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2020-11-30 22:01:44.062826+00

https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2020cv1108-44-0

In the United States Court of Federal Claims Nos. 20-1108C and 20-1290C (Filed: November 30, 2020) ) THE TOLLIVER GROUP, INC., ) Solicitation cancellation; Small ) Business Act; Rule of Two; set-aside; and ) withdrawal; Federal Supply Schedule PEOPLE, TECHNOLOGY AND ) (FSS); multiple award contract; IDIQ; PROCESSES, LLC, ) RAMCOR; SRA Int’l; Federal ) Acquisition Streamlining Act (FASA); Plaintiffs, ) Administrative Dispute Resolution v. ) Act of 1996 (ADRA); Competition in ) Contracting Act (CICA); GAO protest THE UNITED STATES, ) jurisdiction; Tucker Act jurisdiction; ) FAR Part 8; FAR Part 14; FAR Part 15; Defendant. ) FAR Part 19. ) Jon D. Levin, Maynard, Cooper & Gale, PC, Huntsville, AL, for Plaintiff, The Tolliver Group, Inc. With him on the briefs were W. Brad English, Emily J. Chancey, and Michael W. Rich. Craig A. Holman, Arnold & Porter Kaye Scholer LLP, Washington, DC, for Plaintiff, People, Technology and Processes, LLC. With him on the briefs was Nathaniel E. Castellano. David R. Pehlke, United States Department of Justice, Civil Division, Washington, DC, for Defendant. With him on the briefs were Jeffrey Bossert Clark, Acting Assistant Attorney General, Civil Division, Robert E. Kirschman, Jr., Director, and Douglas K. Mickle, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC. OPINION AND ORDER SOLOMSON, Judge. This case presents the question of whether, or under what circumstances, an agency – in this case, the Department of the Army (“Army” or the “agency”) – may cancel a Federal Acquisition Regulation (“FAR”) Part 8 procurement for the express purpose of moving it from a service disabled veteran-owned small businesses (“SDVOSB”) set-aside under a General Service Administration (“GSA”) Federal Supply Schedule (“FSS”) to a multiple award indefinite quantity indefinite delivery 1 (“MAIDIQ”) vehicle, a contract that the Plaintiffs in this case do not hold. Additionally, the Court must address the source, if any, of this Court’s jurisdiction to decide complaints challenging an agency’s cancellation of a FAR Part 8 procurement. Plaintiffs, The Tolliver Group, Inc. (“TTGI” or “Tolliver”), and People, Technology and Processes, LLC (“PTP”), claim that the agency’s decision to cancel two GSA FSS support staffing solicitations fails the Administrative Procedure Act (“APA”) standard of review applicable in actions brought pursuant to 28 U.S.C. § 1491 (b)(1), which requires that an agency action must not be arbitrary, capricious, or otherwise contrary to law. Plaintiffs allege the agency’s cancellation decisions fail the APA standard of review based on the extreme brevity of the analysis underlying the agency’s decision and, in Plaintiff’s view, the agency’s ipse dixit conclusions. More significantly, Plaintiffs assert that the agency’s decision and supporting rationale – namely, to move the solicitations at issue to a recently awarded MAIDIQ – violates FAR 19.502-2(b), commonly known as the “Rule of Two.” Plaintiffs seek permanent injunctive relief, including an order preventing the Army from cancelling the set-aside solicitations and resoliciting the work under the MAIDIQ until the agency complies with the Rule of Two and other relevant regulations. Defendant, the United States, counters that the agency acted reasonably under the APA review standard, or, in the alternative, because the agency’s power to cancel a FAR Part 8 solicitation is virtually plenary, the decision should be reviewed only for “bad faith,” which, the government claims is unsupported based on the record. The government further contends that Plaintiffs’ Rule of Two claim is foreclosed by the Federal Acquisition Streamlining Act (“FASA”) task order protest bar and, that on the merits, an agency is not required to perform a Rule of Two analysis before soliciting work under an existing MAIDIQ. For the reasons explained below, the Court holds: (1) in the context of the facts of this case, this Court has jurisdiction based upon an “alleged violation of statute or regulation in connection with a procurement or a proposed procurement.” 28 U.S.C. § 1491 (b)(1); (2) the FASA task order bar does not pose a jurisdictional hurdle to Plaintiffs’ respective causes of action, including the Rule of Two arguments; and (3) pursuant to the APA review standard, which applies here, the agency’s decision is inadequate, both in terms of the dearth of its analysis and because the agency has not complied with the FAR’s Rule of Two and other provisions of law. Consequently, the Court holds that Plaintiffs are entitled to the equitable relief that they seek. 2 I. Factual and Procedural Background 1 TTGI and PTP are both Florida-based SDVOSBs which provide, among other things, staffing and technical support services. ECF 21 (“TTGI Am. Compl.”) at ¶ 5; People, Technology and Processes, LLC, v. United States, Fed. Cl. No. 20-1290, ECF No. 1 (“PTP Compl.”) at ¶¶ 15–17. The Army maintains the Fires Center of Excellence (“FCoE”), 2 a field artillery school located at Fort Sill, Oklahoma, that “trains soldiers, officers, and marines in tactics, techniques, and procedures for the use of fire support systems in combat.” PTP Compl. at ¶ 16. From 2010 until 2016, the Army had utilized a long-term omnibus multiple award IDIQ (“OMNIBUS MAIDIQ”) contract to procure training and instructor services at Fort Sill. ECF No. 25 (“Administrative Record” or “AR”) at 617–20 (AR 613–16). 3 Following the expiration of those contracts, the Army utilized a series of short-term contracts to procure those services. Id. at 617 (AR 613). This case arises out of the Army’s issuance of two solicitations in early 2020 — the 13F and Joint Fires Observer Course (“JFOC”) Solicitations — for procuring training instructors for fire support specialists at Fort Sill, awarding contracts pursuant to those solicitations, and subsequently cancelling both the contracts and the solicitations, the latter for the purpose of transferring their scopes of work to an existing MAIDIQ. This section summarizes this matter’s factual background and procedural history. A. The 13F And JFOC Solicitations And Award Of The Contracts On April 3, 2020, the Army’s Mission and Installation Contracting Command (“MICC”) 4 at Fort Sill issued Solicitation No. W9124L-20-R-0016 (the “13F Solicitation”) pursuant to the GSA Multiple Award Schedule (“MAS”) 5 as a 100% SDVOSB set-aside using primarily the procedures outlined in FAR 8.4 and incorporating certain FAR Part 15 provisions. ECF No. 25 at 5–7, 346 (AR 1–3, 342). Specifically, the 13F Solicitation sought to procure “20 fully qualified personnel to instruct 13F [Advanced Individual 1 See, infra, Section III.A. 2 See Fort Sill Fire Center of Excellence, Fort Sill Values, https://sill-www.army.mil/index.html (last visited Nov. 11, 2020). 3Throughout this opinion, the dual citations to the Administrative Record account for discrepancy between the page number indicated in the Court’s CM/ECF stamp on the PDF document and the AR page cite. 4The MICC “provides contracting support for Soldiers across Army commands, installation and activities” and is “responsible for contracting goods and services in support of Soldiers as well as readying trained contracting units for the operating force and contingency environment when called upon.” See https://www.army.mil/micc#org-locations (last visited Nov. 15, 2020). 5GSA Schedules are referred to as a Multiple Award Schedules (“MAS”) and Federal Supply Schedules (“FSS”). See https://www.gsa.gov/buying-selling/purchasing-programs/gsa- schedules (last visited Nov. 25, 2020); see also FAR Part 8. 3 Training] courses” regarding “[p]lanning and coordinating fire support for the maneuver commander, locate and engage targets utilizing calls for indirect fire to mortars, field artillery and naval surface fire support assets and battlefield information reporting.” Id. at 40, 44, 83 (AR 36, 40, 79). This solicitation contemplated the award of a contract with a “twelve (12) month base period [of performance] to include a 90 day [sic] phase-in period, followed by one (1), one-year option period.” Id. at 40 (AR 36). On April 6, 2020, the MICC separately issued Solicitation No. W9124L-20-R-0020 (the “JFOC Solicitation”), pursuant to the GSA MAS, also as a 100% SDVOSB set-aside. Id. at 386–88 (AR 382–384). Specifically, the JFOC Solicitation sought to procure “14 qualified personnel” to provide “JFOC instruction to multi-service and coalition students attending Field Artillery Basic Officer Leader Course.” Id. at 428–29 (AR 424– 25). This solicitation contemplated the award of a contract with a “twelve (12) month base period [of performance] to include a 90 day [sic] phase-in period, followed by one (1), one-year option period.” Id. at 428 (AR 424). In sum, both the 13F and JFOC Solicitations contemplated relatively short-term contracts that the agency designated as 100% SDVOSB set-asides. 6 Several eligible small businesses submitted timely proposals under both solicitations, including TTGI and PTP, the latter which was the incumbent provider of these services at Fort Sill. TTGI Am. Compl. at ¶ 14; PTP Compl. at ¶¶ 26, 34. On April 30, 2020, the agency awarded the 13F contract to TTGI. TTGI Am. Compl. at ¶ 16; ECF No. 25 at 244–49 (AR 240–45). On May 18, 2020, the agency awarded the JFOC contract to Navigation Development Group, Inc. (“NDGI”), another SDVOSB. Id. at 565, 576 (AR 561, 572). B. Bid Protests And Corrective Actions 1. PTP’s 13F GAO Protest 7 On July 17, 2020, PTP filed a post-award bid protest with GAO, challenging the 6The Veterans Benefit Act of 2003 (“the Act”), amending the Small Business Act, created the SDVOSB program to facilitate the participation of service-disabled veteran-owned small businesses in federal contracting. Pub. L No. 108-183, 117 Stat. 2651 . The Act contemplates the use of “set asides,” which permits federal agencies to limit certain procurements for exclusive competition among SDVOSBs. See 15 U.S.C. § 657f. This program is implemented via FAR provisions and Small Business Administration (“SBA”) regulations. See FAR 6.206, 19.1401– 19.1408; 13 C.F.R. §§ 125.11 –125.33. 7 On May 8, 2020, PTP filed its first post-award protest before GAO, alleging that the agency did not reasonably evaluate its price proposal and that certain provisions in the 13F Solicitation were ambiguous. See ECF No. 25 at 327, 343 (AR 323, 339). The Army took corrective action on May 21, 2020 and, after re-evaluating the relevant proposals, on July 9, 2020, once again, awarded the task order to TTGI. Id. at 342–57 (AR 338–53). For purposes of the pending motions, however, the particulars of PTP’s first GAO protest is not relevant. 4 agency’s award of the 13F contract to TTGI. ECF No. 25 at 358–81 (AR 354–77). PTP alleged, among other things, that the method the agency employed to evaluate PTP’s professional compensation, in comparison to that of TTGI, was improper and that, in awarding the task order to TTGI, the agency had “departed from the Solicitation's required evaluation process, held PTP and Tolliver to unequal standards, and conducted a[] flawed price realism evaluation.” Id. at 359 (AR 355). On July 29, 2020, Contracting Officer (“CO”) Pauline K. Abraham issued a Notice of Corrective Action. Id. at 382 (AR 378). CO Abraham acknowledged that “[t]he Army believes that taking corrective action would better serve the procurement process” and identified the measures that the agency would take, as follows: a. Cancel the task order award to The Tolliver Group, Inc. b. Re-evaluate the requirement and acquisition strategy to ensure that it accurately reflects the Army’s current need. c. Once the reevaluation is complete, the solicitation will either be cancelled or amended. d. If the solicitation is amended, the Army will evaluate revised proposals, conduct discussions if necessary, and make a new award decision. Id. (emphasis added). While the Notice of Corrective Action did not elaborate on what considerations the agency would weigh as part of its re-evaluation, CO Abraham, in an internal agency memorandum (dated July 29, 2020), further explained that the rationale behind the agency’s “reevaluat[ing] its acquisition strategy” was that “[o]n 21 July 2020, MICC-Fort Eustis awarded the Training Management Support (‘TMS’) Multiple Award Indefinite Delivery Indefinite Quantity contract, which may provide a potentially better procurement vehicle for this requirement than the [current GSA MAS].” Id. at 383 (AR 379) (emphasis added). Following the Army’s July 29, 2020 Notice of Corrective Action, the GAO dismissed PTP’s bid protest “as academic.” Id. at 385 (AR 381). 2. PTP’s JFOC GAO Protest A similar situation unfolded with the JFOC contract. On May 28, 2020, PTP filed a post-award bid protest before the GAO, challenging the agency’s award of the JFOC contract to NDGI. ECF No. 25 at 581 (AR 577). PTP alleged that the agency’s price evaluation did not comply with the solicitation, that the agency had conducted an improper best value decision, and that the agency had evaluated PTP’s past performance in an unreasonable manner. Id. at 582–602 (AR 578–98). 5  On July 29, 2020, CO Lisa Slagle 8 issued a Notice of Corrective Action that was similar to the one CO Abraham had issued in response to PTP’s 13F bid protest. Id. at 612 (AR 608). CO Slagle’s Notice of Corrective Action outlined the same steps that the agency intended to take in response to the JFOC bid protest as the agency did for the 13F bid protest: cancel the contract award, re-evaluate the Army’s needs, and either amend the solicitation or cancel it. Id. CO Slagle also authored an internal agency memorandum (dated July 29, 2020), which similarly explained that the agency’s re- evaluation of its acquisition strategy was based on the availability of the recently awarded TMS MAIDIQ. Id. at 613–14 (AR 609–10). The GAO also dismissed PTP’s bid protest of the JFOC award as “academic.” Id. at 615–16 (AR 611–12). C. The TMS MAIDIQ As noted above, the Army previously had procured training and instructor services using the OMNIBUS MAIDIQ, which expired in 2016, thus necessitating the use of the GSA MAS contracts. ECF No. 25 at 617–20 (AR 613–16). On October 31, 2017, the Army approved the creation of a new contractual vehicle – the TMS MAIDIQ – for the purpose of procuring these services. Id. at 618 (AR 614). While the Army initially intended the TMS MAIDIQ to be a small business set-aside, the Army determined, after conducting market research, that – given the breadth of the MAIDIQ’s anticipated scope of work – none of the small business proposals could meet the requirements; the set- aside plan for the TMS MAIDIQ thus was abandoned in coordination with the SBA. Id. at 618 , 1194–1212 (AR 614, 1190–1208). On September 13, 2018, the Army issued the TMS MAIDIQ Solicitation as a full and open competition. Id. at 618, 1207 (AR 614, 1203). After numerous delays in the evaluation process, the agency, on July 21, 2020, awarded TMS MAIDIQ contracts to five companies, all of which were large businesses. Id.; ECF No. 21 at ¶ 26. Plaintiffs in this case do not hold a TMS MAIDIQ contract. D. The Army’s Cancellation Of The 13F And JFOC Contracts On August 10, 2020, CO Abraham – presumably as part of the agency’s correction action processes – authored an internal agency Memorandum For Record (the “August 10 MFR”), “[t]he purpose” of which was “to capture the background for the recently award Training Management Support (TMS) Multiple Award Indefinite Delivery Indefinite Quantity Contract awarded by MICC-Fort Eustis.” ECF No. 25 at 617 (AR 613); see generally ECF No. 25 at 617–20 (AR 613–16). In her four-page memorandum, CO Abraham detailed the history of the 13F and JFOC Solicitations, as well as the TMS MAIDIQ, and in the last paragraph concluded: Based upon the above information, I believe the Government’s best interests can be met by competing the JFO, 13F and KMS 8Apparently, CO Slagle retired, two days later, on July 31, 2020, and was replaced by another as the cognizant contracting officer for the JFOC procurement. ECF No. 40 at 5. 6  requirements under the MICC-Fort Eustis recently awarded TMS MAIDIQ. Both time and money can be saved by the Government in pursuit of this avenue. Time and money are expended on soliciting and awarding interim short term contract actions to support on-going requirements. Contract periods can be adjusted to support a Base and Four Option periods on most requirements thus saving manpower and costs tied to phase-in and certification of new contractor employees. Longer periods of performance also support the Government’s ability to successfully recruit and retain qualified personnel on existing requirements, thereby ensuring continuity of the training mission. Id. at 620 (AR 616) (emphasis added). Her memorandum also referenced 11 enclosures that further detailed the development and scope of the TMS MAIDIQ, but that did not otherwise address, in any way, the corrective action or any cancellation decisions. Id. at 621–862 (AR 617–858). 9 The August 10 MFR does not itself purport to be a solicitation cancellation decision, nor is it a recommendation to another agency official. E. Procedural History On August 31, 2020, TTGI filed its initial complaint against the United States, in this Court. See ECF No. 1. On September 3, 2020, PTP filed an Unopposed Motion to Intervene, pursuant to Rule 24 of the Rules of the United States Court of Federal Claims (“RCFC”), which the Court granted. Minute Order (Sep. 3, 2020). On September 4, 2020, TTGI filed an amended complaint. TTGI Am. Compl. at 1. 9 Subsequently, on August 21, 2020 – presumably based on her August 10 MFR – CO Abraham authored an additional internal agency memorandum, documenting that “a reevaluation of the acquisition strategy has resulted in the decision to solicit [the 13F Solicitation] requirement under the recently awarded [TMS] Contract awarded by the [MICC] Fort Eustis” as “[t]he requirements addressed by this specific task order were included within the scope of the TMS and support the long term, continuous service need of Fort Sill.” Id. at 1235 (AR 1231). That same day, the Army notified PTP and TTGI that “after thoughtful review, the decision has been made to utilize [the TMS MAIDIQ] contract to support [the 13F Solicitation] requirement.” Id. at 1236–37 (AR 1232–33) (August 21, 2020 letter to PTP); ECF No. 1 Appendix A (August 21, 2020 letter to TTGI). Regarding the JFOC Solicitation, however, the Administrative Record does not appear to contain any materials documenting the agency’s final decision to utilize the TMS MAIDIQ instead of the JFOC Solicitation (i.e., subsequent to the August 10 MFR). The Administrative Record also does not appear to contain any actual cancellation of the 13F or JFOC Solicitations. Nevertheless, the parties do not dispute – and the Court agrees – that, as a practical matter, the agency’s decision to abandon the 13F and JFOC Solicitations constitutes a final agency decision that is ripe for review. 7  In the amended complaint, TTGI maintains that the Army’s decision to cancel the 13F Solicitation was not rationally related to the “alleged procurement defect” which had been raised in PTP’s GAO protest and was instead a “decision solely because [the Agency] likes the New Ft. Sill IDIQ better than the GSA schedule contract it used originally.” TTGI Am. Compl. at ¶¶ 30, 33. Moreover, TTGI contends that by “mov[ing] the unchanged requirements to the New Ft. Sill IDIQ, where only large businesses are eligible for award” the Army violated the “Rule of Two.” Id. at ¶¶ 36–38. Accordingly, TTGI asks that this Court “permanently enjoin the Agency proceeding with its corrective action as implemented.” Id. at 10–11. Although PTP initially entered this case as an intervenor, PTP sought leave to file a separate complaint and requested that its new case be consolidated with TTGI’s case. ECF No. 26. On September 29, 2020, the Court granted PTP’s motion to file its own complaint. ECF No. 28. 10 PTP’s complaint advances similar claims to those of TTGI. Specifically, PTP alleges that the Army’s decision to cancel the 13F and JFOC Solicitations was arbitrary and capricious because “there is no documented cancelation decision for either procurement. And, to the extent there are any record materials that shed light on the Agency’s decision, the record materials do not justify cancellation.” PTP Compl. at ¶¶ 5, 45–48. Further, PTP contends that, by cancelling the 13F and JFOC Solicitations for the purpose of reissuing the requirements using the TMS MAIDIQ, the Army violated the Rule of Two. Id. at ¶¶ 87–90, 104–08. Accordingly, PTP seeks injunctive relief, ordering the Army to refrain from cancelling (or to reinstate) the 13F or JFOC Solicitations and from resoliciting those requirements “absent Agency compliance with the Rule of Two and all other applicable regulations.” Id. at ¶¶ 66, 78, 95, 111 . On September 18, 2020, the government filed the Administrative Record. ECF No. 25. On September 5, 2020, TTGI and PTP filed motions for judgment on the Administrative Record (“MJAR”) and the government filed a cross-motion for judgment on the Administrative Record. ECF No. 29-1 (“PTP MJAR”); ECF No. 30 (“Def. MJAR”); ECF No 31 (“TTGI MJAR”). On October 12, 2020, the parties filed their respective response briefs. ECF No. 32 (“PTP Resp.”); ECF No. 33 (Def. Resp.”); ECF No. 34 (“TTGI Resp.”). On October 16, 2020, the Court held oral argument. ECF No. 35. Following oral argument, the Court ordered the parties to file supplemental briefs addressing a variety of specific issues that had not been covered in the parties’ briefs or at oral argument. ECF No. 39. In particular, the Court ordered supplemental briefing for the parties to address several issues, including the application of 10 U.S.C. § 2305 (b)(2) to the agency’s cancelation decision. ECF No. 39; see 10 U.S.C. § 2305 (b)(2) (“[A] solicitation may be 10The caption in this case has been revised to reflect PTP’s position as a plaintiff only, given the nature of PTP’s claims in its complaint and the arguments in PTP’s motion for judgment on the administration record. 8 rejected if the head of the agency determines that such action is in the public interest.”). On October 28, 2020, the government filed its supplemental brief, ECF No. 40 (“Def. Supp. Br.”), and, on November 2, 2020, both PTP and Tolliver filed their respective supplemental briefs. ECF No. 41 (“PTP Supp. Br.”); ECF No. 42 (“TTGI Supp. Br.”). II. Jurisdiction Both Plaintiffs seek relief pursuant to 28 U.S.C. § 1491 (b)(1). TTGI Am. Compl. at ¶ 2; PTP Compl. at ¶ 18. In that regard, the Tucker Act, as amended by the Administrative Dispute Resolution Act of 1996 (“ADRA”), Pub. L. No. 104-320, 110 Stat. 3870 , provides this Court with “jurisdiction to render judgment on an action by an interested party objecting [1] to a solicitation by a Federal agency for bids or proposals for a proposed contract or [2] to a proposed award or [3] the award of a contract or [4] any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.” 28 U.S.C. § 1491 (b)(1) (emphasis and alterations added). 11 The government concedes that this “Court’s jurisdiction extends to an agency’s decision to cancel a solicitation.” Def. MJAR at 15 (citing Madison Servs., Inc. v. United States, 92 Fed. Cl. 120 , 125–26 (2010), and FFTF Restoration Co., LLC v. United States, 86 11This Court reads the statute as the United States Court of Appeals for the Federal Circuit, our appellate court, interpreted it in Sys. Application & Techs., Inc. v. United States, where the Federal Circuit counted four separate causes of action: “On its face, the statute grants jurisdiction over [1] objections to a solicitation, [2] objections to a proposed award, [3] objections to an award, and [4] objections related to a statutory or regulatory violation so long as these objections are in connection with a procurement or proposed procurement.” 691 F.3d 1374 , 1380–81 (Fed. Cir. 2012); see also Jacobs Tech. Inc. v. United States, 100 Fed. Cl. 173 , 174 (2011) (explaining that “this provision [§ 1491(b)(1)] grants the Court jurisdiction over [objections to] (1) a ‘solicitation,’ (2) a ‘proposed award’ (3) an ‘award’ or (4) ‘any alleged violation of statute or regulation in connection with a procurement or a proposed procurement’”). The government, on occasion, also has counted four separate prongs. FFTF Restoration Co., LLC v. United States, 86 Fed. Cl. 226 , 234 (2009) (“The government further contends that, because 28 U.S.C. § 1491 (b)(1) only allows for objections to (1) ‘a solicitation by a Federal agency for bids or proposals for a proposed contract,’ (2) ‘a proposed award,’ (3) ‘the award of a contract,’ or (4) ‘any alleged violation of statute or regulation in connection with a procurement or a proposed procurement,’ see 28 U.S.C. § 1491 (b)(1). . . .”). Although some decisions group the statute into just three prongs, Angelica Textile Servs., Inc. v. United States, 95 Fed. Cl. 208 (2010), the critical point, as explained infra, is that the objection “to a solicitation” prong or cause of action is distinct from the others, and the first two or three prongs – again, depending on how they are counted – are themselves distinct from the final prong, permitting an objection to “any alleged violation” of law in connection with a procurement. 95 Fed. Cl. at 212 (“The first two portions of Section 1491(b)(1) address pre-award and post-award bid protests” while “the third portion of the Section concerns protests involving ‘any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.’”). 9 Fed. Cl. 226 , 236–37 (2009)). This Court has a duty, however – as does every Federal court – to assure itself of jurisdiction over any complaint or cause of action. Folden v. United States, 379 F.3d 1344 , 1354 (Fed Cir. 2004) (“Subject-matter jurisdiction may be challenged at any time by the parties or by the court sua sponte.”); RCFC 12(h)(3). Thus, although the Court generally agrees with both Plaintiffs and the government with regard to jurisdiction here, we write at greater length to address the unique aspects of a FAR Part 8 procurement, generally, and the facts and circumstances of the procurements at issue here, in particular. A. Source Of Jurisdiction For Challenges To Cancellation Of FAR Part 8 Procurements We begin, as always, with the plain language of the applicable jurisdictional statutory provision, in this case 28 U.S.C. § 1491 (b)(1). A plaintiff’s claim that a government agency improperly has cancelled a solicitation is plainly not a challenge “[1] to a solicitation . . . or [2] to a proposed award or [3] the award of a contract…” (alterations added). For the reasons explained in this subsection, this Court concludes, however, that it possesses jurisdiction to decide Plaintiffs’ claims that the agency improperly decided to cancel the solicitations at issue, pursuant to the fourth prong of 28 U.S.C. § 1491 (b)(1); Plaintiffs sufficiently have alleged “[a] violation of statute or regulation in connection with a procurement or a proposed procurement.” 28 U.S.C. § 1491 (b)(1). In that regard, “[a] non-frivolous allegation of a statutory or regulatory violation in connection with a procurement or proposed procurement is sufficient to establish jurisdiction.’’ Distributed Sols., Inc. v. United States, 539 F.3d 1340 , 1345 n.1 (Fed. Cir. 2008)). That standard is easily met here. TTGI Am. Compl. at ¶¶ 31–38; PTP Compl. at ¶¶ 64–66, 76–78, 81–95; see also TTGI Supp. Br. at 3; PTP Supp. Br. at 6–7. In particular, Plaintiffs’ respective complaints regarding the agency’s cancellation decisions sufficiently allege a violation of FAR 1.602-2(b) and 10 U.S.C. § 2305 (b)(2). 12 1. FAR 1.602–2(b) The basis for this Court’s jurisdiction to decide a challenge to an agency’s cancellation of a procurement solicitation is not unambiguous; it is certainly not explicit 12This subsection only addresses the Court’s jurisdiction to review the merits of the agency’s solicitation cancellation decisions. The Court separately has jurisdiction – pursuant to the fourth prong of 28 U.S.C. § 1491 (b)(1) – to consider Plaintiffs’ independent claims that the government violated FAR 19.502-2 and FAR 19.502-9, provided that the FASA task order protest bar does not apply to such allegations. See, infra, Section II.B. The Court recognizes that the question of whether Plaintiffs may obtain relief for the government’s alleged violation of any of these provisions may be more accurately viewed as merits issues, Perry v. United States, 149 Fed. Cl. 1 , 10-14 (2020), but that distinction is not critical here given the outcome. 10 in the text of 28 U.S.C. § 1491 . While the Federal Circuit has upheld this Court’s jurisdiction to consider challenges to an agency’s allegedly improper cancellation of a solicitation, those decisions involved solicitations issued pursuant to FAR Part 14 or 15, which contain specific provisions governing cancellation. For example, in Croman Corp. v. United States, 724 F.3d 1357 , 1359, 1363 (Fed. Cir. 2013), the Federal Circuit reviewed the reasonableness of the cancellation of a FAR Part 15 (“Contracting By Negotiation”) procurement, where the regulations require that “[t]he source selection authority may [only] reject all proposals received in response to a solicitation, if doing so is in the best interest of the government.” FAR 15.305(b) (emphasis added). More recently, in Veterans Contracting Grp., Inc. v. United States, 920 F.3d 801 , 806 (Fed. Cir. 2019), the Federal Circuit addressed whether an agency acted reasonably in canceling a FAR Part 14 (“Sealed Bidding”) procurement, where the regulations mandate that after the opening of bids there must be “a compelling reason to reject all bids and cancel the invitation.” FAR 14.404-1(a)(1) (emphasis added); see FAR 14.404-1(c). In such cases, the Federal circuit has invoked the APA standard of review applicable to § 1491(b)(1) claims, explaining that “[u]nder this standard, a procurement decision may be set aside if it lacked a rational basis or if the agency’s decision-making process involved a clear and prejudicial violation of statute, regulation, or procedure.” Croman, 724 F.3d at 1363. In particular, in Croman, the Federal Circuit observed that “[i]n reviewing [an agency’s] exercise of discretion, this court has articulated relevant factors as general guidelines in determining whether [the agency’s] actions were arbitrary, capricious, or an abuse of its discretion.” 724 F.3d at 1365. “‘[R]elevant factors include: subjective bad faith on the part of the officials; the absence of a reasonable basis for the administrative decision; the amount of discretion entrusted to the procurement officials by applicable statutes and regulations; and proven violation of pertinent statutes or regulations.’” Id. (quoting Prineville Sawmill Co., Inc. v. United States, 859 F.2d 905 , 911 (Fed. Cir. 1988) (quoting Keco Indus., Inc. v. United States, 492 F.2d 1200 , 1203–04 (Ct. Cl. 1974))). 13 In neither Croman nor Veterans Contracting, however, did the Federal Circuit identify which prong of § 1491(b)(1) was at issue, but, notably, both Prineville Sawmill 13 There is a difference in the requirements applicable to the cancellation of a sealed bidding procurement as compared to a negotiated procurement. “In contrast to sealed bidding, in a negotiated procurement . . ., [GAO] decisions have found that ‘the contracting officer need only have a reasonable basis for cancellation after receipt of proposals, as opposed to the cogent and compelling reason required for cancellation of a solicitation after sealed bids have been opened [,] ... because in sealed bidding competitive positions are publicly exposed as a result of the public opening of bids, while in negotiated procurements there is no public opening.’” DCMS- ISA, Inc. v. United States, 84 Fed. Cl. 501 , 511 (2008) (quoting Cantu Servs., Inc., B–219998, 89-1 CPD ¶ 306, 1989 WL 240549 , *1 (Mar. 27, 1989) (internal quotations omitted)). 11 and Keco Indus., Inc. involved a prior version of the Tucker Act, pursuant to which this Court’s predecessor had jurisdiction under § 1491(a) to decide whether the government breached an implied contractual duty to fairly consider responsive bids or proposals. Prineville Sawmill, 859 F.2d at 909 (“An invitation for bids issued by the government carries, as a matter of course, an implied contractual obligation to fairly and honestly consider all responsive bids.”); see also Parcel 49C Ltd. P'ship v. United States, 31 F.3d 1147 , 1153 (Fed. Cir. 1994) (holding that plaintiff “showed that GSA had no rational basis for the cancellation” in case brought pursuant to § 1491(a) and the prior version of the Tucker Act, as amended by the Federal Courts Improvement Act of 1982, Pub. L. No. 97-164, § 133(a), 96 Stat. 25 (emphasis added)). This, of course, tends to demonstrate that our jurisdiction to decide such procurement cancellation cases was imported into § 1491(b), following ADRA. Res. Conservation Grp., LLC v. United States, 597 F.3d 1238 , 1246 (Fed. Cir. 2010) (holding that “[t]he legislative history makes clear that the ADRA was meant to unify bid protest law in one court under one standard” and that “it seems quite unlikely that Congress would intend that statute to deny a pre-existing remedy without providing a remedy under the new statute”). Turning back to 28 U.S.C. § 1491 (b)(1), while the case law makes clear that a plaintiff’s challenge to the rationality of an agency’s cancellation of a solicitation may be brought as an alleged violation of FAR 14.404-1 or FAR 15.305(b) in, respectively, a sealed bid (FAR Part 14) or negotiated procurement (FAR Part 15), the jurisdictional (and merits) questions in this case are complicated by the fact that the cancelled solicitations were issued pursuant to FAR Part 8, under the FSS program, and thus are not subject to either FAR Part 14 or FAR Part 15 cancellation provisions. See 28 U.S.C. § 1491 (b)(1) (covering an “alleged violation of statute or regulation in connection with a procurement or a proposed procurement”). In other words – given the absence of any analogous FAR Part 8 provision governing an agency’s solicitation cancellation – does our Court possess jurisdiction to decide a challenge to an agency’s cancellation of a solicitation issued under FAR Part 8? Judge Wolski decided that precise question in MORI Assocs., Inc. v. United States, 102 Fed. Cl. 503 (2011). In that case, Judge Wolski held that “the protest of a cancellation of a solicitation is not an ‘objecti[on] to a solicitation ... for bids or proposals for a proposed contract or to a proposed award or the award of a contract.’” 102 Fed. Cl. at 523 (quoting 28 U.S.C. § 1491 (b)(1)). Therefore, the statutory “phrase ‘or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement,’ . . . must be the vehicle by which the remainder of our pre- existing jurisdiction over procurement protests was preserved.” 102 Fed. Cl. at 523. This Court concurs with MORI that the fourth-prong of 28 U.S.C. § 1491 (b)(1) – covering an alleged violation of law in connection with a procurement or a proposed 12 procurement – provides the necessary ballast for solicitation cancellation cases, 14 but, as Judge Wolski correctly observed, and as noted above, FAR 15.305(b) “does not apply to FSS procurements such as the . . . procurement cancelled” in the instant case. Id. (citing FAR 8.404(a) and rejecting various “provisions plaintiff cites from the FSS subpart of the FAR” as a basis for such jurisdiction). In the absence of a specific cancellation provision, “[the Court] should look for a regulation codifying the duty to fairly consider bids, as the repository of the remainder of our bid protest jurisdiction.” 102 Fed. Cl. at 523 (explaining that pre-ADRA, “our court’s jurisdiction over challenges to solicitation cancellations was not based on the violation of a regulation specifically addressing cancellation, but rather on the implied contract to fairly and honestly consider bids”). In that regard, MORI “holds that that the FAR section 1.602–2(b) requirement that contracting officers shall ‘[e]nsure that contractors receive impartial, fair and equitable treatment’ is, among other things, the codification of the government’s duty, previously implicit, to fairly and honestly consider bids.” 102 Fed. Cl. at 523–24 (concluding that “numerous opinions of our court have treated FAR section 1.602–2(b) as a binding requirement the violation of which may be reviewed in a bid protest”). In other words, just as this Court, pre-ADRA, would have been able to hear a challenge to the cancellation of a solicitation under the FSS program pursuant to 28 U.S.C. § 1491 (a), we may continue to do so under the fourth prong of § 1491(b) as an alleged violation of FAR 1.602-2(b). Despite the government’s initial concession in its motion for judgment on the Administrative Record, acknowledging our jurisdiction to review the solicitation cancellation decisions at issue, see Def. MJAR at 15, 15 the government later “disagree[d] 14See also Def. Supp. Br. at 6 (“An action challenging a cancelation decision does not challenge a solicitation for bids or proposals or a proposed award.”). This appears to be the government’s consistent position, and the Court concurs that the government is correct. See MCI Diagnostic Ctr., LLC v. United States, 147 Fed. Cl. 246 , 270 (2020) (noting the government’s argument that plaintiff “challenges only the VA’s decision to cancel the solicitation ... and the protest of a cancellation is not an ‘objecti[on] to a solicitation ... for bids or proposals for a proposed contract or to a proposed award or the award of a contract’”). 15 The government in its MJAR relied upon Madison Servs., Inc., 92 Fed. Cl. at 125–26, and FFTF Restoration Co., 86 Fed. Cl. at 236–37, in conceding that the Court of Federal Claims possesses jurisdiction to review an agency’s decision to cancel a solicitation. Def. MJAR at 15. In FFTF Restoration, Judge Firestone – in addition to relying upon FAR 15.305(b) – “reject[ed] the government’s attempt to carve out challenges to negotiated procurement cancellations from this court’s bid protest jurisdiction” because “ 28 U.S.C. § 1491 (b)(1) authorizes this court to review cancellations of negotiated procurements to ensure compliance with the requirements of ‘integrity, fairness, and openness’ in FAR 1.102(b)(3) and the requirement that ‘[a]ll contractors and prospective contractors shall be treated fairly and impartially’ in FAR 1.102–2(c)(3).” FFTF Restoration, 86 Fed. Cl. at 237 & n.15. In Madison Servs., this Court held that “the decision to 13 with the conclusion in MORI that FAR 1.602-2(b) confers jurisdiction upon this Court over any general allegation of an arbitrary decision to cancel a solicitation that is not instead based on a specific violation of statute or regulation.” Def. Supp. Br. at 6. According to the government in its supplemental brief, “a contracting officer cannot violate FAR 1.602-2(b) by taking an action that a plaintiff deems ‘unfair,’ unless the contracting officer violated another, specific substantive provision of the FAR.” Id. at 7. The government’s contentions must be rejected for several reasons. First, a recent Federal Circuit decision all but precludes the government’s position. Office Design Grp. v. United States, 951 F.3d 1366 , 1372 (Fed. Cir. 2020) (“The [FAR] requires an agency to treat offerors fairly and impartially. [FAR] 1.602–2(b) . . . . This obligation necessarily encompasses an agency’s obligation to fairly and impartially evaluate all proposals.”). 16 Second, apart from the Federal Circuit’s decision in Office Design Grp., the great weight of authority supports Plaintiffs’ position that FAR 1.602-2(b) is indeed “substantive” and supports a claim under the fourth prong of 28 U.S.C. § 1491 (b)(1). MORI, 102 Fed. Cl. at 524 (cataloging decisions that “reinforce[] the Court’s conclusion that FAR section 1.602–2(b) is the place where the formerly implied contract now expressly resides” and holding “that this provision is violated by government actions which would have breached the implied duty to fairly and honestly consider bids, and thus such actions—including arbitrary cancellations of solicitations—would be the ‘violation of ... regulation in connection with a procurement’”); R. Nash, FAIR TREATMENT OF CONTRACTORS: Do FAR Provisions Confer Rights?, 27 NO. 7 Nash & Cibinic Rep. ¶ 35 (noting that “[t]here are numerous Court of Federal Claims decisions relying on FAR 1.602-2(b) to find a substantive right of a contractor” and commenting that “it is good to see the Court of Federal Claims finding that the FAR confers a right of contractors to fair treatment”). 17 cancel a negotiated procurement remains subject to the court’s review, pursuant to 28 U.S.C. § 1491 (b) and the APA standard.” 92 Fed. Cl. at 125; see Def. Tech., Inc. v. United States, 99 Fed. Cl. 103 , 114–15 (2011) (surveying the prior case law, and “conclud[ing] that Judge Firestone’s decision in FFTF Restoration is on point and should be followed by this Court.”). 16 See also Krygoski Const. Co. v. United States, 94 F.3d 1537 , 1542–43 (Fed. Cir. 1996) (“CICA mandates impartial, fair, and equitable treatment for each contractor. This competitive fairness requirement, with its bid protest remedies, restrains a contracting officer’s contract administration. If, for instance, a contracting officer discovers that the bid specifications inadequately describe the contract work, regulations promulgated under CICA may compel a new bid.” (emphasis added) (citing 10 U.S.C. §§ 2304 and 2305 (1994), and FAR 1.602–2)). 17See also, e.g., MCI Diagnostic Ctr., 147 Fed. Cl. at 272 (“It is, therefore, consistent with Resource Conservation Group to hold that this court continues to have jurisdiction over alleged arbitrary cancellations of procurement solicitations. Moreover, given this court's pre-ADRA jurisdiction to address procurement cancellation issues, it follows that whether or not protestor alleges the 14  2. 10 U.S.C. § 2305 (b)(2) Even if FAR 1.602–2(b) were construed not to provide a basis for this Court’s review of a challenge to a solicitation cancellation in a FAR Part 8, FSS procurement, the Court holds that, in this case, 10 U.S.C. § 2305 (b)(2) does provide such a predicate for this Court’s jurisdiction, again pursuant to the fourth prong of 28 U.S.C. § 1491 (b)(1). In that regard, and as noted above, the Court ordered the parties to submit supplemental briefs addressing 10 U.S.C. § 2305 (b)(2), which provides that “[a]ll sealed bids or competitive proposals received in response to a solicitation may be rejected if the head of the agency determines that such action is in the public interest” (emphasis added). Given that FAR 15.305(b) may serve as a jurisdictional predicate where applicable, the Court has no trouble concluding that almost identical language in 10 U.S.C. § 2305 (b)(2) similarly provides jurisdiction here. Although FAR Part 15 provisions do not apply wholesale to the procurements at issue, the referenced Title 10 statutory provision does apply by its terms. The Court further notes that the statutory provision contains a heightened procedural requirement of a determination by the “head of the agency” and a heighted substantive requirement that a cancellation be “in the public interest” and not merely “in the best interest of the government” as in FAR 15.305(b). See 10 U.S.C. § 2305 (b)(2). The government contends that 10 U.S.C. § 2305 (b)(2) is inapplicable to the cancelled solicitations because the agency did not seek “competitive proposals.” Def. Supp. Br. at 1–2. According to the government, the FAR distinguishes between violation of a specific statute or regulation, this court continues to be able to address cancellation issues.”); B & B Med. Servs., Inc. v. United States, 114 Fed. Cl. 658 , 660 (2014) (“Given our long history of entertaining such [arbitrary procurement cancellation] protests, the Court does not find subject-matter jurisdiction to be absent merely because the particular regulation that is violated by arbitrary cancellation is absent from the complaint.”); Sigmatech, Inc. v. United States, 141 Fed. Cl. 284 , 313 (2018) (“The [FAR] requires that contracting officers ‘[e]nsure that contractors receive impartial, fair, and equitable treatment.’” (quoting FAR 1.602-2(b))); Centerra Grp., LLC v. United States, 138 Fed. Cl. 407 , 413 (2018) (holding that “[f]airness in government procurements is enshrined in a number of FAR provisions[,]” including FAR 1.602–2(b)); BCPeabody Constr. Servs., Inc. v. United States, 112 Fed. Cl. 502 , 512 (2013) (“Contracting officers are required to ‘ensure that contractors receive impartial, fair, and equitable treatment.’” (quoting FAR 1.602–2(b))); Serco Inc. v. United States, 81 Fed. Cl. 463 , 482 (2008) (noting “agency’s fundamental duty to ‘[e]nsure that contractors receive impartial, fair and equitable treatment’” (quoting FAR 1.602–2))); Precision Images, LLC v. United States, 79 Fed. Cl. 598 , 619 (2007) (“The [FAR] impose[s] upon the Air Force the affirmative duty to ‘[e]nsure that contractors receive impartial, fair, and equitable treatment’ during the procurement process.” (citing FAR 1.602–2(b)) (emphasis added)), aff’d, 283 F. App’x 813 (Fed. Cir. 2008); Jacobs Tech. Inc. v. United States, 131 Fed. Cl. 430 , 445 (2017) (holding that plaintiff “sufficiently alleged that the Army violated applicable regulations in connection with the . . . procurement” (citing FAR 1.602–2(b))). 15 procurements seeking “competitive proposals” and those involving “competitive procedures”: FAR 6.102(d)(3) provides that the “[u]se of multiple award schedules issued under the procedures established by the Administrator of General Services consistent with the requirement of 41 U.S.C.152(3)(A) for the multiple award schedule program of the General Services Administration is a competitive procedure” (emphasis added). FAR 6.102(b) explicitly defines “competitive proposal” as “other” than a subsection (d) “competitive procedure[.]” Def. Supp. Br. at 2. The Court rejects the government’s argument for two reasons: (1) the hypothesized dichotomy between a procurement requesting “competitive proposals” and a procurement involving “competitive procedures” is false – there is no inherent contradiction or distinction; and (2) the cancelled solicitations at issue here in fact sought competitive proposals. This is evident from statutory language, as well as the mechanics of a typical FAR Part 8 procurement, the latter which the agency did not follow in this case. First, Title 10 of the U.S. Code consistently uses the term “competitive proposals” not in contrast with “competitive procedures” but rather only in contrast with sealed bids. For example, 10 U.S.C. § 2302 (3)(D) incorporates the definition of the term “full and open competition” found “in chapter 1 of title 41.” The latter statutory section, in turn, defines “full and open competition” to “mean[] that all responsible sources are permitted to submit sealed bids or competitive proposals on the procurement.” 41 U.S.C. § 107 (emphasis added). Similarly, 10 U.S.C. § 2304 (a)(2)(B) provides that “the head of an agency . . . shall request competitive proposals if sealed bids are not appropriate. . . .” Cf. 41 U.S.C. § 3701 (a) (“An executive agency shall evaluate sealed bids and competitive proposals, and award a contract, based solely on the factors specified in the solicitation.” (emphasis added)). The solicitations at issue were not invitations for sealed bids. Second, although the government relies on FAR 6.102, as explained above, to argue that “competitive proposals” are synonymous with FAR Part 15 procurements, that thread quickly unravels as the Court follows it through. For example, FAR 6.401 indicates that “[s]ealed bidding and competitive proposals, as described in parts 14 and 15, are both acceptable procedures for use under subpart[] 6.1,” which, of course, includes FAR 6.102. Furthermore, FAR 6.401(b) covers “competitive proposals” and references FAR Part 15 “for procedures”; but, FAR 15.000 itself – similar to the statutory provisions discussed above – distinguishes only between negotiated procurements and sealed bidding. See FAR 15.000 (noting that “[t]his part prescribes policies and procedures governing competitive and noncompetitive negotiated acquisitions” and providing that “[a] contract awarded using other than sealed bidding procedures is a 16 negotiated contract”). The cancelled solicitations in this case contemplated negotiated procurements and did not follow “sealed bidding procedures.” Id. Accordingly, while the Court agrees with the government that the cancelled solicitations at issue were not subject to FAR Part 15 per se, Def. Supp. Br. at 3–5, the Court agrees with the PTP that the solicitations nevertheless constituted “negotiated procurements” that solicited “competitive proposals” pursuant to a Request for Proposals (“RFP”). See PTP Supp. Br. at 8–9 (“Although the Agency may have had the authority to structure the Solicitations as RFQs seeking only responsive quotes, the Agency here issued unmistakable RFPs, seeking competitive proposals that the Agency could evaluate and accept.” (emphasis in original)). The Administrative Record thoroughly supports PTP’s position in that regard. For example, the July 10, 2020 Task Order Decision Document (“TODD”) for the 13F procurement, signed by the Contracting Officer, see ECF No. 25 at 346–55 (AR 342–51), admits that the “solicitation was placed against the GSA MAS . . . as a 100% [SDVOSB] set-aside competitive action using order procedure under [FAR] 8.405-2 in conjunction with FAR Part 15-Contract by Negotiation and FAR Part 12-Acquisition of Commercial Items.” Id. at 346 (AR 342) (emphasis added). Moreover, the Administrative Record confirms that the agency engaged in negotiations insofar as “[p]roposal revisions were allowed and offerors could submit a final offer based on changes provided on solicitation amendments.” Id. at 348 (AR 344) (also citing FAR 15.404-1 regarding price analysis); see also AR 350 (citing FAR 15.403 regarding “adequate price competition”). Similarly, the JFOC Past Performance Questionnaire explicitly informed prospective references that the agency’s planned “schedule will allow sufficient time to analyze the data prior to the start of negotiations.” Id. at 499 (AR 495) (emphasis added). The JFOC TODD indicated that the FAR Part 8 RFP “was placed against the GSA MAS . . . as a 100% [SDVOSB] set-aside competitive action using FAR Part 15-Contract by Negotiation and FAR Part 12-Acquisition of Commercial Items.” Id. at 565 (AR 561) (emphasis added). As part of the JFOC procurement, the agency conducted discussions and permitted final proposal revisions. AR 563 (indicating that “[t]wo of the four offerors made changes and submitted Final Offers”). As this Court has noted, “the acid test for deciding whether an agency has engaged in discussions is whether the agency has provided an opportunity for proposals to be revised or modified.” Allied Tech. Grp., Inc. v. United States, 94 Fed. Cl. 16 , 44 (2010) (quoting Career Training Concepts, Inc. v. United States, 83 Fed. Cl. 215 , 230 (2008)). A solicitation that contemplates the submission of proposals and the possibility of discussions is a negotiated procurement. The government itself further admits that the procurements at issue in this case are “negotiated procurement[s].” Def. MJAR at 15 (acknowledging that “[i]n the context of a negotiated procurement like this one,” the contracting officer’s cancellation decision is subject to the APA review standard in § 1491(b)(4) (emphasis added)); id. at 16 (addressing the “Court’s review of a cancellation decision in the course of a 17 negotiated procurement” and arguing that “[b]ecause the contracting officer has the discretion to cancel a negotiated procurement,” a plaintiff must show the decision “had no rational basis”). As demonstrated above, a negotiated procurement involves competitive proposals. See PHT Supply Corp. v. United States, 71 Fed. Cl. 1 , 12 (2006) (“This federal statute provides that, in negotiated procurements, agencies ‘shall evaluate ... competitive proposals and make an award based solely on the factors specified in the solicitation.’” (quoting 10 U.S.C. § 2305 (b)(1))). The government’s attempt to distinguish the solicitations at issue from a procurement seeking competitive proposals is particularly unavailing where, as here, the government did not follow normal FAR Part 8 procedures. In that regard, the government is correct that, typically, there is a distinction between procurements conducted pursuant to FAR Parts 14 and 15, on the one hand, and FAR Part 8 procurements, on the other: the former solicit bids or proposals from bidders or offerors, respectively, while the latter solicits quotations. FAR 2.101 delineates the difference: Offer means a response to a solicitation that, if accepted, would bind the offeror to perform the resultant contract. Responses to invitations for bids (sealed bidding) are offers called “bids” or “sealed bids”; responses to requests for proposals (negotiation) are offers called “proposals”; however, responses to requests for quotations (simplified acquisition) are “quotations”, not offers. FAR 2.101 (emphasis added). 18 The GAO also helpfully has explained that a request for quotation (“RFQ”) is nothing more than a request for information: The submission of a bid or proposal constitutes, by its very nature, an offer by a contractor that, if accepted, creates a binding legal obligation on both parties. Because of the binding nature of bids and offers, they are held open for acceptance within a specified or reasonable period of time . . . . 18Cf. FAR 13.004(a) (“A quotation is not an offer and, consequently, cannot be accepted by the Government to form a binding contract. Therefore, issuance by the Government of an order in response to a supplier's quotation does not establish a contract. The order is an offer by the Government to the supplier to buy certain supplies or services upon specified terms and conditions. A contract is established when the supplier accepts the offer.”). 18  A quotation, on the other hand, is not a submission for acceptance by the government to form a binding contract; rather, vendor quotations are purely informational. In the RFQ context, it is the government that makes the offer, albeit generally based on the information provided by the vendor in its quotation, and no binding agreement is created until the vendor accepts the offer. FAR § 13.004(a). A vendor submitting a price quotation therefore could, the next moment, reject an offer from the government at its quoted price. Because vendors in the RFQ context hold the power of acceptance and their submissions are purely informational, there is nothing for vendors to hold open. Sea Box, Inc., B-405711, 2012 CPD ¶ 116, 2012 WL 924951 , *2–*3 (Mar. 19, 2012) (internal citations omitted) (emphasis added). 19 In this case, in contrast, the agency did not merely solicit quotes resulting in a purchase order to the putative awardees. Rather, the agency solicited competitive proposals pursuant to RFPs, contemplated negotiations, and awarded contracts based upon those proposals. 20 ECF No. 25 at 5 (AR 1) (13F Solicitation); id. at 386 (AR 382) (JFOC Solicitation); id. at 244-45 (AR 240-41) (F13 TODD consistently using the term “proposals”); id at 565-66 (AR 561-62) (JFOC TODD consistently using the term “proposals”). Because the solicitations at issue here were RFPs seeking competitive proposals as part of a negotiated procurement – and were neither Invitations for Bids (“IFBs”) nor Requests for Quotations (“RFQs”), see PTP Supp. at 8 – the Court concludes that the agency had to comply with 10 U.S.C. § 2305 (b)(2). The FAR’s definition of “solicitation” 19“Though GAO opinions are not binding on this court, . . . this court may draw on GAO’s opinions for its application of this expertise.” Allied Tech. Grp., Inc. v. United States, 649 F.3d 1320 , 1331 n.1 (Fed. Cir. 2011) (citing Honeywell, Inc. v. United States, 870 F.2d 644 , 648 (Fed. Cir. 1989)); see Tech. Innovation All. LLC v. United States, 149 Fed. Cl. 105 , 140 n.6 (2020) (“GAO decisions are not binding on the Court but may be treated as persuasive authority in light of GAO’s expertise in the bid protest arena.”). 20The GSA itself warns against using an RFP for FSS purchases, but that is exactly what the agency did here. https://interact.gsa.gov/wiki/its-rfq-quote-rather-rfp-offer-when-talking- about-orders-against-schedules-far-84 (“It is inappropriate and contrary to FAR SubPart 8.4 to call a Schedule order request for quotation an ‘RFP.’ The FAR never recognizes ‘RFP’ as a suitable substitute for a Schedule order’s ‘RFQ.’ As the FAR (as well as the Government Contracts Reference Book and other sources) point out, ‘RFP’ and ‘RFQ’ are not interchangeable. They differ in when offer and acceptance occurs. When talking about Schedule orders, only ‘RFQ’ is recognized by the FAR.”) (last visited Nov. 25, 2020). 19 proves the point: “Solicitation means any request to submit offers or quotations to the Government. Solicitations under sealed bid procedures are called ‘invitations for bids.’ Solicitations under negotiated procedures are called ‘requests for proposals.’” FAR 2.101 (emphasis added). Accordingly, in this case, the cancelled solicitations were not IFBs or RFQs, but rather were RFPs – that is, “requests for proposals” as part of negotiated procurements conducted under FAR Part 8. Id. That is all that is necessary for 10 U.S.C. § 2305 (b)(2) to apply, and the government cannot now, for the purposes of litigation, recharacterize the procurements as typical FSS purchases seeking only quotations. Aiken v. United States, 4 Cl. Ct. 685 , 694 (1984) (“party characterizations or mere contract formalisms cannot alter the substance of a transaction”); Burstein v. United States, 622 F.2d 529 , 537 (Ct. Cl. 1980) (“[W]e must look to the substance of the transaction; the true nature of the arrangement cannot be altered by mere contractual formalisms.”); see IBM U.S. Fed., A Div. of IBM Corporation, B-409806, 2014 CPD ¶ 241, 2014 WL 4160022 , *6 (Aug. 15, 2014) (“Where, as here, an agency . . . uses an approach more akin to a competition in a negotiated procurement than to a simple FSS buy, GAO will review the record to ensure that the procurement was conducted on a fair and reasonable basis and consistent with standards generally applicable to negotiated procurements.”); Omniplex World Servs. Corp., B-291105, 2002 CPD ¶ 199, 2002 WL 31538212 , *3 (Nov. 6, 2002) (“[W]hile the provisions of FAR Part 15, which govern contracting by negotiation, do not directly apply, . . . we analyze [the protestor’s] contentions by the standards applied to negotiated procurements.”); Allied Tech. Grp., Inc., B-402135, 2010 CPD ¶ 152, 2010 WL 2726056 , *4 n.8 (Jan. 21, 2010) (“The procurement here was conducted under the FSS provisions of FAR subpart 8.4, and thus the negotiated procurement provisions of FAR part 15 do not directly apply. However, our Office has held that where agencies use the negotiated procurement techniques of FAR part 15 in FSS buys, such as discussions, we will review the agency's actions under the standards applicable to negotiated procurements.”). 21 * * * * Plaintiffs also allege violations of FAR 19.502-2 and FAR 19.502-9, TTGI Am. Compl. at ¶¶ 36–38; PTP Compl. at ¶¶ 87–90, 104–08, independently vesting this Court 21The Court acknowledges that the GAO’s decision in The MIL Corp., B-297508, 2006 CPD ¶ 34, 2006 WL 305965 (Jan. 26, 2006), may be read to have reached a contrary conclusion, in part in reliance upon this Court’s decision in Systems Plus, Inc. v. United States, 68 Fed. Cl. 206 , 209–210 (2005). Both cases are distinguishable, however, because while they involved FSS procurements having elements of negotiated procedures, they involved RFQs and not RFPs. The MIL Corp., 2006 WL 305965 , *5 (“Here, the procurement was not conducted pursuant to the negotiated procedures of FAR Part 15, nor did it involve the issuance of a request for proposals. Rather, the procurement here was conducted under the FSS program, pursuant to the procedures set forth in FAR Subpart 8.4 and using a request for quotations.” (emphasis added)); Sys. Plus, Inc., 68 Fed. 20 with jurisdiction to consider those claims pursuant to the fourth prong of 28 U.S.C. § 1491 (b)(1). Finally, even if Plaintiffs were unable to rely on any particular statute or regulation to challenge the cancellation of the solicitations at issue pursuant to 28 U.S.C. § 1491 (b)(1), the Court still would have jurisdiction under 28 U.S.C. § 1491 (a), although the available relief would include only proposal costs, and not injunctive relief. See Eco Tour Adventures, Inc. v. United States, 114 Fed. Cl. 6 , 41–42 (2013) (“[E]quitable relief is . . . unavailable in implied contract bid protests pursued under section 1491(a).”). B. The FASA Task Order Protest Bar The FASA task order protest bar provides that “[a] protest is not authorized in connection with the issuance or proposed issuance of a task or delivery order . . . .” 41 U.S.C. § 4106 (f)(1) (emphasis added). The government does not contend that the FASA task order protest bar precludes this Court’s jurisdiction over Plaintiffs’ claim generally challenging the propriety of the agency’s solicitation cancellation decisions (i.e., even though the agency intends to utilize a task order vehicle for the replacement procurement). The government argues, however, that this Court is precluded from deciding Plaintiffs’ claims to the extent that they depend upon this Court’s ruling on the application of the Rule of Two. Def. MJAR at 30–33. Relying on Federal Circuit precedent in SRA Int’l, Inc. v. United States, 766 F.3d 1409 (Fed. Cir. 2014), where that court held that “nothing in FASA’s language automatically exempts actions that are temporally disconnected from the issuance of a task order,” id. at 1413 , the government asserts that SRA “affirms the broad reach of FASA and establishes that a protest of the failure to conduct a rule of two analysis prior to issuing a task order [under an IDIQ] is not a colorable basis to avoid the statutory Cl. at 206 (noting that the procurement at issue was an RFQ). Moreover, the GAO in The MIL Corp. explicitly agreed with our determination here that “the use of negotiated procedures in accordance with [FAR] Part 15 and as evidenced by the issuance of a request for proposals, constitutes a procurement conducted on the basis of competitive proposals.” The MIL Corp., 2006 WL 305965 , *5 (emphasis added) (citing cases in which the GAO equated “a negotiated procurement with a procurement conducted on the basis of competitive proposals”); see also Comfort Inn South, B- 270819, 96-1 CPD ¶ 225, 1996 WL 251441 , *2 (equating the term “competitive proposals” in 10 U.S.C. § 2304 (a)(2)(B) with “negotiated procedures”). On another note, the Court finds it very hard to believe that the government would argue that Plaintiffs’ proposals are subject to public disclosure. See 41 U.S.C. § 4702 (“Prohibition on release of contractor proposals”) (providing that “[a] proposal in the possession or control of an executive agency may not be made available to any person under [the Freedom of Information Act,] section 552 of title 5” where “proposal” is defined as “including a technical, management, or cost proposal, submitted by a contractor in response to the requirements of a solicitation for a competitive proposal” (emphasis added)); see also 10 U.S.C. § 2305 (g) (same). 21 [task order protest] bar.” Def. Mot. at 30–31. 22 Furthermore, the government notes that the Federal Circuit in RAMCOR Servs. Grp., Inc. v. United States, 185 F.3d 1286 , 1289 (Fed. Cir. 1999), has interpreted broadly the phrase “in connection with” in the Tucker Act, 28 U.S.C. § 1491 (b)(1). 23 Def. Resp. at 8–9. Accordingly, the question that the government fairly raises is whether Plaintiffs’ claims that the Army failed to perform the Rule of Two analysis (before deciding to move the 13F and JFOC scopes of work to the TMS MAIDIQ) constitute a “protest” that is “in connection with the issuance or 22 Candidly, the Court notes that the government’s position is far more persuasive than the Court at oral arguments gave the government credit for and, thus, the Court addresses the relevant issues at greater length. 23The filing of a protest with the General Accounting Office (“GAO”) may trigger an automatic stay of a procurement under the provisions of the Competition in Contracting Act (“CICA”), 31 U.S.C. §§ 3551 –56, prohibiting an agency from awarding a new contract pending a decision on the protest. See 31 U.S.C. § 3553 (c)(1). CICA, however, also allows an agency to override the automatic stay if it issues a written finding that “urgent and compelling circumstances which significantly affect interests of the United States will not permit waiting” for the bid protest decision. 31 U.S.C. § 3553 (c)(2); see RAMCOR, 185 F.3d at 1287 . In RAMCOR, the Federal Circuit addressed the question of “whether an objection to a [31 U.S.C.] § 3553(c)(2) override can serve as a jurisdictional basis under § 1491(b)(1).” Id. at 1289. The Federal Circuit thus had “to determine whether § 3553(c)(2) is a statute ‘in connection with a procurement,’ as required by § 1491(b)(1).” Id. While the Court of Federal Claims had held that a plaintiff protestor “could only invoke § 1491(b)(1) jurisdiction by including in its action an attack on the merits of the underlying contract award” – and that this Court accordingly lacked jurisdiction to decide an override challenge – the Federal Circuit reversed. Id. The Federal Circuit explained its reasoning as follows: The language of § 1491(b) . . . does not require an objection to the actual contract procurement, but only to the “violation of a statute or regulation in connection with a procurement or a proposed procurement.” The operative phrase “in connection with” is very sweeping in scope. As long as a statute has a connection to a procurement proposal, an alleged violation suffices to supply jurisdiction. Section 3553(c)(2) fits comfortably in that broad category. After all, [the agency’s] § 3553(c)(2) override allowed it to procure immediately [the awardee’s] services. Moreover, under that procurement, [the contact awardee] could have immediately commenced work. Where an agency’s actions under a statute so clearly affect the award and performance of a contract, this court has little difficulty concluding that that statute has a “connection with a procurement.” Id. (emphasis added). 22 proposed issuance of a task or delivery order.” Def. MJAR at 30 (discussing 41 U.S.C. § 4106 (f)(1)). 24 According to the government, “[t]here simply is no way to view the protests of the TMS MAIDIQ as anything other than the protest of a proposed task order.” Id. at 32–33 (emphasis added). This Court disagrees that Plaintiffs are protesting either the TMS MAIDIQ itself or even the “proposed issuance” of a task order. The Court further disagrees with the government that the FASA protest bar is at all applicable here. The Court must first appropriately frame Plaintiffs’ Rule of Two arguments. All of the parties (and the Court) appear to agree that the Army’s decision to cancel the solicitations at issue depends upon the availability of the TMS MAIDIQ as a viable alternative under which the procurements may be conducted. In other words, there is no question about the agency’s continuing need for the precise services sought pursuant to the 13F and JFOC Solicitations. Accordingly, there are several possible ways to view Plaintiffs’ Rule of Two arguments. One possible way is that the agency’s cancellation decisions are irrational to the extent the agency has not performed a Rule of Two analysis in order to know whether the TMS MAIDIQ is, in fact, a viable alternative. Another possible way to view Plaintiffs’ claims is that because the agency has selected the TMS MAIDIQ vehicle as part of a revised acquisition strategy, that selection itself violated the Rule of Two, irrespective of the rationale offered in the agency’s August 10 MFR. 25 The first view ties the Rule of Two issue to the propriety or legality of the agency’s cancellation decisions, while the latter view constitutes a challenge to the legality of an independent agency action. Viewed either way, Plaintiffs’ actions before this Court do not constitute a “protest . . . in connection with the issuance or proposed 24 In terms of the FASA task order protest bar, the government relies exclusively upon the provision in Title 41, notwithstanding the government’s contention in its supplemental brief that “Section 3701(b) of Title 41 does not apply here because nothing in Title 41, Subtitle I, Division C (§§ 3101 – 4714) applies to the Department of Defense.” Def. Supp. Br. at 2 (citing 41 U.S.C. § 3101 (c)(1)(A)). The government nowhere addresses 10 U.S.C. § 2304c(e), the task order protest bar applicable to Department of Defense (“DOD”) procurements. The difference between the two statutes is the dollar value of the GAO jurisdictional threshold; for DOD procurements, the applicable threshold is $25 million. 10 U.S.C. § 2304c(e)(1)(B). Because there is no practical difference between the two provisions for the purposes of this decision, the instant decision discusses 41 U.S.C. § 4106 (f), the statutory provision upon which the government has relied in its briefs. 25Even on that point, however, the government is noncommittal, in one sentence asserting that “there is no uncertainty as to what contracting vehicle would be selected,” and then in the very next sentence asserting that “the administrative record demonstrates that the agency has decided already to use the TMS MAIDIQ.” Def. MJAR at 32 (emphasis added). 23 issuance” of a task order, nor does the Court agree with the government that Plaintiffs are protesting the TMS MAIDIQ itself (or the proposed issuance of a task order). For the reasons explained below, the Court finds that the FASA task order bar does not apply to the present case because: (1) FASA only applies to a “protest” but that term does not necessarily encompass an action alleging an independent “violation of statute or regulation in connection with a procurement or proposed procurement”; (2) even where an action properly may be considered a “protest,” FASA only applies where there is some relationship to a “proposed issuance or issuance of a task order” – that is, where a plaintiff is, in effect, a disappointed bidder or offeror; and (3) a challenge to an agency’s alleged failure to conduct a Rule of Two analysis is not “in connection with” a task order, no matter how Plaintiffs’ claims are viewed or how the other operative language in FASA is interpreted or parsed. As with any question of statutory analysis, this Court starts, as it must, with the applicable statutory language. 26 The FASA task order protest bar provides, in its entirety, as follows: “[a] protest is not authorized in connection with the issuance or proposed issuance of a task or delivery order except for— (A) a protest on the ground that the order increases the scope, period, or maximum value of the contract under which the order is issued; or (B) a protest of an order valued in excess of $10,000,000.” 41 U.S.C. § 4106 (f)(1) (emphasis added). With respect to the latter exception, the GAO has exclusive jurisdiction to decide such claims. Id. § 4106(f)(2). The interpretative difficulty is that FASA does not provide any further definitional clarity regarding its operative terms. Solving this puzzle requires paying close attention to the entirety of the FASA’s statutory language. While decisions from this Court and the Federal Circuit generally have focused on the “in connection with” language 27 – and that phrase’s “very sweeping . . . scope,” RAMCOR, 185 F.3d at 1289 – that is but one-third of the FASA statutory equation. The remaining operative language that remains to be unpacked is (a) “protest” and (b) “issuance or proposed issuance of a task or delivery order,” 41 U.S.C. § 4106 (f)(1), both of which, in this Court’s view, considerably narrow the FASA’s jurisdictional bar. Cf. Maracich v. Spears, 570 U.S. 48 , 60 (2013) (“[T]he phrase ‘in connection with’ provides little guidance without a limiting principle consistent with the structure of the statute and its other provisions.”). 26Dyer v. Dep't of the Air Force, 971 F.3d 1377 , 1380 (Fed. Cir. 2020) (quoting Kingdomware Techs., Inc. v. United States, –– U.S. ––, 136 S. Ct. 1969 , 1976 (2016), for the proposition that “[i]n statutory construction, we begin with the language of the statute” (internal quotes omitted)). 27BayFirst Sols., LLC v. United States, 104 Fed. Cl. 493 , 502 (2012) (“There seems to be some variation in this court’s approach to interpreting the term ‘in connection with’ when applying the ban on task order protests in particular cases.”). 24  1. FASA Does Not Necessarily Bar Claims Alleging A “Violation Of Statute Or Regulation In Connection With A Procurement Or Proposed Procurement” The FASA task order bar applies only to “protest[s].” This Court therefore must decide whether Plaintiffs’ claims in this case – specifically with respect to the agency’s alleged violation of the Rule of Two – constitute a “protest.” The Court is unconcerned with how that word is employed colloquially to describe § 1491(b) actions generally; instead, the Court focuses on the language that Congress actually enacted in its statutes. Azar v. Allina Health Servs., 587 U.S. ––, 139 S. Ct. 1804 , 1812 (2019) (“This Court does not lightly assume that Congress silently attached different meanings to the same term in . . . related statutes.”). In that regard, on the one hand, neither the FASA task order protest bar provision nor the Tucker Act defines the term “protest” and the question of what that term includes is not straightforward. On the other hand, the GAO’s bid protest jurisdictional statute, the Competition in Contracting Act (“CICA”), 28 defines that term as follows: The term “protest” means a written objection by an interested party to any of the following: (A) A solicitation or other request by a Federal agency for offers for a contract for the procurement of property or services. (B) The cancellation of such a solicitation or other request. (C) An award or proposed award of such a contract. (D) A termination or cancellation of an award of such a contract, if the written objection contains an allegation that the termination or cancellation is based in whole or in part on improprieties concerning the award of the contract. (E) Conversion of a function that is being performed by Federal employees to private sector performance. 31 U.S.C.A. § 3551 (1); see also FAR 33.101 (defining “protest” similarly to CICA). 29 28 Pub. L. No. 98-369, 98 Stat. 1175 (1984) (codified, as amended, at 31 U.S.C. §§ 3551-3557 ). 29Notably, the CICA’s definition of “protest” explicitly distinguishes between an objection to a solicitation, an objection to a solicitation’s cancellation, and an objection to “[a]n award or proposed award.” 25  Focusing on CICA’s definition of the word “protest,” a Tucker Act cause of action may be “in connection with” the issuance (or proposed issuance) of a task order, but not subject to the FASA task order protest bar because the cause of action simply does not qualify as a “protest.”30 As a more obvious practical analogy demonstrating the accuracy of that conclusion, the government could not contend that a Contract Disputes Act (“CDA”) claim qualifies as a “protest” subject to the FASA task order protest bar. Kellogg Brown & Root Servs., Inc. v. United States, 117 Fed. Cl. 764 , 770 (2014) (holding that “this matter is not within our bid protest jurisdiction, but instead involves questions of contract administration that must be brought under the CDA”); Itility, LLC v. United States, 124 Fed. Cl. 452 , 458 (2015) (noting that “a long line of our cases has held that the ‘interested party’ standing to bring a bid protest does not extend to the complaints of contractors concerning the administration of contracts they have been awarded and performing”); Digital Techs., Inc. v. United States, 89 Fed. Cl. 711 , 722, 728– 29 (2009) (“By its terms, the FASA prohibition on bid protests does not apply to a breach of contract case” or CDA claims). 31 A further comparison of the FASA task order protest bar to the Tucker Act language (and RAMCOR’s interpretation of the latter) is instructive and demonstrates that not all § 1491(b)(1) claims qualify as a “protest.” For starters, the Tucker Act nowhere employs the term “protest” but rather refers repeatedly to “an action” (or “any action”). 28 U.S.C. § 1491 (b). 32 As noted previously, the Tucker Act, as amended by ADRA, provides for four distinct causes of action related to the procurement process: “an action by an interested party objecting [1] to a solicitation by a Federal agency for bids or proposals for a proposed contract or [2] to a proposed award or [3] the award of 30“The CICA and the ADRA are, after all, different statutes, with different definitions of bid protest.” Alaska Cent. Exp., Inc. v. United States, 50 Fed. Cl. 510 , 517 (2001). 31Cf. Cont'l Serv. Grp., Inc. v. United States, 722 F. App’x 986, 992 (Fed. Cir. 2018) (noting government’s position that a particular claim, dismissed by the trial court, was “a contract administration claim subject to the [CDA] over which the Claims Court had no bid protest jurisdiction”). 32CICA explicitly distinguishes between an “action” in this Court and a “protest” before the GAO. 31 U.S.C. § 3556 (explaining that “nothing contained in this subchapter shall affect the right of any interested party to file a protest with the contracting agency or to file an action in the United States Court of Federal Claims”); see also 41 U.S.C. § 2101 (6) (“The term ‘protest’ means a written objection by an interested party to the award or proposed award of a Federal agency procurement contract, pursuant to subchapter V of chapter 35 of title 31.”); 31 U.S.C. § 1558 (distinguishing between a “protest filed under subchapter V of chapter 35 of this title,” on the one hand, and “an action commenced . . . for a judicial remedy” involving a “a challenge to-- (i) a solicitation for a contract; (ii) a proposed award of a contract; (iii) an award of a contract; or (iv) the eligibility of an offeror or potential offeror for a contract or of the contractor awarded the contract” (emphasis added)). 26 a contract or [4] any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.” Id. § 1491(b)(1) (emphasis added). The first three causes of action are what we typically refer to as bid “protests,” as that term is defined in CICA – i.e., challenges, respectively, to a solicitation or to the merits of a contract award (or a proposed award). In contrast, the fourth prong of § 1491(b)(1) – pursuant to which a plaintiff may allege a “violation of statute or regulation in connection with a procurement or a proposed procurement” – is not necessarily a “protest,” at least as that term is defined in CICA. 33 Indeed, although “ADRA covers primarily pre- and post-award bid protests,” the Federal Circuit in RAMCOR explicitly reversed this Court’s determination “that a [plaintiff] could only invoke § 1491(b)(1) jurisdiction by including in its action an attack on the merits of the underlying contract award” or the solicitation. RAMCOR, 185 F.3d at 1289 (emphasis added). Put differently, “[t]he language of § 1491(b) . . . does not require an objection to the actual contract procurement, but only to the ‘violation of a statute or regulation in connection with a procurement or a proposed procurement.’” RAMCOR, 185 F.3d at 1289 . The Federal Circuit further explained that construing § 1491(b)(1) to require a plaintiff to object to the merits of a procurement effectively would eliminate the fourth prong of the statute, as “[a] challenge on the merits would, for example, amount to an objection to ‘a proposed award or the award of a contract.’” Id. (emphasis added) (“If § 1491(b) required a challenge to the merits of the contract award, the contractor would never need to use the ‘violation’ prong but could always rely on other jurisdictional grants in § 1491(b)(1).”). Simply put, an action under the last prong of § 1491(b) is not a “protest” because it is not a challenge to a solicitation or to the proposed award or award of a contract. In that regard, an axiomatic canon of statutory interpretation is that “[w]hen construing a statute, this court must, if at all possible, give effect to all its parts.” 185 F.3d at 1289 (citing Weinberger v. Hynson, Westcott & Dunning, Inc., 412 U.S. 609 , 633 (1973), and noting that “[t]he trial court’s proposed interpretation of § 1491(b)(1) would violate this basic tenet of statutory construction”). Accordingly, 33Thus, while “the Federal Circuit has made clear that a RAMCOR-type action may be brought independent of whether the plaintiff objects to the actual contract procurement[,] CICA’s definition of ‘protest’ is more limited than the scope of actions described by the Tucker Act and does not include an independent ‘violation of statute or regulation in connection with a procurement or a proposed procurement’ prong[.]” M. Solomson & J. Handwerker, Subcontractor Challenges To Federal Agency Procurement Actions, 06-3 Briefing Papers 1, *6 (Feb. 2006). That is not to say that the GAO’s protest jurisdiction precludes its consideration of alleged violations of statutes or regulations, see 31 U.S.C. § 3552 (a), but rather the GAO may only consider such allegations as part of a “written objection by an interested party” that meets the definition of “protest” in 31 U.S.C. § 3551 . 27 § 1491(b)(1) must be construed to permit a cause of action which is neither a “protest” of a solicitation, nor of a contract award (or proposed award). 34 The question, then, is what is the nature of Plaintiffs’ Rule of Two claims in this case? Does an alleged violation of the Rule of Two challenge a solicitation or otherwise object to an award or proposed award of a contract (i.e., are Plaintiffs’ claims “protests”)? Or, are Plaintiffs’ claims properly considered only under the fourth prong of § 1491(b)(1)? Before answering those questions, the Court returns to the statutory language of the FASA task order protest bar, and concludes that it applies, by its plain terms, only to the first three causes of action identified in § 1491(b)(1), where CICA’s definition of “protest” and the Tucker Act overlap. 35 In that regard, this Court concludes that the in 34As RAMCOR confirms, the protest of a “proposed award” concerns the merits of the agency’s presumptive award (prior to the actual award), but in any event is not the same thing as a solicitation protest. 185 F.3d at 1289 (“[a] challenge on the merits would, for example, amount to an objection to ‘a proposed award or the award of a contract’”); see also, e.g., CGI Fed., Inc., B- 418807, 2020 CPD ¶ 276, 2020 WL 4901733 , *4 (Aug. 18, 2020) (holding that although “[u]nder CICA, protests are defined to include challenges involving solicitations, and awards made or proposed under those solicitations[,]” the putative protestors did not allege grounds within the GAO’s jurisdiction “because they do not object to the terms of a solicitation and do not otherwise concern the award of a contract”); Litton Sys., Inc., B-229921, 88-1 CPD ¶ 448, 1988 WL 227107 , *6 (May 10, 1988) (explaining that GAO “generally see[s] nothing improper in an agency requirement that a proposed award selection be reviewed by higher agency officials” (emphasis added)). A typical “proposed award,” for example, is an agency’s announcement of its intent to award a sole-source contract. See, e.g., Wamore, Inc., B-417450, 2019 CPD ¶ 253, 2019 WL 3214259 (July 9, 2019) (“Wamore filed its protest challenging the Army’s planned sole-source contract award to Airborne Systems.”); eFedBudget Corp., B-298627, 2006 CPD ¶ 159, 2006 WL 3347953 (Nov. 15, 2006) (“eFedBudget Corporation protests the proposed award of a contract on a sole- source basis to RGII Technologies, Inc.”). 35Alphapointe v. Dep’t of Veterans Affairs, -- F. Supp. 3d --, 2020 WL 4346914 , at *6–*7 (D.D.C. July 29, 2020) (transferring case to the Court of Federal Claims, and rejecting, consistent with other cases, plaintiff’s argument that § 1491(b)(1) only covers “a bid protest or ‘a dispute over an individual contract solicitation or award.’” (quoting Pub. Warehousing Co. K.S.C. v. Defense Supply Ctr., 489 F. Supp. 2d 30 , 39–40 (D.D.C. 2007)). In Public Warehousing Co., the District Court correctly explained that the notion of a “‘bid protest’ limitation was squarely rejected in RAMCOR” because “[l]imiting the ‘violation of statute or regulation’ prong to bid protest cases would render it superfluous.” 489 F. Supp. 2d at 40 (holding that if “section 1491(b)(1) were limited to claims challenging the merits of a specific solicitation or contract award, the ‘violation of statute or regulation’ clause would serve no purpose because the other clauses in section 1491(b)(1) vesting jurisdiction in the Court of Federal Claims would suffice” (citing RAMCOR, 185 F.3d at 1289 )). Thus, although the term “bid protest” is generally used to refer to actions brought pursuant to 28 U.S.C. § 1491 (b)(1), it more accurately describes only the first three prongs of that statutory section. 489 F.2d at 40 (rejecting plaintiff’s contention that “Congress intended the matters described [in § 1491(b)(1)] to be limited to bid protests,” and citing cases 28 pari materia canon of statutory interpretation 36 should be applied here such that FASA’s usage of the term “protest” must be read as Congress defined the term in CICA. First, the Federal Acquisition Streamlining Act of 1994 expressly incorporated the CICA’s definition of “protest.” See Pub. L. No. 103-355, 108 Stat. 3243 §§ 1004 (“Task and Delivery Order Contracts”), 1054 (“Task and Delivery Order Contracts”), 1401 (“Protest Defined”), 1438 (“Definition of Protest”). There is no reason to go searching for another definition of “protest” in FASA (or elsewhere) where Congress literally defined the term in context. Second, binding Federal Circuit precedent requires us to apply CICA’s definition of “interested party” to § 1491(b), and both “interested party” and “protest” are defined in the very same statutory provision. See 31 U.S.C. § 3551 ; see also Am. Fed’n of Gov’t Employees, AFL–CIO v. United States, 258 F.3d 1294 (Fed. Cir. 2001). 37 There is no plausible justification for applying CICA’s definition of “interested party” to § 1491(b), while ignoring CICA’s definition of “protest” in interpreting a jurisdictional limit on § 1491(b). Third, the current FASA task order protest bar itself provides GAO with “exclusive jurisdiction” over a “protest of an order valued in excess of $10,000,000.” 41 U.S.C. § 4106 (f)(1)(B) & (F)(2). 38 The term “protest” in the jurisdictional bar must be read as coterminous with what that term means at the GAO. Viewed from the other for the proposition that “every court to address the ‘violation of statute or regulation’ clause outside of a traditional bid protest setting—in plaintiff’s words, ‘some other challenge’—has concluded that the breadth of that clause covers even non-traditional disputes arising from the procurement process as long as the violation is ‘in connection with a procurement or a proposed procurement’” (emphasis added)). “Thus, although it is true that litigation under the ADRA traditionally has developed around pre- and post-award bid protests, no inference can be drawn that the ADRA covers only those types of cases.” 489 F. Supp. 2d at 41 (footnote omitted). The Federal Circuit favorably cited Public Warehousing Co. K.S.C. in Distributed Sols., Inc. v. United States, 539 F.3d 1340 , 1345 (Fed. Cir. 2008). 36 “Under this canon, courts should interpret statutes with similar language that generally address the same subject matter together, “‘as if they were one law.’” Strategic Hous. Fin. Corp. of Travis Cty. v. United States, 608 F.3d 1317 , 1330 (Fed. Cir. 2010) (quoting Erlenbaugh v. United States, 409 U.S. 239 , 243 (1972) (internal quotes omitted)). 37See also Banknote Corp. of Am. v. United States, 365 F.3d 1345 , 1352 (Fed. Cir. 2004); Rex Serv. Corp. v. United States, 448 F.3d 1305 , 1307 (Fed. Cir. 2006) (noting that “the term ‘interested party’ in section 1491(b)(1) is construed in accordance with the [CICA], 31 U.S.C. §§ 3551 –56”); Digital Techs., Inc., 89 Fed. Cl. at 722 n.15 (“The United States Court of Appeals for the Federal Circuit has applied the CICA definition of ‘interested party’ in bid protests . . . .”); Wildflower Int'l, Ltd. v. United States, 105 Fed. Cl. 362 , 377 (2012) (discussing 41 U.S.C. § 4106 (f), and CICA’s definition of “protest”); Technatomy Corp., B–405130, 2011 WL 2321836 , at *4 (June 14, 2011) (employing CICA’s definition of protest in GAO’s analysis of § 4106(f)). 38 Or $25 million for DOD procurements. 10 U.S.C. § 2304c(e)(1)(B). 29 end of the telescope, the word “protest” cannot be read to mean one thing in the task order protest bar, but something else in the jurisdictional grant to the GAO, as both provisions are contained within 41 U.S.C. § 4106 (f). Henson v. Santander Consumer USA Inc., –– U.S. ––, 137 S. Ct. 1718 , 1723 (2017) (unanimous decision) (explaining that a court must have a “persuasive reason” to “abandon our usual presumption that ‘identical words used in different parts of the same statute’ carry ‘the same meaning’” (quoting IBP, Inc. v. Alvarez, 546 U.S. 21 , 34 (2005))). With the CICA’s definition of “protest” in mind, the Court concludes that the FASA task order protest bar does not preclude Plaintiffs’ respective claims that the agency failed to comply with the Rule of Two, particularly to the extent that such an alleged violation may be viewed as distinct from the solicitation cancellation decisions themselves. Although we recognize that CICA’s definition of “protest” includes an objection to “[t]he cancellation of . . . a solicitation[,]” 31 U.S.C. § 3551 (1)(B), and thus such a claim (or cause of action) is plausibly within the ambit of FASA’s task order protest bar, (1) the Tucker Act does not even authorize that same, independent action per se, as demonstrated supra (and as the government itself argues), 39 and (2) the government itself attempts to disengage the Rule of Two issue here from the challenged cancellation decisions. Again, the government does not argue that FASA task order protest bar generally precludes Plaintiffs’ challenges to the cancellation decisions; indeed, the government’s FASA protest bar argument is focused entirely upon Plaintiffs’ Rule of Two argument standing alone and makes no mention of the cancelled procurements. See Def. MJAR at 30–31 (arguing for the “broad reach of FASA” such that “a protest of the failure to conduct a rule of two analysis prior to issuing a task order is not a colorable basis to avoid the statutory bar”); Def. Resp. at 11. The Court is not surprised by the government’s approach because the cancellation decisions themselves are far removed from the selection of a replacement acquisition vehicle, and the government no doubt prefers to target something more likely to be considered “in connection with” a task order process. To repeat: the government does not argue that Plaintiffs’ challenge to the solicitation cancellations are barred per se by FASA. Thus, the government’s strategy, understandably, is to tie the Rule of Two claims directly to the agency’s putative selection of a task order vehicle, and then rely upon the breadth of FASA’s “in connection with” language to argue for the application of the FASA protest bar. If the government’s view of the Rule of Two claims is correct, however – i.e., that it is segregable from the challenge to the solicitation cancellations as such – that means that Plaintiffs’ “action” alleging a violation of various statutory or regulatory provisions does not fit within any of CICA’s “protest” categories. And, thus, this Court properly 39That is why, pursuant to the fourth prong of 28 U.S.C. § 1491 (b)(1), Plaintiffs must ground their case here upon an alleged violation of statute or regulation. 30 may consider Plaintiffs’ Rule of Two claims, as explained above, only under the fourth prong of 28 U.S.C. § 1491 (b)(1), just as this Court must for the direct cancellation decision challenge. Again, the fourth prong of 28 U.S.C. § 1491 (b)(1) constitutes an independent cause of action that is best understood as “cover[ing] even non-traditional disputes arising from the procurement process as long as the violation is ‘in connection with a procurement or proposed procurement[.]’” Validata Chem. Servs. v. Dep't of Energy, 169 F. Supp. 3d 69 , 78 (D.D.C. 2016) (quoting Pub. Warehousing Co. K.S.C. v. Defense Supply Ctr., 489 F. Supp. 2d 30 , 40 (D.D.C. 2007) (quoting 28 U.S.C. § 1491 (b)(1))). Again, CICA’s definition of protest contains no analog to that prong of § 1491(b)(1). 40 The Court can demonstrate this conclusion by viewing the problem from yet another, slightly different, angle. As explained above, the word “protest” cannot mean one thing in the FASA provision precluding this Court’s jurisdiction over a particular class of actions, but another thing in conferring exclusive jurisdiction on the GAO for the very same objections (or “protests”). Accordingly, the FASA statutory provision only precludes this Court from hearing actions over which GAO would itself have exclusive jurisdiction were the task order award (or proposed award) valued in excess of $10 million (or $25 million for DOD procurements). 41 U.S.C. § 4106 (f)(2); 10 U.S.C. § 2304c(e)(1)(B). The GAO does not have jurisdiction over RAMCOR-type actions brought pursuant to the final prong of 28 U.S.C. § 1491 (b)(1), 41 and, thus, to the extent Plaintiffs’ respective actions here may be properly considered under that final prong, but not by the GAO under its jurisdictional statute, the FASA task order protest bar cannot apply to preclude them. 42 That Plaintiffs’ allegations are properly considered 40To the extent Plaintiffs object to the solicitation cancellations, our jurisdiction to consider such a challenge is also covered by the fourth prong of 28 U.S.C. § 1491 (b)(1), but at least that cause of action fits comfortably within CICA’s definition of “protest,” although the government does not argue that the FASA bar applies to such an objection here. 31 U.S.C.A. § 3551 (1)(B) (solicitation cancellation). In contrast, a challenge to an agency’s selection of a replacement acquisition vehicle as contrary to law, while squarely within 28 U.S.C. § 1491 (b)(1), is not covered per se by CICA’s definition of “protest.” 41See Aerosage, LLC, B-417289, 2019 CPD ¶ 151 n.10 (Apr. 24, 2019) (“A protester desiring to seek enforcement of CICA’s stay provisions must request relief from a court of competent jurisdiction-currently the U.S. Court of Federal Claims.”); Aerosage, LLC, B-415267.13, 2018 CPD ¶ 114, 2018 WL 1392945 n.7 (Mar. 19, 2018) (“our Office has no jurisdiction to consider whether an agency improperly failed to comply with a stay of performance”). A challenge to an agency’s override of a CICA automatic stay is not characterized as a “protest.” Any interpretation of the word “protest” in the FASA task order protest bar must come to grips with the fact that RAMCOR-type actions are not protests. 42Again, even though the CICA’s definition of “protest” does include a challenge to the “cancellation of . . . a solicitation,” 31 U.S.C. § 3551 (1)(B), Plaintiffs here do not challenge the cancellation of a solicitation “in connection with the issuance or proposed issuance of a task . . . order” – which language concerns the merits of a task order award (or proposed award), as explained infra. Moreover, § 1491(b)(1) does not even independently identify solicitation 31 under the final prong of § 1491(b)(1) is a conclusion all but compelled by the Federal Circuit’s decision in PDS Consultants, Inc. v. United States, 907 F.3d 1345 , 1356 (Fed. Cir. 2018) (“PDS Consultants alleged a statutory violation—namely, that the VA acted in violation of [statute] by awarding contracts without first conducting the Rule of Two analysis. . . . As an ‘alleged violation of statute or regulation in connection with a procurement or a proposed procurement,’ PDS Consultants’ action arises under the Claims Court’s jurisdiction.”); see Glob. Computer Enterprises, Inc. v. United States, 88 Fed. Cl. 350 , 445–49 (2009) (rejecting government’s contention that if plaintiff “can overcome the jurisdictional bar simply by alleging that a regulation was violated, then that just eviscerates the jurisdictional bar”). In sum, our point is only that, even assuming the Rule of Two issue may be disconnected entirely from the cancellation challenges themselves, as the government suggests, the FASA task order bar would not apply here because it does not necessarily reach “actions” brought pursuant to the fourth prong of 28 U.S.C. § 1491 (b)(1). Unisys Corp. v. United States, 90 Fed. Cl. 510 , 517 (2009). The Court quotes Unisys at length because it is particularly instructive in the context of the instant case: This court therefore reviews an agency’s compliance with § 3553 “independent of any consideration of the merits of the underlying contract award.” Planetspace Inc. v. United States, 86 Fed. Cl. 566 , 567 (2009). Although “the Comptroller General of the United States” has “exclusive jurisdiction” over protests of task orders valued in excess of $10 million, this lawsuit does not concern the task order itself, but merely whether TSA wrongfully failed to comply with 31 U.S.C. § 3553 . National Defense Authorization Act for Fiscal Year 2008, Pub. L. No. 110–181, § 843, 122 Stat. 3 , 236 (codified at 10 U.S.C. § 2304c); see also Digital Techs. v. United States, No. 08– 604C, 2009 WL 4785451 (Fed. Cl. Dec. 9, 2009). This Court thus possesses jurisdiction to review the alleged violation of § 3553. 90 Fed. Cl. at 517 (emphasis added). In terms of the language of § 1491(b)(1), Plaintiffs allege that, in cancelling the solicitations at issue, based primarily upon the agency’s cancellations as a separate category of claims, and, thus, any such challenge under the Tucker Act, as amended by ADRA, must rely upon the final prong of § 1491(b)(1) in any event. Validata Chem. Servs., 169 F. Supp. 3d at 84 (explaining that “any arguable parallel between CICA and ADRA breaks down, as explained above, where the plaintiff’s cause of action falls under the [final] prong of ADRA’s ‘objecting to’ test, which does not require that the plaintiff object to a federal contract solicitation or award” (citing § 1491(b)(1) and RAMCOR, 185 F.3d at 1289 )); Alaska Cent. Exp., Inc. v. United States, 50 Fed. Cl. 510 , 517 (2001) (“The CICA and the ADRA are, after all, different statutes, with different definitions of bid protest.”). 32 intent to use the TMS MAIDIQ, the agency has violated FAR 1.602–2(b), FAR 19.502-2 and FAR 19.502-9 – all of which are regulations “in connection with a procurement or proposed procurement” under the Tucker Act. TTGI Am. Compl. at ¶¶ 36–38; PTP Compl. at ¶¶ 98–111; TTGI MJAR at 20–22; PTP MJAR at 21–28. In any event, neither the terms or parameters of the TMS MAIDIQ itself nor any specific task order solicitation is at issue. Indeed, at least as of the time of filing of Plaintiffs’ respective complaints, there was no pending task order solicitation, let alone a task order award (or proposed award). TTGI Am. Compl. at ¶ 27; PTP Compl. at ¶ 51. 43 2. FASA Only Bars Challenges Related To The “Proposed Issuance Or Issuance” Of A Task Order Further supporting the Court’s conclusion that the FASA bar does not apply to Plaintiffs’ Rule of Two claims is the fact that the FASA task order protest bar – again, by its terms – only applies to a “protest . . . in connection with the issuance or proposed issuance of a task . . . order . . . .” 41 U.S.C. § 4106 (f)(1) (emphasis added). The latter phrase further limits the scope of the protest bar insofar as it virtually mirrors only the second and third prongs of § 1491(b)(1) – i.e., “a proposed award or the award of a contract” – but with FASA replacing the Tucker Act’s reference to “award” and “contract” with, respectively, “issuance” and “task order.” As demonstrated, supra, however, the second and third prongs of § 1491(b)(1), properly understood, include challenges to the results or merits of a procurement – an award or proposed award of a contract – but do not cover solicitation protests, the latter which is a distinct cause of action under both the Tucker Act, as amended by ADRA, and CICA’s definition of “protest.” 43 The government, in its response brief, notified this Court that: [t]he agency recently issued a request for task order proposals in order to be prepared to proceed with the procurement in the event the Court dismisses plaintiffs’ protest of that procurement. This precautionary step was taken subsequent to the filing of the complaints in this action. However, in accordance with the agency’s voluntary stay to October 20, 2020, no awards will be issued. Def. Resp. at 8 n.2 (emphasis added). Following a status conference with the parties on November 12, 2020, Minute Order (Nov. 12, 2020), the government agreed to delay the task order proposal deadline until November 30, 2020. Because this request for proposals was issued following the initiation of this action, this Court’s analysis remains limited to the facts as alleged in Plaintiffs’ complaints. See Walton v. United States, 80 Fed. Cl. 251 , 264 (2008) (“[I]t appears that binding Federal Circuit law has not departed from the established rule that jurisdiction is determined on the basis of the facts that existed at the time the complaint was filed.” (emphasis added)), aff’d, 551 F.3d 1367 (Fed. Cir. 2009). 33  Accordingly, just as a challenge to a solicitation is distinct from the challenge to a proposed award of contract, so too a challenge to the selection (or planned selection) of a particular (task order) contracting vehicle does not equate to the “proposed issuance” of a task order. The fact that the agency here has “proposed” to use a MAIDIQ is not the same as the “proposed issuance” of a task order.44 Again, FASA’s reference to the “proposed issuance” of a task order mirrors § 1491(b)(1)’s use of “proposed award” – the former does not cover an agency’s “proposed issuance” of a task order solicitation any more than the latter includes an agency’s mere issuance of a standard solicitation. A close reading of FASA’s task order protest bar thus suggests that it is inapplicable even to a claim explicitly challenging an agency’s selection of a task order vehicle for a procurement, assuming that is one way to characterize Plaintiffs claims in this case. To be clear, however, Plaintiffs here challenge neither the terms of a solicitation, the issuance of a task order solicitation, nor the award (or proposed award) of a task order. Validata Chem. Servs., 169 F. Supp. 3d at 78 (explaining that where plaintiff “is not objecting ‘to a [government] solicitation,’ ‘to a proposed award,’ or to an actual ‘award of a [government] contract,’ . . . neither the first nor the second prong of 44 See supra n. 36. It bears repeating that if a “proposed award” were interpreted to cover the same cause of action as a challenge to a solicitation, the first prong of the § 1491(b)(1) would be rendered meaningless, just as the Federal Circuit in RAMCOR explained with respect to the “violation of a statute or regulation in connection with a procurement or a proposed procurement” language. RAMCOR, 185 F.3d at 1289 ; Jacobs Tech. Inc., 100 Fed. Cl. at 175 (critiquing the “conflat[ion] [of] the separate jurisdiction grounds of solicitation, proposed award or award, on the one hand, and violation of a statute or regulation, on the other”); Nat'l Air Cargo Grp., Inc. v. United States, 126 Fed. Cl. 281 , 288–89 (2016) (noting that the Court “must address whether the protestor is objecting to a solicitation, proposed award, award, or violation of law ‘in connection with a procurement or a proposed procurement’” – all distinct categories). While this Court has often grouped the first two prongs of § 1491(b)(1) into pre- or post-award protest categories, as noted supra, the statute clearly distinguishes between an action that is an objection to a solicitation and one that constitutes a challenge to a proposed award of a contract. Advanced Sys. Tech., Inc. v. United States, 69 Fed. Cl. 474 , 482 (2006) (explaining that “[t]he statute’s use of the conjunction ‘or’ makes it clear that the Court has jurisdiction over each of the . . . identified types of actions” and citing RAMCOR, 185 F.3d at 1289 , for the proposition that the “violation of statute or regulation prong” of 28 U.S.C. § 1491 (b)(1) provides a grant of jurisdiction separate and apart from “an objection to ‘a proposed award or the award of a contract’”). Indeed, Advanced Sys. Tech. specifically referenced “[t]he plain language of the first prong of 1491(b)(1)” as “provid[ing] that this Court has jurisdiction over ‘an action brought by an interested party objecting to a solicitation[.]’” Id.; see also DMS All–Star Joint Venture v. United States, 90 Fed. Cl. 653 , 661 n.10 (2010) (noting the protestor challenged not the terms of the solicitation but the proposed award to a particular offeror). The Federal Circuit similarly has distinguished between the different categories of § 1491(b)(1) protest-type actions. Res. Conservation Grp., 597 F.3d at 1245 (referencing “a challenge to an award, proposed award, or solicitation”). 34 ADRA’s ‘objecting to’ test is implicated”). Instead, Plaintiffs’ focus is on the agency’s allegedly improper cancellation of two completed procurements. As explained above, Plaintiffs allege that the agency’s decision to cancel those solicitations fails the APA standard of review, at least in part because the agency erred in concluding that it could utilize the TMS MAIDIQ vehicle to procure the work at issue. In turn, whether the agency correctly (or incorrectly) reached that latter conclusion depends at least in-part on whether the agency complied with the Rule of Two. But whether this Court addresses the Rule of Two question simply as a subsidiary issue in deciding the propriety of the agency’s cancellation decisions or whether we view Plaintiffs’ Rule of Two claim as a stand-alone allegation of a regulatory violation, as explained supra, the action in either case is not a “protest . . . in connection with the issuance or proposed issuance of a task . . . order[.]” 41 U.S.C. § 4106 (f)(1) (emphasis added). Again, Plaintiffs’ action here properly is considered pursuant to the last prong of § 1491(b)(1) – an alleged “violation of a statute or regulation in connection with a procurement or a proposed procurement.” Acetris Health, LLC v. United States, 949 F.3d 719 , 728 (Fed. Cir. 2020) (“The reference to ‘proposed procurements’ likewise broadly encompasses all contemplated future procurements by the agency.”). Put yet differently, while all “proposed” awards of either contracts or task orders may be subsumed within the “in connection with a procurement” language, not all alleged violations of a statute or regulation “in connection with a procurement or proposed procurement” involve an award or a proposed award. 45 Any contrary interpretation would read a statutory phrase out of existence. 45Indeed, the phrase “proposed award” in 28 U.S.C. § 1491 (b)(1) appears to be a term of art employed due to this Court’s prior, more limited, pre-ADRA jurisdiction over “bid protests” pursuant to § 1491(a). Prior to ADRA, this Court had jurisdiction to consider implied contract claims exclusively from “disappointed bidders” but could only order injunctive relief in pre- award cases. That meant there was no jurisdiction over solicitation challenges brought prior to the submission of proposals because such a plaintiff could not be a “disappointed bidder” – no implied contract to fairly consider a proposal would yet exist. And, once an award was actually made, a plaintiff might be a “disappointed bidder” but could not obtain injunctive relief. For a “proposed award,” however, a plaintiff could file a bid protest claim pursuant to § 1491(a) and obtain injunctive relief. The critical point here is that the phrase “proposed award” – whether in 28 U.S.C. § 1491 or in FASA – is not intended to cover some future result of a solicitation that has not been issued or even the future result of an ongoing procurement process, in general. See, e.g., United States v. John C. Grimberg Co., 702 F.2d 1362 , 1367 (Fed. Cir. 1983) (“Thus [§ 1491](a)(3) made an equitable remedy available when a claim over which the court has jurisdiction (implied contract under (a)(1)) is filed in the court before a contract has been awarded.”); Central Ark. Maintenance, Inc. v. United States, 68 F.3d 1338 , 1341 (Fed. Cir. 1995) (pre-ADRA § 1491(a) “jurisdictional grant . . . extends to suits brought by disappointed bidders, commonly called bid protests, challenging the proposed award of contracts based on alleged improprieties in the procurement process” (emphasis added)). “Proposed award” was never understood, pre-ADRA, to encompass pre-solicitation agency decisions or even solicitation challenges for the simple reason that “[v]iolations of law, rule, or regulation in the structuring 35  The government’s interpretive approach would rewrite the FASA task order protest bar as applying “in connection with a task order” generally or “in connection with a task order procurement or proposed procurement.” Congress’ selection of the phrase “issuance or proposed issuance,” however, must be given meaning. In sum, while the phrase “in connection with” must be interpreted broadly per the directions of the Federal Circuit, the Court concludes that the neighboring language in 41 U.S.C. § 4106 (f)(1) – the phrases “protest” and “issuance or proposed issuance of a task . . . order” – serve to limit the reach of the FASA task order protest bar. 46 3. The Failure To Conduct A “Rule Of Two” Analysis Challenge Is Not “In Connection With” A Task Order Finally, while the Federal Circuit often has recognized that the phrase “in connection with” should be interpreted broadly, this Court recognizes that the Supreme Court has cautioned that “a non-hyperliteral reading [of this term] is needed to prevent the statute from assuming near-infinite breadth.” FERC v. Electric Power Supply Ass’n, 136 S. Ct. 760 , 774 (2016); see Maracich, 570 U.S. at 59–60 (citing cases). Although the government relies upon SRA Int’l, Inc. v. United States, 766 F.3d 1409 (Fed. Cir. 2014), Def. Mot. at 30–31, that case is distinguishable in a manner that supports jurisdiction here (even putting aside this Court’s foregoing analysis of the other parts of the FASA statutory language). In SRA Int’l, the protestor appealed this Court’s dismissal of a protest, which alleged that the agency improperly had waived a conflict of interest following the award of a task order. Id. at 1410 . This Court held the waiver was not in connection with the task order because the waiver was issued after the award and was “a matter left to agency discretion.” Id. at 1412 (quoting SRA Int'l, Inc. v. United States, 114 Fed. Cl. 247 , 255–56 (2014)). The Federal Circuit reversed, holding that neither the of a solicitation . . . are breaches of statutory or regulatory obligations, not contractual ones, and this court does not have the authority to redress them either in law or equity through a disappointed bidder suit.” Eagle Const. Corp. v. United States, 4 Cl. Ct. 470 , 476–77 (1984) (emphasis added) (explaining that pursuant to pre-ADRA § 1491(a) jurisdiction, “the court's jurisdiction over the implied contract of fair dealing in disappointed bidder cases embraces neither claims challenging terms, conditions, or requirements of solicitations, nor policies and activities which preceded and resulted in the solicitations”). On the other hand, where offerors had submitted bids or proposals, “Congress intended 28 U.S.C. § 1491 (a)(3) to [provide] . . . an unsuccessful bidder [with] standing to challenge a proposed contract award on the ground that in awarding the contract the government violated statutory and procedural requirements.” C.A.C.I., Inc.-Fed. v. United States, 719 F.2d 1567 , 1574 (Fed. Cir. 1983) (emphasis added). In this case, there is no “proposed award” at issue. 46Glob. Computer Enterprises, Inc., 88 Fed. Cl. at 414–15 (“If Congress intended to prohibit protests stemming from any action related to a task order contract, then it could have explicitly drafted a statute that barred any protest in connection with a task order. It did not do so. Instead, Congress prohibited bid protests in connection with either the issuance or proposed issuance of a task order. . . .” (emphasis added)). 36 temporal disconnect between the task order and the waiver, nor the latter’s discretionary nature, adequately separated the protest from the underlying task order. 766 F.3d at 1413. Thus, in SRA Int’l, the Federal Circuit concluded that an “OCI waiver was directly and causally connected to the issuance of [a task order], despite being executed after issuance.” 766 F.3d at 1413 (emphasis added). Indeed, “[t]he GSA issued the waiver in order to go forward with [the selected awardee].” Id. Substitute “solicitation cancellation” for “OCI waiver,” and the government’s position here – at least on the surface – would seem to be correct. Critically, however, the Federal Circuit cautioned that while “nothing in FASA’s language automatically exempts actions that are temporally disconnected from the issuance of a task order[,] . . . a temporal disconnect may, in some circumstances, help to support the non-application of the FASA bar . . . .” 766 F.3d at 1413 (emphases added). In this case, as previously explained, Plaintiffs’ respective complaints may be read as contending that the agency’s failure to follow the Rule of Two (1) renders the solicitation cancellations arbitrary and capricious, and/or (2) independently violated FAR 19.502-2(b). Either way, for the reasons explained further below, the Rule of Two issue in the instant case is both conceptually and sufficiently “temporally disconnected from the issuance of a task order” to avoid it. Id. Plaintiffs essentially contend that an agency must apply the Rule of Two before an agency can even identify the possible universe of procurement vehicles which may be utilized for a particular scope of work. TTGI Am. Compl. at ¶ 36; PTP Compl. at ¶¶ 95, 111; TTGI MJAR at 26; PTP MJAR at 25–27. The Court agrees. Where an agency refuses to perform the Rule of Two analysis or otherwise disregards the results of such an analysis, that does not mean an agency necessarily will select an unrestricted vehicle or as task order vehicle. Indeed, the agency still may solicit the work utilizing procurement vehicles that have nothing to do with task orders (e.g., a standalone solicitation contemplating a single awardee but that is not set-aside for small business). In other words, there is no necessary connection between the Rule of Two analysis (or the failure to conduct such an analysis) and the issuance of a task order. Proxtronics Dosimetry, LLC v. United States, 128 Fed. Cl. 656 , 680 (2016) (“Necessarily, the decision to set aside an acquisition for a small business must be made prior to issuing the solicitation.” (citing FAR 19.508)). In contrast, in SRA Int'l, the agency simply could not proceed with a task order that the agency already had awarded, absent the challenged conflict waiver. The conflict waiver thus was necessary to the actual task order award (and the plaintiff had challenged a specific task order award). To further illustrate the distinction, consider a hypothetical case in which an agency purports to have applied the Rule of Two. As a result of the agency’s analysis, the agency determines that a set-aside is not required. Instead of immediately proceeding with a particular procurement strategy, however, the agency issues a request for information (“RFI”), in which the agency indicates that it is considering various unrestricted vehicles with no set-aside component: e.g., a stand-alone, new 37 solicitation with a single-awardee; an existing MAIDIQ; or the issuance of a new MAIDIQ. At that stage, following the issuance of the RFI, may a dissatisfied small business file suit in the Court of Federal Claims, pursuant to 28 U.S.C. §1491 (b)(1), challenging the agency’s decision not to set-aside the procurement? In the Court’s view, the answer to that question is a straightforward “yes” based upon a simple syllogism: (1) the RFI is part of the procurement process; (2) the RFI includes the agency’s decision not to set-aside the procurement; (3) a small business protestor’s allegation that the agency’s decision violates the Rule of Two constitutes an alleged “violation of statute or regulation in connection with a procurement or a proposed procurement”; and, thus, (4) the allegation is unquestionably within this Court’s jurisdiction. Distributed Sols., Inc., 539 F.3d at 1346 (“The statute explicitly contemplates the ability to protest these kinds of pre-procurement decisions by vesting jurisdiction in the Court of Federal Claims over ‘proposed procurements.’ A proposed procurement, like a procurement, begins with the process for determining a need for property or services.”). In the hypothetical case outlined above, the FASA task order protest bar clearly would not apply because, at a minimum, 47 the agency has not yet selected any contract vehicle (task order or otherwise). Moreover, if the small business were to file suit in this Court, the government could not subsequently divest this Court of jurisdiction merely by selecting an IDIQ vehicle. See GAF Bldg. Material Corp. v. Elk Corp., 90 F.3d 479 , 483 (Fed. Cir. 1996) (“[J]urisdiction must be determined on the facts existing at the time the complaint under consideration was filed.”) Nor, for that matter, should jurisdiction depend upon whether the small business beats the agency to the punch, and files suit to challenge the set-aside analysis, or whether the agency quickly makes a decision to utilize a task order vehicle prior to the filing of a suit. In both cases, the agency’s Rule of Two decision simply has no necessary connection to the selection of the particular vehicle. 48 See McAfee, Inc. v. United States, 111 Fed. Cl. 696 , 709–10 (2013) (holding that 47Pursuant to the Court’s interpretation of the FASA task order protest bar, supra, an objection to an agency’s selection of a task order vehicle is not, in any event, a “protest . . . in connection with the issuance or proposed issuance of a task . . . order[.]” 41 U.S.C. § 4106 (f)(1). The Court’s point here is that, even if our statutory interpretation were rejected, SRA Int’l is consistent with “the non-application of the FASA bar” in this case. 766 F.3d at 1413. 48Again, this assumes, arguendo, that the challenge to an agency’s selection of a task order vehicle itself would be within the ambit of the FASA task order protest bar, a proposition with which the Court disagrees. In any event, the Court’s view of the correct result in the hypothetical fits well with the Court’s interpretation of the FASA statutory language. In particular, a challenge to an agency’s failure to comply with the Rule of Two is not a “protest” as that term is defined in CICA. In this case, for example, it is a challenge neither to a particular solicitation nor to the merits of an award or to a proposed award of a task order. Similarly, in the Court’s hypothetical case involving the RFI, the small business would be challenging the agency’s decision not to set-aside the procurement, but would not be objecting to the agency’s decision to proceed with any particular procurement strategy because none has been selected. 38 “McAfee’s complaint falls under the [final] prong of Section 1491(b)(1), concerning an alleged ‘violation of statute or regulation in connection with a procurement or a proposed procurement’” and that “the protested decision is not directly connected to the award of any particular delivery order”); BayFirst Sols., LLC v. United States, 104 Fed. Cl. 493 , 499, 507–08 (2012) (holding that the FASA jurisdictional bar did not apply to the agency’s decision to cancel a solicitation, and that although the cancellation of the solicitation and issuance of the task order were temporally connected, the cancellation of the solicitation can be viewed as “a discrete procurement decision and thus could have been the subject of a separate protest”); cf. MORI Assocs., Inc. v. United States, 113 Fed. Cl. 33 , 38 (2013) (citing the Court’s earlier decision in MORI Assocs., Inc. v. United States, 102 Fed. Cl. 503 , 533 (2011), for the proposition that “[d]iscrete, preliminary matters that may not necessarily lead to the proposed issuance of a task order may still be protested” such as “a ‘Rule of Two’ determination under 48 C.F.R. § 19.502 –2(b)” which is “required prior to the selection of a particular procurement vehicle, since whether the work must be set aside for small business must be known before an agency can select the means of fulfilling its needs”). 49 The actual Plaintiffs in this case are similarly situated to the hypothetical small business; their complaint may be read as challenging the agency’s solicitation cancellation decision and its refusal to set aside the work at issue, but not the decision to use a task order contact per se. In contrast, in SRA Int'l, the protestor had filed a post-award bid protest, challenging the issuance of a task order on the grounds of a conflict (and an improper waiver) – that clearly is a “protest” that is “directly and causally connected” to the issuance of a task order in way that a challenge to a Rule of Two violation is not. 49 But cf. Insap Servs., Inc. v. United States, 145 Fed. Cl. 653 , 654 (2019). In that case, Judge Wheeler rejected plaintiff’s argument “that this Court has jurisdiction to hear its protest because it is challenging the conditions antecedent to the solicitation, not the solicitation itself” and because “the decision to bundle [certain] services under a single solicitation is not connected to the solicitation, as it occurs ‘prior to’ and is not ‘mutually dependent on’ the issuance of the task order.” Id. Insap is distinguishable insofar as it involved a challenge to a bundling decision where a “Request for Task Order Proposals” already had been issued at the time of the protest. Id. In any event, the undersigned admittedly does not share Insap’s capacious view of the Federal Circuit’s decision in SRA Int’l, particularly to the extent Insap relied upon “[p]olicy considerations[,]” including the assessment that this Court should not “allow a protest to be heard at this Court after already being heard by GAO” as that “would burden the Government and negate Congress's intent to streamline.” Id. at 655 . Although Insap concluded that “[i]t would defeat Congress’s purpose if would-be protestors could make an end run around the FASA’s plain meaning by claiming that they are challenging the conditions of the solicitation, but not the task order itself[,]” id., this Court disagrees with such an interpretation of the FASA task order protest bar for the reasons explained herein. See BayFirst Sols., 104 Fed. Cl. at 507–08 (“The cancellation of the Solicitation may be viewed as a discrete procurement decision and one which could have been the subject of a separate protest. This approach is not unlike the one employed by the court in MORI, where a preliminary procurement decision, one which should have occurred before any contract vehicle was selected, was held to be subject to challenge and 39  Finally, at least one GAO decision supports the Court’s view of the jurisdictional question and the FASA task order protest bar. In LBM, Inc., the protestor challenged the Army’s decision to acquire certain services under the Logistical Joint Administrative Management Support Services (“LOGJAMSS”) contracts, when those services previously had been provided exclusively by small businesses. B-290682, 2002 CPD ¶ 157, 2002 WL 31086989 , *1. After the Army decided to transfer the services at issue to the LOGJAMSS contracts, the agency solicited proposals from LOGJAMSS contractors, but “did not coordinate with, or notify, the SBA of its intent to withdraw ... services from exclusive small business competition and to transfer these services to LOGJAMSS contracts.” Id. at *3 . The GAO sustained the protest. Id. at *8 . In so doing, the GAO rejected the Army’s contention that the FASA task order protest bar divested the GAO of jurisdiction because the protestor challenged the proposed issuance of a task order under the LOGJAMSS contract; the GAO explained as follows: LBM is not challenging the proposed issuance of a task order for these services, but is raising the question of whether work that had been previously set aside exclusively for small businesses could be transferred to LOGJAMSS.... This is a challenge to the terms of the underlying LOGJAMSS solicitation and is within our bid protest jurisdiction. Id. at *3 . 50 The GAO further held that the FASA “was not intended to, and does not, preclude protests that timely challenge the transfer and inclusion of work in ID/IQ contracts without complying with applicable laws or regulations,” id., and explained that Small Business Act requirements “were applicable to acquisitions prior to the enactment of [the] FASA, and nothing in that statute authorizes the transfer of acquisitions to ID/IQ contracts in violation of those laws and regulations,” id. at *4 . The GAO indicated that the “Rule of Two” applied “to ‘any acquisition over $100,000,’” id. at *7 (quoting 48 C.F.R. § 19.502 –2(b)), and therefore determined that the Army was required to comply with FAR § 19.502–2(b) and conduct the appropriate “Rule of Two” analysis. Id. (“Whatever the outcome of the FAR § 19.502–2(b) analysis, ... the agency’s intent to use a task order under LOGJAMSS as the contract vehicle did not eliminate the legal requirement that the agency undertake that analysis.”). not barred by § 4106(f), even though the agency eventually issued a task order to fulfill its needs. 102 Fed. Cl. at 533–34.”). And, again, in any event, Plaintiffs in this case do not challenge the conditions of any solicitation. 50To be clear, although this Court agrees with the GAO’s view of the scope of task order bar as applied (or, more accurately, not applied) in LBM, the Court does not concur with the GAO’s view that a challenge to the agency’s selection of an IDIQ task order contract vehicle constitutes a solicitation protest. 40  Accordingly, in LBM, Inc., the GAO declined to apply the FASA task order protest bar even where the protestor directly challenged the agency’s selection of a task order vehicle and after the agency had issued a task order solicitation under that vehicle – the latter which, the Court again notes, had not occurred in this case at the time Plaintiffs filed their respective complaints. Apparently, then, the GAO’s view of the FASA task order protest bar is consistent with this Court’s reasoning, supra, that even an objection to a solicitation – a “protest” within the GAO’s jurisdiction – does not equate to a protest “in connection with” the proposed issuance of a task order. See Glob. Computer Enter., Inc., 88 Fed. Cl. at 448 (“Although the protest in LBM, Inc. concerned the underlying contracts . . ., the court nevertheless finds it instructive” because the protestor “did not challenge the issuance or proposed issuance of a task order under the existing contract.”). **** In sum, this Court holds that the FASA task order protest bar is not an obstacle to considering Plaintiffs’ challenge to the cancellation of a solicitation, even where this Court will have to reach the merits of their Rule of Two claims – whether because the rationality of the agency’s cancellation depends upon the availability of the preferred MAIDIQ vehicle, or because the alleged failure to conduct a Rule of Two analysis constitutes an independent basis for our jurisdiction pursuant to the last prong of § 1491(b)(1). III. Standards of Review A. Motion For Judgment On The Administrative Record Judgment on the Administrative Record, pursuant to RCFC 52.1, “is properly understood as intending to provide for an expedited trial on the record.” Bannum, Inc. v. United States, 404 F.3d 1346 , 1356 (Fed. Cir. 2005). The rule requires the Court “to make factual findings from the record evidence as if it were conducting a trial on the record.” Id. at 1354 . The Court asks whether, given all the disputed and undisputed facts, a party has met its burden of proof based on the evidence in the record. See id. at 1356–57. B. Challenge To Cancellation Decision Generally, in an action brought pursuant to § 1491(b) of the Tucker Act, the Court reviews “the agency’s actions according to the standards set forth in the Administrative Procedure Act, 5 U.S.C. § 706 .” See Nat’l Gov't Servs., Inc. v. United States, 923 F.3d 977 , 981 (Fed. Cir. 2019) (citing 28 U.S.C. § 1491 (b)(4)). “In applying this standard of review, we determine whether ‘(1) the procurement official’s decision lacked a rational basis; or (2) the procurement procedure involved a violation of 41 regulation or procedure.’” Id. (quoting Weeks Marine, Inc. v. United States, 575 F.3d 1352 , 1358 (Fed. Cir. 2009)). “When a challenge is brought on the first ground, the test is ‘whether the contracting agency provided a coherent and reasonable explanation of its exercise of discretion, and the disappointed bidder bears a heavy burden of showing that the award decision had no rational basis.’” Banknote Corp. of Am. v. United States, 365 F.3d 1345 , 1351 (Fed. Cir. 2004) (quoting Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324 , 1332–33 (Fed. Cir. 2001)). “When a challenge is brought on the second ground, the disappointed bidder must show a clear and prejudicial violation of applicable statutes or regulations.” Impresa Construzioni, 238 F.3d at 1333 . To establish prejudice, a protestor must further demonstrate “that there was a ‘substantial chance’ it would have received the contract award but for the . . . errors in the bid process.” Bannum, Inc., 404 F.3d at 1357 (quoting Infro. Tech. & Applications Corp. v. United States, 316 F.3d 1312 , 1319 (Fed. Cir. 2003)); see Kiewit Infrastructure West Co. v. United States, 147 Fed. Cl. 700 , 707 (2020) (requiring a showing of prejudice in challenge to cancellation decision). In some cases, a statute or regulation may provide a substantive yardstick against which an agency’s exercise of discretion may be measured or impose a related procedural requirement. For example, as noted above, in the context of a sealed bid procurement, FAR 14.404-1 (“Cancellation of invitations after opening”) provides that “after bids have been opened, award must be made to that responsible bidder who submitted the lowest responsive bid, unless there is a compelling reason to reject all bids and cancel the invitation.” FAR 14.404-1(a)(1) (emphasis added). The FAR further defines what constitutes a “compelling reason” in FAR 14.404-1(c) and imposes a procedural requirement that “the agency head determine[] in writing” that such a reason exists. See, e.g., Veterans Contracting Grp., 920 F.3d at 806–07 (framing the issue as “whether the contracting officer’s decision to cancel the . . . solicitation lacked any rational basis,” citing Parcel 49C Ltd. P’ship, 31 F.3d 1153 –54, for the proposition that “the government cannot cancel a solicitation solely to satisfy an agency’s whim, we held that the cancellation was arbitrary and capricious[,]” and holding that the contracting officer “had a compelling reason to request cancellation”); Nat'l Forge Co. v. United States, 779 F.2d 665 , 668 (Fed. Cir. 1985) (explaining, in a pre-ADRA case, that “[t]he Claims Court correctly restricted its legal review to whether the contracting officer’s interpretation of, and later decision to cancel, the solicitation was unreasonable or an abuse of discretion under the requirements for cancellation set forth in 48 C.F.R. § 14.404 –1(c)”). Here, the 13F and JFOC Solicitations were issued as FAR Part 8, FSS procurements, which, as the government correctly notes, Def. Supp. Br. at 1–5, do not contain any provisions providing substantive considerations for, or constraints on, 42 cancellation decisions, similar to those contained in FAR 14.404-1 regarding sealed bidding. While the government in its initial briefs conceded that the agency’s cancellation decision nevertheless should be reviewed pursuant to the standard APA rational basis test, Def. MJAR at 15–17, 25; Def. Resp. at 1, 5, the government takes the position in its supplemental brief that the agency action should only be reviewed for “bad faith” because the procurements were solicited pursuant to FAR Part 8, which does not contain any substantive yardstick for limiting an agency decision to cancel a procurement. Def. Supp. Br. at 9-10. While a finding of bad faith may be sufficient, it is not necessary for the Court to determine that an agency decision is arbitrary and capricious. Croman Corp. v. United States, 724 F.3d 1357 , 1365 (Fed. Cir. 2013) (holding that “Croman has failed to show that the partial cancellation of the 2011 Solicitation was in bad faith or lacking in rational basis” (emphasis added)); see also Prineville Sawmill Co., , 859 F.2d at 911 . In this case, even though FAR Part 8 does not specify substantive cancellation considerations, the Tucker Act, as amended by ADRA, “explicitly imports the APA standard of review into the Court of Federal Claims’ review of agency [procurement-related] decisions.” RAMCOR, 185 F.3d at 1290 ; cf. Strategic Tech. Inst., Inc., B-408005.2, 2013 CPD ¶ 229, 2013 WL 5754966 , *3 (Oct. 21, 2013) (“Under FAR subpart 8.4 procedures, an agency need only advance a reasonable basis to cancel a solicitation.”). 51 Moreover, as explained above, see supra Section II, FAR 1.602–2(b) permits this Court to conduct an APA review, while 10 U.S.C. § 2305 (b)(2) supplies a procedural requirement and a substantive yardstick, against which we may evaluate the agency’s decisions here. IV. The Court Grants Plaintiffs’ Motion For Judgment On The Administrative Record And Denies The Government’s Cross-Motion For Judgment On The Administrative Record Plaintiffs’ motions for judgment on the Administrative Record present two primary arguments: (1) the agency acted in an irrational and unreasonable manner when it cancelled the 13F and JFOC Solicitations due, in part, to the agency’s plan to resolicit the requirements under the TMS MAIDIQ; and (2) the agency violated the “Rule of Two” (see FAR 19.502-2(b)) and FAR 19.502-9 when cancelling the solicitations for the purpose of recompeting the requirements under the TMS MAIDIQ. See TTGI MJAR at 13–22; PTP MJAR at 21–24. The government, in its cross-motion for judgment on the Administrative Record, contends that (1) the agency decision to cancel the 13F 51TTGI counters that because the cancellation decision arose in the context of a corrective action, the Court should apply a more demanding review to determine whether the corrective action was “’rationally related’ to an alleged procurement defect.” TTGI MJAR at 13–14 (emphasis added) (citing Dell Fed Sys., L.P. v. United States, 906 F.3d 982 , 955 (Fed. Cir. 2018)). In either event, whether the cancellation decision is reviewed on its own merits or as part of corrective action, this Court ultimately reviews the agency’s decision for “reasonableness.” 43 and JFOC Solicitations for the purpose of transferring the procurements to the TMS MAIDIQ was rational, and (2) the “Rule of Two” does not apply to the facts of this case. ECF No. 30 at 17. For the reasons explained below, the Court agrees with Plaintiffs. A. The Agency Failed To Provide A Sufficiently Reasonable Explanation For The Cancellation Of The Solicitations In determining whether the agency adequately explained the reasoning behind its decision to cancel the 13F and JFOC Solicitations, we turn to the explanation provided by the agency at the time of its decision-making. See WHR Group, Inc. v. United States, 115 Fed. Cl. 386 , 399 (2014) (noting that the agency decision must be supported by the reasoned basis the agency actually provided). The Court notes that in this case there is no formal cancellation decision or memorandum regarding the 13F and JFOC Solicitations; rather, the only document that proports to show the agency’s rationale behind its decision to cancel those solicitations is CO Abraham’s August 10 MFR. ECF No. 25 at 617–20 (AR 613–16). In that four-page memorandum, CO Abraham describes the GSA MAS solicitation’s requirements and history at length, and outlined the features of the TMS MAIDIQ that the agency could use as a replacement. Id. In discussing the previous solicitations, the memo explained: After extensive use of the GSA OASIS MAIDIQ and GSA Multiple Award Schedule, it was determined the contract vehicles did not meet FCoE mission needs as world events unfolded. Events included emerging worldwide requirements due to short notice missions, [Training Resource Arbitration Panels] requirements, and lack of capability to provide the subject matter expertise. . . . As conveyed above, GSA OASIS MAIDIQs and Multiple Award Schedules did not provide the support required by FCoE to support emerging and known requirements.” Id. at 617–18 (AR 613–14) (emphasis added). But, concluding that the prior MAIDIQ and GSA MAS vehicles were not sufficient for the entire breadth of work contemplated by the new TMS MAIDIQ is not the same thing as concluding that the latter vehicle is somehow superior to the GSA MAS vehicles for the purposes of the statements of work at issue. In that regard, following additional historical details about the awarding of the GSA MAS, the August 10 MFR concluded with what is the only excerpt of any agency memoranda in the Administrative Record that reasonably might be characterized as representing the agency’s rationale for planning to cancel the 13F and JFOC Solicitations: 44  Based on the above information, I believe the Government’s best interest can be met by competing the JFO, 13F and KMS requirements under the MICC-Fort Eustis recently awarded TMS MAIDIQ. Both time and money can be saved by the Government in pursuit of this avenue. Time and money are expended on soliciting and awarding interim short term contract actions to support on-going requirements. Contract periods can be adjusted to support a Base and Four Option periods on most requirements thus saving manpower and costs tied to phase-in and certification of new contractor employees. Longer periods of performance also support the Government’s ability to successfully recruit and retain qualified personnel on existing requirements, thereby ensuring continuity of the training mission. Id. at 620 (AR 616) (emphasis added). In sum, the agency justified the cancellation on the basis of the assertion that by transitioning the procurements at issue to the TMS MAIDIQ, the agency would get a more flexible and longer term of performance while saving time and money. This explanation, however, without more information – and in the absence of any supporting citations in the underlying record – does not satisfy the agency’s burden. Although the Court is mindful that the APA rational basis standard of review is “highly deferential” and “the court should not substitute its judgment for that of the agency,” CW Government Travel, Inc. v. United States, 110 Fed. Cl. 462 , 479 (2013), that “does not mean that this [Court’s] review is ‘toothless.’” Orchard Hill Bldg. Co. v. United States Army Corps of Engineers, 893 F.3d 1017 , 1024 (7th Cir. 2018) (quoting Pioneer Trail Wind Farm, LLC v. FERC, 798 F.3d 603 , 608 (7th Cir. 2015)). More specifically, courts are authorized to set aside agency action where the record fails to articulate a “rational connection between the facts found and the choice made.” Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 , 43 (1983)); see Starry Assoc., Inc. v. United States, 127 Fed. Cl. 539 , 548–49 (2016) (“Where the agency fails to undertake a review or fails to document such review, we must conclude that it acted irrationally.”). Here, the August 10 MFR is bereft of any specific context or factual details that would support its generalized assertions and naked conclusions about the GSA MAS solicitations not meeting agency needs or how the agency would be better served by transferring the solicitations from the GSA MAS to the TMS MAIDIQ. See, e.g., Patterson v. Comm’r of Soc. Sec. Admin., 846 F.3d 656 , 663 (4th Cir. 2017) (“[T]he dispute here arises from a problem that has become all too common among administrative decisions challenged in court – a problem decision makers could avoid by following the admonition they have no doubt heard since their grade-school math class: Show your work.”); Highway J Citizens Grp., U.A. v. Dep’t of Trans., 2010 WL 1170572 , at *2 (E.D. Wis. Mar. 23, 2010) (“Defendants cannot simply list cursory comments or other 45 information and then assert a conclusion; rather, they must demonstrate the path of their reasoning from whatever data they rely on to their conclusion . . . .”). Take, for example, the August 10 MFR’s first assertion as to the inefficiency of the GSA MAS to meet the agency’s needs “as world events unfolded.” ECF No. 25 at 617 (AR 613). While this conceivably could be a legitimate concern with the GSA MAS solicitations justifying cancellation, 52 without factual support for this contention, this Court cannot evaluate whether there is a rational basis for the assertion. See Kirwa v. Dep’t of Defense, 285 F. Supp. 3d 257 , 270 (D.D.C. 2018) (“APA review may be limited, but it involves more than a court rubberstamping action based on bare declarations from the agency amounting to “trust us, we had good . . . reasons for what we did.”). Again, even if the GSA MAS generally is insufficient to meet the agency’s needs in some long-term, strategic sense – as compared to the breadth of the new TMS MAIDIQ – that says nothing about the suitability of the GSA MAS to meet the agency’s current needs with respect to the 13F and JFOC procurements at issue. Moreover, consider the August 10 MFR’s naked assertion that “time and money can be saved by the Government in pursuit of this avenue.” ECF No. 25 at 620 (AR 616). If the Court were to accept this rationale at face value without asking for supporting details, the government could always include this attractive catch-all at the end of its decision document to justify almost any solicitation cancellation. Meaningful judicial review requires more than just accepting such a bald assertion. See Bagdonas v. Dep’t of Treasury, 93 F.3d 422 , 426 (7th Cir. 1996) (“The statement of reason need not include detailed findings of fact but must inform the court and the petitioner of the grounds of decision and the essential facts upon which the administrative decision was based.” (emphasis added)). In this case, the agency does not explain how the TMS MAIDIQ will save the agency “time and money” in comparison with finalizing procurements that were all but completed, nor is there any support in the record for that conclusion beyond the statement itself. The government, in its cross-motion for judgment on the Administrative Record, argues that the “supporting materials to the August 10 memorandum documented multiple benefits that the TMS MAIDIQ was designed to provide” and “the fact that the current acquisition strategy did not provide those benefits.” Def. MJAR at 12, 22. But those putative “benefits” reflect the long-term strategic advantages of the TMS MAIDIQ overall; the government cannot simply point to its general justification for that MAIDIQ, without more, to support the proposition that it will better meet the agency’s needs with respect to the precise statements of work at issue. Moreover, although the agency asserts that the TMS MAIDIQ will provide a longer period of performance than 52See, e.g., Tien Walker, B-414623.2, 2017 CPD ¶ 218, 2017 WL 2954445 , *2 (July 10, 2017) (“A reasonable basis to cancel exists when, for example, an agency concludes that a solicitation does not accurately reflect its needs.”) 46 the present “short term contract actions,” ECF No. 25 at 620 (AR 616), nowhere does the agency address the possibility of extending the duration of those contracts beyond the originally planned 12-month period of performance or why that would be more difficult than utilizing the TMS MAIDIQ. The government also points the Court to the following examples of the agency’s “key finding[s]”: • The agency “necessitates the use of an IDIQ to meet contract execution in a timely manner due to MICC staffing shortfalls.” • “Using other contract mechanism as opposed to a FCoE IDIQ will add a minimum of 120 days to the procurement timeline, potentially eliminate the ability for an expedited contract action for unforecasted organizational needs, and put existing requirements at increased risk for gaps on contracted services.” • “Costs for the use of non-IDIQ contract mechanism will increase significantly.” • “FCoE’s ability to support short term, emerging training requirements to meet Army demands will be greatly reduced.” • “FCoE’s ability to rapidly provide training, experimentation, analytic, and simulation support will be reduced. Fires-led experiments and the TRADOC Campaign of Learning will be interrupted and/or degraded.” Id. at 12–13, 22–23 (quoting ECF No. 25 at 675 (AR 671)). These generalized conclusions, however, do little to provide actual factual support for the agency’s cancellation decisions at issue here. Rather than engaging in a factual contrast between the cancelled procurements at issue and the TMS MAIDIQ, the supporting material’s conclusory assertions fail to provide a meaningful factual roadmap for the agency’s decision. 53 For example, although the Court has no basis to 53The government also asserts that “[a]n additional benefit of the TMS MAIDIQ is that the issues that continued to snag the GSA MAS solicitations and send them into bid protests are eliminated as an issue. . . . This ensured that the TMS MAIDIQ was not subject to a protest and automatic stay at GAO . . . and it would also provide some comfort that a protest direct to this Court was not likely . . . .” Def. MJAR at 24 (emphasis added, internal citations omitted). Rather than 47 question the agency’s conclusion that it generally requires a MAIDIQ due to staffing shortfalls, there is zero record evidence indicating that any such shortfall would impact the agency’s proceeding with the 13F and JFOC procurements or that moving such work to the TMS MAIDIQ would improve any putative staffing difficulties for the work at issue. The timeline comparison also is not specific to the already-completed (albeit protested) 13F and JFOC procurements; nowhere in the Administrative Record does it appear that the agency compared the timeline of continuing with those procurements as opposed to starting from scratch under the MAIDIQ. The agency’s concern about increased costs for a non-MAIDIQ procurement seems plausible, in general, but CO Abraham never compares the cost of proceeding with the cancelled procurements, as opposed to starting a new task order procurement under the preferred TMS MAIDIQ. And the final two conclusions above regarding the ability of the FCoE to support Army needs has nothing whatsoever to do with the 13F and JFOC procurements. To be clear, CO Abraham does not conclude in any way that the proceeding with those procurements would jeopardize the FCoE’s mission or abilities. Rather, the point is that the materials upon which she relies merely demonstrates the agency’s general interest in utilizing the TMS MAIDIQ. Although there is no universal test for what constitutes an agency’s failure to provide a sufficient justification for its actions and no one factor is dispositive, see Sierra Nevada v. United States, 107 Fed Cl. 735, 751 (2012), a cursory review of relevant caselaw from this Court is illustrative. Compare FMS Investment Corp. v. United States, 139 Fed. Cl. 221 , 223–25 (2018) (finding that the Department of Education acted unreasonably when it cancelled solicitation for student loan debt collection services because, in part, the cancellation notice relied on a brief Administrative Record and failed to contain detailed information to support important assertions made in that notice), and Applied Business Mgmt. Solutions v. United States, 117 Fed Cl. 589, 605–06 (2014) (holding, in part, that GSA’s conclusory assertions about “budgetary concerns” and “need to reduce personnel” failed to provide a rational basis for cancellation decision), with Inverness Technologies, Inc. v. United States, 141 Fed. Cl. 243 , 248, 251–53 (2019) (emphasizing that Department of Labor’s cancellation of solicitation for veterans job transition program “provid[ing] some comfort,” this Court is quite troubled by the government’s assertion that the agency’s decision-making was influenced by a desire to avoid bid protest litigation. See ECF No. 37 at 22-24 (“Hearing Transcript”) (raising this concern with the government); see also California Indus. Facilities Resources, Inc. v. United States, 100 Fed. Cl. 404 , 412 (2011) (holding that government conduct taken to “avoid possible bid protests was arbitrary and capricious”). Notwithstanding the government’s troubling assertion, it is a “foundational principle of administrative law” that this Court’s role in this context is limited to reviewing “the grounds that the agency invoked when it took the action.” Oracle America, Inc. v. United States, 975 F.3d 1279 , 1290 (Fed. Cir. 2020) (quoting Michigan v. EPA, 576 U.S. 743 , 758 (2015)). Here, the agency in its August 10 MFR does not mention this rationale. Rather, the first mention of this rationale is in the government’s brief in this case. Def. MJAR at 24. Accordingly, this rationale does not play a role in this Court’s determination that the Army acted unreasonably. 48 services was reasonable because the agency’s memorandum was “comprehensive, well- considered and logical” and “outlined, in chart form, key differences between the solicitation and the new requirements”). Some decisions from the GAO also have found that an agency acts unreasonably when it fails to provide sufficient documentation of its decision-making. See, e.g., Walker Development & Trading Grp., Inc., B-413924, 2017 CPD ¶ 21, 2017 WL 134346 , *4–*5 (Jan. 12, 2017) (“We find that the agency failed to produce agency report that coherently addressed the agency’s rationale for the cancellation of the solicitation.”); Pro-Fab, Inc., B-243607, 91-2 CPD ¶ 128, 1991 WL 162538 , *3 (Aug. 5, 1991) (“The agency’s speculation that increased competition or cost savings will result from [the cancellation and] solicitation of the identical requirements is not supported by the record[.]”). In sum, this Court concludes that although it is not irrational per se for an agency to prefer one contractual vehicle over another or even for the TMS MAIDIQ to be more suitable for the Army’s needs in this case, the government here did not provide a sufficiently documented rationale or meaningful analysis for cancelling the original 13F and JFOC Solicitations for the purpose of transitioning the work to the TMS MAIDIQ. B. The Agency’s Cancellation Decision Violates The Law Plaintiffs argue that the TMS MAIDIQ cannot be leveraged for the work at issue because doing so would violate the Rule of Two. As explained supra, see Section II.B., whether we view Plaintiffs’ argument as merely addressing the rationality of the cancellation decision or whether we view the agency’s cancellation as representing an independent decision with respect to its putative set-aside obligations (as the government appears to do), the result is the same: the central rationale for the agency’s cancellation of the solicitations at issue depends upon whether the agency may leverage the TMS MAIDIQ to meet the agency’s needs. In either case, the Court agrees with Plaintiffs that the agency’s failure to conduct a Rule of Two analysis vitiates the cancellation decision. 1. The Agency Improperly Failed To Comply With The Rule Of Two, Which Applies To The Work At Issue The Rule of Two – as the Court already has explained – is straightforward, and provides that “[t]he contracting officer shall set aside any acquisition over the simplified acquisition threshold for small business participation when there is a reasonable expectation that – (1) Offers will be obtained from at least two responsible small business concerns; and (2) Award will be made at fair market prices.” FAR 19.502-2(b) (“Total small business set-asides”) (emphasis added). The government’s 49 decision to procure the services at issue is itself part of an acquisition 54 – the cancelled solicitations constitute part of that acquisition – and the agency’s continued decision to procure those services is part of an acquisition (whether viewed as a continuation of the same acquisition, under a newly proposed strategy, or whether viewed as an entirely new acquisition). 55 Nor does the government dispute that, in light of the acquisition history thus far, there are at least two responsible business concerns capable of performing the work at fair market prices, 56 or that, in general, the Rule of Two is mandatory. Mgmt. & Training Corp. v. United States, 115 Fed. Cl. 26 , 44 n.13 (2014) (“this 54 FAR 2.101 (“Acquisition begins at the point when agency needs are established”). 55Although the Court hesitates to further belabor the jurisdictional question, the Federal Circuit’s decision in Distributed Solutions is worth another brief discussion here. In that case, this Court had granted the government’s motion to dismiss, but the Federal Circuit reversed, concluding that two agencies had “initiated ‘the process for determining a need,’” Distributed Solutions, 539 F.3d at 1346 , in that an RFI “was a market survey to gather data to determine an acquisition strategy, and the beginning of a procurement process, within the procurement protest jurisdiction granted to the Court of Federal Claims by the Tucker Act.” Distributed Sols., Inc. v. United States, 104 Fed. Cl. 368 , 375 (2012) (on remand). The Federal Circuit reasoned that the plaintiffs in that case, “as potential competitors under a direct procurement,” id., with the government – an acquisition strategy the agencies sought to avoid – were objecting to “alleged violation[s] of statute[s] or regulation[s] in connection with a procurement or a proposed procurement.” 28 U.S.C. § 1491 (b)(1) (emphasis added). The Federal Circuit previously had concluded that the phrase “‘in connection with a procurement or a proposed procurement’” is “‘very sweeping in scope.’” 539 F.3d at 1345 (quoting RAMCOR, 185 F.3d at 1289 ). Because a “procurement includes all stages of the process of acquiring property or services, beginning with the process of determining a need for property or services and ending with contract completion and closeout,” id. (emphasis in original) (internal quotation marks omitted), the Federal Circuit concluded that “plaintiffs’ grievances [regarding the RFI and planned acquisition strategy] fell in that continuum.” 104 Fed. Cl. at 375; see 41 U.S.C. § 111 (defining “procurement”). Accordingly, “[w]hile the government ultimately decided not to procure software itself from the vendors, but rather to add that work to [an] existing contract …, the statute does not require an actual procurement.” 539 F.3d at 1346 . Instead, “[t]he statute explicitly contemplates the ability to protest these kinds of pre-procurement decisions by vesting jurisdiction in the Court of Federal Claims over ‘proposed procurements.’” Id. Summarized, “[p]laintiffs possessed jurisdictional standing because they: (1) were prospective bidders; (2) had a direct and significant economic interest in the proposed direct procurement that was eliminated; and (3) alleged a number of statutory and regulatory violations in the decision to forego a direct procurement.” 104 Fed. Cl. at 375. Plaintiffs in this case are similarly situated to those in Distributed Solutions, and the central allegations here are similar to those at issue in that case, as well. 56PTP Resp. at 9 (“The Agency does not dispute that multiple small businesses (SDVOSBs) stand ready and willing to submit offers to perform the 13F and JFOC requirements at fair market prices.”). 50 court has consistently held that the Rule of Two is mandatory” (citing cases)); Analytical Graphics, Inc. v. United States, 135 Fed. Cl. 378 , 411 (2017). 57 Notably, in Analytical Graphics, the government argued at length that while “[t]here are many competition statutes and regulations, . . . they are structured in such a way to give priority to the application of the small business set-aside[,]” and thus “[o]ther competition regulations may be applied to the subsequent competition between small businesses.” Defendant’s Cross-Motion for Judgment on the Administrative Record, 2017 WL 2722839 (March 7, 2017) (filed in Case No. 116CV01453, Analytical Graphics, Inc. v. United States, 135 Fed. Cl. 378 (2017)). Indeed, the government in that case argued that “[t]he expedited procedures associated with a Rule of Two determination further confirm the intention to make the set-aside determination at the very start of procurement decision-making.” Id. (explaining that “the mandatory term ‘shall’ . . . requires the Government to set-aside acquisitions when the Rule of Two is satisfied” and noting that Supreme Court’s decision in Kingdomware Technologies, 136 S. Ct. at 1976–77 (interpreting the term “shall” in the context of a different small business preference)). 58 This Court agrees with the government’s position in Analytical Graphics, and the government does not really make an effort to contend otherwise here. Rather the government argues only that “the 2010 statutory and regulatory changes . . . are fatal to [Plaintiffs’] attempt to challenge the ability to issue task orders under the TMS MAIDIQ.”59 Def. MJAR at 26. According to the government, pursuant to those changes 57In Analytical Graphics, 135 Fed. Cl. at 411, the Court quoted Proxtronics Dosimetry, LLC v. United States, 128 Fed. Cl. 656 , 680 (2016) (quoting 48 C.F.R. § 19.501 (c)): “As noted by another Judge of the United States Court of Federal Claims, ‘[C]ontracting officers are required to ‘review acquisitions to determine if they can be set aside for small business,’ and must ‘perform market research’ before concluding that an acquisition should not be set aside for a small business.’” See FAR 19.203(e) (“Small business set-asides have priority over acquisitions using full and open competition.”). 58In Kingdomware, the Supreme Court addressed a similar Rule of Two contained in The Veterans Benefits, Health Care, and Information Technology Act of 2006, requiring the Secretary of Veterans Affairs to set annual goals for contracting with service-disabled and other veteran-owned small businesses. 38 U.S.C. § 8127 . In finalizing the regulations to implement the Act, the Department indicated in a preamble that § 8127’s procedures “do not apply to [Federal Supply Schedule] task or delivery orders.” VA Acquisition Regulation, 74 Fed. Reg. 64624 (Dec. 8, 2009) (quoted in Kingdomware, 136 S. Ct. at 1974 ). Nevertheless, because of the mandatory nature of the statute, the Court rejected the government’s argument that “the mandatory provision does not apply to ‘orders’ under ‘pre-existing FSS contracts.’” 136 S. Ct. at 1978 (quoting the government’s brief). The government also challenges our jurisdiction to decide any Rule of Two issue here, see Def. 59 MJAR at 26, but the Court rejected that argument, supra, see Section II.B. 51 “as implemented in the FAR and the Small Business Act, contracting officers have the discretion to make use of a multi-award contract without first conducting a rule of two analysis to determine whether the task order should be set aside for small business.” Id. at 28; see id. at 26–30 (relying upon 15 U.S.C. § 644 (r), FAR 19.502-4, and FAR 16.505(b)(2)(i)(F)). The Court rejects the government’s interpretation of the provisions upon which it relies. First, as PTP correctly notes, “[t]he Rule of Two unambiguously applies to ‘any’ ‘acquisition,’ FAR 19.502-2, without any loophole for MAIDIQ task orders. . . .” PTP Resp. at 9. Second, the government misreads the statutory and FAR provisions. We begin, once again, with the statutory language. Section 644(r) of Tile 15 of the United States Code mandates the issuance of regulations to provide agencies “at their discretion” to take several actions. The government focuses on the word “discretion,” but then conspicuously only summarizes the remaining statutory language. Def. MJAR at 26–27 (ECF No. 30 at 30–31). The actual statutory words, however, demonstrate the government’s summary is wrong; we must be precise about what “discretion” agencies gained. Pursuant to 15 U.S.C. § 644 (r), agencies may: (1) set aside part or parts of a multiple award contract for small business concerns . . . ; (2) notwithstanding the fair opportunity requirements under section 2304c(b) of title 10 and section 4106(c) of title 41, set aside orders placed against multiple award contracts for small business concerns. . .; and (3) reserve 1 or more contract awards for small business concerns under full and open multiple award procurements . . . . 15 U.S.C. § 644 (r)(1) – (3). This language is straightforward. The first subparagraph means that an agency, when awarding a multiple award contract, may designate particular portions of the scope of work to be performed only by small business. The second paragraph means that even though, normally, every multiple award contract holder must be permitted – pursuant to “fair opportunity requirements” – to compete for every task order, agencies may set aside particular task orders for which only small business multiple award contract holders may compete. And the final paragraph means that, of the multiple awards to be made in a multiple award contract procurement, some contact award slots may be set aside for small business concerns, even though the overall procurement is generally full and open. FAR 19.502-4 supports our reading given that it covers “Partial set-asides of multiple-award contracts” and 52 specifically provides that “contracting officers may, at their discretion, set aside a portion or portions of a multiple-award contract” under certain circumstances. 60 Accordingly, that statute only tells an agency how a multiple award contract may be structured or how a task order competition under a multiple award contract may be competed. In contrast, none of those provisions answers the question, one way or the other, of whether an agency – when deciding the foundational, prerequisite question of what type of procurement vehicle to use for a planned acquisition (i.e., to satisfy a particular agency need) – may avoid the Rule of Two merely because a MAIDIQ already has been awarded and the agency prefers to use that vehicle. Again, the fact that an agency has the discretion to partially set-aside “a portion” of a multiple award contract for small business does not lead to the ineluctable conclusion that having decided not to engage in a partial set-aside, an agency may thereafter dispense with the Rule of Two. The latter does not follow from the former. To the contrary, the grant of discretion applies even where the Rule of Two does not require a set-aside, but the grant of discretion does not somehow, by negative implication, eliminate the Rule of Two requirement. In sum, what the government really seems to be arguing is that the agency, having awarded its preferred TMS MAIDIQ without any set-aside component, is now exempt from applying the Rule of Two to any proposed procurement (or acquisition) of services that might be obtained using the TMS MAIDIQ. Put yet differently, the government asserts that, having exercised its discretion not to set-aside any portion of the TMS MAIDIQ scope or any of the TMS MAIDIQ‘s contract awards for small business, the agency can utilize the TMS MAIDIQ for any acquisition – and avoid the 60Further support for this understanding can be found in a Proposed Rule notice issued by the SBA: [T]he Jobs Act amended the Small Business Act (Act) to permit Federal agencies to: • Set-aside part or parts of multiple award contracts for small business concerns . . . ; • Set-aside orders placed against multiple award contract (notwithstanding the fair opportunity requirements set forth in 10 U.S.C. 2304c and 41 U.S.C. 253j) for small business concerns . . .; and • Reserve one or more contract awards for small business concerns under full and open competition, where the agency intends to make multiple awards . . . . Acquisition Process: Task and Delivery Order Contracts, Bundling, Consolidation, 77 Fed. Reg. 29130 - 01 (May 16, 2012). 53 Rule of Two – so long as the contemplated scope of work is within the TMS MAIDIQ’s scope. No statutory or regulatory language, however, supports such a sweeping inference. PTP, for its part, argues that “19.502-4 plainly does not relieve agencies from applying the Rule of Two, as the first of five conditions stated in FAR 19.502-4 is that: ‘Market research indicates that a total set-aside is not appropriate [pursuant to the Rule of Two].’” PTP Resp. at 10 (quoting FAR 19.502-4(1)). In that regard, PTP asserts that, pursuant to that subparagraph’s “plain language, the discretion to set aside orders described does not apply unless the Agency has first engaged in market research and confirmed that the Rule of Two does not mandate total set aside.” PTP Resp. at 11 (underline in original, bold text added). On that point, however, the Court parts ways with PTP, as well. Although PTP reads FAR 19.502-4(1) as applying to “orders,” the regulation – as demonstrated above – only addresses how and when an agency may “set aside a portion or portions of a multiple-award contract.” Thus, all FAR 19.502-4(1) provides is that, with respect to a scope of work, the agency cannot create a multiple award contract with only a partial set aside “portion” where that overall scope of work should be entirely set-aside (i.e., at “total set-aside”) pursuant to the Rule of Two. Again, however, that does not answer the question of whether the agency has any obligation to apply the Rule of Two to a particular scope of work that is covered by the scope of an already-issued multiple-award contract. 61 Nor does FAR 16.505(b)(2)(i)(F) advance the interpretive ball. That provision is simply one of many “[e]xceptions to the fair opportunity process” under an IDIQ contract. FAR 16.505(b)(2). In the absence of an applicable exception, “[t]he contracting officer shall give every awardee a fair opportunity to be considered for a delivery-order or task-order exceeding $3,500….” FAR 16.505(b)(2)(i) (emphasis added). In other words, “contracting officers may, at their discretion, set aside orders” under an IDIQ without violating the fair opportunity to compete requirement that normally applies. FAR 16.505(b)(2)(i)(F). But that, too, tells us nothing about whether a procuring agency 61FAR 19.504 covers “Orders under multiple-award contracts” but also does not deal with this case. Rather, FAR 19.504 presumes a multiple-award contract for which a partial set-aside of scope has been made already, or where small businesses hold an unrestricted contract slot. See FAR 19.504(a)(1) (“The contracting officer shall state in the solicitation and resulting contract whether order set-asides will be discretionary or mandatory when the conditions in 19.502-2 are met at the time of order set-aside. . . .”); see also FAR 19.504(b) (“Orders under partial set-aside contracts.”). If, under a particular multiple award contract, there is no small business contractor, the agency cannot set aside a task order. See PTP Resp. at 11 (“discretionary authority ‘obviously works only if there are small business awardees on the multiple award contract’” (quoting 78 Fed. Reg. 61123 (Oct. 2, 2013))). 54 must apply the Rule of Two to a scope of work before deciding whether to leverage an existing multiple award contract. In sum, none of the updates to the various small business set-aside provisions resolve the question before this Court: whether the agency must apply the Rule of Two to a discrete scope of work before deciding to use an existing MAIDIQ. This Court answers that question in the affirmative, once again following the same reasoning as the GAO in LBM, Inc. In that case, LBM, Inc., a small business concern, protested the Army’s decision to acquire transportation motor pool services under the LOGJAMSS contracts. LBM, Inc., B-290682 at *1. The GAO found that the “Army violated FAR § 19.502-2(b) when the agency did not consider continuing to acquire the Fort Polk motor pool services under a total small business set-aside, and . . . sustain[ed] LBM’s protest on this basis.”). Id. at *8. The GAO reasoned as follows: Acquisition is defined by the FAR to mean: the acquiring by contract with appropriated funds of supplies or services (including construction) by and for the use of the Federal Government through purchase or lease, whether the supplies or services are already in existence or must be created, developed, demonstrated, and evaluated. Acquisition begins at the point when agency needs are established and includes the description of requirements to satisfy agency needs, solicitation and selection of sources, award of contracts, contract financing, contract performance, contract administration, and those technical and management functions directly related to the process of fulfilling agency needs by contract. FAR § 2.101. Under this broad definition, the agency’s purchasing the Fort Polk motor pool services by contract with appropriated funds is an “acquisition,” subject to FAR § 19.502-2(b), regardless of the fact that the agency anticipated acquiring those services through their transfer to the LOGJAMSS scope of work. . . . Had the agency complied with the requirements of FAR § 19.502-2(b), it might have concluded that the LOGJAMSS contracts were not the appropriate vehicle for this acquisition. Whatever the 55  outcome of the FAR § 19.502-2(b) analysis, though, the agency’s intent to use a task order under LOGJAMSS as the contract vehicle did not eliminate the legal requirement that the agency undertake that analysis. Id. at *7. Notably, the GAO reached that conclusion notwithstanding that there were “four small business concerns that [held] LOGJAMSS contracts.” Id. at *8 n.7. Indeed, the agency thereafter asked the GAO to modify its recommendation so that the agency could compete the work at issue amongst only the small business LOGJAMSS contractors. The GAO rejected the agency’s request, explaining: The Army apparently now concedes that under FAR § 19.502- 2(b) these services should be set aside for exclusive small business competition. As discussed above, any such competition must be a full and open competition among the eligible small businesses; there is no legal authority in such circumstances to limit this competition to certain designated small businesses. Dep’t of the Army--Request for Modification of Recommendation, B-290682.2, 2003 CPD ¶ 23, 2003 WL 103408 , *5–*6 (Jan. 9, 2003) (“[W]hat the Army has requested is not consistent with the statutory and regulatory scheme applicable to small business set-asides. The Army is essentially asking us to waive statutory requirements for what the Army views as strong policy reasons.”). 62 The bottom line from this Court’s perspective is that the cancelled solicitations at issue here are themselves acquisitions. The government’s identification of a need – of a scope of work – that it must procure itself begins an acquisition. Accordingly, we view 62Although the GAO “agreed to hear LBM’s contention despite the (then in-place) limitation on [GAO’s] jurisdiction to hear protests involving the placement of task and delivery orders” it did so because the GAO “treated LBM’s complaint as a timely solicitation challenge to the LOGJAMSS contract.” Delex Sys., Inc., B-400403, 2008 CPD ¶ 181, 2008 WL 4570635 , *7 (Oct. 8, 2008). (discussing LBM, at *5–*6). In contrast, we view jurisdiction as proper in this case either as a challenge to the cancellation of a solicitation or as a violation of the Rule of Two; either way, this Court properly considers Plaintiffs’ claims under the last prong of 28 U.S.C. § 1491 , as explained supra, see Section II, and not as a challenge to the TMS MAIDIQ. Even if we were to consider Plaintiffs’ claims as a challenge to the TMS MAIDIQ, however, we would follow LBM’s approach to the task order protest bar, and not apply it here. LBM, at *3 (“Contrary to the Army’s arguments, LBM is not challenging the proposed issuance of a task order for these services, but is raising the question of whether work that had been previously set aside exclusively for small businesses could be transferred to LOGJAMSS, without regard to the Federal Acquisition Regulation (FAR) § 19.502-2(b) requirements pertaining to small business set-asides.”). 56 the identification of the continued need for 13F and JFOC requirements as either part of in-process acquisition or a new acquisition. Either way – no matter how the acquisition is viewed – PTP is correct that the “Rule of Two unambiguously applies” to “any acquisition,” FAR 19.502-2, “and just because the Agency may have satisfied its small business set aside obligations with respect to the TMS MAIDIQ acquisition in 2018 does not mean the Agency has also satisfied its set aside obligations with respect to the separate acquisitions of the 13F and JFOC requirements in 2020.” PTP Resp. at 12. Nothing in the updated small-business regulations provides otherwise. 63 Moreover, where the FAR intends to make the Rule of Two entirely inapplicable to the selection of a particular procurement vehicle, the FAR knows how to do so. See FAR 8.404(a) (“Use of Federal Supply Schedules”) (providing that FAR “Parts 13 (except 13.303-2(c)(3)), 14, 15, and 19 (except for the requirements at 19.102(b)(3) and 19.202-1(e)(1)(iii)) do not apply to BPAs or orders placed against Federal Supply Schedules contracts (but see 8.405-5)”). Accordingly, there is no requirement for an agency to apply the Rule of Two prior to an agency’s electing to use a FAR Part 8 FSS procurement, although the agency has the discretion to set-aside such procurements after deciding to utilize FAR Part 8, just as the Army did here with respect to the 13F and JFOC Solicitations. See FAR 8.405-5(a) (“Although the preference programs of part 19 are not mandatory in this subpart, in accordance with section 1331 of Public Law 111-240 (15 U.S.C. 644(r)) - (1) Ordering activity contracting officers may, at their discretion - (i) Set aside orders for any of the small business concerns identified in 19.000(a)(3)”). 63Later GAO decisions are not to the contrary. In Delex Systems, Inc., B–400403, the GAO merely “concluded that the set-aside provisions of FAR §19.502–2(b) applied to competitions for task and delivery orders issued under multiple-award contracts” (emphasis added); and, in Aldevra, the GAO explained that it had “subsequently found that [its] holding in Delex had been superseded by the passage of section 1331 of the Jobs Act.” Aldevra, B-411752, 2015 CPD ¶ 339, 2015 WL 6723876 n.4 (Oct. 16, 2015) (citing Edmond Scientific Co., B–410179, 2014 CPD ¶336, 2014 WL 6199127 , *8 n.10 (Nov. 12, 2014)). None of those decisions address the precise question at issue in this case. For example, in Edmond, the protestor simply “allege[d] that the agency was required to use the Rule of Two to decide whether to set aside [a] task order” – that is, “whether the Army abused its discretion in not reserving this task order for small business participation” under a particular multiple award contract. 2014 WL 6199127 , *3, *5. The GAO reached the same conclusion this Court did, above: the applicable FAR provisions “grant discretion to a contracting officer about whether to set aside for small business participation task orders placed under multiple-award contract.” Id. *5 (discussing FAR §§19.502–4, 16.505(b)(2)(i)(F)). In short, none of those GAO cases, except LBM, addresses the precise issue of an agency moving work currently performed by a small business to a MAIDIQ where the incumbents are ineligible to compete for an award. 57  In contrast, no provision similar to FAR 8.404(a) – exempting the selection of an FSS procurement from FAR Part 19 – exists in FAR part 16, generally, or FAR 16.5, in particular. 64 To the extent the agency argues that Plaintiffs’ claims with regard to the Rule of Two are nothing more than untimely challenges to the TMS MAIDIQ solicitation, the Court rejects that contention. The Court, instead, once again, agrees with PTP: “Had [Plaintiffs] protested the TMS MAIDIQ Solicitation on the basis that the Agency might one day issue task orders for 13F and JFOC work (not even specified in the TMS MAIDIQ), the Agency would have challenged the action as unripe (speculative as to whether the task orders would issue and whether the MAIDIQ would include small business contractors).” PTP Resp. at 14; see also LBM, B-290682 at *3–*5 (rejecting solicitation protest timeliness argument). Given that there is no evidence that the incumbent Plaintiffs had reason to believe that the work would be consolidated into the TMS MAIDIQ at the time the TMS MAIDIQ solicitation was issued, the Court will not apply waiver. Cf. Boeing Co. v. United States, 968 F.3d 1371 , 1382 (Fed. Cir. 2020). In sum, the government’s failure to apply the Rule of Two prior to deciding to cancel the solicitations at issue is fatal to that decision, whether because that failure undermines the central rationale of the cancellation decision or whether because the decision to move the work to the TMS MAIDIQ prior to conducting a Rule of Two analysis constitutes an independent violation of law. 2. Additional Violations Of Law The Court further concludes that the agency violated FAR 19.502-9 (“Withdrawing or modifying small business set-asides”). That provision permits a contracting officer to “withdraw [a] small business set-aside” only where “before award of a contract involving a total or partial small business set-aside, the contracting officer 64If FAR Subpart 16.5 contained a provision similar to FAR 8.404(a), perhaps this Court would reach a different conclusion. See FAR 16.000 (“This part describes types of contracts that may be used in acquisitions. It prescribes policies and procedures and provides guidance for selecting a contract type appropriate to the circumstances of the acquisition.”); FAR 16.5 (“Indefinite- Delivery Contracts”). Indeed, FAR 16.500(e) instructs its readers to “[s]ee subpart 19.5 for procedures [1] to set aside part or parts of multiple-award contracts for small businesses; [2] to reserve one or more awards for small business on multiple-award contracts; and [3] to set aside orders for small businesses under multiple-award contracts.” Notably, this Court interpreted the various provisions discussed above (e.g., 15 U.S.C. § 644 (r), FAR 19.502-4, FAR 19.504, and FAR 16.505(b)(2)(i)(F)) as governing precisely the actions specified in FAR 16.500(e). None of those procedures, however, answer the preliminary, more basic question of whether the Rule of Two must be applied in an acquisition before deciding whether a particular MAIDIQ may be used at all. 58 considers that award would be detrimental to the public interest (e.g., payment of more than a fair market price)[.]” FAR 19.502-9. 65 Where such a decision is made, “[t]he contracting officer shall initiate a withdrawal of an individual total or partial small business set-aside, by giving written notice to the agency small business specialist and the SBA PCR . . . stating the reasons.” Id. (emphasis added). 66 The Court holds that the agency’s decision to cancel the solicitations at issue and move the scopes of work to the TMS MAIDIQ constitutes a withdrawal of a set-aside. Nutech Laundry & Textile, Inc. v. United States, 56 Fed. Cl. 588 , 592 (2003); Aviation Enterprises, Inc. v. United States, 8 Cl. Ct. 1 , 27 (1985) (“After the solicitation was cancelled and the Air Force opted to utilize aircraft under an existing lease, such actions can arguably be considered a withdrawal of the unilateral set-aside.”). This unexplained violation of law independently justifies judgment for Plaintiffs. 67 Had the agency complied with the above-quoted FAR 19.502-9 and related procedures, the agency may not have cancelled the solicitations in favor of the TMS MAIDIQ. See, e.g., Gear Wizzard, Inc. v. United States, 99 Fed. Cl. 266 , 275 (2011) (noting the government’s explanation that “one of the reasons the contracting officer sought a new procurement was because of [the agency’s] failure to properly withdraw the set- aside requirement in accordance with FAR 19.506[,]” the prior version of FAR 19.502-9); id. at 276 (“According to defendant, ‘Based on these and other errors, the contracting officer determined it was necessary to start over with a new procurement.’”). 68 65Although this FAR provision applies “before award of a contract,” the Court finds it applicable, as the solicitation cancellations were, in fact, “before award of a contract.” Since the agency had cancelled the contracts, the 13F and JFOC Solicitations were pending at the time of cancellation, the agency was in receipt of responsive proposals, and the agency could have made a new award as part of its corrective action. The fact that one set of awards had been made and canceled does not make this FAR requirement in applicable. In any event, the agency cannot be permitted to evade FAR 19.502-9 merely by awarding a contract, cancelling it, and then cancelling the solicitation. 66SBA PCR is short for Small Business Administration Procurement Center Representatives, “who are generally located at Federal agencies and buying activities which have major contracting programs” and “may review any acquisition to determine whether a set aside or sole-source award to a small business under one of SBA’s program is appropriate.” 13 C.F.R. § 125.2 ; see FAR 19.402. 67The government does not address this issue at all in its briefs. Any further response is therefore waived. See SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312 , 1320 (Fed. Cir. 2006) (“’When a party includes no developed argumentation on a point . . . we treat the argument as waived under our sell established rule.’” (quoting Anderson v. City of Boston, 375 F.3d 71 , 91 (1st Cir. 2004))). 68In Aviation Enterprises, Inc., the plaintiff asserted that the government “failed to comply with the notice provisions of section 19.506[,]” the predecessor provision to FAR 19.502-9. 8 Cl. Ct. at 59  The Court also concludes that the agency violated 10 U.S.C. § 2305 (b)(2), which provides that “competitive proposals received in response to a solicitation may be rejected if the head of the agency determines that such action is in the public interest.” Based on the Administrative Record, the Court was unable to find the involvement of the agency head in a cancellation decision, any delegation of authority by the head of agency to the contracting officer to make a cancellation decision, or that the contracting officer is delegated such authority under the applicable regulations governing a FAR Part 8 procurement seeking competitive proposals pursuant to an RFP. See AFARS Appendix GG (Delegations). Moreover, nowhere does the agency conclude that the cancellation of the 13F and JFOC Solicitations is in the “public interest.” 69 V. The Court Grants Plaintiffs’ Request For Injunctive Relief The Tucker Act vests this Court to award “any relief that the court considers proper, including . . . injunctive relief.” 28 U.S.C. § 1491 (b)(2); see RCFC 65. In evaluating whether permanent injunctive relief is warranted in a particular case, a court must consider (1) whether the plaintiff has succeeded on the merits; (2) whether the plaintiff has shown irreparable harm without the issuance of the injunction; (3) whether the balance of the harms favors the award of injunctive relief; and (4) whether the injunction serves the public interest. PGBA v. United States, 389 F.3d 1219 , 1228-29 (Fed. Cir. 2004); see Kiewit Infrastructure West Co., 147 Fed. Cl. at 712 (applying these four factors to an agency cancellation decision). As this Court explained at length above, Plaintiffs have succeeded on the merits. 29. Although just as here, “[i]t [was] uncontradicted that neither the contracting officer nor any [ ] procuring official ever notified a SBA representative of the decision to utilize existing” leases. Id. The Claims Court concluded that “[t]hough this failure to give notice may have been a minor technical violation of the regulation, assuming the regulation to be applicable, the court finds that such a minor violation does not warrant injunctive relief” because “[n]ot every violation of a regulation mandates a right to relief.” Id. (citing Keco Indus., Inc. v. United States, 203 Ct. Cl. 566 , 573–74, 492 F.2d 1200 , 1203–4 (Ct. Cl. 1974)). The undersigned respectively disagrees with Aviation Enterprises, particularly given its reliance on a pre-ADRA case. See Impresa Construzioni, 238 F.3d at 1333 (“cases such as Keco . . . are based on the implied contract theory of recovery and do not govern APA review of contracting officer decisions”). 69The closest that the agency comes to making such a conclusion is CO Abraham’s assertion that “the Government’s best interest can be met by competing the JFO, 13F and KMS requirements under the MICC-Fort Eustis recently awarded TMS MAIDIQ.” ECF No. 25 at 620 (AR 616) (emphasis added). That the TMS MAIDIQ “can meet” the “government’s” “best interest” may simply mean that the TMS MAIDIQ is one option to meet the agency’s needs, and, in any event, is not the same as a determination that a solicitation cancellation is in the public’s interest. 60  In evaluating irreparable harm, “[t]he relevant inquiry . . . is whether plaintiff has an adequate remedy in the absence of an injunction.” Magellan Corp. v. United States, 27 Fed. Cl. 446 , 447 (1993). Moreover, in the bid protest context, “the loss of the opportunity to fairly compete for future government contracts constitutes irreparable harm.” ViroMed Laboratories, Inc. v. United States, 87 Fed. Cl. 493 , 503 (2009). Here, with regard to TTGI, the agency cancelled TTGI’s 13F contract award and then, instead of reevaluating proposals or re-soliciting the requirement with an amended solicitation, the agency cancelled the 13F Solicitation for the purpose of moving the work to the MAIDIQ, under which TTGI is not a contract holder and therefore is ineligible to bid on any task order procurement. TTGI’s loss of anticipated profits from the 13F contract award, in addition to its inability to compete for that work on the MAIDIQ, establishes the immediate and irreparable harm that TTGI would suffer in the absence of an injunction. Turning to PTP, following the agency’s cancellation of the 13F and JFOC contract awards, PTP, the prior incumbent on both contracts – having successfully induced corrective action following GAO protests – once again stood to have an opportunity to have its proposal considered for award or to submit a proposal on an amended solicitation. Instead, PTP’s protests resulted in its losing the opportunity to compete. While PTP’s harm is arguably more speculative than that of TTGI (insofar as PTP had not been awarded the now-cancelled contracts and solicitations), nonetheless, “it is well-established that the potential profits that are lost to offerors when arbitrary procurement actions would deprive them of the opportunity to compete for a contract will normally be sufficient to constitute irreparable injury.” MORI Assoc., Inc., 102 Fed. Cl. at 553. As PTP also is not a contract holder on the TMS MAIDIQ, PTP faces similar irreparable harm should the procurement be solicited on the TMS MAIDIQ without the agency first conducting a Rule of Two analysis, the results of which may permit PTP to bid on the work at issue. For these reasons, this Court finds Plaintiffs meet the second factor for equitable relief. In balancing the harms, the agency has not shown that the continued use of the GSA MAS contracts will be onerous. While the government asserts that “the primary harm to the Government” is its inability to “finally use a long-planned IDIQ designed for these requirements, and to leave behind the ill-fitting stop-gaps of the GSA MAS task orders, as it always intended to do,” Def. MJAR at 36, this Court, as discussed above, is unable ascertain the factual basis for the agency’s decision that the GSA MAS contracts were “ill-fitting” and, as such, cannot conclude that the harm to the government would outweigh the clear harm to Plaintiffs. The government’s further contention that “delay will also harm the FCoE, as it threatens to leave it with an inability to secure the necessary training for artillery personnel,” id., suffers from the same defect. In addition, crediting the government’s assertion here would be tantamount to punishing PTP, in particular, for having filed a GAO protest, the effect of which was to secure corrective action. The agency should not be permitted to conduct a 61 procurement, inducing would-be contractors to expend time and money preparing and submitting proposals, only to have the rug pulled out from underneath them when an offeror points out putative flaws in the agency’s process. This is not a case where the agency has shown that its substantive needs have changed, and a different vehicle is more capable of meeting those changed needs. Moreover, the Court’s decision here does not even preclude the agency from proceeding, per se, with an alternative procurement vehicle that better meets the agency’s needs. Rather, the injunctive relief ordered here merely reinstates the status quo prior to the cancellation decisions and requires the agency to follow the law consistent with this decision. The public interest also favors this Court’s granting an injunction, as “the public always has an interest in the integrity of the federal procurement system.” Starry Assoc., 127 Fed. Cl. at 550 (citing Hosp. Klean of Tex, Inc. v. United States, 65 Fed. Cl. 618 , 624 (2005)); MVM, Inc. v. United States, 46 Fed. Cl. 137 , 143 (2000) (“Many cases have recognized that the public interest is served when there is integrity in the public procurement system.”). This is particularly applicable to the present case where the agency’s cancellation and planned movement of work to the TMS MAIDIQ violated statutory and regulatory requirements. CONCLUSION The Court GRANTS Plaintiffs’ respective motions for judgment on the Administrative Record and DENIES the government’s cross-motion for judgment. The Court further GRANTS Plaintiffs’ request for equitable relief and orders as follows: 1. To the extent formal cancellations of Solicitation Nos. W9124L-20-R-0016 and W9124L-20-R-0020 have not been issued already, the agency is enjoined from cancelling them in the absence of a new cancellation decision. 2. To the extent the agency already has cancelled those solicitations, the cancellation decisions hereby are set-aside as unlawful, and the agency is instructed to reinstate the solicitations. 3. The agency is enjoined from transitioning the 13F and JFOC requirements to the TMS MAIDIQ (or any other procurement vehicle) without complying, at a minimum, with FAR 19.502-2, FAR 19.502-9, and 10 U.S.C. § 2305 (b)(2). 4. Should the agency determine, however, that a change in acquisition vehicle is still warranted, the agency shall issue new cancellation decisions not inconsistent with this opinion and order. 62 If Plaintiffs believe they are also entitled to proposal preparation costs under the facts of this case, see, e.g., TTGI Am. Compl. at 11 (¶ F), they shall file a motion for such on or before December 14, 2020. See CNA Corp. v. United States, 83 Fed. Cl. 1 , 8–12 (2008), aff’d, 332 Fed. Appx. 638 (Fed. Cir. 2009). IT IS SO ORDERED. s/Matthew H. Solomson Matthew H. Solomson Judge 63

