 DBA Anova, D.C. No. Plaintiff-Appellee, 3:20-cv-00072-RCJ-CLB v. MEMORANDUM* OTODATA WIRELESS NETWORK, INC.; et al., Defendants-Appellants. Appeal from the United States District Court for the District of Nevada Robert Clive Jones, District Judge, Presiding Argued and Submitted September 15, 2020 San Francisco, California Before: SCHROEDER, W. FLETCHER, and VANDYKE, Circuit Judges. This is an appeal from the grant of a preliminary injunction. We have jurisdiction under 28 U.S.C. § 1292 . We “will reverse a preliminary injunction only where the district court ‘abused its discretion or based its decision on an erroneous legal standard or on clearly erroneous findings of fact.’” MAI Sys. Corp. v. Peak * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Comput., Inc., 991 F.2d 511 , 516 (9th Cir. 1993) (citation omitted). “[W]e ‘determine de novo whether the trial court identified the correct legal rule’” and whether the rule’s application to the facts “was … without support in inferences that may be drawn from the facts in the record.” Pimentel v. Dreyfus, 670 F.3d 1096 , 1105 (9th Cir. 2012) (citation omitted). The parties dispute whether the district court’s “use” and “solicitation” preliminary injunctions were warranted and “narrowly tailored.” Price v. City of Stockton, 390 F.3d 1105 , 1117 (9th Cir. 2004).1 To warrant a preliminary injunction, Anova must show a likelihood of success on the merits against Otodata, a likelihood of irreparable harm, that the balance of hardships tips in Anova’s favor, and that it would be in the public’s interest to issue the injunction. Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7 , 20 (2008). I. “Use” Prohibition A. Success on the Merits & Irreparable Harm For Anova to succeed on its claims for misappropriation of trade secrets under the federal Defense of Trade Secrets Act (DTSA) and the Nevada Uniform Trade Secrets Act (NUTSA), it must show Defendants used or disclosed its trade secrets in contravention of a “duty not to disclose.” Kaldi v. Farmers Ins. Exch., 21 P.3d 16 , 23 (Nev. 2001) (citation omitted). Anova provided sufficient evidence 1 Because the parties are familiar with the facts, we discuss them only as necessary to resolve the issues presented in this appeal. 2 demonstrating Defendants Steven and Brian Rechenmacher2 used and disclosed Anova’s trade secrets to its competitor Otodata in contravention of their confidentiality agreements. Steven sent emails disclosing Anova trade secret information to Otodata and encouraged Otodata to use it. Anova produced emails showing that after this disclosure the information was likely used in marketing pitches to win customers away from Anova to Otodata.3 The district court did not abuse its discretion in finding Defendants have a high likelihood of success on the merits of its claims. “Where a party can show a strong chance of success on the merits, he need only show a possibility of irreparable harm.” MAI Sys. Corp., 991 F.2d at 517 (citation and alterations omitted). Because Anova provided evidence casting doubt on Defendants’ protestations that everything was deleted, the district court did not abuse its discretion in concluding there was at least a “possibility of irreparable harm” to justify the “use” prohibition in the preliminary injunction. Id.4 2 Brian claimed he did not communicate with Otodata prior to leaving Anova. Although Brian may not have spoken directly to Otodata, emails sent during that time period demonstrate Steven acted as Brian’s emissary and the injunction thus reasonably includes Brian. 3 Although the emails demonstrating this use constitute hearsay, “[a] district court may … consider hearsay in deciding whether to issue a preliminary injunction.” Johnson v. Couturier, 572 F.3d 1067 , 1083 (9th Cir. 2009). 4 We do not need to reach the merits of the spoliation discovery sanction to find that the facts demonstrate Anova is at risk of irreparable harm in the disclosure and use of its trade secrets by a competitor. 3  B. Balance of Equities & Public Interest The balance of equities tips sharply in Anova’s favor under the “use” prohibition: if Defendants still retain paper or digital copies of Anova trade secrets, the “use” prohibition protects Anova from its trade secrets being used against it and retains its ability to compete. A “use” prohibition is warranted under the balance of equities. But Defendants reasonably argue that the prohibition against use of “proprietary” information could practically include Anova “advertising material and its website”—which is arguably “proprietary,” but not a trade secret. The “use” injunction should thus be narrowly tailored to specify that it prohibits the use of Anova’s “nonpublic” proprietary information to enable Otodata to continue legitimately competing with Anova using publicly available information. See InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653 (9th Cir. 2020). II. Solicitation Prohibition A. Balance of Equities & Public Interest The “solicitation” prohibition differs from the “use” prohibition under the balance of the equities. Despite the district court’s initial stated desire that the solicitation restriction would not “cover[] existing clients of Otodata,” the prohibition’s resulting customer list both includes current Otodata customers, and customers the Rechenmachers aver they never serviced, tipping the balance of equities sharply in favor of the Defendants. The district court acknowledged that 4 “Defendants’ solicitation of th[o]se clients would not, in and of itself, infringe on [Anova’s] protected trade secret rights; however, solicitation of th[o]se clients utilizing [Anova’s] trade secrets would.” As ordered, the “solicitation” prohibition is overinclusive as to companies that are not implicated in Defendants’ actions and acts as an anticompetitive punishment.5 The injunction against solicitation should be narrowed to enjoin the use of any trade secret information in the solicitation of existing Anova customers. CONCLUSION The “use” prohibition, once amended to specify that it applies to only “nonpublic” proprietary information, validly ensures that any Anova trade secrets still in Defendants’ possession may not be used on penalty of further sanctions from the district court. But the overbroad “solicitation” prohibition as currently written restricts Otodata’s legitimate business activity. Accordingly, the district court on remand is directed to narrow the “solicitation” prohibition consistent with the above discussion. REMANDED with instructions to amend the preliminary injunctions consistent with this disposition. 5 Anova points to Lamb-Weston, Inc. v. McCain Foods, Ltd., arguing that the “solicitation” provision merely “eliminate[s] any unfair head start the defendant[s] may have gained.” 941 F.2d 970 , 974 (9th Cir. 1991). But the injunction in Lamb-Weston was narrowly tailored to prevent McCain Foods from selling a product worldwide that it was already prohibited from lawfully selling, placing McCain Foods in precisely the place it would have been absent its theft of Lamb- Weston’s trade secrets. Id. at 973–74. Lamb-Weston does not apply here, where the district court admits the “solicitation” provision “includes … preexisting customers,” such that it prevents Otodata from being in the same competitive position it was prior to hiring the Rechenmachers. 5