2020-11-30 21:02:38.06167+00

https://www.courts.ca.gov/opinions/nonpub/C086729.PDF

Filed 11/30/20 P. v. Lopez 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 (Yolo) ---- THE PEOPLE, C086729 Plaintiff and Respondent, (Super. Ct. No. CR177254) v. DANIEL LOPEZ, Defendant and Appellant. Following dinner and an argument with his wife, defendant Daniel Lopez drove off to a friend’s house. Defendant ran a stop sign, attracting the attention of a sheriff’s deputy. In the ensuing pursuit, defendant crossed into oncoming traffic along a country road about 17 times. A jury convicted defendant of reckless driving, misdemeanor driving under the influence, misdemeanor driving with a blood alcohol content (BAC) and misdemeanor driving with a suspended license. Sentenced to 150 days in jail and five years of probation, defendant appeals, challenging the sufficiency of the evidence and instructional error. We shall affirm the judgment. 1  FACTUAL AND PROCEDURAL BACKGROUND An information charged defendant with evading a police officer with reckless driving, count 1 (Veh. Code, § 2800.2); evading a police officer while driving in the opposite direction, count 2 (Veh. Code, § 2800.4); misdemeanor driving under the influence of alcohol, count 3 (Veh. Code, § 23152, subd. (a)); misdemeanor driving with a BAC of .08 or above, count 4 (Veh. Code, § 23152, subd. (b)); and misdemeanor driving with a suspended license, count 5 (Veh. Code, § 14601.2, subd. (a)). The information also alleged defendant was previously convicted of a serious felony within the meaning of Penal Code sections 667, subdivision (c) and 667, subdivision (e)(1) and that he served a prior prison term (Pen. Code, § 667.5, subd. (b)).1 The following evidence was introduced at the jury trial. The Incident In November 2017 defendant and his wife had dinner at a sports bar around 7:00 p.m. Defendant drank two beers and a mixed drink. His wife drove them home an hour to an hour and a half later. Shortly after 9:00 p.m., Sheriff’s Deputy Andre Stafford saw a white Chevy Malibu run a stop sign on a country road. Stafford activated his overhead lights and followed defendant, who kept driving. Defendant began “fumbling around” inside his car in the back seat and on the passenger side. Although Deputy Stafford activated his siren, defendant failed to stop. Stafford summoned back up. Defendant drove on, crossing into the northbound lanes about 17 times, forcing oncoming traffic to pull over to avoid a collision. Defendant ran two or three more stop signs. The speed limit on the country road was 55 miles per hour; 1 All further statutory references are to the Penal Code unless otherwise designated. 2 defendant’s speed ranged from 60 to 83 miles per hour. Stafford estimated defendant committed between 17 and 20 moving violations as he sped along. Defendant threw something out of the car window, which officers later identified as a can of Modelo beer. Finally, after 15 minutes of pursuit, defendant stopped. The Aftermath Deputy Stafford ordered defendant at gunpoint to exit the car with his hands in the air. Defendant complied and did not try to flee. Defendant was on the phone with his wife and Stafford told him to put the phone down. Deputy Stafford’s search of defendant’s records revealed he was on parole as of February 21, 2017, and his driver’s license had been suspended as of December 17, 2012. Sergeant Charles Hoyt arrived and assisted “in conducting a high risk felony traffic stop” and “with clearing the trunk area at gunpoint.” Hoyt discovered an open box of Modelo beer in defendant’s trunk. Deputy Stafford arrested defendant around 9:30 p.m. Defendant seemed agitated in the patrol car. As deputies transported defendant he tried to kick out a car window and hurled “vulgar slang” at them. DUI Evaluation Deputy Stafford detected the odor of alcohol. Deputy Matthew Milliron spoke with defendant around 10:15 p.m. and also detected the smell of alcohol. Milliron observed defendant’s eyes were red and watery and his eyelids drooped. In Milliron’s opinion, defendant’s “overall reactions seemed to be delayed.” While defendant sat in the patrol car, Deputy Milliron conducted a DUI evaluation. He tested defendant’s right eye for horizontal gaze nystagmus (HGN) and found signs of intoxication. However, defendant refused to allow Milliron to test the other eye. Defendant’s lack of cooperation prevented any other field sobriety tests. 3  Deputy Milliron performed two preliminary alcohol screening tests (PAS) using a breathalyzer. The first sample, taken at 10:34 p.m., was 0.084 percent. The second sample, taken at 10:41 p.m., was 0.087 percent. A few minutes later, Sergeant Hoyt smelled alcohol on defendant’s breath and conducted two more breathalyzer tests, with defendant’s cooperation. Hoyt observed defendant for 15 minutes prior to administering the tests and did not see defendant burp, vomit, or do anything that might impact the results. The first test, taken at 10:55 p.m., registered 0.10 percent. The second, taken at 10:57 p.m., also registered 0.10 percent. When deputies took defendant to jail, he did not stumble or resist. Expert Testimony A criminalist provided expert testimony regarding forensic alcohol analysis and the effects of alcohol on the body. The criminalist employed retrograde extrapolation, a scientific method used to estimate an individual’s BAC at a certain time. She stated retrograde extrapolation has “been scientifically proven to be a good estimation.” Using this method, the criminalist estimated defendant’s BAC at 9:20 p.m., the time when defendant had been driving. She based the estimation on his BAC of 0.10 percent at 10:55 and 10:57 p.m. Assuming the alcohol defendant drank had been fully absorbed into his bloodstream at that time, the criminalist estimated defendant’s BAC was between 0.115 to 0.137 at 9:20 p.m, In her expert opinion, a driver would not be able to safely operate a vehicle with that blood alcohol level. Defense Case Defendant testified on his own behalf. He acknowledged he was on parole on the night of the incident, and the conditions of parole included a prohibition on drinking alcohol. He also admitted having a suspended license on the night of the incident. 4  At dinner that night, defendant ate three tacos and drank two Modelos and a Jack and Coke. After fighting with his wife, defendant drove to a friend’s house. On the way he bought a 12-pack of beer and took a sip from one. He drove on, but did not drink again. Defendant admitted throwing a can of beer out the window. As defendant drove, he swerved and ran a stop sign because the rug on the car floor slipped and prevented him from breaking. While talking on the phone with his wife, defendant swerved and crossed into oncoming traffic. He ran another stop sign because he was afraid the patrol car behind him might hit him. Defendant did not realize he was speeding at 80 miles per hour or that he had run one of the stop signs. Although he knew officers were attempting to pull him over, defendant kept driving. Finally, defendant realized he should pull over. When he was in the back seat of the patrol car, Sergeant Hoyt “tapped on the window with his flashlight, flashed it in [hi]s face and laughed.” Defendant kicked the window of the patrol car to get Hoyt’s attention. He asked Hoyt why he was laughing at him and Hoyt apologized. Defendant admitted alcohol might have impaired his ability to drive. Verdict and Sentencing The jury found defendant not guilty of counts 1 and 2 and found him guilty on counts 3, 4, 5, and reckless driving (Veh. Code, § 23103), the lesser included offense of count 1. The trial court found both allegations true. The court sentenced defendant to 150 days in jail and five years of probation: for count 1, 30 days in jail, stayed (§ 654): for count 3, 150 days in jail; for count 4, 150 days in jail, stayed (§ 654): and for count 5, 30 days in jail, stayed (§ 654). Defendant filed a timely notice of appeal. 5  DISCUSSION I Sufficiency of the Evidence Defendant challenges the sufficiency of the evidence to support his conviction for driving with a BAC of 0.08 percent or more. He disputes the admission of the criminalist’s expert testimony, arguing that without it the evidence is insufficient. Standard of Review In reviewing a defendant’s challenge to the sufficiency of the evidence, we review the whole record in the light most favorable to the judgment to determine whether it discloses substantial evidence. Substantial evidence is evidence that is credible, reasonable, and of solid value such that a reasonable jury could find the defendant guilty beyond a reasonable doubt. (People v. Rodriguez (1999) 20 Cal.4th 1 , 11.) We do not reassess the credibility of witnesses, and we draw all inferences from the evidence that supports the jury’s verdict. (People v. Olguin (1994) 31 Cal.App.4th 1355 , 1382.) Unless the testimony of a single witness is physically impossible or inherently improbable, it is sufficient to support a conviction. (People v. Young (2005) 34 Cal.4th 1149 , 1181.) Vehicle Code section 23152, subdivision (b), prohibits “a person who has a 0.08 percent or more, by weight, of alcohol in his or her blood to drive a vehicle.” The statute creates a permissive inference of a BAC at or above 0.08 percent “if the person had 0.08 percent or more, by weight, of alcohol in his or her blood at the time of the performance of a chemical test within three hours after the driving.” (Veh. Code, § 23152, subd. (b).) In addition, “circumstantial evidence of intoxication, while not dispositive, may be relevant” in interpreting a driver’s BAC. (Coffey v. Shiomoto (2015) 60 Cal.4th 1198 , 1215 (Coffey).) 6 Discussion In essence, defendant argues the criminalist’s testimony should be rejected. Defendant summarizes the test results, noting he was pulled over at about 9:28 p.m. Officers performed the PAS tests at 10:34 p.m. and 10:41 p.m., yielding results of 0.84 and 0.87. Approximately twenty minutes later officers again performed PAS tests which yielded results of 0.10. According to defendant, “Viewed together, [defendant’s] test results show that his blood alcohol level was rising. The critical question is whether the evidence supports the inference that [defendant’s] blood alcohol level rose to 0.08 before Deputy Stafford pulled him over.” Defendant faults the criminalist for using “retrograde extrapolation, which required the assumption that all of the alcohol appellant ingested had been fully absorbed into his bloodstream by 9:20 p.m. Drinking with food slows alcohol absorption.” Therefore, the court should not consider the criminalist’s testimony. We disagree. The criminalist provided expert testimony on the ramifications of the tests. She employed retrograde extrapolation, using the latter results in calculating defendant’s BAC to have been between 0.115 to 0.137 percent at 9:20 p.m. The criminalist’s testimony was based on a hypothetical posed by the prosecution, which assumed that the alcohol was fully absorbed into defendant’s bloodstream by 9:20 p.m. Defendant and his wife testified defendant drank two beers and a mixed drink during dinner between 7:00 p.m. and 8:30 p.m. Defendant testified he drank a single sip of beer before he started driving. Under CALCRIM No. 332, “An expert witness may be asked a hypothetical question. A hypothetical question asks the witness to assume certain facts are true and to give an opinion based on the assumed facts. It is up to you to decide whether an assumed fact has been proved. If you conclude that an assumed fact is not true, consider the effect of the expert’s reliance on that fact in evaluating the expert’s opinion.” Given the 7 evidence, the jury could conclude the criminalist’s estimate of defendant’s BAC at the time the deputy pulled him over was 0.08 or higher. II Instructional Error: Permissive Inference Defendant argues CALCRIM No. 2111 reduced the prosecution’s burden of proof, violating his right to due process. According to defendant, the permissive inference under the instruction was the only proof that he was driving with a BAC of 0.08 or more. “When a permissive inference is the only proof of a fact, the connection between the proved fact and the inferred fact must be established beyond a reasonable doubt to pass constitutional muster. It was not in this case.” Background For count 4, the court gave CALCRIM No. 2111: “If the People have proved beyond a reasonable doubt that a sample of the defendant’s breath was taken within three hours of the defendant’s driving and a chemical analysis of the sample showed a blood alcohol level of 0.08 percent or more, you may, but are not required to, conclude that the defendant’s blood alcohol level was 0.08 percent or more at the time of the alleged offense.” The parties agree we review jury instructions de novo. (People v. Jimenez (2016) 246 Cal.App.4th 726 , 731.) In the appropriate case, permissive inferences do not shift the prosecution’s burden of proof. Because the jury may or may not choose to rely on them, permissive inferences do not operate in an unconstitutional manner. However, a permissive inference may shift the burden of proof if, under the facts of the case, there is no possibility the jury could make the connection permitted by the inference. (People v. Beltran (2007) 157 Cal.App.4th 235 , 244-245 (Beltran).) 8  If a permissive inference is not the only evidence offered of a defendant’s guilt, “there need . . . only [be] a ‘ “substantial assurance that the presumed fact is more likely than not to flow from the proved fact on which it is made to depend.” ’ ” (Beltran, supra, 157 Cal.App.4th at p. 245.) Otherwise, “the connection between the proved fact and the inferred fact [must] be established beyond a reasonable doubt . . . .” (Ibid.) Discussion According to defendant, the permissive inference was the only proof defendant was driving with a BAC of 0.08 or more, requiring that it be proved beyond a reasonable doubt, which it was not. Therefore, the instruction improperly lowered the prosecution’s burden of proof. We disagree. The prosecution offered other evidence that defendant was intoxicated when stopped by the police. Deputy Stafford’s testimony, supported by the dashboard camera video, established that prior to being pulled over, defendant committed numerous moving violations, many of them extremely dangerous. Defendant smelled of alcohol and showed signs of intoxication during HGN testing. He refused to cooperate with the officers and tried to kick out the window of the patrol car. Defendant also admitted his drinking that evening affected his driving. We find no error in the court’s giving of CALCRIM No. 2111. III Instructional Error: Instruction on Reckless Driving Finally, defendant contends the trial court’s instruction on reckless driving violated his due process rights because it is not a lesser included offense of count 1, evading a peace officer with reckless driving. Defendant acknowledges that, under People v. Toro (1989) 47 Cal.3d 966 (Toro), disapproved on another ground in People v. Guiuan (1998) 18 Cal.4th 558 , 568, footnote 3, his failure to object waives the issue. He raises the issue “so he may pursue it in the California Supreme Court.” 9  In Toro, the defendant was charged with attempted murder. The court instructed on battery with serious bodily injury as a lesser included offense. The Supreme Court found battery with serious bodily injury was not a lesser included offense of attempted murder, and held the defendant’s “failure to promptly object [to the jury instruction] will be regarded as a consent to the new charge and a waiver of any objection based on lack of notice.” (Toro, supra, 47 Cal.3d at p. 971-972, 976.) Here, defendant failed to object to the jury instruction on reckless driving as an uncharged offense, waiving the issue. However, defendant contends Toro conflicts with section 1259, which gives “an appellate court statutory authority to review any jury instruction ‘even though no objection was made thereto in the lower court, if the substantial rights of the defendant were affected thereby.’ ” (Toro, supra, 47 Cal.3d at p. 977, quoting § 1259.) Toro addressed section 1259, concluding the failure to object does not bar review of the instruction, but does bar a contention based on a lack of notice. (Ibid.) Under Toro, defendant waived challenging the instruction based on a lack of notice. DISPOSITION The judgment is affirmed. /s/ RAYE, P. J. We concur: /s/ ROBIE, J. /s/ MAURO, J. 10

2020-11-30 22:00:28.954147+00

http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2020/D11-30/C:19-2596:J:Scudder:aut:T:fnOp:N:2620089:S:0

In the United States Court of Appeals For the Seventh Circuit ____________________ No. 19‐2596 RICO SANDERS, Petitioner‐Appellant, v. SCOTT ECKSTEIN, Respondent‐Appellee. ____________________ Appeal from the United States District Court for the Eastern District of Wisconsin. No. 2:11‐cv‐868 — Lynn Adelman, Judge. ____________________ ARGUED SEPTEMBER 23, 2020 — DECIDED NOVEMBER 30, 2020 ____________________ Before HAMILTON, SCUDDER, and ST. EVE, Circuit Judges. SCUDDER, Circuit Judge. Rico Sanders received a 140‐year sentence for raping four women. He was 15 at the time of the sexual assaults, and his offense conduct was heinous and cruel in the extreme. Now 40 years old, Sanders will first be‐ come eligible for parole under Wisconsin law in 2030. He sought post‐conviction relief in state court, arguing that Wis‐ consin’s precluding him from any meaningful opportunity of parole before 2030 offends the Supreme Court’s holding in 2 No. 19‐2596 Graham v. Florida, 560 U.S. 48 (2010). Sanders later added a claim that the sentencing court’s failure to meaningfully con‐ sider his youth and prospect of rehabilitation when imposing the 140‐year sentence runs afoul Miller v. Alabama, 567 U.S. 460 (2012). After the Wisconsin courts rejected these claims, Sand‐ ers invoked 28 U.S.C. § 2254 and sought relief in federal court. The district court denied the application, and we now affirm. I A Between May and September 1995, Rico Sanders commit‐ ted a series of sexual assaults. He forcibly entered his victims’ homes while they slept, suffocated and raped them, and then robbed them of cash, food stamps, or whatever else he could find. The youngest victim was living in a foster home. An‐ other victim had given birth only a few weeks prior to Sand‐ ers’s assault. Sanders admitted that he committed his crimes near the first of the month on the belief the victims would have just received public assistance checks. Fingerprints recovered from three homes led the police to Sanders. Wisconsin authorities then charged him as an adult with five counts of sexual assault and one count of armed rob‐ bery. Rather than proceed to trial, Sanders entered an Alford plea in the Milwaukee County Circuit Court. See North Caro‐ lina v. Alford, 400 U.S. 25 , 38 (1970) (allowing the defendant to plead guilty while maintaining his innocence). Sentencing en‐ sued and the state recommended 50 to 70 years. The Milwaukee court concluded that the recommended sentence was insufficient to protect the community and to punish Sanders, and instead imposed consecutive terms of imprisonment amounting to 140 years’ incarceration. The No. 19‐2596 3 sentencing judge noted that, while he had handled “hundreds of sexual assaults over the last three years,” Sanders’s crimes were “some of the most horrific and horrible sexual assaults that [he had] seen,”—“just beyond belief.” The judge also re‐ marked that he did not “even know if [Sanders was] grown up [enough], to commit crimes so violent at the age of 17.” (Sanders was 17 at the time of sentencing but only 15 at the time of the offenses.) Sanders challenged his plea without success on direct ap‐ peal in the Wisconsin courts. Wisconsin circuit and appellate courts rejected the argument that his Alford plea was not knowing, intelligent, and voluntary, and the Wisconsin Su‐ preme Court denied his petition for review. Sanders then sought post‐conviction relief in the Wisconsin courts, alleging that his counsel on direct appeal was ineffective. After the cir‐ cuit court denied his motion and the court of appeals af‐ firmed, the Wisconsin Supreme Court again declined review. In 2011, Sanders turned to federal court, invoking 28 U.S.C. § 2254 and seeking relief in the Eastern District of Wisconsin. Beyond reviving his challenge to his Alford plea, Sanders claimed that his sentence did not conform with the Supreme Court’s holding in Graham v. Florida, which requires that states give juvenile nonhomicide offenders “some mean‐ ingful opportunity to obtain release based on demonstrated maturity and rehabilitation.” 560 U.S. 48 , 75 (2010). The dis‐ trict court stayed Sanders’s proceeding to give him an oppor‐ tunity to exhaust this Graham‐related claim in state court, as required by 28 U.S.C. § 2254 (b)(1)(A). With his federal pro‐ ceeding stayed, Sanders amended his petition to include a claim for relief under Miller v. Alabama, contending that the Wisconsin sentencing court violated his Eighth Amendment 4 No. 19‐2596 rights by not considering his youth in sentencing him to 140 years. See 567 U.S. 460 , 479 (2012) (holding that “the Eighth Amendment forbids a sentencing scheme that mandates life in prison without possibility of parole for juvenile offend‐ ers”). B With these two claims in hand—one Graham‐related and the other Miller‐related—Sanders returned to the Wisconsin courts. The Milwaukee County Circuit Court denied relief, and the Wisconsin Court of Appeals affirmed. The court of appeals assumed that both Graham and Miller applied retro‐ actively to Sanders’s case but nonetheless concluded that he was not entitled to sentencing relief. In the face of competing evidence, the court accepted Sanders’s assertion that his pro‐ jected life expectancy was 63.2 years. The court then reasoned that the rule announced in Graham did not apply because Sanders is serving a term of years and not a life sentence with‐ out the possibility of parole. Reading Graham to afford a juve‐ nile offender (not convicted of homicide) a “meaningful op‐ portunity to obtain release” before his natural life expectancy, the court noted that Sanders is first eligible for parole in his early 50s—well before his asserted life expectancy of 63.2 years. From there the Wisconsin Court of Appeals did not pro‐ vide an extended analysis of Miller, observing only that it was “not directly on point, as it concerned juveniles who commit‐ ted homicides and were given mandatory sentences of life without parole.” Sanders was a nonhomicide juvenile of‐ fender who would have the opportunity for parole under Wisconsin law, and therefore Miller did not entitle him to any No. 19‐2596 5 sentencing relief. The Wisconsin Supreme Court again de‐ clined review. C Following these proceedings in state court, the federal dis‐ trict court in Wisconsin lifted the stay on Sanders’s § 2254 pe‐ tition. Sanders then renewed not only his challenge to his Al‐ ford plea, but also his contentions that his sentence neither af‐ fords him a meaningful opportunity to obtain release as re‐ quired by Graham nor complies with Miller’s directive that the sentencing court consider his youth. The district court denied relief. The court concluded that the state court did not act unreasonably in concluding that Sanders’s Alford plea was valid. The district court declined to grant a certificate of appealability on this question, and the issue forms no part of Sanders’s appeal. The district court also determined that the Wisconsin Court of Appeals’ decision that Sanders’s sentence affords him a meaningful opportunity to obtain release because he will be eligible for parole at age 51 with a life expectancy of 63.2 years did not reflect an unreasonable application of Gra‐ ham. In reaching this conclusion, the district court declined to consider statistics Sanders presented from an American Civil Liberties Union analysis showing that the average life expec‐ tancy for a juvenile sentenced to life in prison is 50.6 years. Having never presented the statistics to the Wisconsin courts, Sanders could not rely upon the information as a basis for ob‐ taining federal habeas relief. Finally, the district court read Miller to bar only “manda‐ tory life without parole sentences for juvenile offenders.” Be‐ cause Sanders did not receive a life sentence, the district court 6 No. 19‐2596 determined that the Wisconsin Court of Appeals reasonably concluded that the principles espoused in Miller do not apply to Sanders’s sentence. In denying relief, the district court granted Sanders a cer‐ tificate of appealability on two questions: whether his sen‐ tence affords him a meaningful opportunity for parole in ac‐ cordance with Graham, and, separately, whether the sentenc‐ ing court failed to consider his youth as a mitigating factor under Miller. II A The Supreme Court’s decisions in Graham and Miller frame the issues before us on appeal. The Court decided Graham five years after Roper v. Simmons, 543 U.S. 551 , 578 (2005). In Roper, the Court held that the Eighth Amendment prohibits the im‐ position of the death penalty upon offenders who were under the age of 18 when they committed their crimes. See 543 U.S. at 578 . Capital punishment is disproportionate for this class, the Court reasoned, because “neither retribution nor deter‐ rence provides adequate justification for imposing the death penalty on juvenile offenders.” Id. at 572 . The Court’s holding was categorical: the execution of a juvenile is repugnant to the Eighth Amendment regardless of the offense the juvenile committed. Id. at 578 . Graham followed in 2010 and presented the question whether the principles animating Roper apply to juvenile of‐ fenders sentenced to life imprisonment without the possibil‐ ity of parole for a crime other than a homicide. See 560 U.S. at 52. Terrance Jamar Graham received a life sentence for an armed burglary he committed as a juvenile in Florida—a state No. 19‐2596 7 that had abolished parole. See id. at 57. Graham’s only chance for release was through the distant possibility of executive clemency. See id. The Court concluded that “penological the‐ ory is not adequate to justify life without parole for juvenile nonhomicide offenders.” Id. at 74. To be sure, a state need not promise early release to this class of offenders. Id. at 75. But the Eighth Amendment compels the lesser measure of afford‐ ing “some meaningful opportunity to obtain release based on demonstrated maturity and rehabilitation.” Id. at 75. Two years later, in Miller v. Alabama, the Court held that mandatory life‐without‐parole sentences for juvenile offend‐ ers convicted of homicide violate the Eighth Amendment. See 567 U.S. at 489 . States are not prohibited from sentencing “the rare juvenile offender whose crime reflects irreparable cor‐ ruption” to life in prison. Id. at 479–80 (quoting Roper, 543 U.S. at 573 ). But before imposing a life sentence for homicide, the sentencing court must “take into account how children are different, and how those differences counsel against irrevoca‐ bly sentencing them to a lifetime in prison.” Id. at 480. The Court has continued to underscore Miller’s direction that life sentences should be imposed sparingly. Even in cases where a court considers the child’s age before sentencing him to a lifetime in prison, “that sentence still violates the Eighth Amendment for a child whose crime reflects ‘unfortunate yet transient immaturity.’” Montgomery v. Louisiana, 136 S. Ct. 718 , 734 (2016) (quoting Miller, 567 U.S. at 479 ). Applying the teachings of Miller, we have held that the Eighth Amendment prohibits not only de jure life sentences, but also de facto life sentences—a term of years so long as to equate for all practical purposes to a life sentence. See McKinley v. Butler, 809 F.3d 908 , 911 (7th Cir. 2016). 8 No. 19‐2596 Roper, Graham, Miller, and Montgomery will not be the Su‐ preme Court’s last word on the Eighth Amendment’s appli‐ cation to juvenile sentencing. Indeed, this term the Court will consider whether the Eighth Amendment requires the sen‐ tencing authority to make a finding that a juvenile is perma‐ nently incorrigible before imposing a sentence of life without parole. See Jones v. State, No. 2015‐CT‐00899‐SCT, 2018 WL 10700848 (Miss. Nov. 29, 2018), cert. granted sub nom. Jones v. Mississippi, 140 S. Ct. 1293 (2020) (No. 18‐1259). That Graham and Miller do not purport to answer every question sure to arise in their wake is the legal reality that defeats Sanders’s request for federal habeas relief. B We begin as we must with the decision of the last state court to consider Sanders’s claim on the merits: the Wisconsin Court of Appeals. See Williams v. Jackson, 964 F.3d 621 , 628 (7th Cir. 2020). That court concluded that Sanders, who was as‐ sumed to have a life expectancy of 63.2 years and will be eli‐ gible for parole in his early 50s, has not been denied a mean‐ ingful opportunity for release under the rule announced by the Supreme Court in Graham. Our review proceeds under 28 U.S.C. § 2254 . Relief is proper only if the state court decision “was contrary to, or in‐ volved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States” or “was based on an unreasonable determina‐ tion of the facts.” 28 U.S.C. § 2254 (d)(1)–(2). The Supreme Court has instructed that under § 2254(d)(1), “an unreasonable application of federal law is different from an incorrect appli‐ cation of federal law.” Harrington v. Richter, 562 U.S. 86 , 101 (2011) (quoting Williams v. Taylor, 529 U.S. 362 , 410 (2000)). To No. 19‐2596 9 prevail, Sanders must show that the state court’s ruling “was so lacking in justification that there was an error well under‐ stood and comprehended in existing law beyond any possi‐ bility for fairminded disagreement.” Id. at 103. “If this stand‐ ard is difficult to meet, that is because it was meant to be.” Id. at 102. Sanders invokes § 2254(d)(2) and contends that the Wis‐ consin court’s determination that his life expectancy was 63.2 years was based on an unreasonable determination of fact. He grounds this contention in an ACLU report indicating that his life expectancy is only 50.6 years. See ACLU of MICHIGAN, MICHIGAN LIFE EXPECTANCY DATA FOR YOUTH SERVING NATURAL LIFE SENTENCES, at 2, available at http://www.lb7.uscourts.gov/documents/17‐12441.pdf. Be‐ cause his first and earliest hope of parole will arrive at age 51, Sanders contends that his sentence equates to life without a meaningful opportunity to obtain release in violation of Gra‐ ham’s core holding. See 560 U.S. at 75. The district court was right to conclude that Sanders waived this argument by not presenting it to the Wisconsin courts. The only information Sanders presented in state court about his life expectancy came in his reply brief in support of his petition for post‐conviction relief, where he asserted that his life expectancy is 63.2 years—a figure he said came from the United States Department of Health and Human Services. The state court reasonably accepted this assertion. Sanders cannot base a request for federal habeas relief on information not presented to the state court in the first in‐ stance. Indeed, evidence introduced for the first time in fed‐ eral court “has no bearing” on review under § 2254(d)(1). Cul‐ len v. Pinholster, 563 U.S. 170 , 185 (2011). As the Supreme 10 No. 19‐2596 Court emphasized in Pinholster, “[i]t would be strange to ask federal courts to analyze whether a state court’s adjudication resulted in a decision that unreasonably applied federal law to facts not before the state court.” Id. at 182–83. The ACLU report accordingly cannot aid Sanders in his pursuit of federal habeas relief. With our review limited to the record before the Wisconsin Court of Appeals, we consider whether that court’s denial of relief constituted an unreasonable application of the Supreme Court’s holding in Graham. We cannot answer that question in Sanders’s favor. The Wisconsin Court of Appeals determined Sanders’s chance of parole at age 51—twelve years before his expected end of life at 63—respects Graham’s requirement of a “mean‐ ingful opportunity to obtain release based on demonstrated maturity and rehabilitation.” 560 U.S. at 75. Nothing about that conclusion reflects an unreasonable application of Gra‐ ham. In time the Supreme Court may give more definition to what constitutes a “meaningful opportunity” for early re‐ lease. For now, however, the Wisconsin court’s conclusion that Sanders will have his first chance at parole at the age of 51 is by no means unreasonable. C Sanders fares no better by rooting his request for relief in Miller. Recall that in Miller the Supreme Court held that it is unconstitutional to subject a juvenile offender convicted of homicide to “a sentencing scheme that mandates life in prison without possibility of parole.” 567 U.S. at 479 . But, as the Wis‐ consin Court of Appeals recognized, Sanders neither commit‐ ted a homicide nor received a mandatory life sentence. He No. 19‐2596 11 was convicted of nonhomicide offenses, his 140‐year sentence was discretionary rather than mandatory, and his sentence provides for the possibility of parole. Our holding in McKinley v. Butler does not compel a dif‐ ferent conclusion. See 809 F.3d 908 (7th Cir. 2016). Benard McKinley committed murder at the age of 16 and was sen‐ tenced to 100 years’ imprisonment with no good time credit or chance for early release. See id. at 909. We recognized that Miller plays a role where juveniles are subject to “discretion‐ ary life sentences and de facto life sentences,” and we noted that the “children are different” language of Miller “implies that the sentencing court must always consider the age of the defendant in deciding what sentence (within the statutory limits) to impose on a juvenile.” Id. at 911, 914. Importantly, though, we made this statement in the con‐ text of McKinley’s sentence, which provided no possibility for parole and was therefore effectively a life sentence. Sanders’s sentence does not fall within that category. Absent controlling Supreme Court authority that Miller requires a sentencing judge to consider a juvenile offender’s youth and its attendant circumstances before imposing a sentence other than a de jure or de facto life‐without‐parole sentence, we cannot say that the Wisconsin court’s decision resulted in an unreasonable appli‐ cation of federal law. See 28 U.S.C. § 2254 (d)(1). III We close with two interrelated observations. No doubt the law will continue to evolve in this area. Future cases will likely test what it means for a person to have a meaningful opportunity for release under the teachings of Graham. So, too, may future cases make clear the outer limits of a 12 No. 19‐2596 sentencing judge’s discretion to punish juvenile offenders un‐ der Miller. But lower federal courts do not enjoy the benefit of foresight—particularly so within § 2254 review. We decide this appeal strictly within the confines of today’s clearly es‐ tablished federal law as determined by the Supreme Court. In doing so, we offer a brief reaction to Sanders’s belief that Wisconsin is certain to deny his request for parole in 2030. He anchors that view in an analysis of outcomes of initial pa‐ role eligibility determinations for offenders serving life sen‐ tences. Put most simply, Sanders is convinced the deck is stacked against his receiving parole in 2030. Now is not the time for Sanders to advance this argument, however, as any assessment of the point would immerse us in Wisconsin’s pa‐ role standards, procedures, past results, and projected out‐ comes—a task well beyond deciding whether the Wisconsin Court of Appeals unreasonably applied Graham and Miller in denying Sanders post‐conviction relief. To its credit, and with appreciated candor, the Warden’s counsel, on behalf of Wisconsin’s Attorney General, acknowl‐ edged during oral argument that Sanders, if he is denied pa‐ role in 2030, will have a future opportunity to challenge that outcome in state court, including by raising claims grounded in Graham, Miller, or another Supreme Court precedent that may enter the U.S. Reports in the intervening years. For these reasons, we AFFIRM.

2020-11-30 22:01:47.527809+00

https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2020cv0774-48-0

In the United States Court of Federal Claims No. 20-774C (E-Filed: November 30, 2020) 1 ) NAVARRO RESEARCH AND ) ENGINEERING, INC., ) ) Plaintiff, ) ) v. ) ) Post-Award Bid Protest; Motions for THE UNITED STATES, ) Judgment on the Administrative Record; ) RCFC 52.1(c); Plain Language Review; Defendant, ) Agency Discretion. ) and ) ) RSI ENTECH, LLC, ) ) Intervenor-defendant. ) ) Richard P. Rector, Washington, DC, for plaintiff. Samuel B. Knowles, Thomas E. Daley, Ryan P. Carpenter, of counsel. Joshua E. Kurland, Trial Attorney, with whom appeared Michael D. Granston, Deputy Assistant Attorney General, Robert E. Kirschman, Jr., Director, and Douglas K. Mickle, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, for defendant. Monekia G. Franklin, United States Department of Energy, of counsel. Damien C. Specht, McLean, VA, for intervenor-defendant. James A. Tucker, Caitlin A. Crujido, Lyle F. Hedgecock, of counsel. OPINION 1 This order was issued under seal on November 3, 2020. See ECF No. 45. The parties were invited to identify source selection, proprietary or confidential material subject to deletion on the basis that the material is protected/privileged. No redactions were proposed by the parties. See ECF No. 47 (notice). Thus, the sealed and public versions of this order are identical, except for the publication date and this footnote. CAMPBELL-SMITH, Judge. Plaintiff filed this bid protest to challenge the award of a contract for the provision of “Legacy Management Support Services” to “‘sites in the United States and the territory of Puerto Rico associated with past radiological and nuclear material production and testing, and energy research.’” ECF No. 1 at 1, 8 (complaint). Plaintiff filed a motion for judgment on the administrative record (AR) on August 3, 2020, ECF No. 32; and both defendant and intervenor-defendant filed cross-motions for judgment on the AR and responses to plaintiff’s motion on September 2, 2020, ECF No. 37 and ECF No. 38. Plaintiff filed its response to the cross-motions and reply in support of its motion on September 18, 2020, ECF No. 39, and defendant and intervenor-defendant filed their replies on October 5, 2020, ECF No. 40 and ECF No. 41. The motions are now fully briefed and ripe for ruling. In ruling on these motions, the court has considered the following: (1) plaintiff’s complaint, ECF No. 1; (2) the AR, ECF No. 27; (3) plaintiff’s motion for judgment on the AR, ECF No. 32; (4) plaintiff’s memorandum in support of its motion for judgment on the AR, ECF No. 33; 2 (5) defendant’s supplement to the AR, ECF No. 36; (6) intervenor-defendant’s response to plaintiff’s motion for judgment on the AR, and its cross-motion for judgment on the AR, ECF No. 37; (7) defendant’s response to plaintiff’s motion for judgment on the AR, and its cross-motion for judgment on the AR, ECF No. 38; (8) plaintiff’s reply in support of its motion for judgment on the AR, and its response to defendant’s and intervenor-defendant’s cross-motions for judgment on the AR, ECF No. 39; (9) defendant’s reply in support of its cross-motion for judgment on the AR, ECF No. 40; (10) intervenor-defendant’s reply in support of its cross-motion for judgment on the AR, ECF No. 41. 2 Plaintiff attached three exhibits to its memorandum in support of its motion for judgment on the AR. See ECF No. 33-1; ECF No. 33-2; ECF No. 33-3. The first and second appear to be charts of labor rates and the third is a declaration from Ms. Susana Navarro-Valenti. See id. Defendant requested in its cross-motion that the court “strike or disregard the exhibits because they are outside the administrative record and supplementation is not necessary to allow ‘meaningful judicial review’ in this case.” ECF No. 38 at 45. Plaintiff points out that the charts are already in the AR at ECF No. 27-15 at 613-18. See ECF No. 39 at 22. The declaration, however, is not. The court finds that supplementation is not necessary for meaningful judicial review in this matter and, therefore, the declaration is not appropriately considered in analyzing the motions before the court. See Axiom Res. Mgmt. v. United States, 564 F.3d 1374 , 1379-80 (Fed. Cir. 2009) (holding that “supplementation of the record should be limited to cases in which the omission of extra-record evidence precludes judicial review”) (quotation marks and citation omitted). The court thus has not taken the declaration into consideration in its review of this matter. The charts, however, are part of the AR in this matter and are considered in that context. 2  On October 29, 2020, plaintiff filed a motion for leave to file notice of supplemental authority “addressing a recent decision of the United States Government Accountability Office that is directly relevant” to this case. ECF No. 44. For the reasons set forth below: (1) plaintiff’s motion for leave to file notice of supplemental authority, ECF No. 44, is DENIED; (2) plaintiff’s motion for judgment on the AR, ECF No. 32, is DENIED; (3) defendant’s cross-motion for judgment on the AR, ECF No. 38, is GRANTED; and (4) intervenor-defendant’s cross-motion for judgment on the AR, ECF No. 37, is GRANTED. I. Background A. The Solicitation On July 1, 2019, the United States Department of Energy (DOE) issued a solicitation for a single award, indefinite-delivery, indefinite-quantity (IDIQ) contract for “Legacy Management Support Services (LMS)” conducting “post-closure site operations” “for protection of human health and the environment” at sites “associated with the legacy of the Cold War.” ECF No. 27-3 at 1 (solicitation); ECF No. 27-7 at 114 (amended solicitation); ECF No. 27-6 at 120 (amended solicitation statement of work). The DOE anticipated awarding a five-year contract under which task orders would issue that could last for up to three years beyond the ordering period, with a minimum anticipated contract amount of $500,000, and a maximum of $1 billion. See ECF No. 27- 7 at 114. The solicitation specified both proposal preparation instructions and evaluation factors. See id. at 211-13; 218-23. The proposal preparation instructions were contained in Section L, titled Instructions, Conditions, and Notices to Offerors, and noted that “[p]roposals are expected to conform to all solicitation requirements and the instructions in this Section L.” Id. at 197, 205. It further clarified that “[t]hese instructions are not evaluation factors. Evaluation factors are set out in Section M, Evaluation Factors for Award, of this solicitation. However, failure to provide the requested information may make an Offeror ineligible for award or adversely affect the Government’s evaluation of an Offeror’s proposal.” Id. at 205. Offerors were to include a separate technical proposal and price proposal. See id. at 205-06. In their technical proposals, offerors were to address each of four factors: (1) technical and capabilities approach; (2) management approach; (3) teaming approach; and (4) past performance. See id. at 211-14. Relevant to this protest, within the technical and capabilities approach, Section L instructed offerors to “demonstrate the extent of skills, knowledge and experience resident within the company personnel (key and non- key personnel) who have performed work within a similar environment and that is relevant to the IDIQ Statement of Work.” Id. at 212. Likewise, as to offerors’ corporate management, Section L directed offerors to “demonstrate the extent of skills, knowledge, 3 and experience resident across the corporate management who has performed oversight and integration of contracted services within a similar environment and that is relevant to the Statement of Work.” Id. Pursuant to Section M, titled Evaluation Factors for Award, the DOE planned to evaluate offerors’ proposals to determine “the best value to the Government” by first having a source evaluation board (SEB) review and evaluate the technical proposals. Id. at 218. Following this initial evaluation, a designated source selection authority was to select an offeror for contract award. Id. at 219. “[T]he evaluation factors for the Technical Proposal, when combined, [were] significantly more important than the evaluated price.” Id. at 218. Within the technical proposal, the technical and capabilities approach was to be “significantly more important than all other technical proposal factors . . . combined.” Id. Section M informed offerors that a proposal would be deemed unacceptable “if it [did] not represent a reasonable initial effort to address itself to the essential requirement of the solicitation, or if it clearly demonstrate[d] that the offeror [did] not understand the requirements of the solicitation or if it [did] not substantially and materially comply with the proposal preparation instructions” of the solicitation. Id. at 219. The solicitation provided that the SEB was to evaluate technical proposal factors one through three using adjectival ratings of outstanding, good, acceptable, marginal, and unacceptable. See id.; id. at 222 (defining each of the adjectival ratings). Factor four, past performance, was evaluated on a scale of significant confidence, satisfactory confidence, neutral, and little confidence. See id. at 223. Evaluators reviewing the technical and capabilities approach were looking for: [T]he extent to which the implementation of the approach demonstrates a thorough understanding of the objective, scope, and intent of the requirement; the skills, knowledge and experience, including the ability to integrate the contracted services, that contractor personnel and corporate management possess; and the extent to which the approach ensures quality services and quality work products. Id. at 220. In arriving at their “overall adjectival rating for a factor,” the SEB assigned strengths and weaknesses to the proposal using the following descriptions: 4 Id. at 222. The final evaluation factor, price, was not assigned an adjectival rating, but the “proposed total price for each year [would] be evaluated to determine whether the total IDIQ price for work on government facility is fair and reasonable.” Id. at 221. The solicitation clarified that the DOE would “only evaluate the labor categories proposed based on the labor categories provided in the solicitation.” Id. It further noted that, while the DOE was “more concerned with obtaining a superior technical proposal than making award at the lowest evaluated price,” it would not “make an award at a price premium it consider[ed] disproportionate to the benefits associated with the evaluated superiority of one Offeror’s technical and management proposal over another.” Id. at 218. The solicitation anticipated that the “closer or more similar in merit that Offerors’ technical proposals [were] evaluated to be, the more likely the evaluated price may be the determining factor in selection for award.” Id. B. Proposals and Award The DOE received five proposals in response to the solicitation, all of which it evaluated and found to be complete and accurate proposals. See ECF No. 27-12 at 766- 67 (source selection decision memorandum). The members of the SEB each 6  C. Plaintiff’s Bid Protest After its protest at the GAO was denied, plaintiff filed its complaint in this court on June 25, 2020. See ECF No. 27-15 at 625-39 (GAO decision); ECF No. 1 (complaint). Plaintiff alleged: (1) that the DOE’s evaluation of offerors’ proposed personnel and corporate management was inconsistent with the evaluation criteria, see ECF No. 1 at 26; (2) that the DOE failed to properly analyze the risks presented by intervenor-defendant’s “unrealistically low labor rates,” id. at 32; (3) that intervenor- defendant’s proposal contained a material misrepresentation, see id. at 42; (4) that the DOE failed to properly evaluate the impact of intervenor-defendant’s teaming partner’s corporate transaction, see id. at 45; (5) that the DOE inflated other offerors’ technical ratings and minimized plaintiff’s, see id. at 52; and (6) that the DOE was unreasonable in its evaluation of the second-place offeror’s proposal, see id. at 57. The parties then filed their cross-motions for judgment on the administrative record, which are now fully briefed. Plaintiff requested oral argument in this matter in its response and reply brief. See ECF No. 39 at 6. The court has broad discretion to manage its docket, and in that discretion determines that oral argument is not necessary in this case. See Amado v. Microsoft Corp., 517 F.3d 1353 , 1358 (Fed. Cir. 2008). Thus, this case is ripe for decision. II. Legal Standards The Tucker Act grants this court jurisdiction: to render judgment on an action by an interested party objecting to a solicitation by a Federal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement . . . without regard to whether suit is instituted before or after the contract is awarded. 28 U.S.C. § 1491 (b)(1). The court’s analysis of a “bid protest proceeds in two steps.” Bannum, Inc. v. United States, 404 F.3d 1346 , 1351 (Fed. Cir. 2005). First, the court determines, pursuant to the Administrative Procedure Act standard of review, 5 U.S.C. § 706 , whether the “agency’s action was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with [the] law.” Glenn Def. Marine (ASIA), PTE Ltd. v. United States, 720 F.3d 901 , 907 (Fed. Cir. 2013) (citing 28 U.S.C. § 1491 (b)(4) (adopting the standard of 5 U.S.C. § 706 )). If the court finds that the agency acted in error, the court then must determine whether the error was prejudicial. See Bannum, 404 F.3d at 1351 . 8  To establish prejudice, “a protester must show ‘that there was a substantial chance it would have received the contract award but for that error.’” Alfa Laval Separation, Inc. v. United States, 175 F.3d 1365 , 1367 (Fed. Cir. 1999) (quoting Statistica, Inc. v. Christopher, 102 F.3d 1577 , 1582 (Fed. Cir. 1996)). “In other words, the protestor’s chance of securing the award must not have been insubstantial.” Info. Tech. & Applications Corp. v. United States, 316 F.3d 1312 , 1319 (Fed. Cir. 2003). The substantial chance requirement does not mean that plaintiff must prove it was next in line for the award but for the government’s errors. See Sci. & Mgmt. Res., Inc. v. United States, 117 Fed. Cl. 54 , 62 (2014); see also Data Gen. Corp. v. Johnson, 78 F.3d 1556 , 1562 (Fed. Cir. 1996) (“To establish prejudice, a protester is not required to show that but for the alleged error, the protester would have been awarded the contract.”). Demonstrating prejudice does require, however, that the plaintiff show more than a bare possibility of receiving the award. See Bannum, 404 F.3d at 1358 (affirming the trial court’s determination that the plaintiff had not demonstrated a substantial chance of award when its “argument rest[ed] on mere numerical possibility, not evidence”). Given the considerable discretion allowed contracting officers, the standard of review is “highly deferential.” Advanced Data Concepts, Inc. v. United States, 216 F.3d 1054 , 1058 (Fed. Cir. 2000). As the Supreme Court of the United States has explained, the scope of review under the “arbitrary and capricious” standard is narrow. See Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281 , 285 (1974). “A reviewing court must ‘consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment,” and “[t]he court is not empowered to substitute its judgment for that of the agency.’” Id. (quoting Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402 , 416 (1971)); see also Weeks Marine, Inc. v. United States, 575 F.3d 1352 , 1368-69 (Fed. Cir. 2009) (stating that under highly deferential rational basis review, the court will “sustain an agency action ‘evincing rational reasoning and consideration of relevant factors’”) (citing Advanced Data Concepts, 216 F.3d at 1058 ). III. Analysis In its motion for judgment on the AR, plaintiff argues that the DOE did not evaluate the offerors’ proposals in accordance with the terms of the solicitation in several respects. See ECF No. 33 at 9. Plaintiff contends that the DOE’s evaluation errors “compromise DOE’s entire evaluation because none of the offerors’ ratings were assigned pursuant to the evaluation criteria in the [s]olicitation.” ECF No. 39 at 7. The court will address each of plaintiff’s arguments in turn. A. The DOE’s Evaluation under Sections L and M of the Solicitation In its motion for judgment on the AR plaintiff first argues that the DOE failed to evaluate offerors’ proposals in accordance with the stated criteria. See ECF No. 33 at 20- 9 26. Specifically, plaintiff contends that the DOE should have taken into account the proposal preparation instructions contained in Section L of the solicitation and evaluated the “extent” of an offeror’s ability to meet the Section L requirements. See id. 20-21. Defendant responds that plaintiff is misreading the solicitation and, in doing so, adding unstated evaluation criteria. See ECF No. 38 at 23-24. Defendant contends that the solicitation’s plain language does not require an evaluation of “the extent” of the offerors’ experience, and, if plaintiff believed it did include such a requirement, plaintiff should have sought clarification before submitting its offer. See id. at 25-26, 28. Intervenor-defendant agrees with defendant. See ECF No. 37 at 15-16. Section L of the solicitation required offerors to “demonstrate the extent of skills, knowledge and experience resident within the company personnel (key and non-key personnel) who have performed work within a similar environment and that is relevant to the IDIQ Statement of Work.” ECF No. 27-7 at 212. Likewise, as to offerors’ corporate management, the solicitation directed offerors to “demonstrate the extent of skills, knowledge and experience resident across the corporate management who has performed oversight and integration of contracted services within a similar environment and that is relevant to the Statement of Work.” Id. Plaintiff reads these instructions, in conjunction with Section M’s requirement that offerors “substantially and materially comply” with the proposal instructions, to require the DOE to “evaluate the ‘extent’ of an offeror’s ability to meet the requirements of Section L, not just whether an offeror could meet the minimum requirements.” ECF No. 33 at 21 (citing ECF No. 27-7 at 219). Thus, plaintiff contends that the DOE should have considered “the extent to which the knowledge, skills, and experience of either an offeror’s personnel or its corporate management were within a ‘similar work environment’” or relevant to the solicitation statement of work as part of its Section M evaluation. Id. Such an evaluation, according to plaintiff, would have resulted in the DOE awarding plaintiff additional strengths based on plaintiff’s direct experience with the program. Id. at 25-26. The court disagrees. Interpretation of a solicitation begins with “the plain language of the document.” Banknote Corp. of Am. v. United States, 365 F.3d 1345 , 1353 (Fed. Cir. 2004). “If the provisions of the solicitation are clear and unambiguous, they must be given their plain and ordinary meaning.” Id. The plain language of the Section L provides proposal preparation instructions only. The solicitation states that “[t]hese instructions are not evaluation factors. Evaluation factors are set out in Section M, Evaluation Factors for Award, of this solicitation.” ECF No. 27-7 at 205. The plain language unambiguously provides that Section L includes instructions, not factors for evaluation. The court must, however, consider the solicitation “as a whole, interpreting it in a manner that harmonizes and gives reasonable meaning to all of its provisions.” Banknote Corp., 365 F.3d at 1353 . Section L makes clear that the “failure to provide the requested information may make an Offeror ineligible for award or adversely affect the 10 Government’s evaluation of an Offeror’s proposal.” ECF No. 27-7 at 205. Section M provides that a proposal would be “deemed unacceptable if it [did] not represent a reasonable initial effort to address itself to the essential requirements of the solicitation, or if it clearly demonstrate[d] that the offeror [did] not understand the requirements of the solicitation or if it [did] not substantially and materially comply with the proposal preparation instructions” of the solicitation. Id. at 219. These sections, read together, with the provision describing Section L as containing the proposal instructions and Section M as setting forth the evaluation factors, make plain that the evaluators were looking for a complete proposal with all requested information included. But, these sections do not convert the proposal instructions of Section L into evaluation factors as plaintiff contends. Such a conversion would be counter to the plain language of the solicitation. Plaintiff cites to several cases that it claims support its argument that Section L contains binding evaluation factors. See ECF No. 33 at 23-24. Unlike the circumstances before the court, however, each of the cited cases present a situation in which an offeror left information out of its proposal in violation of the proposal instructions and later argued that the instructions were not binding. See, e.g., Orion v. United States, 102 Fed. Cl. 218 , 228 (2011) (reviewing plaintiff’s contention that the specific pricing information called for in the solicitation was not a binding requirement and finding it contrary to the plain language of the solicitation). These cases are inapplicable here—where plaintiff argues that the Section L requirements are not only binding, but add additional requirements to the evaluation factors. 3 Further, the court reads at least one of the cases cited by plaintiff as supporting defendant’s position. Plaintiff cites Antarctic Support Associates v. United States, 46 Fed. Cl. 145 (2000), for the proposition that a capability discussed in Section L, but not Section M, can be considered as an evaluation factor. See ECF No. 39 at 7. In Antarctic, 3 In its notice of supplemental authority, plaintiff reviews a GAO decision from September 23, 2020, Evergreen JV, B-418475.4, 2020 WL 5798042 (Comp. Gen. Sept. 23, 2020). See ECF No. 44-1 at 2-4. Plaintiff argues that this decision is relevant here because it involved the interpretation of a similar solicitation term regarding an evaluation of the extent of offerors’ ability to demonstrate capabilities. Id. In Evergreen JV, the GAO held that “[w]here a solicitation indicates that the agency will evaluate the ‘extent’ a proposal meets a particular requirement, offerors can reasonably expect that a proposal exceeding the agency’s minimum requirements will garner a more favorable evaluation than one that merely meets the requirements.” Evergreen JV, 2020 WL 5798042 at *8. The solicitation at issue in Evergreen JV, unlike the solicitation here, included specific evaluation factors regarding the extent of an offeror’s relevant capabilities. See id. at *2-3 . The court is not persuaded by plaintiff’s argument, and the outcome of this opinion would be unaffected by plaintiff’s offered supplemental authority. Therefore, plaintiff’s motion for leave to file notice of supplemental authority, ECF No. 44, is denied. 11 the plaintiff argued that the proposal instructions in the solicitation at issue referenced a requirement that was not listed in the evaluation factors. See Antarctic, 46 Fed. Cl. at 155. The court noted, however, that the requirement was included within an evaluation factor and that the evaluation report clearly and appropriately showed consideration of the requirement as part of the agency’s consideration of the whole factor. Id. Similarly, in this case, Section L instructed offerors to “demonstrate the extent of skills, knowledge and experience” their personnel and management had in similar environments, and the Section M evaluation criteria incorporated this directive, noting that the evaluation would consider “the extent to which the implementation of the approach demonstrates . . . the skills, knowledge and experience, including the ability to integrate the contracted services, that contractor personnel and corporate management possess.” ECF No. 27-7 at 212, 220. Like in Antarctic, the requirement plaintiff identifies in Section L and argues must convey to Section M, is in fact included in Section M, even if not how plaintiff would like. 4 The record in this case reveals that the DOE treated the Section L instructions as binding and evaluated the proposals received for completeness and accuracy, finding that each proposal satisfied the instructions. See ECF No. 27-12 at 767 (Source Selection Decision Memorandum stating that “[e]ach respective proposal included a complete Volume as instructed, and therefore [was] determined to be responsive”). The DOE also evaluated each offeror’s technical capabilities pursuant to the evaluation factors outlined in Section M. See ECF No. 27-12 at 549-722; 764. That the DOE evaluated the skills, knowledge, and experience of each offerors’ personnel and management in accordance with the Section M factors is clear in the record. See, e.g., id. at 617-18 (assigning plaintiff strengths for “Essential/Critical Personnel with Unique Depth of Knowledge of LM Site and Services” and for its personnel in general). Thus, the DOE appropriately evaluated the proposals according to the terms of the solicitation, and plaintiff’s protest on this count must be denied. B. The DOE’s Evaluation of Performance Cost and Risk of Labor Rates Plaintiff argues that intervenor-defendant’s representation in its proposal that it would “‘[p]rovide a compensation and benefits structure aligned with current salary and benefits,’” was a misrepresentation given that the prices it proposed “failed to cover just the base salary and fringe benefits of incumbent personnel” in a majority of the labor categories. ECF No. 33 at 38-39 (quoting ECF No. 27-9 at 86 (intervenor-defendant’s proposal)). Plaintiff thus contends that intervenor-defendant should not have been 4 Notwithstanding plaintiff’s arguments regarding the exact language of the Section L instructions, the plain language of Section L does not support plaintiff’s preferred reading. The court is not persuaded that the Section L instructions are ambiguous, and declines to read evaluation factors into the solicitation in the manner plaintiff desires. 12 eligible for award since its “approach to recruiting and retaining incumbent personnel is based on the knowingly false foundation that [intervenor-defendant] will offer salaries and benefits consistent with the incumbent salaries and benefits.” Id. at 41. Plaintiff further argues that because intervenor-defendant’s proposal includes labor prices that are “unrealistically low,” it represents a cost and performance risk that the DOE should have—but did not—take into account. ECF No. 33 at 27. Plaintiff contends that the Section M factor requiring the DOE to evaluate the “cost and performance risks of each Offeror’s proposal” made it mandatory for the DOE to make “an assessment of whether the offeror’s costs to the Agency are too low to support successful contract performance.” Id. (quoting ECF No. 27-7 at 219 (solicitation Section M.3(b)(2))). In further support of its position, plaintiff cites to Federal Acquisition Regulation (FAR) 52.237-10(d), which is included in the solicitation, and provides that “[p]roposals that include unrealistically low labor rates, or that do not otherwise demonstrate cost realism, will be considered in a risk assessment and will be evaluated for award in accordance with that assessment.” Id. at 28 (quoting and adding emphasis to ECF No. 27-2 at 197). Plaintiff contends that intervenor-defendant’s labor rates should have been subjected to a risk analysis because it proposed to retain “‘the majority’” of plaintiff’s incumbent staff and the labor rates proposed “for 75% of the work at issue, do not even cover the paychecks of the incumbent workforce.” ECF No. 33 at 27 (emphasis in original). Both defendant and intervenor-defendant respond that it is plaintiff who mischaracterizes intervenor-defendant’s proposal. See ECF No. 38 at 42; ECF No. 37 at 32-35. Defendant notes that intervenor-defendant’s approach to recruiting incumbent personnel did not rely on maintaining the entire or the majority of the workforce, but rather “to prioritize and to target ‘incumbents with critical institutional knowledge, superior management and leadership performance, and high skill levels’” and to maintain a majority of that staff. ECF No. 38 at 42 (quoting ECF No. 27-9 at 83). Both defendant and intervenor-defendant further point out that, because the solicitation requested fully- burdened labor rates, “the risk of the costs of performance lies with the contractor, and offerors may offer below-cost labor rates.” Id. at 44; see also ECF No. 37 at 34. Defendant and intervenor-defendant add that plaintiff’s argument that the DOE should have evaluated intervenor-defendant’s price—to determine whether they were too low—effectively requests a price realism analysis, which was not required by the solicitation. See ECF No. 38 at 30; ECF No. 37 at 21. The two parties also contend that, without an explicit requirement in the solicitation that the agency will conduct a price realism analysis, such an analysis is inappropriate and “an agency cannot reject an offer merely because it deems the price too low.” ECF No. 38 at 31; ECF No. 37 at 22. Defendant points out that plaintiff’s citation to FAR 52.237-10 is inapposite because that provision relates to uncompensated overtime—which intervenor-defendant’s proposal did not include. Id. at 33. Rather, defendant argues, the solicitation only required that the proposed total price “‘be evaluated to determine whether the total IDIQ price for work on 13 [the] government facility is fair and reasonable.’” Id. (quoting ECF No. 27-7 at 221). And, according to defendant, this is what the DOE did when the contracting officer performed the price analysis. Id. at 36. As an initial matter, the court agrees with defendant and intervenor-defendant that intervenor-defendant’s proposal did not include a misrepresentation. Intervenor- defendant clearly stated that it intended to hire the majority of a group of key incumbent personnel that it targeted for specific reasons. See ECF No. 27-9 at 83. Whether intervenor-defendant proposed prices that would support the salaries of the incumbent personnel does not change intervenor-defendant’s intent. Rather, it informs the risk that the intervenor-defendant was willing to accept. The court also agrees with defendant and intervenor-defendant that the solicitation in this case does not require a price realism analysis. It is well-settled that an agency may not evaluate a proposal using unstated evaluation criteria. See, e.g., Acra, Inc. v. United States, 44 Fed. Cl. 288 , 293 (1999) (“[T]he government is not permitted to rely upon undisclosed evaluation criteria when evaluating proposals.”). In the case of a fixed price contract, price realism is not ordinarily considered because, as defendant pointed out, a fixed-price contract assigns the risk of loss to the contractor. See NVE, Inc. v. United States, 121 Fed. Cl. 169 , 180 (2015). Therefore, “it is improper for an agency to conduct a price realism analysis in a fixed-price procurement when the solicitation does not expressly or implicitly require a price realism analysis because such an analysis would employ unstated evaluation criteria.” UnitedHealth Military & Veterans Servs., LLC v. United States, 132 Fed. Cl. 529 , 561 (2017). The solicitation in this case does not explicitly require a price realism analysis. The court finds that the only explicit reference to price realism to which plaintiff pointed in the solicitation is FAR 52.237-10(d). See ECF No. 33 at 28. When read in context, it is clear that this FAR provision relates to uncompensated overtime, and does not provide an independent basis for price realism review. To determine whether the solicitation implicitly included a price realism analysis requirement, the court looks to the plain language of the solicitation. See UnitedHealth, 132 Fed. Cl. at 562. Plaintiff identified no term in the solicitation that required proposals to be rejected because their prices were too low; nor did plaintiff identify any term that required prices to be evaluated for anything other than fairness and reasonableness. See generally, ECF No. 33 at 27-37. Indeed, the solicitation stated clearly, more than once, that price would be evaluated for fairness, reasonableness, and completeness. See ECF No. 27-7 at 215, 218, 221. Without more, plaintiff’s argument that the solicitation’s statement that “cost and performance risks,” along with the relative strengths and weaknesses of the proposals, would be assessed “against the evaluation factors in this Section M to determine the Offeror’s ability to perform the contract” is sufficient to implicitly require a price realism analysis, must fail. ECF No. 33 at 27 (quoting and adding emphasis to ECF No. 27-7 at 218-19). The court finds that the plain language of 14 the solicitation neither explicitly nor implicitly provided for a price realism analysis. Therefore, the DOE appropriately did not conduct a price realism analysis in its evaluation of the proposals. The DOE was required, however, to evaluate the “cost and performance risks” associated with the evaluation factors in Section M. See ECF No. 27-7 at 218-19. Plaintiff did not present, and the court did not find, any evidence that the DOE failed to perform this assessment. The fact that problems related to intervenor-defendant’s labor rates and ability to recruit incumbent personnel may arise, simply does not mean that the agency failed to consider these potential problems rendering the award arbitrary and capricious or unreasonable. To the contrary, the DOE appears to have fully considered intervenor-defendant’s recruitment plan and set forth its considerations. See ECF No. 27- 12 at 643. The court will not substitute its judgment for that of the agency under such circumstances. See Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 , 43 (1983) (noting that review under the arbitrary and capricious standard is “narrow” and “a court is not to substitute its judgment for that of the agency”). Plaintiff’s claim on this count must be denied. C. The DOE’s Evaluation of Intervenor-Defendant’s Teaming Partner’s Corporate Transaction Plaintiff argues that the DOE failed to evaluate the impact of the sale of intervenor-defendant’s teaming partner—AECOM N&E Technical Services, LLC (AECOM). See ECF No. 33 at 42-48. Plaintiff contends that, although intervenor- defendant included information in its proposal alerting the DOE to an impending corporate transaction involving AECOM, that transaction did not occur and another, slightly different transaction did. See id. at 43-44 . According to plaintiff, the transaction that ultimately occurred affected intervenor-defendant’s technical capabilities and past performance information, and the DOE should have evaluated the impact of that transaction. See id. at 44-46 ; ECF No. 39 at 25. Defendant responds that the DOE “reasonably accepted [intervenor-defendant’s] representations regarding AECOM and the transaction in its proposal.” ECF No. 38 at 51. Defendant argues that intervenor-defendant notified the DOE of the impending transaction and represented that the contract would be “minimally impacted.” Id. at 53 . The DOE, defendant contends, was entitled to—and did—rely on that representation and “reasonably evaluated [intervenor-defendant’s] proposal in light of its assurances.” Id. at 56 . Further, defendant argues, when the DOE learned that the transaction had been completed, the DOE followed up with intervenor-defendant and issued an “updated determination confirming [its] responsibility finding.” Id. at 54 . The court agrees with defendant that the DOE was reasonably entitled to rely on intervenor-defendant’s representations in its proposal related to its teaming partner and the impending transaction. The scope of review under the “arbitrary and capricious” 15 standard is narrow. See Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43 . “A reviewing court must ‘consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment,” and “[t]he court is not empowered to substitute its judgment for that of the agency.’” Bowman Transp., 419 U.S. at 285 (quoting Citizens to Preserve Overton Park, 401 U.S. at 416 ). The DOE found intervenor-defendant’s proposal to be thorough, found its teaming approach to be “complete, detailed, and comprehensive,” and found its past performance to be “recent and relevant” providing “significant confidence that the offeror would successfully perform the requirement.” ECF No. 27-12 at 767, 773-74. The only evidence plaintiff has provided that it was unreasonable for the DOE to rely on intervenor-defendant’s representations as to the corporate transaction are qualifying statements in the United States Securities and Exchange Commission documents that AECOM released related to the transaction. See ECF No. 33 at 44. The court does not find these statements to be persuasive evidence that the DOE should not have relied on intervenor-defendant’s assurances that the transaction would have a minimal impact on the contract. Without more, the court finds that the DOE performed a reasonable evaluation of intervenor-defendant’s proposal that comported with the evaluation factors outlined in the solicitation. The court will not substitute its judgment for that of the agency as it relates to the impact of the AECOM corporate transaction on intervenor- defendant’s proposal. Further, the contracting officer, upon learning of the completion of the AECOM transaction, which occurred “just prior to award,” decided that “it was in the best interest of DOE to perform an updated responsibility determination.” ECF No. 27-15 at 503. The contracting officer evaluated the transaction and its results, reviewed a declaration provided by intervenor-defendant, and determined that “the latest information did not affect [intervenor-defendant’s] responsibility status” and that intervenor-defendant was “still considered responsible.” Id. Plaintiff describes the DOE’s consideration of the declaration as a post hoc rationalization because it was completed after contract award and after plaintiff’s protest at the GAO. See ECF No. 33 at 47-48. Defendant responds that it is appropriate for an agency to “reassess an issue like this one” if additional information becomes available. ECF No. 38 at 58. The court agrees with defendant. Because the AECOM transaction occurred so close to the time of award, it was appropriate and reasonable for the contracting officer— when she became aware of the issue—to investigate and make a determination. Cf. Turner Constr. Co., Inc. v. United States, 645 F.3d 1377 , 1386 (Fed. Cir. 2011) (noting that in the context of organizational conflicts of interest (OCI), information may not come to light until after award, making a post-award OCI review appropriate). Thus, the DOE thoroughly considered the AECOM transaction and its impact on the award. Once again, the court will not second guess the agency’s determination or substitute its judgment for 16 that of the agency. See Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43 . Plaintiff’s claim on this point must fail. D. The DOE’s Evaluation of the Technical Ratings of Offerors Plaintiff next argues that the DOE inappropriately evaluated the offerors’ proposals by “‘grade inflation’” for intervenor-defendant and the second-place proposal and by “minimizing the technical superiority of [plaintiff’s] proposal” in a quest for the lowest price offer. ECF No. 33 at 49. Plaintiff contends that the DOE erred by not “meaningfully distinguish[ing]” between strengths and significant strengths, thereby “impermissibly level[ing] the offerors’ technical proposals and chang[ing] the very nature of the procurement.” Id. Plaintiff adds that the DOE also “flatten[ed] the remaining discriminators that worked in [plaintiff’s] favor” by minimizing the weaknesses in the other proposals. Id. Defendant responds that plaintiff’s argument is “‘mere disagreement’” with the evaluation, and that any suggestion that the DOE was angling for the lowest price offer is incorrect because the SEB did not consider the offerors’ price proposals. ECF No. 38 at 59. Defendant points out that “[i]t is well-recognized” that evaluators’ “judgment in assigning strengths or significant strengths . . . is inherently subjective.” Id. at 60 . Defendant argues that despite the subjective nature of this judgment, the record in this case demonstrates that both the SEB and the source selection authority “carefully documented the basis for every strength” awarded and “discussed those [intervenor- defendant] strengths [ ] found to be discriminators.” Id. at 60-61 . Plaintiff replies that “it is implausible that the DOE rationally determined that 152 aspects of offerors’ proposals exceeded the [s]olicitation’s requirements, yet only one aspect significantly exceeded the [s]olicitation’s requirements.” ECF No. 39 at 30. This, plaintiff argues, led to four of the five offerors receiving “perfect technical and past performance ratings,” and made DOE’s award decision almost certain to be “only [ ] based on price.” Id. at 31 . Plaintiff’s quarrel with the DOE’s ratings of the proposals amounts to a request that the court substitute its judgment for that of the agency. Plaintiff’s only evidence that the DOE artificially inflated and deflated the offerors’ ratings is its assumption that the ratings would have been less similar if the DOE had not done so. See ECF No. 33 at 49. The record reflects that the DOE performed an extensive evaluation of each offeror’s proposal. Without more, the court will not substitute its judgment for that of the agency. See Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43 . Plaintiff’s claim on this count must fail. E. The DOE’s Evaluation of the Second-Place (LATS) Proposal Finally, plaintiff argues that “there are multiple flaws in DOE’s evaluation” of the second-place offeror’s proposal and in the source selection authority’s conclusion 17 regarding the second-place ranking. ECF No. 33 at 52. Plaintiff repeats its earlier claims as to the DOE’s evaluation of the proposals and contends that the second-place offeror was “neither eligible for award, nor technically equivalent to” plaintiff. Id. at 53 . Specifically, plaintiff claims that one of the second-place offeror’s key personnel is no longer employed by the company thereby rendering the company ineligible for award. Id. Plaintiff also argues that the DOE should not have found similar merit between plaintiff and the second-place offeror because, although they had similar number of strengths, the second-place offeror also had a weakness. Id. at 53-54 . Defendant responds that plaintiff’s argument is “reprising the other counts of its protest” and “fail[s] for the same reasons” as defendant has previously argued. ECF No. 38 at 66. Defendant also asserts that plaintiff’s claim related to the second-place offeror’s personnel is based on extra-record evidence not before the agency at the time of its decision, while the employee’s signed commitment letter was. Id. at 67 . And, defendant argues, plaintiff’s disagreement with the technical ratings is “mere disagreement with the agency’s discretionary judgment” and “is not a valid basis for protest.” Id. Plaintiff replies that the second-place offeror was obligated to inform the DOE of changes in its proposed staffing and did not. See ECF No. 39 at 32. It requests that the court supplement the AR with evidence of the employee’s change in employment to permit the court to evaluate whether the offeror “would have been eligible for award in light of [the employee’s] departure.” Id. The court has already addressed the merits of the claims plaintiff repeats here as to the second-place offeror and has found each claim unavailing. The court, therefore, will not reexamine the claims it has already carefully considered. Plaintiff’s claim regarding the departure of a key employee of the second-place offeror does not persuade the court. The court agrees with defendant that the evidence presented by plaintiff falls outside of the AR, and finds that supplementation is not necessary for meaningful judicial review in this matter. Axiom Res. Mgmt., 564 F.3d at 1379-80 . The DOE evaluated the proposals with the information that it had in front of it at the time of evaluation, including a letter of commitment from the key employee. See ECF No. 27-11 at 257 (letter of commitment included in the proposal). The court will not substitute its judgment for that of the agency with respect to the evaluation of the availability of the offeror’s key personnel. See Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43 . The court also agrees with defendant that plaintiff’s disagreement with the technical ratings is a disagreement with the agency’s discretionary judgment. See ECF No. 38 at 67. As the court previously stated, the record reveals that the DOE performed an extensive evaluation of each offeror’s proposal. Plaintiff did not point to any evidence in the record that the agency inappropriately evaluated the second-place offeror’s 18 proposal outside its claim that because the company had a weakness that plaintiff did not, the second-place offeror’s proposal should not have been so highly rated. See ECF No. 33 at 54. Without more, the court will not substitute its judgment for that of the agency. See Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43 . Plaintiff’s claim on this count must fail. IV. Conclusion Accordingly, having found none of plaintiff’s claims meritorious, (1) Plaintiff’s motion for leave to file notice of supplemental authority, ECF No. 44, is DENIED; (2) Plaintiff’s motion for judgment on the AR, ECF No. 32, is DENIED; (3) Intervenor-defendant’s cross-motion for judgment on the AR, ECF No. 37, is GRANTED; (4) Defendant’s cross-motion for judgment on the AR, ECF No. 38, is GRANTED; (5) The clerk’s office is directed to ENTER final judgment in defendant’s and intervenor-defendant’s favor DISMISSING plaintiff’s complaint with prejudice; and (6) On or before November 25, 2020, the parties are directed to CONFER and FILE a notice informing the court as to whether any redactions are required before the court makes this opinion publicly available, and if so, attaching an agreed-upon proposed redacted version of the opinion. IT IS SO ORDERED. s/Patricia E. Campbell-Smith PATRICIA E. CAMPBELL-SMITH Judge 19

2020-11-30 22:01:51.458259+00

https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2020cv0944-13-0

In the United States Court of Federal Claims ) RICHARD L. SATTGAST, TREASURER OF ) THE STATE OF SOUTH DAKOTA; JOHN ) NEELY KENNEDY, TREASURER OF THE ) STATE OF LOUISIANA; ALLISON BALL, ) TREASURER OF THE COMMONWEALTH OF ) KENTUCKY; LYNN FITCH, TREASURER OF ) Nos. 15-1364C, 15-1365C, 16-221C, THE STATE OF MISSISSIPPI; CURTIS M. ) 16-231C, 16-451C, 16-699C, 16-1021C, LOFTIS, JR., TREASURER OF THE STATE OF ) 16-1482C, 19-678C, 20-944C SOUTH CAROLINA; GREGORY F. ZOELLER, ) ATTORNEY GENERAL OF THE STATE OF ) (Filed: November 30, 2020) INDIANA; JACQUELINE T. WILLIAMS, ) DIRECTOR, OHIO DEPARTMENT OF ) COMMERCE; JEFF ATWATER, CHIEF ) FINANCIAL OFFICER FOR THE STATE OF ) FLORIDA; MICHAEL L. FITZGERALD, ) TREASURER OF THE STATE OF IOWA; ) JOSEPH M. TORSELLA, TREASURER OF THE ) COMMONWEALTH OF PENNSYLVANIA, ) ) Plaintiffs, ) ) v. ) ) THE UNITED STATES OF AMERICA, ) ) Defendant. ) ) OPINION AND ORDER These related cases are currently before the Court on the plaintiffs’ joint request for a status conference. For the reasons set forth below, Plaintiffs’ request is DENIED. Further, in light of the court of appeals’ decision in Laturner v. United States, 933 F.3d 1354 (Fed. Cir. 2019), cert. denied, No. 19-1279, 2020 WL 5882248 (U.S. Oct. 5, 2020), the cases are DISMISSED with prejudice for failure to state a claim. BACKGROUND The plaintiffs in these cases, acting through their Treasurers and other state officials, are the States of South Dakota, Louisiana, Mississippi, South Carolina, Indiana, Ohio, Florida, and Iowa, and the Commonwealths of Kentucky and Pennsylvania. Each of the ten plaintiffs has filed a similar complaint alleging that the state obtained title to a large but unknown number of matured, unredeemed United States savings bonds under valid state judicial escheat proceedings. Each has further alleged that the United States Department of the Treasury (“Treasury”) wrongfully refused to redeem any “Absent Bonds,” i.e, bonds to which the state had secured title but for which it did not possess the bond certificates that Treasury issued when the bonds were purchased. In addition, each has argued that the failure to pay the proceeds of the Absent Bonds to the state was a breach of contract (express and implied) and a Fifth Amendment Taking of its property without just compensation. They have all requested that the Court enter declaratory judgments that they were entitled to redeem the Absent Bonds and an award of many millions of dollars in damages. This Court stayed all ten cases while essentially identical issues were pending before it (and then the court of appeals) in LaTurner v. United States, 133 Fed. Cl. 47 (2017), rev’d, 933 F.3d 1354 (Fed. Cir. 2019) (Kansas) and Lea v. United States, 132 Fed. Cl. 705 (2017), rev’d, 933 F.3d 1354 (Fed. Cir. 2019) (Arkansas). In those cases, this Court ruled that, under Treasury’s regulations, Kansas and Arkansas were the rightful owners of Absent Bonds to which they asserted title pursuant to state court judgments of escheat and that they were entitled to pursue redemption of the proceeds of the bonds on that basis. See LaTurner, 133 Fed. Cl. at 69; Lea v. United States, 132 Fed. Cl. at 724. On December 1, 2017, on the motion of the United States, the Court certified its Orders in LaTurner and Lea for interlocutory appeal and stayed proceedings in those cases pending appeal. Laturner v. United States, 135 Fed. Cl. 501 , 503 (2017); Lea v. United States, No. 16- 43C, 2017 WL 5929229 , at *1 (Fed. Cl. Dec. 1, 2017). The court of appeals granted the federal government’s motion to appeal and reversed this Court’s decisions. See Laturner v. United States, 933 F.3d 1354 (Fed. Cir. 2019), cert. denied, No. 19-1279, 2020 WL 5882248 (U.S. Oct. 5, 2020). The court of appeals held that federal law does not permit the transfer of ownership of the bonds under state escheat laws and that federal law pre-empted state law. Id. at 1361 . Further, the court of appeals held, “even if Federal law recognized [the states] as the rightful bond owners, they could have no greater rights than the original bond owners.” Id. at 1363–64. It reasoned that under Treasury regulations a bond owner must present the bond in order to redeem it, that the states could not do so with respect to the Absent Bonds, and that even if the bonds were considered “lost” under Treasury regulations, the states could not redeem them because it did not have the bonds’ serial numbers as Treasury’s regulations require. Id. at 1364 . The court of appeals also held that it would circumvent these regulatory requirements to require Treasury to search for serial numbers and produce them in discovery. Id. It therefore reversed this Court’s ruling granting partial summary judgment to the plaintiffs in both cases and directed this Court to enter summary judgment on behalf of the government. Id. at 1367 . 1 1 Plaintiffs in LaTurner and Lea filed petitions for rehearing en banc, which the court of appeals denied on December 11, 2019. Order on Petitions for Rehearing En Banc, Nos. 18-1509 and 18- 1510 (Fed. Cir. Dec. 11, 2019). 2  After the court of appeals ruled, the parties advised the Court that the State of Kansas was considering seeking Supreme Court review in LaTurner. The Court granted the parties’ request that it continue to stay the cases pending a decision by the Supreme Court either denying the LaTurner petition for certiorari or disposing of the case on the merits. 2 On October 5, 2020, the Supreme Court denied certiorari in LaTurner (as well as in Lea). LaTurner v. United States, No. 19-1279, 2020 WL 5882248 (U.S. Oct. 5, 2020); Lea v. United States, No. 19-1285, 2020 WL 5882249 (U.S. Oct. 5, 2020). This Court then granted two unopposed motions to extend the deadline for filing a joint status report proposing further proceedings in the cases. 3 The parties have now filed their joint report. See, e.g., Joint Status Report, Sattgast v. United States, No. 15-1364, ECF No. 21. They disagree regarding the next steps in these cases. DISCUSSION The government contends that LaTurner “leaves no question as to the proper and necessary disposition of the remaining escheat cases,” which is dismissal. Id. at 8. Indeed, the government observes, “Plaintiffs have represented to this Court numerous times over the years that it would be efficient to litigate LaTurner and Lea first because the claims and issues in those cases are substantially identical to the claims and issues in their complaints.” Id. (citations omitted); see also Petition for a Writ of Certiorari at 4, LaTurner v. United States, No. 19-1279, 2020 WL 5882248 (U.S. Oct. 5, 2020) (contentions by attorneys who also represent plaintiffs here that the Supreme Court “should resolve the appellate disagreement the Federal Circuit created and reject that court’s overreaching approach to preemption” and that “[n]o future case will better present the issue, because all future Tucker Act claims will be resolved the same way, in the same court, under the panel’s precedential opinion”); Petition for Writ of Certiorari at 30, Lea v. United States, No. 19-1285, 2020 WL 5882249 (U.S. Oct. 5, 2020) (“[T]he legal conclusions adopted by the Federal Circuit will also ultimately dictate the fate of the entirety of the $26 billion worth of abandoned bonds that have matured but have been left unredeemed.”). On the other hand, Plaintiffs argue that their cases should not be dismissed because “the state plaintiffs retain a significant interest in—and numerous legal avenues for—recovering the 2 See Sattgast v. United States, No. 15-1364C (ECF No. 16); Kennedy v. United States, No. 15- 1365 (ECF No. 16); Ball v. United States, No. 16-221 (ECF No. 14); Fitch v. United States, No. 16-231 (ECF No. 14); Loftis v. United States, No. 16-451 (ECF No. 11); Zoeller v. United States, No. 16-699 (ECF No. 13); Williams v. United States, No. 16-1021 (ECF No. 11); Atwater v. United States, No. 16-1482 (ECF No. 10); Fitzgerald v. United States, No. 19-678 (ECF No. 10). The complaint in Torsella v. United States, No. 20-944, was filed on July 31, 2020. See ECF No. 1. The Court subsequently entered a stay order in Torsella on September 14, 2020. See ECF No. 7. 3 See Sattgast, No. 15-1364 (ECF Nos. 18, 20); Kennedy, No. 15-1365 (ECF Nos. 18, 20); Ball, No. 16-221 (ECF Nos. 16, 18); Fitch, No. 16-231 (ECF Nos. 16, 18); Loftis, No. 16-451 (ECF Nos. 13, 15); Zoeller, No. 16-699 (ECF Nos. 15, 17); Williams, No. 16-1021 (ECF Nos. 13, 15); Atwater, No. 16-1482 (ECF Nos. 12, 14); Fitzgerald, No. 19-678 (ECF No. 13); Torsella, No. 20-944 (ECF Nos. 9, 11). 3 proceeds of their citizens’ matured unredeemed savings bonds.” E.g., Joint Status Report at 5, Sattgast, No. 15-1364, ECF No. 21. Although not entirely clear, the Court understands the plaintiffs to be referencing their interests in redeeming bonds in their possession as described in 31 C.F.R. § 315.88 . That rule—which Treasury proposed and finalized during the course of this litigation—authorizes Treasury “in its discretion,” to “recognize an escheat judgment that purports to vest a State with title to a definitive savings bond that has reached the final extended maturity date and is in the State’s possession.” Id. Plaintiffs assert that “[m]aximizing the States’ ability to connect their citizens with the proceeds of abandoned savings bonds in the States’ possession will require Treasury’s cooperation—cooperation that history shows will not come easily but that this Court can legally compel.” E.g., Joint Status Report at 5, Sattgast, No. 15- 1364. They ask the Court to schedule a status conference “so that we may explore how the cases should proceed in a manner that protects the states’ ongoing interest consistent with the Federal Circuit’s rulings on appeal.” Id. The Court agrees with the government that holding a status conference for these stated purposes would be pointless and that these cases must be dismissed in light of LaTurner. The claims in these cases arose exclusively out of Treasury’s refusal to redeem Absent Bonds, i.e., bonds to which the states acquired title through escheat, but which they do not possess. The court of appeals’ decision in LaTurner, which is now final, establishes that the state laws that purport to bestow title to Absent Bonds on the state are pre-empted by federal law and that, in any event, the states cannot redeem the bonds without at least supplying their serial numbers. These holdings are fatal to the claims that the Plaintiffs have presented in their complaints here, which, as noted, concern the redemption of Absent Bonds, not bonds that are in the states’ possession and may be redeemed under 31 C.F.R. § 315.88 . In fact, Plaintiffs do not attempt to explain why LaTurner does not mandate dismissal of the claims in their complaints. Their rationale for this Court to exercise “continued oversight and supervision” arises out of other concerns—i.e., how Treasury has or may (in the future) exercise its discretion under 31 C.F.R. § 315.88 . E.g., Joint Status Report at 5, Sattgast, No. 15-1364. As noted, they seek to “[m]aximiz[e] the States’ ability to connect their citizens with the proceeds of abandoned savings bonds in the States’ possession.” Id. (emphasis supplied); see also id. Exs. A, B, C, D, E, G, H, I, J (letters from state officials explaining that “Bonds in Possession” and “Bonds Returned to Treasury . . . remain a key priority” for the states); id. Ex. F (letter from Mississippi Attorney General stating that the Court’s oversight is needed to “secure the unclaimed property successes that Treasury claims to permit”); Exs. K, L (affidavits of offspring of deceased bond owners regarding the states’ efforts to help them identify and redeem abandoned bonds). The Court is somewhat bewildered by Plaintiffs’ expression of concern about whether Treasury will allow them to redeem bonds that are in their possession, as they have acknowledged that Treasury has already done so in the past and agreed to do so going forward. 4 But in any event, this Court has no authority to retain jurisdiction over claims arising out of future disputes under 31 C.F.R. § 315.88 about the redemption of savings bonds that are in the 4 E.g., Compl. ¶ 62, Kennedy, No. 15-1365, ECF No. 1; Compl. ¶ 61, Sattgast, No. 15-1364, ECF No. 1; Compl. ¶ 57, Atwater, No. 16-1482, ECF No. 1; Compl. ¶ 62, Torsella, No. 20-944, ECF No. 1. 4 states’ possession. Because the claims in the complaints concern the redemption of Absent Bonds, they cannot withstand the holding in LaTurner, and must be dismissed. CONCLUSION Based on the foregoing, Plaintiffs’ request for a status conference is DENIED. In addition, the cases are DISMISSED with prejudice in accordance with the court of appeals’ holding in LaTurner. The Clerk is directed to enter judgment accordingly. IT IS SO ORDERED. s/ Elaine D. Kaplan ELAINE D. KAPLAN Judge 5

2020-11-30 22:02:22.625667+00

http://www.courts.ca.gov/opinions/documents/A159104.PDF

Filed 11/30/20 (see concurring opinion) CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FIVE THE PEOPLE, Plaintiff and Respondent, A159104 v. RANSOM HUNTLEY (Lake County GRIFFIN, Super. Ct. Nos. CR952884, CR953175-B, Defendant and Appellant. CR953305-A) Senate Bill No. 136 (2018-2019 Reg. Sess.) (Senate Bill 136) 1 eliminated the Penal Code section 667.5, subdivision (b) 2 enhancement for all prior prison terms except those based on sexually violent offenses. Defendant and appellant Ransom Huntley Griffin (Appellant) appeals from the trial court’s October 2019 judgment pursuant to a plea agreement resolving three criminal cases. He contends the one-year enhancement for a prior felony conviction imposed under section 667.5, subdivision (b) as part of the plea agreement must be stricken due to Senate Bill 136. Respondent agrees the enactment is retroactive, and the enhancement must be stricken, but argues the prosecution must be given the opportunity to withdraw from the plea agreement. 1 (See Stats. 2019, ch. 590, § 1, effective January 1, 2020.) 2 All undesignated statutory references are to the Penal Code. 1  We agree with respondent on that issue, following the reasoning of the California Supreme Court in People v. Stamps (2020) 9 Cal.5th 685 (Stamps) and a recent Fifth District decision, People v. Hernandez (2020) 55 Cal.App.5th 942 (Hernandez). However, we part with Hernandez in one respect and conclude it would be an abuse of discretion for the trial court to impose a longer sentence than the original agreement if a new plea agreement is entered on remand. BACKGROUND 3 In December 2018, the Lake County District Attorney filed a felony complaint in case number CR952884 charging Appellant with possession of methamphetamine for sale (Health & Saf. Code, § 11378), possession of materials with the intent to make an explosive (§ 18720), and possession of ammunition by a prohibited person (§ 30305, subd. (a)(1)). The complaint further alleged that Appellant was prohibited from possessing a firearm pursuant to Welfare and Institutions Code sections 8100 and 8103. In February 2019, the Lake County District Attorney filed a felony complaint in case number CR953175-B charging Appellant with entry with intent to commit larceny (§ 459), malicious destruction of personal property over $400 (§ 594, subd. (a)), being a felon in possession of a firearm (§ 29800, subd. (a)(1)), and assault with a firearm (§ 245, subd. (a)(2)). The complaint further alleged that Appellant personally used and discharged a firearm within the meaning of various Penal Code provisions, and that two prior prison term enhancements applied under section 667.5, subdivision (b). The prior prison term enhancements were based on convictions for weapons offenses (§§ 21310 & 22210). 3The details of the underlying offenses are not relevant to the issues on appeal and are not summarized herein. 2  Also in February 2019, the Lake County District Attorney filed a felony complaint in case number CR953305-A charging Appellant with felony transportation of methamphetamine with intent to sell (Health & Saf. Code, § 11379, subd. (a)), felony possession of methamphetamine for sale (Health & Saf. Code, § 11378), felony withholding of a ring stolen by extortion (§ 496, subd. (a)), misdemeanor possession of psilocybin mushrooms (Health & Saf. Code, § 11377, subd. (a)), and misdemeanor possession of paraphernalia (Health & Saf. Code, § 11364). The complaint further alleged two prior prison term enhancements under section 667.5, subdivision (b). In September 2019, Appellant entered into a plea agreement for all three cases. In case numbers CR952884 and CR953305-A, Appellant pled no contest to possession of a controlled substance for sale (Health & Saf. Code, § 11378). The stipulated term was eight months for each offense. In case number CR953175-B, Appellant pled no contest to burglary (§ 459) and admitted a prior prison term (§ 667.5, subd. (b)). The stipulated term was seven years: a six-year term for burglary and the one-year section 667.5 enhancement. In October 2019, the trial court sentenced Appellant to a prison term of eight years, four months pursuant to the plea agreement. This appeal followed. DISCUSSION Under the version of the statute in effect when Appellant was sentenced, section 667.5, subdivision (b) required a one-year enhancement for each prior prison term served for “any felony,” with an exception not applicable here. (Stats. 2018, ch. 423, § 65.) Senate Bill 136 substantially narrowed the enhancement, limiting its application only to a prior prison term served “for a sexually violent offense as defined in subdivision (b) of 3 Section 6600 of the Welfare and Institutions Code.” (§ 667.5, subd. (b); see also Hernandez, supra, 55 Cal.App.5th at p. 947; People v. Matthews (2020) 47 Cal.App.5th 857 , 862 (Matthews).) 4 Appellant contends and respondent agrees that Senate Bill 136 applies retroactively to non-final judgments. (Matthews, at pp. 864–865; Hernandez, at p. 947.) Because neither of the prior prison term enhancements alleged below were based on a sexually violent offense, we agree the one-year enhancement imposed under section 667.5, subdivision (b) must be stricken. However, we reject Appellant’s argument that the trial court may strike the enhancement and leave the remainder of the agreement intact. Instead, the plea agreement is now unenforceable. On remand, the parties may enter into a new plea agreement that does not include the enhancement, but the trial court may not impose a longer sentence than that imposed under the original agreement. I. On Remand, the Trial Court Must Strike the Enhancement, but Thereafter it May Not Enforce the Remainder of the Agreement The first disputed issue on appeal is whether the 667.5, subdivision (b) enhancement must be stricken while the rest of the sentence remains intact. Appellant urges this court to follow Matthews, supra, 47 Cal.App.5th 857 , decided before Stamps, which held that where there is an agreed-upon sentence for each offense that was part of a plea deal, those parts of the sentence may not be reconsidered when a trial court strikes a section 667.5, subdivision (b) enhancement. (Matthews, at pp. 867-869.) Matthews 4Section 667.5, subdivision (b) provides in relevant part, “[W]here the new offense is any felony for which a prison sentence . . . is imposed . . . , in addition and consecutive to any other sentence therefor, the court shall impose a one-year term for each prior separate prison term for a sexually violent offense as defined in subdivision (b) of Section 6600 of the Welfare and Institutions Code . . . .” 4 reasoned that the benefits of Senate Bill 136 “would not be fully realized if the trial courts and the People could abandon a plea agreement whenever a defendant seeks retroactively to obtain elimination of an enhancement invalidated by” the enactment. (Matthews, at p. 869.) Matthews remanded with directions that the trial court strike all section 667.5, subdivision (b) enhancements “and leave the remainder of the sentences imposed under the plea agreements intact.” (Matthews, at p. 869.) Matthews’ reasoning is no longer sustainable in light of the decision on a related issue in Stamps, supra, 9 Cal.5th 685 , subsequently followed by the Fifth District in People v. Barton (2020) 52 Cal.App.5th 1145 (Barton) (regarding an enactment analogous to Senate Bill 136) and Hernandez, supra, 55 Cal.App.5th 942 (regarding Senate Bill 136 itself). In Stamps, the defendant’s plea agreement specified a nine-year prison sentence that included a five-year prior serious felony conviction enhancement. (Stamps, at pp. 692–693.) While the defendant’s “appeal was pending, a new law went into effect permitting the trial court to strike a serious felony enhancement in furtherance of justice [citation], which it was not previously authorized to do.” (Id. at. p. 692.) The change in the law resulted from Senate Bill No. 1393 (2017–2018 Reg. Sess.) (Senate Bill 1393). (Stamps, at p. 700.) The Supreme Court held the matter should be remanded to give the defendant an opportunity to request that the trial court exercise its newly granted discretion to strike under section 1385. (Stamps, at p. 692.) But the court rejected the defendant’s suggestion “that the [trial] court is authorized to exercise its discretion to strike the enhancement but otherwise maintain the plea bargain.” (Ibid.) Stamps reasoned, “Even when applicable, section 1385 ordinarily does not authorize a trial court to exercise its discretion to strike in contravention 5 of a plea bargain for a specified term. Section 1192.5 allows a plea to ‘specify the punishment’ and ‘the exercise by the court thereafter of other powers legally available to it,’ and ‘[w]here the plea is accepted by the prosecuting attorney in open court and is approved by the court, the defendant, except as otherwise provided in this section, cannot be sentenced on the plea to a punishment more severe than that specified in the plea and the court may not proceed as to the plea other than as specified in the plea.’ ” (Stamps, supra, 9 Cal.5th at p. 700.) Stamps continued, “In order to justify a remand for the court to consider striking his serious felony enhancement while maintaining the remainder of his bargain, defendant must establish not only that Senate Bill 1393 applies retroactively, but that, in enacting that provision, the Legislature intended to overturn long-standing law that a court cannot unilaterally modify an agreed-upon term by striking portions of it under section 1385.” (Id. at p. 701.) In Stamps, the defendant argued there was sufficient indication of legislative intent because, in enacting Senate Bill 1393, the Legislature sought “ ‘to reduce prison overcrowding, save money, and achieve a more just, individualized sentencing scheme.’ ” (Stamps, supra, 9 Cal.5th at p. 702.) The Supreme Court concluded that was insufficient because “the legislative history does not demonstrate any intent to overturn existing law regarding a court’s lack of authority to unilaterally modify a plea agreement. Indeed, none of the legislative history materials mention plea agreements at all. . . . Thus, the Legislature gave a court the same discretion to strike a serious felony enhancement that it retains to strike any other sentence enhancing provision. Its action did not operate to change well-settled law that a court lacks discretion to modify a plea agreement unless the parties agree to the modification.” (Ibid.) 6  Stamps distinguished Harris v. Superior Court (2016) 1 Cal.5th 984 . In Harris, the defendant had pleaded guilty to felony grand theft with a prior in exchange for a stipulated prison sentence of six years. (Harris, at pp. 987– 989.) As Stamps explained, “After passage of Proposition 47, which ‘reduced certain nonviolent crimes . . . from felonies to misdemeanors’ [citation], [the defendant] petitioned to have his theft conviction resentenced as a misdemeanor. [Citation.] The People argued the reduction violated the plea agreement and sought to withdraw from the bargain.” (Stamps, supra, 9 Cal.5th at p. 702, quoting Harris, at p. 988.) Noting that the enactment “specifically applied to a person ‘serving a sentence for a conviction, whether by trial or plea,’ Harris concluded that ‘[b]y expressly mentioning convictions by plea, Proposition 47 contemplated relief to all eligible defendants.’ ” (Stamps, at p. 703, quoting Harris, at p. 991.) Stamps observed that, unlike the enactment in Harris, “Senate Bill 1393 is silent regarding pleas and provides no express mechanism for relief,” which “undercuts any suggestion that the Legislature intended to create special rules for plea cases involving serious felony enhancements.” (Stamps, at p. 704.) Stamps concluded the appropriate remedy was to remand to provide the defendant an opportunity to ask the trial court to exercise its newly granted discretion; “[h]owever, if the court is inclined to exercise its discretion, . . . the court is not authorized to unilaterally modify the plea agreement by striking the serious felony enhancement but otherwise keeping the remainder of the bargain.” (Stamps, supra, 9 Cal.5th at p. 707.) Instead, “[i]f the court indicates an inclination to exercise its discretion . . . , the prosecution may, of course, agree to modify the bargain to reflect the downward departure in the sentence such exercise would entail. Barring 7 such a modification agreement, ‘the prosecutor is entitled to the same remedy as the defendant—withdrawal of assent to the plea agreement . . . .’ ” (Ibid.) In People v. Barton (2020) 52 Cal.App.5th 1145 (Barton), the Fifth District followed Stamps in a statutory context similar to that involved in the present case. The issue in Barton was application of Senate Bill No. 180 (2017–2018 Reg. Sess.) (Senate Bill 180) to a non-final judgment. (Barton, at p. 1149.) Senate Bill 180 amended Health and Safety Code section 11370.2 “by eliminating its three-year enhancements for most drug-related prior convictions.” (Barton, at p. 1149.) As in the present case, the parties agreed the enactment was retroactive, and, like Appellant, the defendant in Barton argued “the proper remedy is to vacate the enhancements and leave the remainder of her plea agreement intact.” (Ibid.) In light of Stamps, Barton reasoned that “the scope of the trial court’s authority on remand depends on the legislative intent behind Senate Bill 180.” (Barton, supra, 52 Cal.App.5th at p. 1157.) The court of appeal concluded the legislative history did not show “the Legislature intended for Senate Bill 180 to override the strictures of . . . section 1192.5.” (Id. at p. 1150.) The history showed the Legislature intended to reduce overcrowding, re-allocate resources, and improve fairness in sentencing, but the history was silent regarding pleas, as was the case in Stamps. (Id. at p. 1159.) Thus, the trial court was required to “abide by” section 1192.5 on remand. (Ibid.) Finally, in Hernandez, supra, 55 Cal.App.5th 942 , the Fifth District followed Stamps as to Senate Bill 136, the enactment at issue in the present case. Hernandez considered “whether the Legislature intended for Senate Bill 136’s amendments to section 667.5, subdivision (b) to allow the trial court to unilaterally modify the plea agreement once the prior prison term 8 enhancements are stricken.” (Hernandez, at p. 957.) The court cited the Senate Bill 136’s author’s statement that the enhancement “re-punishes people for previous jail or prison time served instead of the actual crime when convicted of a non-violent felony. By ignoring the actual offense committed, this enhancement exacerbates existing racial and socio-economic disparities in our criminal justice system. Additionally, wide-spread research refutes the underlying premise that arbitrary enhancements increase public safety or deter future crime. . . . Given that this 1-year enhancement is commonly used, the Department of Finance projects that repealing this single enhancement will save California tax payers tens of millions dollars each year. It will also keep families together, redirect funds to evidence-based rehabilitation and reintegration programs, and move California away from our failed mass incarceration policies.” (Sen. Rules Com., Off. of Sen. Floor Analyses, Analysis of Senate Bill No. 136 (2019-2020 Reg. Sess.), as amended Sept. 3, 2019, pp. 2–3; see also Hernandez, at pp. 957-958.) Hernandez rightly observed that “[t]he legislative intent for the enactment of Senate Bill 136 is very similar to the intents discussed in Stamps and Barton.” (Hernandez, at p. 958; see also Stamps, supra, 9 Cal.5th at p. 702; Barton, supra, 52 Cal.App.5th at pp. 1158–1159.) Further, “[i]n contrast to Harris’s analysis of Proposition 47 and section 1170.18, Senate Bill 136 is silent regarding pleas and provides no express mechanism for relief, and thus refutes any suggestion the Legislation intended to create special rules for the court to unilaterally modify the plea agreement once the enhancements are stricken.” (Hernandez, at p. 958; see also Stamps, at p. 704; Barton, at p. 1159.) 5 5Hernandez recognized that Matthews, supra, 47 Cal.App.5th 857 , reached a different result with respect to Senate Bill 136. (Hernandez, supra, 55 9  There is one significant difference between Senate Bill 1393, at issue in Stamps, and Senate Bill 136. Senate Bill 1393 gave trial courts discretion to strike an enhancement, while Senate Bill 136 categorically removed authorization to impose the section 667.5, subdivision (b) enhancement in the circumstances of the present case. Thus, while Stamps’ remand instructions provided that the prosecution could withdraw from the plea agreement only if the trial court indicated its intent to exercise its discretion to strike the serious felony enhancement, the plea agreement in the present case is no longer enforceable. The same was true of the enactment addressed in Barton, leading the court to declare, “[T]he parties’ plea agreement is unenforceable and the trial court cannot approve of the agreement in its current form. [Citation.] Whether by withdrawal of its prior approval or the granting of a withdrawal/rescission request by one or both of the parties, the trial court ‘ “ ‘must restore the parties to the status quo ante.’ ” ’ [Citations.] The parties may then enter into a new plea agreement, which will be subject to the trial court’s approval, or they may proceed to trial on the reinstated charges.” (Barton, supra, 52 Cal.App.5th at p. 1159.) The same reasoning applies with respect to Senate Bill 136. Cal.App.5th at p. 959) Hernandez concluded the Matthews remand instructions were no longer proper in light of Stamps, supra, 9 Cal.5th 685 . We also note that the decisions in People v. Martinez (2020) 54 Cal.App.5th 59 , review granted November 10, 2020, S264848, and People v. Petri (2020) 45 Cal.App.5th 82 remanded with instructions to strike section 667.5, subdivision (b) enhancements due to enactment of Senate Bill 136, but those courts did not consider the remand instruction issues addressed in Stamps, Matthews, Barton, and Hernandez. 10 II. The Trial Court May Not Impose a Longer Sentence Than the Original Plea Agreement The second disputed issue on appeal is whether on remand the trial court may impose a longer sentence than that provided in the original plea agreement, if the parties enter into a new agreement. We conclude it may not. 6 At the outset, we observe such a result plainly would be inconsistent with the legislative intent underlying Senate Bill 136. The purpose of the enactment was to decrease the length of sentences imposed on repeat felons by substantially narrowing the scope of application of the prior prison term enhancement. An increased sentence due to retroactive application of the enactment would be directly contrary to the result the Legislature intended. The risk of an increased sentence would also discourage defendants from exercising their right to challenge unauthorized section 667.5 subdivision (b) enhancements. Indeed, that risk might also discourage some defendants from filing or maintaining an appeal on non-sentencing issues. For example, a defendant who lost a search and seizure motion and then entered into a plea bargain impacted by Senate Bill 136 or other sentencing reform measures might be hesitant to appeal the search issue, fearing the possibility that a reviewing court will reverse a judgment including an unauthorized enhancement even absent a request from a party to do so. (See In re Harris (1993) 5 Cal.4th 813 , 842 [“An appellate court may ‘correct a sentence that is 6 We do not address a situation where the parties fail to enter into a new plea agreement after a post-Senate Bill 136 remand, and the defendant is convicted at trial. Whether the trial court could sentence that defendant to a term in excess of the originally agreed upon sentence, and what circumstances might affect that determination, are questions well beyond the scope of the present appeal. 11 not authorized by law whenever the error comes to the attention of the court.’ ”].) The California Supreme Court’s decision in People v. Collins (1978) 21 Cal.3d 208 (Collins), supports a conclusion that the trial court may not on remand approve a new plea agreement imposing a longer sentence than that in the original plea agreement. In Collins, the defendant pleaded guilty to oral copulation in violation of former section 288a, in exchange for dismissal of numerous remaining charges. (Collins, at p. 211.) Prior to the sentencing hearing, the Legislature repealed former section 288a and decriminalized “the act of oral copulation between consenting, nonprisoner adults . . . .” (Collins, at p. 211.) The Supreme Court held that decriminalization of the offense applied retroactively and that the trial court improperly imposed a sentence on the offense. (Id. at p. 212.) However, the court rejected the defendant’s suggestion that he could “gain relief from the sentence imposed but otherwise leave the plea bargain intact.” (Id. at p. 215.) Instead, the court held the prosecution could “revive one or more of the dismissed counts” on remand. (Id. at p. 216.) Nevertheless, and as relevant to the present appeal, Collins emphasized the defendant was “also entitled to the benefit of his bargain.” (Collins, supra, 21 Cal.3d at p. 216.) The court explained, “This is not a case in which the defendant has repudiated the bargain by attacking his guilty plea; he attacks only the judgment, and does so on the basis of external events—the repeal and reenactment of section 288a—that have rendered the judgment insupportable.” (Collins, at p. 216.) To preserve the benefit for the defendant, the court held the defendant’s sentence on remand could not exceed the punishment the plea agreement had subjected him to. (Id. at pp. 216–217.) That disposition “permits the defendant to realize the benefits 12 he derived from the plea bargaining agreement, while the People also receive approximately that for which they bargained.” (Id. at p. 217.) As support for its result, Collins invoked cases from the double jeopardy context. (Id. at p. 216.) The court explained the “concern there was specifically to preclude vindictiveness and more generally to avoid penalizing a defendant for pursuing a successful appeal.” (Ibid.) Similarly, the defendant in Collins “should not be penalized for properly invoking [precedent] to overturn his erroneous conviction and sentence by being rendered vulnerable to punishment more severe than under his plea bargain.” (Id. at p. 217; see also People v. Hanson (2000) 23 Cal.4th 355 , 366 [following Collins and emphasizing “the chilling effect on the right to appeal generated by the risk of a more severe punishment”].) The same reasoning applies here. Appellant, like the defendant in Collins, did not repudiate his plea; “he attacks only the judgment, and does so on the basis of external events . . . that have rendered the judgment insupportable.” (Collins, supra, 21 Cal.3d at p. 216.) Rejection of Appellant’s request to leave the remainder of the plea bargain intact ensures he will not receive a “bounty in excess of that to which he is entitled.” (Id. at p. 215.) But it would be contrary to legislative intent and deprive Appellant of the benefit of his bargain were the trial court on remand to impose a longer sentence following Appellant’s entry of a guilty plea pursuant to a new agreement. “ ‘The process of plea bargaining . . . contemplates an agreement negotiated by the People and the defendant and approved by the court.’ ” (Stamps, supra, 9 Cal.5th at p. 705.) “ ‘In exercising their discretion to approve or reject proposed plea bargains, trial courts are charged with the protection and promotion of the public’s interest in vigorous prosecution of the accused, imposition of appropriate punishment, and protection of victims 13 of crimes. [Citation.] For that reason, a trial court’s approval of a proposed plea bargain must represent an informed decision in furtherance of the interests of society . . . .” (Id. at p. 706.) We conclude that imposing a longer sentence would constitute an abuse of discretion. Respondent urges this court to follow Hernandez, supra, 55 Cal.App.5th 947 , which rejected the idea of extending the reasoning of Collins to a Senate Bill 136 remand. Hernandez stated, “we acknowledge the holding in Collins that allowed the prosecution to refile the previously dismissed charges as long as the defendant was not resentenced to a greater term than provided in the original plea agreement. Stamps did not extend Collins to permit such a resolution, and instead held the People could completely withdraw from the plea agreement if the prior serious felony enhancement was dismissed.” (Hernandez, at p. 959.) We respectfully disagree. Stamps never addressed the language in Collins capping the sentence that could be imposed on remand, and Stamps never addressed whether the trial court could properly impose a longer sentence on remand. (Stamps, supra, 9 Cal.5th at pp. 703– 704.) More fundamentally, as Appellant argues, the present case is more like Collins than Stamps: Any new plea agreement on remand in Stamps would have been the result of the defendant’s decision to seek relief under Senate Bill 1393. (Stamps, supra, 9 Cal.5th at p. 708.) In contrast, in both Collins and the present case, the legislative enactments were “external events” that simply rendered the plea agreements unenforceable. (Collins, supra, 21 Cal.3d at p. 216.) Under the reasoning of Collins, that distinction supports different remand instructions here than in Stamps. 7 7We note that Stamps questions no aspect of the Collins decision and, in 2016, the California Supreme Court observed, “Contrary to defendant’s argument, we did not impliedly overrule Collins in Doe v. Harris.” (Harris v. Superior Court, supra, 1 Cal.5th at p. 993.) The concurring opinion urges our 14  Because “we must fashion a remedy that restores to the state the benefits for which it bargained without depriving defendant of the bargain to which he remains entitled” (Collins, supra, 21 Cal.3d at pp. 215–216), we reverse the judgment and direct the trial court to strike the section 667.5, subdivision (b) enhancement and to give the parties an opportunity to negotiate a new plea agreement consistent with our ruling. 8 DISPOSITION The judgment is reversed and remanded for further proceedings consistent with this opinion. high court to reconsider Collins. We instead urge the Legislature to clarify its intent on how its differing sentencing reform measures should be applied. 8 Because “ ‘ “the court must restore the parties to the status quo ante” ’ ” (Stamps, supra, 9 Cal.5th at p. 707), respondent may be able to fashion a new plea agreement that imposes the same sentence as the now unenforceable agreement by “reviv[ing] one or more of the dismissed counts.” (Collins, supra, 21 Cal.3d at p. 216.) Respondent may also seek to file an amended complaint or complaints pursuant to section 1009, which may aid the parties in reaching a new plea agreement that imposes the same sentence as the now unenforceable agreement. (See also People v. Michaels (2002) 28 Cal.4th 486 , 513.) 15  SIMONS, Acting P.J. I concur. NEEDHAM, J. (A159104) 16  Reardon, J., Concurring. I agree fully with the conclusion in Part I of the majority opinion that, on remand, the trial court must strike the one-year enhancement and, thereafter, may not otherwise enforce the remainder of the original plea agreement, absent the consent of the parties. Under the authority of our Supreme Court’s decision in People v. Collins (1978) 21 Cal.3d 208 (Collins), I concur with the opinion’s further conclusion in Part II that, on remand, the trial court may not accept a new plea agreement with a sentence longer than that contemplated by the original plea agreement. This area of the law admits of several different permutations. Among them, as noted in the majority opinion, is whether the change in law which undermines the original plea agreement is one that, as here, renders the agreement unenforceable because a provision of law has been repealed or no longer applies to the matter, or is a change that renders the agreement newly subject to judicial discretion, as in People v. Stamps (2020) 9 Cal.5th 685 (Stamps). In the former circumstance, the plea agreement is nullified by operation of law; in the latter, by judicial determination. As explained in the majority opinion, per the reasoning in Stamps (id. at p. 707), the parties are no longer bound by the agreement in either instance. The majority opinion goes on to conclude that the original plea agreement continues to operate as a cap on punishment, even if the parties otherwise agree. I believe this result is compelled by language in Collins, supra, 21 Cal.3d at pages 216–217. I also agree with my colleagues that an implied overruling of Collins did not occur in Stamps. (See maj. opn. ante, at p. 14, fn. 7.) The court in Stamps cited Collins approvingly on a related point (Stamps, supra, 9 Cal.5th at pp. 703–704), and had the opportunity to overrule Collins on this one and did not. (Cf. People v. Hernandez (2020) 1  55 Cal.App.5th 942 , 949.) However, I believe the court’s analysis in Stamps indicates a willingness to reconsider Collins on this point. I write here to encourage that reconsideration. The majority opinion confines its analysis to those situations wherein, upon remand, the parties enter into a new plea agreement. (See maj. opn. ante, at pp. 10–11, fn. 6.) 1 However, as I explain below, whether to impose a sentencing cap on remand to new plea agreements is implicated by whether a cap would apply in other situations, namely to sentencing following trial. Consequently, I discuss that situation as well. I see no reason to prevent the parties on remand from reaching a new agreement that contemplates a punishment in excess of the original agreement. 2 Any new agreement would, of course, be subject to the trial court’s approval. “ ‘Judicial approval is an essential condition precedent to 1The majority opinion notes that the situation in which, after a post- Senate Bill No. 136 (2019–2020 Reg. Sess.) remand, the defendant is convicted at trial “is not before us.” But neither is the situation in which that same defendant is convicted, after remand, upon a plea. In short, the defendant here is being granted a post-Senate Bill No. 136 remand; we do not know what will happen next. I would decline to provide guidance for either eventuality. That said, any guidance as to one implicates the other. 2 I question on what basis a trial court’s acceptance of a new plea agreement in excess of the cap would even be reviewable on appeal. The Stamps court’s discussion of Penal Code section 1237.5, subdivision (a)’s requirement of a certificate of probable cause on appeal from a plea is instructive on this point. (Stamps, supra, 9 Cal.5th at pp. 694–698.) A defendant may seek appellate relief without obtaining a certificate of probable cause when “the law subsequently changed to his potential benefit.” (Id. at p. 698.) But, having been granted that relief and having entered into a new plea agreement, there seems no reason to relax the requirement of the certificate. It is not clear on what basis the trial court would grant a certificate in the face of a plea that the parties had agreed to and that the court had approved. Undesignated statutory references are to the Penal Code. 2 the effectiveness of the “bargain” worked out by the defense and prosecution.’ [Citations.] [¶] The statutory scheme contemplates that a court may initially indicate its approval of an agreement at the time of the plea but that ‘it may, at the time set for the hearing on the application for probation or pronouncement of judgment, withdraw its approval in the light of further consideration of the matter . . . .’ [Citation.] ‘The code expressly reserves to the court the power to disapprove the plea agreement’ up until sentencing. [Citation.] ‘In exercising their discretion to approve or reject proposed plea bargains, trial courts are charged with the protection and promotion of the public’s interest in vigorous prosecution of the accused, imposition of appropriate punishment, and protection of victims of crimes. [Citation.] For that reason, a trial court’s approval of a proposed plea bargain must represent an informed decision in furtherance of the interests of society.’ ” (Stamps, supra, 9 Cal.5th at pp. 705–706.) I would expect the trial court to exercise its discretion appropriately in approving or rejecting the new agreement, but I would not limit that discretion or the ability of the parties to freely contract by imposing a cap. (People v. Segura (2008) 44 Cal.4th 921 , 930 [“[A] ‘negotiated plea agreement is a form of contract.’ ”].) The parties to a plea bargain must consider all possibilities, from complete acquittal with no punishment to conviction on all charges and imposition of the maximum sentence. A plea bargain represents a meeting of the minds between those two poles based upon the parties’ individual risk- benefit analysis. (See Stamps, supra, 9 Cal.5th at p. 705.) If subsequent alteration of the legal landscape, through the fault of neither party, invalidates the plea agreement and the parties are sent back to the bargaining table, the imposition of a cap based upon the originally agreed- 3 upon term substantially weakens the People’s bargaining position and may, as a result, inure to the detriment of the defendant. Take as an example a defendant charged, prior to the passage of Senate Bill No. 136, with one count of residential burglary (§ 460) and one prison prior (§ 667.5, subd. (b)). The state prison term options upon a plea as charged would be the principal offense triad of two, four, or six years, plus one year for the enhancement. The parties could structure an agreed-upon term of two, three, four, five, six or seven years. Suppose the defendant proposes two years, the People propose four years, and they settle on three years: low term for the burglary plus the one-year enhancement. Following a post-Senate Bill No. 136 remand, in the absence of the one-year enhancement, the parties’ statutory options would be limited to the burglary triad: two, four, or six years. The proposed cap would further limit them to one option—two years—the only term not to exceed the previous agreement. Thus, in order to resolve the matter by plea, the People would have to accept the two-year term. Of course, the goal posts have shifted to the extent the defendant’s maximum exposure is now only six years, rather than seven. But, the People, who originally rejected the idea that two years was an appropriate resolution of the case, now have that resolution thrust upon them. They may well assess that two years is appropriate in light of the new exposure, but possibly not. Instead, they could choose to go to trial. I know of no authority whereby the appellate court or the trial court could force the People to enter into a plea agreement. In that case, the cap could have the unintended consequence of forcing a trial. But, the defendant may not want a trial, unless of course the sentencing cap were to apply also to any trial following remand—to which I now turn. 4  Take a second example in which a defendant pleads guilty to one of many counts, the plea is invalidated, and the matter remanded. Suppose further that no new agreement is reached and the matter goes to trial. If the defendant is convicted of more offenses at trial than incorporated in the plea bargain, any cap would act to hamstring the trial court’s appropriate exercise of sentencing discretion. Certainly, a court approving a plea bargain weighs different interests and different information when approving that bargain than does a court at sentencing following trial. In addition, a cap on any posttrial sentence would inordinately skew the plea bargaining process in favor of the defendant. Returning to my first example of the defendant facing one count of residential burglary. On remand, the cap, represented by the term of the original plea bargain, would be three years—a term not available in the sentencing triad for residential burglary. In light of the cap, the only term available for a plea agreement or after trial would be two years. Now, at the renewed plea bargaining session, the parties know that the defendant’s maximum exposure is two years under any circumstance, rather than six. Indeed, such a defendant would have little to lose by rejecting a plea deal and taking the matter to trial. The effect of such a cap is likely to be magnified in my second example, which contemplates a post-remand trial on numerous charges. In essence, the new bargaining session would be substantially altered to the detriment of the People: the greatest downside for the defendant is the cap, not the maximum sentence carried by the charged offenses. This would seem to be an unfair result. As noted, the alteration in the legal landscape was not the defendant’s fault, but it was also not the People’s. Here, for instance, defendant was charged in three different dockets with a variety of offenses. Should he choose not to enter into a new 5 agreement, the People would face the prospect of trying all three cases, yet being limited to a potential punishment no greater than that contemplated by the original plea agreement. Certainly, any concession by the People reflected by the original plea term, in the name of efficiency, the interests of victims, convenience of witnesses, guaranteed result, finality, etc., would be lost if the cases had to be tried. And, the greater potential punishment that the People forwent by entering into the plea bargain would also be lost by the imposition of a cap. For this reason, in addition to the inappropriate limitation on a sentencing court’s discretion after trial, the imposition of a sentencing cap on any trial after remand is not advisable. The majority opinion relies, in part, on the laudable principle that our ruling should not dissuade individuals from seeking appellate redress. (See maj. opn. ante, at p. 11.) But, at the time a defendant is deciding whether to appeal in these situations, he does not know if he will be able to reach a new plea agreement with the People, and neither he nor the court can force one. That is to say, he may have to go to trial, where no cap would apply. Thus, there seems to be no way to avoid the potential of dissuading him from appealing. The court in Stamps held: “Defendant should be allowed to make an informed decision whether to seek relief on remand.” (Stamps, supra, 9 Cal.5th at p. 708.) Of course, there, the original plea bargain was not unlawful on its face. Rather, on remand, a defendant would be inviting the trial court’s exercise of discretion as to whether or not to strike the serious felony prior conviction. I see no meaningful distinction where, as here, the plea bargain is nullified by operation of law. A defendant need not seek redress if on balance he feels it is in his best interest not to do so. The defendant is simply put to the choice of whether or not, considering all the 6 potential outcomes, to make that request. We presume the defendant knowingly, intelligently and voluntarily entered into the original plea agreement. Why would we presume otherwise when considering a decision whether to seek appellate redress? It is important to note that this balancing by the defendant of the risks and benefits of appellate review pertains only in cases of a plea bargain. When a defendant is convicted following trial or after entering an open plea to all the charges, no plea bargain is involved. On remand for resentencing, the sentencing court simply “reconsider[s] its sentence in light of its newly conferred authority.” (Stamps, supra, 9 Cal.5th at p. 700.) The sentencing court is appropriately limited by its original sentence should the matter be remanded for resentencing following the alteration of the legal landscape. (People v. Ali (1967) 66 Cal.2d 277 , 281.) In the former case, the People have had their opportunity to prove all the charges; in the latter, the defendant has admitted all the charges. The parties’ bargaining positions have not been altered. Rather, the sentencing court having originally exercised its discretion to impose a certain sentence is simply limited by that sentence on remand. A defendant convicted under either of those scenarios would not be dissuaded from pursuing his appellate rights for fear of receiving a greater sentence. As a general proposition, the court has no interest in preserving erroneous judgments. (People v. Henderson (1963) 60 Cal.2d 482 , 497.) Yet, the Legislature did not go so far as to apply the remedy of Senate Bill No. 136 to final judgments, which it could have done. (See Sen. Bill No. 1437 (2017– 2018 Reg. Sess.), granting retroactive relief when liability for murder under the theories of felony murder and natural and probable consequence was 7 altered.) Is the interest, therefore, so great that we would require alteration of a nonfinal judgment that a defendant understandably did not request? The majority opinion also explains that a cap on post-remand plea bargains would be consistent with the legislative intent underlying Senate Bill No. 136, namely to decrease prison sentences imposed on repeat felons. (See maj. opn. ante, at p. 11.) However, the Supreme Court’s discussion in Stamps explains the persuasive limits of that intent in light of the wording of the statute at issue there (similar to the one before us), particularly when compared to the more sweeping language of Proposition 47, analyzed in Harris v. Superior Court (2016) 1 Cal.5th 984 and referenced in the majority opinion. (Stamps, supra, 9 Cal.5th at pp. 702–705 [“[T]his bill . . . says nothing about the proper remedy should we conclude a law retroactively applies.”].) The Stamps court concluded that the legislative intent to reduce sentences did not extend so far as to lock the People into a diminished plea bargain. This brings us to what is, in my view, the persuasive reason for the holding in Part II of the majority opinion: Collins, supra, 21 Cal.3d 208 . In that case, the defendant was charged with various felonies, including several forcible sexual assaults. Pursuant to a plea bargain, he pled guilty to one count of nonforcible oral copulation, which at that time was unlawful even between consenting adults. He was committed for treatment as a mentally disordered offender. By the time he was later returned to court for further proceedings, consensual oral copulation had been legalized. Overruling his objection, the court sentenced Collins to prison for an indeterminate term of one to fifteen years. (Id. at pp. 211–212.) The Collins court did four things. First and unremarkably, it applied its earlier ruling in People v. Rossi (1976) 18 Cal.3d 295 , holding that the 8 change in law legalizing the conduct for which Collins had been convicted applied retroactively, thus nullifying Collins’s conviction. (Collins, supra, 21 Cal.3d at pp. 212–213.) Secondly, it determined that “the proper remedy is to reverse the judgment with directions to dismiss the count involved herein,” rather than uphold the conviction and indicate “ ‘no penalty,’ ” as suggested by Collins. (Id. at p. 214.) Thirdly, it provided guidance to the trial court on remand by finding that the counts that were dismissed at the time of the plea could be reinstated. Because the defendant in Rossi had been convicted at trial of only nonforcible oral copulation, the question of other, dismissed counts had not been presented in that case. “Critical to plea bargaining is the concept of reciprocal benefits. When either the prosecution or the defendant is deprived of benefits for which it has bargained, corresponding relief will lie from concessions made. . . . [¶] The question to be decided, then, is whether the prosecution has been deprived of the benefit of its bargain by the relief granted herein. We conclude that it has and hence the dismissed counts may be restored.” (Collins, at pp. 214–215.) The court in Stamps relied upon Collins on this third point. (Stamps, supra, 9 Cal.5th at pp. 703–704.) But, Collins went one step further by limiting the defendant’s potential sentence on remand “to not more than three years in state prison, the term of punishment set by the Community Release Board pursuant to the determinate sentencing act.” (Collins, supra, 21 Cal.3d at p. 216.) 3 In so 3After Collins’s original plea and before the Supreme Court’s ruling, the former indeterminate sentencing law was replaced with the determinate sentencing law. The prison terms of those sentenced under the former law were subject to recalculation by the Community Release Board, forerunner of our current Board of Parole Hearings. (See, generally, In re Gray (1978) 85 Cal.App.3d 255 , 259–260; Hoffman v. Superior Court (1981) 122 9 doing, the Collins court seemed to suggest, without explanation, that the parties must enter into another plea agreement. The court did not expressly contemplate the possibility that the parties may be unable to reach a new agreement. Additionally, the court acknowledged: “We find precedent for the foregoing result in a line of cases based on principles of double jeopardy. Our concern there was specifically to preclude vindictiveness and more generally to avoid penalizing a defendant for pursuing a successful appeal.” (Id. at p. 216.) Any concern that the People would be acting vindictively, I believe, is adequately addressed through the trial court’s traditional powers of supervision and approval of plea bargains. As I have explained above, the potential chilling of a defendant’s appellate remedies is a weighty factor where the defendant has been sentenced following trial—the cases relied upon by the court in Collins. (Collins, supra, 21 Cal.3d at pp. 216–217.) I find it less weighty and, indeed, unavoidable in the quite complicated context of plea bargaining. As mentioned, the Stamps court relied upon Collins as to the third point: the restoration of the dismissed counts. Curiously, the court did not rely upon Collins on the fourth and final point—the post-remand cap—or even take that issue up, in so many words. Instead, the court discussed at length and with approval People v. Ellis (2019) 43 Cal.App.5th 925 , as to whether remand for resentencing would be futile in that case. As Stamps explained: “In light of these potential consequences to the plea agreement, we emphasize that it is ultimately defendant’s choice whether he wishes to Cal.App.3d 715, 724–725 [Board of Prison Terms, formerly Community Release Board]; Lopez v. Superior Court (2010) 50 Cal.4th 1055 , 1059–1060, fn. 4 [Board of Parole Hearings, formerly Board of Prison Terms].) 10 seek relief under Senate Bill 1393. As Ellis reasoned: ‘Given that defendants in criminal cases presumably obtained some benefit from the plea agreement, we anticipate that there will be defendants who determine that, notwithstanding their entitlement to seek relief based on the change in the law, their interests are better served by preserving the status quo. That determination, however, lies in each instance with the defendant.’ [Citation.] While it is true that defendant has consistently argued on appeal that Senate Bill 1393 should retroactively apply to him, his argument has always been coupled with his claim that the proper remedy should be to simply allow the trial court to reduce his sentence by five years while otherwise maintaining the remainder of the plea agreement. Now that we have rejected his proposed remedy, defendant’s calculus in seeking relief under Senate Bill 1393 may have changed. Defendant should be allowed to make an informed decision whether to seek relief on remand.” (Stamps, supra, 9 Cal.5th at p. 708.) Clearly, the court did not contemplate that any sentencing cap would pertain when it described the defendant’s informed decisionmaking on remand. The court did not express concern that the absence of a cap would deter the exercise of appellate redress or be inconsistent with the legislative intent to reduce sentences, even though these ramifications would be as likely in the case of remand to allow the court to exercise its discretion as it would in a remand to correct an erroneous judgment. The discussion in Stamps suggests a willingness by our Supreme Court to revisit Collins. I hope my thoughts may encourage that. Nonetheless, I agree that Collins remains our Supreme Court’s clearest pronouncement on this point and that we are compelled to follow it. Thus, I join in the majority opinion’s conclusion in Part II as well. 11  _________________________ Reardon, J. * A159104 * Judge of the Superior Court of Alameda County, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. 12 Superior Court of Lake County, Nos. CR952884, CR953175-B, CR953305-A, Hon. Arthur H. Mann, Judge. Nathan Siedman, under appointment by the Court of Appeal, for Defendant and Appellant. Xavier Becerra, Attorney General, Lance E. Winters, Chief Assistant Attorney General, Jeffrey M. Laurence, Senior Assistant Attorney General, Catherine A. Rivlin and Bruce M. Slavin, Deputy Attorneys General, for Plaintiff and Respondent. 13

2020-11-30 22:02:24.496461+00

http://www.courts.ca.gov/opinions/documents/B297107.PDF

Filed 10/28/20; Modified and Certified for Publication 11/25/20 (order attached) IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN SORAYA SABETIAN, B297107 Plaintiff and Appellant, (Los Angeles County Super. Ct. No. BC475956) v. EXXON MOBIL CORPORATION et al., Defendants and Respondents. APPEAL from the judgment of the Superior Court of Los Angeles County, John J. Kralik, Judge. Affirmed. Weitz & Luxenberg, Benno Ashrafi and Josiah Parker for Plaintiff and Appellant. Dentons US, Jayme C. Long, Justin Reade Sarno, Alexander B. Giraldo; Gibson, Dunn & Crutcher, Theodore J. Boutrous, Jr., Joshua S. Lipshutz and Joseph R. Rose for Defendants and Respondents Exxon Mobil Corporation and ExxonMobil Oil Corporation.  King & Spadling, Ashley C. Parrish, Peter A. Strotz, Steven D. Park and Anne M. Voigts for Defendants and Respondents Chevron U.S.A. Inc. and Texaco, Inc. __________________________ Soraya Sabetian 1 appeals from a judgment entered after the trial court granted the motions for summary judgment filed by defendants Chevron U.S.A. Inc. and Texaco, Inc. (Chevron defendants), and Exxon Mobil Corporation and ExxonMobil Oil Corporation (Exxon defendants). Soraya and her husband Houshang Sabetian brought claims for negligence, premises liability, and loss of consortium, alleging Sabetian contracted mesothelioma caused by exposure to asbestos while he was an Iranian citizen working for the National Iranian Oil Company (NIOC) from about 1960 to 1979 in facilities controlled by defendants. 2 The trial court concluded the Chevron and Exxon defendants did not owe a duty of care to Sabetian. On appeal Soraya contends the Chevron and Exxon defendants owed Sabetian a duty of care based on their predecessors’ control over the Abadan refinery in which Sabetian 1 During the pendency of this appeal, Houshang Sabetian died. On July 29, 2020 we granted Soraya Sabetian’s motion to be substituted in place of Houshang Sabetian as his successor in interest. To avoid confusion, we refer to Houshang Sabetian as Sabetian and Soraya by her first name. 2 Mesothelioma is a cancer associated with exposure to asbestos. The parties dispute the extent to which asbestos exposure causes testicular mesothelioma, with which Sabetian was diagnosed. 2 worked and a 1954 contractual agreement between the Iranian government and a consortium of international oil companies, including defendants’ predecessors in interest (the Agreement). Soraya also asserts the Chevron and Exxon defendants, through their predecessors, owed a duty to protect refinery workers like Sabetian from asbestos exposure based on a special relationship between the predecessors and the refinery workers arising from commitments in the Agreement. 3 We affirm. FACTUAL AND PROCEDURAL BACKGROUND A. The Agreement 4 In 1951 the government of Iran nationalized its oil assets, assuming control from the Anglo-Iranian Oil Company, which was majority-owned by the government of Great Britain. In 1952 Iran formed NIOC to own and supervise all of Iran’s oil assets. But NIOC did not have access to the global oil markets. To avoid possible influence from the former Union of Soviet Socialist Republics, the United States “devised a plan in which a consortium of newly-formed international corporations would operate the Abadan refinery and some of the other Iranian Oil 3 Soraya also contended in her appellate briefing that Sabetian was a third party beneficiary of the Agreement. However, at oral argument Soraya’s attorney stated Soraya is no longer relying on this argument. 4 This discussion is based on undisputed facts taken from evidence submitted in connection with the summary judgment motions. 3 Premises, under Iranian supervision.” 5 The United States invited several major American companies with operations in the Middle East to participate in an international consortium with other oil companies. In 1954 American oil companies Gulf Oil Corporation, Socony-Vacuum Oil Company, Inc., Standard Oil Company of New Jersey, Standard Oil Company of California, and the Texas Company, and European oil companies Anglo-Iranian Oil Company, Ltd., N.V. de Bataafsche Petroleum Maatschappij, and Compagnie Francaise des Pétroles (collectively, the consortium members) entered into the Agreement with Iran and NIOC. Defendant Chevron is the successor in interest to Standard Oil Company of California and Gulf Oil Corporation. Defendant Texaco, Inc., is the successor of the Texas Company. The Exxon defendants are successors in interest to Socony-Vacuum Oil Company, Inc., and Standard Oil Company of New Jersey. The Agreement consists of two parts, the first among the consortium members, Iran, and NIOC and the second among Iran, NIOC, and the Anglo-Iranian Oil Company, Ltd. Only part I is at issue in this case. The recitals for part I provided, “WHEREAS, both the Government of Iran and [NIOC] desire to increase the production and sale of Iranian oil, and thereby to increase the benefits flowing to the Iranian nation . . . , but additional capital, experienced management, and technical skills are required in order to produce, refine, transport and market . . . oil in quantities sufficient to effect this increase in a substantial 5 It is undisputed the Agreement principally covered the Abadan refinery. Consistent with the practice of the parties, we use “Abadan refinery” to refer generally to the area covered by the Agreement. 4 amount . . . [¶] WHEREAS, the international oil [consortium members] are in a position and are willing to supply such capital, management and skills; and [¶] . . . are in a position to market substantial quantities of Iranian oil . . . throughout a large part of the world over a considerable period of time, to the mutual benefit of the Iranian nation and themselves . . . [¶] . . . the Parties are agreed that said companies should undertake the operation and management of certain of the oil properties . . . of the Government of Iran and [NIOC], including the Abadan refinery, as hereinafter set forth . . . [¶] . . . negotiations have been amicably carried out with the object of assuring to the Government of Iran and [NIOC], on the one hand, a substantial export market for Iranian oil and a means of increasing the material benefits to and prosperity of the Iranian people, and to the companies, on the other hand, the degree of security and the prospect of reasonable rewards necessary to justify the commitment of their resources and facilities to the reactivation of the Iranian oil industry.” Article 3, section A of the Agreement provided that to carry out the “functions of exploration, producing, refining, transportation and the other functions specified in” the Agreement, the consortium members incorporated the “Operating Companies” under the laws of the Netherlands. The Agreement defined the Operating Companies as the Iranian Oil Exploration and Producing Company (IOEPC) and Iranian Oil Refining Company (IORC). The consortium members incorporated a holding company, Iranian Oil Participants Ltd. (IOP), which wholly owned IOEPC and IORC. Each consortium member formed at least one wholly owned subsidiary, each of which purchased 7 to 8 percent of IOP’s shares. In article 3, section A of 5 the Agreement, the consortium members “jointly and severally guarantee[d] the due performance by the Operating Companies of their respective obligations under this Agreement.” Article 4 of the Agreement listed and “strictly limited” the “rights, powers and obligations of the Operating Companies as well as the nature and extent of the supervision to be exercised by Iran and NIOC . . . to what is clearly stated in this Article.” (Art. 4, § J.) Section A, paragraph (1) provided IOEPC the right to explore, drill for, produce, extract, process, store, transport, and ship crude oil and natural gas. Section A, paragraph (2) provided for IORC to have the right to refine and process crude oil and natural gas produced by IOEPC. Article 4, section F sets forth “[t]he obligations of the Operating Companies to Iran and NIOC.” These obligations included the duty “to conform with good oil industry practice and sound engineering principles applicable and appropriate to operations under similar conditions in conserving the deposits of hydrocarbons, in operating the oilfields and refinery and in conducting development operations.” (Agreement, art. 4, § F, ¶ (1).) The Operating Companies were obligated “to carry on such exploration operations as are economically justifiable with a view to providing sufficient reserves to support the rate of production of oil” (id., § F, ¶ (2)); to maintain full records and accounts of their activities (id., § F, ¶ (3)); “to minimize the employment of foreign personnel” (id., § F, ¶ (4)); and “to prepare in consultation with NIOC plans and programs for industrial and technical training and education and to cooperate in their execution . . . to replace foreign personnel as soon as reasonably practicable” (id., § F, ¶ (5)). Article 4, section I further provided, “[T]he Operating Companies shall determine and have full and 6 effective management and control of all their operations,” subject to supervision of their operations by Iran and NIOC as set forth in sections F and G. Article 5, section A of the Agreement stated, “Iran and NIOC undertake that neither of them, and no person other than the Operating Companies, shall at any time . . . carry out . . . any of the functions specified in [p]aragaphs (1) and (2) of Section A of Article 4 of this Agreement” (defining the rights of IOEPC and IORC to exploration, production, and refining). Article 7 of the Agreement granted the Operating Companies the right to “exclusive use” of certain lands owned by NIOC and Iran for “their operations under [the] Agreement.” 6 Under article 17 of the Agreement, NIOC retained authority over all “non-basic operations,” including medical and health services, industrial and technical training and education, and housing. Article 18 provided consortium members “shall” purchase crude oil and “may” purchase natural gas from NIOC for resale in Iran for export. Consortium members were permitted to assign their rights and obligations to purchase crude oil and natural gas to their subsidiaries, referred to “Trading Companies.” Under article 20 of the Agreement, the consortium members guaranteed certain oil production and export quantities on an annual basis. The Agreement contemplated a 25-year lifespan, but in 1973 Iran assumed operations from IORC and IOEPC. IORC’s employees were transferred to a new entity formed by NIOC, Oil 6 It is undisputed NIOC owned and operated the Abadan refinery prior to execution of the Agreement, and the Agreement’s grant of authority to the Operating Companies constituted a transfer of control over the functions in article 4 from NIOC to the Operating Companies. 7 Services Company of Iran, which assumed operation of the Abadan refinery. B. The Complaint Sabetian and Soraya filed this action on March 28, 2018 against the Chevron and Exxon defendants and others, alleging causes of action for negligence, strict liability, premises liability, negligent joint venture, alter ego, and loss of consortium. The complaint alleged the Chevron and Exxon defendants are the successors in interest to consortium members that were signatories to the Agreement. The complaint alleged further Sabetian was exposed to products containing asbestos while he worked at the Abadan refinery and other Iranian facilities from approximately the 1960’s to the late 1970’s. In January 2017 Sabetian was diagnosed with testicular mesothelioma caused by his exposure to asbestos at these facilities. The complaint alleged the predecessors to the Chevron and Exxon defendants, as consortium members, contributed “capital, management and skills in the operation and management of the oil properties of the [NIOC], specifically the . . . oil refinery in Abadan, Iran.” Further, the predecessor companies had “full and effective control of the [Abadan] refinery . . . in order to operate that refinery in conformity with good oil industry practice and sound engineering principles applicable to that industry.” 8 C. The Chevron and Exxon Defendants’ Motions for Summary Judgment The Chevron and Exxon defendants separately moved for summary judgment. 7 They argued they owed no duty of care to Sabetian because they did not own, possess, or control the facilities in which Sabetian alleged he was exposed to asbestos. The Chevron defendants filed a declaration of Frank G. Soler, the senior subsidiary governance liaison for Chevron Corporation, who stated the Chevron defendants’ predecessors “did not ever own, lease, maintain, manage, control, or supervise” the Abadan refinery. Soler averred a separate corporate entity facilitated requests from the Operating Companies to the consortium members “for skilled personnel.” Employees of the consortium members sent to work at the Abadan refinery were “seconded,” meaning “their employment with the [consortium member] oil company terminated and such employees were then formally employed by IORC and/or IOEP[C.]” The Chevron defendants also filed a declaration of former Texaco, Inc., employee Carter Conlin, in which Conlin averred he worked at the Abadan refinery from 1958 to 1963. At the refinery, Conlin supervised 8 approximately 20 engineers, including “seconded employees” from other oil companies. Conlin and the other seconded employees he supervised were “employed 7 The Sabetians also moved for summary judgment of their claims, which the trial court denied. 8 From 1958 to 1960, Conlin held the position of section head of the oil conversion processes section of the process engineering department for IORC. From 1960 to 1963, he held the position of technical advisor for catalytic reforming in the refining operations department for IORC. 9 and paid by IORC for all work performed at the Abadan [r]efinery.” Conlin and the employees Conlin supervised did not take direction or payment from “their previous oil company employer or any oil company subsidiaries.” The Chevron defendants filed excerpts from deposition testimony from Conlin in Alkhas v. A.W. Chesterton Company (Super. Ct. L.A. County, 2014, No. BC473745), in which he testified employees loaned by consortium members to IORC were thereafter treated as employees of IORC. 9 D. The Sabetians’ Oppositions to Defendants’ Motions for Summary Judgment The Sabetians opposed the Chevron and Exxon defendants’ motions, arguing the Agreement and defendants’ control over operations at the Abadan refinery created a duty of care owed by the Chevron and Exxon defendants to Sabetian to protect him from asbestos exposure. 10 The Sabetians filed multiple 9 The Exxon defendants also relied on the Conlin and Soler declarations and the Conlin deposition transcript filed by the Chevron defendants. 10 The Sabetians abandoned their strict liability, negligent joint venture, and alter ego claims during the summary judgment proceedings by failing to oppose summary adjudication of those claims. The Sabetians did not dispute they had “no information about how” IOP, IORC, IOEPC, or NIOC “were capitalized, whether they held shareholder meetings, or whether they held board of director meetings,” “no evidence to support a finding that IOP, IORC, IOEP[C], [or] the [consortium members] . . . had a right of joint control and ownership of the Abadan [r]efinery,” and “no evidence to support piercing the corporate veils” of IOP, IORC, IOEPC, NIOC, or the consortium members. 10 declarations and excerpts of deposition testimony with their oppositions. Dr. Neill Weaver stated in his deposition testimony he worked from 1951 to 1973 as a physician for Esso Standard Oil Company, an Exxon predecessor. 11 When asked about Esso’s asbestos practices, Dr. Weaver testified that when he began working in Esso’s Baton Rouge, Louisiana refinery in 1951, “measures were in effect for the control of exposures throughout the refinery and the medical surveillance program for the workers potentially exposed to asbestos was in operation and had been in operation for decades.” Dr. Weaver identified a 1937 document entitled “Dust Producing Operations in the Production of Petroleum Products and Associated Activities,” which made suggestions for control and suppression of asbestos dust. The Sabetians also attached Exxon Mobil Corporation’s responses to interrogatories, in which it admitted it began warning its employees of the dangers of asbestos dust as early as 1936. Bruce Larson, who testified as Exxon Mobil Corporation’s person most qualified in Shahabi v. A.W. Chesterton Company (Super. Ct. L.A. County, 2012, No. BC421531), was asked, “Do you agree that Exxon and Mobil had employees in high level management at the Abadan refinery between 1955 and 1968?” He responded, “I think that’s probably correct, yes.” Larson also testified it was “certainly possible” that a person with management responsibility could cause work practices to be 11 Weaver testified he worked for Esso Standard Oil Co., which later became Exxon. The Exxon defendants acknowledge previously doing business under the name Esso. It is not clear from the record which consortium member Esso succeeded. 11 followed at the refinery, but he clarified that the Abadan refinery “had a patchwork of various jobs represented by Iranian nationals, various jobs represented by people from the participating oil companies, and . . . I don’t really know how control was exercised in a situation like that.” Larson testified he believed Exxon employees who worked at the Abadan refinery would be paid by the “holding company,” not Exxon, and he was not aware of Exxon or Mobil “exercis[ing] any direct control over anybody” working at the Abadan refinery. Testifying as Exxon Mobil Corporation’s person most qualified in Enayati v. A.W. Chesterton Company (Super. Ct. L.A. County, 2009, No. BC400729), Larson testified he had no direct knowledge of the health and safety practices of the Abadan refinery during the period from 1954 to the 1980’s. But he stated it had “always been at least the policy of Exxon and Mobil that . . . the same rules and regulations that apply domestically apply to overseas facilities. So I’m assuming that—and this is an assumption . . . [¶] . . . that comparable safety procedures and programs would be in place at [the Abadan] refinery as they would have been elsewhere.” Larson affirmed he based his assumption on his experience with the standard operating procedures of the company. Daniel Agopsowicz testified in his deposition as the person most qualified for the Exxon defendants. When asked whether the Exxon defendants agreed “[i]t is part of good oil industry practice to ensure that the people on the refinery floor are kept safe,” Agopsowicz replied, “Yes.” When asked whether the Exxon defendants’ predecessors “believe[d] at the time of signing [the Agreement] that [they] had an obligation to ensure that the Abadan [r]efinery was operated appropriately,” Agopsowicz 12 replied, “If they signed [the Agreement], then they would agree with this, yes.” 12 In response to the Exxon and Chevron defendants’ undisputed material facts, the Sabetians did not dispute that Sabetian was employed by NIOC, not by defendants or their predecessors, and he was never supervised or directed by an employee of the defendants or their predecessors. Nor did the Sabetians dispute “IORC was the company that conducted the basic functions necessary for refining oil and natural gas at the Abadan [r]efinery.” Likewise, the Sabetians did not dispute that the Chevron defendants did not “select, procure, manufacture, distribute, sell, or install any asbestos-containing products or equipment” at the Iranian facilities. The Sabetians also did not dispute that IOP did not operate any Iranian oil facilities. E. The Trial Court’s Ruling and Entry of Judgment On November 1, 2018 the trial court granted the Chevron and Exxon defendants’ motions for summary judgment. In its written ruling, the court found the parties to the Agreement “did not intend to provide Iranian oil refinery workers with a direct remedy against the American oil companies sued here.” The court rejected Sabetian’s argument refinery workers were third party beneficiaries to the Agreement, reasoning it was “far- fetched to believe that the parties to the . . . Agreement thought of the refinery workers at all, except to find a way to limit their liability to the American companies that were being enlisted to 12 It appears from the question and answer that this testimony was in the context of questions about the Agreement. However, the record does not contain the prior page of the deposition transcript. 13 invest.” The court explained, “There is no other reason for the complicated structure making clear that the Oil Companies were shareholders, and not directly responsible for the ownership and operation of the refineries. It is hard to imagine why the parties would have made such an effort to limit the liability of the new investors through complicated corporate structures if their real intent was to be directly liable to Iranian refinery workers and other creditors of the operating entities. In sum, there is nothing in the Agreement or the contemporary writings that indicates an intent to benefit third parties at all.” The court also rejected the Sabetians’ argument the recitals in Part 1 of the Agreement created rights and obligations of the Chevron and Exxon defendants. Further, the court found the Agreement was “clear that the ‘Operating Companies’ are separate entities from the [d]efendants. The corporate forms should be respected given [the Sabetians’] decision to not submit evidence regarding the joint-venture and alter-ego claims.” The court continued, “While the Oil Companies’ predecessors did guarantee the obligations of the Operating Companies under the Agreement, there is no evidence that the parties intended that third parties would have the option of enforcing these guarantees.” 13 Finally, the court found the other evidence submitted by the Sabetians did not support their position because “[n]one of it [was] contemporaneous with the execution of the Agreement, or [was] informative of the underlying intent of the Agreement.” 13 In ruling on the motions for summary judgment, the trial court overruled all evidentiary objections made by the parties. The parties do not renew their objections on appeal, and we do not consider them. 14 Further, the former employees’ testimony confirmed IORC operated the Abadan refinery, which employed the workers and ran the “safety department,” but the testimony “fail[ed] to establish that the named [d]efendants owned and operated the refineries.” The court concluded the predecessor oil companies “who were IOP shareholders did not owe a duty to Mr. Sabetian under the . . . Agreement.” On November 20, 2018 the trial court entered judgments of dismissal in favor of the Chevron and Exxon defendants. The Sabetians timely appealed. DISCUSSION A. Standard of Review on Summary Judgment Summary judgment is appropriate only if there are no triable issues of material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c); Regents of University of California v. Superior Court (2018) 4 Cal.5th 607 , 618 (Regents); Delgadillo v. Television Center, Inc. (2018) 20 Cal.App.5th 1078 , 1085.) “‘“‘“We review the trial court’s decision de novo, considering all the evidence set forth in the moving and opposing papers except that to which objections were made and sustained.”’ [Citation.] We liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.”’” (Hampton v. County of San Diego (2015) 62 Cal.4th 340 , 347; accord, Valdez v. Seidner-Miller, Inc. (2019) 33 Cal.App.5th 600 , 607 (Valdez).) A defendant moving for summary judgment has the initial burden of presenting evidence that a cause of action lacks merit 15 because the plaintiff cannot establish an element of the cause of action or there is a complete defense. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826 , 853; Valdez, supra, 33 Cal.App.5th at p. 607.) If the defendant satisfies this initial burden, the burden shifts to the plaintiff to present evidence demonstrating there is a triable issue of material fact. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar, at p. 850; Valdez, at p. 607.) We must liberally construe the opposing party’s evidence and resolve any doubts about the evidence in favor of that party. (Regents, supra, 4 Cal.5th at p. 618; Valdez, at p. 608.) B. Principles of Contract Interpretation “‘The rules governing the role of the court in interpreting a written instrument are well established. The interpretation of a contract is a judicial function. [Citation.] In engaging in this function, the trial court “give[s] effect to the mutual intention of the parties as it existed” at the time the contract was executed. [Citation.] Ordinarily, the objective intent of the contracting parties is a legal question determined solely by reference to the contract’s terms. [Citations.]’” (Brown v. Goldstein (2019) 34 Cal.App.5th 418 , 432; accord, State of California v. Continental Ins. Co. (2012) 55 Cal.4th 186 , 195; Wolf v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107 , 1125- 1126.) “‘Extrinsic evidence is admissible, however, to interpret an agreement when a material term is ambiguous. [Citations.]’” (Brown, at p. 432; accord, Wolf, at p. 1126.) “The law has long distinguished between a ‘covenant’ which creates legal rights and obligations, and a ‘mere recital’ which a party inserts for his or her own reasons into a contractual 16 instrument. Recitals are given limited effect even as between the parties.” (Emeryville Redevelopment Agency v. Harcros Pigments, Inc. (2002) 101 Cal.App.4th 1083 , 1101; accord, Hunt v. United Bank & Trust Co. (1930) 210 Cal.108, 115 [“Recitals or preambles prefixed to an agreement may or may not have binding force. If they form part of the operative covenants of the instrument in such a way as to show it was designed and intended that they should form part of it, they will be so construed.”]; O’Sullivan v. Griffith (1908) 153 Cal. 502 , 506 [“A covenant or warranty is never implied from a mere recital.”]; McDonough v. Chu Chew Shong (1937) 21 Cal.App.2d 257 , 259 [contract to indemnify bail bondsmen was enforceable because the argued variance between the bond’s guarantee and the respondent’s criminal offense was in “a mere recital and form[ed] no part of the contractual obligation”].) However, “[i]f the operative words of a grant are doubtful, recourse may be had to its recitals to assist the construction.” (Civ. Code, § 1068; 14 see Golden West Baseball Co. v. City of Anaheim (1994) 25 Cal.App.4th 11 , 38 [language labeled “recital” was actually covenant because it contained operative promise and recourse to language was necessary to identify real property subject to the agreement].) C. The Sabetians Failed To Raise a Triable Issue of Fact as to Their Negligence and Premises Liability Claims 1. Duty of care “The elements of a negligence claim and a premises liability claim are the same: a legal duty of care, breach of that duty, and 14 All further undesignated statutory references are to the Civil Code. 17 proximate cause resulting in injury.” (Kesner v. Superior Court (2016) 1 Cal.5th 1132 , 1158 (Kesner); accord, Castellon v. U.S. Bancorp (2013) 220 Cal.App.4th 994 , 998.) “Recovery in a negligence action depends as a threshold matter on whether the defendant had ‘“a duty to use due care toward an interest of [the plaintiff’s] that enjoys legal protection against unintentional invasion.”’” (Southern California Gas Leak Cases (2019) 7 Cal.5th 391 , 397.) “In general, each person has a duty to act with reasonable care under the circumstances.” (Regents, supra, 4 Cal.5th at p. 619; accord, Vasilenko v. Grace Family Church (2017) 3 Cal.5th 1077 , 1083 (Vasilenko).) As section 1714 provides, “Everyone is responsible, not only for the result of his or her willful acts, but also for an injury occasioned to another by his or her want of ordinary care or skill in the management of his or her property or person, except so far as the latter has, willfully or by want of ordinary care, brought the injury upon himself or herself.” “‘[I]n the absence of a statutory provision establishing an exception to the general rule of . . . section 1714, courts should create one only where “clearly supported by public policy.”’” (Kesner, supra, 1 Cal.5th at p. 1143; accord, Regents, supra, 4 Cal.5th at p. 628 [“The court may depart from the general rule of duty . . . if other policy considerations clearly require an exception.”]; Cabral v. Ralphs Grocery Co. (2011) 51 Cal.4th 764 , 771 (Cabral).) In determining whether an exception to section 1714 applies, courts consider “the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, the policy of preventing future harm, the 18 extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost, and prevalence of insurance for the risk involved.” (Rowland v. Christian (1968) 69 Cal.2d 108 , 113 (Rowland); accord, Kesner, supra, 1 Cal.5th at p. 1143.) A defendant’s control over property is sufficient to create a duty of care owed to persons using the property. (Alcaraz v. Vece (1997) 14 Cal.4th 1149 , 1162, 1166 [affirming reversal of summary judgment because there were triable issues of fact as to landlord’s control of strip of city land where landlord had “maintained the lawn . . . and, subsequent to the incident at issue, constructed a fence surrounding the entire lawn”]; Annocki v. Peterson Enterprises, LLC (2014) 232 Cal.App.4th 32 , 37 [trial court should have allowed plaintiff to plead that defendant restaurant failed to warn patrons leaving the restaurant that only a right turn could safely be made from its parking lot although accident occurred on adjacent roadway].) “Premises liability ‘“is grounded in the possession of the premises and the attendant right to control and manage the premises”’; accordingly, ‘“mere possession with its attendant right to control conditions on the premises is a sufficient basis for the imposition of an affirmative duty to act.”’” (Kesner, supra, 1 Cal.5th at p. 1158; accord, Taylor v. Trimble (2017) 13 Cal.App.5th 934 , 943-944 [“landowners are required ‘to maintain land in their possession and control in a reasonably safe condition’ [citations], and to use due care to eliminate dangerous conditions on their property”].) However, “[a] defendant cannot be held liable for the defective or dangerous condition of property which it did not own, possess, or control. Where the absence of 19 ownership, possession, or control has been unequivocally established, summary judgment is proper.” (Isaacs v. Huntington Memorial Hospital (1985) 38 Cal.3d 112 , 134; accord, Seaber v. Hotel Del Coronado (1991) 1 Cal.App.4th 481 [hotel did not owe duty to patron who was struck and killed in a marked crosswalk outside hotel’s entrance]; cf. Vasilenko, supra, 3 Cal.5th at p. 1085 [church had duty toward invitees who crossed public street to get to parking lot across the street because the church increased the invitees’ exposure to the dangers of the street by placing and maintaining the parking lot on the other side of the street].) “[S]ection 1714 does not . . . impose a presumptive duty of care to guard against any conceivable harm that a negligent act might cause.” (Southern California Gas Leak Cases, supra, 7 Cal.5th at p. 399; accord, Dekens v. Underwriters Laboratories Inc. (2003) 107 Cal.App.4th 1177 , 1187-1188 [plaintiffs failed to raise a triable issue of material fact whether defendant “undertook the responsibility to guarantee [decedent’s] safety from cancer-causing asbestos through its process of testing and certifying small appliances as safe from injury due to fire, electrical shock, or injuries from sharp protruding objects”].) 2. The Sabetians failed to raise a triable issue of fact as to the Chevron and Exxon defendants’ ownership, possession, or control of the Iranian facilities Soraya acknowledges the central question is whether the Chevron and Exxon defendants (as successors to the consortium members) “had active supervisory control and management over the premises.” Soraya contends the consortium members controlled asbestos sources at the Iranian facilities at which 20 Sabetian was exposed to asbestos. She argues the Agreement itself created a duty of care by providing for the consortium members to undertake to create the Operating Companies, ensure the Operating Companies would use “good oil industry practice,” promise to purchase oil for export, and guarantee the production and exportation of specified quantities of oil. But the Chevron and Exxon defendants’ commitments in the Agreement do not demonstrate their control over the Abadan refinery. Soraya does not dispute NIOC, and later Iran, not the consortium members, owned the facilities where Sabetian was exposed to asbestos. Article 1 of the Agreement defined “Operating Companies” by express reference only to IOEPC (the exploration and production company) and IORC (the refining company), to the exclusion of the separately defined term of “[c]onsortium members.” The Agreement gave Iran and NIOC supervisorial authority over the Operating Companies, with IORC and NIOC sharing control of the Abadan refinery. As discussed, IORC controlled the refining and processing of the crude oil and natural gas at the refinery (art. 4, § A, ¶ (2)) and NIOC controlled the “non-basic operations,” including housing, medical and health services, and industrial and technical training and education (art. 17, §§ A, ¶ (1), B). Contrary to Soraya’s assertion the Chevron and Exxon defendants’ predecessors had effective control over the Abadan refinery, the Agreement expressly stated “no person other than the Operating Companies, shall at any time . . . carry out . . . any of the functions” of exploration, production, and refining, and the “nature and extent of the foregoing rights, powers and obligations of the Operating Companies as well as the nature and extent of 21 the supervision to be exercised by Iran and NIOC shall be strictly limited to what is clearly stated in [article 4].” That each of the consortium members or their subsidiaries owned 7 to 8 percent of IOP’s shares, which in turn owned IOEPC and IORC, is not sufficient to create a duty of care as to refinery workers employed by the Operating Companies, let alone those employed by NIOC, like Sabetian, absent evidence supporting the piercing of the corporate veil based on the alter ego doctrine. (See Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290 , 300 [to pierce the corporate veil, a plaintiff must show “‘(1) that there be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist and (2) that, if the acts are treated as those of the corporation alone, an inequitable result will follow’”]; Curci Investments, LLC v. Baldwin (2017) 14 Cal.App.5th 214 , 220 [“Ordinarily a corporation is considered a separate legal entity, distinct from its stockholders, officers and directors, with separate and distinct liabilities and obligations.”].) Further, to the extent the consortium members controlled IOP, which in turn owned the Operating Companies, the Sabetians never presented evidence to support liability of IOP as the parent corporation. (See Waste Management, Inc. v. Superior Court (2004) 119 Cal.App.4th 105 , 110 [“[A] parent corporation is not liable for injuries of a subsidiary’s employee in the absence of evidence establishing a duty owed by the parent corporation to the employee.”].) As discussed, the Sabetians abandoned their alter ego claims during the summary judgment proceedings. Soraya is correct the consortium members incorporated the Operating Companies and “jointly and severally guarantee[d] the due performance by the Operating Companies of their respective 22 obligations under this Agreement.” (Art. 3, § A.) Further, under the Agreement, “[t]he obligations of the Operating Companies to Iran and NIOC” included a commitment “to conform with good oil industry practice.” 15 (Art. 4, § F, ¶ (1).) In addition, under article 20 of the Agreement, the consortium members guaranteed the Abadan refinery would produce and export certain quantities of oil. Although Soraya argues these commitments show the consortium members had some ability to intervene in refinery management to meet these goals, the consortium members could have satisfied their commitments, as they argue, by their creation of independent corporate entities (the Operating Companies) to provide the necessary day-to-day management and control of the Abadan refinery. As stated, the Agreement tasked IORC and NIOC, not the consortium members, with refinery operations. Further, as discussed below, to the extent the Chevron and Exxon members’ duty of care owed to refinery workers flowed from the terms of the Agreement, the Sabetians had to show Sabetian was an intended beneficiary of the Agreement. Yet IORC’s commitment to conform with good industry practice was explicitly stated in the Agreement as an obligation to Iran and NIOC, as were the consortium members’ guarantees. Soraya also argues defendants’ control over the Abadan refinery is demonstrated by the recital language in the Agreement that the consortium members “are in a position and 15 Although the Chevron and Exxon defendants dispute that good oil industry practice included ensuring refinery workers were not exposed to unsafe levels of asbestos, we assume without deciding that good oil industry practice included such an obligation. 23 are willing to supply . . . capital, management and skills” and that the consortium members “should undertake the operation and management of certain . . . oil properties . . . including the Abadan refinery, as hereinafter set forth.” Although the recital language refers to the consortium members undertaking operation and control of the Abadan refinery, that language is qualified by the words “as hereinafter set forth.” As discussed, articles 4 and 5 of the Agreement provided that “no person other than the Operating Companies, shall at any time . . . carry out . . . any of the functions” of exploration, production, and refining, subject to the supervision of NIOC and Iran. The Agreement divided authority over refinery operations between the Operating Companies (IORC and IOEPC) and NIOC, and it vested NIOC and Iran with authority to supervise the operating companies’ performance. Contrary to Soraya’s position, the Agreement does not grant the consortium members supervisorial or managerial control over IORC, IOEPC, NIOC, or the Abadan refinery. Thus, the recital language referring to the willingness of the consortium members to provide their management abilities and their agreement to undertake the operation and management of the oil facilities was by its own terms limited by the specific provisions of the Agreement that vested responsibility for operation and control in the Operating Companies and NIOC. (See Hunt v. United Bank & Trust Co., supra, 210 Cal. at p. 115.) Moreover, the parties’ recitals are antecedent to the Agreement’s proclamation, “NOW THEREFORE, it is hereby agreed by and between [Iran and NIOC] and [the consortium members],” indicating the parties did not intend the recitals to have a binding effect. 24  Finally, the other evidence submitted by the Sabetians also did not create a triable issue of fact that the consortium members had control over operations at the Abadan refinery. The testimony of Larson, testifying as Exxon Mobil Corporation’s person most qualified, that “there may have been some” Exxon or Mobil employees in high level management positions at the Abadan refinery is consistent with defendants’ evidence that employees of consortium members who worked at the Abadan refinery were loaned to the refinery and under the control of and paid by IORC. For example, Soler, the senior subsidiary governance liaison for Chevron Corporation, declared that consortium members sometimes provided “skilled personnel” to the Abadan refinery in response to requests from the Operating Companies, but these workers were then “formally employed” by the Operating Companies, not their former consortium member employer. Similarly, Conlin, who in 1958 was an assistant chief design engineer employed by Texaco, Inc., testified that from 1958 to 1963 he was seconded to work at the Abadan refinery, at which time he was employed and paid by IORC and took direction from IORC, not Texaco, Inc., or other American oil companies. Further, Larson testified he was not aware of Exxon or Mobil “exercis[ing] any direct control over anybody” working at the Abadan refinery. The Sabetians did not submit any evidence showing employees of the consortium members who were seconded to the Abadan refinery as management employees were paid by the consortium members or their work was directed or controlled by the consortium members. 16 16 Soraya also relies on Agopowicz’s testimony in which he agreed that the Exxon defendants’ predecessors “believe[d] at the 25  Soraya’s reliance on the holding in Kesner, supra, 1 Cal.5th 1132 is misplaced. In Kesner, the Supreme Court held that employers and premises owners have a duty to protect family members of on-site workers from secondary exposure to asbestos carried home on the bodies and clothing of the workers. (Id. at p. 1140.) The Kessner court started from the premise that under section 1714, “‘the general duty to take ordinary care in the conduct of one’s activities’ applies to the use of asbestos on an owner’s premises or in an employer’s manufacturing processes” (Kessner, at p. 1144), but it considered the Rowland factors to determine “‘whether a categorical exception to that general rule should be made’ exempting property owners and employers from potential liability to individuals who were exposed to asbestos by way of employees carrying it on their clothes or person.” (Id. at p. 1145, quoting Cabral, supra, 51 Cal.4th at p. 774.) The Kessner court concluded it was “entirely foreseeable” that workers would bring asbestos dust home at the end of the day if adequate precautions were not taken, and, therefore, “[t]he foreseeability factors weigh in favor of finding a duty.” (Kesner, at p. 1149.) Unlike the defendants in Kesner, there is no evidence the Chevron and Exxon defendants operated or controlled the time of signing [the Agreement] that [they] had an obligation to ensure that the Abadan [r]efinery was operated appropriately.” But as discussed, the consortium members’ guarantees were to Iran and NIOC and fall short of evidence defendants exercised direct control of day-to-day operations at the refinery. Further, although Agopowicz was designated as the person most qualified for the Exxon defendants, his testimony was not based on personal knowledge of the consortium members’ intent in entering into the Agreement, but his reading of the Agreement. 26 Abadan refinery or the sources of asbestos at the refinery, thereby imposing on them a duty under section 1714 to protect refinery workers like Sabetian from exposure to asbestos. (See Isaacs v. Huntington Memorial Hospital, supra, 38 Cal.3d at p. 134.) Sabetian was employed by NIOC on premises operated by NIOC and IORC. This is in contrast to the allegations at issue in Kesner that the defendant’s predecessors were “engaged in active supervisory control and management of asbestos sources” at the workplace. (Kesner, supra, 1 Cal.5th at p. 1161.) 3. Soraya failed to raise a triable issue of fact the Agreement created a special relationship between defendants’ predecessors and Sabetian Soraya contends the Chevron and Exxon defendants (through their predecessor companies) owed a duty to protect refinery workers like Sabetian from asbestos exposure based on a special relationship between the consortium members and the refinery workers arising from the consortium members’ guarantee in the Agreement of the Operating Companies’ “due performance” under the Agreement, relying on Biakanja v. Irving (1958) 49 Cal.2d 647 (Biakanja) and J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799 (J’Aire). Under Soraya’s argument, the Chevron and Exxon defendants owed a duty to the refinery workers because injury to refinery workers from asbestos exposure was reasonably foreseeable under the Agreement. Further, Soraya points to the Operating Companies’ obligation to conform to “good oil industry practice and sound engineering principles.” Defendants respond it was IORC and NIOC that had a special relationship with refinery workers like Sabetian under the Agreement based on their control of the Abadan refinery, not 27 the consortium members, and therefore the Agreement did not create a duty on the part of the consortium members. The Chevron and Exxon defendants have the better argument. 17 “A duty running from a defendant to a plaintiff may arise from contract, even though the plaintiff and the defendant are not in privity. [Citations.] Under these circumstances, the existence of a duty is not the general rule, but may be found based on public policy considerations.” (Lichtman v. Siemens Industry Inc. (2017) 16 Cal.App.5th 914 , 921 (Lichtman) [company responsible for maintaining battery backup system for traffic signals owed duty of care to plaintiffs who were injured in traffic collision during power outage in which traffic signal stopped functioning].) The Supreme Court has recognized negligence claims by third parties against contractors based on a special relationship arising from the contract between the contractor and the owner of the property, applying the six-factor balancing test the Supreme Court articulated in Biakanja, supra, 49 Cal.2d 647 to determine whether a notary public who drafted a will for the decedent owed a duty of care to an estate beneficiary who was not in contractual privity with the notary 17 Soraya does not argue, and we do not reach, whether the predecessors to the Chevron and Exxon defendants owed a duty based on a special relationship with Sabetian to protect him from the criminal conduct of third parties. (Regents, supra, 4 Cal.5th at p. 619 [“a duty to control may arise if the defendant has a special relationship with the foreseeably dangerous person that entails an ability to control that person’s conduct”]; accord, Delgado v. Trax Bar & Grill (2005) 36 Cal.4th 224 , 235 [“A defendant may owe an affirmative duty to protect another from the conduct of third parties if he or she has a ‘special relationship’ with the other person.”].) 28 public. (See J’Aire, supra, 24 Cal.3d at pp. 802, 804-805 [lessee who operated a restaurant alleged sufficient facts to state a cause of action for negligence to recover lost income from dilatory performance by contractor hired by owner of building to renovate restaurant]; Stewart v. Cox (1961) 55 Cal.2d 857 , 859 (Stewart) [upholding homeowner’s judgment for property damage against subcontractor who was not in privity with the homeowner for the negligent application of concrete inside a swimming pool, causing a leak that damaged the pool and house]; see generally Aas v. Superior Court (2000) 24 Cal.4th 627 , 637-645 (Aas) [detailing evolving case law], superseded by statute on other grounds as stated in Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070 , 1079-1080.) Under the Biakanja and J’Aire balancing tests, in determining whether a duty of care arises from a contract in favor of a noncontracting party, the Supreme Court considered “[(1)] ‘the extent to which the transaction was intended to affect the plaintiff,’ [(2)] ‘the foreseeability of harm to [him],’ [(3)] ‘the degree of certainty that the plaintiff suffered injury,’ [(4)] ‘the closeness of the connection between the defendant’s conduct and the injury suffered,’ [(5)] ‘the moral blame attached to the defendant’s conduct,’ and [(6)] ‘the policy of preventing future harm.” (Southern California Gas Leak Cases, supra, 7 Cal.5th at p. 401, citing J’Aire, supra, 24 Cal.3d at p. 804; accord, Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817 , 838 (Goonewardene); 18 Aas, supra, 24 Cal.4th at p. 644; Stewart, 18 In Goonewardene, supra, 6 Cal.5th at page 838, the Supreme Court observed additional “policy considerations that may appropriately be considered in determining whether a tort 29 supra, 55 Cal.2d at p. 863; see Biakanja, supra, 49 Cal.2d at p. 650.) 19 In J’Aire, the Supreme Court concluded as to the first factor that because the purpose of the contract between the property owner and the contractor was to renovate the heating and ventilation systems at the lessee’s business premises (a restaurant), the work “could not have been performed without impinging” on the lessee’s business, and therefore the contractor’s “performance was intended to, and did, directly affect [the plaintiff].” (J’Aire, supra, 24 Cal.3d at p. 804.) With respect to the second factor, the J’Aire court held “it was clearly foreseeable that any significant delay in completing the construction would adversely affect [the lessee’s] business beyond the normal disruption associated with such construction. [The lessee] alleges this fact was repeatedly drawn to [the contractor’s] attention.” duty of care should be recognized or imposed in the absence of privity of contract” included whether recognition of the duty of care “would (1) impose liability out of proportion to fault, (2) be unnecessary in light of the prospect of private ordering [of a product or service], and (3) would likely have an adverse effect on the availability of [a defendant’s] services.” Because Soraya has not argued that consideration of these additional factors supports finding a duty of care, we focus on the factors in the Biakanja and J’Aire balancing tests as briefed by the parties. 19 The Supreme Court in Southern California Gas Leak Cases, supra, 7 Cal.5th at page 401 explained the J’Aire and Biakanja balancing tests apply a subset of the factors first established in Rowland, supra, 69 Cal.2d at page 113 to determine whether a defendant owes a duty of care to the plaintiff. For simplicity, we refer to the “J’Aire factors,” as the Supreme Court did in Aas, supra, 24 Cal.4th at page 646. 30 (Id. at pp. 804-805.) As to the third and fourth factors, the complaint “[left] no doubt” the lessee suffered harm as a direct result of the contractor’s negligence because it was unable to open its restaurant for a month because of delayed construction, and it operated without heat and air conditioning for even longer. (Id. at pp. 802, 805.) As to the fifth factor, the contractor’s “lack of diligence in the present case was particularly blameworthy since it continued after the probability of damage was drawn directly to [its] attention.” (Id. at p. 805.) With respect to the sixth factor, the J’aire court reasoned there is a public policy to discourage construction delays, which policy would be advanced by recognizing a duty of care. (Ibid.) The J’Aire court concluded, “[T]his court holds that a contractor owes a duty of care to the tenant of a building undergoing construction work to prosecute that work in a manner which does not cause undue injury to the tenant’s business, where such injury is reasonably foreseeable.” (Id. at p. 808.) Contrary to Soraya’s argument, the J’Aire factors do not support imposition of liability on the Chevron and Exxon defendants by virtue of the consortium members’ guarantee in article 3 of the Operating Companies’ performance of their obligations under the Agreement. Most significantly, under the first factor, the Agreement was not intended to affect Sabetian or other refinery workers, but rather, it was intended to accelerate Iranian oil production and exportation to the global market. Indeed, the obligations of the Operating Companies most relevant to protection of the refinery workers—to conform with good industry practice and prepare plans and programs for industrial and technical training and education—were specifically owed under the Agreement “to Iran and NIOC.” 31 Sabetian is unlike the plaintiff in J’Aire, a lessee whose restaurant business was interrupted by a contractor’s renovations to improve the restaurant, or the plaintiff in Biakanja, the sole beneficiary of a will the notary public negligently failed properly to attest. (J’Aire, supra, 24 Cal.3d at p. 804; Biakanja, supra, 49 Cal.2d at pp. 648, 651.) Typically, as in J’Aire and Stewart, the first two J’Aire factors operate in tandem—because the underlying contract was intended to affect the plaintiffs, the harm to the plaintiffs as a result of the defendants’ negligence was a fortiori foreseeable. (See J’Aire, supra, 24 Cal.3d at pp. 804-805 [where defendant’s performance was intended directly to affect the lessee, “it was clearly foreseeable that any significant delay in completing the construction would adversely affect [the lessee’s] business beyond the normal disruption associated with such construction”]; Stewart, supra, 55 Cal.2d at p. 863 [because the concrete work was intended for plaintiffs, the property damage to them “was foreseeable in the event the work was . . . negligently done”]; see also Chameleon Engineering Corp. v. Air Dynamics, Inc. (1980) 101 Cal.App.3d 418 , 422-423 [general contractor alleged sufficient facts to state negligence claim against supplier of component parts to subcontractor for delay in provision of parts where supplier knew intent of its contract with subcontractor was to provide essential parts general contractor needed, and therefore it was foreseeable a delay in supplying the parts would harm general contractor].) Conversely, where a transaction is not intended to affect the plaintiff, this fact may show the harm to the plaintiff was not reasonably foreseeable. (See, e.g., Mega RV Corp. v. HWH Corp. (2014) 225 Cal.App.4th 1318 , 1341 [because repair of plaintiff’s mobile home by retailer was not 32 intended to affect manufacturer of component part for mobile home, it was not reasonably foreseeable the component part manufacturer would be sued by plaintiff; therefore, retailer did not owe duty to component part manufacturer]; Ott v. Alfa-Laval Agri, Inc. (1995) 31 Cal.App.4th 1439 , 1455-1456 [where milking system was not intended to affect plaintiff, defect in system manifesting 15 years later was not reasonably foreseeable].) As the Supreme Court observed in Goonewardene, supra, 6 Cal.5th at page 840, where a plaintiff is not entitled to maintain a breach of contract action based on the third party beneficiary doctrine, “it would clearly be anomalous to impose tort liability, with its increased potential damages [citation], upon [the defendant] based upon its alleged failure to perform its obligations under its contract with plaintiff’s employer.” Here, Sabetian was not a third party beneficiary of the Agreement because one the three required elements is missing—that the “motivating purpose of the contracting parties was to provide a benefit to the third party.” (Id. at p. 830.) The foreseeability of harm to refinery workers as a result of the consortium members’ failure to protect refinery workers under the Agreement does not favor Soraya. Although it was foreseeable oil refinery operations could result in asbestos exposure to refinery workers, the role of the consortium members must be viewed in the context of the purpose of the Agreement— to enable Iran to develop its oil resources. To accomplish this goal, the consortium members created IOP and its subsidiaries, IORC and IOEPC, and the Agreement in article 4 vested the power to control day-to-day operations in those companies, not the consortium members. Further, as discussed, article 5 of the Agreement prohibited any entity other than the Operating 33 Companies (IORC and IOEPC) from carrying out the assigned operational functions under the Agreement. The fact the consortium members committed to ensure the Operating Companies performed their obligations under the Agreement does not mean the consortium members had the power to control the day-to-day activities of the refineries. This is unlike the situation in J’Aire, in which the contractor had the ability to control the extent to which the tenant was harmed by the contractor’s conduct under the agreement with the property owner. (J’Aire, supra, 24 Cal.3d at p. 804.) As to the third factor, there is a high degree of certainty that Sabetian suffered injury due to his exposure to asbestos at the Abadan refinery. 20 But the fourth factor, the closeness of the connection between consortium members’ conduct and Sabetian’s injury, is attenuated because IORC and NIOC, not the consortium members, controlled day-to-day refinery operations. Likewise, the fifth factor, the moral blame attached to the consortium members’ conduct, is weak. “‘Negligence in the execution of contractual duties is generally held to be morally blameworthy conduct.’” (Lichtman, supra, 16 Cal.App.5th at p. 925.) But Soraya did not present any evidence of the consortium members’ negligence in the execution of their contractual duties or, as noted, that they had control over the operations that caused the harm. 20 On appeal, defendants do not contend Soraya failed to raise a triable issue of fact regarding whether Sabetian’s mesothelioma was caused by asbestos exposure at the Abadan refinery. For purposes of our analysis under J’Aire, we assume Soraya has raised a triable issue as to causation. 34  The sixth factor, the policy of preventing future harm, similarly does not favor Soraya. Because the consortium members were not in a position to control the day-to-day operations of the Abadan refinery, they were not in the best position to prevent future harm at the refinery. Further, the Agreement acknowledged the consortium members were separate corporate entities from the Operating Companies, including IORC. We recognize the important public policy to require employers to provide a safe and secure workplace, but there is also a public policy recognizing the benefits of allowing companies to limit their business risks through the creation of a separate corporate entity. (Greenspan v. LADT LLC (2010) 191 Cal.App.4th 486 , 512 [“society recognizes the benefits of allowing persons and organizations to limit their business risks through incorporation”]; Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220 , 1249 [same].) Had the Sabetians presented evidence showing the consortium members should have been treated as the alter egos of IOP, which in turn should have been considered the alter ego of IORC, this would have tipped the balance toward Soraya. But the Sabetians abandoned this legal argument in the trial court. Seo v. All-Makes Overhead Doors (2002) 97 Cal.App.4th 1193 , 1197 (Seo), relied on by Soraya, does not support a contrary result. There, a commercial subtenant was injured when he reached his arm through an electronic sliding gate to activate a switch to close the gate. (Id. at p. 1198.) The Court of Appeal concluded the defendant company that had repaired the gate for the property owner owed no duty of care to the subtenant to warn of design defects unrelated to the repairs performed by the defendant. (Id. at pp. 1198-1199.) The Seo court observed, 35 however, that an independent contractor may owe a duty to a third party where it negligently performs a repair, fails to make a requested repair, or assumes the owner’s duty to inspect and maintain the equipment and negligently fails to perform, leading to injury to the third party. (Id. at p. 1206.) Here, Soraya has not presented evidence showing defendants performed repairs, inspections, or maintenance or assumed the responsibility assigned to IORC and NIOC under the Agreement to inspect or maintain the Abadan refinery. 21 On balance the J’Aire factors do not support imposition of liability on the Chevron and Exxon defendants, especially in light of the strength of the first factor—Soraya seeks to impose a duty on the consortium members arising from the Agreement, but the Agreement was never intended to benefit the refinery workers. D. The Trial Court Did Not Abuse Its Discretion in Awarding Discovery Sanctions to the Exxon Defendants 1. Proceedings below On July 2, 2018, the 10th day of Sabetian’s deposition, the attorney for the Exxon defendants, Jon Kasimov, asked Sabetian, “Do you have any information that Exxon[ ]Mobil Corporation 21 Soraya also relies on Harold A. Newman Co. v. Nero (1973) 31 Cal.App.3d 490 , 496 for the proposition “a person who has assumed the contractual duty to perform a service for another cannot escape his contractual obligation to perform the service in a competent manner by delegating performance to another.” But under the Agreement, it was IORC and NIOC that assumed the duty to control refinery operations. Soraya has provided no authority for the proposition a party who guarantees the performance of another assumes a duty to prevent harm to third parties caused by performance of the service. 36 caused you to be exposed to asbestos?” Sabetian’s attorney Benno Ashrafi objected and instructed Sabetian not to answer. Ashrafi explained, “That’s a contention interrogatory. You can propound an interrogatory and we will respond.” Kasimov continued to ask a series of questions concerning the Exxon defendants and their predecessors, to which Ashrafi instructed Sabetian not to answer, including: “Do you have information that [the Exxon defendants] misrepresented anything to you?”; “Do you have any information that [the Exxon defendants] concealed any information from you?”; “Do you have any knowledge that [the Exxon defendants] acted with a conscious disregard for your safety or with intent to harm you?”; “Do you have any information that [the Exxon defendants] operated Abadan?”; “Have you worked at any refinery, oil field, or other facility that you contend was owned or operated by [the Exxon defendants]?”; “Do you know if [the Exxon defendants] made, sold or supplied any product used at any of your job sites?”; “Do you have any information that [the Exxon defendants] caused you to be exposed to asbestos?” 22 Relying on Rifkind v. Superior Court (1994) 22 Cal.App.4th 1255 (Rifkind), Ashrafi asserted the questions should “be propounded as . . . contention interrogator[ies].” At a July 26, 2018 informal discovery conference, the trial court reviewed five of the questions and explained the “questions 22 Kasimov asked some or all of these questions as to Exxon Mobil Corporation, ExxonMobil Oil Corporation, Exxon Corporation, Mobil Oil Corporation, Humble Oil Refining Company, and companies with the names Esso, Enco, Socony, and Standard Oil. Each time, Ashrafi instructed Sabetian not to answer. 37 cannot refer to legal contentions for this witness.” The court continued, “And it’s understood that the questions are to call for his personal knowledge and not for his contentions or information that might be possessed by other witnesses or his attorneys. [¶] With that clarified, I’ve ordered that any objections based on Rifkind be matters for the record that I will rule on prior to trial, if necessary; and that the witness is to go ahead and answer the question[s] to the best of [his] ability.” When Sabetian’s deposition continued on July 31, 2018, Ashrafi placed several documents in front of Sabetian, including a July 12, 2017 order of the Superior Court of Los Angeles, Judge Steven Kleifield, denying the Exxon defendants’ motion for summary judgment in the case Kordestani v. 3M Company (Super. Ct. Los Angeles County, 2017, No. BC519273) (Kordestani order) and three invoices Ashrafi described as “reflecting [Exxon]’s supply of materials to the Abadan [r]efinery.” Kasimov objected, “For you to provide him with information that is outside of the parameters of this case to try to lead him and coach him, I think is highly improper.” Kasimov asked Sabetian, “[D]o you know, based upon your personal knowledge, whether [Exxon Mobil] Corporation caused you to be exposed to asbestos?” Ashrafi again objected based on Rifkind. He explained, “[Sabetian] has given 14 days of testimony about what he has done in the Abadan [r]efinery. We are not going to call him to testify about the details of the contract. We believe the contract makes [Exxon] responsible for the operation of the Abadan [r]efinery, and as such, any exposure at the Abadan [r]efinery would be . . . caused by [Exxon].” Sabetian then answered, “Well, I think the judge’s opinion [in the Kordestani order] is my personal opinion.” However, after further discussion 38 between counsel, Kasimov asked the question again and Sabetian responded, “Yes. Definitely. Look at me.” Kasimov asked, “Do you know whether [Exxon Mobil] Corporation concealed any information from you?” Ashrafi again objected under Rifkind. Sabetian then answered, “No.” But after Ashrafi interjected and told Sabetian, “He is asking if [Exxon] ever concealed any information,” Sabetian responded, “Concealed, of course.” Kasimov inquired, “What information?” Sabetian responded, “Because all of the product, they had asbestos and they never actually declare . . . anything about asbestos and the dangers of asbestos.” Kasimov asked, “Do you have personal knowledge whether [Exxon Mobil] Corporation either acted or failed to act with a conscious disregard for your safety?” Sabetian responded, “Yes.” But when asked “What did they . . . ,” he stated the Kordestani order “shows that [Exxon] had no regard for safety and especially never—they have mention about the danger of asbestos.” Kasimov asked Sabetian if he had any knowledge “[i]ndependent of the [j]udge’s [o]rder,” to which Ashrafi again asserted an objection under Rifkind. When Kasimov asked Sabetian for his answer, Sabetian responded, “[T]hat was my exactly the same what I said before.” Kasimov claimed Ashrafi had “sandbagged” him by waiting until the last day of Sabetian’s deposition, then having Sabetian testify to knowledge “he clearly doesn’t have.” After a vitriolic exchange between counsel and discussions of possible stipulations, Kasimov suspended the deposition without asking all his questions. On August 3, 2018 the Exxon defendants filed a motion for terminating, evidence, issue, and monetary sanctions, arguing Ashrafi improperly coached Sabetian by making inappropriate 39 speaking objections and providing Sabetian with documents after the trial court had ordered Sabetian to testify from personal knowledge. The Exxon defendants filed a declaration by Kasimov, in which he stated that after the July 26, 2018 informal discovery conference he had “spent time re-wording [his] questions” to “make it even clearer that the questions seek Mr. Sabetian’s personal knowledge.” The Exxon defendants requested $12,790 in monetary sanctions. At the August 28, 2018 hearing, the trial court stated, “Reviewing the transcript and knowing the history of this, it’s apparent to me that Mr. Sabetian does not have any personal knowledge about the involvement of Exxon or its subsidiaries at the site.” Addressing Ashrafi, the trial court continued, “I think by providing [Sabetian] the type of documents you were providing him, you were encouraging him to make contentions. And the whole point I think I clarified pretty clearly and actually went on the record to say it, is that we were just looking for his personal knowledge here in this deposition. [¶] Providing him these documents and having him argue from them really did obstruct the deposition. It sought to evade my order.” The court noted Sabetian’s deposition responses on July 31, 2018 were “answer[s] [Sabetian] was trained to give” and “his whole testimony, if he had anything, it’s completely worthless to [the Exxon defendants].” The court asked Ashrafi, “Why are you feeding [Sabetian] what is obviously legal contentions to repeat to [the Exxon defendants], which results in useless testimony, going around in circles, and prolonging the deposition until we get to the point that [Sabetian] has no recollection of ever seeing the word Exxon, which is what we all know to be true?” The court admonished Sabetian’s attorneys, “[T]he whole point of my order, 40 and I couldn’t be clearer, was let him answer the question and we will figure [the Rifkind issue] out later. . . . [¶] . . . If the question is somehow improper under Rifkind . . . it’s going to be ruled out.” On September 20, 2018 the trial court granted in part the Exxon defendants’ motion for sanctions. The court ordered, “Plaintiff is deemed to have no personal knowledge as to the questions he was instructed not to answer during the July 2, 2018 session of his deposition regarding [the Exxon defendants] and their related companies.” The court further ordered monetary sanctions against Sabetian and his attorney in the amount of $2,500. 2. Standard of review and applicable law Code of Civil Procedure section 2023.030 authorizes a trial court to impose a range of penalties against “any party engaging in the misuse of the discovery process,” including monetary and evidence sanctions (id., subds. (a), (c)). (Accord, Los Defensores, Inc. v. Gomez (2014) 223 Cal.App.4th 377 , 390; Kayne v. The Grande Holdings Limited (2011) 198 Cal.App.4th 1470 , 1475.) Code of Civil Procedure section 2023.010 provides that misuses of the discovery process include “[f]ailing to respond or to submit to an authorized method of discovery” (id., subd. (d)), “[m]aking, without substantial justification, an unmeritorious objection to discovery” (id., subd. (e)), “[m]aking an evasive response to discovery” (id., subd. (f)), and “[d]isobeying a court order to provide discovery” (id., subd. (g)). We review the trial court’s imposition of discovery sanctions for an abuse of discretion. (Stephen Slesinger, Inc. v. Walt Disney Co. (2007) 155 Cal.App.4th 736 , 765; accord, Britts v. 41 Superior Court (2006) 145 Cal.App.4th 1112 , 1123 [abuse of discretion standard of review applies “to review of an order imposing discovery sanctions for discovery misuse” unless “the propriety of a discovery order turns on statutory interpretation”].) “We view the entire record in the light most favorable to the court’s ruling, and draw all reasonable inferences in support of it. . . . The trial court’s decision will be reversed only ‘for manifest abuse exceeding the bounds of reason.’” (Slesinger, at p. 765; accord, Los Defensores, Inc. v. Gomez, supra, 223 Cal.App.4th at p. 390 [“‘“The power to impose discovery sanctions is a broad discretion subject to reversal only for arbitrary, capricious, or whimsical action.”’”].) In Rifkind, supra, 22 Cal.App.4th 1255 , the Court of Appeal held it was improper for a party to ask “legal contention questions” at a deposition, which the court defined as “deposition questions that ask a party deponent to state all facts, list all witnesses and identify all documents that support or pertain to a particular contention in that party’s pleadings.” (Id. at p. 1259.) The Rifkind court clarified it was not addressing “questions at a deposition asking the person deposed about the basis for, or information about, a factual conclusion or assertion, as distinguished from the basis for a legal conclusion.” (Ibid.) It reasoned it would be “unfair” to “call upon the deponent to sort out the factual material in the case according to specific legal contentions, and to do this by memory and on the spot.” (Id. at p. 1262.) The Rifkind court explained, “If the deposing party wants to know facts, it can ask for facts; if it wants to know what the adverse party is contending, or how it rationalizes the facts as supporting a contention, it may ask that question in an interrogatory.” (Ibid.) 42  3. The trial court did not abuse its discretion in ordering monetary and evidence sanctions Soraya contends the trial court abused its discretion in ordering monetary and evidence sanctions based on Ashrafi’s conduct in relation to Sabetian’s deposition. She argues Kasimov’s questions were improper under Rifkind, and Sabetian’s review of documents to prepare for the deposition was an “attempt[] to answer the improper deposition questions as if they had been properly propounded as contention interrogatories.” Soraya asserts, “The trial court, upon determining that the deposition questions were improper under Rifkind,[23] should not have permitted Exxon to re-ask the same questions with the limitation that they only need be answered from personal knowledge.” The trial court did not abuse its discretion. At the informal discovery conference, the trial court ordered Sabetian to answer the questions to the best of his ability, and then the court would rule on any Rifkind objections at a later date. Kasimov modified the questions he asked at the July 31, 2018 deposition to comply with the court’s order that “the questions are to call for [Sabetian’s] personal knowledge and not for his contentions or information that might be possessed by other witnesses or his attorneys.” For example, Kasimov asked whether Sabetian had personal knowledge “whether [Exxon Mobil] Corporation caused [him] to be exposed to asbestos.” Had 23 Soraya inaccurately states “the trial court . . . found that Exxon’s questions were improper under Rifkind.” The trial court did not make a finding as to whether the questions were improper. 43 Sabetian worked under a manager who was employed by Exxon Mobil Corporation, Sabetian could have provided that information. Or if Sabetian received training materials prepared by Exxon Mobil Corporation, he could have provided that information. If he had no personal knowledge, Sabetian could have simply said so. He did not. Ashrafi again objected based on Rifkind (which was proper), but then Sabetian answered by stating the court’s opinion in the Kordestani order was his “personal opinion.” As to the question whether he knew if Exxon Mobil Corporation concealed any information from him, Ashrafi again objected under Rifkind, and Sabetian answered, “No.” That was proper. But then Ashrafi interjected, “He is asking if [Exxon] ever concealed any information,” and Sabetian stated, “Concealed, of course.” As to Kasimov’s question whether Sabetian had personal knowledge “whether [Exxon Mobil] Corporation either acted or failed to act with a conscious disregard for [Sabetian’s] safety,” Sabetian failed to state whether he had any personal knowledge, instead responding that the Kordestani order “shows that [Exxon] had no regard for safety and especially never—they have mention about the danger of asbestos.” This caused Kasimov to suspend the deposition without asking his remaining questions. Ashrafi defied the trial court’s order. Instead of allowing Sabetian to testify as to his personal knowledge to the best of his ability, while preserving his objections under Rifkind, Ashrafi provided Sabetian documents to use in response to Kasimov’s questions as though they were contention interrogatories. We recognize the questions asked Sabetian to state whether he had personal knowledge of the actions of the Exxon Mobil Corporation 44 defendants and their predecessors, not IORC or NIOC. But to the extent Sabetian believed this was a disguised contention interrogatory seeking Sabetian’s legal theory, Ashrafi could have preserved his objection under Rifkind but still allowed Sabetian to answer the question by saying he did not have any personal knowledge. Ashrafi could later seek to exclude Sabetian’s response from being used at trial. Ashrafi’s efforts to have Sabetian instead rely on facts and legal conclusions set forth in the Kordestani order, and Sabetian’s refusal to respond whether he had any personal information regarding Exxon Mobil’s involvement, violated the letter and spirit of the court’s order. The court therefore did not abuse its discretion in sanctioning Ashrafi and Sabetian for misuse of the discovery process by “evad[ing]” the trial court’s order and “obstruct[ing]” the deposition. 24 (See Code Civ. Proc., § 2023.010, subds. (d)-(g).) DISPOSITION We affirm the judgment. Respondents are entitled to recover their costs on appeal. 24 Although the court deemed Sabetian not to have had personal knowledge as to the questions asked during the July 2, 2018 deposition (not those asked on July 31), this was not an abuse of discretion because Kasimov was planning on asking all the questions he asked at the July 2, 2018 deposition, modified to seek only Sabetian’s personal knowledge. Because Kasimov did not have an opportunity to ask those questions on July 31, it was appropriate for the court to deem Sabetian to have no personal knowledge to the questions that were asked on July 2. 45  FEUER, J. We concur: PERLUSS, P. J. DILLON, J. * * Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. 46 Filed 11/25/20 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN SORAYA SABETIAN, B297107 Plaintiff and Appellant, (Los Angeles County Super. Ct. No. BC475956) v. ORDER MODIFYING AND EXXON MOBIL CERTIFYING OPINION CORPORATION et al., FOR PUBLICATION Defendants and NO CHANGE IN Respondents. APPELLATE JUDGMENT THE COURT: ∗ The opinion in the above-entitled matter filed on October 28, 2020 is modified as follows: 1. The opinion was not certified for publication in the Official Reports. For good cause it now appears that the opinion should be published in the Official Reports, and it is so ordered. 2. On page 3, after the footnote 3 reference, delete “We affirm,” and in a new paragraph insert the following: Contrary to Soraya’s contentions, neither the Agreement nor the evidence presented by the Sabetians shows the predecessors to the Chevron and Exxon defendants operated or controlled the Abadan refinery. Nor did the Agreement create a special relationship between the predecessor companies and the refinery workers. A duty to a plaintiff may arise from a contract based on public policy considerations, but here the two most significant factors of the six-factor balancing test articulated by the Supreme Court in J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799 (J’Aire) do not support imposition of liability on the Chevron and Exxon defendants. Most significantly, the Agreement was not intended to affect Sabetian and other refinery workers, but rather, to accelerate Iranian oil production and exportation to the global market. In addition, because the predecessor companies had no ability to control day-to-day operations at the Abadan refinery, it was not foreseeable that the companies’ conduct would harm Sabetian and other refinery workers. We affirm. 3. On page 27 replace “J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799 (J’Aire)” with “J’Aire, supra, 24 Cal.3d 799 .” 4. On page 33, in the first full paragraph, insert “of” between “because one” and “the three required elements.” There is no change in the appellate judgment. ∗ PERLUSS, P. J. FEUER, J. DILLON, J.** ** Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. 2

2020-11-30 22:02:49.912134+00

http://courts.delaware.gov/Opinions/Download.aspx?id=313620

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE TRANSDEV ON DEMAND, INC., ) ) Plaintiff/Counterclaim-Defendant, ) ) v. ) ) C.A. No. 2019-0912-SG ) BLACKSTREET INVESTMENT ) HOLDINGS, LLC, ) ) Defendant/Counterclaim-Plaintiff. ) MEMORANDUM OPINION Date Submitted: August 7, 2020 Date Decided: November 30, 2020 John L. Reed, Peter H. Kyle, and Kelly L. Freund, of DLA PIPER LLP (US), Wilmington, Delaware; OF COUNSEL: Laura Sixkiller and Kyle T. Orne, of DLA PIPER LLP (US), Phoenix, Arizona, Attorneys for Plaintiff/Counterclaim- Defendant. Thomas E. Hanson, Jr. and William J. Burton, of BARNES & THORNBURG LLP, Wilmington, Delaware, Attorneys for Defendant/Counterclaim-Plaintiff. GLASSCOCK, Vice Chancellor  The seller of a company promised to provide financial information in a certain form, prior to closing. According to the buyer, it failed. This Memorandum Opinion largely concerns itself with the seller’s argument that the buyer, allegedly contractually prevented from seeking contract damages for breach, has attempted to bootstrap the contractual claim into a claim for fraud. “Bootstrap” is, to me, an interesting metaphor. The actual bootstrap, of course, is a leather loop at the back of a high boot that allows a wearer to bring his strength to bear in pulling the boot over his heel. A third party, assuming sufficient strength of arm and loop, could lift a wearer by these bootstraps; lacking a fulcrum, however, a wearer never can. This observable fact has led to the phrase “he lifted himself by his own bootstraps,” meaning that one has, admirably, by great effort overcome seemingly impossible obstacles without assistance. The impossibility of lifting oneself thus has also given rise to a metaphorical verb in legalese, “to bootstrap,” meaning to make an unsupported attempt to create from one thing or proposition an unlikely or impermissible other. 1 Here, the seller’s allegation is that the buyer has attempted to create, from the breach of a promise to act, a tort, common-law fraud, on the theory that the seller never intended to perform. If true, this is an impermissible bootstrap. 1 Leading to the noun form for an instance of such an action, a “bootstrap.” The term may also refer to an individual creating the conditions by which she extends her own power or ability to act. See Stuart M. Benjamin, Bootstrapping, 75 Law and Contemp. Probs., no. 3, 2012, at 115. 1  The unusual contract at issue involves a sale by the Plaintiff and Counterclaim-Defendant, Transdev on Demand, Inc. (“Transdev”), of its wholly- owned subsidiary, SuperShuttle International, Inc. (“SuperShuttle”), to Defendant and Counterclaim-Plaintiff, Blackstreet Investment Holdings, LLC (“Blackstreet”). The term “sale” is accurate but misleading; SuperShuttle had, apparently, negative value, the sales price totaled $1.00, and Transdev agreed to retain certain liabilities and to fund working capital, initially by providing roughly $18 million to SuperShuttle for that purpose (the “Initial Funding Amount”), with the amount to be “trued up” post-closing. The contract required Transdev to provide financial information pre-closing, and then to make an “Estimated Closing Working Capital Statement,” to which Blackstreet could object. It is the truing-up process that is the issue here; the parties dispute the amount due SuperShuttle from Transdev as working capital, and whether the contract controlling the sale requires that amount to be determined by an accountant or the Court. Transdev, the natural party defendant, brought this action for declaratory judgment. It seeks a declaration that Blackstreet failed to make a timely objection to the Estimated Closing Working Capital Statement, and thus has waived its contractual right to object. It also seeks a declaration that, in any event, Blackstreet’s contractual rights have terminated and that this Court must resolve any remaining legal issues regarding working capital. Blackstreet counterclaimed 1) seeking 2 specific performance of a contractual provision requiring the parties to submit the dispute to an independent accountant; 2) seeking a declaration that Transdev breached the contract in computing working capital; and 3) claiming that Transdev fraudulently induced Blackstreet to purchase SuperShuttle via inaccuracies in its contractually-required financial disclosures. Before me is the Plaintiff’s Motion to Dismiss the counterclaims. For the reasons that follow, that Motion is granted in part and denied in part. I. BACKGROUND 2 A. The Parties Blackstreet, the Defendant and Counterclaim-Plaintiff, is a Delaware limited liability company with its principal place of business in Maryland. 3 Blackstreet is a holding company created to purchase the stock of SuperShuttle. 4 Transdev, the Plaintiff and Counterclaim-Defendant, is a Delaware corporation with its principal place of business in Illinois.5 2 The facts, except where otherwise noted, are drawn from the Defendant’s First Amended Answer to Verified Complaint and Counterclaims, Dkt. No. 26 (the “Answer” and the “Amended Counterclaim” or “Am. Countercl.”), and are presumed true for the purpose of evaluating the Plaintiff’s Motion to Dismiss. 3 Am. Countercl. ¶ 1. 4 Id. 5 Id. ¶ 2. 3  B. Relevant Facts 1. Blackstreet Agrees to Acquire SuperShuttle Prior to its acquisition by Blackstreet, SuperShuttle was a wholly-owned subsidiary of Transdev providing shared-ride and private car transportation to and from various airports in the continental United States and Mexico.6 However, due to a shifting transportation marketplace rife with new competition, SuperShuttle had suffered significant losses. 7 As a result of these losses, Transdev began to explore the possibility of selling SuperShuttle.8 After failing to close a sale with a different buyer, Transdev approached Blackstreet about potentially purchasing SuperShuttle.9 SuperShuttle had lost $14.1 million in 2018, and by June 2019 its trailing twelve month losses were $13.1 million. 10 Accordingly, the parties entered into a stock purchase agreement (the “SPA”) whereby Transdev would finance Blackstreet’s purchase of SuperShuttle. 11 2. Relevant Provisions of the Stock Purchase Agreement Under the SPA, Transdev agreed to deposit an Initial Funding Amount of $17,953,375 into a SuperShuttle bank account at closing. 12 In exchange, Blackstreet 6 See id. ¶¶ 2, 4. 7 Id. ¶ 4. 8 Id. 9 Id. ¶ 5. 10 Id. ¶ 7. 11 Id. ¶ 6. 12 Id. ¶¶ 8, 9. 4 agreed to purchase all of the issued and outstanding shares of SuperShuttle’s common stock for $1.00 in total. 13 Certain “Excluded Assets” and “Excluded Liabilities” were to remain obligations of Transdev post-closing. 14 Transdev also agreed to provide certain unaudited financial statements of SuperShuttle that were “prepared in accordance with GAAP applied on a consistent basis throughout the period involved” and “fairly present[ed] in all material respects the financial condition of SuperShuttle as of the respective dates they were prepared and the results of the operations of SuperShuttle for the periods indicated.” 15 The Initial Funding Amount could be increased or decreased to ensure that SuperShuttle would have sufficient working capital to operate post-closing.16 The parties agreed to a target amount for SuperShuttle’s working capital of negative $5,575,000 (the “Target Working Capital”). 17 Thus, if, at closing, SuperShuttle’s working capital (the “Closing Working Capital”) was less (or more) than the Target Working Capital, Transdev would deposit (or withdraw) the difference into the same account that held the Initial Funding Amount. 18 Section 2.06 of the SPA set forth the process for making these adjustments.19 13 Am. Countercl. ¶ 9. 14 Id. ¶ 9. 15 Id. ¶ 10. 16 Id. ¶¶ 13, 9. 17 Id. ¶ 8. 18 Id. ¶ 8. 19 Id. ¶ 12. 5  Under Section 2.06(b), Transdev was required to provide, at least three business days before the closing date, a “good faith” statement of SuperShuttle’s estimated Closing Working Capital, including certification by Transdev’s President “that the Estimated Closing Working Capital was prepared in accordance with GAAP.” 20 After receiving the Estimated Closing Working Capital Statement, Blackstreet had thirty days to review the statement and then provide any objections (the “Working Capital Review Period”).21 In the event of any objections, the parties were to negotiate in good faith to resolve them. 22 If, after thirty days of negotiations, any amounts remained in dispute, the parties agreed to submit the “Disputed Amounts” “to a mutually-agreed and nationally recognized firm of independent certified public accountants other than [Transdev]’s Accountants or [Blackstreet]’s Accountants” (the “Independent Accountant”) for a binding determination of what, if any, adjustments should be made to the Initial Funding Amount.23 3. Blackstreet Objects to the Closing Working Capital Statement At closing, Transdev provided Blackstreet with an Excel summary estimating that the Initial Funding Amount should be decreased by $7,000—the difference between Transdev’s estimated Closing Working Capital and the Target Working 20 Id. ¶ 14. 21 Id. ¶ 15. 22 Id. ¶ 16. 23 Id. ¶ 17. 6 Capital of $5,575,000. 24 During the ensuing Working Capital Review Period, Blackstreet gained access to SuperShuttle’s full books and records and historical financial information. 25 After examining SuperShuttle’s books and records, Blackstreet came to the conclusion that Transdev’s estimate had materially overstated SuperShuttle’s current assets and had materially understated SuperShuttle’s current liabilities.26 As such, Blackstreet delivered Transdev its own calculation of SuperShuttle’s estimated Closing Working Capital with supporting balance sheets comparing the parties’ calculations. 27 Based on these calculations, Blackstreet asserts that the Initial Funding Amount actually needed to be increased by $7,485,177 to reach the amount required by the SPA. 28 4. The Parties Fail to Resolve Objections Over the next thirty days, the parties worked to resolve the discrepancies in their valuations, but were ultimately unsuccessful.29 After Blackstreet demanded that the dispute be submitted to an Independent Accountant, Transdev initiated this action. 30 24 Id. ¶ 20. 25 Id. ¶ 23. 26 Id. ¶ 24. 27 Id. ¶ 26. 28 Id. ¶ 24. 29 Id. ¶¶ 30–31. 30 Id. ¶¶ 33, 36; see also Verified Compl. for Decl. J., Dkt. No. 1 [hereinafter the “Complaint” or “Compl.”]. 7  C. Procedural History Transdev initiated this action on November 13, 2019, seeking declaratory relief. 31 In its Complaint, Transdev asserts three counts for declaratory judgment against Blackstreet.32 First, Transdev seeks a declaration that the spreadsheet Blackstreet provided on October 9, 2019 (the “October 9 Spreadsheet”) was not a Statement of Objections as defined in the SPA, and therefore, Blackstreet accepted Transdev’s Estimated Closing Working Capital Statement. 33 In the alternative, i.e., if the Court determines that the October 9 Spreadsheet was a Statement of Objections, Transdev requests a declaration that those objections are invalid because they do not survive the Closing under Section 7.01 of the SPA. 34 Lastly, Transdev seeks a declaration that an Independent Accountant may not determine legal issues and disputes or interpretations of the SPA and this Court is the exclusive forum for the parties to resolve their disputes relating to the Closing Working Capital.35 Blackstreet filed its first answer and counterclaim on December 12, 2019.36 Transdev moved to dismiss Count II of that counterclaim, which sounded in breach 31 See generally Compl. 32 See generally id. 33 Id. ¶ 70. 34 E.g., id. ¶ 80. 35 Id. ¶ 93. 36 See Answer to Verified Compl. and Countercl., Dkt. No. 14. 8 of contract.37 Blackstreet responded by moving for judgment on the pleadings,38 but subsequently filed its Amended Answer and Counterclaims, 39 which Transdev has also moved to dismiss. 40 I heard oral argument on Transdev’s Motion to Dismiss the Amended Counterclaims on August 7, 2020, and consider the matter submitted for decision as of that date. II. STANDARD OF REVIEW The Defendants have moved to dismiss this action pursuant to Court of Chancery Rule 12(b)(6).41 The standard applicable to resolution of a motion to dismiss under Rule 12(b)(6) is well-established: (i) all well-pleaded factual allegations are accepted as true; (ii) even vague allegations are well-pleaded if they give the opposing party notice of the claim; (iii) the Court must draw all reasonable inferences in favor of the nonmoving party; and (iv) dismissal is inappropriate unless the plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances susceptible of proof. 42 I need not, however, “accept conclusory allegations unsupported by specific facts, nor do we draw unreasonable inferences in the plaintiff’s favor.”43 37 See Pl.-Countercl.-Def.’s Partial Mot. to Dismiss Def.-Countercl.-Pl.’s Countercls., Dkt. No. 17. 38 See Mot. for J. on the Pleadings and-or Default J., Dkt. No. 18. 39 See generally Answer and Am. Countercl., Dkt. No. 26. 40 See Pl.-Countercl.-Def.’s Mot. to Dismiss Am. Countercls., Dkt. No. 30. 41 Ct. Ch. R. 12(b)(6). 42 Savor, Inc. v. FMR Corp., 812 A.2d 894 , 896–97 (Del. 2002) (footnotes and internal quotation marks omitted). 43 Windsor I, LLC v. CWCapital Asset Mgmt. LLC, 238 A.3d 863 , 871 (Del. 2020) (internal quotation marks omitted). 9 Additionally, “the court may consider documents outside the pleadings when ‘the document is integral to a plaintiff’s claim and incorporated into the complaint.’” 44 III. ANALYSIS In analyzing a contract on a motion to dismiss under Rule 12(b)(6), the Court must interpret ambiguous provisions in the light most favorable to the nonmoving party. 45 The Court “give[s] priority to the intention of the parties . . . by looking to the four corners of the contract to conclude whether the intent of the parties can be determined from its express language. In interpreting contract language, clear and unambiguous terms are interpreted according to their ordinary and usual meaning.”46 A. The Motion to Dismiss is Denied in Part Transdev’s Motion to Dismiss Counts I and II are rather easily resolved. Count I seeks specific performance of what Blackstreet contends is a contractual 44 Id. at 873 (quoting Vanderbilt Income & Growth Assoc., L.L.C. v. Arvida/JMB Managers, Inc., 691 A.2d 609 , 613 (Del. 1996)); see also In re General Motors (Hughes) S’holder Litig., 897 A.2d 162 , 169–70 (Del. 2006) (“Without the ability to consider the document at issue in its entirety, complaints that quoted only selected and misleading portions of such documents could not be dismissed under Rule 12(b)(6) even though they would be doomed to failure.”). Because the SPA is integral to Blackstreet’s claim and incorporated into its counterclaim by reference, I refer to its provisions throughout. See generally Compl., Ex. A, Dkt. No. 1 [hereinafter the SPA]. 45 Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872 , 881 (Del. Ch. 2009). 46 Paul v. Deloitte & Touche, LLP, 974 A.2d 140 , 145 (Del. 2009); see also, e.g., In re Viking Pump, Inc., 148 A.3d 633 , 648 (Del. 2016). 10 right to submit the working capital dispute to an Independent Accountant.47 Transdev counters that this claim is merely a redundant mirror image of its own request for declaratory relief. 48 It is true that, in addition to specific performance, Count I also seeks a mirror-image declaration regarding the meaning of the contractual language at issue. However, specific performance is an equitable remedy requiring a demonstration not only of a contractual right, but also that equity is compelled to act to enforce the right.49 A request for specific performance is therefore not merely redundant of Transdev’s claim. Transdev also avers that the specific performance claim is unripe, because Transdev’s declaratory judgment claim remains outstanding, under the theory that there can be no breach leading to specific performance while the legal issues remain unresolved.50 A specific performance request may be ripe, however, when a duty to perform is outstanding; 51 such is Blackstreet’s allegation here. 47 See Am. Countercl. ¶¶ 46–60. Count I also requests, in the alternative, a declaratory judgment that the SPA requires submitting the Disputed Amounts to an Independent Accountant. See id. 48 See Opening Br. of Pl.-Countercl.-Def. in Support of its Mot. to Dismiss Def.-Countercl. Pl.’s Am. Countercls. 13–15, Dkt. No. 35 [hereinafter Transdev’s Op. Br.]. 49 See, e.g., Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153 , 1158 (Del. 2010); Kuroda v. SPJS Holdings, L.L.C., 971 A.2d at 883 . 50 See Reply Br. of Pl.-Countercl.-Def. in Support of its Mot. to Dismiss Def.-Countercl. Pl.’s Am. Countercls. 24–26, Dkt. No. 41 [hereinafter Transdev’s Reply Br.]. In support of this proposition, Transdev notes that “the Delaware courts will not grant specific performance when the contract has not been breached and therefore the controversy is not ripe.” Transdev’s Reply Br. 25 (citing Mehiel v. Solo Cup Co., 2005 WL 1252348 , at *8 (Del. Ch. May 13, 2005)). 51 See, e.g, Chavin v. H. H. Rosin & Co., 246 A.2d 921 , 922 (Del. 1968) (“The object of specific performance is to enforce a plaintiff’s equitable rights, and to compel a defendant to specifically perform his equitable obligations.”). At this early stage in the proceedings, I must accept 11  The record necessary to invoke equity requires a factual record not appropriate to a pleading-stage motion such as the one before me. Accordingly, Transdev’s motion to dismiss Count I is denied. Count II alleges that Transdev breached the SPA by failing to accept responsibility for Aged Accounts Payable, resulting in what Blackstreet alleges is Transdev’s improperly-computed Estimated Closing Working Capital Statement.52 Transdev points out that contractually, this must be an indemnification claim, not a breach claim. This, argues Transdev, is because the SPA limits recovery for breach to indemnification. Further, Transdev avers that Blackstreet is not entitled to indemnification, because under the facts pled in light of the language in the SPA, indemnification is contractually unavailable; and, alternatively because Blackstreet is not out-of-pocket. 53 Accordingly, per Transdev, Blackstreet has failed to state a claim. It is true that contractual interpretation involves issues of law often well suited to motions to dismiss. 54 The questions here presented involve mixed issues of fact and law regarding a complex stock-purchase agreement. Count II, I note, is pled in Blackstreet’s allegations, and the reasonable inferences therefrom, that Transdev’s failure to refer the Disputed Amounts to an Independent Accountant was a breach of contract. Therefore, Blackstreet’s claim for specific performance cannot be dismissed as unripe. 52 Am. Countercl. ¶¶ 61–64. 53 See, e.g., Transdev’s Op. Br. 19; Transdev’s Reply Br. 21. 54 E.g. Schuss v. Penfield Partners, L.P., 2008 WL 2433842 , at *6 (Del. Ch. June 13, 2008). 12 the alternative. The issue it is directed toward, the computation of working capital and relief for any improprieties therein, is the whole subject of this ongoing litigation; thus, resolution of the Motion to Dismiss Count II is unlikely to avoid appreciable litigation effort. The question is whether I must resolve this alternative request for relief by construing the contract at this pleading stage, regardless of the fact that other allegations in the Complaint and Amended Counterclaim may render the indemnification claim moot. That determination, it seems to me, should await resolution of the many predicate issues raised, which may moot Blackstreet’s damages/indemnification claim in any event.55 That is the efficient time to determine whether any portion of Count II survives. Accordingly, I deny the Motion to Dismiss Count II without prejudice to its renewal (as a motion for judgment on the pleadings or otherwise) should it become appropriate. B. The Motion to Dismiss Count III is Granted Transdev’s Motion to Dismiss Count III, by contrast, must be granted. Count III is a claim, purportedly, for fraud in the inducement. 56 Blackstreet alleges that Transdev represented contractually that “SuperShuttle’s Financial Statements were: 55 For instance, if Transdev is correct that Blackstreet has accepted Transdev’s Estimated Closing Working Capital Statement (or that its objections were invalid), I likely never reach the indemnification question. Alternatively, if Blackstreet is entitled to specific performance or a declaratory judgment, I similarly never reach the indemnification question. 56 Am. Countercl. ¶¶ 65–75. 13 (a) ‘prepared in accordance with GAAP . . .’ and (b) ‘fairly presented . . . the financial condition of SuperShuttle as of the respective dates they were prepared,’” and that these statement were “incorporated into the SPA itself.” 57 I note that Blackstreet itself uses the defined contractual term “Financial Statements” in delimiting the fraudulent conduct. The fraud allegation is that Transdev promised to provide Blackstreet with GAAP-compliant financial statements, that such promise was made to induce Blackstreet to purchase SuperShuttle, and that Transdev failed to keep that promise. But, if true, this states a contract claim. The duty to provide certain financial statements is not a common-law duty; it arises solely by contract. Blackstreet’s allegations are that this contractual duty was breached. It cannot also successfully argue that it was defrauded by Transdev’s failure to satisfy an obligation that arose exclusively from the terms of the SPA. The SPA, 58 and more fundamentally, the common law, limit Blackstreet’s ability to allege breach of the contract’s terms as the basis of a fraud claim. “[C]ouching an alleged failure to comply with the contract at issue as a failure to disclose an intention to take certain actions arguably inconsistent with that contract 57 Def. Countercl.-Pl.’s Answering Br. in Opp’n to Pl. Countercl.-Def.’s Mot. to Dismiss Am. Countercls. 5, Dkt. No. 39 [hereinafter Blackstreet’s Answering Br.]. 58 See SPA §§ 3.28, 7.01, 8.09(a). 14 is ‘exactly the type of bootstrapping this Court will not entertain.’” 59 If the financial statements were not compliant with the promises made in the SPA, Transdev has committed a contractual breach. But, having agreed to be bound by the contract, Blackstreet cannot litigate a tort action as a result of allegations of breach. 60 That is, Blackstreet identifies no duty breached by Transdev, beyond those duties imposed by contract. In such a situation, Blackstreet is limited to its contractual remedies. Blackstreet argues that it has suffered fraud in the inducement; that it would never have entered the SPA if it had known that Transdev would produce non- compliant financial statements that would prevent SuperShuttle from receiving a proper true-up of working capital. But this is the quintessence of a bootstrap from contract to fraud. I note, in that regard, that the promises allegedly breached by Transdev were promises to perform in the future: Blackstreet defines the fraud alleged as Transdev’s promise under the SPA that it “would provide a ‘good faith’ statement of SuperShuttle’s Estimated Closing Working Capital . . . in accordance 59 MicroStrategy Inc. v. Acacia Research Corp., 2010 WL 5550455 , at *17 (Del. Ch. Dec. 30, 2010) (quoting BAE Sys. N. Am. Inc. v. Lockheed Martin Corp., 2004 WL 1739522 , at *8 (Del. Ch. Aug. 3, 2004)); see also Smash Franchise P’rs, LLC v. Kanda Hldgs., Inc., 2020 WL 4692287 , at *16 (Del. Ch. Aug. 13, 2020) (“A bootstrapped fraud claim thus takes the simple fact of nonperformance, adds a dollop of the counterparty’s subjective intent not to perform, and claims fraud.”); Narrowstep, Inc. v. Onstream Media Corp., 2010 WL 5422405 , at *15 (Del. Ch. Dec. 22, 2010) (“[A] plaintiff cannot bootstrap a claim of breach of contract into a claim of fraud merely by alleging that a contracting party never intended to perform its obligations.” (internal quotations omitted)). 60 See, e.g., Narrowstep, Inc., 2010 WL 5422405 , at *15. 15 with GAAP,” which it failed to do. 61 Also, Blackstreet avers that fraud resides in the contractual promise Transdev made “to provide” unaudited financials, before closing, in accordance with GAAP. 62 These obligations, allegedly unperformed, arise solely by contract. Blackstreet relies on Abry Partners V, L.P. v. F&W Acquisition LLC 63 for the proposition that knowingly false contractual representations may breach a duty in tort as well as contract. In that case, however, financial statements were not merely inaccurate or misrepresented; they were alleged to have been manipulated to induce the contract at issue. 64 The buyer alleged that the company used a variety of improper methods to manipulate its reported earnings and overstate its revenues in a series of financial reports.65 Specifically, the company, a book and magazine publisher, engage in such hijinks as “backstarting,” providing new magazine subscribers back issues when they receive their first issue under the subscription; “channel stuffing,” artificially inflating revenue by providing discounts to retailers without accounting for the associated increase in returns of unsold inventory; extending quarterly reporting periods of its subsidiaries to mask losses; shipping 61 Blackstreet’s Answering Br. 31. 62 Blackstreet’s Answering Br. 32. 63 891 A.2d 1032 (Del. Ch. 2006). 64 Id. at 1038–41. 65 Id. 16 subscriptions early to shift revenue from July to June; and reporting revenues in one period while delaying reporting of expenses until the following period.66 Here, the allegations are simply that Transdev maintained and provided its records in a way that did not comply with what it had promised in the SPA. 67 If so, and damage has resulted, this is a mundane contract claim, and not a tort claim. Having determined that the allegations of Count III sound in contract, not fraud, I need not examine Transdev’s forceful argument that Count III otherwise fails to plead the elements of a claim for fraud. IV. CONCLUSION For the forgoing reasons, Transdev’s Motion to Dismiss Blackstreet’s Amended Counterclaims is GRANTED IN PART and DENIED IN PART. The parties should provide an appropriate form of order. 66 Id. 1038–39 67 Blackstreet also notes that Transdev “provided false financial information and commingled assets of its affiliates.” Am. Countercl. ¶ 28. Because Blackstreet alleges no facts to support these conclusions, I need not consider them further. 17

2020-11-30 22:12:44.126818+00

http://www.tsc.state.tn.us/sites/default/files/lindsley.ashley.opn_.pdf

11/30/2020 IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE Assigned on Briefs September 1, 2020 ASHLEY JOELL LINDSLEY v. PHILIP J. LINDSLEY Appeal from the Chancery Court for Williamson County No. 43580 Joseph A. Woodruff, Judge ___________________________________ No. M2019-00767-COA-R3-CV ___________________________________ This is an appeal from a divorce proceeding involving a short-term marriage with minor children. In conjunction with its divorce judgment, the trial court designated the mother as the primary residential parent, allowed her to relocate to Mississippi, and awarded her both transitional alimony and alimony in solido. Father now raises several issues for our review on appeal. While we affirm the trial court’s judgment pertaining to the parties’ parenting plan and its determination about the children’s best interests, we vacate a component of the in solido award given to the mother in a purported attempt to equalize the division of the marital estate. We further vacate the award of transitional alimony and remand the case for that issue to be reconsidered by the trial court. The balance of the judgment is affirmed. The mother’s request for an award of attorney’s fees on appeal is granted. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed in Part, Vacated in Part and Remanded ARNOLD B. GOLDIN, J., delivered the opinion of the court, in which JOHN W. MCCLARTY and W. NEAL MCBRAYER, JJ., joined. Selena L. Flatt, Cookeville, Tennessee and Mary Frances Parker, Charlotte, North Carolina, for the appellant, Philip J. Lindsley. Casey Ashworth, Franklin, Tennessee, for the appellee, Ashley Joell Lindsley. OPINION BACKGROUND AND PROCEDURAL HISTORY Ashley Lindsley (“Mother”) and Philip Lindsley (“Father”) were married in Davidson County, Tennessee in September 2012. They have three minor children. The parties’ oldest child was approximately three years old at the time of their marriage. When the parties originally met, Mother was living in Mississippi where she has family. According to her testimony, she did not initially marry Father when their oldest child was born because she first “wanted to make sure that his partying lifestyle was behind him.” At that time, Father was working as a manager at a store called Auto House. He would later run Titan Motoring LLC (“Titan Motoring”), a business specializing in the electronic customization of cars. Although Titan Motoring was formally organized by Mother as the principal, Mother left the operation of the business up to Father. According to Father, he and Mother agreed that Titan Motoring would be in her name originally, but that she would later transfer her interest to him. This apparently never happened, although Father was eventually designated as Titan Motoring’s registered agent. The business started out as a mobile audio installer, but it eventually grew to occupy an 8,000 square foot state-of-the-art facility performing various automotive customization services, including car audio and video systems upgrades and full frame-off restorations. In the early stages of the marriage, the parties lived off of Mother’s salary as a dental hygienist, and any money made from Titan Motoring was put back into the business. Although Mother became a homemaker in 2013, she went back to work part-time in 2017. Mother testified at the eventual trial of this matter that she wanted Titan Motoring to grow into a company that could “be the breadwinner of the family.” There is no dispute in this litigation that the parties’ interest in Titan Motoring is marital property. According to the record, the marriage was marked by multiple indiscretions on Father’s part, including instances of drug use and adultery. Although Mother filed for divorce in October of 2014, the parties attempted a reconciliation in 2015 after Father emailed Mother and expressed his love for her and acknowledged his mistakes. When Father testified at trial, he confessed that when he had been in a relationship with one of his paramours, he had been on a lot of drugs, including using cocaine, amphetamines, and marijuana. He further acknowledged that he was an addict and testified that at a previous point in his addiction he had used three to four grams of cocaine per night. In the summer of 2017, Mother discovered that Father had fathered a child outside of the marriage. Later, in the fall of the same year, Father chose to leave the marital residence and move into a condominium in downtown Nashville. The parties’ divorce trial occurred over three days in March 2019. The proof at trial covered several issues, including the valuation of Titan Motoring, the parties’ respective financial conditions, Mother’s desire to relocate to Mississippi with the children, and, as alluded to above, Father’s various affairs and drug use. Although many issues were hotly contested between the parties, the trial court was informed of a number of stipulations at the opening of trial, including that Mother was entitled to a divorce on the grounds of adultery and inappropriate marital conduct and that Father would -2- pay Mother’s reasonable attorney’s fees. Throughout the litigation of this case and in discovery, Father was less than forthcoming about certain factual matters. For instance, Mother had not learned about a DUI arrest of Father’s, one that occurred in 2017, until just days before trial. 1 As Mother’s counsel shed light onto Father’s shifting accounts on various topics and initial lack of truthfulness at certain points from discovery, the trial judge actually interjected, stating, “[Mother’s counsel], I appreciate what you’re doing but let me just say, and [Father’s counsel], just so you know, I find that husband has been thoroughly impeached.” In the dental hygienist position, she had at the time of trial, Mother received no benefits and was only paid if a patient was in her chair. By way of example, she claimed that she could work a full day but only get paid for four hours if she only saw four patients. Mother also detailed her unsuccessful efforts to seek other employment, and she attributed her difficulty in locating other employment to online postings directed by one of Father’s paramours, wherein Mother was accused of behavior the trial court would later note “the repetition of which . . . would perpetuate the harm [the paramour’s] perfidy has already inflicted.” Mother testified that she had a full-time position with benefits available in Mississippi through her brother-in-law who was a pediatric dentist. During the course of her testimony, Mother detailed Father’s failures to help her out with the children, and she explained that, whereas she always wanted him to spend more time with the family, that had been a topic of continued disagreement. Mother stated that Father spent “[v]ery little” time with the children when they were living together, and exercised only 99 out of 114 days of his parenting time in 2018. According to Mother, when Father had the children, he routinely brought them home early. Regarding the children’s schooling, Mother stated that Father had gone to a few open houses and parent-teacher conferences in 2018, but he had not been to any prior to that. She further testified that Father does not help the children with their homework or projects. At trial, she submitted evidence where Father had called her a “great Mom” and thanked her for the work she had put into helping one of their children with school. Mother testified that she had promoted Father to the children, including him in prayers and telling the children how much fun they are going to have when they go to spend time with him. She claimed that she helped the children make phone calls with Father but stated that, in contrast to her promotion of Father to the children, he did not return the favor. She further testified that, at times, Father had not let the children call her when they were with him “as a form of punishment.” 1 Although the proof showed that Father had lost his license for a year following this arrest, he had nonetheless continued to drive during this period, a point he acknowledged. -3-  As for the strength of the relationship Father had with the children, Mother stated that it was “okay,” testifying specifically as follows: “There’s not been a deep connection established because he’s been absent for most of them. I mean they have fun with their father when he takes them to Chuckie Cheese and Trampoline Park but it’s very strained on our oldest son’s relationship with him.” Mother testified that she believed Father loved their children, “the best way he knows how to,” but that other things such as “women and socializing and drinking and partying” had been more of a priority for him. Mother testified that Father had been violent towards her in front of the children and described an incident where Father had thrown her “up against the passenger car window with a choke hold position with one hand, his right hand, his left hand on the steering wheel.” Mother claimed that she reached for her phone and indicated that she was going to call 911, but Father grabbed the phone and tossed it out onto the interstate. Mother testified that Father had been arrested following this episode. According to her, Father later admitted that he had been using drugs at the time of this incident, although she had not known it at the time. Father did not dispute this assault, although he did attempt to deny the assertion that he was on drugs at the time notwithstanding previous representations by him to the contrary. In Mississippi, in addition to having a job available, Mother testified that she also had a support system through her family, who would be able to help with childcare and provide other assistance. She also testified that she could get “a lot of home” there for considerably less than she could in Brentwood or Franklin; in fact, she testified that she could obtain “a very nice home in the 200’s, 250’s.” Mother expressed her desire to enroll the children in a private Christian academy if she relocated to Mississippi. When asked if she would be solely responsible for tuition if Husband agreed to allow the children to attend that school, Mother stated as follows: “I have recently discovered that I qualify for financial aid for that and my parents also told me that they would pick up any expenses after that.” She later indicated in her testimony that if she was allowed to relocate and enroll the children in that school that it would not be at the expense of Father. She testified that her cost of childcare in Mississippi would be approximately $300 per month. Although Mother asked for alimony, she testified that her overall needs would be much less if she moved to Mississippi. She sought an award of transitional alimony for a five-year period. Father acknowledged at trial that he believed Mother “needs limited alimony if she moves to Mississippi.” Father proposed that Mother be the primary residential parent, and he agreed that Mother, who in his eyes was a good mother, had been the children’s primary caregiver. He also testified, however, that he had recently been able to spend a lot more time with the children, as opposed to previous years when his business was smaller. He said this was -4- true “especially in 2018.” In that year, he claimed, he had a lot more time to break away from work due to added employees. He stated that he believed he would have more time to spend with the children as time goes on. Concerning the valuation of Titan Motoring, testimony was offered by Tom Price, CPA, Mother’s expert forensic accountant. Mr. Price testified that he found the documents given by Father to be incomplete and that certain income to the business had been underestimated in 2017 due to treatment that had been given to expenses for a professional football suite and tickets. Moreover, Mr. Price testified that his efforts to value the business had been complicated by the fact that the company did not keep its books in accordance with generally accepted accounting principles. Concerning a loan to Titan Motoring with debt in the approximate amount of $116,000, Mr. Price testified that his valuation had originally been based on the understanding that the loan had a zero balance. He acknowledged he had later learned there was still a balance on the loan and stated that the “amount that is owed . . . should be deducted from our value.” His trial testimony was clear that, when taking the balance due on this loan into account, the value of Titan Motoring was $256,476. On April 11, 2019, the trial court entered a thorough “Memorandum and Order,” wherein the court awarded Mother a divorce. In stating that some of the disputed issues in the case hinged on credibility determinations, the court noted that whereas “[Mother] was a credible witness whose testimony was entitled to great weight,” the same was not true for Father. In contrast to Mother, the court noted that Father was “often argumentative and equivocal.” The court held that his “demeanor and emotional affect while testifying were inconsistent with those expected of a person attempting to testify truthfully.” In addition to awarding Mother a divorce, the trial court divided the marital property, awarded Mother transitional alimony in the amount of $2,500 per month for sixty months, awarded Mother $216,800 as alimony in solido, and ruled that Mother’s proposed parenting plan contemplating her relocation to Mississippi should be adopted. The in solido award given to Mother was ordered to be paid in installments, and notably, the record reflects that a sizeable component of the in solido award, namely $75,000, was intended to serve as an equalizing distribution of the marital estate. In its order, the court noted that both parties were 38 years of age. Following the denial of a motion to alter or amend which was subsequently filed by Father, this timely appeal ensued. ISSUES PRESENTED In his appellate brief, Father raises three primary issues for our review. First, he challenges the trial court’s division of the marital estate. Second, he challenges the alimony awarded. Third, he asserts error in the trial court’s decision to allow Mother to relocate to Mississippi with the parties’ children. Mother opposes Father’s contentions as to each of these issues. For her own part, -5- she independently asserts that she should be awarded her reasonable attorney’s fees on appeal. DISCUSSION “The dissolution of a marriage requires the courts to engage in the orderly disentanglement of the parties’ personal and financial affairs.” Anderton v. Anderton, 988 S.W.2d 675 , 679 (Tenn. Ct. App. 1998). Before the financial aspects of a divorce are decided, status issues such as the entitlement to a divorce and custody arrangements must be adjudicated. Id. Here, no issue is raised as to the granting of the divorce. Parenting issues, however, have been presented for our review. We thus focus our attention on those matters first before delving into the financial issues. Parenting Issues Although Father does not dispute that Mother should be the primary residential parent, he does assert that the court erred in allowing her to relocate to Mississippi. Along the same lines, he further claims that the adopted parenting plan is not in the children’s best interests. In his view, it does not properly maximize both parents’ parenting time. Despite the fact that Mother’s relocation to Mississippi is a prominent issue of concern to Father in this case, the parental relocation statute, Tenn. Code. Ann. § 36-6-108, is not itself applicable. In several cases, we have held “that the standards in the Relocation Statute should not be applied when the court is making the initial custody decision or parenting arrangement.” Nasgovitz v. Nasgovitz, No. M2010-02606-COA-R3-CV, 2012 WL 2445076 , at *5 (Tenn. Ct. App. June 27, 2012). The proper manner to address the relocation request and parenting issues is a consideration of the child’s best interests. Id. at *6-7. In his appellate brief, Father complains of the entered parenting plan by asserting that the “trial court abused its discretion because it failed to make findings of fact that the parenting schedule it adopted was in the children’s best interests.” This is simply incorrect. The trial court specifically concluded that Mother’s proposed parenting plan, “prepared in contemplation of relocation to Mississippi,” was “in the best interest of the children,” and prior to that conclusion, the court engaged extensively with the facts of the case and the best interest factors codified at Tennessee Code Annotated section 36-6-106.2 In relevant part, the trial court stated as follows: Child custody determinations in divorce proceedings are to be made 2 When fashioning a parenting plan, trial courts are required to consider the factors in Tennessee Code Annotated section 36-6-106(a)(1)-(15) if the limitations of section 36-6-406 are not dispositive of the child’s residential schedule. Tenn. Code Ann. § 36-6-404 (b). -6- on the basis of the best interest of the child, taking into account all relevant factors including those specified in Tenn. Code Ann. § 36-6-106 (a). The parties agree Wife should be the primary residential parent. The principal disagreement between the parties is whether Wife will be allowed to relocate with the parties’ children from Tennessee to Mississippi. The issue driving Wife’s desire to move back to her hometown of Brandon, Mississippi is the character assassination Wife has suffered at the hands of Husband’s former lover and her allies. Armed with a keyboard and access to the internet- a phenomenon existing in an electronic universe with a shelf-life akin to plutonium-the jilted mother of Husband’s child K, vented the spleen of her rage upon Wife, accusing a wholly innocent person of wrongs the Court will not dignify with repetition. As a result, Wife has encountered great difficulty obtaining full-time employment in her field in Middle Tennessee. She has a full-time job as a dental hygienist waiting for her in Brandon, Mississippi. The cost of living in Brandon is materially less than in Williamson County. Wife grew up in Brandon. Her parents, recently retired, are moving to Brandon from their current residence in Granada [sic], Mississippi. In Brandon, Wife and her children will live in close proximity to Wife’s sister, and other extended family. Wife plans to apply for the children to be enrolled in a private Christian academy in Brandon, from which Wife graduated high school. Wife has been the primary caregiver to the children. During the marriage, Husband has devoted himself to building the business of Titan Motoring, but has been little more than a passing, recreational figure in the children’s lives. To be sure, Husband has done many fun and entertaining things with the boys, especially since the parties separated and he exercised individual residential parenting time. The history of Husband’s behavior around the children includes assaulting Wife in their presence, being absent from the home pursuing extramarital affairs, and using illegal drugs. Husband has even gratuitously used social media and the internet to insult Wife, giving little, if any, thought to the effect of such juvenile behavior on his sons. Since the parties separated, Husband has for the first time, taken a more active role in the children’s lives, but the record of his performance of parental responsibilities has been uneven, at best. On cross examination, Wife’s counsel proved Husband could not name any of the children’s teachers or treating pediatricians. His supervision of homework and preparation for school on nights he exercises residential parenting is best described as inconsistent. On one occasion, Wife became ill during her residential parenting and was unable to transport the children to where they -7-  needed to be. Wife telephoned Husband and asked him to help. Husband replied he was in Chattanooga at a business meeting. In truth, he was in Hawaii with his current paramour. The Court notes that Husband successfully completed the four-hour Parenting Skills Institute Parent Education and Family Stabilization Course on March 17, 2019. Wife’s existing employment schedule, and her anticipated employment schedule after she begins work in Brandon, is more accommodating to her responsibilities as primary residential parent than is Husband’s schedule, which often requires him to work six days per week. Affording Wife substantially greater residential parenting days will promote continuity in the children’s lives and enhance stability in their home environment. .... The Court finds Wife’s proposed parenting plan [contemplating relocation to Mississippi] . . . to be in the best interest of the children. (internal footnotes omitted). Littered throughout the court’s discussion above were various footnotes both to the record and statutory best interest factors. Again, Father is simply incorrect that the children’s best interests were not considered. Moreover, we find no reason to disturb the trial court’s determination that the parenting plan adopted in contemplation of Mother’s relocation to Mississippi was in their best interests. The court appropriately placed emphasis on the fact that although Mother had been the children’s primary caregiver, Father by contrast had much less of a presence in their lives. Moreover, in juxtaposition to life in Tennessee, Mother’s potential rearing of the children in Mississippi not only came with greater employment prospects, it also came with the opportunity for the children to be around Mother’s family and a larger support system. Aside from the fallacious argument by Father that the trial court did not make a best interests determination, he appears to primarily complain that the schedule adopted by the trial court failed to maximize his parenting time and therefore contradicts the policy behind Tennessee Code Annotated section 36-6-106(a). Respectfully, we reject Father’s argument on this issue as well. Although the Tennessee Code no doubt now directs trial judges to “order a custody arrangement that permits both parents to enjoy the maximum participation possible in the life of the child,” Tenn. Code Ann. § 36-6-106 (a), the polestar behind any parenting arrangement remains the best interests of the children impacted. The very statute containing the “maximum participation possible” aspiration make this clear: In a suit for annulment, divorce, separate maintenance, or in any other -8-  proceeding requiring the court to make a custody determination regarding a minor child, the determination shall be made on the basis of the best interest of the child. In taking into account the child’s best interest, the court shall order a custody arrangement that permits both parents to enjoy the maximum participation possible in the life of the child consistent with the factors set out in this subsection (a), the location of the residences of the parents, the child’s need for stability and all other relevant factors. Id.; see also In re Cannon H., No. W2015-01947-COA-R3-JV, 2016 WL 5819218 , at *6 (Tenn. Ct. App. Oct. 5, 2016) (“The plain language of Section 36-6-106(a) directs courts to order custody arrangements that allow each parent to enjoy the maximum possible participation in the child’s life only to the extent that doing so is consistent with the child’s best interests.”). Indeed, “the ‘maximum participation possible’ principle does not alter or diminish the trial court’s broad discretion in fashioning permanent parenting plans in accordance with the best interest of the child.” Flynn v. Stephenson, No. E2019-00095- COA-R3-JV, 2019 WL 4072105 , at *7 (Tenn. Ct. App. Aug. 29, 2019). Having reviewed the record transmitted to us, we discern no abuse of discretion here. Although it is apparent that Father wants more parenting time than that available to him under the entered parenting plan, we must again note that it is the children’s best interests, not a parent’s personal preferences, that control the analysis. Moreover, here it is noteworthy that Father opposes the parenting plan, in part, based on his testimony that he has recently been able to spend more time with the parties’ children, “especially in 2018.” Although Father did eventually take on a more active role in the children’s lives, the trial court also noted that his performance of parental responsibilities had been “uneven, at best.” That observation is not without great significance in our opinion. Having the children remain in Tennessee and/or awarding Father more parenting time would create a theoretical opportunity for more interaction between Father and the children, but the propriety of fashioning a parenting schedule with more time for Father must of course be considered in light of the evidence and the statutory best interest factors. In this regard, although Father emphasizes his greater parental participation in the 2018 year, we observe that he only exercised 99 out of 114 days of his allotted parenting time that year per Mother’s testimony. The trial court was fully aware that it was giving Mother “substantially greater residential parenting days.” Yet, its order reflects that it was convinced that Mother’s “proposed parenting plan order allocating 261 days of residential parenting time to Wife and 104 days to Husband, as well as all other aspects of the proposed plan, [was] in the best interest of the children.” Although Father raises a number of suggestions as to how he believes the parties’ parenting plan might be improved, some of his arguments are not supported by any citation to the record. For instance, whereas he criticizes the allocation of the children’s Thanksgiving break based upon how the children’s school calendar is allegedly structured, no citation reference to the school calendar is actually provided in his brief. Argument -9- must be supported by citation to the record in order to be countenanced by this Court. See Tenn. R. App. P. 27(a)(7) (requiring the argument of the appellant’s brief to contain “appropriate references to the record”). In any event, it is not the province of this Court to tweak minor aspects of a permanent parenting plan. Again, such matters are within the trial court’s broad discretion. See Eldridge v. Eldridge, 42 S.W.3d 82 , 88 (Tenn. 2001) (“It is not the function of appellate courts to tweak a visitation order in the hopes of achieving a more reasonable result than the trial court.”); Maupin v. Maupin, 420 S.W.3d 761 , 770 (Tenn. Ct. App. 2013) (noting that “details of permanent parenting plans are typically left to the discretion of trial courts”). For the foregoing reasons, we affirm the trial court’s entered parenting plan. Division of Marital Estate In addition to challenging the trial court’s ordered parenting schedule, Father takes umbrage at its division of marital property. As to the standards that guide a court’s consideration of this issue, we have noted previously as follows: When dividing a marital estate in a divorce proceeding, the trial court’s goal and duty is to divide the marital property equitably. Owens v. Owens, 241 S.W.3d 478 , 489–90 (Tenn. Ct. App. 2007) (citations omitted). In seeking to achieve an equitable result, the trial court need not adopt a mechanical approach. Id. at 490 (citations omitted). Instead, it should carefully weigh the relevant factors in Tennessee Code Annotated section 36–4–121(c) in light of the parties’ evidence. Id. (citations omitted). Although the fairness of the trial court “is inevitably reflected in its results,” “[a] division of marital property is not rendered inequitable simply because it is not precisely equal[.]” Id. (citations omitted). The trial court has wide latitude in fashioning an equitable division of marital assets, Brown v. Brown, 913 S.W.2d 163 , 168 (Tenn. Ct. App. 1994) (citation omitted), and as a reviewing court, we give great weight to the trial’s decision. Bookout v. Bookout, 954 S.W.2d 730 , 732 (Tenn. Ct. App. 1997) (citations omitted). Our role is simply to determine “whether the trial court applied the correct legal standards, whether the manner in which the trial court weighed the factors in Tenn. Code Ann. § 36 –4–121(c) is consistent with logic and reason, and whether the trial court’s division of the marital property is equitable.” Owens, 241 S.W.3d at 490 (citations omitted). It is well-settled that “[t]rial courts have the authority to apportion marital debts in the same way that they divide marital assets.” Cutsinger v. Cutsinger, 917 S.W.2d 238 , 243 (Tenn. Ct. App. 1995) (citation omitted). In fact, a trial court’s division of a martial estate is not complete until it has allocated both the marital property and the marital debt. Owens, 241 S.W.3d - 10 -  at 490 (citations omitted). Bewick v. Bewick, No. M2015-02009-COA-R3-CV, 2017 WL 568544 , at *4–5 (Tenn. Ct. App. Feb. 13, 2017). Here, the court divided the parties’ assets after considering the evidence in light of the statutory factors at Tennessee Code Annotated section 36-4-121(c). Although other assets were involved in the court’s division, the major marital assets were the marital residence and the interest in Titan Motoring. These assets were awarded to Mother and Father, respectively. Per the trial court’s calculations, the overall distribution resulted in Mother receiving 45% of the marital assets with Father receiving 55%. The court specifically noted that the “division of marital assets favors Husband by $75,000 in asset value” and concluded that its alimony in solido award should include an “equalizing distribution” to address this. The trial court’s order reflects that $75,000 was included in the in solido award to account for Father’s alleged receipt of a larger share of the assets. This equalizing distribution essentially swapped the positions of the parties; indeed, when taking the $75,000 component of the in solido award into account, Mother effectively received approximately 55% of the marital assets as calculated and valued by the trial court, whereas Father effectively received 45%. We would discern no abuse of discretion here in such a division were the trial court’s underlying calculations accurate, and ultimately, having carefully reviewed the record, we do not conclude that there was any error committed with respect to how the marital assets and interests were actually divided. We agree with Father, however, that the trial court’s initial valuation of the marital assets was in error. We further conclude that, when taking a proper valuation of the assets into account, the awarded $75,000 component of the trial court’s in solido award results in an inequitable division of the marital assets. Father’s specific grievance is that his awarded interest in Titan Motoring was significantly overvalued. We agree. The trial court valued that interest at over $370,000, but this was clear error based on the testimony at trial. The trial court appears to have simply overlooked the testimony that was offered as to a certain debt Titan Motoring had in the approximate amount of $116,000. As noted earlier, although Mother’s own expert testified that he originally had valued the business based on an understanding that the subject debt had a zero balance, he acknowledged that he later learned there was a balance on this loan and that the “amount . . . owed . . . should be deducted from [the] value.” Upon specific questioning by the trial judge concerning the value of Titan Motoring when taking this balance into account, Mother’s expert testified, without equivocation, that the value was $256,476. If the correct $256,476 value of the interest in Titan Motoring is properly considered, we calculate that Mother received approximately 53% of the marital assets, Father 47%. Of course, if the court’s $75,000 equalizing distribution is left in place, the - 11 - picture changes even more favorably for Mother, resulting in an effective distribution of marital assets as follows: ≈65% for Mother and ≈35% for Father. As to the estate as a whole, the disparity in the distribution appears even larger once the parties’ personal marital debts are considered. Father received a slightly greater amount of these debts under the court’s distribution. Again, although we take no issue with the overall distribution of the marital estate in general terms of how the parties’ assets and debts were initially allocated, we do conclude that the $75,000 “equalizing” component of the in solido award results in an inequitable distribution for this short-term marriage when considering the factors of Tennessee Code Annotated section 36-4-121(c). As we have noted, the trial court’s basis for making a purported equalizing distribution was, in essence, a product of its inaccurate valuation of the interest in Titan Motoring. Therefore, we vacate the $75,000 component of the in solido award which was intended to serve as an equalizing distribution. Transitional Alimony Award In addition to the $75,000 component of the in solido award which was given to Mother in an attempt by the trial court to equalize the distribution of the marital estate, Father challenges the court’s transitional alimony award on several grounds. As discussed below, we agree with Father that the amount of Mother’s transitional alimony should be modified. “There are no hard and fast rules for spousal support decisions.” Owens v. Owens, 241 S.W.3d 478 , 493 (Tenn. Ct. App. 2007). Indeed, a trial judge has “broad discretion to determine whether spousal support is needed and, if so, its nature, amount, and duration.” Id. Thus, although it is true that alimony awards are by no means immunized from appellate scrutiny, considerable deference is given to the trial courts: [A]ppellate courts are generally disinclined to second-guess a trial court’s spousal support decision unless it is not supported by the evidence or is contrary to the public policies reflected in the applicable statutes. Our role is not to fine tune a trial court’s spousal support award, but rather to determine whether the trial court applied the correct legal standard and reached a decision that is not clearly unreasonable. .... Initial decisions regarding the entitlement to spousal support, as well as the amount and duration of spousal support, hinge on the unique facts of each case and require a careful balancing of all relevant factors, including those identified in [Tennessee Code Annotated section] 36-5-121(i). Among these factors, the two that are considered the most important are the disadvantaged - 12 -  spouse’s need and the obligor spouse’s ability to pay. Of these two factors, the disadvantaged spouse’s need is the threshold consideration. Id. at 493-94 (internal citations omitted). The court’s analysis here reflects that it considered the factors codified at Tennessee Code Annotated section 36-5-121(i), but we agree with Father that it abused its discretion with respect to the amount of the transitional alimony award. We have no concerns about the court’s general conclusion that Mother requires some assistance to aid in her transition to a post-divorce reality, and we find no basis to tweak the duration of the period the court concluded that Mother was entitled to such assistance. In this respect, notwithstanding our ultimate conclusion below that the transitional alimony award must be modified as to its amount, we do regard some of Father’s suggested arguments to be completely disingenuous. In his brief, Father asserts that “wife testified in her deposition that she would not have a need for alimony if she were allowed to move to Mississippi.” Although it is not precisely clear to what end Father references this supposed fact, ostensibly it is offered in support of his position that the duration of transitional alimony should be shortened, because Father did testify at trial that Mother would need some alimony if she moves to Mississippi. Regardless of the exact nature of Father’s reliance on this supposed statement,3 his reference to it in his appellate brief is spurious. Mother never disclaimed a need for alimony in her deposition, a point that was made clear at trial when her deposition was read into the record. Turning to the issue of the amount of the transitional alimony award, we observe that the trial court ruled as follows as it pertained to Mother’s financial needs: Wife testified she anticipates a monthly deficit of expenses against her income if she remains in Tennessee in the amount of $7,395. By relocating to Mississippi, Wife will increase her monthly income and reduce her living expenses. Wife projects her monthly deficit of expenses against income in Mississippi will be $2,364. Wife testified she intends to enroll the children in private school in Brandon, and that she intends to pay for their tuition; however, Wife did not include private school tuition for her children in her projected expenses after moving to Mississippi. Wife will be receiving child support. Nevertheless, taking into account the cost of private school tuition, an increase in Wife’s projected income deficit is reasonably foreseeable. Therefore, the Court finds Wife should be awarded transitional alimony in the monthly amount of $2,500. 3 It also may be referenced to support his contention that the amount of transitional alimony should be lowered. Although the amount of transitional alimony should be modified as discussed herein, it should not be modified on the basis of this supposed statement. - 13 - (internal footnotes omitted). In his brief, Father raises a number of concerns about the trial court’s analysis. The first issue relates to the trial court’s consideration of private school tuition costs for the children. Father contends that such consideration was an abuse of discretion. In relevant part, he argues that “the parties’ children had always attended public school, the children were receiving financial aid, and the wife was not requesting any contribution from the husband.” He further argues that “the record is completely devoid of the private school tuition cost and how much, if any, the wife would be paying each month.” “A court abuses its discretion when it causes an injustice to the party challenging the decision by (1) applying an incorrect legal standard, (2) reaching an illogical or unreasonable decision, or (3) basing its decision on a clearly erroneous assessment of the evidence.” Bounds v. Bounds, 578 S.W.3d 440 , 446–47 (Tenn. Ct. App. 2018). Here, the trial court essentially imputed certain private school expenses to Mother in the absence of any proof that she would incur any. Mother, in fact, testified that she qualified for private school financial aid and stated that her parents had advised her that they would pick up any expenses after that. Mother’s testimony further indicated that she was not requesting any contribution from Father with respect to the cost of private school. The trial court’s decision to increase the calculation of Mother’s alleged needs to account for private school tuition was therefore error. We also agree with Father that the trial court’s determination of Mother’s needs failed to properly account for her receipt of child support. The law is clear that such support should be considered incident to a determination of need for alimony. See Scherzer v. Scherzer, No. M2017-00635-COA-R3-CV, 2018 WL 2371749 , at *16 (Tenn. Ct. App. May 24, 2018) (“[C]hild support income should be considered in conjunction with all of Wife’s financial assets when determining Wife’s need for alimony.”). Mother states on appeal that the trial court’s order mentions her receipt of child support “while discussing alimony.” This is technically true, as the court’s order does reference that she will be receiving child support. Yet, the trial court failed to properly take the receipt of that support into consideration.4 It is apparent that the trial court used Mother’s income and expense statement as the baseline for her demonstrated needs, noting that her projection of “monthly deficit of expenses against income in Mississippi will be $2,364.” While there is certainly no error in the court’s decision to use that figure as a baseline for Mother’s needs, the figure 4 Because the trial court did not show its math as to the amount of private school tuition expenses it was considering, one could arguably construe its broad phrasing to conclude that the court did take proper account of the awarded child support but also considered there to be several thousand dollars of offsetting tuition expenses per month. (“Wife will be receiving child support. Nevertheless, taking into account the cost of private school tuition, an increase in Wife’s projected income deficit is reasonably foreseeable. Therefore, the Court finds Wife should be awarded transitional alimony in the monthly amount of $2,500.”). Even assuming such a calculation was made by the court, we have already noted that the court erred in including the cost of private school tuition in its calculations. - 14 - must be considered in its proper context. At trial, upon questioning from the trial court, Mother’s counsel agreed that her income and expense statement did not take child support into account. Mother was awarded child support of $2,071 per month. When that amount is considered in connection with Mother’s income and expense statement, as is necessary for a full picture of Mother’s financial needs, it is clear that Mother’s needs are significantly lower than calculated by the trial court. As such, we vacate the court’s transitional alimony award and remand the issue for reconsideration. The disadvantaged spouse’s need is, as already noted, the threshold consideration when a court makes a decision pertaining to alimony. Owens, 241 SW.3d at 494 . This factor must be properly considered by the trial court in the exercise of its discretion, without reference to private school expenses but with proper reference to Mother’s receipt of child support. We are mindful of the fact that time does not stand still, and we leave it to the trial court’s discretion as to whether it chooses to reopen the proof on this issue. Appellate Attorney’s Fees In closing, we turn to Mother’s request for appellate attorney’s fees. The decision to award attorney’s fees on appeal is a discretionary decision. Cain-Swope v. Swope, 523 S.W.3d 79 , 101 (Tenn. Ct. App. 2016). In this appeal, Mother successfully defended Father’s efforts to reverse the entered parenting plan. Moreover, as discussed herein, Mother was required to defend against several of Father’s arguments on the issue which were without any basis in the record. We, therefore, find it appropriate to award Mother her reasonable attorney’s fees for this appeal. The amount of Mother’s award should be calculated by the trial court on remand. CONCLUSION For the reasons stated herein, we affirm the trial court’s parenting plan but vacate a component of the court’s in solido award to Mother. Further, the transitional alimony award is vacated, and the issue is remanded for further consideration by the trial court consistent with this Opinion. To foster clarity between the parties, the trial court should also enter an order designating the amount of Father’s structured payments relative to the in solido award in light of our determination that the “equalizing” distribution component of that award should not be included in the total sum previously awarded. The balance of the trial court’s judgment is affirmed. Mother’s request for an award of attorney’s fees on appeal is granted. _________________________________ ARNOLD B. GOLDIN, JUDGE - 15 -

2020-11-30 22:12:51.859467+00

http://www.tsc.state.tn.us/sites/default/files/griffin.nicholas.opn_.pdf

11/30/2020 IN THE COURT OF CRIMINAL APPEALS OF TENNESSEE AT NASHVILLE Assigned on Briefs July 15, 2020 NICHOLAS GRIFFIN v. STATE OF TENNESSEE Appeal from the Criminal Court for Davidson County No. 2013-A-713 Steve R. Dozier, Judge ___________________________________ No. M2019-00971-CCA-R3-PC ___________________________________ Petitioner, Nicholas Griffin, appeals the denial of his post-conviction petition. The post- conviction proceeding attacked his conviction of second degree murder with a Range II sentence of 26 years pursuant to a negotiated plea agreement. Petitioner argues that his guilty plea was not knowingly and voluntarily entered. Petitioner asserts he was denied effective assistance of counsel when his trial counsel failed to adequately prepare for trial and failed to file a motion to suppress the recordings of his jail calls with his mother. Petitioner further argues that trial counsel and his mother pressured him into accepting the guilty plea. Following a review of the briefs of the parties and the record, we affirm the judgment of the post-conviction 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. Kevin Kelly, Nashville, Tennessee, for the appellant, Nicholas Griffin. Herbert H. Slatery III, Attorney General and Reporter; Sophia S. Lee, Senior Assistant Attorney General; Glenn R. Funk, District Attorney General; and J. Wesley King, Assistant District Attorney General, for the appellee, State of Tennessee. OPINION Guilty Plea Submission Hearing The facts of this case as set forth by the State at Petitioner’s guilty plea submission hearing are as follows: [O]n October 26, 2012, the victim in this case, Mr. Henry Willy Moore, worked as a taxi[ ]cab driver for the company Yellow Cab. He was a 69[-] year old gentleman. He - - on that particular morning, in the early morning hours, was dispatched to a call for service. He was driving cab number 61. He received that call from dispatch and he proceeded to the area of 10th Avenue North and Garfield Street here in Davidson County. The telephone number that called - - that made that telephone call for service was 615-600-9287. On Mr. Moore’s arrival, [Petitioner] appeared on the scene of 10th Avenue North and Garfield Street as well as possible other individuals. Those individuals tried to rob Mr. Moore. Mr. Moore hit the gas of the vehicle attempting to drive away and someone fired a single gunshot at Mr. Moore. The gunshot entered Mr. Moore’s right upper extremity passing through his chest and exiting the left side of his body, exiting out of the vehicle. The projectile was not able to be recovered. Based on the gunshot wound that he sustained, Mr. Moore - - Mr. Moore dies as a result of that. The medical examiner indicated that he may have been able to take one or two breaths after the gun shot. He did hit the gas of the vehicle and wrecked at the side of a church approximately half a block to a block away from the shooting. Police responded to the scene quickly and crime scene tape was put up. The scene was processed. A single shell casing, nine millimeter shell casing was recovered at the scene of the shooting. Sometime after the shooting, Detective Mosley, who knew [Petitioner], received a call from [Petitioner]. [Petitioner] advised Mr. Mos[le]y that he had information about who was involved in the shooting that occurred on 10th Avenue North from the telephone number. [Petitioner] had called Mr. Mosley from the same telephone number, the 600-9287 number previously referenced, that had called the taxi to the scene. Detectives attempted to meet with [Petitioner] and gather some more information about the shooting. [Petitioner] did not show up at the locations that detectives tried to meet him and then ceased contact with detectives. On October 31st, 2012, [Petitioner] was arrested. Shortly after he was placed in custody, he made several phone calls to family and friends. In -2-  those calls, he placed himself at the scene of the homicide. Additionally, there was a witness, a Derrick Bailey, who was questioned a couple of weeks after the shooting. Mr. Bailey advised police that [Petitioner] showed [Mr.] Bailey the weapon that was used to shoot Mr. Moore and kill him. And he showed him that - - [Petitioner] showed Mr. Bailey that weapon several hours after the killing. [Mr.] Bailey then helped [Petitioner] find a buyer for the gun. The weapon that [Petitioner] showed Mr. Bailey was a nine millimeter Luger semi-automatic pistol that was a very distinctive looking weapon. A few days after the homicide, [Petitioner] was able to meet with another gentleman named Thomas Dixon who [Petitioner] sold the weapon to. Mr. Dixon kept the weapon for several months before advising detectives that he had the weapon used in the Henry Moore shooting. Police retrieved the weapon and sent that weapon that did match the description they had been given of the weapon, that being a distinctive looking nine[-]millimeter semi-automatic weapon. They sent that weapon to the Tennessee Bureau of Investigation for comparison analysis against the single nine[-]millimeter shell casing recovered from the scene. It was determined after analysis that that casing recovered at the scene of the shooting was fired from the nine[-]millimeter Luger handgun that [Petitioner] showed Mr. Bailey and that [Petitioner] ultimately sold to Mr. Dixon. Post-Conviction Hearing At the post-conviction hearing, Petitioner testified that the first attorney who represented him, who will be referred to as “initial counsel,” discussed the case with him, provided him with a copy of discovery, and explained the nature of the charges, possible punishment, and different theories of guilt for premeditated murder versus felony murder. Initial counsel filed a successful motion to suppress Petitioner’s statement to police. Trial counsel took over Petitioner’s case in February 2015 after the trial date had been set. The trial was later reset for August 2015 in order for trial counsel to prepare. Petitioner testified that trial counsel told him that there was a “good chance” of an acquittal if the case went to trial. However, approximately two weeks prior to the August trial date, the State provided trial counsel with recordings from the jail of phone calls between Petitioner and his mother. Thereafter, trial counsel’s outlook on the case changed. Petitioner testified that initial counsel did not know about the calls so they were not included in his suppression motion. He said that trial counsel “stated in his memo that he wrote that when he got the case, [there] was a lot of evidence that was missing. . . including phone calls - - including ballistics that was missing out of the motion to -3- discover, which I didn’t know about.” Petitioner testified that the jail phone calls were illegally obtained and would not have existed but for his arrest and his statements which were suppressed. Petitioner testified that he requested trial counsel to file a motion to suppress the jail phone calls. However, trial counsel told him that it was too late to file the motion. Petitioner remembered that there was an automated voice at the beginning of the jail calls stating that all jail calls are recorded. However, Petitioner said that he was not thinking clearly about that while talking to his mother from the jail. Petitioner testified that trial counsel advised him of a plea offer for thirty or thirty- five years. Petitioner did not want to accept the offer but said that he would accept a fifteen-year offer. However, he never heard anything else from trial counsel about the offer. Petitioner did not feel that trial counsel was prepared for trial, and they did not discuss what Petitioner’s testimony would be or if he would testify at trial. Petitioner testified that he told trial counsel that he wanted his mother to testify on his behalf, but trial counsel told him that his mother was going to testify for the State. He said that trial counsel also told him that Derrick Bailey was going to testify against him, which Petitioner claimed he later learned was untrue. Petitioner testified that he and trial counsel discussed what the potential outcomes of trial would be, and Petitioner insisted that he still wanted to go to trial. Petitioner testified that closer to the trial date, trial counsel informed him of another plea offer from the State. Trial counsel also told him that the prosecutor would not accept any offer for less than twenty-eight to thirty years. Petitioner said that he then requested to go to trial. Petitioner testified that trial counsel brought his mother with him to discuss the plea offer. He said that trial counsel also told him that he would be convicted if the case went to trial and that they argued about the evidence and the jail phone calls for “an hour to two[.]” Petitioner said that this made him feel pressured to take the offer. He did not feel that trial counsel was prepared for trial, and he felt that trial counsel was “appointed” to him but not representing him. Petitioner testified that trial counsel knew that Petitioner was on medication at the time of the guilty plea submission hearing. He said that initial counsel told him that trial counsel was going to request that Petitioner undergo a mental health evaluation. However, Petitioner never had an evaluation. On cross-examination, Petitioner agreed that he had been released on his “own recognizance” at the time of the homicide in the present case for two aggravated assault charges in another case. He ultimately pled guilty to those charges. Petitioner claimed that he did not fully understand what he was doing when he pled guilty to the offenses. He admitted that he had been charged on several occasions with offenses as a juvenile, and he had been adjudicated delinquent on multiple offenses. -4-  Petitioner agreed that initial counsel explained the nature of the charges that he was facing in the present case and the possible punishment involved with the charges. He agreed that he was charged with first degree felony murder as well as first degree premeditated murder. Petitioner testified that trial counsel also discussed the nature of the charges with him on the day of his guilty plea. He agreed that trial counsel discussed the “pros and cons” of going to trial. They also discussed the evidence and the jail phone calls. Petitioner testified that he received a copy of discovery from initial counsel, and he was aware that the State would call many witnesses, including police officers, to testify as to how the victim died, and there were photographs that would be introduced. Petitioner agreed that he had reviewed the discovery packet, and he knew what the State claimed had occurred. Petitioner testified that he knew approximately one week before he pled guilty that Mr. Bailey, who was listed as the State’s witness, had not been transported from federal custody to testify at trial. He was aware that Mr. Bailey had given a statement shortly after the homicide indicating that Petitioner came to his house the morning after the homicide with a gun. Mr. Bailey had also told the officers that Petitioner admitted to killing the victim, but made it sound like an accident. Mr. Bailey’s statement was included in the discovery packet. Petitioner testified that he was aware from discovery and from the preliminary hearing evidence of a call that was alleged to have been made to the taxi company which resulted in the victim being dispatched to the area where he was shot. The telephone number from that call was written on a piece of paper found inside the victim’s taxi. Petitioner was aware that Detective Mosley, who had previously wanted Petitioner to work as a confidential informant, had said that Petitioner called him from the same telephone number, and Petitioner said that someone else murdered the victim. Detective Mosley was listed as a witness for the State at trial. Petitioner testified that he was arrested on October 31, 2012, and the phone calls to his mother from the jail began on November 2, 2012, and continued through November 6, 2012. He also spoke with his girlfriend, Indonesia Suggs, during some of the calls. Petitioner asserted that he and his mother talked about many things during the calls including what was said during Petitioner’s interrogation. Petitioner admitted that he “confessed his part” in the crimes during the interrogation; however, he denied telling his mother about the shooting. Petitioner testified that trial counsel allowed him to listen to the recordings of one or two of the phone calls between him and his mother. Petitioner testified that he argued with his mother and trial counsel approximately one to two hours about what to do in his case. Petitioner asserted that he ultimately pled guilty because he felt pressured to do so by trial counsel and his mother. He said that his mother sat in the front row of the courtroom during the guilty plea submission hearing. Petitioner agreed that he and trial counsel reviewed the guilty plea petition before Petitioner signed it, but Petitioner claimed that he did not understand the plea because he was so angry at the time and scared for his life. However, he understood that he was -5- pleading guilty to second degree murder with a twenty-six-year sentence at one hundred percent but that he could receive eighty-five percent. Petitioner agreed he was placed under oath at the guilty plea submission hearing, he told the trial judge that he was on a couple of medications, and he answered all of the judge’s questions. He never told the trial judge that he did not want to plead guilty, that he wanted a new attorney, or that he felt pressured to plead guilty. Trial counsel testified that he has been licensed to practice law since October 2009, and approximately fifty to sixty percent of his cases at the time he took over Petitioner’s case involved criminal defense work. Trial counsel spent the first couple of months after he took over Petitioner’s case familiarizing himself with the case file. He met with Petitioner in March, once in July, and a number of times in August. They also spoke by phone many times. Trial counsel testified that he and Petitioner communicated well, and Petitioner understood his charges and the facts of the case. Trial counsel thought he had a good working relationship with Petitioner, and he initially thought that the State’s case against Petitioner was very weak. However, trial counsel’s perception of the case changed after the jail phone calls were discovered. He said that he first became aware that Petitioner was taking “mood disorder medication” when Petitioner mentioned it at the guilty plea submission hearing. Trial counsel testified that he reviewed discovery received from initial counsel and noticed that there were one or two things missing from the file, such as the ballistics report and another interview. Trial counsel said that the State had offered open file discovery so trial counsel met with the prosecutor on August 3, 2015, to review the material. He did not believe that initial counsel had taken advantage of the State’s offer. Trial counsel testified that he “found about 11 disks of various interviews and a few other reports, [and] the ballistics report[.]” Contained in the eleven disks was one labeled “jail calls” and it had a series of phone calls made from November 2 until November 6, 2012, between Petitioner and his mother. He did not specifically remember the calls between Petitioner and his girlfriend. Trial counsel immediately became concerned about the calls. He noted that some of the calls were irrelevant to Petitioner’s case. Trial counsel further testified: [Petitioner] was talking about family, friends[,] life. There were some that referenced specifically conversations in the interview. So talking about, well the detectives said this or that. Things that happened during the interview that my gut feeling was that those could definitely be excluded under the fruit of the poisonous tree argument, I don’t want to say definitely, but I - - * * * -6-  I would have litigated that. I had a very strong argument for that. The third category of calls, and some of them were conversations mixed in with other calls or on totally separate calls were conversations with [Petitioner] and his mother where they were just talking about the - - were talking about the crime shortage. [sic] And they weren’t talking about the interview. They weren’t talking about the context of the interview the detective said this remember when I said that or this. It was just sort of - - his mom said something about, you know sympathy for the family and he would make a statement. So there were three or four things that you said that I thought were particularly bad. He acknowledged. He said that the - - that they had the money wrong. That they were claiming he only got $12. He said that he got a lot more than $12. That he went to a hotel for a few days with his girlfriend. That was really concerning for me. At one point, he said that he felt really bad about what he had done. And at another point he said that they hadn’t - - it was something to the [e]ffect of they hadn’t found the shooter, it was [a] guy named Mud Cat. And there may have been one or two other little things. And I had some notes - - so more specific notes, but those are really the kind of three big things that stood out to me that in my mind were - - and they weren’t even things his mother said. His mother said some other things about you need to take responsibility, you need [to] go and - - if you need to lay down for a little while, you need to do it, think about his family and - - I mean, she was talking about pretty serious stuff, it wasn’t as bad as the interview. But in my mind[,] it was - - it put him at risk for being convicted of possibly felony murder under a criminal responsibility theory. So that - - to immediately - - almost immediately I went and met with [Petitioner], we listened to those jail calls specifically. We started talking about how that changed the strength of our case. Trial counsel testified that he and Petitioner had at least three or four meetings in the jail about the phone calls. He said that Petitioner asked him to file a motion to suppress the calls. He also noted that Petitioner was very frustrated because he found out about the jail phone calls three or four weeks before trial, and Petitioner was frustrated that initial counsel had not found out about the calls earlier. Trial counsel testified that he told Petitioner that there was no legal basis for an independent motion to suppress based on the phone calls because the conversations were between Petitioner and his mother and that there was “no agency relationship” because the police were not involved in the calls. -7- Trial counsel testified that he did not feel that the phone calls would qualify as fruit of the poisonous tree. He further testified: I will say that in hindsight and retrospect and thinking about it today, candidly there may have been an argument if his arrest was only based off of that jail [sic]. Viewing that may be the - - or that police interview that was suppressed, that may have been a fruit of a poisonous tree. So maybe that could have been a mistake. So I will say that. And I didn’t file a motion to suppress based on that. I know that’s not actually what you wanted to hear, but my analysis at the time was that there was other evidence in the case possibly the Derrick Bailey thing, the phone like you are talking about and that his phone calls with his mother after he was in jail were attenuated from the - - his - - his interview. There was no police officer standing over her putting her in the room like they were in - - in the suppressed [sic] interview. And so I thought there was a pretty good chance those were coming in. Trial counsel testified that he filed motions in limine to redact the jail calls and to exclude the portions of the calls that were irrelevant and that made any reference to the suppressed interviews. The motions were filed before Petitioner entered his guilty plea. Trial counsel testified that he and Petitioner had extensive discussions about the jail calls and “what parts of them might come in, what parts of them might not come in. Because I thought there was a distinction.” Trial counsel further testified: “I thought there were enough pieces of them that would come in that were - - could be very problem[atic] and could be used against them. And [Petitioner] saying incriminating things that were not in reference to the interviews that would maybe - - or very likely give him a chance of being convicted.” Trial counsel testified that after he learned of the jail calls, he told Petitioner that the State’s case against him was “still not spectacular [.]” It was trial counsel’s impression that the State never thought that Petitioner was the shooter. Trial counsel testified: “So that gave us a little bit of leverage to try to negotiate something that wasn’t like 40 years and might be a little bit better.” Trial counsel recalled making a plea offer to the State of fifteen years at one hundred percent. He thought that the State’s counter-offer was thirty-five years. Trial counsel testified that Petitioner “wavered a lot between I want to go to trial no matter what, to I will take - - if it’s anything more than 20, I will - - I will - - I’m going to trial to, I will take up to 25 [years].” Trial counsel testified that he was preparing for trial during the entire time of the plea negotiations. He said that he felt comfortable going to trial despite the number of witnesses and the amount of evidence against Petitioner. Trial counsel testified that “the really substantial evidence against him was - - there wasn’t a lot of it and it was all stuff that we were sort of comfortable and familiar with and could be dealt with.” He felt -8- that there was “a lot of risk” for Petitioner, and he expressed his concerns to Petitioner “a lot.” Trial counsel testified that he called Petitioner’s mother after he listened to the jail calls and asked her about them. He again noted that Petitioner’s mother was listed as a State’s witness. Trial counsel testified: But even if the jail calls were kept out and she was brought in to testify about statements he made, that was another concern. I don’t know what - - if she would have, but she - - as soon as I said, hey, they have jail calls. She said, I know exactly what you are talking about. He needs to work out a deal. So she was very concerned about it. She did come when exactly [Petitioner] said. She came to the last - - I think it was our motion day before the trial, so that Thursday before. And she asked to talk to him. I think it was her idea. And I will say - - and this is something I have very mixed feelings about. She did get a little up in his face and maybe that’s putting it lightly. I mean, she put a lot of pressure on him to say, you know, I want to see you again. And I know what those jail calls say. I know what a jury is going to think. Save your life, all of that sort of stuff. And you know, I think there was some pressure there. But [Petitioner] also - - you know his frustration in a lot of ways, my impression was almost directed more at the fact that he wasn’t getting the evidence until very late and that it should have been - - should have gotten it earlier. But it was somehow like hide the ball. And so he was very angry and upset about that. And we were trying to sort of parse out that frustration verses the fact that, you know, look this is something separate and apart from your interview. And ultimately, the 26th - - and I have some notes about this that we came down on, was I think your [prosecutor] and [my] conversation was that you were at 30 and you kind of said to me if you bring me a signed plea petition, we might be able to get it done. And [Petitioner] himself said I’ll do 26 and so we put 26 on paper and he signed it and was okay with it. And I think that’s how the last kind [sic] of few minutes went. And there was - - it was a hot moment. There was a lot of pressure there in the moments leading up to it. But ultimately at the end of the day, my impression was that he - - I think he had heard those jail calls and he knew that risk. He didn’t like it. He was very frustrated by the few -9-  weeks when we knew about the jail calls how that changed. You know, he had maybe - - I don’t know when the Court’s order on the suppression hearing came down, but you know eight, nine months maybe a year when he thought this case was in the bag. And all of the sudden it’s sort of upside down on him. But I think - - I really do think in the last minute that he understood that that was in a lot of ways his best, just because there was such a big risk of going to trial. Trial counsel believed that Petitioner understood the questions asked by the trial court during the guilty plea submission hearing. He also thought that Petitioner entered the guilty plea knowingly and voluntarily. He said: “I think he voluntarily did it and I think he did it after a lot of discussion about the circumstances and what was the best thing to do with his case.” Trial counsel did not recall Petitioner asking him to file a motion to withdraw his guilty plea. On cross-examination, trial counsel reiterated that he thought the remaining evidence against Petitioner was weak and that the State had a relatively weak case against Petitioner outside of the police interrogation and the jail phone calls. When asked what his trial strategy would have been, trial counsel testified that “there was Derrick Bailey who was a listed witness and I don’t have records of him being transported, but it was represent[ed] to me and it was my impression that he was going to be brought in as a witness.” Trial counsel asserted that Mr. Bailey’s statement was harmful to Petitioner’s case; however, Mr. Bailey was not a “very compelling witness himself.” He noted that Mr. Bailey had an extensive criminal record and that “there was [a] lot of fertile ground for cross-examination with him.” Trial counsel testified that there were also grounds to attack the phone call that was made to the cab company from the phone number that Petitioner also used some hours after the murder. Trial counsel did not believe that the phone call itself was enough to convict Petitioner because he thought that the caller was a female. Trial counsel felt that the case against Petitioner, other than the jail calls, was mostly circumstantial. He was comfortable that there was an opportunity for reasonable doubt in Petitioner’s case in terms of the jury deliberations. Trial counsel testified: “But I thought we had - - we had defenses that could be raised. I thought there was.” Trial counsel agreed that the jail phone calls changed his analysis of Petitioner’s case. He felt that any statements made during the calls that pertained to the suppressed interrogation would have been covered by the suppression order entered by the trial court, which was referenced in trial counsel’s motion in limine. Trial counsel did not know if Petitioner’s arrest was based solely on the interrogation. He did not believe that he and Petitioner discussed whether that would have been a ground for a second suppression motion. Trial counsel testified that he and Petitioner discussed the fact that the jail calls were not prompted by law enforcement and that some of the conversations would not - 10 - have been “fruit of the poisonous tree if they weren’t talking about the interview.” Trial counsel testified that he did not extensively research the issue of whether or not the jail calls should have been suppressed. Trial counsel did not recall if he considered asking the trial court for a continuance to research the issue. Trial counsel admitted that it was rare for a defendant’s parent to come into the “booth” with him to speak with a defendant. He said that the conversation that Petitioner’s mother had with him bordered on making trial counsel uncomfortable. Trial counsel testified that his recollection was that “this was a situation where [Petitioner] and his mom were talking about the case a lot.” He said that Petitioner and his mother had a close relationship, and she was an advocate of his accepting a plea offer. When asked if Petitioner’s mother was brought into the booth because Petitioner did not want to accept a plea offer, trial counsel testified: I - - I don’t know that she was in the booth just because he said that he didn’t want to take a plea necessarily. I think that she was just helping to talk him through it generally. I don’t think we were - - at that point, had anything close to numbers that either of us thought were okay. I think the State was on 35, maybe a 30, which wasn’t going to happen. It was just whether or not we were even going to have a negotiation. Trial counsel thought that getting Petitioner’s family’s input would be helpful for his decision-making process. He did not feel that any of the medications that Petitioner was taking at the time prevented Petitioner from understanding what he was doing. Trial counsel noted that Petitioner was probably a range-two offender and that even if he was convicted of second-degree murder rather than first-degree murder at trial, he still faced a sentence of twenty-five to forty years. Analysis Petitioner contends that had trial counsel been prepared for trial and filed a motion to suppress the recordings of his jail calls with his mother he would not have entered a guilty plea and would have proceeded to trial. He further contends that trial counsel and his mother pressured him into entering the guilty plea. To obtain post-conviction relief, a petitioner must prove that his or her conviction or sentence is void or voidable because of the abridgement of a right guaranteed by the United States Constitution or the Tennessee Constitution. T.C.A. § 40-30-103; Howell v. State, 151 S.W.3d 450 , 460 (Tenn. 2004). A petitioner has a right to “reasonably effective” assistance of counsel under both the Sixth Amendment to the United States Constitution and article I, section 9 of the - 11 - Tennessee Constitution. State v. Burns, 6 S.W.3d 453 , 461 (Tenn. 1999). The right to effective assistance of counsel is inherent in these provisions. Strickland v. Washington, 466 U.S. 668 , 685-86); Dellinger, 279 S.W.3d at 293. When a claim of ineffective assistance of counsel is made, the burden is on the petitioner to show (1) that counsel’s performance was deficient and (2) that the deficiency was prejudicial. Strickland, 466 U.S. at 687 ; see Lockhart v. Fretwell, 506 U.S. 364 , 368-72 (1993). Failure to satisfy either prong results in the denial of relief. Strickland, 466 U.S. at 697 . The deficient performance prong of the test is satisfied by showing that “counsel’s acts or omissions were so serious as to fall below an objective standard of reasonableness under prevailing professional norms.” Goad v. State, 938 S.W.2d 363 , 370 (Tenn. 1996) (citing Strickland, 466 U.S. at 688 ; Baxter v. Rose, 523 S.W.2d 930 , 936 (Tenn. 1975)). Furthermore, the reviewing court must indulge a strong presumption that the conduct of counsel falls within the range of reasonable professional assistance, see Strickland, 466 U.S. at 690 , and may not second-guess the tactical and strategic choices made by trial counsel unless those choices were uninformed because of inadequate preparation. See Hellard v. State, 629 S.W.2d 4 , 9 (Tenn. 1982). The prejudice prong of the test is satisfied by showing a reasonable probability, i.e. a “probability sufficient to undermine confidence in the outcome,” that “but for counsel’s unprofessional errors, the result of the proceeding would have been different.” Strickland, 466 U.S. at 694 . In the context of a guilty plea, the petitioner must show a reasonable probability that were it not for the deficiencies in counsel’s representation, he or she would not have pled guilty but would instead have insisted on proceeding to trial. Hill v. Lockhart, 474 U.S. 52 , 59 (1985); House v. State, 44 S.W.3d 508 , 516 (Tenn. 2001). In addition, in determining the voluntariness of a guilty plea, a trial court must advise the defendant of the consequences of a guilty plea and determine whether the defendant understands those consequences to ensure the plea is a “voluntary and intelligent choice among the alternative courses of action open to the defendant.” North Carolina v. Alford, 400 U.S. 25 , 31 (1970); see also Boykin v. Alabama, 395 U.S. 238 , 244 (1969). The trial court must address the defendant personally in open court, inform the defendant of the consequences of the guilty plea, and determine whether the defendant understands those consequences. See State v. Mackey, 553 S.W.2d 337 , 341 (Tenn. 1977), superseded on other grounds by rule as stated in State v. Wilson, 31 S.W.3d 189 , 193 (Tenn. 2000); Tenn. R. Crim. P 11(c). The trial court looks to the following factors in determining whether the defendant’s guilty pleas were knowing and voluntary: the relative intelligence of the [petitioner]; the degree of his familiarity with criminal proceedings; whether he was represented by competent counsel and had the opportunity to confer with counsel about the options available to him; the extent of advice from counsel and the court concerning the charges against him; and the reasons for his decision to - 12 -  plead guilty, including a desire to avoid a greater penalty that might result from a jury trial. Blankenship v. State, 858 S.W.2d 897 , 904 (Tenn. 1993). Our supreme court has stated that: [T]he petitioner for post-conviction relief [ ] has the burden of proving his factual allegations by clear and convincing evidence. Calvert v. State, 342 S.W.3d 477 , 485 (Tenn. 2011) (citing *336 Tenn. Code Ann. § 40-30-110 (f) (2006) and Tenn. Sup. Ct. R. 28 § 8(D)(1)). The factual findings of the post-conviction court are binding on an appellate court unless the evidence in the record preponderates against those findings. Dellinger v. State, 279 S.W.3d 282 , 294 (Tenn. 2009). The post- conviction court’s application of law to its factual findings is reviewed de novo with no presumption of correctness. Calvert, 342 S.W.3d at 485 . A claim of ineffective assistance of counsel presents a mixed question of law and fact that is subject to de novo review with no presumption of correctness. Id.; Dellinger, 279 S.W.3d at 294 ; Pylant v. State, 263 S.W.3d 854 , 867 (Tenn. 2008). Smith v. State, 357 S.W.3d 322 , 335-36 (Tenn. 2011). “Evidence is clear and convincing when there is no serious or substantial doubt about the correctness of the conclusions drawn from the evidence.” Grindstaff v. State, 297 S.W.3d 208 , 216 (Tenn. 2009) (quoting Hicks v. State, 983 S.W.2d 240 , 245 (Tenn. Crim. App. 1998)). In this case, the post-conviction court made extensive findings concerning trial counsel’s failure to file a motion to suppress the jail calls. The post-conviction court pointed out that while trial counsel did not file a motion to suppress the calls, he filed a motion in limine to exclude the portions of the calls during which Petitioner made reference to what he said in the police interrogation that had been suppressed pursuant to an earlier suppression motion filed by initial counsel. The post-conviction court concluded: “Thus, [trial counsel] was not ineffective for failing to deal with that category of jail calls.” The post-conviction court further found: Accordingly, the question before the Court is whether [trial counsel] was ineffective because he failed to file a motion to suppress the jail calls in which Petitioner made independent statements about the incident. After consideration of this issue, the Court finds that [trial counsel’s] failure to take this action does not rise to the level of deficient performance. Both federal and Tennessee courts recognize that the question of deficiency - 13 - revolves around whether the attorney’s actions are outside of a range of competency. By its very nature, this range can be difficult to define. See Baxter v. Rose, 523 S.W.2d 930 , 936 (Tenn. 1975)(discussing variability of “range of competence” standard). To aid in making this determination, although not binding, the Court finds persuasive the guideline used by the [Sixth] Circuit Court of Appeals to evaluate whether an attorney was deficient for failing to file a motion to suppress. According to that test, while a “single, serious error,” such as a “failure to file a plainly meritorious motion to suppress,” can constitute deficient performance, such a failure “does not constitute per se ineffective assistance of counsel.” See Hendrix v. Palmer, 893 F.3d 906 , 922 (6th Cir. 2018). In order for such a failure to rise to the level of deficient performance, “the meritorious nature of the motion must be so plain that ‘no competent attorney would think a motion to suppress would have failed.’” Id. (quoting Premo v. Moore, 562 U.S. 115 , 124 (2011). In light of this standard, the Court finds that [trial counsel’s] failure to file a motion to suppress the independent statements about the incident from the jail calls did not constitute deficient performance. The Court recognizes that [trial counsel] could have filed a motion to suppress all of the Petitioner’s jail calls based on the argument that they were fruit of the poisonous tree, and that motion clearly would not have been frivolous. However, while such a motion could have been filed, the Court is not of the opinion that such a motion would have been so “plainly meritorious” that “no competent attorney would think [that] motion would have failed.” Id. The Court still has questions about whether the Petitioner’s arrest and detention was solely based on his statements from the suppressed interrogation, as is discussed below in the Court’s analysis of the prejudice prong. However, even if the Court were to accept the Petitioner’s belief that he would not have been arrested but for his suppressed statements in the interrogation, the Court is of the opinion that the issue of attenuation would still be subject to reasonable debate. See Utah v. Strieff, 136 S.Ct. 2056 , 2061 (2016) (noting that under the doctrine of attenuation, evidence that is arguably the fruit of the poisonous tree is still “admissible when the connection between unconstitutional police conduct and the evidence is remote or has been interrupted by some intervening circumstances”). Because the Court is of the opinion that the issue of attenuation would be subject to debate even if the jail calls were otherwise fruit of the poisonous tree, the Court cannot find that a motion to suppress those calls was “plainly meritorious” such that [trial counsel’s] failure to file such a motion constituted deficient performance. - 14 - The post-conviction court further found that Petitioner failed to show that he was prejudiced by trial counsel’s failure to file a motion to suppress the jail calls. The post- conviction court concluded: Turning to the matter at hand, even if the Court were to accept the Petitioner’s legal theory that the jail calls should be suppressed as fruit of the poisonous tree under certain circumstances, the Petitioner has still failed to establish that he was prejudiced by [trial counsel’s] failure to file such a motion. This is because the Petitioner has failed to prove by clear and convincing evidence that such a motion would have been granted. The Petitioner’s theory is based on his assumption, which he testified to, that he would have been arrested in the case but for the statements he made in the interview which was subsequently suppressed. In support of that assumption, the Petitioner testified that he thought that was the case because he was not arrested until after the interview. While the Court understands the logic of this inference to some extent, the Court cannot find that this inference establishes the fact in question by clear and convincing evidence. It is common practice for law enforcement officers to question suspects before taking out arrest warrants in order to help a suspect lower their guard and be more willing to speak. Thus, in the absence of additional proof from law enforcement officials involved in securing the arrest warrant, the Court is not of the opinion that the fact the Petitioner was arrested shortly after he made his statement established by clear and convincing evidence that the Petitioner would not have been arrested but for the suppressed interviews. Accordingly, the Court finds that the Petitioner had failed to establish that he was prejudiced by [trial counsel’s] failure to file a motion to suppress the jail calls. Thus, the Petitioner is not entitled to relief on this ground. The record does not preponderate against the post-conviction court’s findings. It is well settled that when a Petitioner in post-conviction proceedings asserts that counsel rendered ineffective assistance of counsel by failing to call certain witnesses to testify, or by failing to interview certain witnesses, these witnesses should be called to testify at the post-conviction hearing; otherwise, Petitioner asks the Court to grant relief based upon mere speculation. Black v. State, 794 S.W.2d 752 , 757 (Tenn. 1990). The same standard applies when a Petitioner argues that trial counsel was constitutionally ineffective by failing to file pretrial motions to suppress evidence. In order to show prejudice, Petitioner must show by clear and convincing evidence that (1) a motion to suppress would have been granted and (2) there was a reasonable probability that the proceedings would have concluded differently if counsel had performed as suggested. Vaughn v. State, 202 S.W.3d 106 , 120 (Tenn.2006) (citing Strickland, 466 U.S. at 687 , 104 S.Ct. at 2064-65 ). In essence, the Petitioner should incorporate a motion to suppress within the - 15 - proof presented at the post-conviction hearing. If trial counsel had filed the motion to suppress evidence that Petitioner claims should have been filed, there is no evidence in the record to justify granting the motion. In Terrance Cecil v. State, No. M2009-00671- CCA-R3-PC, 2011 WL 4012436 , at *8 (Tenn. Crim. App., Sept. 12, 2011), in the context of a warrantless search, a panel of this Court stated: “On issues such as the ones in the case sub judice, it is likely a rare occasion indeed when the testimony of only the Petitioner and the trial counsel could provide proof of the merit of a suppression motion based upon a warrantless search.” Thus, based upon the entire record before this Court, which consists of only testimony by Petitioner and trial counsel, it would require pure speculation to conclude that a motion to suppress the jail calls in Petitioner’s case would have been granted. Petitioner has not proven his allegations of fact concerning this issue by clear and convincing evidence. Petitioner has failed to prove that trial counsel rendered deficient performance or that any deficiency caused him prejudice on this ground. Of further note, we reject the post-conviction court’s reliance upon Hendrix v. Palmer, 893 F.3d 906 , 922 (6th Cir. 2018) to authorize what appears to be a new test for a state court to determine whether failure to file a pretrial motion to suppress evidence rises to the level of deficient performance. We hold the Hendrix test is much too restrictive, requiring a finding that “no competent attorney would think [the] motion to suppress would have been filed.” The better test is the one well established in Tennessee for determining deficient performance. As set forth above, deficient performance is satisfied by showing that “counsel’s acts or omissions were so serious as to fall below an objective standard of reasonableness under prevailing professional norms.” Goad, 938 S.W.2d at 369 , (citing Strickland, 466 U.S. at 688 ; Baxter, 523 S.W.2d at 936 ). Even though the post-conviction court erred by applying the Hendrix test, that does not affect the ultimate result reached by the trial court. The record is void of any proof showing the merit of a motion to suppress the recorded jail calls. In fact in his appellate brief, Petitioner’s post-conviction counsel states: As stated during argument [in the post-conviction court] in support of the petition for post[-]conviction relief, counsel has not been able to find any case law directly on point supporting the proposition that recorded jail calls following an illegally obtained confession are themselves suppressible. Petitioner further asserts that trial counsel should have filed a motion for a continuance to have more time to consider and research the issue of the jail calls. Concerning this issue, the post-conviction court found: [Trial counsel] indicated that he did not file a motion to suppress the portions of the jail calls at issue not because he did not have enough time - 16 -  before trial, but because he did not believe that there was a basis to do so. The Petitioner was incarcerated awaiting trial and never requested [trial counsel] seek to continue the case. [Trial counsel] assessed the possibility of filing a motion to suppress the independent portions of the jail calls but did not do so because he did not believe there was a justification for suppressing the calls. In light of these facts, in the same vein as the Court’s ruling on whether [trial counsel] should have filed a motion to suppress, the Court is not of the opinion that [trial counsel’s] failure to file a motion to continue the trial fell below the range of competency. Further, just as with the Court’s analysis of whether [trial counsel] should have filed a motion to suppress, the Court also finds that the Petitioner has failed to establish that he was prejudiced by [trial counsel’s] decision not to seek a continuance to file such a motion because the Petitioner has not established that he would have been successful on that motion. Thus, the Petitioner is not entitled to relief on this ground. Again, the record does not preponderate against the post-conviction court’s findings concerning this ground for relief. Petitioner has not demonstrated that a motion to continue would have been granted. Additionally, Petitioner has not shown or alleged in his brief how a continuance or additional research would have changed the outcome of Petitioner’s case. As noted above, in Petitioner’s brief, post-conviction counsel admits that he was unable to find “any case law directly on point supporting the proposition that recorded jail calls following an illegally obtained confession are themselves suppressible.” See Owens v. State, 13 S.W.3d 742 , 756 (Tenn. Crim. App. 1999)(“[f]or purposes of proving an ineffective assistance of counsel claim, proof of deficient representation by omission requires more than a speculative showing of a lost potential benefit”). Furthermore, the post-conviction court accredited trial counsel’s testimony that he was prepared for trial. At the post-conviction hearing, trial counsel testified that he was preparing for trial during the entire time of the plea negotiations. He felt comfortable going to trial despite the number of witnesses and the amount of evidence against Petitioner. Therefore, no continuance was needed. Petitioner has failed to prove that trial counsel rendered deficient performance or that any deficiency caused him prejudice on this ground. Finally, Petitioner argues that he was pressured into pleading guilty because trial counsel brought Petitioner’s mother into the booth with him and that she talked with Petitioner for one to two hours. He asserts that the “end result of her presence in the booth with his attorney was that he ‘felt like [he] was pressured to plead guilty.’” Concerning this ground for relief, the post-conviction court concluded: - 17 -  However, the Petitioner’s primary argument is not focused on his understanding of the plea, but on his claim that he did not enter into the plea agreement voluntarily because of pressure from [trial counsel] and his mother. Ultimately, while the Court recognizes that the Petitioner may not have been happy about entering the instant plea and his mother and [trial counsel] may have counseled him that taking the plea would be advantageous, the Court finds that the plea was entered into voluntarily. The Court has considered the testimony regarding the conversations between the Petitioner, his mother, and [trial counsel] on the day the plea was entered. The Court also recognizes that [trial counsel] indicated that those discussions were uncomfortable, given the fact the Petitioner’s mother was very clear about her desire for the Petitioner to reach a plea agreement and not risk exposure to a possible life sentence. However, in spite of that pressure, [trial counsel] also testified that he still believed the Petitioner entered this plea voluntarily. The Court agrees with this assessment. Every individual who enters a plea agreement faces some degree of external pressures, whether it be through family’s needs or desires, advice of counsel, or a desire to avoid exposure to a greater possible sentence. While the Petitioner’s mother was particularly vocal in expressing her opinion about the case, the Court is not persuaded that advice from either the Petitioner’s mother or [trial counsel] resulted in the Petitioner’s will being overborne such that the Petitioner’s plea was not voluntary. The post-conviction court also noted that that the plea colloquy “strongly supports a finding that the Petitioner’s plea was entered into voluntarily.” The court further concluded: “Perhaps most importantly, when asked if he was being forced in any way to enter the plea, the Petitioner stated that he was not.” The record supports the post-conviction court’s findings. Trial counsel testified that Petitioner and his mother had a close relationship, and his mother asked to talk with him. Trial counsel agreed that she pressured Petitioner to accept a guilty plea. However, trial counsel testified that he thought Petitioner entered the plea knowingly and voluntarily. He said: “I think he voluntarily did it and I think he did it after a lot of discussion about the circumstances and what was the best thing to do with his case.” At the guilty plea submission hearing, the trial court asked Petitioner the following question: “Is there anyone forcing you in any way to enter this particular plea?” Petitioner replied: “No.” Petitioner also told the trial court that no one had promised him anything, and he did not have any questions. At the post-conviction hearing, Petitioner admitted that he never told the trial court at the guilty plea submission hearing that he felt pressured to accept the plea. Petitioner has not proven his allegations of fact on this ground by clear and convincing evidence. - 18 -  Petitioner has failed to show that his guilty plea was not knowingly, voluntarily, and intelligently made with the effective assistance of counsel. In our de novo review with no presumption of correctness to the trial court’s ruling, we conclude that Petitioner failed to establish either deficient performance or prejudice if there had been deficient performance by trial counsel. Accordingly, Petitioner is not entitled to post-conviction relief. CONCLUSION Based on the foregoing, we affirm the judgment of the post-conviction court. ____________________________________________ THOMAS T. WOODALL, JUDGE - 19 -

2020-11-30 21:02:19.226736+00

http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/1%20CA-CV%2019-0799%20Aubuchon%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 LISA M. AUBUCHON, et al., Plaintiffs/Appellants, v. MARICOPA COUNTY, Defendant/Appellee. No. 1 CA-CV 19-0799 FILED 11-24-2020 Appeal from the Superior Court in Maricopa County No. CV2011-014754 The Honorable Daniel G. Martin, Judge AFFIRMED COUNSEL Lisa M. Aubuchon, Peter R. Pestalozzi, Tempe Edward Moriarity, Missoula, MT Plaintiffs/Appellants Sacks Tierney P.A., Scottsdale By James W. Armstrong, Jeffrey S. Leonard, Evan F. Hiller Counsel for Defendant/Appellee  AUBUCHON, et al. v. MARICOPA 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 This appeal represents the final phase of litigation arising out of Lisa Aubuchon’s former employment as a deputy county attorney. She was terminated and ultimately disbarred. See In re Aubuchon, 233 Ariz. 62 (2013). Aubuchon and her husband, Peter Pestalozzi, sued multiple parties for damages, including the County. See Aubuchon v. Brock, 1 CA–CV 13– 0451, 2015 WL 2383820 (Ariz. App. May 14, 2015) (mem. decision) (Aubuchon I); Aubuchon v. Maricopa County, 1 CA-CV 17-0301, 2018 WL 2315778 (Ariz. App. May 22, 2018) (mem. decision) (Aubuchon II). ¶2 In the previous appeal, this court remanded for the superior court to address Aubuchon’s and Pestalozzi’s contract claims, and the award of sanctions and attorney fees. See Aubuchon II, 1 CA-CV 17-0301, at *4, ¶¶ 20–23. The superior court did so, entering judgment in favor of the County, including an award of attorney fees, costs, and sanctions. This appeal followed. Because appellants have shown no genuine issues of material fact or abuse of discretion by the superior court, we affirm. FACTUAL AND PROCEDURAL HISTORY ¶3 Aubuchon and Pestalozzi seek to revive their claims for breach of contract and breach of the covenant of good faith and fair dealing against the County. They argue Aubuchon was contractually entitled to unconditional, County-funded representation in her State Bar disciplinary proceedings. In September 2016, the parties filed cross-motions for summary judgment. After full briefing and oral argument, the superior court granted summary judgment for the County. The superior court then awarded attorney fees against Aubuchon and Pestalozzi in the amount of $57,010.00 and costs in the amount of $1,826.80. The superior court also reimposed sanctions against Aubuchon, Pestalozzi, and Moriarity in the amount of $35,486.50, with interest. 2  AUBUCHON, et al. v. MARICOPA Decision of the Court ¶4 Aubuchon, Pestalozzi, and Moriarity timely appealed. This court has jurisdiction pursuant to Article 6, Section 9, of the Arizona Constitution, and A.R.S. § 12-2101.A.1. ANALYSIS I. The superior court correctly granted summary judgment for the County on Aubuchon’s and Pestalozzi’s breach of contract claim. ¶5 Summary judgment is appropriate when “no genuine dispute as to any material fact” exists and “the moving party is entitled to judgment as a matter of law.” Ariz. R. Civ. P. 56(a); see also Orme Sch. v. Reeves, 166 Ariz. 301 , 305 (1990). This court reviews a superior court’s grant of summary judgment de novo, viewing the facts in the light most favorable to the non-movant, and will affirm “for any reason supported by the record, even if not explicitly considered by the superior court.” See KB Home Tucson, Inc. v. Charter Oak Fire Ins. Co., 236 Ariz. 326 , 329, ¶ 14 (App. 2014). ¶6 A breach of contract claim requires the plaintiff to show “the existence of the contract, its breach, and the resulting damages.” See Thomas v. Montelucia Villas, LLC, 232 Ariz. 92 , 96, ¶ 16 (2013) (quotation omitted). In Arizona, an “employment relationship is contractual in nature,” even for at-will employees like Aubuchon. See A.R.S. § 23-1501.A.1. Accordingly, Aubuchon and Pestalozzi have met the first element. They have not presented “evidence that would create a genuine issue of fact” on the remaining two elements of their breach of contract claim. See Aranki v. RKP Invs., Inc., 194 Ariz. 206 , 209, ¶ 12 (App. 1999). A. The County did not breach Aubuchon’s employment contract. ¶7 Aubuchon’s and Pestalozzi’s argument is based on language contained in the County’s policies and procedures manual. But “for an enforceable contract to exist there must be an offer, an acceptance, consideration, and sufficient specification of terms so that the obligations involved can be ascertained.” Savoca Masonry Co., Inc. v. Homes & Son Const. Co., Inc., 112 Ariz. 392 , 394 (1975). Aubuchon did not receive the manual until after she accepted her position with the County. Accordingly—as a matter of law—nothing in the County manual could be a term of Aubuchon’s initial employment contract. See id. ¶8 Aubuchon and Pestalozzi correctly note employment contracts can be modified. Relying heavily on Leikvold v. Valley View Community Hospital, they argue the manual and various statements by the 3  AUBUCHON, et al. v. MARICOPA Decision of the Court County about providing Aubuchon with representation constitute a modification of her employment contract. See 141 Ariz. 544 , 547–48 (1984). ¶9 To begin, modification of a contract requires “(1) an offer to modify the contract, (2) assent to or acceptance of that offer, and (3) consideration.” Demasse v. ITT Corp., 194 Ariz. 500 , 506, ¶ 18 (1999) (citation omitted). True, the Leikvold court held policy manuals can modify employment contracts, and whether a specific policy manual “becomes part of the particular employment contract is a question of fact.” See 141 Ariz. at 548 . But the supreme court did not stop there, going on to hold: Where the terms of an agreement are clear and unambiguous, the construction of the contract is a question of law for the court. However, if the court determines that the terms of the contract can be reasonably construed in more than one manner, the language is ambiguous and extrinsic evidence may be used to ascertain the real meaning of the terms. Only after the contract is so construed can the jury then determine whether it was breached. Id. (emphasis added) (citations omitted); see also Demasse, 194 Ariz. at 505, ¶ 15 (a term within an employee manual “is contractual only if it discloses a promissory intent or is one that the employee could reasonably conclude constituted a commitment by the employer”) (emphasis added) (quotation and alteration omitted). ¶10 The policy manual receipt Aubuchon signed says “nothing in this manual in any way creates an express or implied contract of employment” and “this manual only summarizes major personnel and office policies which are subject to change without notice.” (Emphasis added). This language is unambiguous, “clearly and conspicuously tell[ing] [Aubuchon] that the manual is not part of [her] employment contract.” See Leikvold, 141 Ariz. at 548 ; see also Demasse, 194 Ariz. at 505, ¶ 15 (mere descriptions “of the employer’s present policies [are] neither a promise nor a statement that could reasonably be relied upon as a commitment”). ¶11 Further, “legal consideration, like every other part of a contract, must be the result of agreement. The parties must understand and be influenced to the particular action by something of value that is recognized by all parties as the moving cause.” See id. at 507, ¶ 20 (quotation and alternations omitted). Even if we assume the County’s manual and subsequent representations were valid offers to modify Aubuchon’s contract, Aubuchon and Pestalozzi have shown no evidence of the necessary consideration. 4  AUBUCHON, et al. v. MARICOPA Decision of the Court ¶12 In her briefing before this court, Aubuchon claims she “changed jobs numerous times” with the County. But Aubuchon’s job title—deputy county attorney—remained constant throughout her employment. Though her specific responsibilities may have changed during her employment, Aubuchon had a preexisting duty, as a County employee, to perform those tasks assigned by her supervisors. Under Arizona law, a contract lacks “consideration if the promisee is under a preexisting duty to counter-perform.” Travelers Ins. Co. v. Breese, 138 Ariz. 508 , 511 (App. 1983). ¶13 In short: “Separate consideration, beyond continued employment, is necessary to effect a modification.” Demasse, 194 Ariz. at 507, ¶ 21 (emphasis added). Accordingly—as a matter of law—the County had no contractual obligation to provide Aubuchon representation for her disciplinary proceedings. As a result, no reasonable jury could have found the County breached Aubuchon’s employment contract. B. Aubuchon and Pestalozzi presented no evidence of compensable damages. ¶14 Aubuchon and Pestalozzi assert the County’s failure to provide representation caused the following damages: lost earning capacity; reputational damage; and attorney fees for Moriarity’s representation. ¶15 To survive summary judgment, the non-movant “bears the burden of producing sufficient evidence that an issue of fact does exist.” Doe v. Roe, 191 Ariz. 313 , 323, ¶ 33 (1998). This burden requires Aubuchon and Pestalozzi to go beyond mere reliance on their pleadings. See Nat’l Bank of Ariz. v. Thruston, 218 Ariz. 112 , 119, ¶ 26 (App. 2008). They “must call the court’s attention to evidence overlooked or ignored by the moving party or must explain why the motion should otherwise be denied.” Id. Aubuchon and Pestalozzi have not met this burden. ¶16 Contrary to Aubuchon’s and Pestalozzi’s arguments, Arizona does not permit recovery for lost earning capacity in an action for breach of an employment contract. See Lindsey v. Univ. of Ariz., 157 Ariz. 48 , 54 (App. 1987). But see Felder v. Physiotherapy Assocs., 215 Ariz. 154 , 163–64, ¶ 44 (App. 2007) (allowing recovery of lost wages in personal injury cases). Aubuchon and Pestalozzi attempt to clear this hurdle by asserting they are “not requesting wages from her lost position at the County,” but rather “the damages that flowed from the bar matter and loss of her license.” But they present no evidence showing the disciplinary proceedings would have 5  AUBUCHON, et al. v. MARICOPA Decision of the Court turned out differently if the County continuously funded her defense. And in any event, it constitutes a claim for loss of earning capacity relating to an alleged breach of contract, nothing more. ¶17 Arizona also prohibits recovery for reputational damage in employment contract cases “because the computation of damages is too speculative.” Lindsey, 157 Ariz. at 54 ; see also Rancho Pescado, Inc. v. Nw. Mut. Life Ins. Co., 140 Ariz. 174 , 186 (App. 1984) (“It is well settled that conjecture or speculation cannot provide the basis for an award of damages.”). “In effect, our courts have decided that in breach of employment contract cases it is reasonable to require almost complete certainty as reflected in the actual terms of the contract and the expectations of the parties to the contract.” Felder, 215 Ariz. at 164, ¶ 45. Accordingly, Aubuchon’s and Pestalozzi’s first two damage claims fail as a matter of law. ¶18 Their final damage claim is negated by the record. During her deposition, Aubuchon said Moriarity undertook her representation pro bono. Similarly, Moriarity’s deposition makes clear he neither collected fees from, nor submitted a bill to, Aubuchon. True, an attorney who represents the successful party in a contract action may be awarded fees. See A.R.S. § 12-341.01. But the ultimate award is paid by the opposing party—not the attorney’s client. Accordingly, a potential post-litigation award of fees to a pro bono attorney is not a “damage” suffered by the client. See, e.g., City Ctr. Exec. Plaza, LLC v. Jantzen, 237 Ariz. 37 , 41, ¶ 13 (App. 2015) (“courts generally do not construe ‘damages’ to include attorneys’ fees”). ¶19 In summary, Aubuchon and Pestalozzi presented no “evidence that would create a genuine issue of fact” on two essential elements—breach and damages—of their contract claim. See Aranki, 194 Ariz. at 209, ¶ 12 . The superior court, therefore, correctly granted summary judgment for the County on this claim. See id. II. The superior court correctly granted summary judgment for the County on Aubuchon’s and Pestalozzi’s good faith and fair dealing claim. ¶20 “Arizona law implies a covenant of good faith and fair dealing in every contract.” Keg Rests. Ariz., Inc. v. Jones, 240 Ariz. 64 , 77, ¶ 45 (App. 2016). A party breaches this covenant by acting in a way inconsistent with, or adverse to, the other “party’s reasonably expected benefits of the bargain.” See Bike Fashion Corp. v. Kramer, 202 Ariz. 420 , 424, ¶ 14 (App. 2002) (emphasis added). In the context of an employment contract, the remedy for a breach of the implied covenant of good faith and fair dealing 6  AUBUCHON, et al. v. MARICOPA Decision of the Court is limited to contractual damages. See Nelson v. Phx. Resort Corp., 181 Ariz. 188 , 198 (App. 1994). ¶21 As discussed above, Aubuchon’s and Pestalozzi’s contention the County’s policy manual and subsequent representations modified Aubuchon’s employment contract fails as a matter of law. Further, Aubuchon herself described her employment contract as “kind of a fluid thing,” and was unable to identify specific terms that apply in her contract. But “an enforceable contract [requires] sufficient specification of terms so that the obligations involved can be ascertained.” See Savoca Masonry, 112 Ariz. at 394 . In short, Aubuchon and Pestalozzi failed to show County- funded representation in her disciplinary proceedings was a “reasonably expected benefit[]” of her employment. See Bike Fashion Corp., 202 Ariz. at 424, ¶ 14 (emphasis added). ¶22 In addition, as described above, Aubuchon and Pestalozzi provided no evidence of contractual damages. Without evidence of compensable contract damages, Aubuchon’s and Pestalozzi’s claim for breach of the covenant of good faith and fair dealing related to her employment contract fails as a matter of law. See Nelson, 181 Ariz. at 198 . ¶23 Accordingly, the superior court correctly granted summary judgment for the County on this claim. See Aranki, 194 Ariz. at 209, ¶ 12 . III. The superior court did not abuse its discretion by awarding the County attorney fees and sanctions. ¶24 This court reviews a superior court’s award of attorney fees and sanctions for an abuse of discretion. See ABCDW LLC v. Banning, 241 Ariz. 427 , 440, ¶ 60 (App. 2016); Cal X-Tra v. W.V.S.V. Holdings, L.L.C., 229 Ariz. 377 , 410, ¶ 113 (App. 2012). A superior court abuses its discretion when its reasoning is legally incorrect, clearly untenable, or otherwise constitutes a denial of justice. See State v. Penney, 229 Ariz. 32 , 34, ¶ 8 (App. 2012). ¶25 Aubuchon and Pestalozzi argue the award of attorney fees constitutes an abuse of discretion because Aubuchon’s contract did not include a specific term obligating her to pay the County’s litigation costs. Arizona law, however, gives courts the authority to award fees to the successful party “[i]n any contested action arising out of contract.” A.R.S. § 12-341.01.A (emphasis added). Because Aubuchon’s and Pestalozzi’s claims are based on Aubuchon’s employment contract, subsection 12- 341.01.A applies. 7  AUBUCHON, et al. v. MARICOPA Decision of the Court ¶26 Aubuchon and Pestalozzi next argue the superior court failed to consider the factors outlined in Associated Indemnity Corporation v. Warner. See 143 Ariz. 567 , 570 (1985). The record contradicts this argument. The superior court’s first post-appeal award of attorney fees explicitly analyzed each of the Warner factors, ultimately awarding the County less than half the fees it requested. Similarly, the superior court’s final fee award is nearly $30,000.00 less than the County requested. Because the County is the successful party, the record establishes the superior court did not abuse its discretion in awarding attorney fees against Aubuchon and Pestalozzi. See Fulton Homes Corp. v. BBP Concrete, 214 Ariz. 566 , 569, ¶ 9 (App. 2007) (“We will affirm an award with a reasonable basis even if the trial court gives no reasons for its decision regarding whether to award fees.”). ¶27 Turning to the sanctions, the issue has been before this court before. Previously, this court found “the superior court acted well within its discretion when it determined that [Aubuchon, Pestalozzi, and Moriarity] had engaged in sanctionable conduct,” but consideration of the amount of sanctions was deferred “until the case is resolved on remand.” The reasoning supporting the sanctions has not changed from that outlined in Aubuchon [I]. Aubuchon II, 1 CA-CV 17-0301, at *4, ¶ 21 (quoting Aubuchon I, 1 CA–CV 13– 0451, at *13, ¶ 48). ¶28 Contrary to appellants’ arguments here, this court never found “the breach of contract and good faith and fair dealing covenants were valid claims.” See Aubuchon II, 1 CA-CV 17-0301, at *4, ¶ 20 (“We express no opinion as to the underlying merits of Aubuchon’s contract case.”). And neither the amount of sanctions nor the underlying justification has changed from Aubuchon I. The superior court now has resolved the case on remand, placing it in the posture referenced in Aubuchon II. The time was right for the superior court to consider the amount of sanctions. Because the sanctions “are supported by reasonable evidence,” we affirm the award. See Roberts v. City of Phoenix, 225 Ariz. 112 , 119, ¶ 24 (App. 2010). ATTORNEY FEES ON APPEAL ¶29 The County requests attorney fees on appeal. As the County is the prevailing party in a “contested action arising out of a contract,” we 8  AUBUCHON, et al. v. MARICOPA Decision of the Court exercise our discretion and award it reasonable attorney fees and taxable costs on appeal upon compliance with ARCAP 21. See A.R.S. 12-341.01.A. CONCLUSION ¶30 For the above reasons, we affirm the superior court’s judgment in all respects. AMY M. WOOD • Clerk of the Court FILED: AA 9

2020-11-30 22:12:54.912081+00

http://www.tsc.state.tn.us/sites/default/files/abdurrahman.abu-ali.v.st_.oftn_.opn_.pdf

11/30/2020 IN THE COURT OF CRIMINAL APPEALS OF TENNESSEE AT NASHVILLE June 9, 2020 Session ABU-ALI ABDUR’RAHMAN v. STATE OF TENNESSEE Appeal from the Criminal Court for Davidson County No. 87-W-417 Monte Watkins, Judge ___________________________________ No. M2019-01708-CCA-R3-PD ___________________________________ This is a State appeal, filed by the State Attorney General and Reporter, from an Agreed Order (“AO”) entered between Petitioner, Abu-Ali Abdur’Rahman, and the District Attorney General for Davidson County. The AO amended Petitioner’s capital sentence to life imprisonment. Petitioner filed a motion to reopen his post-conviction proceedings based upon the ruling of the United States Supreme Court in Foster v. Chatman, 578 U.S. ___, 136 S. Ct. 1737 (2016). The post-conviction court granted the motion and set the matter for a hearing. At the hearing, the parties presented to the court an AO stating that Petitioner’s sentence would be amended in exchange for his waiving and dismissing all post-conviction claims. The post-conviction court accepted the AO and subsequently entered an amended judgment of conviction. The State appealed, arguing that the post- conviction court lacked jurisdiction to accept the AO and amend Petitioner’s sentence. Petitioner responds that this Court lacks jurisdiction to hear this appeal because the State consented to the AO in the post-conviction court, thereby foreclosing any right to appeal. We have thoroughly considered the briefs and arguments of both parties as well as the amici curiae. We conclude that the State has a right to appeal to challenge the jurisdiction of the post-conviction court. We also conclude that the post-conviction court lacked jurisdiction to accept the AO and to amend Petitioner’s final judgment of conviction because it did not comply with the statutory requirements for granting relief under the Post-Conviction Procedure Act. Therefore, we vacate both the AO and the amended judgment of conviction and remand this case to the post-conviction court for further proceedings consistent with this opinion. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Criminal Court Vacated and Remanded TIMOTHY L. EASTER, J., delivered the opinion of the court, in which ROBERT L. HOLLOWAY, JR., J., joined. THOMAS T. WOODALL, J., filed a separate opinion concurring in part and dissenting in part. Herbert H. Slatery III, Attorney General and Reporter; Andrée Sophia Blumstein, Solicitor General; Leslie E. Price, Senior Deputy Attorney General; Zachary T. Hinkle, Deputy Attorney General; Glenn R. Funk, District Attorney General, for the appellant, State of Tennessee. David R. Esquivel, Michael C. Tackeff, Kelley J. Henry, Katherine M. Dix, and Bradley A. MacLean, Nashville, Tennessee, for the appellee, Abu-Ali Abdur’Rahman. Lucille A. Jewel and Stephen Ross Johnson, Knoxville, Tennessee, for the Amicus Curiae, the National Association of Criminal Defense Lawyers. Donald Capparella and Tyler Chance Yarbro, Nashville, Tennessee; and Lawrence J. Fox and Susan Martyn, New Haven, Connecticut, for the Amicus Curiae, the Ethics Bureau at Yale. L. Webb Campbell II, William L. Harbison, Eric G. Osborne, and Amy R. Mohan, Nashville, Tennessee, for the Amicus Curiae, former Tennessee state and federal prosecutors Ed Yarbrough, Bill Farmer, Hal Hardin, Charles Fels, and Tom Dillard. Jonathan Harwell, Knoxville, Tennessee; Shane Ramsey and Woods Drinkwater, Nashville, Tennessee, for the Amicus Curiae, the Tennessee Association of Criminal Defense Lawyers. Gregory D. Smith, J. David Wicker, and Alexandra T. MacKay, Nashville, Tennessee, for the Amici Curiae, the Tennessee Conference of the NAACP and the Napier-Looby Bar Association. OPINION Factual Background and Procedural History Well over 33 years ago, Petitioner, Abu-Ali Abdur’Rahman (formerly known as James Lee Jones, Jr.), was convicted of first-degree premeditated murder, assault with intent to commit first-degree murder, and armed robbery for the stabbing attacks of Patrick Daniels and Norma Norman. Petitioner was sentenced to death for the murder conviction and consecutive life sentences for the two other convictions. See State v. Jones, 789 S.W.2d 545 (Tenn. 1990), cert. denied, Jones v. Tennessee, 498 U.S. 908 (1990). As relevant to this appeal, Petitioner raised a claim on direct appeal that the prosecutor’s use of peremptory strikes against African-American jurors violated his constitutional rights under Batson v. Kentucky, 476 U.S. 79 (1986). Jones, 789 S.W.2d at 548-49 . The Tennessee Supreme Court found that “[t]here was no pattern of strikes -2- against black jurors” and that “[t]here was no indication of any discriminatory purpose in the strikes” given the prosecutor’s “neutral reasons for the exercise of its challenges.” Id. at 549 . The Tennessee Supreme Court affirmed Petitioner’s convictions and sentences. Id. at 553 . Petitioner subsequently filed a petition for post-conviction relief, the denial of which was affirmed by this Court on appeal. See James Lee Jones, Jr. v. State, No. 01C01-9402-CR-00079, 1995 WL 75427 , at *1 (Tenn. Crim. App. Feb. 23, 1995), perm. app. denied (Tenn. Aug. 28, 1995), cert. denied, Jones v. Tennessee, 516 U.S. 1122 (1996). Petitioner also unsuccessfully sought federal habeas corpus relief, primarily raising claims of ineffective assistance of counsel and the prosecutor’s withholding of certain evidence in violation of Brady v. Maryland, 373 U.S. 83 (1963). See Abdur’Rahman v. Bell, 226 F.3d 696 (6th Cir. 2000); Abdur’Rahman v. Colson, 649 F.3d 468 (6th Cir. 2011); Abdur’Rahman v. Carpenter, 805 F.3d 710 (6th Cir. 2015). On June 24, 2016, Petitioner filed a motion to reopen post-conviction proceedings in the Davidson County Criminal Court. See T.C.A. § 40-30-117. Petitioner asserted three claims based on recent United States Supreme Court cases. First, and as relevant to this appeal, Petitioner asserted that Foster v. Chatman, 578 U.S. ___, 136 S. Ct. 1737 (2016), established a new rule of constitutional law regarding a prosecutor’s use of peremptory strikes against potential jurors that are “motivated in substantial part by discriminatory intent” and that this rule was retroactively applicable. Like the defendant in Foster, Petitioner obtained the prosecutor’s jury selection notes after his trial and direct appeal, which Petitioner alleged contradicted the prosecutor’s race-neutral reasons for the strikes given at trial. The other claims raised in Petitioner’s motion were that capital punishment should be declared unconstitutional because it is inconsistent with the reasoning of the majority opinion in Obergefell v. Hodges, 576 U.S. __, 135 S.Ct. 2584 (2015), and with Justice Breyer’s dissent in Glossip v. Gross, 576 U.S. 863 (2015). On September 23, 2016, Petitioner filed a petition for writ of habeas corpus as a supplement to his motion to reopen, asserting that capital punishment should be deemed unconstitutional based on the historical record of its application in Tennessee since 1977 showing that it “operates in an arbitrary and capricious manner” and that it is not consistent with the “evolving standards of decency.” The State did not file a response to either of Petitioner’s pleadings. On October 5, 2016, the post-conviction court entered an order entitled “Order Granting ‘Motion to Reopen Post-Conviction Petition’ in Part and Denying in Part.” The post-conviction court denied Petitioner’s motion with respect to his claims based on Obergefell and Glossip, concluding that they did not establish new rules of constitutional -3- law that would entitle Petitioner to relief.1 The post-conviction court also denied Petitioner’s petition for writ of habeas corpus. However, the post-conviction court stated that it would “hold an evidentiary hearing in order to make a determination as to issue one, whether Petitioner is entitled to relief under Foster v. Chatman.” The post- conviction court stated that the hearing would focus on whether Foster created a new rule of law regarding peremptory strikes of potential jurors that were “motivated in substantial part by discriminatory intent” or whether the new rule was actually announced in Snyder v. Louisiana, 552 U.S. 472 (2008). If Snyder controlled, the post-conviction court would determine whether Petitioner waived his claim because he failed to raise it for eight years. On August 28, 2019,2 Petitioner filed a “Pre-Hearing Memorandum” detailing his claim that “Foster formulated a change in the evidentiary and procedural rules for adjudicating a jury race discrimination claim” from that originally established in Batson. After describing the development of United States Supreme Court’s jurisprudence from Batson through the recent decision in Flowers v. Mississippi, __ U.S. __, 139 S.Ct. 2228 (2019), Petitioner argued that “Foster stands in an important position in the Court’s development of the law in this area” because it allowed a defendant to raise a jury discrimination claim that had been previously adjudicated on direct appeal and to support the claim with “newly discovered evidence from outside the trial record – specifically in this case, the prosecutor’s notes taken during jury selection[.]” Additionally, Petitioner 1 The Petitioner did not file an application for permission to appeal the denial of these claims pursuant to Tennessee Code Annotated section 40-30-117(c) or an appeal as of right under Tennessee Rule of Appellate Procedure 3(b) from the denial of his habeas corpus petition. 2 Pending before this Court is Petitioner’s motion, pursuant to Tennessee Rule of Appellate Procedure 14, to consider the declaration of Petitioner’s counsel regarding his various meetings with the District Attorney General to negotiate a settlement of this case over the course of this three-year delay. Rule 14(a) empowers an appellate court to consider certain facts that “occur[] after judgment,” are “capable of ready demonstration[,]” and “affect[] the positions of the parties or the subject matter of the action[.]” In deferring consideration of Petitioner’s motion and the State’s response, a panel of this Court noted: Although the facts contained in counsel’s declaration are not later-arising and were known to the appellee and to the District Attorney General at the time of the negotiated settlement, the parties could not have anticipated the need to include details of the settlement negotiations in the record at the time of the entry of the parties’ agreed order. The circumstances presented in this case are unique, and the motion before the court does not squarely fall within the guidelines of Tennessee Rule of Appellate Procedure 14. Order Reserving Judgment on Motion to Consider Post-Judgment Facts, March 5, 2020. Given the unique circumstances of this case, this Court will consider the declaration of Petitioner’s counsel only insofar as it provides helpful information regarding the procedural history of this case. -4- asserted that Foster retroactively applied to post-conviction proceedings the standard established in Snyder, a direct appeal, that a defendant must show that the prosecutor’s strike of a juror was “motivated in substantial part by discriminatory intent.” See Foster, 136 S. Ct. at 1754 (citing Snyder, 552 U.S. at 485 ). The memorandum then detailed Petitioner’s factual allegations regarding the peremptory strikes of specific African- American jurors by the prosecutor in his case. An evidentiary hearing was held on August 28, 2019, consisting of arguments by counsel for both parties. Petitioner’s counsel submitted multiple exhibits, including the prosecutor’s jury selection notes, transcripts of voir dire from Petitioner’s trial, and an affidavit from one of the stricken jurors. The exhibits also contained a letter written by Davidson County District Attorney General, Glenn R. Funk, to the Tennessee District Attorney Generals Conference regarding comments made by the prosecutor as a panel member at a continuing legal education seminar in 2015 suggesting the use of racial stereotypes in jury selection. Petitioner’s counsel presented the factual and legal arguments underpinning Petitioner’s claim that he was entitled to relief under Foster. Petitioner’s counsel also argued that this claim should be considered in conjunction with Petitioner’s claims of prosecutorial misconduct that were raised in his federal habeas corpus proceedings.3 The District Attorney General stated that the “hearing [was] not about an innocent man” but that “[o]vert racial bias has no place in the justice system” and “the pursuit of justice is incompatible with deception.” The District Attorney General stated that upon his review of Petitioner’s case and his discussions with the surviving victim and both victims’ families, he was prepared to enter an agreement in which Petitioner’s death sentence would be vacated in exchange for Petitioner “withdrawing his application for a new trial[,] waiving any other claims for relief[,]” and “not fil[ing] any other petitions.” The parties then presented the post-conviction court with the AO, which they signed in open court. The post-conviction court took the matter under advisement, stating that it would “review the order, as well as the pleadings and exhibits in this case, and make a determination as to whether the [c]ourt will accept this.” On the next day, August 29, 2019, the post-conviction court signed the AO entitled “Agreed Order Allowing Amended Judgment”, which stated in pertinent part as follows: It appears from the signatures appearing below of the Petitioner and his counsel, and of the attorney for the State, that the parties stipulate, and therefore the Court finds, as follows: 3 Petitioner’s attorney relied on the dissenting opinion by Judge Cole in Abdur’Rahman v. Colson, 649 F.3d at 478-483 . However, the majority opinion in that case rejected Petitioner’s claim that the prosecutor violated Brady by failing to disclose certain pieces of evidence or that any prejudice arising therefrom was sufficient to entitle Petitioner to relief. See id. at 475, 478 . -5-  .... G. The State and the Petitioner have agreed to settle this case according to the terms set forth below, subject to Court approval. The State represents that this settlement will serve the ends of justice. H. By signing below, Petitioner represents to the Court that he understands the terms of this settlement which involve the waiver of any claims he may have in this case, subject to the terms of this Order, and that he believes this settlement is in his best interest. ACCORDINGLY, IT IS ORDERED, ADJUDGED AND DECREED as follows: 1. The Court’s judgment for Count 1 convicting Petitioner of First Degree Murder and sentencing him to death is hereby amended, such that Petitioner’s sentence for Count 1 is and shall be Life in Prison, and not Death. 2. All other provisions of the Court’s judgments for Counts 1, 2 and 3 shall remain in full force and effect. 3. All of Petitioner’s claims in this case are deemed waived by Petitioner and are therefore DISMISSED, subject to the terms of this Agreed Order. The following day, the post-conviction court announced its ruling in open court, stating: The [c]ourt reviewed the pleadings, including the facts of the case, the jury selection process, the exhibits and the relevant statutory and case law regarding this matter. During my consideration of the agreed order, an issue arose as to whether parties could agree to set aside a jury verdict such as the one presented to this court. The [c]ourt believes that the issue has been resolved or is resolved by [Tennessee Code Annotated section] 40-30- 103, as well as cases such as [Joseph Matthew] Maka v. State, [No. W2003- 01209-CCA-R3-PC, 2004 WL 2290493 , at *2 (Tenn. Crim. App. Oct. 11, 2004), no perm. app. filed] and Foster v. Chatman, as well as Batson v. Kentucky. The [c]ourt concludes that the prosecuting office has the authority to remedy a legal injustice under circumstances such as these before us. After -6-  careful consideration, the [c]ourt believes the parties reached an equitable and just resolution and, therefore, approves the agreed order. The post-conviction court subsequently entered an amended judgment of conviction for Count 1, reflecting a life sentence for the first degree murder conviction. Under the section of the form for special conditions, the post-conviction court wrote: Judgment amended pursuant to agreed order signed by the court on 8/28/19 which was entered in consideration of potential unconstitutional conviction and sentence pursuant to the provisions of [T.C.A. §] 40-30-101 et seq and [T.C.A. §] 40-30-117 (post-conviction statutes). In consideration of this modification of judgment, [Petitioner] waives all appeals and claims related to this matter. On September 20, 2019, the State, acting through the Office of the Attorney General and Reporter (hereinafter, “State Attorney General”), filed a notice of appeal pursuant to Tennessee Rule of Appellate Procedure 3(c). Analysis On appeal, the State Attorney General argues that the post-conviction court lacked jurisdiction to accept the AO and to amend Petitioner’s judgment of conviction because the court failed to follow the statutory requirements of the Post-Conviction Procedure Act. In particular, the State relies upon this Court’s recent opinion in Harold Wayne Nichols v. State, No. E2018-00626-CCA-R3-PD, 2019 WL 5079357 , at *11-12 (Tenn. Crim. App. Oct. 10, 2019), perm. app. denied (Tenn. Jan. 15, 2020), in which this Court held that the post-conviction court lacked jurisdiction to accept a proposed settlement agreement in the absence of a finding that the petitioner was entitled to post-conviction relief. Petitioner, as the appellee, responds that this Court lacks jurisdiction to hear this appeal because the State, represented by the District Attorney General, consented to the entry of the AO in the post-conviction court. With regard to the merits of the State’s claim, Petitioner argues that because the post-conviction court had the jurisdiction to adjudicate his motion to reopen, it also had the jurisdiction to accept the parties’ settlement agreement and that this Court’s decision in Harold Wayne Nichols is inapplicable to the case at bar. This Court is required to “consider whether the trial and appellate court have jurisdiction over the subject matter, whether or not presented for review.” Tenn. R. App. P. 13(b). Subject matter jurisdiction is “the power of a court to adjudicate the particular category or type of case brought before it.” Turner v. Turner, 473 S.W.3d 257 , 269 (Tenn. 2015). “Subject matter jurisdiction involves the nature of the cause of action and the relief sought, and can only be conferred on a court by legislative or constitutional -7- act.” State v. Cawood, 134 S.W.3d 159 , 163 (Tenn. 2004) (citing Northland Ins. Co. v. State, 33 S.W.3d 727 , 729 (Tenn. 2000)). Subject matter jurisdiction “cannot be waived, because it is the basis for the court’s authority to act.” Meighan v. U.S. Sprint Commc’ns Co., 924 S.W.2d 632 , 639 (Tenn. 1996). “‘It is fundamental that jurisdiction, neither original nor appellate, can be conferred by consent and neither waiver nor estoppel could be more effective than the consent of parties.’” State v. Smith, 278 S.W.3d 325 , 329 (Tenn. Crim. App. 2008) (quoting James v. Kennedy, 129 S.W.2d 215 , 216 (Tenn. 1939)). Whether a court has subject matter jurisdiction is a question of law, and our review is de novo with no presumption of correctness. Cawood, 134 S.W.3d at 163 (internal quotation omitted). Because this Court’s jurisdiction to hear an appeal is a prerequisite to appellate review, we will first address the question of whether the State Attorney General can pursue an appeal of the AO on behalf of the State when the District Attorney General, also representing the State, consented to the entry of the AO in the post-conviction court. This involves issues related to the State’s right to appeal and the proper allocation of authority between the District Attorney General and the State Attorney General. Because we ultimately conclude that this Court has jurisdiction to hear this appeal, the second question we will address is whether the post-conviction court had jurisdiction to enter the AO. This involves issues related to the post-conviction court’s jurisdiction to adjudicate Petitioner’s motion to reopen as well as its jurisdiction to amend Petitioner’s sentence upon agreement of the parties that his post-conviction claims would be waived. We note that due to the procedural posture of this case, the merits of Petitioner’s Foster claim are not before this Court, and we express no opinion thereon. I. Appellate Court’s Jurisdiction A. State’s Right to Appeal Generally, the State does not have the right to appeal in a criminal case “‘unless the right is expressly conferred by a constitutional provision or by statute.’” State v. Menke, 590 S.W.3d 455 , 460 (Tenn. 2019) (quoting State v. Meeks, 262 S.W.3d 710 , 718 (Tenn. 2008)); see Tenn. R. Crim. P. 37(b) (stating that “the state may appeal any order or judgment in a criminal proceeding when the law provides for such appeal”). “‘When a statute affords [the State] the right to an appeal in a criminal proceeding, the statute will be strictly construed to apply only to the circumstances defined in the statute.’” Menke, 590 S.W.3d at 460 (quoting Meeks, 262 S.W.3d at 718 ). Tennessee Rule of Appellate Procedure 3(c) provides as follows: Availability of Appeal as of Right by the State in Criminal Actions. In criminal actions an appeal as of right by the state lies only from an order or -8-  judgment entered by a trial court from which an appeal lies to the Supreme Court or Court of Criminal Appeals: (1) the substantive effect of which results in dismissing an indictment, information, or complaint; (2) setting aside a verdict of guilty and entering a judgment of acquittal; (3) arresting judgment; (4) granting or refusing to revoke probation; or (5) remanding a child to the juvenile court. The state may also appeal as of right from a final judgment in a habeas corpus, extradition, or post-conviction proceeding, from an order or judgment entered pursuant to Rule 36 or Rule 36.1, Tennessee Rules of Criminal Procedure, and from a final order on a request for expunction. According to the Advisory Commission Comments, “This subdivision specifies situations, within constitutional limits, in which it seems desirable to recognize the state’s right of appeal.” Tenn. R. App. P. 3(c), Adv. Comm’n. Cmts. This case was initiated when Petitioner filed a motion to reopen post-conviction proceedings, which was granted by the post-conviction court on October 5, 2016.4 Once the post-conviction court granted the motion to reopen, “the procedure, relief and appellate provisions” of the Post-Conviction Procedure Act applied. T.C.A. § 40-30- 117(b). This includes the provision that the post-conviction court’s final order is appealable “in the manner prescribed by the Tennessee Rules of Appellate Procedure.” T.C.A. § 40-30-116. The AO, which disposed of Petitioner’s pending post-conviction claims by stating that they were waived and dismissed, was a final judgment in a post- conviction proceeding from which the State has a right to appeal under Rule 3(c). Moreover, from the language of the AO, it does not appear that the State explicitly waived the right to appeal.5 Additionally, the Tennessee Supreme Court has recently held that a defendant has an appeal as of right from the entry of an amended order or judgment under Rule 3(b) by applying Tennessee Rule of Criminal Procedure 36. State v. Allen, 593 S.W.3d 145 , 153 (Tenn. 2020). Rule 36 grants a trial court the authority to correct clerical errors in judgments and orders at any time and provides that “[u]pon filing of the corrected judgment or order, . . . the defendant or the [S]tate may initiate an appeal as of right pursuant to Rule 3[.]” Tenn. R. Crim. P. 36. In Allen, the supreme court concluded that 4 As discussed in further detail below, we reject the State’s argument that the post-conviction court’s October 5, 2016 order did not actually grant the motion to reopen. 5 Even if such a waiver is possible, this Court has noted that the State Attorney General “would be a necessary party to such an agreement.” State v. Burrow, 769 S.W.2d 510 , 512 n.3 (Tenn. Crim. App. 1989). -9- because the trial court “was not purporting to simply correct a clerical mistake or supply omitted or overlooked information” when it amended an order that had become final over five years previously, it “exceeded the authority Rule 36 provides.” Allen, 593 S.W.3d at 154. Similarly, when the post-conviction court in this case entered the amended judgment, which amended Petitioner’s sentence for first degree murder from death to life imprisonment, it did not purport to merely correct a clerical mistake or omission. Because, as we discuss further below, the post-conviction lacked any other basis to amend Petitioner’s final judgment, the State has an appeal as of right under Rule 3(c) from the entry of the amended judgment because the post-conviction court exceeded the authority granted by Rule 36.6 Petitioner relies heavily on case law stating that consent decrees in civil cases are “not appealable by the parties entering into the agreement.” City of New Johnsonville v. Handley, No. M2003-00549-COA-R3-CV, 2005 WL 1981810 , at *10 (Tenn. Ct. App. Aug. 16, 2005) (citing City of Shelbyville v. State ex rel. Bedford Cnty., 415 S.W.2d 139 , 144 (Tenn. 1967); Bacardi v. Tenn. Bd. of Registration in Podiatry, 124 S.W.3d 553 , 562 (Tenn. Ct. App. 2003)), perm. app. denied (Tenn. Feb. 6, 2006). “However, a party may appeal from a consent order upon a claim of lack of actual consent, fraud in its procurement, mistake, or lack of the court’s jurisdiction to enter the judgment.” Leroy Jackson, Jr. v. Purdy Bros. Trucking Co., Inc., No. E2011-00119-COA-R3-CV, 2011 WL 4824198 , at *3 (Tenn. Ct. App. Oct. 12, 2011) (citing Swift & Co. v. United States, 276 U.S. 311 , 323-24 (1928)), perm. app. denied (Tenn. Mar. 8, 2012) (emphasis added). Even in criminal cases, “a defendant who pleads guilty may appeal the issue of whether or not the trial court had subject matter jurisdiction because jurisdictional defects are not waived by the plea.” State v. Yoreck, 133 S.W.3d 606 , 612 (Tenn. 2004); see also State v. Carter, 988 S.W.2d 145 , 148 (Tenn. 1999) (holding that “a no contest plea or plea of guilty does not waive a challenge to the court’s jurisdiction”); Tenn. R. App. P. 3(b)(2) (allowing a defendant to appeal as of right from a guilty plea to raise issues “not waived as a matter of law by the plea”). Thus, we believe that, when a statute or rule specifically provides for an appeal as of right from a trial court’s order, an appellate court has jurisdiction to hear the case and to determine whether any specific errors complained of were waived as a matter of law by a party’s consent to the judgment in the court below. See Pacific R.R. Co. v. Ketchum, 101 US 289 , 290 (1880). Generally speaking, a party’s consent or failure to object to a trial court’s order may waive most evidentiary and procedural issues under Tennessee 6 The trial court entered its amended judgment six days after the State filed its notice of appeal. To the extent that the State’s notice of appeal was premature, it would be deemed timely filed upon the entry of the amended judgment. See Tenn. R. App. P. 4(d). - 10 - Rule of Appellate Procedure 36(a).7 However, that rule does not place a restriction on this Court’s jurisdiction to hear an appeal in the first place. See Tenn. R. App. P. 36(b) (stating the plain error doctrine, which authorizes discretionary review of otherwise waived claims); Tenn. R. App. P. 13(b) (stating that an appellate court must consider subject matter jurisdiction and may consider other issues “(1) to prevent needless litigation, (2) to prevent injury to the interests of the public, and (3) to prevent prejudice to the judicial process”). Moreover, this Court has held that the State’s failure to object to a trial court’s lack of jurisdiction did not bar it from raising the issue on appeal “because such jurisdiction could not be conferred upon the criminal court by consent, estoppel, or waiver.” Smith, 278 S.W.3d at 329 ; see also John Thedford Day v. Vici Martha Day Gatewood, No. 02A01-9805-CV-00141, 1999 WL 269928 , at *1 (Tenn. Ct. App. Apr. 30, 1999) (“The issue of subject matter jurisdiction is not waivable and thus may be raised at any time, regardless of whether any objection to the assertion of jurisdiction was made at the trial court level.”). Thus, subject matter jurisdiction remains a viable issue on appeal even if the parties consented to the judgment in the court below. Alternatively, even if we were to determine that the State does not have an appeal as of right under Rule 3(c), this Court has the authority to treat the State’s notice of appeal as a petition for a writ of certiorari. See State v. Adler, 92 S.W.3d 397 , 401 (Tenn. 2002), superseded on other grounds by statute, as recognized in State v. Rowland, 520 S.W.3d 542 , 545 (Tenn. 2017); see also State v. L.W., 350 S.W.3d 911 , 916 (Tenn. 2011) (holding that “the failure to follow the procedural requirements of [T.C.A. §] 27-8-106 for petitions for writ of certiorari in civil cases did not deprive the Court of Criminal Appeals of jurisdiction to hear these appeals”). The common law writ of certiorari has been codified at Tennessee Code Annotated section 27-8-101, which provides: The writ of certiorari may be granted whenever authorized by law, and also in all cases where an inferior tribunal, board, or officer exercising judicial functions has exceeded the jurisdiction conferred, or is acting illegally, when, in the judgment of the court, there is no other plain, speedy, or adequate remedy. This section does not apply to actions governed by the Tennessee Rules of Appellate Procedure. The common law writ of certiorari is an “extraordinary judicial remedy,” State v. Lane, 254 S.W.3d 349 , 355 (Tenn. 2008), and may not be used “to inquire into the correctness of a judgment issued by a court with jurisdiction.” Adler, 92 S.W.3d at 401 (citing State v. Johnson, 569 S.W.2d 808 , 815 (Tenn. 1978)). Instead, the writ of certiorari is 7 “Nothing in this rule shall be construed as requiring relief be granted to a party responsible for an error or who failed to take whatever action was reasonably available to prevent or nullify the harmful effect of an error.” Tenn. R. App. P. 36(a). - 11 - available “to correct ‘(1) fundamentally illegal rulings; (2) proceedings inconsistent with essential legal requirements; (3) proceedings that effectively deny a party his or her day in court; (4) decisions beyond the lower tribunal’s authority; and (5) plain and palpable abuses of discretion.’” Lane, 254 S.W.3d at 355 (citation omitted). Because the State Attorney General’s claim on appeal is that the post-conviction court, by accepting the AO and amending Petitioner’s sentence, “exceeded the jurisdiction conferred” by the Post- Conviction Procedure Act, the writ of certiorari would be appropriate if there were “no other plain, speedy or adequate remedy” under the Rules of Appellate Procedure. T.C.A. § 27-8-101. B. Authority of the State Attorney General and District Attorney General Petitioner argues that the District Attorney General had the discretion to consent to the entry of the AO and that, by appealing therefrom, the State Attorney General invaded the constitutional and statutory powers of the District Attorney General. Both the State Attorney General and the District Attorney General are constitutional officers established by Article 6, section 5 of the Tennessee Constitution, and the Legislature has codified the respective duties and responsibilities of each office. The District Attorney General “[s]hall prosecute in the courts of the district all violations of the state criminal statutes and perform all prosecutorial functions attendant thereto,” T.C.A. § 8-7-103(1), while the State Attorney General shall “attend to all business of the state, both civil and criminal in the court of appeals, the court of criminal appeals[,] and the supreme court,” T.C.A. § 8- 6-109(b)(2). The same division of authority applies in post-conviction proceedings. Under the Post-Conviction Procedure Act, “[t]he district attorney general shall represent the state” in responding to the petition and asserting “the affirmative defenses the district attorney general deems appropriate.” T.C.A. § 40-30-108(a), (d). Additionally, the district attorney general “has the option to assert” certain defenses by filing a motion to dismiss. T.C.A. § 40-30-108(c). During proceedings in the post-conviction court, the State Attorney General shall “lend whatever assistance may be necessary to the district attorney general in the trial and disposition of the cases,” T.C.A. § 40-30-114(b)(1). However, “[i]n the event an appeal is taken[,]” the State Attorney General “shall represent the state and prepare and file all necessary briefs in the same manner as now performed in connection with criminal appeals.” T.C.A. § 40-30-114(b)(2). As this Court has previously explained: Considering . . . these sections of the Code together, we conclude that the legislature has given the District Attorney General the power to prosecute criminal cases at the trial level, and that the State Attorney General has been given the full right, power and exclusive authority to prosecute criminal cases and/or pursue other remedies that may be attendant to such cases in the appellate courts. - 12 - State v. Simmons, 610 S.W.2d 141 , 142 (Tenn. Crim. App. 1980) (holding that the district attorney general did not have standing to object to the State Attorney General’s motion to dismiss an appeal). Thus, in pursuing an appeal of the post-conviction court’s order, the State Attorney General was acting within his exclusive sphere to exercise the State’s right to appeal. Petitioner relies upon the Tennessee Supreme Court’s opinion in State v. Watkins, 804 S.W.2d 884 (Tenn. 1991), for the proposition that the State Attorney General is bound by the agreements made in the trial court by the District Attorney General. In Watkins, the court said: We have carefully considered the state’s argument that in representing the prosecution on appeal, the Office of the Attorney General is more than a mere extension of the local District Attorney’s office and should not be bound on appeal by the action of the prosecutor in the trial court. The Attorney General undoubtedly has a role to play in ensuring that errors in the trial court prejudicial to the state are corrected on appeal. But there is a difference between seeking to correct errors in the trial court not deliberately of the state’s making, and second-guessing the judgment of the local prosecutor in settling a case. Where such a settlement is not illegal and does not result in manifest injustice (and, certainly, the sentence in this case fits neither category), the state should be held on appeal to the same waiver rule as the defendant. Such a rule is particularly important in this context, because it ensures adequate notice and, therefore, fundamental fairness to a defendant engaged in the delicate process of making the determination whether to plead guilty or to go to trial. Id. at 886-87 . However, Watkins is distinguishable from the present case because the issue being discussed was an erroneous sentencing range, which the Tennessee Supreme Court has repeatedly said is a “non-jurisdictional” element of a defendant’s sentence and may be the subject of plea negotiations between the defendant and the State. See, e.g., Davis v. State, 313 S.W.3d 751 , 759-60 (Tenn. 2010). In this Court’s experience, it is not uncommon for the State Attorney General to take a different position on appeal from the one held by the District Attorney General in the trial court, even when such position is contrary to an agreement between the District Attorney General and the defendant. See, e.g., Harold Wayne Nichols, 2019 WL 5079357 , at *11 (noting the State’s changed position on appeal with regard to the post- conviction court’s ability to accept a settlement agreement), perm. app. denied (Tenn. Jan. 15, 2020); State v. A.B. Price, No. W2017-00677-CCA-R3-CD, 2018 WL 3934213 , at *5 (Tenn. Crim. App. Aug. 14, 2018) (noting the State’s changed position on appeal with regard to whether the constitutionality of a statute was justiciable), rev’d, 579 - 13 - S.W.3d 332 (Tenn. 2019); State v. Alex Hardin Huffstutter, No. M2013-02788-CCA-R3- CD, 2014 WL 4261143 , at *1 (Tenn. Crim. App. Aug. 28, 2014) (noting the State’s changed position on appeal with regard to whether the defendant’s certified question of law was dispositive), no perm. app. filed; State v. Shannon A. Holladay, No. E2004- 02858-CCA-R3-CD, 2006 WL 304685 , at *5 (Tenn. Crim. App. Feb. 8, 2006) (Wade, P.J., concurring) (noting the State’s changed position on appeal with regard to whether the defendant had an expectation of privacy), no perm. app. filed; State v. James Anthony Hill, No. M2003-00516-CCA-R3-CD, 2004 WL 431481 , at *4 (Tenn. Crim. App. Mar. 9, 2004) (noting the State’s changed position on appeal with regard to whether an offense was a lesser-included offense), perm. app. denied (Tenn. Sept. 7, 2004). Generally speaking, “[t]he same rules that apply to defendants likewise apply to the State” with regard to the waiver of issues raised for the first time on appeal, even when “[t]he Attorney General’s Office on appeal apparently disagrees with the assistant district attorney general’s concession in the trial court[.]” State v. Jarus Smith, No. M2014- 01130-CCA-R3-CD, 2015 WL 4656553 , at *7 (Tenn. Crim. App. Aug. 6, 2015), perm. app. denied (Tenn. Dec. 10, 2015); see also Watkins, 804 S.W.2d at 886 (noting that, “proverbially speaking, what is applicable to the goose ought to be applied to the gander” with regard to waiver); State v. Adkisson, 899 S.W.2d 626 , 635-36 (Tenn. Crim. App. 1994) (“It is elementary that a party may not take one position regarding an issue in the trial court, change his strategy or position in mid-stream, and advocate a different ground or reason in this Court.”). However, as stated above, in this case the State Attorney General is challenging the post-conviction court’s jurisdiction to enter the AO and the amended judgment, which is not waived by the District Attorney General’s agreement thereto. See generally State v. Boyd, 51 S.W.3d 206 (Tenn. Crim. App. 2000). As this Court has previously observed: We agree that it may appear unfair to a defendant for the State to take one position at the trial court level, and after a defendant has relied on that position, take a different position on appeal. In most cases we could refuse to accept the State’s position on appeal on the ground that we will not address issues not raised at the trial court level. However, as stated previously, neither we nor the trial court can ignore court rules in order to assume jurisdiction where there is none. Id. at 211 (internal citations omitted). To be clear, the resolution of the question of the authority of Attorney General to take a different position on appeal will always lie when that resolution, as is here, involves questions of the trial court’s jurisdiction. It is neither a question of position change by the State as a party on appeal, nor a question of allocation of authority between a District Attorney General and the State Attorney General. It is simply a question of jurisdiction which this Court can never ignore. - 14 -  Based on the foregoing, we conclude that the State had a right to appeal, that the State Attorney General had the authority to bring the appeal, and that the jurisdictional issue raised on appeal was not waived by the agreement of the parties in the court below. Thus, this appeal is properly before this Court, and we will proceed to consider the merits of the State’s claim that the post-conviction court lacked jurisdiction to enter the AO and amend Petitioner’s sentence. II. Post-Conviction Court’s Jurisdiction A. Motion to Reopen Post-Conviction Proceedings In Case v. Nebraska, 381 U.S. 336 (1965), the United States Supreme Court recommended that the states implement post-conviction procedures to address alleged constitutional errors arising in state convictions in order to divert the burden of habeas corpus ligation in the federal courts. In response, the Tennessee legislature passed the Post-Conviction Procedure Act, whereby a defendant may seek relief “when a conviction or sentence is void or voidable because of the abridgement of any right guaranteed by the Constitution of Tennessee or the Constitution of the United States.” T.C.A. § 40-30-103; see also Sills v. State, 884 S.W.2d 139 , 142 (Tenn. Crim. App. 1994) (“The Post- Conviction Procedure Act was created to address and remedy constitutional wrongdoing in the convicting or sentencing process which is significant enough to render the conviction or sentence void or voidable.”). However, “there is no constitutional duty to provide post-conviction relief procedures.” Serrano v. State, 133 S.W.3d 599 , 604 (Tenn. 2004) (citing Burford v. State, 845 S.W.2d 204 , 207 (Tenn. 1992)). Thus, “the availability and scope of post-conviction relief lies within the discretion of the General Assembly because post-conviction relief is entirely a creature of statute.” Bush v. State, 428 S.W.3d 1 , 15-16 (Tenn. 2014) (citing Pike v. State, 164 S.W.3d 257 , 262 (Tenn. 2005)). Under its current iteration, the Post-Conviction Procedure Act “contemplates the filing of only one (1) petition for post-conviction relief. In no event may more than one (1) petition for post-conviction relief be filed attacking a single judgment.” T.C.A. § 40- 30-102(c). While “any second or subsequent petition shall be summarily dismissed[,]” a petitioner may seek relief on the basis of claims that arise after the disposition of the initial petition by filing a motion to reopen the post-conviction proceedings “under the limited circumstances set out in § 40-30-117.” Id.; see Fletcher v. State, 951 S.W.2d 378 , 380 (Tenn. 1997). A motion to reopen post-conviction proceedings is only cognizable if it asserts one of the following grounds for relief: (1) The claim in the motion is based upon a final ruling of an appellate court establishing a constitutional right that was not recognized as existing - 15 -  at the time of trial, if retrospective application of that right is required. The motion must be filed within one (1) year of the ruling of the highest state appellate court or the United States supreme court establishing a constitutional right that was not recognized as existing at the time of trial; or (2) The claim in the motion is based upon new scientific evidence establishing that the petitioner is actually innocent of the offense or offenses for which the petitioner was convicted; or (3) The claim asserted in the motion seeks relief from a sentence that was enhanced because of a previous conviction and the conviction in the case in which the claim is asserted was not a guilty plea with an agreed sentence, and the previous conviction has subsequently been held to be invalid, in which case the motion must be filed within one (1) year of the finality of the ruling holding the previous conviction to be invalid[.] T.C.A. § 40-30-117(a)(1)-(3). Additionally, the motion must assert facts underlying the claim which, “if true, would establish by clear and convincing evidence that the petitioner is entitled to have the conviction set aside or the sentence reduced.” Id. at (a)(4). Taking the petitioner’s factual allegations as true, the post-conviction court shall deny the motion if it fails to meet the requirements listed in subsection (a). T.C.A. § 40-30-117(b). If the post-conviction court grants the motion to reopen, “the procedure, relief and appellate provisions” of the Post-Conviction Procedure Act apply. Id. The State does not contest the fact that the Davidson County Criminal Court, as the original court of conviction, had subject matter jurisdiction over Petitioner’s post- conviction proceedings. See T.C.A. § 40-30-104(a) (stating that the petition must be filed with “the clerk of the court in which the conviction occurred”). Instead, the State argues that the post-conviction court lacked jurisdiction in this case because it did not properly grant Petitioner’s motion to reopen post-conviction proceedings in the first place. The State contends that, despite the fact that the post-conviction court’s October 5, 2016 order was entitled “Order Granting ‘Motion to Reopen Post-Conviction Petition’ in Part[,]” the post-conviction court did not actually reopen post-conviction proceedings because it “made none of the findings required for reopening a post-conviction petition.” Specifically, the State asserts that the post-conviction court never made a finding that Foster established a new rule of constitutional law or that it was retroactively applicable. The State argues that, because the motion to reopen was never granted, the post- conviction court lacked jurisdiction to accept and enter the AO because there was “no case or controversy pending before it to be settled or otherwise adjudicated.” Alternatively, the State argues that the October 5, 2016 order “should be vacated because the post-conviction court had no legally cognizable basis for reopening” the post- - 16 - conviction proceedings based upon the merits of Petitioner’s claim. Specifically, the State argues that “Foster did not create a new rule of law” and that Petitioner cannot “establish by clear and convincing evidence that there was a constitutional violation that entitles him to relief.” As an initial matter, we disagree with the State’s characterization of the post- conviction court’s October 5, 2016 order. However, even if the State is correct that the post-conviction court did not actually grant the motion to reopen with respect to the Foster claim, it clearly did not deny the claim as it did with the Obergefell and Glossip claims. Thus, at the very least, the motion to reopen itself remained pending for adjudication at the time of the August 28, 2019 hearing. Secondly, we note that the State did not seek to appeal the post-conviction court’s October 5, 2016 order. While the motion to reopen statute provides a means by which a petitioner may seek a permissive appeal from the post-conviction court’s denial of a motion to reopen, see T.C.A. § 40-30-117(c), it does not provide a means by which the State may appeal the post-conviction court’s grant of the motion. Additionally, the State did not seek either an interlocutory appeal under Tennessee Rule of Appellate Procedure 9 or an extraordinary appeal under Tennessee Rule of Appellate Procedure 10. Indeed, an order granting a motion to reopen is, by its very nature, an interlocutory order, triggering application of “the procedure, relief and appellate provisions” of the Post-Conviction Procedure Act. See T.C.A. § 40-30-117(b). The motion to reopen statute does not require the post-conviction court to specifically state its findings of fact and conclusions of law in its order granting the motion. Cf. T.C.A. § 40-30-109(a) (stating that the court is merely required to enter an order setting an evidentiary hearing if it does not summarily dismiss the petition); T.C.A. § 40-30-111(b) (requiring the court to enter an order stating “the findings of fact and conclusions of law with regard to each ground” “[u]pon the final disposition of [the] petition”) (emphasis added). Instead, to grant a motion to reopen, the statute merely requires the post-conviction court to determine if the petitioner’s “factual allegations, if true, meet the requirements of subsection (a).” T.C.A. § 40-30-117(b). The State does not contend that Petitioner’s motion to reopen failed to comply with the pleading requirements of subsection (a); it simply disagrees with Petitioner’s claim on the merits. However, “[i]n order to determine if a court has jurisdiction, we consider whether or not it had the power to enter upon the inquiry; not whether its conclusion in the course of it was right or wrong.” Cawood, 134 S.W.3d at 163 (internal quotation omitted). Regardless of whether the post-conviction court’s decision was right or wrong, it had subject matter jurisdiction to grant the motion to reopen and to set the matter for an evidentiary hearing where Petitioner would “have the burden of proving the allegations of fact by clear and convincing evidence.” T.C.A. § 40-30-110(f). - 17 -  B. AO and Amended Judgment The problem in this case arises from the fact that, although the post-conviction court had jurisdiction over Petitioner’s reopening of the post-conviction proceedings, it did not have jurisdiction to amend Petitioner’s death sentence to life imprisonment under the terms of the AO. “There obviously is an important distinction between the right to seek relief in a post-conviction proceeding and the right to have relief in a post-conviction proceeding.” Shazel v. State, 966 S.W.2d 414 , 415-16 (Tenn. 1998) (emphasis in original). “[I]n order for a Court to have the jurisdiction to enter a decree in a particular case it must not only have the general jurisdiction over the subject matter involved and over the parties, it must also have the power to grant the particular relief decreed.” Brown v. Brown, 281 S.W.2d 492 , 503 (Tenn. 1955). Rather than granting Petitioner post-conviction relief upon a finding of a constitutional violation, the AO in this case specifically stated that Petitioner’s post-conviction claims were waived and dismissed. Thus, the post-conviction court did not have jurisdiction to amend Petitioner’s sentence because his original judgment of conviction remained final. See Delwin O’Neal v. State, No. M2009-00507-CCA-R3-PC, 2010 WL 1644244 , at *3 (Tenn. Crim. App. Apr. 23, 2010) (affirming trial court’s finding that it lacked jurisdiction over a post-conviction petitioner’s request for a reduction of sentence after constitutional claims were abandoned), perm. app. denied (Tenn. Sept. 3, 2010). “As a general rule, a trial court’s judgment becomes final thirty days after its entry unless a timely notice of appeal or a specified post-trial motion is filed.” Boyd, 51 S.W.3d at 210 (citing State v. Pendergrass, 937 S.W.2d 834 , 837 (Tenn. 1996)). “[O]nce the judgment becomes final in the trial court, the court shall have no jurisdiction or authority to change the sentence in any manner[,]” except under certain limited circumstances. T.C.A. § 40-35-319(b); see State v. Moore, 814 S.W.2d 381 , 383 (Tenn. Crim. App. 1991). “[J]urisdiction to modify a final judgment cannot be grounded upon waiver or agreement by the parties.” Moore, 814 S.W.2d at 383 (citing State v. Hamlin, 655 S.W.2d 200 (Tenn. Crim. App. 1983)). “[A]ny attempt by the trial court to amend the judgment, even with the agreement of the [d]efendant and the State, is void.” Boyd, 51 S.W.3d at 210 (citing Pendergrass, 937 S.W.2d at 837 ; Moore, 814 S.W.2d at 383 ); see also Lonnie Graves v. State, No. 03C01-9301-CR-00001, 1993 WL 498422 , at *2 (Tenn. Crim. App. Dec. 1, 1993). “To hold otherwise would effectively allow the trial court to exercise the pardoning and commutation power, which is vested solely in the Governor under Article 3, section 6 of the Tennessee Constitution.” Harold Wayne Nichols, 2019 WL 5079357 , at *12 (citing Workman v. State, 22 S.W.3d 807 , 808 (Tenn. 2000); State v. Dalton, 72 S.W. 456 , 457 (Tenn. 1903)). The Post-Conviction Procedure Act provides a means for seeking relief from an otherwise final judgment “when the conviction or sentence is void or voidable because of the abridgment of any right guaranteed by the Constitution of Tennessee or the - 18 - Constitution of the United States.” T.C.A. § 40-30-103; see Taylor v. State, 995 S.W.2d 78 , 83 (Tenn. 1999) (noting the availability of post-conviction proceedings “to collaterally attack a conviction and sentence which have become final”). With regard to the disposition of a post-conviction petition, the statute provides as follows: If the court finds that there was such a denial or infringement of the rights of the prisoner as to render the judgment void or voidable, including a finding that trial counsel was ineffective on direct appeal, the court shall vacate and set aside the judgment or order a delayed appeal as provided in this part and shall enter an appropriate order and any supplementary orders that may be necessary and proper. T.C.A. § 40-30-111(a). The language of this statute is significant in two respects. First, it limits the available relief that a post-conviction court may grant to either vacating the original judgment or ordering a delayed appeal. See T.C.A. § 40-30-113 (describing the procedures for granting a delayed appeal). Vacating a judgment allows the case to “be returned to the particular stage needed to remedy the constitutional wrong found to have occurred,” whether that be the pre-trial stage or the pre-sentencing stage. Sills, 884 S.W.2d at 142-43 . Significantly, the post-conviction statute “does not authorize a trial judge to reduce a sentence[.]” State v. Carter, 669 S.W.2d 707 , 708 (Tenn. Crim. App. 1984). Second, the post-conviction court’s authority to grant relief “is contingent upon the court’s finding that the judgment is void or voidable due to an infringement of the petitioner’s constitutional rights.” Harold Wayne Nichols, 2019 WL 5079357 , at *11; see Wilson v. State, 724 S.W.2d 766 , 768 (Tenn. Crim. App. 1986) (holding that trial court’s grant of a delayed appeal was inappropriate where there was no finding of a constitutional violation on the face of the order). “In the absence of a finding of constitutional violation sufficient to grant post-conviction relief, the post-conviction court is without jurisdiction to modify a final judgment.” Harold Wayne Nichols, 2019 WL 5079357 , at *12. Thus, taking these provisions of the statute together, it is clear that “[o]nly upon a finding that either the conviction or sentence is constitutionally infirm can the post-conviction court vacate the judgment and place the parties back into their original positions, whereupon they may negotiate an agreement to settle the case without a new trial or sentencing hearing.” Id., at *11 (citing Boyd, 51 S.W.3d at 211-12 ). Petitioner asserts that much of this Court’s opinion in Harold Wayne Nichols regarding a post-conviction court’s jurisdiction to accept a settlement agreement was dicta and, therefore, is not controlling. The term “obiter dictum” refers to a statement made by the court that is not necessary for a determination of the issue and, although it may be persuasive, it generally is not binding as precedent within the rule of stare decisis. See Staten v. State, 232 S.W.2d 18 , 19 (Tenn. 1950). The Tennessee Supreme Court has held that “inferior courts are not free to disregard, on the basis that the statement is obiter dictum, the pronouncement of a superior court when it speaks directly on the matter - 19 - before it[.]” Holder v. Tenn. Judicial Selection Comm’n, 937 S.W.2d 877 , 882 (Tenn. 1996). In Harold Wayne Nichols, the petitioner was specifically challenging the post- conviction court’s conclusion that it could not accept the proposed settlement agreement “where there is no claim for post-conviction relief before this [c]ourt which should survive this [c]ourt’s statutorily required preliminary order.” 2019 WL 5079357 , at *11. Thus, dicta or not, the question of the post-conviction court’s authority to accept a proposed settlement agreement without following the statutory requirements of the Post- Conviction Procedure Act was squarely before this Court. Alternatively, Petitioner argues that Harold Wayne Nichols, which was decided less than two months after the entry of the AO in this case, represents a change in the law and cannot be applied to retroactively invalidate the AO. Petitioner asserts on appeal that this Court’s unpublished opinion in Joseph Matthew Maka, 2004 WL 2290493 , which was relied upon by the post-conviction court, was “the only appellate authority on point” regarding the validity of settlement agreements in post-conviction cases at the time the AO was entered. However, Joseph Matthew Maka simply stands for the proposition that the trial court loses jurisdiction to amend or vacate an agreed order granting post- conviction relief once it becomes final. Id. at *2 (citing State v. Peele, 58 S.W.3d 701 , 705-06 (Tenn. 2001)); see also Anthony E. Perry v. State, No. W2006-02236-CCA-R3- PC, 2008 WL 2483524 , at *4 (Tenn. Crim. App. June 19, 2008) (relying on Joseph Matthew Maka in holding that the post-conviction court lost jurisdiction to vacate its order denying relief after it became final), perm. app. denied (Tenn. Oct. 27, 2008). Although the Joseph Matthew Maka court vacated the post-conviction court’s subsequent order denying relief and reinstated the earlier agreed order, 2004 WL 2290493 , at *3, the court did not specifically address the propriety of the agreed order itself. Moreover, we would note that, unlike this case, the agreed order in Joseph Matthew Maka did not state that the defendant was waiving all claims or that the post-conviction court was amending an otherwise final judgment. Instead, it stated that the post-conviction petition was “granted as to each issue and claim for relief raised therein,” and that it appeared that the defendant’s conviction for second degree murder was vacated and he stood to be retried for first degree murder. Id., at *1-2. Thus, Joseph Matthew Maka does not support the proposition that the post-conviction court had the jurisdiction to enter the AO in this case, which amended Petitioner’s final judgment of conviction in the absence of any finding of a constitutional violation. Moreover, Petitioner’s argument overlooks this Court’s published opinion in Boyd, which was cited in Harold Wayne Nichols. In Boyd, the defendant filed a petition for post-conviction relief alleging ineffective assistance of counsel after the direct appeal of his guilty plea was dismissed for failure to properly preserve his certified questions of law. 51 S.W.3d at 208 . The prosecutor agreed that the defendant was entitled to post- conviction relief, and the post-conviction court entered an agreed order granting the defendant a delayed appeal pursuant to Tennessee Code Annotated section 40-30-213(a) - 20 - (now renumbered as 40-30-113(a)). Id. However, on appeal, the State Attorney General argued “that the trial court did not have jurisdiction to amend the final judgment” to include the certified questions of law. Id. at 209 . This Court agreed, concluding that the post-conviction court “did not have the jurisdiction to amend the judgment when it granted the delayed appeal” despite the agreement of the parties. Id. at 210 . This Court concluded, however, that defendants in such a situation were not “left without a remedy” in that the post-conviction court, upon a finding of ineffective assistance of counsel according to the appropriate standard, could “vacate the judgment of conviction and allow the defendant to withdraw the guilty plea” pursuant to Tennessee Code Annotated section 40-30-211(a) (now renumbered as 40-30-111(a)). Id. at 211 . Thereupon, the parties are “placed back in the position they occupied prior to the guilty plea” where they could “re-enter into such a plea agreement[.]” Id. at 212 . The trial court could then “conduct another plea hearing and enter a new judgment of conviction, explicitly reserving the certified questions of law.” Id. Thus, Boyd stands for the proposition that the post-conviction court cannot accept an agreement of the parties to bypass the statutory requirements of the Post-Conviction Procedure Act to amend a final judgment of conviction. Because the AO in this case stated that Petitioner’s claims were waived and dismissed, the post-conviction court never made a finding of a constitutional violation as required to grant relief under the Post-Conviction Procedure Act. Indeed, the amended judgment states that it was entered “in consideration of potential unconstitutional conviction and sentence” (emphasis added). Without finding that Petitioner’s conviction or sentence were constitutionally infirm, the post-conviction court did not have the authority to vacate Petitioner’s original judgment under Tennessee Code Annotated section 40-30-111(a). Thus, because Petitioner’s original judgment was never vacated, it remained final, and the post-conviction court had no jurisdiction to amend it, despite the agreement of the parties. See Boyd, 51 S.W.3d at 210 (citing Pendergrass, 937 S.W.2d at 837 ; Moore, 814 S.W.2d at 383 ). We conclude that the proper remedy in this case is to vacate both the amended judgment and the AO, thereby placing the parties back into the positions they occupied at the time of the evidentiary hearing on August 28, 2019. See State v. Santos Macarena, No. M2005-01905-CCA-R3-CO, 2006 WL 1816326 , at *3 (Tenn. Crim. App. June 27, 2006), no perm. app. filed. Conclusion Based on the foregoing, we vacate the AO and the amended judgment. We hereby remand this case to the post-conviction court for proceedings consistent with this opinion. ____________________________________ - 21 -  TIMOTHY L. EASTER, JUDGE - 22 -

2020-11-30 23:03:35.821269+00

https://www.courts.state.hi.us/wp-content/uploads/2020/11/CAAP-19-0000540sdo.pdf

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 30-NOV-2020 11:40 AM Dkt. 110 SO NO. CAAP-XX-XXXXXXX IN THE INTERMEDIATE COURT OF APPEALS OF THE STATE OF HAWAI#I STATE OF HAWAI#I, Plaintiff-Appellee, v. MARK CHAR, Defendant-Appellant APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CASE NO. 1PC161001291) SUMMARY DISPOSITION ORDER (By: Ginoza, C.J., and Leonard and Wadsworth, JJ.) Defendant-Appellant Mark Char (Char) appeals from the Judgment of Conviction and Sentence (Judgment), entered on July 1, 2019, in the Circuit Court of the First Circuit (Circuit Court).1/ After a jury trial, Char was convicted of: (1) Attempted Murder in the Second Degree, in violation of Hawaii Revised Statutes (HRS) §§ 705-500,2/ 707-701.5,3/ and 706-656;4/ 1/ The Honorable Todd W. Eddins presided. 2/ HRS § 705-500 (2014) provides: Criminal Attempt. (1) A person is guilty of an attempt to commit a crime if the person: (a) Intentionally engages in conduct which would constitute the crime if the attendant circumstances were as the person believes them to be; or (b) Intentionally engages in conduct which, under the circumstances as the person believes them to be, constitutes a substantial step in a course of conduct intended to culminate in the person's commission of the crime. continue...  NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER (2) Assault in the Second Degree, in violation of HRS §§ 707-711(1)(a) and/or 707-711(1)(b);5/ and (3) Assault in the Third Degree, in violation of HRS §§ 707-712(1)(a) and/or 707-712(1)(b).6/ 2/ ...continue (2) When causing a particular result is an element of the crime, a person is guilty of an attempt to commit the crime if, acting with the state of mind required to establish liability with respect to the attendant circumstances specified in the definition of the crime, the person intentionally engages in conduct which is a substantial step in a course of conduct intended or known to cause such a result. (3) Conduct shall not be considered a substantial step under this section unless it is strongly corroborative of the defendant's criminal intent. 3/ HRS § 707-701.5 (2014) provides: Murder in the second degree. (1) Except as provided in section 707-701, a person commits the offense of murder in the second degree if the person intentionally or knowingly causes the death of another person. (2) Murder in the second degree is a felony for which the defendant shall be sentenced to imprisonment as provided in section 706-656. 4/ HRS § 707-656 (2014) states, in relevant part: Terms of imprisonment for first and second degree murder and attempted first and second degree murder . . . . . . . . (2) Except as provided in section 706-657, pertaining to enhanced sentence for second degree murder, persons convicted of second degree murder and attempted second degree murder shall be sentenced to life imprisonment with possibility of parole. 5/ HRS § 707-711 (2014) states, in relevant part: (1) A person commits the offense of assault in the second degree if: (a) The person intentionally or knowingly causes substantial bodily injury to another; (b) The person recklessly causes serious or substantial bodily injury to another[.] 6/ HRS § 707-712 (2014) states, in relevant part: (1) A person commits the offense of assault in the third degree if the person: continue... 2  NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER On appeal, Char contends that: (1) the Circuit Court's jury instruction on the presumption of innocence and reasonable doubt, presented in lieu of Hawai#i Pattern Jury Instructions Criminal (HAWJIC) 3.02, "was prejudicially insufficient, thus denying Char his constitutional rights to due process and a fair trial"; and (2) the State committed prosecutorial misconduct during its rebuttal closing argument when the Deputy Prosecuting Attorney (DPA) posed questions that "clearly and improperly appealed to the jury's sympathy." After reviewing the record on appeal and the relevant legal authorities, and giving due consideration to the issues raised and the arguments advanced by the parties, we affirm the Judgment for the reasons set forth below. I. Background On August 1, 2016, Char was involved in a physical altercation along the H-1 freeway following a traffic incident. He was charged with Attempted Murder in the Second Degree as to Complainant Jesther Marlang (Marlang), Assault in the Second Degree as to Complainant Deion Anunciacion (Anunciacion), and Assault in the Third Degree as to Complainant Jene Winn (Winn). At trial, the State alleged that during the altercation, Char: (1) stabbed Marlang five times, to his abdomen and the side of his body, and sliced the back of Marlang's neck and forearm; (2) stabbed one and sliced the other of Anunciacion's forearms; and (3) sliced two of Winn's fingers. Char claimed he was defending himself against two younger men, Marlang and Anunciacion, who were attacking him. On March 1, 2019, the jury found Char guilty as charged on all three counts. This appeal followed. 6/ ...continue (a) Intentionally, knowingly, or recklessly causes bodily injury to another person; or (b) Negligently causes bodily injury to another person with a dangerous instrument. 3  NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER II. Discussion A. Jury Instruction Char argues that the Circuit Court erred in substituting its own jury instruction on the presumption of innocence and reasonable doubt for HAWJIC 3.02. HAWJIC 3.02 states: 3.02 PRESUMPTION OF INNOCENCE; REASONABLE DOUBT You must presume the defendant is innocent of the charge against him/her. This presumption remains with the defendant throughout the trial of the case, unless and until the prosecution proves the defendant guilty beyond a reasonable doubt. The presumption of innocence is not a mere slogan but an essential part of the law that is binding upon you. It places upon the prosecution the duty of proving every material element of the offense charged against the defendant beyond a reasonable doubt. You must not find the defendant guilty upon mere suspicion or upon evidence which only shows that the defendant is probably guilty. What the law requires before the defendant can be found guilty is not suspicion, not probabilities, but proof of the defendant's guilt beyond a reasonable doubt. What is a reasonable doubt? It is a doubt in your mind about the defendant's guilt which arises from the evidence presented or from the lack of evidence and which is based upon reason and common sense. Each of you must decide, individually, whether there is or is not such a doubt in your mind after careful and impartial consideration of the evidence. Be mindful, however, that a doubt which has no basis in the evidence presented, or the lack of evidence, or reasonable inferences therefrom, or a doubt which is based upon imagination, suspicion or mere speculation or guesswork is not a reasonable doubt. What is proof beyond a reasonable doubt? If, after consideration of the evidence and the law, you have a reasonable doubt of the defendant's guilt, then the prosecution has not proved the defendant's guilt beyond a reasonable doubt and it is your duty to find the defendant not guilty. If, after consideration of the evidence and the law, you do not have a reasonable doubt of the defendant's guilt, then the prosecution has proved the defendant's guilt beyond a reasonable doubt and it is your duty to find the defendant guilty. In lieu of HAWJIC 3.02, the Circuit Court instructed the jury as follows: 4  NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER It is a cardinal principle of our system of justice that a person accused of a crime is presumed not to have committed the crime. Mark Char is presumed innocent unless you conclude that his guilt has been established beyond a reasonable doubt. The presumption of innocence requires the prosecution to prove every element of the offenses charged against Mark Char beyond a reasonable doubt. He does not have to prove anything. The phrase reasonable doubt does not have a technical or complicated meaning. A reasonable doubt is exactly what it is -- a doubt that is reasonable. You must use your common sense and the rational faculties and logical processes of your mind to determine whether you have a doubt that is reasonable. Be mindful that not all doubts are reasonable doubts. A doubt based upon imagination, or mere speculation or guesswork is not a reasonable doubt. A reasonable doubt is a doubt based on your reason and common sense. It arises from the evidence, or a lack of evidence, or the reasonable inferences that emerge. Through reason you must decide whether your mind is free or not free of a reasonable doubt. Proof beyond a reasonable doubt is a very high standard for the prosecution to satisfy. However, the prosecution's heavy burden does not mean it must prove the elements of a crime beyond all possible doubt or to an absolute certainty. You must not base your decision on the proposition that anything is possible or nothing is certain. If, after fair and impartial consideration of all the evidence and the law, you do not have a reasonable doubt of Mark Char's guilt, then the prosecution has proved his guilt beyond a reasonable doubt and it is your duty to find Mark Char guilty. On the other hand, if, after fair and impartial consideration of all the evidence and the law, you have a reasonable doubt of Mark Char's guilt, then the prosecution has not proved his guilt beyond a reasonable doubt and it is your duty to find Mark Char not guilty. Char first contends that the Circuit Court's instruction was prejudicially deficient because it omitted the following statement contained in HAWJIC 3.02: "The presumption of innocence is not a mere slogan but an essential part of the law that is binding upon you." Char argues that this statement "highlights that the presumption of innocence is not a phrase to be taken lightly and/or ignored" and was thus "an essential precept that should have been provided to the jury." The United States Supreme Court has explained that "the Constitution does not require that any particular form of words be used in advising the jury of the government's burden of 5  NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER proof[,]" so long as "taken as a whole, the instructions . . . correctly convey the concept of reasonable doubt to the jury." Victor v. Nebraska, 511 U.S. 1 , 5 (1994) (brackets omitted) (quoting Holland v. United States, 348 U.S. 121 , 140 (1954)). Likewise, the Hawai#i Supreme Court has stated: "It is well settled that jury instructions are to be viewed as a whole." State v. Sawyer, 88 Hawai#i 325, 335, 966 P.2d 637 , 647 (1998) (citing State v. Cullen, 86 Hawai#i 1, 8, 946 P.2d 955 , 962 (1997)). The court also has made clear that "the duty to properly instruct the jury lies with the trial court," State v. Nichols, 111 Hawai#i 327, 335, 141 P.3d 974 , 982 (2006), and deviation from HAWJIC "does not automatically result in incomplete and confusing jury instructions." Sawyer, 88 Hawai#i at 335, 966 P.2d at 647 (rejecting the defendant's argument that "deviation from HAWJIC is prejudicial per se" and noting "[t]he introduction to the instructions clearly states that 'nothing herein shall be construed as an approval by the Supreme Court of the State of Hawai#i of the substance of any of said instructions.'" (brackets omitted) (quoting HAWJIC (1991))). Here, the Circuit Court explained its use of alternative instructions in lieu of HAWJIC, as follows: I have modified or revised the Hawaii standard jury instructions. In my view a lot of the standard jury instructions are stale. They are unhelpful phrases, misleading comparisons. There's a lack of consolidation, there's redundancy. So I have attempted to craft jury instructions that are more easily understandable to the jury that will better aid the jury in their understanding of the law. Viewing the Circuit Court's instructions as a whole, we conclude that they correctly conveyed the concepts of the presumption of innocence and reasonable doubt, and sufficiently conveyed the importance of these concepts. See Sawyer, 88 Hawai#i at 335, 966 P.2d at 647 . For example, the instruction at issue included the following language: "It is a cardinal principle of our system of justice that a person accused of a crime is presumed not to have committed the crime. Mark Char is presumed innocent unless you conclude that his guilt has been established beyond a reasonable doubt." Additionally, the court 6  NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER instructed the jurors: "The presumption of innocence requires the prosecution to prove every element of the offenses charged against Mark Char beyond a reasonable doubt. He does not have to prove anything." Likewise, the court instructed: "Proof beyond a reasonable doubt is a very high standard for the prosecution to satisfy." Viewed as a whole, the court's instructions were not "prejudicially insufficient, erroneous, inconsistent, or misleading." State v. Matuu, 144 Hawai#i 510, 516, 445 P.3d 91 , 97 (2019) (quoting State v. Kassebeer, 118 Hawai#i 493, 504, 193 P.3d 409 , 420 (2008)). Char next contends that the challenged instruction was misleading because, in its last two sentences, the "'guilty' instruction comes before the 'not guilty' instruction." Char notes that in contrast, HAWJIC 3.2 "gives the 'not guilty" instruction before the 'guilty instruction.'" Char argues that by "[p]lacing the 'guilty' instruction first," the challenged instruction is "subliminally misleading and leans towards the presumption of guilt and not the presumption of innocence." Char does not cite any Hawai#i authority to support his argument, and we have found none. We note, however, that a number of courts in other jurisdictions have rejected similar claims regarding the order in which "guilty" and "not guilty" have appeared on verdict forms. See, e.g., Rowland v. State, 829 S.E.2d 81 , 89 (Ga. 2019) ("Nor did the order in which 'guilty' and 'not guilty' were listed on the verdict form, when viewed in light of the rest of the court's instructions, mislead the jury."); Commonwealth v. Pi Delta Psi, Inc., 211 A.3d 875 , 888 Pa. Super.), appeal denied, 221 A.3d 644 (Pa. 2019) (concluding that a verdict slip that listed "Guilty" before "Not Guilty" "did not infringe upon the [defendant's] right of presumed innocence" and, thus, "no Due Process violation occurred, and no appellate relief is due"); State v. Hayes, 462 P.3d 1195 , 1207 (Kan. Ct. App. 2020) ("The district court did not err by placing the guilty option above the not guilty option in the verdict form given to the jury."). 7  NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER Here, after fully explaining the presumption of innocence and the concept of reasonable doubt, the Circuit Court articulated the circumstances under which the jury had a duty to find Char "guilty," and those under which it had a duty to find him "not guilty." Viewing the instructions as a whole, we conclude that the order of the last two sentences of the challenged instruction was not "prejudicially insufficient, erroneous, inconsistent, or misleading," Matuu, 144 Hawai#i at 519, 445 P.3d at 100; nor did the instructions result in "a reasonable possibility that error might have contributed to conviction." State v. Pond, 118 Hawai#i 452, 462, 193 P.3d 368 , 378 (2008). B. Prosecutorial Misconduct At trial, toward the end of the State's rebuttal argument, the DPA stated: You also know it's not self defense because Judy Char does not get out of the red Camaro. What spouse, if they're seeing their spouse or loved one being beaten by two men, isn't going to get out and try to do something? Get out and plead with the attackers to stop, honk the horn, get out, try to flag by some motorists, flag down some motorists. Or how about she just pulls her cell phone out and calls 911, because the defendant said she had a cell phone to call 911. That makes absolutely no sense, that he's being so -- he's beaten so badly that he's got to pull out a knife and maim these men, but she doesn't call 911. It makes absolutely no sense. There's two types of people in this case. You have those folks who did nothing. Judy Char. You have other folks who did something. You have a nurse practitioner who bare handed plugged Jesther's hole where his kidney had been sliced off. You had a military man take off his uniform and wrap it around Jesther's injury. You have Kaohu Detwiler trying to desperately keep Jesther from bleeding out on the freeway. Those are the two types of people involved in this case. And so, you know, when I'm hearing -- and when I'm sitting there and I'm listening to defense counsel trying to think, you know, what -- what can I say to these people? What is going to be the most persuasive thing I can say? For Jesther and Deion, what can I say for these boys? And then, you know what, I think I realize that there's nothing I really can say, because what I have done in the time we've spent together is I've tried to recreate exactly what happened on August 1st, 2016 for you folks, in this courtroom, with 14 witnesses. 8  NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER So there's only really two questions left. Are you going to stop and help these boys? Or are you going to just pass on by? Thank you. Char contends that the questions, "Are you going to stop and help these boys? Or are you going to just pass on by?" constituted prosecutorial misconduct. He argues that these questions "appealed to the sympathy of the jury" and constituted "a request for them to use their conscience." When a defendant alleges prosecutorial misconduct, we decide: "(1) whether the conduct was improper; (2) if the conduct was improper, whether the misconduct was harmless beyond a reasonable doubt; and (3) if the misconduct was not harmless, whether the misconduct was so egregious as to bar reprosecution." State v. Udo, 145 Hawai#i 519, 534-35, 454 P.3d 460 , 475-76 (2019) (citing State v. Maluia, 107 Hawai#i 20, 25-26, 108 P.3d 974 , 979-80 (2005)); see State v. Tuua, 125 Hawai#i 10, 14, 250 P.3d 273 , 277 (2011) ("This court evaluates claims of improper statements by prosecutors by first determining whether the statements are improper, and then determining whether the misconduct is harmless." (citing State v. Kiakona, 110 Hawai#i 450, 458, 134 P.3d 616 , 624 (App. 2006)). Similarly, because Char did not object to the alleged misconduct during trial, "we must determine whether the prosecutor's comment[s] [were] improper and, if so, whether such misconduct constituted plain error that affected [Char's] substantial rights." State v. Clark, 83 Hawai#i 289, 304, 926 P.2d 194 , 209 (1996) (citing State v. Marsh, 68 Haw. 659 , 661, 728 P.2d 1301 , 1302 (1986)); see State v. Wakisaka, 102 Hawai#i 504, 513, 78 P.3d 317 , 326 (2003); HRPP Rule 52(b). In evaluating whether a prosecutor's conduct was proper, we consider "the nature of the challenged conduct in relation to our criminal justice system generally and the special role of the prosecutor specifically." Udo, 145 Hawai#i at 535, 454 P.3d at 476 (quoting State v. Underwood, 142 Hawai#i 317, 325, 418 P.3d 658 , 666 (2018)). The supreme court has stated: 9  NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER [A] prosecutor, during closing argument, is permitted to draw reasonable inferences from the evidence and wide latitude is allowed in discussing the evidence. It is also within the bounds of legitimate argument for prosecutors to state, discuss, and comment on the evidence as well as to draw all reasonable inferences from the evidence. Clark, 83 Hawai#i at 304, 926 P.2d at 209 (citations omitted). In determining whether a prosecutor's statements during closing were improper, we look at the statements in context, considering the argument in its entirety. See State v. Mars, 116 Hawai#i 125, 142, 170 P.3d 861 , 878 (App. 2007); see also State v. Bruce, 141 Hawai#i 397, 407-08 411 P.3d 300 , 310-11 (2017)(concluding that, while viewed in a vacuum, the prosecutor's comments during closing argument could be viewed as improper, considered in context, the comments were not improper "because they did not detract from the main point of the otherwise meritorious argument" based on the evidence); State v. Pasene, 144 Hawai#i 339, 369, 439 P.3d 864 , 894 (2019) ("in context, the DPA's statements entreated the jury to use their life experiences to judge the credibility of the witness' testimony, rather than asking the jury to put themselves in the witnesses' position"). Here, viewed in isolation, the questions at issue can be construed as an appeal to the jury's sympathy. The questions, however, were not posed in isolation. Immediately prior to raising the questions, the State argued against Char's self-defense claim by highlighting the alleged inconsistencies between his testimony and his wife's alleged actions during the incident, and by contrasting those actions with those of the witnesses who stopped to render aid or who contacted the police. The State also referenced its attempt to recreate the incident for the jury through its fourteen witnesses. It was in this context that the State then posed the two questions at issue. Considering the argument in its entirety, we conclude that these questions were not a bald request for sympathy, but, rather, a rhetorical device to urge the jury to reject Char's self-defense claim and to return a guilty verdict based on the evidence presented at trial. In sum, the two questions at issue did not rise to the level of misconduct. See Bruce, 141 Hawai#i at 408 411 P.3d at 311. 10  NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER Having reached this conclusion, we need not determine whether the alleged misconduct was harmless beyond a reasonable doubt or so egregious as to bar reprosecution. See State v. Mara, 98 Hawai#i 1, 16, 41 P.3d 157 , 172 (2002); State v. Roqan, 91 Hawai#i 405, 423, 984 P.2d 1231 , 1249 (1999). For the same reason, we do not reach the issue of plain error. See Clark, 83 Hawai#i at 305, 926 P.2d at 210 . III. Conclusion For these reasons, we affirm the Judgment of Conviction and Sentence, entered on July 1, 2019, in the Circuit Court of the First Circuit. DATED: Honolulu, Hawai#i, November 30, 2020. On the briefs: /s/ Lisa M. Ginoza Harrison L. Kiehm Chief Judge for Defendant-Appellant. Chad M. Kumagai, /s/ Katherine G. Leonard Deputy Prosecuting Attorney, Associate Judge City & County of Honolulu, for Plaintiff-Appellee. /s/ Clyde J. Wadsworth Associate Judge 11

2020-11-30 23:12:55.019052+00

http://www.tsc.state.tn.us/sites/default/files/williamscraigopn.pdf

11/20/2020 IN THE COURT OF APPEALS OF TENNESSEE AT JACKSON September 15, 2020 Session CRAIG WILLIAMS ET AL. v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY ET AL. Appeal from the Chancery Court for Shelby County No. CH-14-0777 JoeDae L. Jenkins, Chancellor ___________________________________ No. W2019-00851-COA-R3-CV ___________________________________ Appellant was injured in an accident involving a vehicle owned by Lexus of Memphis and insured under a policy issued by Appellee insurance company. The at-fault driver entered into a rental agreement with Lexus of Memphis for use of the subject vehicle. After a jury entered a verdict in favor of Appellant against the at-fault driver, Appellant sought to collect the judgment under a policy issued by Appellee. The trial court held that the at-fault driver, as a renter of the vehicle, was exempt from coverage under the policy. Discerning no error, we affirm. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed and Remanded KENNY ARMSTRONG, J., delivered the opinion of the court, in which J. STEVEN STAFFORD, P.J., W.S., and CARMA DENNIS MCGEE, J., joined. Matthew V. Porter, Memphis, Tennessee, for the appellants, Craig Williams and Melissa Williams. M. Clark Spoden and Kathryn Grundy, Nashville, Tennessee, and Timothy M. Thornton, Encino, California, for the appellee, Tokio Marine America Insurance Company. OPINION I. Background The underlying car accident occurred on May 18, 2008. Craig Williams was seriously injured when his vehicle collided with a vehicle driven by Kreston Smith. The vehicle driven by Mr. Smith was owned by Avenir Partners d/b/a Lexus of Memphis (“Lexus of Memphis”). On May 13, 2008, Mr. Smith brought his personal vehicle to Lexus of Memphis for service. While at the dealership, Mr. Smith signed a written “Rental Agreement” to drive a 2008 Lexus ES Sedan. After signing the Rental Agreement, Mr. Smith saw a 2008 Lexus RX 350 SUV in the queue of “loaner” vehicles. Mr. Smith advised a Lexus of Memphis employee that he was considering purchasing a used Lexus SUV vehicle and inquired whether he could drive the RX 350 SUV instead of the 2008 Lexus ES 350 Sedan. Lexus of Memphis agreed to Mr. Smith’s request to substitute the RX 350 SUV for the ES 350 Sedan and provided Mr. Smith a yellow copy of the written Rental Agreement with the vehicle reference number (436) for the RX 350 SUV substituted for the vehicle reference number (446) for the ES 350 Sedan. On this yellow copy, in the box marked “Vehicle Number,” the original typewritten number “446” has a line drawn through it (i.e., “446”) and the handwritten number “436” with a circle around it is written in the same box. Mr. Smith was driving the RX 350 SUV (Lexus of Memphis vehicle number 436) at the time of the subject accident. After Mr. Smith left the dealership in the RX 350 SUV, a Lexus of Memphis employee wrote the word “SWAP” and the number “436” at the top of the original white written Rental Agreement, which Mr. Smith had signed prior to leaving the dealership. In addition, after Mr. Smith left, Lexus of Memphis made certain entries into its internal computer system to confirm that the vehicle used by Mr. Smith was the Lexus RX 350 SUV. Following the accident, Mr. Williams and his wife Melissa (together, “Appellants”) filed suit against Mr. Smith and others. On February 7, 2014, a jury found that Mr. Smith was 100% at fault for the accident. The jury returned verdicts in favor of Mr. Williams in the amount of $2,000,000.00 and in favor of Mrs. Williams in the amount of $50,000.00. At the trial, Mr. Smith testified that he understood he was using the RX 350 SUV because it was part of the “loaner” program. In his deposition, Mr. Smith conceded that his operation of the RX 350 SUV was governed by the Rental Agreement. The jury rendered a verdict in favor of Lexus of Memphis, finding that Lexus of Memphis was not liable for the injuries sustained by Mr. Williams. As is relevant to this appeal, the jury found that Mr. Smith was not test driving the RX 350 SUV at the time of the accident. Mr. Smith subsequently filed bankruptcy. The instant appeal arises from Appellants’ complaint for declaratory judgment, which was filed on May 15, 2014 in the Shelby County Chancery Court (“trial court”). The complaint was filed against several corporate defendants, some of which were subsequently dismissed. The remaining defendant, Tokio Marine American Insurance Co. (“Tokio”), is the Appellee in this appeal. Tokio issued three automobile policies (i.e., Primary Policy, Rental Excess Policy, and Excess Policy) to Toyota Motor North America, Inc. for the policy period of April 1, 2008 to April 1, 2009. In said policies, the Named Insured Endorsement as amended includes “All Participating Toyota and Lexus Dealerships and Subsidiaries.” Lexus of Memphis was a named insured under these policies. By their complaint, Appellants sought a determination as to whether Mr. Smith -2- was an insured under any of the policies issued by Tokio. After the trial court denied Tokio’s motion for summary judgment, the declaratory judgment action proceeded to hearing on December 4, 2018. As discussed in further detail below, by order of April 17, 2019, the trial court held that: (1) the Tokio policies were neither ambiguous nor illusory; (2) the exclusions in the policies were not precluded under the Tennessee Financial Responsibility Law of 1977; (3) “[a]s a permissive user of the service loan car under a written rental agreement, Kreston Smith was not an additional insured under the Primary Policy, Rental Excess Policy, or Excess Policy;” and, as such, (4) the Tokio policy would not cover the judgment entered against Mr. Smith in the underlying jury case. Appellants appeal. II. Issues Appellants raise four issues for review as stated in their brief: 1. Whether there was a valid rental agreement involving the vehicle at issue in the underlying accident. 2. Whether the relevant insurance policies are patently ambiguous. 3. Whether the relevant insurance policies appear to be illusory. 4. Whether the insurance policies run afoul of Tennessee statutory laws. III. Standard of Review This case involves a dispute over the scope of coverage under an insurance contract, which presents a question of law involving the interpretation of contractual language. Clark v. Sputniks LLC, 368 S.W.3d 431 , 44 (Tenn. 2012); see also Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303 , 308 (Tenn. 2009) (“The interpretation of a written agreement is a question of law and not of fact.”). A trial court’s conclusions of law are subject to de novo review with no presumption of correctness. See Regions Bank v. Thomas, 532 S.W.3d 330 , 336 (Tenn. 2017). Issues related to the admission or exclusion of evidence at trial are reviewed for an abuse of discretion. Id. (quoting Otis v. Cambridge Mut. Fire Ins. Co., 850 S.W.2d 439 , 442 (Tenn. 1992)). Courts interpret insurance policies using the same tenets that guide the construction of any other contract. Garrison v. Bickford, 377 S.W.3d 659 , 664 (Tenn. 2012) (citing Am. Justice Ins. Reciprocal v. Hutchison, 15 S.W.3d 811 , 814 (Tenn. 2000)). Thus, the terms of an insurance policy “‘should be given their plain and ordinary meaning, for the primary rule of contract interpretation is to ascertain and give effect to the intent of the parties.’” Id. (quoting Clark, 368 S.W.3d at 441). The insured has the burden to prove that a loss falls within the insuring agreement. Mass. Mut. Life Ins. v. -3- Jefferson, 104 S.W. 3d 13 , 22 (Tenn. Ct. App. 2002). An insurance company has the burden of proving that an exclusion in its policy applies to a claim. Interstate Life & Accident Ins. Co. v. Gammons, 408 S.W.2d 397 , 399 (Tenn. Ct. App. 1966). Once an insurance company demonstrates that an exclusion applies, the burden shifts to the insured to demonstrate that its claim fits within an exception to the exclusion. Standard Fire Ins. Co. v. Chester O’Donley & Assocs., 972 S.W.2d 1 , 8 (Tenn. Ct. App. 1998). The insuring agreement sets the outer limits of an insurer’s contractual liability. If coverage cannot be found in the insuring agreement, it will not be found elsewhere in the policy. Id. at 7 . “Exclusions help define and shape the scope of coverage, but they must be read in terms of the insuring agreement to which they apply. Exclusions can only decrease coverage; they cannot increase it.” Id. at 7-8 . Exclusions should not be construed broadly in favor of the insurer, nor should they be construed so narrowly as to defeat their intended purpose. Id. at 8 . IV. Rental Agreement As discussed above, while at the Lexus of Memphis dealership, Mr. Smith signed a “Rental Agreement.” In its April 17, 2019 order, the trial court held that, “Mr. Smith was operating the Subject Auto under a written rental agreement and was thus excluded from coverage by the Amendatory Endorsement to Tokio Marine’s primary policy.” We will discuss the specific provisions of the insurance policies below. However, as an initial matter, Appellants challenge the trial court’s holding that Mr. Smith was operating the RX 350 SUV under a written Rental Agreement. As noted above, after signing the rental agreement to drive the ES 350 Sedan, Mr. Smith requested to change the “loaner” vehicle to the RX 350 SUV. Lexus of Memphis obliged, and the Rental Agreement was modified with the RX 350 SUV number 436 substituted for the ES 350 Sedan number 446. This change was noted on the yellow copy of the Rental Agreement that was given to Mr. Smith before he left the dealership. On appeal, Appellants contend that because Lexus of Memphis either failed to execute a new Rental Agreement specifying that Mr. Smith was loaned the RX 350 SUV, or because Lexus of Memphis unilaterally changed the vehicles on the Rental Agreement without Mr. Smith’s consent, there is no written agreement governing Mr. Smith’s use of the RX 350 SUV. This argument rests on whether Mr. Smith and Lexus of Memphis achieved a modification of the original Rental Agreement. Concerning that question, the trial court held that: 28. Kreston Smith then drove the RX 350 off the Lexus of Memphis dealership lot with the yellow copy of the written rental agreement with the reference number crossed out for the ES 350 and the vehicle reference number for the RX 350 handwritten on the yellow copy of the rental agreement. 29. In so doing, Kreston Smith assented to the modification memorialized in writing on the yellow copy of the written rental agreement by driving off the dealership lot with the Lexus RX 350. -4- In reaching its conclusion that Mr. Smith assented to the modification of the Rental Agreement, the trial court relied on evidence admitted in the underlying lawsuit, to-wit: 71. At the trial in the Underlying Case, Mr. Smith testified he had visited Lexus of Memphis sometime prior to the May 13, 2018 visit to inquire about a possible purchase of a used Lexus SUV vehicle. However, Lexus of Memphis disputes this account. Mr. Smith further testified that on the day of the Subject Accident, and after signing the Rental Agreement, he advised a Lexus of Memphis employee—who served as a valet in the garage that he was considering purchasing a used Lexus SUV vehicle. Mr. Smith saw a Lexus RX 350 in the queue of vehicles lined up to be used as loaners by Lexus of Memphis customers, and asked to drive a Lexus RX 350 SUV instead of the ES 350 Sedan. The Lexus of Memphis employee testified at the trial (i) that he did not recall being told that Mr. Smith was considering buying a used Lexus SUV, (ii) that no customer had ever asked to use as loaner car to test-drive, and (iii) that he was not authorized to allow someone to road-test a loaner vehicle. Shortly after signing the Rental Agreement, Lexus of Memphis provided Mr. Smith the Lexus RX 350 SUV and gave him a yellow copy of the written Rental Agreement. The vehicle reference number (436) for the RX 350 was substituted for the vehicle reference number (446) for the ES 350 sedan. Agreed Trial Exhibit 7. 72. No separate written Rental Agreement for this SUV was tendered to Mr. Smith, but Mr. Smith was given a yellow copy of the original Rental Agreement. On this yellow copy, in the box marked “Vehicle Number,” the original typewritten number “446’ has a line drawn through it . . . and the handwritten number “436” with a circle around it is written in. 73. The number 446 is the identification number used by Lexus of Memphis to identify the ES 350 Sedan while the number 436 is the number used to identify the RX 350 SUV. Trial Exhibit 13, Stip. Fact 14. *** 76. Mr. Smith testified at trial that he understood he was in th[e] RX 350 because it was part of the Loaner Program that he signed up for by signing the Rental Agreement. Mr. Smith also testified in his deposition in this case that he assumed his operation of the RX 350 was governed by the Rental Agreement that he signed. Trial Exhibit 13, Stip. Fact 12. On appeal, Appellants contend that the trial court erred in admitting the stipulated evidence from the jury trial concerning the facts surrounding Mr. Smith and Lexus of Memphis’ agreement to swap the ES 350 Sedan for the RX 350 SUV. In the absence of -5- the foregoing parol evidence, Appellants contend that there is insufficient evidence to support the trial court’s conclusion that the original Rental Agreement was successfully modified to cover Mr. Smith’s use of the RX 350 SUV. In its order, the trial court first held that “because [Appellants] were not parties to the written rental agreement between Kreston Smith and Lexus of Memphis, [Appellants] may not use the parol evidence rule to exclude extraneous evidence regarding [the Rental] [A]greement.” The trial court further held that, “Parol evidence is admissible to explain such conduct [i.e., modification of the Rental Agreement], and therefore, [Appellants’] objections are overruled.” We first address the trial court’s decision to allow parol evidence concerning the changes to the Rental Agreement. Under Tennessee law, the parol evidence rule “‘applies only between the parties to the written contract and strangers cannot raise the question of the admissibility of parol evidence to vary a written contract.’” Consumers Ins. USA v. Smith, No. E2002-00724-COA-R3-CV, 2002 WL 31863300 , at *6 (Tenn. Ct. App. Dec. 23, 2002) (quoting Evans v. Tillett Bros. Constr. Co., 545 S.W.2d 8 , 12 (Tenn. Ct. App. 1976)). As such, Tennessee courts have consistently disallowed use of the parol evidence rule by an entity or individual that was not a party to the written contract at issue. See, e.g., Lancaster v. Ferrell Paving, 397 S.W.3d 606 , 613 (Tenn. Ct. App. 2011) (holding that an insurance company, who was not a party to the disputed contract, could not use the parol evidence rule to exclude facts surrounding an oral modification of the disputed contract, which was made by and between a security services company and a property owner); Consumers Ins. USA, 2002 WL 3186330 at *6. (holding that an insurer could not block the admission of evidence concerning a disputed date on a bill of sale entered by and between the insured and a third party); Evans, 545 S.W.2d at 12 (citations omitted) (“The parol evidence rule applies only between the parties to the written contract and strangers cannot raise the question of the admissibility of parol evidence to vary a written contract.”); Isabell v. Aetna Insur. Co., Inc., 495 S.W.2d 821 (Tenn. Ct. App. 1972) (holding that the parol evidence rule could not be used to exclude extraneous evidence regarding a written contract between a builder and a property owner). In each of the foregoing cases, the gravamen of the ruling concerning the applicability of the parol evidence rule rests on the fact that the parties attempting to use the parol evidence were “strangers” (i.e., not parties) to the contract at issue. Here, the disputed Rental Agreement was made by and between Mr. Smith and Lexus of Memphis. Neither appellant is a party to this agreement. As such, Appellants may not use the parol evidence rule to exclude evidence regarding the Rental Agreement between Mr. Smith and Lexus of Memphis. The trial court did not err in overruling Appellants’ objection to the admission of parol evidence. Although Appellants may not rely on the parol evidence rule to exclude evidence from the underlying lawsuit, this fact does not, ipso facto, mean that parol evidence was properly admitted in this case. Tennessee courts have held that parol evidence can be used to show acceptance of terms in a contract and to define non-obvious terms in an agreement. See, e.g., Jones v. Brooks, 696 S.W.2d 885 , 886 (Tenn. 1985) (finding that -6- parol evidence could be considered where a contract provision was subject to two reasonable interpretations); Hillard v. Franklin, 41 S.W.3d 106 , 112 (Tenn. Ct. App. 2000) (holding that parol evidence can be used to show acceptance); Coble Systems, Inc. v. Gifford Co., 627 S.W.2d 359 , 362 (Tenn. Ct. App. 1981) (noting that parol evidence may be used to clarify latent ambiguities in written agreements); Patterson v. Davis, 192 S.W.2d 227 , 229 (Tenn. Ct. App. 1945) (noting that acceptance may be demonstrated by parol evidence even for contracts where the statute of frauds applies and a writing is required). Furthermore, this Court has explained that, although the parol evidence rule prevents contracting parties from using extraneous evidence to alter or vary the terms of an integrated, unambiguous contract[,] [s]ee GRW Enters., Inc. v. Davis, 797 S.W.2d 606 , 610-11 (Tenn.Ct.App.1990) (citing Jones v. Brooks, 696 S.W.2d 885 , 886 (Tenn.1985))[,] [t]he rule does not . . . prevent the use of extraneous evidence to prove a separate agreement made after the written one. Id. (citing Brunson v. Gladish, 174 Tenn. 309 , 125 S.W.2d 144 , 147 (Tenn.1939)). Parol evidence is admissible to prove a subsequent modification to a written contract, as it is itself a separate contract. Id. In re Estate of Nelson, 2007 WL 851265 , at *17; see also Smith v. Hi-Speed, Inc., 536 S.W.3d 458 , 471 (Tenn. Ct. App. 2016) (allowing evidence of conduct occurring after the execution of a written lease agreement to show the basis for modification of a written contract) (emphasis added); Schwartz v. Diagnostix Network All., LLC, No. M2014- 00006-COA-R3-CV, 2014 WL 6453676 , at *10 (Tenn. Ct. App. Nov. 17, 2014) perm. app. denied (Tenn. April 10, 2015) (citing Brunson v. Gladish, 125 S.W.2d 144 , 147 (Tenn. 1939)) (“[E]vidence of an agreement made subsequent to the execution of the written agreement, even though it may have the effect of adding to, changing, modifying, or altogether abrogating the parties’ written agreement, is not barred by the parol evidence rule.”). We can glean from the foregoing authority that parol evidence is admissible to: (1) show a party’s acceptance of the terms of a contract; (2) evidence a modification of the original agreement; and (3) clarify vague or ambiguous terms in the contract. In the instant case, parol evidence was properly admitted to: (1) establish Mr. Smith’s acceptance of the Rental Agreement; (2) evidence the modification of the original Rental Agreement to include the RX 350 SUV instead of the ES 350 Sedan; and (3) clarify the ambiguity concerning the numbers Lexus of Memphis used to reference the RX 350 SUV and the ES 350. Concerning Mr. Smith’s acceptance of the Rental Agreement, the evidence establishes that Mr. Smith received a yellow copy of the written Rental Agreement. The parol evidence also establishes that the number 446 (i.e., Lexus’ number for the ES 350 Sedan) was struck and the number 436 (i.e., Lexus number for the RX 350 SUV) was -7- written on the yellow copy of the Rental Agreement. Mr. Smith left the Lexus dealership in the RX 350 SUV. Parol evidence establishes that Mr. Smith had in his possession the modified yellow copy of the rental agreement when he left the dealership. Furthermore, Mr. Smith testified that he understood that his use of the RX 350 SUV was governed by the Rental Agreement. Based on this evidence, the trial court held that, “Kreston Smith assented to the modification memorialized in writing on the yellow copy of the written rental agreement by driving off the dealership lot with the Lexus RX 350 . . . .” Concerning the modification of the Rental Agreement to cover the RX 350 SUV, “[a] modification to a contract is a change to one or more contract terms which introduces new elements into the details of the contract, or cancels some of them, but leaves the general purpose and effect of the contract undisturbed.” Lancaster, 397 S.W.3d at 611. In Tennessee, parties to a written contract may modify their agreement in writing or orally, so long as both parties consent to such modifications. Id. A party’s agreement to a modification may be implied from a course of conduct and need not be in writing. Id. at 611; see also R. Mills Contractors, Inc., v. WRH Enterprises, LLC, 93 S.W.3d 861 , 866 (Tenn. Ct. App. 2002); Jerry T. Beech Concrete Contractors, Inc. v. Powell Builders, Inc., 2001 WL 487574 , at *2 (Tenn. Ct. App. May 9, 2001). Here, it is undisputed that Mr. Smith and Lexus of Memphis entered into a written Rental Agreement with regard to the 2008 Lexus ES Sedan, Vehicle Number 446. This was a written Rental Agreement prepared by the service advisor and signed by Kreston Smith. Lexus of Memphis retained the white original of the written Rental Agreement and gave Mr. Smith the yellow copy of the written Rental Agreement. Mr. Smith then requested to drive the RX 350 SUV. A Lexus of Memphis employ took the sedan keys back, gave Mr. Smith the keys to an SUV, and crossed out, on the yellow copy of the Rental Agreement, the reference number of the sedan – “446” – and wrote in “436” immediately beside the crossed out reference in the “the vehicle number” portion of the yellow copy of the Rental Agreement. Mr. Smith then left the dealership in the RX 350 SUV with the modified yellow copy of the Rental Agreement. After Mr. Smith left the dealership, Lexus of Memphis recorded the exchange of vehicles with the notation “SWAP 436” on the signed original of the Rental Agreement (i.e., the white copy) and noted the modification in its computer records. On appeal, Appellants contend that any modification of the Rental Agreement was made unilaterally by Lexus of Memphis, and, thus, no written rental agreement exists for the RX 350 SUV. This argument is not supported by the evidence. Based on the parties’ conduct, Mr. Smith requested the RX 350 SUV and took the yellow copy of the Rental Agreement when he left the dealership in that vehicle. The mere fact that Mr. Smith left the dealership in the RX 350 SUV indicates his consent to drive that vehicle. Furthermore, his testimony that his use of the “loaner” vehicle was governed by the Rental Agreement indicates his consent to the inclusion of the RX 350 SUV on that document. The fact that Lexus of Memphis entered the notation “Swap 436” on its copy of the Rental Agreement -8- and also changed the vehicle in its computer system does not evidence a unilateral modification of the Rental Agreement. Rather, these actions constitute Lexus of Memphis’ internal bookkeeping to evidence Lexus of Memphis and Mr. Smith’s agreement to modify the Rental Agreement. Parol evidence of the requested modification is admissible because it occurred after Mr. Smith signed the original Rental Agreement. See Schwartz, 2014 WL 6453676 , at *10; GRW Enter., 797 S.W.2d at 610; Hi-Speed, Inc., 536 S.W.3d at 471. Finally, as discussed above, the Rental Agreement that Mr. Smith signed references number 446 for the Lexus ES 350 Sedan. The yellow copy of the Rental Agreement, which was given to Mr. Smith, has the number 446 marked out, with vehicle reference 436 handwritten in its place. The yellow copy of the Rental Agreement does not reference the specific vehicles to which these numbers refer. Accordingly, the written Rental Agreement contains a latent ambiguity, which may be resolved through parol evidence. A “latent ambiguity” that may be removed by parol evidence is one resulting not from the words themselves, but from the “ambiguous state of extrinsic circumstances to which the words of the instrument refer, and which is susceptible of explanation by the mere development of extraneous facts, without altering or adding to the written language . . . .” Cobble Systems, Inc. v. Gifford Co., 627 S.W.2d 359 , 362 (Tenn. Ct. App. 1981) (citing Teague v. Sowder, 114 S.W. 484 (Tenn. 1908)). Because Lexus of Memphis’ use of numbers to identify its vehicles presents a latent ambiguity in the context of this case, the trial court properly overruled Appellants’ objection regarding the admissibility of parol evidence to determine that the use of “436” on the Rental Agreement was a reference to the RX 350 SUV that Mr. Smith was driving at the time of the accident. See Jones 696 S.W.2d at 886 ; In re Estate of Nelson, 2007 WL 851265 ; Gifford Co., 627 S.W.2d at 362 . Based on the foregoing analysis, the trial court did not err in allowing parol evidence concerning Mr. Smith and Lexus of Memphis’ modification of the original signed Rental Agreement to substitute the RX 350 SUV for the ES 350 Sedan. Following modification, the Rental Agreement clearly covered the RX 350 SUV, and Mr. Smith was using that vehicle as a renter at the time of the subject accident. We now turn to the question of whether the Tokio insurance policies cover Mr. Smith under these circumstances. V. Tokio Insurance Policies As noted above, Tokio issued three policies to Toyota Motor North America, Inc. for the relevant policy period of April 1, 2008 to April 1, 2009. The Named Insured Endorsement (as amended) includes, “All Participating Toyota and Lexus Dealerships and Subsidiaries.” It is undisputed that Lexus of Memphis is a named insured under the Tokio policies. We now turn to the provisions of each of the subject policies: -9-  A. The Primary Policy (CA 859000403) The Primary Policy contains both a Common Declarations Page and a Business Auto Form Declarations page. Section II of the Business Auto Policy states that Tokio will pay “all sums an insured legally must pay as damages to which the insurance applies caused by an accident and resulting from the ownership, maintenance or use of a covered auto.” The Business Auto Policy defines “covered auto” (for liability coverage) as, “Only those ‘autos’ you own that are ‘enrolled’ in the TOYOTA RENT A CAR (TRAC) SYSTEM and the LEXUS CUSTOMER CONVENIENCE SYSTEM (LCCS).” (Emphases in original). “You” is defined as the Named Insured and, so, would include Lexus of Memphis. “Enrolled” is defined, in part, as a vehicle listed in the monthly LCCS VIN tape. It is undisputed that the RX 350 SUV at issue here was enrolled in the LCCS system. Under the “Who is An Insured” section, the Business Auto Policy provides: The following are “insureds”: a. You for any covered “auto” b. Anyone else while using with your permission a covered “auto” you own, hire or borrow except: (1) The owner or anyone else from whom you hire or borrow a covered “auto”. This exception does not apply if the covered “auto” is a “trailer” connected to a covered “auto” you own. (2) Your “employee” if the covered “auto” is owned by that “employee” or a member of his or her household. (3) Someone using a covered “auto” while he or she is working in a business of selling, servicing, repairing, parking or storing “autos” unless that business is yours. (4) Anyone other than your “employees,” partners (if you are in a partnership), member (if you are in a limited liability company), or a lessee or borrower of any of their “employees,” while moving property to or from a covered “auto.” (5) A partner (if you are a partnership), or a member (if you are a limited liability company) for a covered “auto” owned by him or her or a member of his or her household. (emphasis added). In its April 17, 2019 order, the trial court held that these “five exceptions do not apply to Kreston Smith.” From the plain language of the policy, we agree. However, the Amendatory Endorsement Form, CA9 99 001 07 97, at section B, adds a sixth exception to the foregoing list of covered permissive users. The additional language excepts from coverage, “Anyone who rents a covered ‘auto’ from a named insured under a written ‘rental agreement’ or operates, drives or in any way uses a - 10 - covered ‘auto’ rented under such ‘rental agreement’.” The Amendatory Endorsement Form defines the term “Rental Agreement,” in relevant part, as “an automobile rental or lease agreement whereby a named insured rents an auto to a renter for a term less than 30 days. . . .” The Amendatory Endorsement further provides that: For “bodily injury,” death or “property damage” assumed by a named insured under a “rental agreement” for rental of an auto in a named insured’s daily “auto” rental business, when the “rental agreement” is in compliance with all the terms and conditions of the rental agreement. Appellants cite the foregoing provision, arguing that this “provision states that a renter, under a rental agreement, is covered.” Accordingly, Appellants argue that this provision [u]nequivocally, on its face . . . states that a renter, under a rental agreement, is covered. Tokio insists that Mr. Smith was a renter under the rental agreement. But, Tokio also contends that the foregoing provision, placed in context actually means that a renter is not covered. Its very argument renders the amendatory endorsement inherently ambiguous. Appellants further argue that the Primary Policy is ambiguous based on the fact that “the exclusionary sections . . . are found in separate areas of Tokio’s primary insurance policy and are not clearly or conspicuously made available to both parties of the insurance agreement. This is because the amendments are not integrated into the policy itself, and contain ambiguous and contradictory language.” This argument ignores the fact that the Amendatory Endorsement specifically states that the additional exception, i.e., for “[a]nyone who rents a covered ‘auto’ from a named insured under a written ‘rental agreement’ or operates, drives or in any way uses a covered ‘auto’ rented under such ‘rental agreement’,” should be “added” to “subparagraph b,” of the Primary Policy. As set out above, subparagraph b of the Primary Policy sets out five enumerated exceptions. Based on the instruction in the Amendatory Endorsement, i.e., that the additional exception be added at “subparagraph b,” the only interpretation is that the additional exception for renters is meant to be added to this list of exceptions. The trial court held that: [t]he interpretation argued by [Appellants] is simply implausible. It would require the Court to ignore specific language in the Amendatory Endorsement that directs the reader where to insert the new provision. The Amendatory Endorsement specifically states that the language is “added” to “subparagraph b,” which says that “[a]nyone else while using with your permission a covered ‘auto’ you own, hire or borrow except . . . .” [Appellants] argument would eliminate language that appears plainly in the policy and such construction is not reasonable or warranted. - 11 - (footnote omitted; emphasis in original). As such, the trial court held that, “The plain meaning of Tokio Marine’s Primary Policy [] is that the Amendatory Endorsement added an additional provision excepting renters under written Rental Agreements from coverage.” From our review of the plain language of the policy, we agree. The Amendatory Endorsement clearly expands the exclusions provision of the Primary Policy to also exclude “[a]nyone who rents a covered ‘auto’ from a named insured under a written ‘rental agreement’ or operates, drives or in any way uses a covered ‘auto’ rented under such ‘rental agreement.’” In this regard, the policy is neither illusory nor ambiguous. Having determined above that Mr. Smith was operating the RX 350 SUV under the terms of the Rental Agreement, he is clearly excepted from coverage under the Primary Policy’s exclusion for persons “who rent[] a covered auto . . . under a written rental agreement.” In short, Mr. Smith was a renter and not a covered permissive user of the subject vehicle. Accordingly, we affirm the trial court’s holding that Mr. Smith “falls within the scope of [the exclusion provisions of the Primary Policy] because Mr. Smith rented a covered auto under the terms of a written rental agreement that was orally modified by the parties [to cover the RX 350 SUV]. . . . Therefore, Mr. Smith is not a covered permissive user under this policy provision.” B. Rental Excess Policy (CA 859000503) In relevant part, the Rental Excess Policy provides: A. In addition to all of the exclusions contained in the “primary insurance,” this insurance does not apply to any of the following: 1. The “renter” or a permitted user of a covered “auto” under the “rental agreement.” 2. Any other person or organization using a covered “auto” with the permission of the “renter,” including any liability imposed upon the “renter” or a permissive user when such liability arises out of the use, possession or control of a covered “auto” by a “renter” or permissive user. Like the Primary Policy, the Rental Excess Policy specifically excludes “renter[s],” who are operating a covered auto under a “rental agreement.” For the reasons discussed above, Mr. Smith meets the criteria for this exclusion. In addition, the Excess Rental Policy provides that, “We will pay all sums an ‘insured’ legally must pay as damages in excess of the ‘primary insurance’ . . . . We will not provide coverage if the ‘loss’ is not covered under the ‘primary insurance.’” Relying on these provisions, the trial court held that Mr. Smith, as a renter, was not only excluded under the plain language of the Rental Excess Policy, but also concluded that because “Mr. Smith is not covered under the - 12 - Primary Policy, there is no coverage under the Rental Excess Policy.” We agree. The language in the Rental Excess Policy is unambiguous. Mr. Smith, a renter, is specifically excluded from coverage. Furthermore, having determined above that Mr. Smith is excluded from coverage under the Primary Policy, he is also excluded under the limiting language of the Rental Excess Policy, i.e., “We will not provide coverage if the ‘loss’ is not covered under the ‘primary insurance.’” C. Excess Policy (E 010 2072) The Excess Policy provides, in relevant part: The following is added to the Additional Exclusions: The policy does not apply to: Liability of any rental customer of a rented auto whether or not said rental customer is operating the auto with the permission of a named insured. (emphasis in original). The Excess Policy further provides that “[e]xcept as may be otherwise stated in this Excess Policy, the coverage provided by this Excess Policy is subject to all the agreements, limitations, exclusions, conditions . . . of the ‘underlying insurance.’” Having determined that Mr. Smith is excluded from coverage under both the Primary Policy and the Rental Excess Policy, under the plain language of the Excess Policy, he is also specifically excluded from coverage thereunder. V. Compliance with Tennessee Financial Responsibility Law As discussed above, while at the Lexus of Memphis dealership, Mr. Smith signed a “Rental Agreement.” Paragraph 5 on the reverse side of the Rental Agreement states: Vehicle Insurance. We have procured a Rental Auto Coverage Policy of Insurance which provides coverage for damages because of bodily injury or property damage caused by an accident resulting from the use of the Vehicle by an authorized driver, as provided in Paragraph 1, who has not engaged in a prohibited use, as provided in Paragraph 2, at the time of the loss (and not otherwise). THE LIMITS OF LIABILITY AVAILABLE FOR PAYMENT OF A LOSS WHICH OUR RENTAL AUTO COVERAGE POLICY COVERS IS EQUAL TO THE MINIMUM REQUIREMENTS OF ANY APPLICABLE STATE FINANCIAL RESPONSIBILITY LAW OR OTHER SIMILAR LAW OR STATUTE. Unless required by law, the policy does not include No-Fault, Supplemental No-Fault, Uninsured/Underinsured Motorist coverage or other optional coverages. . . . You warrant that all drivers identified in Paragraph 1 above have a valid and collectible automobile liability insurance policy in effect, - 13 -  which provides coverage for the driver’s use and operation of the Vehicle we rent to you. By signing this agreement you agree to be bound by all of the provisions and terms found in our Rental Auto Coverage Policy of Insurance. You agree that all policy provisions which exclude coverage contained therein apply to you as renter, and to any driver you authorize or permit to drive the Vehicle. (emphasis in original). Appellants contend that paragraph 5 of the Rental Agreement is contrary to the Tennessee Financial Responsibility Law of 1977, Tennessee Code Annotated section 55-12-101, et seq. (“TFRL”). At section 55-12-122, the TFRL provides: (a) An owner’s policy of liability insurance shall designate, by explicit description or by appropriate reference, all motor vehicles with respect to which coverage is thereby granted; and shall insure the person named therein, and any other person using the motor vehicle or motor vehicles with the express or implied permission of the named insured, against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of the motor vehicle or motor vehicles within the United States or the Dominion of Canada, subject to limits, exclusive of interest and costs, with respect to each such motor vehicle, which are set forth in § 55-12-102. (b) An operator’s policy of liability insurance shall insure the person named as insured therein against loss from the liability imposed upon the insured by law for damages arising out of the use by the insured of any motor vehicle not owned by the insured within the same territorial limits and subject to the same limits of liability as are set forth above with respect to an owner's policy of liability insurance.1 At section 55-12-102(12)(C), the TFRL further provides: (12) “Proof of financial responsibility” or “proof of financial security” means: (A)(i) If proof is required after December 31, 1989, but prior to January 1, 2009, such proof means: (a) A written proof of liability insurance coverage provided by a single limit policy with a limit of not less than sixty thousand dollars ($60,000) 1 We note that the TFRL applies only to primary policies with Minimum Financial Responsibility Limits and does not apply to excess policies. Tenn. Code Ann. § 55-12-122 (f). - 14 -  applicable to one (1) accident; (b) A split-limit policy with a limit of not less than twenty-five thousand dollars ($25,000) for bodily injury to or death of one (1) person, not less than fifty thousand dollars ($50,000) for bodily injury to or death of two (2) or more persons in any one (1) accident, and not less than ten thousand dollars ($10,000) for damage to property in any one (1) accident; (c) A deposit of cash with the commissioner in the amount of sixty thousand dollars ($60,000); or (d) The execution and filing of a bond with the commissioner in the amount of sixty thousand dollars ($60,000); (ii) An insured holding a policy that complies with the insurance requirements of the financial responsibility law on December 31, 1989, will not be deemed to be in violation of the law if the policy meets the limits specified in subdivisions (12)(A)(i)(a)-(d) as of the first renewal after that date; In their brief, Appellants argue that Tokio has not proffered any evidence of a bond, cash deposit or certificate of self-insurance. The only possible compliance of record is through the policies at issue. If Tokio is correct that the primary policy’s amendatory endorsement excludes coverage when the vehicle’s use is subject to a “rental agreement,” then the Proof of Financial Responsibility statutes would be violated. . . . Appellants’ argument overlooks the fact that the TFRL contemplates certain exceptions for rental vehicles. Specifically, section 55-12-106(10) of the TFRL provides: Any person licensed and engaged in the business of renting or leasing motor vehicles to be operated on the public highways shall be required only to furnish proof of financial ability to satisfy any judgment or judgments rendered against the person in the person’s capacity as owner of the motor vehicle, and shall not be required to furnish proof of its financial ability to satisfy any judgment or judgments rendered against the person to whom the motor vehicle was rented or leased at the time of the accident[.] In its April 17, 2019 order, the trial court correctly explained that the TFRL draws a distinction as to renters and lessors of automobiles and other businesses that provide automobiles to the public, and other automobile owners; and between “renter risks” and “owner risks.” The concern to have the automobile insured in those circumstances is, in common experience, - 15 -  resolved by those businesses requiring a member of the public to carry liability insurance sufficient to meet the requirements of the [TFRL]. Those businesses must insure their own exposure (e.g. use by officers and employees of such a business) (the “Owner Risk”). The customers insure their own exposure . . . . The trial court’s analysis is in line with the Tennessee Supreme Court’s holding in Martin v. Powers, 505 S.W.3d 512 , wherein it explained, in relevant part, that Section 55-12-106(10) [of the TFRL] recognizes that a car rental company . . . faces two distinct classes of risks arising from the operation of its fleet of rental vehicles. The first class of risks, which we shall refer to as “Owner Risks,” includes those accidents that may occur from the operation of [a rental company’s] vehicle by [a rental company’s employee] while in the course of her employment, or that may occur from the negligent maintenance of its vehicles . . . . The second class of risks, which we shall refer to as “Renter Risks,” includes those accidents that may arise from the operation of one of [the rental company’s] vehicles by one of its rental customers. As to Renter Risks, section 55-12-106(10) of the [TFRL] specifically exempts [the rental company] from demonstrating proof of financial security. Martin, 505 S.W.3d at 534-25. Contrary to Appellants’ argument, the TFRL does not require Lexus of Memphis to “furnish proof of its financial ability to satisfy any judgment or judgments rendered against the person to whom the motor vehicle was rented or leased at the time of the accident[.]” Tenn. Code Ann. § 55-12-106 (10). Rather, the TFRL only requires Lexus of Memphis to “furnish proof of financial ability to satisfy any judgment or judgments rendered against [it] in [its] capacity as owner of the motor vehicle.” Id. Furthermore, Lexus of Memphis’ requirements under the TFRL may be fulfilled “by policies of one (1) or more insurance carriers which policies together meet these requirements.” Tenn. Code Ann. § 55-12-122 (emphasis added). As set out above, the Rental Agreement between Mr. Smith and Lexus of Memphis clearly satisfies the requirements of the TFRL in that Lexus of Memphis warrants that it has “procured a Rental Auto Coverage Policy of Insurance which provides coverage for damages because of bodily injury or property damage caused by an accident resulting from the use of the Vehicle by an authorized driver,” and that “the limits available for payment of a loss . . . is equal to the minimum requirements of any applicable state financial responsibility law . . . .” The plain language of the Rental Agreement covers Lexus of Memphis’ financial responsibility requirement, i.e., its “Owner Risks.” As to the “Renter Risks,” in signing the rental agreement, Mr. Smith warranted “that all drivers identified in Paragraph 1 . . . have a valid and collectible automobile liability insurance policy in effect, which provides - 16 - coverage for the driver’s use and operation of the Vehicle we rent to you.” Together, Mr. Smith’s policy and Lexus of Memphis’ policy satisfy the requirements of the TFRL concerning rented vehicles. Tenn. Code Ann. § 55-12-122 . VI. Conclusion For the foregoing reasons, we affirm the trial court’s order. The case is remanded for such further proceedings as may be necessary and are consistent with this opinion. Costs of the appeal are assessed to the Appellants, Craig Williams and Melissa Williams, for all of which execution may issue if necessary. _________________________________ KENNY ARMSTRONG, JUDGE - 17 -

2020-12-01 02:00:52.507626+00

https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2019cv1182-20

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ) DAVID COLE, ) ) Plaintiff, ) ) v. ) Civil Action No. 19-cv-1182 (TSC) ) DR. WALTER G. COPAN, in his official ) capacity as Director of the National ) Institute for Standards and Technology, ) AND THE NATIONAL INSTITUTE OF ) STANDARDS AND TECHNOLOGY, ) ) Defendants. ) ) MEMORANDUM OPINION Plaintiff David Cole brought this action against Defendants the National Institute of Standards and Technology, an agency of the United States Department of Commerce, and its Director, Dr. Walter Copan, (collectively “NIST”) under the Freedom of Information Act (“FOIA”). 5 U.S.C. § 552 . Cole seeks to compel disclosure of input data and original analyses conducted by NIST regarding the role played by the seated connection at Column 791 of 7 World Trade Center (“WTC 7”) in the collapse of WTC 7 on September 11, 2001. WTC 7 was one of seven buildings comprising the original World Trade Center complex. Defendants have moved for summary judgment, (ECF No. 10), and Plaintiff cross-moved for summary judgment or, in 1 A “seated connection” is a structural element typically used in large commercial buildings in which a horizontal steel beam is connected to a vertical steel column via a protruding “seat” on which the horizontal beam rests in order to provide greater stability. See generally Types of Steel Beam Connections and Their Details, THE CONSTRUCTOR, https://theconstructor.org/structural- engg/types-steel-beam-connections/19010/ (last visited November 12, 2020). the alternative, for discovery under Rule 56(d). (ECF No. 12.) For the reasons set forth below, the court will GRANT Defendants’ motion and DENY Plaintiff’s motion. I. BACKGROUND On September 11, 2001, in a coordinated terrorist attack, two large commercial airplanes flew into the North and South towers of the World Trade Center in New York City. The collapse of the North tower caused structural damage to WTC 7, which collapsed seven hours later. (ECF No. 14-1, Pl. SOF ¶¶ 1–2.)2 In 2002, Congress enacted the National Construction Safety Team Act (“NCSTA”), 15 U.S.C. § 7301 et seq., authorizing NIST to establish National Construction Safety Teams to investigate “the failure of a building or buildings that has resulted in substantial loss of life or that posed significant potential for substantial loss of life.” 15 U.S.C. § 7301 (a). Pursuant to this authority, NIST investigated the collapse of WTC 7, a forty-seven-story office building located immediately to the north of the buildings surrounding World Trade Center Plaza. (Pl. SOF ¶¶ 4– 6.) NIST subsequently published two reports summarizing the results of its investigation—the first in 2005 and the second in 2008 (collectively the “NCSTAR Report”). (Id.) In January 2009, NIST released an errata sheet reflecting changes made to the text of the NCSTAR Report, which was subsequently updated in April and June of 2012. (Id. ¶¶ 8–10.) The errata sheet includes two corrections to the stated “dimensions and lateral displacements” of WTC 7 column 79. (Id.) On July 8, 2012, Cole, a “researcher and concerned citizen,” (ECF No. 1, Compl. ¶ 4), submitted a FOIA request asking the agency to “[p]lease reference” the errata sheet to the 2 The parties have submitted statements of facts and agree regarding the events of September 11, 2001, that are relevant to the discussion herein. (See Pl. SOF; ECF No. 10-1, Defs. SOF.) 2 NCSTAR Report and seeking “the input data and the original analyses for the seated connection at column 79 referenced [therein]”; on July 12, 2012 he revised his request. (ECF No. 10-3, Ex. 1, FOIA Request; see also Pl. SOF ¶¶ 13–15.) In response, NIST searched records systems containing information related to the WTC 7 collapse investigation. The search was performed by the Deputy Director of the Building and Fire Research Laboratory and overseen by Catherine Fletcher, NIST’s FOIA/Privacy Act Officer. (Pl. SOF ¶¶ 22–26; see also ECF No. 10-3, Ex. 7, FOIA Checklist.) On August 16, 2012, NIST informed Cole that it had identified 35,394 responsive files. (ECF No. 10-3, Ex. 2, FOIA Final Response.) However, the agency noted that the files contained information received in the course of its investigation, disclosure of which would jeopardize public safety, and that information was therefore exempt from disclosure pursuant to FOIA Exemption 3, which protects records that are “specifically exempted from disclosure by statute,” 5 U.S.C. § 552 (b)(3), in this case Section 7(d) of the NCSTA. 15 U.S.C. § 7306 (d). NIST withheld the files in their entirety, claiming that any non-exempt responsive records could not be segregated from records covered by the exemption. (FOIA Final Response; see also Pl. SOF ¶¶ 16–17, 29; ECF No. 10-3, Fletcher Decl. ¶ 14.) Cole appealed the determination. (ECF No. 10-3, Ex. 3, FOIA Appeal.) In its response letter, the Department of Commerce denied Cole’s appeal and reiterated that the documents and information he sought were not segregable and were covered in full by FOIA Exemption 3 and NCSTA Section 7(d). (ECF No. 10-3, Ex. 4, FOIA Appeal Final Response.) 3  II. LEGAL STANDARD A. Summary Judgment Summary judgment is appropriate where the record shows no genuine issue of material fact, and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317 , 322 (1986); Waterhouse v. District of Columbia, 298 F.3d 989 , 991 (D.C. Cir. 2002). Courts must view “the evidence in the light most favorable to the non- movant[ ] and draw[ ] all reasonable inferences accordingly,” and must determine whether a “reasonable jury could reach a verdict” in the non-movant’s favor. Lopez v. Council on Am.- Islamic Rel. Action Network, Inc., 826 F.3d 492 , 496 (D.C. Cir. 2016). FOIA cases are “typically and appropriately decided on motions for summary judgment.” Moore v. Bush, 601 F. Supp. 2d 6 , 12 (D.D.C. 2009). B. FOIA FOIA provides a “statutory right of public access to documents and records” held by federal agencies. Citizens for Resp. & Ethics in Wash. (CREW) v. U.S. Dep’t of Just., 602 F. Supp. 2d 121 , 123 (D.D.C. 2009) (quoting Pratt v. Webster, 673 F.2d 408 , 413 (D.C. Cir. 1982)). FOIA requires that federal agencies comply with requests to make their records available to the public, unless such “information is exempted under [one of nine] clearly delineated statutory [exemptions].” CREW, 602 F. Supp. 2d at 123 (internal quotation marks omitted); see also 5 U.S.C. § 552 (a)–(b). In cases challenging the applicability of certain FOIA exemptions, the district court conducts a de novo review of the agency’s decision to withhold requested documents. See Moore v. Aspin, 916 F. Supp. 32 , 35 (D.D.C. 1996); 5 U.S.C. § 552 (a)(4)(B). The burden is on the agency to show that nondisclosed, requested material falls within a stated exemption, see 4 Petroleum Info. Corp. v. U.S. Dep’t of Interior, 976 F.2d 1429 , 1433 (D.C. Cir. 1992) (citing 5 U.S.C. § 552 (a)(4)(B)), and its “justification for invoking a FOIA exemption is sufficient if it appears ‘logical’ or ‘plausible.’” Ayuda, Inc. v. FTC, 70 F. Supp. 3d 247 , 261 (D.D.C. 2014) (quoting Wolf v. CIA, 473 F.3d 370 , 374–75 (D.C. Cir. 2007)). Agencies may rely on supporting declarations that are reasonably detailed and non-conclusory. See King v. U.S. Dep’t of Just., 830 F.2d 210 , 218 (D.C. Cir. 1987). “If an agency’s affidavit describes the justifications for withholding the information with specific detail, demonstrates that the information withheld logically falls within the claimed exemption, and is not contradicted by contrary evidence in the record or by evidence of the agency’s bad faith, then summary judgment is warranted on the basis of the affidavit alone.” ACLU v. U.S. Dep’t of Def., 628 F.3d 612 , 619 (D.C. Cir. 2011) (citations omitted). In cases where the adequacy of a search is at issue, the court employs a reasonableness test to evaluate the agency’s search for responsive materials. Rodriguez v. Dep’t of Def., 236 F. Supp. 3d 26 , 34 (D.D.C. 2017) (citing Campbell v. U.S. Dep’t of Just., 164 F.3d 20 , 27 (D.C. Cir. 1998)). “[T]he adequacy of a FOIA search is generally determined not by the fruits of the search, but by the appropriateness of the methods used to carry out the search.” Iturralde v. Comptroller of the Currency, 315 F.3d 311 , 315 (D.C. Cir. 2003). “An agency may establish the adequacy of its search by submitting reasonably detailed, nonconclusory affidavits [or declarations] describing its efforts.” Baker & Hostetler LLP v. U.S. Dep’t of Commerce, 473 F.3d 312 , 318 (D.C. Cir. 2006). The court must accord agency affidavits “a presumption of good faith, which cannot be rebutted by purely speculative claims about the existence and discoverability of other documents.” SafeCard Servs., Inc. v. SEC, 926 F.2d 1197 , 1200 (D.C. Cir. 1991) (internal quotation marks and citation omitted). 5  C. Discovery When a plaintiff seeks discovery under Federal Rule of Civil Procedure 56(d) in response to a defendant’s motion for summary judgment, a court may deny or defer summary judgment if “a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition.” Fed. R. Civ. Pro. 56(d). To be entitled to discovery, the nonmovant must: (1) “outline the particular facts [the non-movant] intends to discover and describe why those facts are necessary to the litigation,” (2) “explain ‘why [the non-movant] could not produce the facts in opposition to the motion for summary judgment,’” and (3) “show the information is in fact discoverable.” United States ex rel. Folliard v. Gov’t Acquisitions, Inc., 764 F.3d 19 , 26 (D.C. Cir. 2014) (quoting Convertino v. U.S. Dep’t of Just., 684 F.3d 93 , 99–100 (D.C. Cir. 2012)) (alterations in original). In FOIA cases, discovery “is rare and should be denied where an agency’s declarations are reasonably detailed, submitted in good faith and the court is satisfied that no factual dispute remains.” Baker & Hostetler LLP, 473 F.3d at 318 (quoting Schrecker v. U.S. Dep’t of Just., 217 F. Supp. 2d 29 , 35 (D.D.C. 2002)). III. ANALYSIS A. NIST’s Interpretation of Cole’s Request was Reasonable and the Ensuing Search was Reasonably Calculated to Discover all Relevant Documents 1. NIST’s Interpretation of “Input Data” was Reasonable Under FOIA, the “burden of adequately identifying the record requested” lies with the requester, Larson v. Dep’t of State, 565 F.3d 857 , 869 (D.C. Cir. 2009) (citation omitted); a request “must reasonably describe the records sought,” although “an agency also has a duty to construe a FOIA request liberally.” Nation Mag. v. U.S. Customs Serv., 71 F.3d 885 , 890 (D.C. Cir. 1995) (citing 5 U.S.C. § 552 (a)(3)) (quotation marks omitted). 6  Agencies read and interpret FOIA requests as drafted, not as the requester “might wish it was drafted.” Miller v. Casey, 730 F.2d 773 , 777 (D.C. Cir. 1984). It is the “requester’s responsibility to frame requests with sufficient particularity.” Assassination Archives & Rsch. Ctr., Inc. v. CIA, 720 F. Supp. 217 , 219 (D.D.C. 1989), aff’d, No. 89-5414, 1990 WL 123924 (D.C. Cir. Aug. 13, 1990). An agency may decide “to limit the scope of an ambiguous request as long as the narrowed scope is a reasonable interpretation of what the request seeks.” Wilson v. U.S. Dep’t of Transp., 730 F. Supp. 2d 140 , 154 (D.D.C. 2010), aff’d, No. 10–5295, 2010 WL 5479580 (D.C. Cir. Dec. 30, 2010). Here, Cole’s amended FOIA request sought “the input data and the original analyses for the seated connection at column 79.” (FOIA Request.) Cole sought this information in the context of two statements made in the errata sheet to the NCSTAR report, each of which provided corrections to typographical errors in Chapter 11 of that report. (Id.) Chapter 11, in turn, specifically discussed the computer simulations NIST conducted as part of its investigation into the collapse of WTC 7. Cole argues that NIST should have read “input data” to mean “information that existed independent of the computer and the modelling and was data taken from paper or other electronic records containing it prior to the modelling being conducted.” (ECF No. 14, Pl. Br. at 18.) NIST, on the other hand, understood “input data” to refer to “the data that was input into the computer models” to drive the models’ analysis. (ECF No. 17, Defs. Reply at 3, 4 n.5 (collecting dictionary definitions of “input data”) (citations omitted).) In light of Cole’s request for information related to the published report on the WTC 7 computer models, NIST’s computer programming experts declared that “it would not be reasonable to interpret ‘input data’ as including anything other than the data input into the computer models, nor would it be 7 reasonable to interpret ‘original analyses’ as including anything other than the results files” produced by those models. (Id. at 3; see also ECF No. 17-1, 2d Fletcher Decl. ¶¶ 6–9.) Cole failed to frame his FOIA request with “sufficient particularity” to reasonably suggest that he wanted something other than the data that was input into the computer models. See Assassination Archives, 720 F. Supp. at 219 ; see also 5 U.S.C. § 552 (a)(3)(A) (requiring that FOIA requests “reasonably describe” the records sought); Larson, 565 F.3d at 869 (upholding a district court’s narrow interpretation of a FOIA request where the request did not “reasonably suggest” the broad scope argued by the plaintiff). Cole’s initial FOIA request sought “the input data and original analyses” referenced in the NCSTAR report and errata sheet. (FOIA Request.) In his FOIA appeal, he distinguished “measurements” and other “information NIST interpreted . . . from the drawings,” which he sought, from the drawings themselves, which he acknowledged were “received” by NIST and were thus subject to the Exemption statute. (FOIA Appeal (emphasis in original).) Now, Cole argues that the “[t]he language used . . . in his administrative appeal should have eliminated any ambiguity regarding whether his request for input data related to records in paper form (such as drawings)” because he “stated, inter alia, that Defendants had ‘drawings’ that ‘contained measurements.’” (ECF No. 19, Pl. Reply at 9–10; cf. Pl. Br. at 18.) But even if his administrative appeal put the government on notice that Cole sought measurements NIST derived from paper documents such as the drawings, it did not indicate that he also sought the drawings. Cole’s attempts to reframe his request and appeal at this stage are unavailing, and the court finds that NIST’s interpretation of the scope of Cole’s FOIA request was reasonable. If Cole seeks information other than the data that was fed directly into NIST’s models, he may submit a new FOIA request identifying those records with the requisite particularity. 8  2. NIST’s Search was Reasonably Calculated to Discover the Requested Documents An agency responding to a FOIA request must make “a good faith effort to conduct a search for the requested records, using methods which can be reasonably expected to produce the information requested.” Baker & Hostetler LLP, 473 F.3d at 318 (quoting Nation Mag., 71 F.3d at 890 ). “When a plaintiff questions the adequacy of the search . . . , the factual question it raises is whether the search was reasonably calculated to discover the requested documents, not whether it actually uncovered every document extant.” SafeCard Servs., Inc., 926 F.2d at 1201 . Moreover, an agency need not search every record system for its search to be considered reasonable; a search is reasonable if it includes all systems “that are likely to turn up the information requested.” Oglesby v. U.S. Dep’t of the Army, 920 F.2d 57 , 68 (D.C. Cir. 1990). Cole argues that NIST’s search was inadequate because NIST “failed to assert or explain whether requested records in paper format or in various electronic formats such as pdf, spreadsheet, word-processing, or image files exist, or whether a search was even conducted for such records.” (Pl. Br. at 17.) In response, NIST explains that this “argument flows from Plaintiff’s erroneous interpretation of the term ‘input data’” and that, given the agency’s interpretation of “input data” as meaning “the information that was entered into the modeling program,” its ensuing search for this data in the Engineering Laboratory files was reasonable. (Defs. Reply at 4–5.) Fletcher, NIST’s FOIA/Privacy Act Officer, supervised the search for records responsive to Cole’s request. Based on her experience responding to prior requests for similar information, Fletcher knew that responsive records would be located in the NIST Engineering Laboratory. (Fletcher Decl. ¶ 19; see also ECF No. 10-2, Defs. Br. at 4–5.) She also knew that “locating responsive documents required significant technical expertise by someone knowledgeable both 9 in computer modelling and NIST’s technical investigation” and that, due to the large number of files involved in the modelling process, “determining precisely which files were responsive to Plaintiff’s request required a subject matter expert.” (Fletcher Decl. ¶ 20.) Accordingly, Fletcher designated then-Deputy Director of NIST’s Building Fire and Research Laboratory, Dr. William Grosshandler, to search the Engineering Laboratory’s computers and computer disks. (Fletcher Decl. ¶¶ 17–21; see also Defs. Br. at 5.) Dr. Grosshandler’s search identified “35,394 files containing embedded information relating to the seated connection at column 79,” which were spread throughout “six of 10 sets of computer modelling programs” used in the WTC 7 investigation. (Defs. Br. at 5; see also Fletcher Decl. ¶ 21; FOIA Checklist.) Based on this declaration, NIST has demonstrated that it made “a good faith effort to conduct a search for the requested records,” and that its methods were “reasonably calculated” to discover records containing the input data and analyses Cole requested. See Baker & Hostetler LLP, 473 F.3d at 318 (internal citation and quotation marks omitted). “Once an agency has made a prima facie showing of adequacy, the burden shifts to the plaintiff to provide countervailing evidence . . . sufficient to raise substantial doubt concerning the adequacy of the agency’s search.” Rodriguez, 236 F. Supp. 3d at 35 (internal citation omitted). Cole’s unsupported assertion that NIST should have interpreted his request for “input data” more broadly does not meet that burden. The court finds that NIST’s search was reasonable and in accordance with its obligations under FOIA. B. NIST’s Reliance on Exemption 3 was Proper 1. The Requested Materials were Appropriately Withheld Under Exemption 3 NIST withheld the 35,394 files it identified as responsive to Cole’s FOIA request pursuant to FOIA Exemption 3 and Section 7(d) of the NCSTA. (Defs. Br. at 5.) Under FOIA 10 Exemption 3, material is protected from disclosure where it is “specifically exempted from disclosure by statute,” so long as the underlying statute “establishes particular criteria for withholding or refers to particular types of matters to be withheld.” 5 U.S.C. § 552 (b)(3)(A)(ii). Here, NCSTA Section 7(d) prohibits NIST from disclosing “any information it receives in the course of an investigation under this chapter if the [NIST] Director finds that the disclosure of that information might jeopardize public safety.” 15 U.S.C. § 7306 (d). Prior to Cole’s FOIA request, then-Director of NIST, Dr. Pat Gallagher, determined that the disclosure of information “received by the National Institute of Standards and Technology [], in connection with its investigation of the technical causes of the collapse of the World Trade Center Towers and World Trade Center Building 7 on September 11, 2001, might jeopardize public safety.” (ECF No. 10-3, Ex. 6, Dir. Findings.) The Director extended his finding to include “[a]ll input and result files” of each computer model used by NIST to study the structural response and collapse propagation phase of WTC 7, as well as “all Excel spreadsheets and other supporting calculations used to develop floor connection failure modes and capacities.” (Id.)3 Cole argues that the Director’s finding applies only to the modeling data as a whole and not to the “release of just the input data describing the component parts of the WTC7 Column 79 connection and the dimensions of same, standing alone.” (Pl. Br. at 28.) He contends that the “input data” he seeks “simply contain[s] measurements of the various beams, columns, side plates, stiffeners, girders, and any other components” of the now destroyed WTC 7 building and 3 Due to the elapsed time between the issuance of the Director’s finding and Cole’s FOIA request, Fletcher confirmed that the NIST Director “still considered that the disclosure of such files enumerated in the July 9, 2009 Finding would still potentially jeopardize public safety” while she supervised the review of Cole’s request. (Fletcher Decl. ¶ 27.) 11 that it does not relate to “how and why certain WTC7 structural components came to fail.” (Id. at 28–29.) Cole’s contention is contradicted by the Director’s finding and the explanations in the supporting declarations. As the court in a similar case, Quick v. U.S. Department of Commerce, National Institute of Standards and Technology found, “the Director of NIST brought his expertise to bear on the subject” and found that public disclosure of information pertaining to the simulated collapse of WTC 7 “‘might jeopardize public safety’ and should be withheld.” 775 F. Supp. 2d 174 , 180–81 (D.D.C. 2011) (quoting 15 U.S.C. § 7306 (d)). In her declaration, Fletcher explains that because of the highly technical nature of the documents in question, Dr. Grosshandler decided whether the Director’s finding applied to the responsive records. He ultimately determined that all the files were covered and that disclosing them could jeopardize public safety. (Fletcher Decl. ¶ 25.) Fletcher explained that the specific detailed models of WTC 7 are beyond the current state of public knowledge and therefore “if the files were disclosed, it would publicly disseminate tools that could be used to predict the collapse of a building which would provide technical instruction on how to most effectively devise schemes to destroy large buildings.” (Id. ¶ 26.) NIST’s declarations describe “the documents and the justifications for nondisclosure with reasonably specific detail, demonstrate that the information withheld logically falls within the claimed exemption, and are not controverted by either contrary evidence in the record nor by evidence of agency bad faith.” Mil. Audit Project v. Casey, 656 F.2d 724 , 738 (D.C. Cir. 1981). NIST has, in short, provided an adequate explanation of its invocation of the exemption. The court need not “conduct a more detailed inquiry to test the agency’s judgment and expertise or to evaluate whether the court agrees with the agency’s opinions.” Larson, 565 F.3d at 865 . 12  Cole further maintains that the Director’s findings were incorrectly applied to his request for NIST’s “original analyses” because the “computer modelling files were created by NIST, they are not information received by NIST . . . from others during an investigation under the statute.” (Pl. Br. at 30–31 (emphasis in original).) This distinction does not alter the court’s analysis. First, NIST attests that the input and results files were “received” by NIST: “The modeling analysis was created largely by individuals at two research and engineering firms,” and “upon completion of their work, the source code was received by NIST.” (Defs. Reply at 8 n.9 (citing 2d Fletcher Decl. ¶¶ 16–17.).) Moreover, as the Department of Commerce stated in its response to Cole’s FOIA appeal, to the extent that some of the material Cole seeks was “interpreted” rather than “received” by NIST, such information “is not segregable as it relates to the seated connection at column 79, and it is not possible to separate that which NIST created from the information it received” that was then integrated into the interpretive process. (FOIA Appeal Final Response at 2.) As discussed further below, NIST’s declarations “show with ‘reasonable specificity’ why the documents cannot be further segregated.” Armstrong v. Exec. Off. of the President, 97 F.3d 575 , 578 (D.C. Cir. 1996). Cole has not provided sufficient evidence to counter NIST’s testimony. See infra Section B.3. Because the records were either themselves received from outside the agency or cannot be reasonably segregated from those that were, all the requested records are thus appropriately protected from disclosure by Exemption 3 and NCSTA Section 7(d). 2. NIST Appropriately Relied Upon Fletcher’s Affidavits Cole objects to portions of Fletcher’s declarations discussing the segregability of input data from results files and the danger posed to public safety by releasing the requested records. (Pl. Br. at 32–34.) Cole claims that Fletcher “offers no fact basis in her declarations” and that 13 she likewise does not “establish any basis in her education, training, or experience to offer an expert opinion.” (Id. at 33.) Under Federal Rule of Civil Procedure 56(e), however, a declarant in a FOIA case satisfies the personal knowledge requirement “if in his declaration, [he] attests to his personal knowledge of the procedures used in handling [a FOIA] request and his familiarity with the documents in question.” Barnard v. Dep’t of Homeland Sec. (“Barnard I”), 531 F. Supp. 2d 131 , 138 (D.D.C. 2008) (internal citations and quotation marks omitted) (alterations in original). To meet these requirements, “FOIA declarants may include statements in their declarations based on information they have obtained in the course of their official duties.” White Coat Waste Project v. U.S. Dep’t of Veterans Affs., 443 F. Supp. 3d 176 , 193 (D.D.C. 2020) (quoting Barnard v. Dep’t of Homeland Sec. (“Barnard II”), 598 F. Supp. 2d 1 , 19 (D.D.C. 2009)). Therefore, a declaration may be sufficient if it is from the employee “in charge of coordinating the [agency’s] search and recovery efforts” because he or she “is the most appropriate person to provide a comprehensive affidavit.” SafeCard Servs. Inc., 926 F.2d at 1201 . Applying this principle, the court finds that Fletcher’s declarations properly supported NIST’s motion for summary judgment. Fletcher did not offer an expert opinion, as Cole alleges, but rather attested “to [her] personal knowledge of the procedures used in handling” the request, Barnard I, 531 F. Supp. 2d at 138 (citations omitted), and any second-hand statements included in her declarations were based on information “obtained in the course of [her] official duties.” White Coat Waste Project, 443 F. Supp. 3d at 193 (quoting Barnard II, 598 F. Supp. 2d at 19 ). 3. NIST’s Finding That the Documents Could Not be Segregated was Proper Cole argues that some of the information he seeks should be released through segregation of the data from the computer model. Although “[a]ny reasonably segregable portion of a record 14 shall be provided to any person requesting such record” under FOIA, 5 U.S.C. § 552 (b), “[a]gencies are entitled to a presumption that they complied with the obligation to disclose reasonably segregable material,” Sussman v. U.S. Marshals Serv., 494 F.3d 1106 , 1117 (D.C. Cir. 2007), so long as “government affidavits . . . show with ‘reasonable specificity’ why the documents cannot be further segregated.” Armstrong, 97 F.3d at 578 ; see also Johnson v. Exec. Off. for U.S. Att’ys, 310 F.3d 771 , 776 (D.C. Cir. 2002) (“The combination of the Vaughn index and the affidavits . . . are sufficient to fulfill the agency’s obligation to show with ‘reasonable specificity’ why a document cannot be further segregated.”). Although the precise “quantum of evidence required to overcome that presumption is not clear,” Sussman, 494 F.3d at 1117 (comparing cases), at minimum, a FOIA requester must “produce evidence that would warrant a belief by a reasonable person that the alleged Government impropriety might have occurred.” Nat’l Archives & Recs. Admin. v. Favish, 541 U.S. 157 , 174 (2004). Cole contends that “any specific portion of the computer code files containing input data that can be [] viewed can also be produced via a ‘screen shot’ . . . without releasing any truly exempt computer modelling code.” (Pl. Br. at 30, 38–39.) In her second declaration, Fletcher affirmed that, under NCSTA Section 7(d) and per the Director’s finding, “all of [the input and results files] were entirely exempt in full,” and thus there was no non-exempt information to segregate. (2d Fletcher Decl. ¶¶ 14–15.) To the extent that any non-exempt information did exist, however, the Department of Commerce noted in its response to Cole’s FOIA Appeal that “there were no separate, segregable analyses conducted in relation to the seated connection at column 79.” (FOIA Appeal Final Response at 2.) In order to make the corrections to the NCSTAR report to which Cole’s FOIA request referred, a NIST Research Structural Engineer would have “to go through the coding and search it to find the dimensions,” and even then the 15 information is embedded within “the input data and original analyses conducted in relation to the overall building collapse.” (Id.) The court finds the government’s argument persuasive. “For the government to produce the requested screenshots, it would have to open the software and create a screenshot, which would not otherwise exist . . . .” Colgan v. Dep’t of Just., No. 14-cv-740, 2020 WL 2043828 , *10 (D.D.C. 2020). “FOIA neither requires agencies to create new records nor to disclose records for which they do not ‘retain possession or control.’” Id. (quoting Kissinger v. Reps. Comm., 445 U.S. 136 , 151–52 (1980)). As elaborated above, the computer modelling data used in NIST’s investigation of the WTC 7 collapse was exempt under the NCSTA Section (d) and FOIA Exemption 3; despite Cole’s argument to the contrary, the agency was under no obligation to create entirely new records in order to remove some data from this exemption. C. Cole has not established that he is entitled to Discovery As noted above, in order to be entitled to discovery under Federal Rule of Civil Procedure 56(d), a nonmoving party must show “by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition.” Fed. R. Civ. P. 56(d). The party’s affidavit must outline the particular facts the party intends to discover, explain why those facts could not be produced without additional discovery, and “show the information is in fact discoverable.” Folliard, 764 F.3d at 26 (quoting Convertino, 684 F.3d at 99) (alterations in original). It is well established in this Circuit that “in the FOIA context, courts have permitted discovery only in exceptional circumstances where a plaintiff raises a sufficient question as to the agency’s good faith in searching for or processing documents.” Cole v. Rochford, 285 F. Supp. 3d 73 , 76 (D.D.C. 2018) (denying Plaintiff’s motion for discovery). Where a party has 16 “offered no evidence of bad faith to justify additional discovery,” the motion may be properly denied. See Baker & Hostetler LLP, 473 F.3d at 318 . Here, Cole’s request for limited discovery is based on his allegation that NIST’s interpretation of “input data” and subsequent search of its digital records alone are evidence of the agency’s bad faith. (Pl. Br. at 40–43.) Cole sets forth four grounds for finding bad faith: first, NIST’s “administrative record documents” acknowledge that Cole “was requesting not just the computer modelling results files, but also records containing the input data regarding WTC7 Column 79’s connection”; second, the NCSTAR Report acknowledges “that NIST used drawings and other sources for data input into its computer modelling of WTC7’s collapse on 9/11”; third, “no WTC7 data input records in paper, pdf, word-processing, or image file formats have been produced nor even listed in the Defendants Vaughn Index”; and fourth, NIST did not “attempt to explain why no records in paper, pdf, word-processing, or image file formats containing WTC7 computer modelling input data were produced or were even the subject of an agency search.” (Id. at 43–44.) Cole’s bad faith argument is, as NIST notes, entirely contingent on the court finding that NIST’s interpretation of Cole’s request—and the scope of the ensuing search—was not reasonable. (See Defs. Reply at 12–13.) But, as explained above, NIST’s interpretation of “input data” was reasonable and its search was reasonably calculated to uncover responsive materials. Cole has not raised a “sufficient question as to the agency’s good faith in searching for or processing documents.” Cole, 285 F. Supp. 3d at 76. Instead, he has proffered “mere assertions” that responsive documents may exist in document formats NIST did not review. Cf. 17 Voinche v. FBI, 412 F. Supp. 2d 60 , 72 (D.D.C. 2006). Cole’s Motion for Discovery will therefore be denied.4 IV. CONCLUSION For the foregoing reasons, the court will GRANT Defendants’ motion for summary judgment, and will DENY Plaintiff’s cross-motion for summary judgment and motion for discovery. A corresponding Order will follow shortly. Date: November 30, 2020 Tanya S. Chutkan TANYA S. CHUTKAN United States District Judge 4 Cole’s brief appears to request the court to conduct an in camera review of the records he identifies as potentially responsive. (Pl. Br. at 39, 47.) In deciding whether to conduct an in camera review, the court considers the following factors: judicial economy, conclusory nature of the affidavits, bad faith on the part of the agency, disputes on the contents, whether the agency proposes the inspection, and strong public interest in disclosure. Allen v. CIA, 636 F.2d 1287 , 1298–99 (D.C. Cir. 1980), overruled on other grounds by Founding Church of Scientology of D.C., Inc. v. Smith, 721 F.2d 828 (D.C. Cir. 1983). Here, the absence of any evidence of bad faith on the part of the agency, the large volume of documents and associated strain on judicial resources, and the properly invoked exemption lead this court to conclude that an in camera exam is neither necessary nor appropriate. See Juarez v. Dep’t of Just., 518 F.3d 54 , 60 (D.C. Cir. 2008) (applying Allen factors and finding that affidavits properly articulated strong reasons for the documents to fall under an Exemption). 18

2020-11-20 19:06:15.315458+00

ESTATE OF JOSEPH A. VAK, DECEASED, JOSEPH R. VAK, PERSONAL REPRESENTATIVE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Estate of Vak v. Commissioner Docket No. 15676-89 United States Tax Court T.C. Memo 1991-503; 1991 Tax Ct. Memo LEXIS 552; 62 T.C.M. 942; T.C.M. (RIA) 91503; October 2, 1991, Filed 1991 Tax Ct. Memo LEXIS 552">*552 Decision will be entered for the respondent. Guy G. Curtis, for the petitioner. Mark S. Heroux, for the respondent. SCOTT, Judge. SCOTT MEMORANDUM OPINION Respondent determined a deficiency in the Federal gift tax of Joseph A. Vak (now deceased) for the calendar year 1985 in the amount of $ 278,300 and an addition to tax pursuant to section 66601 for a valuation understatement in the amount of $ 83,490. The issues for decision are: (1) When was the transfer of property by Joseph A. Vak complete for gift tax purposes; (2) what was the property which was the subject of the gift; (3) what was the value of the property transferred by gift; and (4) whether petitioner is liable for an addition to tax pursuant to section 6660 for the calendar year 1985. FINDINGS OF FACT Some of the facts have been stipulated and are found accordingly. Joseph R. Vak, the personal representative1991 Tax Ct. Memo LEXIS 552">*553 of Joseph A. Vak, deceased, was a resident of Nebraska at the time the petition in this case was filed. Joseph A. Vak (Mr. Vak) was a resident of Nebraska during his lifetime and at the date of his death. On January 1, 1975, Mr. Vak incorporated Joe Vak Farms, Inc. (Farms), in Nebraska to own and operate ranches and farms, and on January 2, 1975, he received 5,000 shares of stock in Farms. Subsequent to the incorporation Mr. Vak made gifts of stock in Farms to members of his family so that as of January 1, 1981, stock ownership in Farms was as follows: NameNumber of shares Joseph A. Vak2,757 Joseph R. Vak1,945 Julie A. Vak55 James Vak81 Jarwyn Vak81 Joseph Adam Vak81 On January 2, 1981, Mr. Vak created the Joseph A. Vak Trust (Trust). Paragraph II, "Trustees," provided in part as follows: 3. In the event of death, removal from office, resignation, or cessation of his duties from any other cause of a Trustee, the grantor if alive shall appoint a successor independent Trustee (not related or subordinator to the grantor); otherwise, the remaining Trustees shall appoint or elect a successor by the unanimous concurrence, or formal vote, of the remaining 1991 Tax Ct. Memo LEXIS 552">*554 Trustees. In anticipation of an event which could result in the entire Board of Trustees, or the grantor, becoming vacant at the same time, such as simultaneous deaths or resignations, the Trustees, other than the grantor, may by unanimous vote appoint one or more successor independent Trustees to assume office in that event (not related or subordinate to the grantor). In the event of the complete failure to appoint a successor Trustee as specified above, a majority of the beneficiaries shall appoint a successor Trustee. * * * 7. Notwithstanding anything to the contrary herein, the grantor may remove any Trustee serving hereunder at any time and from time to time, with or without cause, and appoint a successor Independent Trustee (not related or subordinate to the grantor within the meaning of Section 672(c) of the Internal Revenue Code). In the Trust instrument, Mr. Vak's son, Joseph R. Vak (Joseph Vak), and Mr. Vak's daughter-in-law, Julie A. Vak, were named as trustees. The trustees, other than the grantor, could elect to either distribute or accumulate the current income of the Trust, in whole or in part, for any or all of the beneficiaries, and the trustees, other than1991 Tax Ct. Memo LEXIS 552">*555 the grantor, had unrestricted sprinkling power among beneficiaries for both corpus and income. No beneficiary was entitled to a corpus distribution as a matter of right except on final termination of the Trust at which time any remaining corpus would be distributed according to each beneficiary's interest in the Trust. The Trust was to continue for 25 years unless the trustees, other than the grantor, either set an earlier termination date or renewed the Trust for a like or shorter period. The Trustees were given broad powers to manage, sell, or otherwise deal with the trust corpus. Beneficial interest in the Trust was divided into 100 "Class A" certificate units. Each unit represented a 1-percent pro rata interest in both income and corpus of the Trust. Neither the Trust nor any trustee had any power or control over the beneficial interest certificates. On January 2, 1981, Mr. Vak, as grantor, transferred his 2,757 shares in Farms to the Trust in exchange for the 100 units of beneficial interest. Mr. Vak could transfer all or any part of his 100 units of beneficial interest in the Trust at any time without restriction. On January 2, 1981, Mr. Vak transferred 50 of his 1001991 Tax Ct. Memo LEXIS 552">*556 units of beneficial interest in the Trust, one-third to each of his three grandchildren, James Vak, Jarwyn Vak, and Joseph Adam Vak, jointly with Joseph Vak. Each of the grandchildren received 16-2/3 units of beneficial interest in the Trust jointly with his father, Joseph Vak. On April 8, 1981, Mr. Vak filed his United States Quarterly Gift Tax Return for the tax period ending March 31, 1981. On the gift tax return, Mr. Vak reported taxable gifts in the amount of $ 184,560, and showed a gift tax due of $ 2,859 resulting from the January 2, 1981, transfer of 50 units of beneficial interest in the Trust. The amount shown as due on the return was paid on May 15, 1981. On February 7, 1985, this Court entered a decision pursuant to the stipulation of the parties that Mr. Vak had made an overpayment in gift tax in the amount of $ 2,859 for the period ending March 31, 1981. On January 2, 1982, Mr. Vak transferred 23 of his remaining 50 units of beneficial interest in the Trust to family members. Subsequent to the transfer, the ownership of units of beneficial interest in the Trust was as follows: NamePercentage Joseph Vak and James Vak16 2/3 Joseph Vak and Jarwyn Vak16 2/3 Joseph Vak and Joseph Adam Vak16 2/3 Joseph Vak and Julie A. Vak (tenants in common)5 James Vak6 Jarwyn Vak6 Joseph Adam Vak6 Joseph A. Vak (grantor)27 1991 Tax Ct. Memo LEXIS 552">*557 On March 1, 1982, Mr. Vak filed his United States Quarterly Gift Tax Return for the tax period ending March 31, 1982. On the gift tax return, Mr. Vak reported taxable gifts in the amount of $ 39,682, but showed no gift tax due as a result of the January 2, 1982, transfer of 23 units of beneficial interest in the Trust. On July 3, 1985, this Court, pursuant to stipulation of the parties, entered a decision determining that there was no deficiency in gift tax due from, or overpayment due to, Mr. Vak for the taxable year 1982. On January 16, 1984, Joseph Vak was named conservator and guardian for Mr. Vak. On February 16, 1985, Joseph Vak, as conservator and guardian for Mr. Vak, petitioned the County Court of Perkins County, Nebraska, for an order approving an attached Declaration, which would amend the original Trust, and to permit the making of gifts of all or part of the beneficial units in said Trust to his son, Joseph Vak, who is "the sole devisee under the protected person's will, and to the son's family, for estate planning purposes." On February 18, 1985, the County Court of Perkins County entered an order approving the Declaration amending the Trust and authorized Joseph1991 Tax Ct. Memo LEXIS 552">*558 Vak to make and execute gifts of all or part of the beneficial units of said Trust belonging to the protected person, Mr. Vak, to the protected person's son, Joseph Vak, and his family. Pursuant to the Declaration, the grantor relinquished his right to remove any trustee and to appoint a successor trustee, and the sprinkling power by the trustees was limited by excluding the grantor as an eligible distributee, with the grantor relinquishing and renouncing the right to receive any amount under such sprinkling power. The duration of the Trust was set at 25 years. On February 18, 1985, at a special meeting of the Board of Trustees, the trustees purported to cancel certificates of beneficial interest numbers 2 through 8, thereby attempting to cancel Mr. Vak's 1981 and 1982 transfers. On November 1, 1985, at a meeting of the Board of Trustees, the trustees again purported to cancel all previous certificates of beneficial interest except the original 100 issued to Mr. Vak. Joseph Vak, conservator and guardian of Mr. Vak, a protected person, then purported to assign the 100 certificates of beneficial interest in the Trust as follows: NamePercentage Joseph Vak and Julie A. Vak (tenants in common)25 James Vak25 Jarwyn Vak25 Joseph Adam Vak25 1991 Tax Ct. Memo LEXIS 552">*559 The last sentence of each of the Certificates of Beneficial Interest executed by Joseph Vak and Julie A. Vak, which were purported to be issued on November 1, 1985, stated that "This Certificate conveys no interest of any kind in The Trust assets, management or control thereof." As of February 18, 1985, the value of the 2,757 shares of Farms, prior to any applicable discounts, was $ 1,132,438. As of November 1, 1985, the value of the 2,757 shares of Farms, prior to any applicable discounts, was $ 1,102,800. On a Quarterly Gift Tax return filed on behalf of Mr. Vak for the taxable quarter ended December 31, 1985, the purported November 1, 1985, gift was valued at $ 86,580. The return shows no tax due. In the notice of deficiency, respondent determined that the gift was completed on February 18, 1985, that the 2,757 shares in Farms were the property which was the subject of the gift, and that the taxable value of the gift was $ 1,132,438. He further determined that the underpayment of gift tax required to be shown on the gift tax return was due to a valuation understatement and that a 30-percent addition to tax was applicable. OPINION Section 2501(a) provides for a tax on the1991 Tax Ct. Memo LEXIS 552">*560 transfer of property by gift during a calendar year by any individual. Section 2511(a) provides that, subject to certain limitations, the gift tax applies whether the transfer is in trust or otherwise, direct or indirect, and whether the property transferred is real or personal, tangible or intangible. 2 1991 Tax Ct. Memo LEXIS 552">*561 As provided in section 25.2511-2(c), Gift Tax Regs., a gift is incomplete where the donor reserves the power to revest the beneficial title to the property in himself. It is well settled that no completed gift occurs from a conveyance in trust where the donor retains dominion and control over the property transferred. Sec. 25.2511-2, Gift Tax Regs.; Sanford's Estate v. Commissioner, 308 U.S. 39">308 U.S. 39, 84 L. Ed. 20">84 L. Ed. 20, 60 S. Ct. 51">60 S. Ct. 51 (1939); Burnet v. Guggenheim, 288 U.S. 280">288 U.S. 280, 77 L. Ed. 748">77 L. Ed. 748, 53 S. Ct. 369">53 S. Ct. 369 (1933); Outwin v. Commissioner, 76 T.C. 153">76 T.C. 153, 76 T.C. 153">159-160 (1981). It is the transfer of the control over the beneficial enjoyment of property that is the event giving rise to the gift tax. Robinette v. Helvering, 318 U.S. 184">318 U.S. 184, 87 L. Ed. 700">87 L. Ed. 700, 63 S. Ct. 540">63 S. Ct. 540 (1943); Smith v. Shaughnessy, 318 U.S. 176">318 U.S. 176, 87 L. Ed. 690">87 L. Ed. 690, 63 S. Ct. 545">63 S. Ct. 545 (1943). Taxation of a transfer of property is not so much concerned with the refinements of title as with actual command over the property. Retention of control over the disposition of trust property, whether for the benefit of the donor or others, renders the gift incomplete until the power is relinquished. 308 U.S. 39">Sanford's Estate v. Commissioner, supra. Each party1991 Tax Ct. Memo LEXIS 552">*562 recognizes the principles set forth above and agrees that no gift was made upon the transfer of the Farms stock to the Trust on January 2, 1981, or because of the transfer of 50 units of beneficial interest in the Trust on that date, since Mr. Vak retained control over the property transferred to the Trust and a right to receive that property back. For the same reason both parties recognize that Mr. Vak made no gift on January 2, 1982, when he transferred additional units of beneficial interest in the Trust. The parties disagree as to whether Mr. Vak made a gift on February 18, 1985, or November 1, 1985, and also disagree as to what property constituted the gift by Mr. Vak. Petitioner contends that the grantor, the sole initial holder and owner of the beneficial units in the Trust, made a gift of these units of beneficial interest on November 1, 1985, when Joseph Vak as Mr. Vak's conservator and guardian issued 25 units of beneficial interest to each grandchild of Mr. Vak and 25 units to Joseph and Julie A. Vak as tenants in common. Respondent contends that the gift occurred on February 18, 1985, when the Declaration of Trust was amended. Respondent contends that the amendment1991 Tax Ct. Memo LEXIS 552">*563 to the Trust Declaration caused Mr. Vak to part with his interest in the Farms stock and make a completed gift. Respondent does not agree with petitioner that the taxable gift was of certificates of beneficial interest in the Trust. He argues that the purported cancellations of prior transfers on February 18, 1985, and November 1, 1985, of certificates of beneficial interest were invalid as cancellations of the beneficial interest certificates and were not permitted by either the Trust document or the order of the County Court. It is respondent's position that the property given on February 18, 1985, was the 2,757 shares of Farms stock. As originally executed, the Trust agreement provided that neither the Trust nor any trustee had power or control over the beneficial interest certificates. Pursuant to the Order Approving Powers of Conservator (order), the conservator was authorized to execute the Declaration amending the Trust agreement on behalf of Mr. Vak and make gifts of all or part of the beneficial units belonging to Mr. Vak to Joseph Vak and his family. It should be noted that although the petition of the conservator is somewhat ambiguous as to which certificates of beneficial1991 Tax Ct. Memo LEXIS 552">*564 interest were to be given, the court order is clear that only certificates belonging to Mr. Vak at the date of the order could be given. At the date of the court order Mr. Vak owned only 27 certificates. Neither the order of the court nor the amendment to the Trust agreement alters the power or control of the trustees over the beneficial interest certificates beyond granting the conservator the right to make gifts of the 27 units still held by Mr. Vak. Because neither the original Trust agreement nor the amendment gave the trustees the power to cancel certificates, the attempts on February 18, 1985, and on November 1, 1985, to cancel certificates are without effect. Disregarding the ineffectual actions of the trustees, on February 18, 1985, the beneficial units were held as follows: NamePercentage Joseph Vak and James Vak16 2/3 Joseph Vak and Jarwyn Vak16 2/3 Joseph Vak and Joseph Adam Vak16 2/3 Joseph Vak and Julie A. Vak (tenants in common)5 James Vak6 Jarwyn Vak6 Joseph Adam Vak6 Joseph A. Vak (grantor)27 Under the State law of Nebraska, a trustee can be relieved of any restriction on his power. Neb. Rev. Stat. sec. 30-2822(1) (1984). 3 Pursuant1991 Tax Ct. Memo LEXIS 552">*565 to the order of February 18, 1985, approving execution of the Declaration, the grantor relinquished his right to remove any trustee and was eliminated as an eligible distributee. By relinquishing the power to remove any trustee, Mr. Vak released dominion and control over the property he had transferred to the Trust, the 2,757 shares of Farms stock, and by removing himself from receiving any distribution of income or corpus of the Trust he rescinded any right he had to regain ownership of the stock or profit income from the stock. Therefore on February 18, 1985, Mr. Vak made a completed gift of the stock to the Trust. After February 18, 1985, the trustees had absolute control in determining to which of the beneficiaries (except the grantor), and in what proportion, income and corpus of the Trust would be sprinkled. The amount of a distribution and to which beneficiary (except the grantor) was dependent entirely on the unfettered discretion of the trustee. Accordingly, on February 18, 1985, the gift was complete. See Smith v. Shaughnessy, 318 U.S. 176">318 U.S. 176, 87 L. Ed. 690">87 L. Ed. 690, 63 S. Ct. 545">63 S. Ct. 545 (1943). See also, Estate of Goelet v. Commissioner, 51 T.C. 352">51 T.C. 352 (1968). 1991 Tax Ct. Memo LEXIS 552">*566 The fact that Mr. Vak retained 27 units of beneficial interest does not change this result. By relinquishing his right to remove the trustee and eliminating himself as an eligible distributee, Mr. Vak gave up dominion and control over the property transferred to the Trust, the stock, and with this relinquishment the gift of the stock was complete. See Fletcher Trust Co. v. Commissioner, 141 F.2d 36">141 F.2d 36 (7th Cir. 1944), affg. 1 T.C. 798">1 T.C. 798 (1943). Since none of the corpus or income of the Trust could be distributed to him, Mr. Vak retained no interest in the Farms stock transferred to the Trust after February 18, 1985. The gift to be valued is the property over which the grantor has relinquished dominion and control. The essence of a gift by trust is the abandonment of control over the property put in trust. 318 U.S. 176">Smith v. Shaughnessy, supra at 181. By relinquishing his power to remove trustees and any right to corpus or income of the Trust, Mr. Vak abandoned control over the Farms stock, the property put in the Trust. Accordingly, it is the stock in Farms that is the subject of the gift and not the certificates of beneficial 1991 Tax Ct. Memo LEXIS 552">*567 interest. See sec. 25.2511-2(a), Gift Tax Regs. Petitioner argues that the gift was of the beneficial units of the Trust. However, the cases cited by petitioner in support of that contention address the issue of the effect of restrictions for purposes of valuation. Estate of Newhouse v. Commissioner, 94 T.C. 193">94 T.C. 193 (1990), and Estate of Hall v. Commissioner, 92 T.C. 312">92 T.C. 312 (1989), address the issue of the value of shares of stock held by a decedent at the time of death. Estate of Reynolds v. Commissioner, 55 T.C. 172">55 T.C. 172 (1970), involves the valuation of transfers inter vivos and at death of certificates which represent common stock stripped of all voting rights. Citizens Bank & Trust Co. v. Commissioner, 839 F.2d 1249">839 F.2d 1249 (7th Cir. 1988), affg. Northern Trust Co. v. Commissioner, 87 T.C. 349">87 T.C. 349 (1986), while cited by petitioner, supports a finding that the property to be valued is the stock transferred to the Trust. In 839 F.2d 1249">Citizens Bank & Trust Co. v. Commissioner, supra, four siblings each owned 25 percent of both voting and nonvoting common stock in a company. The four 1991 Tax Ct. Memo LEXIS 552">*568 siblings wanted to maintain family ownership of the company as far into the future as possible. Each created an identical trust and transferred all of his or her voting stock to the trust. Three of the four also created identical trusts and transferred all of his or her nonvoting stock to the trust. There was no dispute among the parties that it was the stock transferred to the trusts that was the subject of the gift. The issue before the court was whether the terms of the trusts should be taken into account in valuing the stock transferred. The Seventh Circuit Court of Appeals held that the value of the stock was not altered by the terms of the conveyance. In reaching this conclusion, the court noted the distinction between restrictions placed on the property before the transfer and restrictions placed on the property after the transfer. The facts in the present case are similar to 839 F.2d 1249">Citizens Bank & Trust Co. v. Commissioner, supra, in that, while there were restrictions on the certificates of beneficial interest, there were no restrictions placed on the stock before it was transferred to the Trust. The effect of the restrictions on the certificates in1991 Tax Ct. Memo LEXIS 552">*569 the hands of the beneficiaries is not relevant in determining the value of the property transferred as a gift, the Farms stock. The fact that Mr. Vak had transferred the certificates of beneficial interest prior to the gift does not change this result as, regardless of the timing of the transfer of the certificates, it is still the stock that is the subject of the gift, and it is the stock that must be valued for gift tax purposes. The standard of valuation for gift tax purposes is the fair market value of the property. Fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell, and both having reasonable knowledge of the relevant facts. Sec. 25.2512-1, Gift Tax Regs. The valuation of stock presents a question of fact, and the trier of fact has the duty to weigh all relevant evidence and to draw appropriate inferences therefrom. Hamm v. Commissioner, 325 F.2d 934">325 F.2d 934, 325 F.2d 934">938 (8th Cir. 1963), affg. a Memorandum Opinion of this Court. Petitioner contends that what was transferred were separate gifts to the beneficiaries, each constituting a minority interest1991 Tax Ct. Memo LEXIS 552">*570 in Farms, and the fact that the gifts were of a minority interest affects their value. Petitioner cites Blanchard v. United States, 291 F. Supp. 348">291 F. Supp. 348 (S.D. Iowa 1968), and Whittemore v. Fitzpatrick, 127 F. Supp. 710">127 F. Supp. 710 (D. Conn. 1954), in support of this contention. Respondent's primary position is that the gift was of 2,757 shares in Farms, which on February 18, 1985, had a fair market value of $ 1,132,438. When Mr. Vak relinquished dominion and control over the stock of Farms he transferred that same control to the trustees. They had the power to sprinkle both income and corpus among the beneficiaries (excluding Mr. Vak). No beneficiary was entitled to a corpus distribution as a matter of right, except on termination of the Trust. The amount of income and corpus to be distributed and to which beneficiaries the distributions would be made was within the unfettered control and discretion of the trustees, and any distributions made by the trustees would not be dependent on the amount of beneficial interest held by each beneficiary. In other words, by releasing control over the stock, Mr. Vak did not transfer a specific amount of corpus or income1991 Tax Ct. Memo LEXIS 552">*571 to any beneficiary. Under these facts, it is not possible to determine what each beneficiary would ultimately receive, if anything. At the time of the transfer the ultimate beneficiaries of the Trust were undeterminable. When Mr. Vak released dominion and control over 2,757 shares of stock, he transferred control of that stock to the Trust. Because there was no division of interest in the stock at the time of transfer, there is no basis for valuing separately portions of the stock transferred, but rather the entire stock transferred is to be valued as a whole. The cases cited by petitioner in support of this contention are distinguishable from the facts before the Court. In 127 F. Supp. 710">Whittemore v. Fitzpatrick, supra, a father owning all 820 outstanding shares of stock in a family corporation transferred 600 shares by irrevocable trust deed for the equal benefit of his three sons. The court found that the transfer should be treated as three separate gifts for gift tax purposes. Under the present facts, a trust was created from which certificate holders might benefit in an amount that is currently undeterminable. In 291 F. Supp. 348">Blanchard v. United States, supra,1991 Tax Ct. Memo LEXIS 552">*572 a taxpayer owning the controlling interest in a bank made gifts of all the stock to six trusts for the benefit of her six grandchildren. Twenty one days later, the trustees sold the stock held in trust to one buyer. The issue before the court was whether the stock should be valued as part of a control block. In considering all the evidence, the court noted that the stock transferred was under the control of the Blanchard family, that the proposed sale of the stock was being negotiated at the time the gifts were made, and that all parties involved knew that the stock was worth the higher value. The court held that the stock was to be valued at the higher, control-block value. This case does not support petitioner's contention that the stock should be considered as having been transferred as separate gifts. The parties have stipulated that as of February 18, 1985, the value of the 55.14-percent block of Joe Vak Farms, Inc., stock was $ 1,132,438. Accordingly, the value of the gift for purposes of the gift tax provisions is $ 1,132,438. Section 6660(a) provides for an addition to tax in the case of any underpayment of estate and gift tax attributable to a valuation understatement. 1991 Tax Ct. Memo LEXIS 552">*573 There is a valuation understatement when the value of property shown on a return is 66-2/3 percent or less of the amount determined to be the correct amount. Sec. 6660(c). We have determined the value of the gift made by Mr. Vak in 1985 to be $ 1,132,438. The value shown on the return, $ 86,530, is less than 66-2/3 percent of the correct amount. Accordingly, imposition of the addition to tax is proper. Because the valuation shown on the return is less than 40 percent of the correct valuation, the addition to tax is equal to 30 percent of the underpayment attributable to the undervaluation. Sec. 6660(b). Decision will be entered for the respondent. Footnotes

2020-09-04 19:00:33.949845+00

http://media.ca11.uscourts.gov/opinions/unpub/files/201911976.pdf

Case: 19-11976 Date Filed: 09/04/2020 Page: 1 of 13 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ________________________ No. 19-11976 Non-Argument Calendar ________________________ D.C. Docket No. 0:10-cr-60284-WPD-1 UNITED STATES OF AMERICA, Plaintiff-Appellee, versus WILLIAM LANIER, a.k.a. Red, Defendant-Appellant. ________________________ Appeal from the United States District Court for the Southern District of Florida ________________________ (September 4, 2020) Before JILL PRYOR, BRASHER and HULL, Circuit Judges. PER CURIAM:  Case: 19-11976 Date Filed: 09/04/2020 Page: 2 of 13 William Lanier, a federal prisoner, appeals the district court’s order denying his motion to reduce sentence pursuant to the First Step Act and 18 U.S.C. § 3582(c)(1)(B). He argues that the district court erred in finding him ineligible for First Step Act relief. After review, and based on our recent decision in United States v. Jones, 962 F.3d 1290 (11th Cir. 2020), we vacate the order denying Lanier’s First Step Act motion and remand for further proceedings. I. BACKGROUND A. 2011 Guilty Plea In a 2011 plea agreement, Lanier pled guilty to two counts of conspiring to possess with intent to distribute “five (5) grams or more” of crack cocaine,1 in violation of 21 U.S.C. §§ 841(a)(1), (b)(1)(B), and 846 (Counts 1 and 2). 2 In a written factual proffer signed by Lanier and the government, Lanier stipulated that Count 1 involved 18.9 grams of crack cocaine, and Count 2 involved 44.5 grams of crack cocaine. Because the drug quantity involved in each count was between 5 and 50 grams of crack cocaine, Lanier faced a statutory mandatory minimum 1 A superseding information charged Lanier with drug possession offenses, not drug conspiracy offenses, but Lanier’s plea agreement, the presentence investigation report, and the sentencing judgment indicate that Lanier was convicted of, and sentenced for, drug conspiracy offenses. 2 Lanier had also been charged with one count of conspiring to possess with intent to distribute 50 grams or more of crack cocaine, in violation of §§ 841(a)(1), (b)(1)(A), and 846, but, in the plea agreement, the government agreed to dismiss it. 2  Case: 19-11976 Date Filed: 09/04/2020 Page: 3 of 13 penalty of 5 years in prison and a statutory maximum penalty of 40 years in prison on each count. See 21 U.S.C. § 841(b)(1)(B)(iii) (2006). B. Sentencing According to the presentence investigation report (“PSI”), the Drug Enforcement Agency, through a confidential informant (“CI”), learned that Lanier had been facilitating the sale of crack cocaine between his codefendant and buyers. During one transaction, the CI purchased 18.9 grams of crack cocaine from Lanier. During another controlled buy, the CI purchased 44.5 grams of crack cocaine from Lanier. In the final transaction with Lanier, the CI purchased 50.1 grams of crack cocaine. Accordingly, a total of 113.5 grams of crack cocaine was attributed to Lanier for the purposes of sentencing. Because Lanier qualified as a career offender, the PSI calculated his offense level under the career offender guidelines in U.S.S.G. § 4B1.1, and not the drug offense guidelines. As a career offender, Lanier’s offense level was 34 because his statutory maximum penalty for his drug offenses was 40 years’ imprisonment under 21 U.S.C. § 841(b)(1)(B)(iii). See U.S.S.G. § 4B1.1(b)(B) (2010). After a three-level reduction for accepting responsibility, Lanier’s total offense level was 31. Even without the career offender provision, Lanier’s criminal history category was VI by virtue of his 15 criminal history points. His advisory guidelines range was 188 to 235 months’ imprisonment. 3  Case: 19-11976 Date Filed: 09/04/2020 Page: 4 of 13 At the 2011 sentencing hearing, the parties did not dispute the amount of crack cocaine attributed to Lanier or the PSI’s advisory guidelines calculations. After adopting the PSI’s advisory guidelines calculations, the district court imposed two concurrent 188-month sentences, the low end of the advisory range. C. Lanier’s 2019 Motion for a Sentence Reduction In February 2019, Lanier filed a pro se motion for a reduced sentence under § 404 of the First Step Act. Because Count 1 involved only 18.9 grams of crack cocaine, Lanier argued that, under the First Step Act, the statutory maximum for Count 1 was reduced from 40 years to 20 years, and, as a result, his advisory guidelines range also was reduced. The government agreed that Count 1 involved only 18.9 grams of crack cocaine. However, the government argued that Lanier was ineligible for a reduction because Count 2 involved 44.5 grams, which was more than the 28 grams of crack cocaine that still triggered a 40-year statutory maximum penalty under the Fair Sentencing Act and § 841(b)(1)(B)(iii). Because the statutory maximum penalty for Count 2 remained 40 years, Lanier’s career offender status and overall advisory guidelines range had not changed. In an order, the district court denied Lanier’s § 404 motion and determined that he was not eligible for relief because, had Lanier been charged today, he “likely would have been charged” with conspiring to possess more than 28 grams of crack cocaine, in light of his plea agreement stipulations. The district court 4  Case: 19-11976 Date Filed: 09/04/2020 Page: 5 of 13 further reasoned that “putting Lanier in the same likely position that he would have been in had the First Step Act been in existence [at the time of his offenses] does not benefit him as the [c]ourt finds that Count Two would have alleged more than 28 grams. His guidelines would not have changed.” Later with counsel, Lanier moved for reconsideration of the denial of relief and argued that the relevant quantity of crack cocaine for determining First Step Act eligibility should have been the “five (5) grams or more” amount charged in both Counts of the superseding information, not the actual quantity attributed to him for the purposes of sentencing. Lanier contended that, under the First Step Act, his offense level was 29, his criminal history was VI, and his advisory guidelines range was now 151 to 188 months’ imprisonment. The district court denied the motion for reconsideration. This appeal followed.3 II. DISCUSSION A. Statutory Provisions Under § 3582(c)(1)(B), a district court “may modify an imposed term of 3 For sure, Lanier’s notice of appeal is timely as to the district court’s order denying his motion for reconsideration of the initial denial of his First Step Act motion. On the other hand, it is arguable that Lanier’s notice of appeal may not be timely as to the initial denial itself. Yet the government has not raised any timeliness issues and has briefed only the merits of the appeal as to the initial denial of the First Step Act motion. Further, subsequent to the district court’s rulings, this Court has published an opinion deciding what constitutes a “covered offense” under the First Step Act and other eligibility issues regarding that Act. See Jones, 962 F.3d at 1298 - 1302. Both parties have filed supplemental letter briefs as to Jones. Therefore, given all these developments, this Court addresses the merits of Lanier’s First Step Act motion. 5  Case: 19-11976 Date Filed: 09/04/2020 Page: 6 of 13 imprisonment to the extent otherwise expressly permitted by statute or by Rule 35 of the Federal Rules of Criminal Procedure.” 4 18 U.S.C. § 3582(c)(1)(B) (emphasis added). “And the First Step Act expressly permits district courts to reduce a previously imposed term of imprisonment” in certain instances for “covered offenses.” Jones, 962 F.3d at 1297 (addressing the First Step Act of 2018, Pub. L. No. 115-391, 132 Stat. 5194 (“First Step Act”)). It defines “covered offenses” as “a violation of a Federal criminal statute, the statutory penalties for which were modified by section 2 and 3 of the Fair Sentencing Act . . . that was committed before August 3, 2010.” First Step Act § 404(a), 132 Stat. at 5222. “A [defendant’s] offense is a covered offense if section two or three of the Fair Sentencing Act modified its statutory penalties.” Jones, 962 F.3d at 1298 . Stated another way, “a [defendant] has a ‘covered offense’ if his offense triggered a statutory penalty that has since been modified by the Fair Sentencing Act.” Id. Specifically, § 404 of the First Step Act “permits a district ‘court that imposed a sentence for a covered offense’ to ‘impose a reduced sentence as if sections 2 and 3 of the Fair Sentencing Act . . . were in effect at the time the covered offense was committed.’” Jones, 962 F.3d at 1297 (quoting the First Step 4 The other two circumstances are: (1) under § 3582(c)(1)(A), when either the Bureau of Prisons or the defendant has filed a motion and extraordinary and compelling reasons warrant a reduction or the defendant is at least 70 years old and meets certain other criteria; or (2) under § 3582(c)(2), when a defendant has been sentenced to a term of imprisonment based on a sentencing range that the Sentencing Commission has subsequently lowered pursuant to 28 U.S.C. § 994(o). See 18 U.S.C. § 3582(c). 6  Case: 19-11976 Date Filed: 09/04/2020 Page: 7 of 13 Act § 404(b), 132 Stat. at 5222) (alteration in original). “To be eligible for a reduction, the district court must have ‘imposed a sentence’ on the [defendant] for a ‘covered offense.’” Id. at 1298 (quoting the First Step Act § 404(a)-(b), 132 Stat. at 5222). The First Step Act authorizes, but does not require, a sentence reduction for a covered offense. Id.; see also First Step Act § 404(b), 132 Stat. at 5222. Further, sections 2 and 3 of the Fair Sentencing Act reduced the penalties for certain specific crack cocaine offenses. Fair Sentencing Act of 2010, Pub. L. No. 111-220, §§ 2-3, 124 Stat. 2372, 2372. In particular, section 2 increased the quantity of crack cocaine required to trigger the higher statutory penalties prescribed by 21 U.S.C. § 841(b)(1)(A)(iii) and (B)(iii). Id. § 2(a), 124 Stat. at 2372; see Dorsey v. United States, 567 U.S. 260 , 264, 132 S. Ct. 2321 , 2326 (2012); Jones, 962 F.3d at 1297 .5 Relevant to Lanier’s appeal, section 2 raised the threshold drug quantity of crack cocaine from 5 grams to 28 grams for § 841(b)(1)(B)(iii)’s 5-year statutory mandatory minimum and 40-year statutory maximum penalties. Fair Sentencing Act § 2(a)(2). Prior to the First Step Act, these changes did not apply retroactively to offenders sentenced before its August 3, 2010 effective date. Dorsey, 567 U.S. at 264 , 132 S. Ct. at 2326; Jones, 962 5 As explained in Jones, section 2 of the Fair Sentencing Act, the only section applicable in Lanier’s appeal, “modified the statutory penalties for crack-cocaine offenses that have as an element the quantity of crack cocaine provided in subsections 841(b)(1)(A)(iii) and (B)(iii).” Jones, 962 F.3d at 1298 . 7  Case: 19-11976 Date Filed: 09/04/2020 Page: 8 of 13 F.3d at 1297 . However, the First Step Act of 2018, in effect, makes section 2 of the Fair Sentencing Act of 2010 retroactive to Lanier’s 2011 sentencing for his violations of 21 U.S.C. §§ 841(a)(1), (b)(1)(B)(iii), and 846. Thus, in ruling on a defendant’s First Step Act motion, the district court “is permitted to reduce a defendant’s sentence only on a ‘covered offense’ and only ‘as if’ sections 2 and 3 of the Fair Sentencing Act were in effect when he committed the covered offense.” United States v. Denson, 963 F.3d 1080 , 1089 (11th Cir. 2020). The district court “is not free to change the defendant’s original guidelines calculations that are unaffected by sections 2 and 3” or “to reduce the defendant’s sentence on the covered offense based on changes in the law beyond those mandated by sections 2 and 3.” Id. B. Lanier’s claims On appeal, Lanier argues that he is eligible for relief under § 404 of the First Step Act because he was convicted of “covered offense[s],” and the district court should have exercised its discretion rather than finding him ineligible for relief based on the actual drug quantities involved in the offenses.6 In Jones, this Court held that the district court imposed a sentence for a “covered offense” if the defendant’s crack cocaine offense triggered the enhanced 6 This Court reviews de novo whether a district court had the authority to modify a term of imprisonment. Jones, 962 F.3d at 1296 . 8  Case: 19-11976 Date Filed: 09/04/2020 Page: 9 of 13 penalties in § 841(b)(1)(A)(iii) or (B)(iii). Jones, 962 F.3d at 1300-01 . To determine whether the defendant’s offense triggered those enhanced penalties and is a “covered offense,” district courts “must consult the record, including the [defendant’s] charging documents, the jury verdict or guilty plea, the sentencing record, and the final judgment.” Id. The Jones Court rejected the government’s argument that, when conducting this inquiry, the district court should consider the actual quantity of crack cocaine involved in the defendant’s violation. Id. at 1301. Rather, the district court should consider only whether the quantity of crack cocaine satisfied the specific drug-quantity elements in a § 841 offense—in other words, whether his offense involved 50 grams or more of crack cocaine, therefore triggering the penalties in § 841(b)(1)(A)(iii), or between 5 and 50 grams, therefore triggering the penalties in § 841(b)(1)(B)(iii). Id. Accordingly, under Jones , a district court may not rely on “its earlier [drug-quantity] findings . . . that were unrelated to the [defendant’s] statutory penalty to conclude that he did not commit a covered offense.” Id. at 1301-02.7 7 The elements of the relevant drug offenses are found in § 841. Jones, 962 F.3d at 1301 . Before the Fair Sentencing Act, “the drug-quantity element in section 841(b)(1)(A)(iii) was 50 grams or more of crack cocaine, and the drug-quantity element in section 841(b)(1)(B)(iii) was five grams or more of crack cocaine.” Id. “[A]ny quantity in the range sufficed and the offense would have as an element either 50 grams or more or five grams or more of crack cocaine, respectively.” Id. “The ranges did not create an infinite number of crack-cocaine offenses.” Id. Thus, for purposes of determining whether a prior offense is a “covered offense” under the First Step Act, the actual drug quantity involved in that offense is irrelevant as far as the element and the offense are concerned. Id. However, as explained later, the actual drug quantity is not 9  Case: 19-11976 Date Filed: 09/04/2020 Page: 10 of 13 Here, in 2011, Lanier pled guilty to two counts of conspiring to possess with intent to distribute “five (5) grams or more” of crack cocaine, as charged in the superseding information. In a factual proffer, he stipulated that the amount of crack cocaine involved in Count 1 was 18.9 grams, and the amount involved in Count 2 was 44.5 grams. Because the drug-quantity element in each count was 5 grams or more, Lanier was subject to the statutory penalties in § 841(b)(1)(B)(iii) of a 5-year statutory mandatory minimum and a 40-year statutory maximum. The Fair Sentencing Act has now modified and reduced the statutory penalties for drug offenses involving “5 grams or more” of crack cocaine to no mandatory minimum prison term (as opposed to 5 years) and a statutory maximum penalty of 20 years (as opposed to 40 years). Compare 21 U.S.C. § 841(b)(1)(B)(iii) (2006), with 21 U.S.C. § 841(b)(1)(C) (2010). Thus, Lanier’s offenses qualify as “covered offense[s].” See Jones, 962 F.3d at 1300-01 . We also must address the next step in Jones. The Jones Court explained that “a [defendant’s] satisfaction of the ‘covered offense’ requirement does not necessarily mean that a district court can reduce his sentence.” Id. at 1303. Specifically, the “as if” qualifier in § 404(b) of the First Step Act, which states that any reduction must be “as if sections 2 and 3 of the Fair Sentencing Act . . . were irrelevant in determining the statutory penalty under the Fair Sentencing Act and in the district court’s exercise of its discretion under the First Step Act. 10  Case: 19-11976 Date Filed: 09/04/2020 Page: 11 of 13 in effect at the time the covered offense was committed,” imposes two limitations on the district court’s authority to reduce a sentence for a covered offense. Id. (quotation marks omitted) (alteration in original); see First Step Act § 404(b). First, the district court cannot reduce a sentence for a covered offense where the defendant “received the lowest statutory penalty that also would be available to him under the Fair Sentencing Act.” Jones, 962 F.3d at 1303 . “Second, in determining what a [defendant’s] statutory penalty would be under the Fair Sentencing Act, the district court is bound by a previous finding of drug quantity that could have been used to determine the [defendant’s] statutory penalty at the time of sentencing.” Id. As further explanation, the Jones Court instructed that, “[i]f the [defendant’s] sentence would have necessarily remained the same had the Fair Sentencing Act been in effect, then the district court lacks authority to reduce the [defendant’s] sentence.” Id. “Any reduction the district court would grant would not be ‘as if’ the Fair Sentencing Act had been in effect.” Id. Accordingly, the “as if” qualifier in the First Step Act requires a district court to determine Lanier’s new penalty ranges under the Fair Sentencing Act. In doing so, the district court is bound by a previous drug-quantity finding that could have been used to determine the statutory penalty at the time of sentencing. Under the Fair Sentencing Act, Lanier’s Count 1 offense and the stipulated 18.9 grams in 11  Case: 19-11976 Date Filed: 09/04/2020 Page: 12 of 13 the factual proffer would now result in no statutory mandatory minimum prison term and a statutory maximum of 20 years. Lanier’s Count 2 offense and the stipulated 44.5 grams would still result in a statutory mandatory minimum of 5 years and a statutory maximum of 40 years because that drug quantity is over 28 grams and under 280 grams. See Fair Sentencing Act § 2(a), 124 Stat. at 2372. 8 Because Lanier’s two concurrent sentences are 188 months each, he has not received the lowest statutory penalty that would be available to him under the Fair Sentencing Act. See Jones, 962 F.3d at 1303 . However, eligibility does not mean entitlement. Although a district court may have the authority and discretion to reduce a sentence under § 404 of the First Step Act, it is not required to do so. Id. at 1304. A district court has “wide latitude to determine whether and how to exercise [its] discretion,” and it may consider the 18 U.S.C. § 3553(a) factors and a previous drug-quantity finding made for the purposes of relevant conduct, including Lanier’s admitted total crack cocaine amount of 113.5 grams. Id. at 1301, 1304. And Lanier’s career offender status is 8 Under the Fair Sentencing Act, a drug quantity of less than 28 grams triggers no statutory mandatory minimum and a statutory maximum of 20 years. 21 U.S.C. § 841(b)(1)(C) (2010). A drug quantity over 28 grams to 280 grams triggers a statutory mandatory minimum of 5 years and a statutory maximum of 40. Id. § 841(b)(1)(B)(iii) (2010). A drug quantity of more than 280 grams triggers a statutory mandatory minimum of 10 years and a statutory maximum of life. Id. § 841 (b)(1)(A)(iii) (2010). Although Lanier’s Count 2 offense still triggers the same statutory penalties because his 44.5 grams is over 28 grams, his Count 2 offense remains a “covered offense” because the Fair Sentencing Act modified the statutory penalties for his offense element of 5 grams or more that applied in 2011. 12  Case: 19-11976 Date Filed: 09/04/2020 Page: 13 of 13 not affected by the Fair Sentencing Act because he still has a 40-year statutory maximum penalty on his drug offense in Count 2. Nonetheless, Lanier’s two drug convictions are “covered offenses,” and he is eligible to have the district court consider whether to exercise its discretion to reduce his sentences in consideration of the statutory ranges that now apply under the Fair Sentencing Act, while maintaining all other unaffected, original sentencing determinations. See id. at 1304; Denson, 963 F.3d at 1089 . Accordingly, we vacate the order denying Lanier’s First Step Act motion and remand for further proceedings to allow the district court to exercise its discretion as to Lanier’s request to reduce his sentences under the First Step Act. VACATED AND REMANDED. 13

2020-09-04 19:00:37.613252+00

http://media.ca11.uscourts.gov/opinions/unpub/files/202010049.pdf

Case: 20-10049 Date Filed: 09/04/2020 Page: 1 of 20 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ________________________ No. 20-10049 Non-Argument Calendar ________________________ D.C. Docket No. 5:18-cv-00178-TKW-MJF FALLON CHRISTINA PAULK, Plaintiff - Appellant, versus TOMMY FORD, Sheriff Bay County Florida, RICK ANGLIN, JEROLD DERKAZ, MD, DAVID SASSER, Defendants - Appellees. ________________________ Appeal from the United States District Court for the Northern District of Florida ________________________ (September 4, 2020)  Case: 20-10049 Date Filed: 09/04/2020 Page: 2 of 20 Before ROSENBAUM, GRANT, and LUCK, Circuit Judges. PER CURIAM: Fallon Paulk nearly died due to complications of Crohn’s disease while in pretrial detention at the Bay County Jail (the “jail”). After undergoing life-saving emergency surgery upon her release, she filed this lawsuit alleging that Defendants- Appellees—Tommy Ford, the Bay County Sheriff; Rick Anglin, the jail’s warden; Dr. Jerold Derkaz, the jail’s Chief Medical Officer and Paulk’s primary doctor at the jail; and David Sasser, the jail’s Health Services Administrator—were deliberately indifferent to her serious medical needs, in violation of her constitutional rights. The district court granted summary judgment to the defendants, concluding that they did not act with deliberate indifference. Because genuine issues of material fact remain in the record, we vacate and remand for further proceedings. I. In January 2014, Paulk was arrested for drug possession and booked into the Bay County Jail, where she remained until her release on July 7, 2014. Immediately after her release, Paulk was rushed to the emergency room and underwent surgery. According to the surgeon, Paulk had been septic and malnourished for seven days and was “lucky to be alive.” Had she stayed in jail any longer, the surgeon told her, she would have been dead. 2  Case: 20-10049 Date Filed: 09/04/2020 Page: 3 of 20 Paulk’s near-death experience stemmed from complications of Crohn’s disease, a chronic inflammatory bowel disease that affects the lining of the gastrointestinal tract. Symptoms of Crohn’s disease include abdominal pain and cramping, diarrhea, fatigue, weight loss, and malnutrition. Crohn’s disease is characterized by active symptomatic periods—sometimes called “flare-ups”—and periods of remission. Flare-ups can also lead to more serious complications like bowel obstructions or perforations, which require immediate medical attention and potentially surgery. Because there is no cure for Crohn’s disease, treatment is focused largely on reducing the inflammation that causes flare-ups and relieving the symptoms that arise. To those ends, a variety of medications may be prescribed, including steroids, immunosuppressants, and antibiotics.1 During her approximately six-month stay at the jail, Paulk experienced multiple flare-ups of Crohn’s disease and submitted numerous written requests for medical treatment. With some fluctuation, her symptoms increased in severity over the course of her pretrial detention. The jail knew that Paulk suffered from Crohn’s disease from the outset because during intake at the jail she disclosed it and a prior bowel resection surgery. 1 See Crohn’s disease – Diagnosis and treatment, MAYO CLINIC, https://www.mayoclinic. org/diseases-conditions/crohns-disease/diagnosis-treatment/drc-20353309 (last visited Aug. 13, 2020). 3  Case: 20-10049 Date Filed: 09/04/2020 Page: 4 of 20 Paulk began experiencing intermittent Crohn’s symptoms in mid-March, starting with abdominal pain. In April, she twice requested a low bunk due to pain and inflammation, but these requests were denied. In late April, she reported vomiting and severe abdominal cramping for three days. She was seen on May 2 by Waneda Wolfe, an advanced registered nurse practitioner (“ARNP”), who prescribed medications to treat her cramps, nausea, and vomiting. From May through June 16, Paulk submitted numerous sick-call requests complaining of abdominal cramping of increasing severity, an inability to use the restroom, and heartburn. In response to these requests, ARNP Wolfe and Dr. Derkaz examined Paulk on multiple occasions, prescribed a variety of medications to treat her symptoms, ordered X-rays to be taken on May 29, June 2, and June 10; and collected blood samples for tests on June 10. The X-rays on May 29 and June 2 found “no evidence for obstruction,” but the X-ray from June 10 noted “[f]indings consistent with an intermittent or partial small bowel obstruction.” On June 16, Wolfe ordered Paulk sent to the emergency room. According to Wolfe, Paulk appeared “ill, pale & in pain” and her abdomen was distended and tender. Paulk was admitted to the hospital and underwent a CT scan, x-rays, a colonoscopy, and other tests. The CT report noted mild constipation and findings that were consistent with Crohn’s disease and a “possible early or partial small bowel obstruction.” The X-ray report noted a possible “inflammatory distal small bowel 4  Case: 20-10049 Date Filed: 09/04/2020 Page: 5 of 20 stricture”—a narrowing of the intestine—but “[n]o signs of bowel perforation or other acute process.” Finally, Dr. Finlaw performed a colonoscopy with biopsy, finding an “ileocolonic anastomosis” stricture that the scope could not pass through. In a post-operative report, Dr. Finlaw wrote that Paulk should “[c]ontinue steroids” and that she “will need Remicade, although this may be challenging in the fact that she is currently incarcerated.” Dr. Finlaw also ordered a high-fiber diet. The hospital discharged Paulk on June 20 in stable condition with a diagnosis of a small-bowel obstruction with a fair prognosis. The discharge summary noted that surgery had signed off and that Paulk was “not having any acute abdomen.” The summary further noted that Paulk “plans to start Remicade in the outpatient” and that she should return to the hospital for a follow-up appointment in one to two weeks. Despite these discharge instructions, however, Paulk did not return to the hospital for a follow-up appointment, nor was she prescribed Remicade. The jail continued her treatment with steroids and other medications that she had previously received at the jail. Meanwhile, Paulk’s parents became increasingly worried about her health. After her hospitalization from June 16–20, Paulk’s father called Sasser, the jail’s Health Services Administrator, every day, speaking with him regularly. For her part, Paulk’s mother called the jail up to five times a day. At some point after Paulk’s discharge, Paulk’s mother spoke with Sasser and informed him that Paulk had 5  Case: 20-10049 Date Filed: 09/04/2020 Page: 6 of 20 previously been on Remicade when Paulk had her prior bowel surgery, and that she (Paulk’s mother) did not think it would be a good idea for Paulk to start taking it again. After her discharge from the hospital, Paulk was returned to the jail’s regular housing. Over the next two days, Paulk requested a refill for Doxepin—used to treat depression, anxiety, and insomnia—and indicated that she was having trouble sleeping. On June 23, Paulk also reported that her abdomen was hurting again. Dr. Derkaz examined Paulk on June 24 and noted that she had been up the night before with some abdominal pain, nausea, and vomiting. That same day, Dr. Derkaz canceled the high-fiber diet ordered by Dr. Finlaw. Dr. Derkaz saw Paulk again on June 30, two days after Paulk was moved to the medical unit for observation. Paulk had been running a fever on June 28, and Paulk’s family members had called the jail to say that other inmates were calling them and stating how sick Paulk was. In his treatment notes for June 30, Dr. Derkaz wrote that Paulk seemed to be doing much better and that she had no guarding or distension. Paulk was returned to general population after seeing Dr. Derkaz. On July 1, Paulk asked for “some [B]oost” and inquired whether she could get “a full liquid diet,” writing that she was “getting weak because I can’t eat” and had lost significant weight. A nurse disputed Paulk’s claim of weight loss and denied the request for Boost. Paulk responded, claiming that she had dropped from 155 to 6  Case: 20-10049 Date Filed: 09/04/2020 Page: 7 of 20 138 pounds. On July 2, Paulk requested a higher dose of Doxepin and to see the doctor. On July 3, Dr. Derkaz examined Paulk and determined that she had a partial small-bowel obstruction that was stable and not a “surgical problem” at that time. It was not a surgical problem, according to Dr. Derkaz, because “[a] physical examination showed her abdomen to be soft and with active bowel signs, left-sided tenderness, no guarding or distension.” Dr. Derkaz’s treatment notes indicated that Paulk had a bowel movement that morning and had vomited once or twice. Paulk was given Boost. This was the last time Dr. Derkaz examined Paulk. At around 10:00 a.m. on July 4, according to treatment notes, Paulk, in tears, presented to medical with stomach pain, nausea, vomiting, and diarrhea. She could not walk or sit up straight. She was given Toradol, an anti-inflammatory pain reliever. Later that night, just after 10:00 p.m., Paulk reported abdominal pain, nausea, and feeling faint. A nurse noted that Paulk’s abdomen was distended and firm with hypoactive bowel sounds and that she had difficulty walking and sitting upright. Paulk was given prescribed medications, but the nursing staff was unable to reach Dr. Derkaz or to leave a voicemail. Paulk was reassessed approximately 40 minutes later and reported that she was feeling better. At around 11:25 a.m. the following day, July 5, Paulk again reported abdominal pain, nausea, vomiting. Her abdomen was distended and firm, and she 7  Case: 20-10049 Date Filed: 09/04/2020 Page: 8 of 20 was unable to stand or sit upright. The nursing staff contacted Dr. Derkaz, who prescribed Toradol for pain relief and Phenergan for nausea and vomiting but took no other action. At that time, according to Dr. Derkaz, he “probably” knew that Paulk was going to be released soon. The treatment notes indicate that a nurse checked on Paulk at approximately 1:30 p.m. and wrote that she was resting quietly with no apparent symptoms of distress. The same nurse checked on Paulk at 4:05 p.m. that same day and twice the next day, July 6, each time noting that Paulk was resting and exhibited no apparent symptoms of distress. Her abdomen remained distended and firm, however. Although the treatment notes indicate that Paulk was being closely monitored from July 3–6, Paulk testified that the nurses “weren’t coming to take care of me” and that she preferred being in general population because at least there she “had people helping take care of me.” She elaborated, They weren’t even wanting to bring my medication inside the medical cell. They were wanting me to come to the door just to get my medication, and I couldn’t even get up. . . . I remember being very, very sick and throwing up and couldn’t even make it to the toilet. And I was puking all over the cell and they were just letting it stay in there. By early July, Paulk’s parents feared for her life. Based on information from Sasser, Paulk, and other inmates, her parents were convinced that Paulk had a bowel blockage and that she was “going septic.” Paulk’s mother kept in touch with an 8  Case: 20-10049 Date Filed: 09/04/2020 Page: 9 of 20 inmate housed with Paulk who was “trying to keep [Paulk] alive basically.”2 But despite their best efforts, the jail refused to take action. In his phone calls to Sasser, Paulk’s father tried to explain that Paulk was likely going septic due to Crohn’s disease, that “[h]er body is swelling up and if it’s not treated, she’s going to be septic.” Paulk’s mother testified that she conveyed similar information to jail staff, though at some point they stopped answering her calls, likely recognizing her number. Two or three days before the court hearing on July 7, Paulk’s mother sent her father to the jail because Paulk was “in really bad shape. She’s got to get to the hospital or she’s going to die.” Paulk’s father went to the jail with his sister and tried to persuade jail staff to call an ambulance, but they refused. Paulk’s father responded, “well let me call an ambulance, and they said, no.” He then implored, “listen, you people don’t understand what’s going on. . . . She is going to die.” But jail staff refused to call an ambulance or provide any information about Paulk. Paulk was released from jail on July 7, after her court date. Paulk testified that she was “so sick that [she] was in a wheelchair” and was largely “unresponsive.” 2 The record contains what appears to be a letter from this inmate to Paulk’s parents. This letter provides details about events relating to Paulk at the jail from late June through Paulk’s release. The letter is unsworn, however, and Paulk has not indicated that this inmate is available to testify. Because the letter itself appears to be inadmissible hearsay, and because it is unclear at this time whether the inmate would be available to provide testimony in this case, we do not consider the letter in evaluating whether the district court correctly granted summary judgment. 9  Case: 20-10049 Date Filed: 09/04/2020 Page: 10 of 20 Her parents rushed her to the emergency room, where a CT scan showed findings of bowel perforation, air, and abscesses. She underwent emergency surgery and had multiple abdominal abscesses drained and small bowel strictures that were resected. Before she was discharged, the surgeon told her that she had “gone septic” and was “lucky to be alive.” The surgeon stated that upon her admission she had “only a 25 percent chance to live” and that she would have died if she stayed in jail any longer. The surgeon informed Paulk’s mother that Paulk had been septic for seven days and that her blood work indicated that she had been without food and water during that time. That suggests Paulk had been septic and without food or water since June 30 or July 1. II. Paulk filed this lawsuit under 42 U.S.C. § 1983 alleging that the defendants were deliberately indifferent to her serious medical needs, in violation of her constitutional rights. Paulk also alleged state-law claims of negligence against Sheriff Ford. After discovery, the defendants filed a motion for summary judgment, which the district court granted. With regard to the federal claims, the court concluded that the defendants were not deliberately indifferent to Paulk’s serious medical needs because the jail’s medical staff provided frequent medical care to address her condition, and because negligence in treatment or even medical malpractice is not enough to give rise to a constitutional claim. The court declined 10  Case: 20-10049 Date Filed: 09/04/2020 Page: 11 of 20 to exercise supplemental jurisdiction over the state-law claims and remanded them to state court. Paulk now appeals the dismissal of her § 1983 claims. III. “We review a district court’s grant of summary judgment de novo considering all the facts and reasonable inferences in the light most favorable to the non-moving party.” Mann v. Taser Int’l, Inc., 588 F.3d 1291 , 1303 (11th Cir. 2009). Summary judgment is appropriate if, based on the evidentiary materials in the record, “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). “Summary judgment is improper, however, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Guevara v. NCL (Bahamas) Ltd., 920 F.3d 710 , 720 (11th Cir. 2019) (quotation marks omitted). IV. Because Paulk was a pretrial detainee at the time of the alleged violations, her claims are governed by the Due Process Clause of the Fourteenth Amendment. Jackson v. West, 787 F.3d 1345 , 1352 (11th Cir. 2015). Nevertheless, the minimum standard allowed by the Due Process Clause for pretrial detainees is the same as that allowed by the Eighth Amendment for prisoners. Id. Under the Fourteenth Amendment, pretrial detainees like Paulk have the “right to receive medical treatment for illness and injuries.” Cook ex rel. Estate of 11  Case: 20-10049 Date Filed: 09/04/2020 Page: 12 of 20 Tessier v. Sheriff of Monroe Cty., Fla., 402 F.3d 1092 , 1115 (11th Cir. 2005). A pretrial detainee can establish a violation of this right by showing that a jail official displayed “deliberate indifference” to her serious medical needs. Id.; see Estelle v. Gamble, 429 U.S. 97 , 104 (1976). A deliberate-indifference claim has both an objective component and a subjective component. Goebert v. Lee Cty., 510 F.3d 1312 , 1326 (11th Cir. 2007). For the objective component, the plaintiff must show that she has an objectively “serious medical need”—that is, “one that has been diagnosed by a physician as mandating treatment or one that is so obvious that even a lay person would easily recognize the necessity for a doctor’s attention.” Id. (quotation marks omitted). Appellees do not dispute that Crohn’s disease and its complications present objectively serious medical needs. The evidence shows that Paulk’s Crohn’s disease led to complications that twice required her hospitalization and nearly resulted in her death. This is sufficient to show that Paulk had serious medical needs. For the subjective component, the plaintiff must “show the [jail] official’s: (1) subjective knowledge of a risk of serious harm; (2) disregard of that risk; and (3) by conduct that is more than mere negligence.” Bingham v. Thomas, 654 F.3d 1171 , 1176 (11th Cir. 2011) (quotation marks omitted); see Farmer v. Brennan, 511 U.S. 825 , 837 (1994) (explaining that the standard of deliberate indifference is consistent with recklessness in the criminal law). “Conduct that is more than mere 12  Case: 20-10049 Date Filed: 09/04/2020 Page: 13 of 20 negligence includes: (1) grossly inadequate care; (2) a decision to take an easier but less efficacious course of treatment; and (3) medical care that is so cursory as to amount to no treatment at all.” Bingham, 654 F.3d at 1176 . Additionally, an officer “who delays necessary treatment for non-medical reasons may exhibit deliberate indifference.” Id.; Farrow v. West, 320 F.3d 1235 , 1246 (11th Cir. 2003). However, “[m]ere incidents of negligence or malpractice do not rise to the level of constitutional violations.” Harris v. Thigpen, 941 F.2d 1495 , 1505 (11th Cir. 1991). Deliberate indifference is about “obduracy and wantonness, not inadvertence or error in good faith.” Whitley v. Albers, 475 U.S. 312 , 319 (1986). “It is the equivalent of recklessly disregarding a substantial risk of serious harm to the inmate.” Cottrell v. Caldwell, 85 F.3d 1480 , 1491 (11th Cir. 1996) (quotation marks omitted). So “a simple difference in medical opinion between the prison’s medical staff and the inmate as to the latter’s diagnosis or course of treatment [fails to] support a claim of cruel and unusual punishment.” Harris, 941 F.2d at 1505 . Here, no reasonable jury could conclude that the defendants were deliberately indifferent to Paulk’s serious medical needs before her hospitalization from June 16– 20.3 Before that time, Paulk regularly received medical attention and treatment for symptoms of Crohn’s disease, in most instances within one or two days after she 3 Notably, Paulk did not sue ARNP Wolfe, who treated Paulk during this time, for deliberate indifference. 13  Case: 20-10049 Date Filed: 09/04/2020 Page: 14 of 20 requested medical assistance. She was prescribed various medications to treat her symptoms, she underwent diagnostic procedures such as X-rays to determine the severity of her condition, and she was taken to the hospital shortly after the jail discovered that she may have a bowel obstruction. Whether this care was good or negligent, it simply does not reflect the type of “reckless[] disregard[]” of inmate health that we have found sufficient to meet the standard of deliberate indifference. 4 Cottrell, 85 F.3d at 1491 ; see Bingham, 654 F.3d at 1176 ; Harris, 941 F.2d at 1505 . But as to the events following her hospital discharge and her return to the jail, we conclude that there are genuine issues of material fact that preclude summary judgment. Before explaining why, we pause a moment to clarify what is at issue on appeal. In granting summary judgment, the court found that Paulk failed to present sufficient evidence of deliberate indifference. But the court did not go further and address the defendants individually or their claims of qualified immunity. The parties on appeal likewise do not address qualified immunity or the claims as to 4 Paulk asserts that laxatives were “contraindicated” for her conditions but were prescribed, anyway. But she offers no medical or expert evidence as to the use of laxatives to treat Crohn’s disease. The only supporting testimony she offers came from her mother, who believed that it was “in total disregard for Crohn’s patients to ever take a laxative” and stated that she had been “[t]old by a gastro doctor to never take a laxative or anything like that because it only aggravated the Crohn’s symptoms.” On the other hand, both Dr. Derkaz and ARNP Wolfe testified that laxatives are sometimes prescribed for Crohn’s patients. On this record, we cannot say that Paulk’s evidence on this point reflects anything more than“a simple difference in medical opinion between the prison’s medical staff and the inmate as to the latter’s diagnosis or course of treatment,” which is not sufficient to “support a claim of cruel and unusual punishment.” Harris, 941 F.2d at 1505 . 14  Case: 20-10049 Date Filed: 09/04/2020 Page: 15 of 20 particular defendants. Because these inquiries require individualized assessments,5 the sole issue before us, as we see it, is simply whether a reasonable jury could find in Paulk’s favor on any of her claims of deliberate indifference, and not the viability of all her claims or whether qualified immunity applies. With that clarification, we explain why Paulk could prevail on a deliberate-indifference claim at least as to Dr. Derkaz. The evidence reflects that Paulk returned to the jail from the hospital with a diagnosis of a partial small-bowel obstruction and recommendations (in the jail’s view) or orders (in Paulk’s view) to give her Remicade and a high-fiber diet and to return her to the hospital for a follow-up appointment within two weeks. Although her condition did not require surgery at that time, Dr. Derkaz knew it required monitoring going forward and that life-threatening complications could result. Dr. Derkaz testified that complications common to Crohn’s disease can lead to life- threatening conditions, such as a complete bowel obstruction or a bowel perforation. 5 See Alcocer v. Mills, 906 F.3d 944 , 951 (11th Cir. 2018) (“Because § 1983 requires proof of an affirmative causal connection between the official’s acts or omissions and the alleged constitutional deprivation, each defendant is entitled to an independent qualified-immunity analysis as it relates to his or her actions and omissions.”); Dang ex rel. Dang v. Sheriff, Seminole Cty. Fla., 871 F.3d 1272 , 1280 (11th Cir. 2017) (stating that, when assessing the subjective component of a claim of deliberate indifference, we must judge each individual defendant “separately and on the basis of what that person kn[ew]” and not on “[i]mputed or collective knowledge”). 15  Case: 20-10049 Date Filed: 09/04/2020 Page: 16 of 20 Life-threatening conditions did in fact result. By July 7, Paulk was largely “unresponsive” and close to death. According to the surgeon who performed emergency life-saving surgery after her release from the jail, Paulk was “lucky to be alive” and had been septic and malnourished for seven days. And there is sufficient evidence for a jury to conclude that Dr. Derkaz was aware that Paulk was deteriorating and developing life-threatening conditions due to her Crohn’s disease but took no reasonable action in response. See McElligott v. Foley, 182 F.3d 1248 , 1259 (11th Cir. 1999) (finding sufficient evidence of deliberate indifference where “the defendant was aware that plaintiff’s condition was, in fact, deteriorating, and still did nothing to treat this deteriorating state.”); Carswell v. Bay Cty., 854 F.2d 454 , 457 (11th Cir. 1988) (finding sufficient evidence of deliberate indifference whether the defendants were aware of the plaintiff’s deteriorating condition but did little to ensure that the plaintiff received medical attention). On July 1, Paulk reported that she was “getting weak because I can’t eat.” Two days later, she saw Dr. Derkaz, who believed that she did not have a “surgical problem” at that time because her abdomen was “soft and with active bowel signs, left-sided tenderness, no guarding or distension.” But the very next day Paulk reported to medical in tears and complained of abdominal pain, nausea, and vomiting. And that day and the next, July 4 and 5, nurses noted that Paulk’s 16  Case: 20-10049 Date Filed: 09/04/2020 Page: 17 of 20 abdomen was distended and firm, that she had difficulty walking and sitting upright, and that she had hypoactive bowel sounds. Although the nursing staff was unable to reach him on July 4, Dr. Derkaz was informed of Paulk’s condition on July 5. 6 Dr. Derkaz’s own testimony reflects that the symptoms reported by Paulk and the nurses indicated that her condition was deteriorating and required emergency care. In attempting to downplay the severity of Paulk’s condition, he testified that “if she had a full bowel obstruction she would have been vomiting and would be getting sicker,” “she wouldn’t be able to eat,” and she “would be getting progressively worse and worse and worse.” But a reasonable jury could conclude that Paulk did exhibit these symptoms, or symptoms of comparable severity, and that Dr. Derkaz knew as much. As of July 5, when Dr. Derkaz was informed of Paulk’s condition, Paulk had been in severe distress for at least two days, with nausea, vomiting, abdominal pain, a distended and firm abdomen, hypoactive bowel sounds, an inability to eat, and difficulty walking or standing upright. Under Dr. Derkaz’s own testimony, these symptoms reflect a potential life-threatening condition requiring surgery. Despite his awareness of these facts, Dr. Derkaz took no action with regard to Paulk’s medical needs, apart from prescribing Toradol, for pain relief, and 6 Meanwhile, Paulk’s parents repeatedly called Sasser and other jail staff and described Paulk’s condition, pleading that she likely had a bowel obstruction, was going septic, and needed emergency medical care or else she would die. 17  Case: 20-10049 Date Filed: 09/04/2020 Page: 18 of 20 Phenergan, for nausea and vomiting, the same medication she had previously received at various times at the jail. He did not order X-rays or blood tests, as the jail previously had done when she experienced similar but less severe symptoms in May and June. He did not personally examine Paulk after July 3. Nor did he call a specialist or an ambulance or direct anyone else to do those things. And Paulk almost died as a result. A reasonable jury could conclude from this evidence, viewed in the light most favorable to Paulk, that Dr. Derkaz “recklessly disregard[ed] a substantial risk of serious harm to the inmate.” See Cottrell, 85 F.3d at 1491 . A jury could reasonably conclude that in early July 2014 Paulk’s need for emergency care was obvious and that Dr. Derkaz’s response—prescribing medication for her symptoms that did little or nothing to ameliorate a potential life-threatening complication like a bowel obstruction or perforation—was “grossly inadequate” or was “so cursory as to amount to no treatment at all.” See McElligott, 182 F.3d at 1255 –57 (reasoning that “a jury could find that the medication provided to [the plaintiff] was so cursory as to amount to no care at all” because it “was not treating the severe pain he was experiencing”). “A jury could infer deliberate indifference from the fact that [Dr. Derkaz] knew the extent of [Paulk’s] pain, knew that the course of treatment was largely ineffective, and declined to do anything more to attempt to improve [her] condition.” Id. at 1257–58 (quotation marks omitted). In other words, this case is 18  Case: 20-10049 Date Filed: 09/04/2020 Page: 19 of 20 not about a simple difference in views on appropriate treatment, which is insufficient to show deliberate indifference. See Harris, 941 F.2d at 1505 . Rather, a jury could reasonably conclude “that the defendant was aware that plaintiff’s condition was, in fact, deteriorating, and still did nothing to treat this deteriorating state.” McElligot, 182 F.3d at 1259 . We acknowledge that Paulk received medical care throughout her incarceration at the jail. And courts “hesitate” to find a constitutional violation where an inmate has received medical care. Waldrop v. Evans, 871 F.2d 1030 , 1035 (11th Cir. 1989). “Hesitation does not mean, however, that the course of a physician’s treatment of a prison inmate’s medical or psychiatric problems can never manifest the physician’s deliberate indifference to the inmate’s medical needs.” Id. And it remains the case that “grossly incompetent medical care or choice of an easier but less efficacious treatment can constitute deliberate indifference.” Id. For the reasons explained above, we conclude that there is sufficient evidence for a reasonable jury to return a verdict against Dr. Derkaz on Paulk’s claim of deliberate indifference. Accordingly, the district court erred in granting summary judgment on the ground that Paulk had not offered sufficient evidence of deliberate indifference as to any of the defendants. We conclude that, at least as to Dr. Derkaz, summary judgment was not appropriate because a reasonable jury could return a verdict in 19  Case: 20-10049 Date Filed: 09/04/2020 Page: 20 of 20 Paulk’s favor on her claim of deliberate indifference. See Guevara, 920 F.3d at 720 . But because the court (and the parties on appeal) did not go further and conduct an individualized assessment of the evidence as to each defendant or address the defendants’ claims of qualified immunity, we do not do so in the first instance. Instead, we believe that the most prudent course of action is simply to vacate the grant of summary judgment and remand for further proceedings. For the issues that remain, the district court may choose to conduct the analysis on the basis of the record as it currently exists, or it may allow the parties to supplement their summary- judgment submissions in light of our opinion today. VACATED AND REMANDED. 20

2020-09-04 19:00:32.942758+00

http://media.ca11.uscourts.gov/opinions/unpub/files/201913816.pdf

Case: 19-13816 Date Filed: 09/04/2020 Page: 1 of 10 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ________________________ No. 19-13816 Non-Argument Calendar ________________________ D.C. Docket No. 2:18-cr-00332-TFM-SMD-1 UNITED STATES OF AMERICA, Plaintiff-Appellee, versus WILLIS COGBURN, Defendant-Appellant. ________________________ Appeal from the United States District Court for the Middle District of Alabama ________________________ (September 4, 2020) Before GRANT, LUCK, and ANDERSON, Circuit Judges. PER CURIAM:  Case: 19-13816 Date Filed: 09/04/2020 Page: 2 of 10 Willis Cogburn appeals his convictions for possession of a firearm by a convicted felon and possession of marijuana with intent to distribute. Cogburn contends that the government presented insufficient evidence to prove (1) he knew he was a convicted felon at the time he possessed the firearm and (2) the substance found in his car was marijuana. We affirm. FACTUAL BACKGROUND AND PROCEDURAL HISTORY Shortly after midnight on July 8, 2017, officers from the Troy Police Department responded to a call near a bar in downtown Troy, Alabama. When they arrived on scene, the officers began dispersing a crowd that had gathered around the bar. One of the officers, Lieutenant Robert Hicks, approached the open passenger- side window of a car parked on the curb blasting loud music. He shined his flashlight inside and saw a man, later identified as Cogburn, in the driver’s seat, and an open can of beer in the cupholder. Lt. Hicks also smelled raw marijuana emanating from inside the car. Lt. Hicks asked Cogburn to identify himself and turn the vehicle off, but Cogburn refused. Lt. Hicks then moved to the driver’s side door, and, by this point, the other officers had joined him. Because Cogburn was still not complying with Lt. Hicks’s orders, the officers tried to remove him from the car. Cogburn, however, put the car in reverse and attempted to flee, but he crashed into another car a few seconds later. With guns drawn, the officers approached the now immobilized car and ordered 2  Case: 19-13816 Date Filed: 09/04/2020 Page: 3 of 10 Cogburn to exit. Again, he refused. This time, the officers grabbed Cogburn, were able to remove him from the car, and brought him to the ground. As they pulled him out of the car, Cogburn dropped a phone and three small plastic bags containing marijuana. The officers searched Cogburn and discovered two flip phones and over $400 in cash. Officer Michael Watts inventoried the car and found (1) a pill bottle with baggies of cocaine and methamphetamine, (2) a trash bag with marijuana, (3) a fully-loaded revolver, and (4) a digital scale. A grand jury indicted Cogburn for possession of methamphetamine, cocaine, and marijuana with intent to distribute, in violation of 21 U.S.C. § 841(a), possession of a firearm as a convicted felon, in violation of 18 U.S.C. § 922(g)(1), and possession of a firearm in furtherance of a drug trafficking crime, in violation of 18 U.S.C. § 924(c)(1)(A). The government notified Cogburn of its intent to introduce evidence at trial of his 2013 Georgia conviction for possession of marijuana to prove “his motive and intent to commit the [current drug] offenses.” Cogburn filed a motion in limine, arguing that, although he was “willing to stipulate [to] the fact of a prior qualifying conviction for purposes of the . . . [section] 922(g) charge,” his prior conviction was inadmissible because it was unduly prejudicial. Before trial, Cogburn claimed that his prior conviction did not prohibit him from possessing a firearm under section 922(g) because it was discharged under 3  Case: 19-13816 Date Filed: 09/04/2020 Page: 4 of 10 Georgia’s First Offender Act after he completed his sentence. 1 In response, the government showed the district court a document from a Georgia superior court that was signed by Cogburn, which, according to the government, indicated that Cogburn was a convicted felon at the time he possessed the firearm. The government further noted that Cogburn’s prior offense was considered a felony under Georgia law and had a maximum penalty of imprisonment for a term longer than one year. The district court denied Cogburn’s motion and found that his prior conviction was a predicate offense for purposes of his felon-in-possession charge. At trial, the government told the district court that the forensic scientist who tested the marijuana in the trash bag found in Cogburn’s car, Kevin Lewis, came down with the flu and was unable to testify. As a result, the government called another forensic scientist, Jessica Glaze, to independently review the chain-of- custody documents and the machine-generated data Lewis produced in his analysis of the marijuana.2 Glaze testified that the data Lewis produced showed that the substance he tested “contained marijuana” and that there were no “errors” in the chain-of-custody documents. Various officers also testified that the substance in the trash bag was marijuana. Lt. Hicks testified that he had investigated well over one 1 In Georgia, a convicted felon with no prior felony convictions may apply for first-offender status. O.C.G.A. § 42-8-60(a). Obtaining first-offender status is not automatic. See id. § 42-8- 61. If the sentencing court grants a defendant’s request, then his “sentence . . . shall be exonerated of guilt and shall be discharged as a matter of law as soon as the defendant [c]ompletes the terms of his . . . probation.” Id. § 42-8-60(e)(1). 2 Glaze had analyzed the cocaine and methamphetamine but not the marijuana. 4  Case: 19-13816 Date Filed: 09/04/2020 Page: 5 of 10 hundred marijuana offenses, he was familiar with the drug’s smell and appearance, and the evidence found in Cogburn’s car was marijuana. Ofc. Watts said he had dealt with marijuana hundreds of times as a law enforcement officer and was familiar with its smell and appearance. Ofc. Watts testified that the car had a “strong” smell of marijuana during his inventory and that, based on his experience, he believed the substance in the trash bag was marijuana. The government also called Chase Avant, a narcotics detective with the police department and a member of the Drug Enforcement Administration’s task force, who testified that he had investigated thirty to forty cases involving marijuana and that the substance in the trash bag looked and smelled like marijuana and weighed approximately 100 grams. The government rested its case, and Cogburn moved for a judgment of acquittal because the government purportedly failed to present sufficient evidence to sustain a conviction on each charge. The district court denied the motion. Cogburn then testified in his own defense. He claimed he had agreed to give another man a ride to a party and that the can of beer, trash bag of marijuana, scale, and pill bottle of drugs belonged to that man. However, Cogburn admitted the three small plastic bags of marijuana and firearm were his. Lastly, Cogburn said that, on the night of his arrest, he didn’t know he was a convicted felon. Cogburn moved for a judgment of acquittal on the same grounds as before, and, again, the district court denied it. 5  Case: 19-13816 Date Filed: 09/04/2020 Page: 6 of 10 The jury found Cogburn guilty of possession of marijuana with intent to distribute, possession of a firearm by a convicted felon, and possession of a firearm in furtherance of a drug trafficking crime. The district court sentenced him to 111 months in prison. This is his appeal. DISCUSSION Cogburn argues that the evidence at trial was insufficient to prove he knew he was a convicted felon at the time he possessed the revolver. He also contends that the evidence did not sufficiently prove the substance found in his car was marijuana. Cogburn Knew He Was a Convicted Felon Cogburn argues he didn’t know he was a felon when he possessed the revolver because he believed he had received first-offender status when he completed his sentence for his Georgia conviction. He contends that the certified judgment the government introduced at trial and his lack of meaningful criminal history suggest he had received such status. Cogburn thus claims that the district court should have granted his motion for acquittal because the government failed to prove he knew he was a felon. We review de novo the denial of a motion for judgment of acquittal on sufficiency grounds. United States v. Browne, 505 F.3d 1229 , 1253 (11th Cir. 2007). When determining sufficiency, we view the evidence in the light most favorable to the government, drawing all reasonable inferences and credibility choices in the 6  Case: 19-13816 Date Filed: 09/04/2020 Page: 7 of 10 government’s favor. Id. We will affirm a district court’s denial of a motion for judgment of acquittal if a reasonable jury could conclude that the evidence established the defendant’s guilt beyond a reasonable doubt. Id. To sustain a conviction for possession of a firearm by a convicted felon under section 922(g), the government must prove that Cogburn knew he was a felon at the time he possessed the firearm. Rehaif v. United States, 139 S. Ct. 2191 , 2195–96 (2019). Here, the evidence was sufficient for a reasonable juror to conclude beyond a reasonable doubt that Cogburn knew he was a convicted felon when he possessed the firearm. The certified judgment for Cogburn’s prior conviction stated that he was adjudicated guilty for possessing marijuana, he was sentenced to three years of probation, and the “final disposition” of his conviction was “FELONY with PROBATION.” In addition, the checkbox designating first-offender status was left unmarked by the sentencing judge, and the certified judgment provided the following notice: “FIREARMS – If you are convicted of a crime punishable by imprisonment for a term exceeding one year . . . , it is unlawful for you to possess or purchase a firearm including a rifle, pistol, or revolver, or ammunition, pursuant to federal law under 18 U.S.C. § 922(g)(2).” Right below the notice was Cogburn’s signature, which acknowledged that he “read the terms of this sentence” and “underst[oo]d the meaning of the order of probation and the conditions of probation.” Further, Cogburn testified that he didn’t know he was a convicted felon 7  Case: 19-13816 Date Filed: 09/04/2020 Page: 8 of 10 when he possessed the revolver. Where a defendant testifies in his own defense, the jury may disbelieve his testimony, conclude that the opposite of his testimony is true, and consider it as substantive evidence of his guilt. United States v. Brown, 53 F.3d 312 , 314 (11th Cir. 1995). We find this evidence sufficient to prove the Rehaif element and thus see no error in the district court’s denial of Cogburn’s motion for acquittal as to his felon-in-possession charge. Cogburn Possessed Marijuana Cogburn argues that the evidence at trial was insufficient to prove that the substance found in his car was marijuana. The district court, Cogburn contends, erred in allowing Glaze to testify about the machine-generated data Lewis produced because Glaze’s testimony “obvious[ly] violat[ed] [his] constitutional rights” and was “the ultimate hearsay testimony.” Although he doesn’t specify which of his constitutional rights were violated, Cogburn appears to make a Confrontation Clause argument as he takes issue with his inability to “challenge the findings of the report where [a] third party witness was not the originator.” In light of these errors, Cogburn argues that the government failed to prove that the substance he possessed was marijuana. Because Cogburn didn’t raise these objections to Glaze’s testimony below, we review them for plain error. See United States v. Arbolaez, 450 F.3d 1283 , 1291 (11th Cir. 2006). To establish plain error, a defendant must show an “(1) error, 8  Case: 19-13816 Date Filed: 09/04/2020 Page: 9 of 10 (2) that is plain, and (3) that affects substantial rights. If all three conditions are met, an appellate court may then exercise its discretion to notice a forfeited error, but only if (4) the error seriously affects the fairness, integrity, or public reputation of judicial proceedings.” Id. (quoting United States v. Baker, 432 F.3d 1189 , 1202–03 (11th Cir. 2005)). An error affects a defendant’s substantial rights if it was prejudicial— that is, if it “affected the outcome of the district court proceedings.” Id. (quoting United States v. Olano, 507 U.S. 725 , 734 (1993)). Even assuming the district court erred by allowing Glaze to testify that the substance in the trash bag was marijuana, Cogburn’s substantial rights were not affected because he has not shown that the verdict would have changed without Glaze’s testimony. “The nature of a substance [such] as marijuana need not be proved by direct evidence where circumstantial evidence establishes beyond a reasonable doubt its identity.” United States v. Rodriguez-Arevalo, 734 F.2d 612 , 616 (11th Cir. 1984). Here, the government produced ample evidence independent of Glaze’s testimony establishing that the green, leafy substance in the trash bag was marijuana: Lt. Hicks, who had extensive experience investigating marijuana offenses, testified that the evidence found in Cogburn’s car was marijuana; Ofc. Watts, who had dealt with marijuana hundreds of times as an officer, identified the substance as marijuana; and Agent Avant, the narcotics detective, testified that the substance was marijuana. Id. (recognizing that the testimony of an agent is “wholly 9  Case: 19-13816 Date Filed: 09/04/2020 Page: 10 of 10 sufficient to establish the identity of [a] substance as marijuana”). Finally, Cogburn admitted at trial that he had “dime bags of marijuana in [his] hand” when he was arrested. With this overwhelming evidence that he possessed marijuana, Cogburn has not met his burden to show that the outcome of the trial would have been different without Glaze’s testimony. AFFIRMED. 10

2020-01-17 22:01:30.865371+00

Siefkin

*1183OPINION. Siefkin : In brief, the petitioner makes two contentions. First, that it is exempt; and, second, that if it is not exempt, the contributions, fees, or dues of members should either be not considered as income at all or the petitioner should be entitled to a deduction equal to the amount of the receipts. It is our opinion that the petitioner is not exempt. To be entitled to exemption it must bring itself within the exemption clauses of the taxing statute, which, in this proceeding, are found in section 231 of the Revenue Act of 1918. That section is composed of 14 paragraphs. The petitioner states in its brief: While the taxpayer cannot point to any particular paragraph of this section which enumerates organizations of the precise character of the taxpayer, it does not follow that the taxpayer is nevertheless taxable. The object and purpose of Section 231 was to exempt certain types of organizations which (except for the exemption) might be construed to be taxable. The activities of the petitioner, however, are of a character so evidently outside the scope or purview of a business organization, and the contributions of the members are so clearly capital contributions, that the Association feels it unnecessary to assimilate its position and status to the organizations referred to in Section 231. We can not agree. Where Congress specifies exemption to certain organizations the organization seeking exemption must bring itself clearly within the exemption granted and there is no reason for another group of exemptions not expressed. See Commercial Health, etc., Co. v. Pickering, 281 Fed. 539; Bankers, etc., Association v. Walker, 279 Fed. 53; Workingmen's Cooperative Association, etc., 3 B. T. A. 1352; Philadelphia & Reading Belief Association, 4 B. T. A. 713. It is evident that the petitioner has confused the conception of exempt status for the association with the conception that certain receipts may not constitute income. This is apparent because the petitioner filed returns as a voluntary unincorporated association and reported as income the amounts received from its invested funds. If the petitioner is entitled to exempt status, even such amounts would be exempt. See Trinidad v. Sagrada Orden De Predicadores, 263 U. S. 578. We hold that the petitioner does not have exempt status. The second contention rests upon the petitioner’s belief, for which there is support in the evidence and in the testimony of an undoubtedly qualified actuary, that it was under a constantly growing liability by the receipt of such monies. The question then is, whether there is anything in the facts stated, construed under the Revenue Act of 1918, that will justify the petitioner in excluding the monies received by it from income or, what *1184results in the same thing, in deducting an amount as a reserve for an accrued liability. It is our opinion that there is no adequate reason given for excluding the receipts. The petitioner says that they are capital contributions. This assertion ignores the distinction between the members and the association. The latter is a separate taxable entity and payments to it by members under the rules and regulations of the Association, become part of the general funds of the Association and may be used for any legitimate purpose expressed in the rules and regulations. Included in such purposes may be, for example, legal expenses in contesting the claim of any member. It is clear, therefore, that payments are not capital contributions in the sense that they must be kept intact and earmarked. Instead, they become part of the current assets of the association, usable for general association purposes. We may concede that the testimony of the actuary who testified in this proceeding is correct, but his testimony goes no farther than this; that accumulations necessary to cover the contingent liability of the association (computed by the usual method of estimating insurance liabilities) should amount to over $400,000 for 1919, whereas the association had about $46,000, and should amount to over $900,000 for 1920, when the surplus, in fact, was about $54,000. Even so, we would not be justified in holding that the amounts received by the association either did not constitute income or that the association had an equivalent deduction without authority for such holding in the taxing act, the Revenue Act of 1918. The justification for similar deductions in the case of an insurance company is found in section 234 (a) (10) and (11), which states: (10) In the case of insurance companies, in addition to the above: (a) The net addition required by law to be made within the taxable year to reserve funds (including in the case of assessment insurance companies the actual deposit of sums with State or Territorial officers pursuant to law as additions to guarantee or reserve funds) ; and (b) the sums other than dividends paid within the taxable year on policy and annuity contracts; (11) In the case of corporations issuing policies covering life, health, and accident insurance combined in one policy issued on the weekly premium payment plan continuing for life and not subject to cancellation, in addition to the above, such portion of the net addition (not required by law) made within the taxable year to reserve funds as the Commissioner finds to be required for the protection of the holders of such policies only. We agree with the respondent that section 234 (a) (10) does not permit the deduction, since there is no net addition “ required by law”. The basis of the petitioner’s contention is that good insurance accounting, not the law of any State or state authority, requires the reserve. See United States v. Boston Insurance Co., 269 U. S. 197, in which it was held that even though state officials denominated *1185a fund to meet certain accrued but unsettled loss claims as a “ reserve fund ”, the Federal Act did not permit the deduction as a “ reserve required by law There, as here, it was undoubtedly good insurance accounting to set up a liability for the contingency, but here we must hold, as the Supreme Court held there, that the creation of such a liability does not justify a deduction from income. hTor does the petitioner come within section 234 (a) (11) since its policies do not continue for life and are subject to cancellation. See section VIII-14, 16, 17, of the Rules and Regulations, set forth in our findings of fact. Nor are its policies issued on the weekly premium plan. The petitioner is not entitled to a deduction or a reserve under section 234 (a) (11). See Philadelphia & Reading Relief Association, 4 B. T. A. 713. Reviewed by the Board. Judgment will be entered for the resfondent. Smith and Trussell dissent. Sternhagen did not participate.

2020-11-30 23:13:00.966123+00

http://www.tsc.state.tn.us/sites/default/files/ruiz.ugenio.opn_.pdf

11/30/2020 IN THE COURT OF CRIMINAL APPEALS OF TENNESSEE AT NASHVILLE Remanded on August 7, 2020 UGENIO DEJESUS RUBY-RUIZ v. STATE OF TENNESSEE Appeal from the Criminal Court for Davidson County No. 2011-C-2109 Steve Dozier, Judge No. M2019-00062-CCA-R3-PC The Tennessee Supreme Court has remanded this case for reconsideration in light of Howard v. State, 604 S.W.3d 53 (Tenn. 2020). See Ugenio Dejesus Ruby-Ruiz v. State, No. M2019-00062-CCA-R3-PC, 2019 WL 4866766 (Tenn. Crim. App. Oct. 2, 2019) (“Ruby-Ruiz I”), case remanded (Tenn. Aug. 7, 2020). Upon further review, we conclude that the supreme court’s holding in Howard does not apply to the untimely filing of an application for permission to appeal to the supreme court. Consistent with the holding of the majority in our previous opinion in this case, we reverse the judgment of the post- conviction court and remand the case for the entry of an order granting the Petitioner a delayed appeal for the limited purpose of filing an application for permission to appeal to our supreme court. The Petitioner’s remaining allegations shall be held in abeyance in the post-conviction court until the resolution of the delayed appeal. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Criminal Court Reversed; Case Remanded ROBERT H. MONTGOMERY, JR., J., delivered the opinion of the court, in which JAMES CURWOOD WITT, JR., J., joined. JOHN EVERETT WILLIAMS, P.J., filed a dissenting opinion. Manuel B. Russ, Nashville, Tennessee, for the appellant, Ugenio Dejesus Ruby-Ruiz. Herbert H. Slatery III, Attorney General and Reporter; Caitlin Smith, Senior Assistant Attorney General; Glenn Funk, District Attorney General; and Tammy Meade, Assistant District Attorney General, for the appellee, State of Tennessee. OPINION On June 27, 2016, the Petitioner filed a petition for post-conviction relief, alleging, in relevant part, that he received the ineffective assistance of appellate counsel. At the post-conviction hearing, the parties did not dispute that counsel filed an untimely application for permission to appeal to our supreme court pursuant to Tennessee Rule of Appellate Procedure 11. Although counsel filed a motion requesting that the supreme court accept a late-filed application for permission to appeal, along with the proposed application, the supreme court entered an order stating that the application for permission to appeal was untimely, that the motion to accept the late-filed application was denied, and that the application was dismissed after the court declined to waive the time limit in the interest of justice. See Ruby-Ruiz I, 2019 WL 4866766 , at *9; see also State v. Ugenio Ruby-Ruiz, No. M2013-01999-SC-R11-CD (Tenn. Mar. 23, 2016) (order). Although the post-conviction court determined that appellate counsel provided deficient performance by failing to file a timely application for permission to appeal to the supreme court, the court determined that the Petitioner was required but failed to establish prejudice by clear and convincing evidence. The post-conviction court, likewise, denied relief in connection with the Petitioner’s remaining ineffective assistance of counsel allegations. See Ruby-Ruiz I, 2019 WL 4866766 , at *7. On appeal, a majority of this panel, relying upon Wallace v. State, 121 S.W.3d 653 (Tenn. 2003), determined that the Petitioner was not required to show prejudice and that presumptive prejudice entitled the Petitioner to a delayed appeal for the limited purpose of filing a timely application for permission to appeal to the supreme court and held the Petitioner’s remaining ineffective assistance allegations in abeyance pending the outcome of the delayed appeal. See Ruby-Ruiz I, 2019 WL 4866766 , at *10; see also Wallace, 121 S.W.3d at 658. The majority, likewise, concluded that the supreme court’s order denying the motion to accept the late-filed application for permission to appeal did not reflect that the court engaged in any substantive review of the allegations raised by appellate counsel. Id. at *9. The supreme court’s order merely stated that the application was untimely, that the court denied the motion to accept the proposed late-filed application, and that the court would not waive the timely filing in the interest of justice. Id. The State sought permission to appeal to the supreme court, arguing that the Petitioner should be required to establish that prejudice resulted from appellate counsel’s deficient performance pursuant to Strickland v. Washington, 466 U.S. 668 (1984). On August 7, 2020, the supreme court entered an order granting the State’s application for review pursuant to Tennessee Rule of Appellate Procedure 11. The order stated that the case was remanded to this court “for reconsideration in light of this Court’s opinion in Antonio Howard v. State, No. W2018- 00786-SC-R11-PC, [ 2020 WL 4013131 ] (Tenn. July 16, 2020).” Ugenio Ruby Ruiz v. State, No. M2019-00062-SC-R11-PC (Tenn. Aug. 7, 2020) (order). Upon remand, the parties were directed to file supplemental briefs addressing the issue of whether the holding in Howard applies in the context of counsel’s failure to file a timely application for permission to appeal to the supreme court. The parties were likewise directed to address a petitioner’s burden in establishing prejudice pursuant to Strickland if this court were to conclude that Howard applies in this context. See Ugenio Dejesus Ruby- -2- Ruiz v. State, No. M2019-00062-CCA-R3-PC (Tenn. Crim. App. Aug. 17, 2020) (order). The Petitioner argues that Howard does not apply in this context and that the presumptive prejudice standard espoused in United States v. Cronic, 466 U.S. 648 (1984), which was the basis for our supreme court’s holding in Wallace, should apply. The State, however, argues that Howard applies and that a petitioner should be required to establish prejudice pursuant to Strickland by showing that the supreme court would have granted the application for permission to appeal if it had been timely. At the time Ruby-Ruiz I was filed, our supreme court had granted the State’s application for permission to appeal in Howard but had not yet released its opinion. See Antonio Howard v. State, No. W2018-00786-SC-R11-PC (Tenn. June 24, 2019) (order). In Howard, the petitioner sought post-conviction relief on the basis that trial counsel had failed to file a timely motion for new trial, which resulted in waiver of appellate review of multiple issues raised on appeal from the conviction proceedings. See T.R.A.P. 3(e). The post-conviction court determined that although counsel had provided deficient performance by failing to file a timely motion, the petitioner failed to show he had been prejudiced by the deficiency. Howard, 604 S.W.3d at 54-55. On appeal, this court concluded pursuant to Wallace, binding precedent at the time, that the failure to file a timely motion for new trial resulted in presumptive prejudice as delineated in Cronic, and that the petitioner was entitled to a delayed appeal. Id.; see Strickland, 466 U.S. at 668 . In Howard, our supreme court, however, overturned its previous holding in Wallace. The Howard court concluded that a petitioner is not entitled to presumptive prejudice and must establish prejudice pursuant to Strickland when counsel fails to file a timely motion for a new trial. Howard, 604 S.W.3d at 63; see Wallace, 121 S.W.3d at 658. The Howard court determined, “Where a failure by trial counsel of this type occurs, a subsequent claim of ineffective assistance of counsel should be analyzed under the Strickland analysis,” requiring a petitioner to establish that prejudice resulted from counsel’s deficient performance. Howard, 604 S.W.3d at 63. Our review is limited to whether this holding in Howard applies when counsel fails to file a timely Rule 11 application for permission to appeal to our supreme court.1 The Howard court expressed “consternation” with the presumptive prejudice standard in the context of an untimely motion for new trial. Id. at 62. The court reasoned that although counsel’s failure to file a timely motion for new trial results in waiver of 1 For the first time, the State raises in its supplemental appellate brief the allegation that the Petitioner’s claim of ineffective assistance of appellate counsel is not cognizable for post-conviction relief. The State is not permitted to raise an issue for the first time at this juncture and has waived appellate consideration of the issue for failure to litigate it in the post-conviction court. See T.R.A.P. 36(a). Furthermore, the issue is beyond the scope of the supreme court’s order remanding this case for consideration in light of Howard. -3- plenary review of issues other than sufficiency of the evidence and sentencing, this “less- than-full” appellate review is not a complete forfeiture of an appeal. Id., But cf. Roe v. Flores-Ortega, 528 U.S. 648 (1984) (concluding that counsel’s failure to file a notice of appeal resulted in a complete forfeiture of an appeal and that the petitioner was entitled to relief). In essence, counsel’s failure to file a timely motion for new trial “limited the scope of the . . . appeal, but . . . it did not deprive him of [the] right to . . . appeal.” Howard, 604 S.W.3d at 62. The court noted that in the absence of plenary review, a defendant is “permitted to seek plain error review on additional issues not properly raised in the motion for new trial,” although the appellate courts may decline to engage in a plain error analysis. Id. The Howard court noted that a post-conviction court is “perfectly equipped to apply the Strickland analysis” when counsel fails to file a timely motion for new trial because the relevant issues are identified in the untimely motion for new trial and in the intermediate appellate court’s opinion. Id. at 63. However, an application for permission to appeal to our supreme court is not an appeal as of right, as was the case in Howard. See T.R.A.P. 3. An appeal to the supreme court is only by permission, and the court has full discretion whether to review a case from an intermediate appellate court. See T.R.A.P. 11(a) (“An appeal by permission may be taken . . . only on application and in the discretion” of the court.). The court has provided limited guidance about its general focus in determining whether to grant an application for permission to appeal, including the need for uniformity of decisions, to settle important questions of law and of public interest, and to exercise the court’s supervisory authority. Id. However, the guidance is “neither controlling nor fully measuring the court’s discretion.” Id. Furthermore, only two of the five justices need to be “satisfied that the application should be granted.” Id. at (e). We note that in Howard, the State sought permission to appeal and “urged” the supreme court to “reconsider” the application of the presumptive prejudice standard espoused in Wallace. Howard, 604 S.W.3d at 61. As noted by the Howard court, a post-conviction court is well-suited to analyze the issues for which plenary review was waived in an appeal from the conviction proceedings as a result of an untimely motion for new trial. Determining whether a petitioner suffered prejudice as a result of deficient performance in this context is a question of law that, generally, can be determined by analyzing the previously waived issues pursuant to Strickland. However, counsel’s failure to file a timely application for permission to appeal to the supreme court is quite distinguishable. The supreme court has full discretion whether to grant an application for permission to appeal. Determining whether the supreme court will grant an application for permission to appeal is not a question of law that can be determined after careful analysis. Although Tennessee Appellate Procedure Rule 11(a) provides guidance regarding the reasons the court might grant an application for permission to appeal, the reasons are neither absolute nor controlling. The supreme court has the -4- authority to grant and to deny an application for permission to appeal for any reason. The court has the authority to deny an application even though the application might raise a relevant reason reflected in Rule 11(a). The court, furthermore, has the authority to grant an application and to subsequently direct the parties to address an issue not raised in the application or by the parties. The critical point is that the supreme court, and only the supreme court, can determine whether it will grant or deny an application pursuant to Rule 11, and requiring a petitioner to show prejudice by establishing that the supreme court would have granted an application for permission to appeal if it had been timely is an impossible task. Likewise, requiring a post-conviction court or an intermediate appellate court to attempt to determine whether the supreme court would have granted an application if it had been timely is an exercise in speculation. The Tennessee Court of Criminal Appeals is an intermediate, error-correction court. Unless the supreme court directs otherwise, this court lacks the authority to substitute its judgment for that of the supreme court relative to the grant or denial of an application for permission to appeal. Because we may not properly speculate about the supreme court’s discretionary decision-making processes, we conclude that the holding in Howard does not extend to an untimely application for permission to appeal to our supreme court. Because we conclude that the holding in Howard does not extend to an untimely application for permission to appeal to the supreme court, the conclusions and determinations in the previous majority and dissenting opinions remain the law of the case. The judgment of the post-conviction court is reversed, and the case is remanded for the entry of an order granting the Petitioner a delayed appeal for the purpose of filing an application for permission to appeal pursuant to the Tennessee Rule of Appellate Procedure 11. The Petitioner’s remaining ineffective assistance of counsel allegations shall be held in abeyance in the post-conviction court until the resolution of the delayed appeal. _____________________________________ ROBERT H. MONTGOMERY, JR., JUDGE -5-

2020-01-17 22:01:31.310315+00

Sternhagen

OPINION. Sternhagen: This proceeding was submitted with that of Mary Blackbird, Docket No. 23272, 14 B. T. A. 1247. The Commissioner determined an overassessment of individual income tax of $49.36 for 1919 and deficiencies of $143.98 for 1920, $26.82 for 1921, and $38.71 for 1922. Petitioner seeks to set aside these deficiencies and also claims overpayment of amounts already paid for the years in question. The case is submitted on a stipulation of facts which is as follows: It is hereby stipulated and agreed between the above named petitioner and the above named respondent that the following is a true and correct statement of the facts involved in this controversy, and that the Board of Tax Appeals may accept the same as a true, correct, and complete statement of the facts involved, in conjunction with the petition and answer filed in this case, and render judgment thereon. (1) The petitioner, Amarillis D. Pettit, is not a member of the Osage Tribe of Indians. (2) During the years 1919, 1920, 1921 and 1922 the petitioner was the owner and in possession of one share or allotment which she had received by way of inheritance from her children who were members of the Osage Tribe of Indians duly enrolled and allotted as such under the Act of Congress.of June 28, 1906. (3) The children of the petitioner, members of the Osage Tribe of Indians, from whom petitioner inherited the said share or allotment did not have certificates of competency as provided for in the Act of Congress of June 28, 1906. (4) During the year 1919 petitioner received as income from the said inherited share or allotment the sum of $4,960.00. Upon the income so received petitioner paid, as income tax, the sum of $159.20. (5). During the year 1920 petitioner received as income from the said inherited share or allotment the sum of $9,900.00. Upon the income so received petitioner paid, as income tax, the sum of $375.00. *1254(6) During the year 1921 petitioner received as income from the said inherited share or allotment the sum of $6,100.00. Upon the income so received petitioner paid, as income tax, the sum of $17.64. (7) During the year 1922 petitioner received as income from the said inherited share or allotment the sum of $11,700.00. Upon the income so received petitioner paid, as income tax, the sum of $221.63. (8) All of the said income received by the petitioner during the years 1919, 1920, 1921 and 1922 was her pro rata part of the income of the Osage Tribe of Indians received from oil and gas mineral leases made by said tribe with the approve of the Secretary of the Interior under said Act of Congress of June 28, 1906, upon part of the lands originally bought for the Osage Tribe of Indians by the United States with money belonging to said tribe, and held in trust for said tribe by the United States, said lands having been purchased from the Cherokee Tribe of Indians and deeded to the United States by it for said Osage Tribe of Indians. A true copy of the afore-mentioned deed, marked Exhibit “A”, is attached hereto and made a part hereof. . (9) The lands aforesaid were purchased from the Cherokee Tribe of Indians with funds theretofore realized from the sale of lands of the Osage Indians located in the State of Kansas. (10) The parties agree that the Board may take judicial noticé of all pertinent statutes and treaties. (11) The computations as to amounts, and the depletion allowed as shown by the deficiency letter are correct. Following Mary Blackbird, 14 B. T. A. 1247, and Leah Brunt, etc., 5 B. T. A. 134, Judgment will be entered for .the respondent.

2020-01-17 22:01:31.343569+00

Sternhagen

opinion. Sternhagen: This proceeding was submitted with that of Mary Blackbird, Docket No. 23272, 14 B. T. A. 1247. The Commissioner determined deficiencies of individual income tax of $40.64 for 1918, $68.98 for 1919, and $248.39 for 1920. Petitioner seeks to set aside these deficiencies and also claims overpayment of amounts already paid for such years. The case is submitted on a stipulation of facts which is as follows : It is hereby stipulated and agreed by and between the above-named petitioner and the above-named respondent, through their respective attorneys, that the following is a true and correct statement of the facts involved in this controversy, and that the Board of Tax Appeals may accept the same as a- true, correct, and complete statement of the facts involved, in conjunction with the petition and answer filed in this ease, and render judgment thereon. *1255(1) The petitioner, Henry Chouteau, is a member of the Osage Tribe of Indians, duly enrolled and allotted as such under the Act of Congress of June 28, 1906 (34 Stat. at L„ 539) and has a certificate of competency as provided for in said Act of Congress, said certificate of competency having been issued on March 5, 1910, a copy of said certificate being attached hereto and made a part hereof, marked as Exhibit A. (2) Henry Chouteau, the petitioner, was also during the years 1918, 1919, 1920 the owner of one-half share or allotment which he had received by inheritance from another member of the Osage Tribe of Indians, who was duly enrolled and allotted as such. The petitioner, during the years 1918, 1919 and 1920 was therefore the owner of one and one-half shares or allotments, representing his own share or allotment which he had received by way of inheritance. (3) During the year 1918 petitioner received as income from his own share or allotment as a member of the Osage Tribe of Indians, the sum of $3,940.00 and from the inherited one-half share or allotment that was owned by him, the sum of $1,970.00. Upon the total income so received petitioner paid, as income tax, the sum of $122.40. (4) During the year 1919 petitioner received as income from his own share or allotment as a member of the Osage Tribe of Indians, the sum of $4,980.00 and from the inherited one-half share or allotment that was owned by him, the sum of $2,490.00. Upon the total income so received petitioner paid, as income tax, the sum of $57.55. (5) During the year 1920 petitioner received as income from his own share or allotment as a member of the Osage Tribe of Indians, the sum of $9,900.00 and from the inherited one-half share or allotment that was owned by him, the sum of $4,950.00. Upon the total income so received petitioner paid, as income tax, the sum of $551.21. (6) The amounts received by the petitioner were paid to him through the Osage Indian Agency at Pawhuska, Oklahoma. (7) All of the said income received by the petitioner during the years 1918, 1919 and 1920 was his pro rata part of the income of the Osage Tribe of Indians which was received during the said years from oil and gas mineral leases made by said tribe with the approval of the Secretary of the Interior under said Act of Congress of June 28, 1906. The oil and gas mineral leases were upon a part of the lands originally bought for the Osage Tribe of Indians by the United States with money belonging to said tribe and held in trust for said tribe by the United States, said lands having been purchased from the Cherokee Tribe of Indians, and deeded to the United States to be held in trust by it for the said Osage Tribe of Indians. A true copy of the aforementioned deed, marked Exhibit “ B ”, is attached hereto and made a part hereof. (8) The lands aforesaid were purchased from the Cherokee Tribe of Indians with funds theretofore realized from the sale of lands of the Osage Indians located in the State of Kansas. (9) The parties agree that the Board may take judicial notice of all pertinent statutes and treaties. (10) The computations as to amounts, and the depletion allowed as shown by the deficiency letter are correct. Following Mary Blackbird, 14 B. T. A. 1247, and Leah, Brunt, etc., 5 B. T. A. 134, Judgment will be entered for the respondent.

2020-12-01 01:00:31.299718+00

http://www.ca5.uscourts.gov/opinions/pub/19/19-60293-CV1.pdf

United States Court of Appeals for the Fifth Circuit No. 19-60293 Will McRaney, Plaintiff—Appellant, versus The North American Mission Board Of The Southern Baptist Convention, Incorporated, Defendant—Appellee. Appeal from the United States District Court for the Northern District of Mississippi USDC No. 1:17-CV-80 ON PETITION FOR REHEARING EN BANC (Opinion – 7/16/2020, 5 Cir., , F.3d ) Before Clement, Higginson, and Engelhardt, Circuit Judges. Per Curiam: The court having been polled at the request of one of its members, and a majority of the judges who are in regular active service and not disqualified not having voted in favor (Fed. R. App. P. 35 and 5th Circ. R. 35), the petition for rehearing en banc is DENIED.  No. 19-60293 In the en banc poll, 8 judges voted in favor of rehearing (Judges Jones, Smith, Elrod, Willett, Ho, Duncan, Oldham, and Wilson), and 9 judges voted against rehearing (Chief Judge Owen and Judges Stewart, Dennis, Southwick, Haynes, Graves, Higginson, Costa, and Engelhardt). ENTERED FOR THE COURT: ___________________________ Stephen A. Higginson United States Circuit Judge 2  No. 19-60293 James C. Ho, Circuit Judge, joined by Jones, Smith, Elrod, Willett, and Duncan, Circuit Judges, dissenting from denial of rehearing en banc: If religious liberty under our Constitution means anything, it surely means at least this much: that the government may not interfere in an internal dispute over who should lead a church—and especially not when the dispute is due to conflicting visions about the growth of the church. But it turns out that nothing is sacred, for that is precisely what we are doing here. The First Amendment forbids government intrusion in “matters of church government.” Our Lady of Guadalupe Sch. v. Morrissey-Berru, 140 S. Ct. 2049 , 2060 (2020). It secures church “autonomy with respect to internal management decisions that are essential to the institution’s central mission.” Id. “And a component of this autonomy is the selection of the individuals who play certain key roles.” Id. This case falls right in the heartland of the church autonomy doctrine. A former Southern Baptist minister brought this suit to protest his dismissal from church leadership. That fact alone should be enough to bar this suit. As the saying goes, personnel is policy. Moreover, this case proves the truth of that old adage. The complaint acknowledges that the plaintiff was dismissed because he “consistently declined to accept” church policy regarding “the specific area of starting new churches, including the selection, assessing and training of church planters.” He even admits that “this cause of action had its roots in Church policy.” We should take him at his word. This case is a dispute over a church’s vision for spreading “the gospel of Jesus Christ through evangelism and church planting”—a fundamental tenet of faith, not just for the defendant in this suit, but for hundreds of millions of evangelicals around the world. Put simply, this suit puts the church’s evangelism on trial. 3  No. 19-60293 Not surprisingly, the district court dismissed this suit as barred by the First Amendment. We should have affirmed that decision. But the panel did the opposite. I respectfully dissent from the denial of rehearing en banc. I. The following facts are taken directly from Plaintiff’s complaint and the strategic partnership agreement (“SPA”) that gives rise to this dispute: The Baptist Convention for Maryland/Delaware (“Maryland/Delaware”) is a state convention comprised of 560 Baptist churches that works in cooperation with the Southern Baptist Convention (“SBC”). The North American Mission Board (“North America”) is a subdivision of the SBC that “exists to work with churches, associations and state conventions in mobilizing Southern Baptists as a missional force to impact North America with the gospel of Jesus Christ through evangelism and church planting.” Its priorities include assisting churches in “planting healthy, multiplying, evangelistic SBC churches,” “appointing, supporting, and assuring accountability for missionaries,” and “providing missions education and coordinating volunteer missions opportunities for church members.” Maryland/Delaware and North America have worked together for some time under the terms of the SPA—a religious document whose stated purpose is “to define the relationships and responsibilities of [Maryland/Delaware] and [North America] in areas where the two partners jointly develop, administer and evaluate a strategic plan for penetrating lostness through church planting and evangelism.” Plaintiff Will McRaney is an ordained minister. As the former executive director of Maryland/Delaware, he guided the direction of the ministry and organization, as well as the screening and managing of all staff. He also served as Maryland/Delaware’s designated representative in SPA negotiations with North America. 4  No. 19-60293 In 2014, North America drafted a new SPA that “gave [North America] more controls over the financial resources and the hiring, supervising and firing of staff positions of the state conventions.” North America then began pressuring Maryland/Delaware—and McRaney in particular—to accept the new SPA. But McRaney “consistently declined to accept the newly written SPA.” He “view[ed] the proposed SPA as a weakening of the autonomy of [Maryland/Delaware] and the relinquishment of all controls to [North America] in the specific area of starting new churches, including the selection, assessing and training of church planters.” In response, North America worked to oust McRaney from his church leadership position. It advised other Maryland/Delaware leaders that he had repeatedly refused to meet with North America’s President. It also threatened to withhold all funding from Maryland/Delaware unless Maryland/Delaware dismissed McRaney and accepted the new SPA. As McRaney puts it, North America leaders “g[ave] a one-year notice of cancellation” of the previous SPA, and “set[] forth in [a] letter . . . false and libelous accusations against [McRaney]”—all “[a]s a direct result of [his] refusal to accept the new SPA.” After a series of meetings with North America, Maryland/Delaware terminated McRaney. McRaney filed this suit alleging that North America interfered with his contract with Maryland/Delaware and caused his termination. He also claims that North America lobbied another religious group to disinvite him from speaking at a large mission symposium in Mississippi. Finally, he contends that North America defamed him and caused him emotional distress by posting a photo of him in its headquarters’ reception area that “communicate[d] he was not to be trusted and [was] public enemy #1.” The district court dismissed the suit under the First Amendment, reasoning that McRaney’s claims would presumably require the court to 5  No. 19-60293 determine whether North America had “valid religious reason[s]” for its actions. McRaney v. N. Am. Mission Bd. of the S. Baptist Convention, 2019 WL 1810991 , at *3 (N.D. Miss. Apr. 24, 2019). But a panel of this court reversed, holding that “[t]he district court’s dismissal was premature” because it is “not certain that resolution of McRaney’s claims will require the court to interfere” with “purely ecclesiastical questions”—“matters of church government, matters of faith, or matters of doctrine.” McRaney v. N. Am. Mission Bd. of the S. Baptist Convention, Inc., 966 F.3d 346 , 350–51 (5th Cir. 2020). II. “The First Amendment protects the right of religious institutions ‘to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine’”—as the Supreme Court has repeatedly held, and reminded us again just this year. Guadalupe, 140 S. Ct. at 2055 (quoting Kedroff v. Saint Nicholas Cathedral of Russian Orthodox Church in N. Am., 344 U.S. 94 , 116 (1952)). See also Hosanna-Tabor Evangelical Lutheran Church & Sch. v. EEOC, 565 U.S. 171 , 186 (2012); Serbian E. Orthodox Diocese for U.S. & Canada v. Milivojevich, 426 U.S. 696 , 721–22 (1976); Watson v. Jones, 80 U.S. 679 , 733–34 (1871). The church autonomy doctrine “does not mean that religious institutions enjoy a general immunity from secular laws.” Guadalupe, 140 S. Ct. at 2060. “[B]ut it does protect their autonomy with respect to internal management decisions that are essential to the institution’s central mission.” Id. So the district court was right to dismiss this suit, because each of the three actions taken by the religious organizations that McRaney wishes to challenge here—decisions about whom to place in leadership, whom to host at a religious conference, and whom to exclude from one’s headquarters—is an “internal management decision[] that [is] essential to the institution’s 6  No. 19-60293 central mission.” Id. Each of these claims involves internal, “purely ecclesiastical” matters of church governance that federal courts have no business adjudicating. Watson, 80 U.S. at 733. See id. (describing certain matters as “strictly and purely ecclesiastical in . . . character, . . . over which the civil courts exercise no jurisdiction,” including “matter[s] which concern[] theological controversy, church discipline, ecclesiastical government, or the conformity of the members of the church to the standard of morals required of them”) (emphasis added). For example, “the authority to select and control who will minister to the faithful”—that is, deciding who will lead and who will speak—“is the church’s alone” because it is “a matter ‘strictly ecclesiastical.’” Hosanna-Tabor, 565 U.S. at 195 (quoting Kedroff, 344 U.S. at 119 ). As a unanimous Supreme Court made clear, “[r]equiring a church to accept or retain an unwanted minister, or punishing a church for failing to do so, . . . interferes with the internal governance of the church, depriving the church of control over the selection of those who will personify its beliefs.” Id. at 188 (emphasis added). After all, “imposing an unwanted minister” or “[a]ccording the state the power to determine which individuals will minister to the faithful” violates both “the Free Exercise Clause, which protects a religious group’s right to shape its own faith and mission through its appointments,” and “the Establishment Clause, which prohibits government involvement in such ecclesiastical decisions.” Id. at 188–89. See also Guadalupe, 140 S. Ct. at 2060 (“[A] church’s independence on matters of faith and doctrine requires the authority to select, supervise, and if necessary, remove a minister without interference by secular authorities.”) (quotations omitted); Simpson v. Wells Lamont Corp., 494 F.2d 490 , 492 (5th Cir. 1974) (“Certainly a congregation’s determination as to who shall preach from the church pulpit is at the very heart of the free exercise of religion.”). 7  No. 19-60293 Likewise, a religious organization’s decision to exclude and communicate internally about a former affiliate is a protected “internal management decision.” See, e.g., Hosanna-Tabor, 565 U.S. at 201 (Alito, J., concurring) (explaining that “control over [certain] employees” is an “essential component” of a religious group’s “freedom to speak in its own voice, both to its own members and to the outside world”) (quotations omitted); Watson, 80 U.S. at 733 (“[C]ivil courts exercise no jurisdiction” over “matter[s] which concern[] . . . church discipline, ecclesiastical government, or the conformity of members of the church to the standard of morals required of them . . . .”); Whole Woman’s Health v. Smith, 896 F.3d 362 , 373 (5th Cir. 2018) (refusing to compel discovery of a third-party religious group’s “internal communications” in part because the order “interfere[d] with [the group’s] decision-making processes,” “expose[d] those processes to an opponent,” and “w[ould] induce similar ongoing intrusions against religious bodies’ self-government”); cf. Boy Scouts of Am. v. Dale, 530 U.S. 640 , 648 (2000) (“Forcing a group to accept certain members may impair [its] ability . . . to express those views, and only those views, that it intends to express.”); see also W. Cole Durham & Robert Smith, 1 Religious Organizations & the Law § 5:17 (2017) (“[T]he church autonomy case law . . . has resulted in [courts] declining to take jurisdiction over numerous subject matters related to religion, including . . . disputes concerning the discipline of church members, and claims arising from or related to church communications.”). So it’s no surprise that the district court dismissed this suit. Because there’s no way to adjudicate this dispute without violating the church autonomy doctrine. For example, the panel acknowledges that, to determine whether North America unlawfully interfered with McRaney’s contract with Maryland/Delaware, a court will have to inquire why Maryland/Delaware voted to fire McRaney—including whether North America “intentionally 8  No. 19-60293 made false statements about him to [Maryland/Delaware] that resulted in his termination” or “damaged [his] business relationships”—and if so, whether to punish North America for doing so. McRaney, 966 F.3d at 349. Likewise, to determine whether North America’s actions impermissibly deprived McRaney of a speaking slot at the mission symposium in Mississippi, a court will need to determine whether North America “got him uninvited to speak at the mission symposium”—and if so, why. Id. Finally, to hold North America liable for defamation and intentional infliction of emotional distress, a court will have to determine why North America circulated an internal opinion about McRaney and excluded him from its own headquarters—and then whether to punish North America for doing so. All of this is anathema to the First Amendment. Decisions about who should lead, who should preach, and who should be excluded are all quintessential examples of “internal management decisions” that the Constitution leaves entirely to the discretion of the church. And this is especially so where, as here, these decisions were made as the result of a disagreement over a core mission of the church—establishing new churches and evangelizing new members. III. The panel’s various attempts to justify further proceedings in this case conflict with bedrock First Amendment doctrine in several additional ways. At first, the panel suggests that this suit does not implicate the church autonomy doctrine, because McRaney is merely asking the court to apply “neutral principles of tort law,” and because dismissal of the case would be tantamount to giving religious institutions a “preferred position in our society” by uniquely immunizing them from civil liability. Id. at 348–49, 351. There are various problems with these rationales, as explained below. But among the most troubling is this: Under the panel’s logic, no claim would 9  No. 19-60293 ever be subject to the church autonomy doctrine—every civil plaintiff purports to invoke neutral legal principles, and every application of the church autonomy doctrine grants religious organizations special treatment. Moreover, these justifications miss a foundational principle of our Constitution—that the whole point of the First Amendment is to give religion a “preferred position in our society.” Id. at 348. See, e.g., Hosanna-Tabor, 565 U.S. at 189 . Perhaps in recognition of these difficulties, the panel ultimately decides to backtrack. In the end, it suggests that it is merely too early in the case to invoke the church autonomy doctrine—and that the doctrine might be successfully deployed at a later stage of the litigation. But this too fails for multiple reasons. It’s internally inconsistent with the panel’s neutral principles and preferential treatment theories, which would presumably bar application of the church autonomy doctrine at all stages of the case. It misunderstands both the scope of and reasoning behind the church autonomy doctrine. And in any event, the district court already has what the panel says it needs to wait for—certainty that McRaney’s case will turn on whether North America had “valid religious reason[s]” for its actions. McRaney, 966 F.3d at 351. Indeed, that standard was met with the very first docket entry in the case—it is clear from the face of McRaney’s complaint (and further confirmed in his later filings) that this case is all about whether North America’s actions were based on “valid religious reason[s].” Id. A. To begin with, the panel contends that the church autonomy doctrine does not apply here because this suit only requires the court to apply “neutral principles of tort law.” Id. at 349. This is wrong for at least three reasons. First, the panel misinterprets the reference to “neutral principles of law” in Jones v. Wolf, 443 U.S. 595 , 602–04 (1979). To be sure, Jones held 10  No. 19-60293 that courts may employ “neutral principles of law as a means of adjudicating a church property dispute”—specifically, that courts may “examine certain religious documents, such as a church constitution, for language of trust in favor of the general church.” Id. at 604 . But this was not to allow “religious autonomy concerns [to] be ignored whenever an ostensibly neutral or secular principle or policy seems relevant.” 1 Rel. Orgs. § 5:16. Rather, it was designed “to protect religious autonomy,” including “internal formulations of religious doctrine and polity,” “by assuring that secular courts would intervene in religious affairs only when the religious community itself had expressly stated in terms accessible to a secular court how a particular controversy should be resolved.” Id. (emphases added). Jones thus includes the following cautionary note: “If . . . the interpretation of the instruments of ownership . . . require[s] the civil court to resolve a religious controversy, then the court must defer to the resolution of the doctrinal issue by the authoritative ecclesiastical body.” 443 U.S. at 604 (emphases added). So Jones is not an invitation to courts to decide all church property disputes—let alone all other manner of internal church disputes. Rather, it’s an invitation to churches, where they deem it appropriate, to ask courts to assist them in resolving certain church property disputes. Moreover, the panel’s theory that this suit should be allowed because it involves only “neutral principles of tort law” is tantamount to saying that any plaintiff can litigate any case against a church, so long as he invokes a legal principle that complies with Employment Division, Department of Human Resources of Oregon v. Smith, 494 U.S. 872 (1990). After all, Smith ostensibly allows the government to impose “neutral law[s] of general applicability” on the religious and non-religious alike, so long as such laws are reasonably related to a legitimate government interest. See id. at 879 , 881 & n.1. But the Supreme Court unanimously rejected this position in Hosanna-Tabor. There the government attempted to apply federal non-discrimination law to a 11  No. 19-60293 church on the ground that the law complied with Smith. See 565 U.S. at 189 (“The EEOC and [Plaintiff] . . . contend that our decision in [Smith] precludes recognition of a ministerial exception.”). But that would require reading Smith to overturn over a century of church autonomy precedent. Not surprisingly, then, the Supreme Court dismissed this argument as having “no merit,” noting that Smith does not govern “internal church decision[s] that affect[] the faith and mission of the church itself.” Id. at 190 . See also 1 Rel. Orgs. § 5:12 (noting that Hosanna-Tabor “affirmed . . . that the principle of church autonomy prevails over a neutral and generally-applicable law[] if it interferes with a religious organization’s dismissal of an unwanted minister”). The panel’s “misguided application” of Jones “invokes external neutral standards to override religious autonomy,” “profoundly weaken[ing] the protection [that] the religious autonomy cases have long provided against government intrusion in religious affairs,” and “tak[ing] state power into protected domains in which []binding religious autonomy cases do not allow it to go.” Id. at § 5:16.1 And consider this: If an appeal to “neutral principles of tort law” were all it took to sue a religious institution, it would be the exception that swallowed the rule. Under Guadalupe and Hosanna-Tabor, the church autonomy doctrine immunizes religious institutions from various anti-discrimination claims. See also id. at § 5:12 (noting that the Court’s decision to allow church autonomy to bar suit brought under “a leading piece of federal civil rights legislation” only “demonstrates [the doctrine’s] reach and power”). Surely the panel would not contend that anti-discrimination 1 In any event, compliance with Smith is hardly the hallmark of First Amendment fidelity, considering that “[c]ivil rights leaders and scholars have derided . . . Smith . . . as ‘the Dred Scott of First Amendment law.’” Horvath v. City of Leander, 946 F.3d 787 , 794 (5th Cir. 2020) (Ho, J., concurring in the judgment in part and dissenting in part) (citing authorities). 12  No. 19-60293 laws are non-neutral legal principles. So if the panel is right, then Guadalupe and Hosanna-Tabor must be wrong. Second, the Supreme Court has never extended the “neutral principles of law” approach beyond the context of church-property disputes. To the contrary, the Court has “intimat[ed]” that the church autonomy doctrine “cannot be brushed aside as irrelevant or controlled by the ‘neutral principles’ rule of Jones v. Wolf merely because it is raised in defense to common law claims.” Id. See also id. (noting that in Hosanna-Tabor, “the Court specifically mentioned contract and tort claims . . . as settings where the ministerial exception might apply”). In fact, the Supreme Court and lower courts have invoked the church autonomy doctrine across a broad range of claims—up to and even including church property disputes. See id. at § 5:17 (citing cases that “decline[d] to take jurisdiction over numerous subject matters related to religion, including . . . disputes over church property, disputes concerning religious employment, disputes between ministers or church leaders and the church, claims against clergy for malpractice or breach of fiduciary duty, claims against churches or church leaders for negligent hiring or poor supervision of employees, disputes concerning the discipline of church members, and claims arising from or related to church communications.”) (emphasis added). Finally, the panel opinion violates our rule of orderliness. In Simpson, a dismissed pastor, like McRaney, claimed that his suit could be resolved “on the basis of ‘neutral principles of law,’ which c[ould] be applied without establishing any particular view or interpretation of religious doctrine.” 494 F.2d at 493 . His suit only required the court to determine secular questions, he claimed—namely, whether he was fired for “his views on race and merger of the segregated church organization, and because of the color of his wife’s skin.” Id. This was not a “church dispute,” he theorized, but a secular 13  No. 19-60293 “racial dispute.” Id. In short, “Simpson would narrowly limit ecclesiastical disputes to differences in church doctrine.” Id. (emphases added). We rejected the argument. In doing so, we noted that the pastor’s crabbed view of the church autonomy doctrine contradicted the “‘spirit of freedom for religious organizations’ . . . reflected in the Supreme Court’s decisions”—including the “‘power to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine.’” Id. (quoting Kedroff, 344 U.S. at 116 ). B. The panel also contends that invoking the church autonomy doctrine here would “impermissibly place a religious [institution] in a preferred position in our society,” and allow “religious entities [to] effectively immunize themselves from judicial review of claims brought against them.” McRaney, 966 F.3d at 348, 351. But the whole point of the First Amendment, of course, is to privilege religion. As the Supreme Court has unanimously stated, “the text of the First Amendment itself . . . gives special solicitude to the rights of religious organizations.” Hosanna-Tabor, 565 U.S. at 189 . That we need to be reminded of this may be what is most alarming about this case. It is widely understood (or at least it used to be) that “[w]e are a religious people whose institutions presuppose a Supreme Being.” Zorach v. Clauson, 343 U.S. 306 , 313 (1952). “Prayers in our legislative halls; the appeals to the Almighty in the messages of the Chief Executive; the proclamations making Thanksgiving Day a holiday; ‘so help me God’ in our courtroom oaths—these and all other references to the Almighty . . . run through our laws, our public rituals, [and] our ceremonies.” Id. at 312–13. 14  No. 19-60293 So it should be beyond dispute that, “[w]hen the state encourages religious instruction or cooperates with religious authorities . . . it follows the best of our traditions. For it then respects the religious nature of our people and accommodates the public service to their spiritual needs. To hold that it may not would be to find in the Constitution a requirement that the government show a callous indifference to religious groups.” Id. at 313–14. In short, protecting religious institutions from government interference is not just the point of the church autonomy doctrine that the Supreme Court has recognized for nearly 150 years—it is foundational to who we are as Americans. C. Having initially intimated that the church autonomy doctrine can never bar cases like McRaney’s, the panel switches gears. It suggests that it is merely too early to dismiss the case on that ground. As the panel now theorizes, it is not yet “certain” that this case will require the court to examine whether North America acted for “valid religious reason[s].” McRaney, 966 F.3d at 351. North America must present some “evidence” of these religious reasons before a court may consider dismissal on First Amendment grounds. Id. Again, this approach is internally inconsistent with the panel’s neutral principles and preferential-treatment concerns, which would logically apply at all stages of a lawsuit. It is also wrong for a number of additional reasons. To begin with, we have no right to condition application of the church autonomy doctrine on a religious institution’s ability to produce “evidence” that it had “valid religious reasons” for its actions. Id. To the contrary, the Supreme Court has been very clear that the church autonomy doctrine does not “safeguard a church’s decision to fire a minister only when it is made for a religious reason.” Hosanna-Tabor, 565 U.S. at 194 (emphasis added). “[A] 15  No. 19-60293 church’s independence on matters ‘of faith and doctrine’ requires the authority to select, supervise, and if necessary, remove a minister without interference by secular authorities.” Guadalupe, 140 S. Ct. at 2060 (emphases added). That is why “the general principle of church autonomy” guarantees “independence,” not only in “matters of faith and doctrine,” but also in “matters of internal government.” Id. at 2061. The reason for the Court’s categorical approach in this sphere is simple: Secular courts are not competent to determine what constitutes a “valid religious reason”—let alone whether a party has produced sufficient evidence of one. See, e.g., Milivojevich, 426 U.S. at 713 (“For civil courts to analyze whether the ecclesiastical actions of a church . . . are . . . ‘arbitrary’ must inherently entail inquiry into [what] . . . canon or ecclesiastical law supposedly requires the church . . . to follow . . . . But this is exactly the inquiry that the First Amendment prohibits.”); Watson, 80 U.S. at 733 (“[C]ivil courts exercise no jurisdiction” over “matter[s] which concern[] theological controversy.”). Moreover, forcing religious institutions to defend themselves on matters of internal governance is itself a tax on religious liberty. See, e.g., NLRB v. Catholic Bishop of Chicago, 440 U.S. 490 , 502 (1979) (warning that “the very process of inquiry” into “the good faith of [a] position asserted by . . . clergy-administrators and its relationship to [the organizations’] religious mission” “may impinge on the rights guaranteed by the Religion Clauses”); Hosanna-Tabor, 565 U.S. at 205–06 (Alito, J., concurring) (“[T]he mere adjudication of . . . questions [regarding the “real reason” for the dismissal of a religious employee] would pose grave problems for religious autonomy: It would require calling witnesses to testify about the importance and priority of [a] religious doctrine . . . , with a civil factfinder sitting in ultimate judgment of what the accused church really believes, and how important that belief is to the church’s overall mission.”); Whole Woman’s Health, 896 F.3d at 373 16  No. 19-60293 (finding it “self-evident” that enforcing a subpoena against a third-party religious organization would “chill[]” the group’s activities and “undermine[]” its ability to “conduct frank internal dialogue and determinations”). Indeed, by forcing a religious institution to produce “evidence” of valid religious reasons for its actions, the panel is approving the very kind of regime that the Supreme Court found so odious in Corporation of the Presiding Bishopric of the Church of Jesus Christ of Latter-day Saints v. Amos, 483 U.S. 327 (1987). “[I]t is a significant burden on a religious organization to require it, on pain of substantial liability, to predict which of its activities a secular court will consider religious. The line is hardly a bright one, and an organization might understandably be concerned that a judge would not understand its religious tenets and sense of mission. Fear of potential liability might affect the way an organization carrie[s] out what it underst[ands] to be its religious mission.” Id. at 336 . Finally, even accepting the panel’s incorrect standard, it is already obvious from the face of the complaint that litigating this dispute will inevitably require inquiry into North America’s “valid religious reason[s].” McRaney, 966 F.3d at 351. McRaney himself argues that North America took action precisely because he refused to accept church policy in “the specific area of starting new churches, including the selection, assessing and training of church planters.” He likewise admits in his response to the motion to dismiss that “this cause of action had its roots in Church policy” and “began as a battle of power and authority between two religious organizations.” *** It should not be difficult for the district court to dismiss this case again on remand, even accepting the incorrect standards set forth by the panel. McRaney admitted, both in his complaint and elsewhere, that this case is 17  No. 19-60293 rooted in a dispute over church policy. Those statements were not mentioned by the panel, and they should be enough to show on remand that there is “evidence” that this case will turn on whether there are “valid religious reason[s]” behind the actions challenged here. Id. I nevertheless find the panel decision troubling because it invites future challenges to internal church decisions based on “neutral principles of tort law.” Id. at 349. And no doubt future plaintiffs will be less candid than McRaney in admitting the religious motivations at the heart of their disputes. The denial of rehearing en banc in this case is accordingly an “ominous sign” and “grave cause for concern” for “those who value religious freedom.” Stormans, Inc. v. Wiesman, 136 S. Ct. 2433 , 2433 (2016) (Alito, J., dissenting from the denial of certiorari). I respectfully dissent. 18  No. 19-60293 Andrew S. Oldham, Circuit Judge, joined by Smith, Willett, Duncan, and Wilson, Circuit Judges, dissenting from the denial of rehearing en banc: The Supreme Court has told us that the judicial power of the United States does not extend to ministry disputes. Watson v. Jones, 80 U.S. 679 , 727 (1871); see also Our Lady of Guadalupe Sch. v. Morrissey-Berru, 140 S. Ct. 2049 , 2059–61 (2020). This case should’ve ended with a straightforward application of that doctrine. Dr. McRaney got into a ministry dispute with the Baptist Convention of Maryland/Delaware (“BCMD”) and the North American Mission Board. The source of that dispute? McRaney did not share the religious organizations’ ministry vision for church planting. So BCMD voted to terminate McRaney. Then McRaney brought the ecclesiastical dispute to the civil courts. The ecclesiastical-autonomy doctrine requires us to stay out of it. But our panel decision puts us in the middle of it. Indeed, the district court on remand is tasked with determining whether the ecclesiastical organizations have “valid religious reasons” for their actions. I respectfully dissent. I. As always, I start with the Constitution’s original public meaning. The ecclesiastical-autonomy doctrine has a rich historical pedigree. And that history informed the meaning of the Constitution and its Religion Clauses at the Founding. A. In the Middle Ages, clergy were categorically exempt from the reach of civil courts. See Felix Makower, The Constitutional History and Constitution of the Church of England 384– 94 (London, 1895). During the reign of the Saxon kings, civil courts had no jurisdiction over clergy accused of even clearly secular crimes unless and 19  No. 19-60293 until the bishop divested them of their spiritual authority. Leonard W. Levy, Origins of the Fifth Amendment 43 (1968); see, e.g., Wihtræd c. 6 (695) (“If a priest allow of illicit intercourse; or neglect the baptism of a sick person, or be drunk to that degree that he cannot do it; let him abstain from his ministry until the doom of the bishop.”); Alfred c. 21 (892) (“If a priest kill another man, . . . let the bishop secularize him; then let him be given up from the minister . . . .”); Edward and Guthrum c. 4 § 2 (906) (“If a priest commits a crime worthy of death, he shall be seized and kept until the bishop’s judgment.”).1 And during the reign of King Edgar the Peaceful (959–975), the Church required all disputes between clergymen to be addressed before bishops and not secular courts. See Makower, supra, at 389. Spiritual supervisors retained exclusive competence to discipline clergy, and civil courts could not intervene in church matters. See id. at 389– 90. The Church’s exclusive jurisdiction over clergy served as a one-way jurisdictional boundary. See id. at 390–91. Although civil courts were powerless to interfere with the matters affecting clergy or other ministerial prerogatives, religious authorities extended their power into the operation of civil courts in a variety of ways. See id. at 385–86. For example, ecclesiastical leaders served alongside a “high civil official” on civil courts. Id. at 384. King Edgar mandated that “the bishop of the shire and the ealdorman” sit together as a civil judicial body empowered to apply both “the law of God” and “the secular law.” Edgar III c. 5. Thus, while civil officials had no role in ecclesiastical matters, ecclesiastical officials adjudicated both sectarian and secular matters. See Makower, supra, at 384–85; William Richard 1 Obviously, the present case involves only non-criminal controversies and, beyond that, is limited to disputes between and among ecclesiastical officials. The aforementioned examples are meant only to illustrate the ancient roots of ecclesiastical jurisdiction. 20  No. 19-60293 Wood Stephens, The English Church from the Norman Conquest to the Accession of Edward I at 49 (1901). The Norman Conquest further solidified the divide. Around 1076, King William I issued an ordinance formally divesting civil courts of subject matter jurisdiction over religious matters. See Ordinance of William I Separating the Spiritual and Temporal Courts (“[N]o bishop . . . shall . . . bring before the judgment of secular men any case which pertains to the rule of souls.”); 1 William Stubbs, The Constitutional History of England in Its Origin and Development 307–08 (3d ed. Oxford, 1897). The ordinance established separate ecclesiastical courts. Stephens, supra, at 49. As a result, bishops and other clergy were granted exclusive jurisdiction over all cases “pertain[ing] to the rule of souls.” Ordinance of William I. Not only did the Church retain exclusive personal jurisdiction over cases involving its clergymen, it also gained exclusive subject matter jurisdiction over disputes involving “the canons and the episcopal laws.” Ibid.; accord Makower, supra, at 392. The resulting changes were legion. See Stubbs, supra, at 307–08. Over the next several centuries, the civil and ecclesiastical courts continued to dispute the boundaries of their respective jurisdictions. See Makower, supra, at 392–93. The courts each strived to extend their competence to reach additional categories of cases claimed by the other. Ibid. In their struggle, “[t]he lay courts employed new weapons” while “the clergy resorted to the old.” Harold W. Wolfram, The “Ancient and Just” Writ of Prohibition in New York, 52 Colum. L. Rev. 334 , 334 (1952). For example, the clergy threatened to excommunicate civil judges who infringed ecclesiastical jurisdiction, while civil courts issued writs of prohibition. Ibid. Writs of prohibition were injunctive. See Norma Adams, The Writ of Prohibition to Court Christian, 20 Minn. L. Rev. 272 , 274 21  No. 19-60293 (1936). Blackstone described them as necessary to secure the jurisdiction of the King’s Bench over secular controversies. 3 William Blackstone, Commentaries *112. When issued, they stripped ecclesiastical jurisdiction and required transfer of the case to a civil court. See Adams, supra, at 274. But a writ of prohibition was not always the last word. See id. at 291– 92. An ecclesiastical court could challenge a writ of prohibition with a competing writ of consultation seeking return of the suit to its court. Ibid. The writs of prohibition and consultation created a procedural mechanism for deciding the appropriate venue for resolution of particular controversies. But they did precious little to clarify the jurisdictional boundary between the secular and sacred. The line between the two remained an oft-litigated source of controversy for centuries to come. Consider for example the famed case of Nicholas Fuller. See Nicholas Fuller’s Case (1607), 12 Co. Rep. 41 (K.B.). There, the High Commission— an ecclesiastical court—hauled Fuller before it to answer for various contemptuous statements he made against high commissioners and other religious authorities. See Roland G. Usher, Nicholas Fuller: A Forgotten Exponent of English Liberty, 12 Am. Hist. Rev. 743, 747–48 (1907). But Fuller, a rabble-rousing lawyer, disputed the jurisdiction of the High Commission and sought a writ of prohibition to transfer the case to the King’s Bench. Id. at 749–50. Fuller argued that because his case implicated slander and contempt—purely secular crimes—jurisdiction could not lie in an ecclesiastical court. See 12 Co. Rep. at 42; Usher, supra, at 749–50. The King’s Bench issued the writ prohibiting ecclesiastical jurisdiction based on the secular crimes for which Fuller stood accused. Usher, supra, at 750. But upon reconsideration, Sir Edward Coke, then Chief Justice of the King’s Bench, issued a writ of consultation partially returning jurisdiction to the High Commission. 12 Co. Rep. at 43–44. In doing so, Coke recognized and 22  No. 19-60293 reaffirmed the jurisdictional boundary between ecclesiastical and civil jurisdiction. The important point for present purposes is not the precise contours of that boundary, which obviously changed over time. What matters is that the jurisdictional line prohibiting civil courts from intruding on ecclesiastical matters is an ancient one. It goes back to the Middle Ages. It has been part of England’s formal law since William the Conqueror. It’s so entrenched in English history that even Coke—the seventeenth century’s fiercest champion of civil jurisdiction and the common law—respected it. And although there were disputes about boundaries of ecclesiastical jurisdiction over laypersons like Nicholas Fuller, there could be little dispute about ecclesiastical jurisdiction over ecclesiastical matters like ministry disputes and discipline. B. English philosopher John Locke also recognized the jurisdictional boundary between religious and civil authority. His Letter Concerning Toleration sought “to distinguish exactly the business of civil government from that of religion, and to settle the just bounds that lie between the one and the other.” John Locke, A Letter Concerning Toleration 10 (J. Brook ed., 1796) (1689). Locke believed it was “the duty of the civil magistrate, by the impartial execution of equal laws, to secure unto all the people in general, and to every one of his subjects in particular, the just possession of these things belonging to this life.” Id. at 11. But he recognized that because the “jurisdiction of the magistrate reaches only to these civil concernments . . . it neither can nor ought in any manner to be extended to the salvation of souls.” Ibid. (emphasis added); cf. Ordinance of William I. Locke’s work was foundational to the original public understanding of church autonomy in America. See Michael W. McConnell, The Origins and 23  No. 19-60293 Historical Understanding of Free Exercise of Religion, 103 Harv. L. Rev. 1409 , 1431 (1990) (“Locke’s ideas . . . are [an] indispensable part of the intellectual backdrop for the framing of the free exercise clause.”); Carl H. Esbeck, Dissent and Disestablishment: The Church-State Settlement in the Early American Republic, 2004 BYU L. Rev. 1385 , 1420 (2004) (“Locke’s theory was imbibed by most educated Americans . . . .”); Noah Feldman, The Intellectual Origins of the Establishment Clause, 77 N.Y.U. L. Rev. 346 , 354 (2002) (“Locke’s version of the idea of liberty of conscience formed the basic theoretical ground for the separation of church and state in America.”). For example, Baptist preacher John Leland made almost verbatim Lockean arguments in favor of disestablishment: “The rights of conscience should always be considered inalienable—religious opinions a[re] not the objects of civil government, nor any way under its jurisdiction.” John Leland, The Yankee Spy: Calculated for the Religious Meridian of Massachusetts, but Will Answer for New Hampshire, Connecticut, and Vermont, Without Any Material Alterations (1794), reprinted in The Writings of the Late Elder John Leland 213, 228 (1845). But Locke didn’t go far enough for many Evangelicals. That’s because Locke was a legislative supremacist—he believed a conflict between the law and matters of faith “does not take away the obligation of that law, nor deserve a dispensation.” A Letter Concerning Toleration, supra, at 51. Locke attempted to rationalize his position by arguing that such conflicts would “seldom happen.” Ibid. That was hollow solace to “[t]he Baptists languishing in the Culpepper jail and the Presbyterians fighting legislative interference with their form of church governance.” McConnell, supra, at 1445. So Evangelicals in America argued for disestablishment on grounds that establishment tended to corrupt religion through governmental interference. See, e.g., Declaration of the Virginia Association of Baptists (Dec. 25, 1776), reprinted in 1 The Papers of Thomas Jefferson 660–61 (Julian P. 24  No. 19-60293 Boyd ed., 1950) [hereinafter Papers of Thomas Jefferson] (arguing that preachers should not be “Officers of the State” because “those whom the State employs in its Service, it has a Right to regulate and dictate to; it may judge and determine who shall preach; when and where they shall preach; and what they must preach.”). And they argued that ecclesiastical jurisdiction must be defined by looking to “what matters God is concerned about, according to the conscientious belief of the individual.” McConnell, supra, at 1446. James Madison echoed those views. Madison’s personal opinions did not always accord with the Religion Clauses he helped frame.2 So I reference him simply as one datum in the public understanding of ecclesiastical jurisdiction. In 1785, when Virginia’s legislature sought to pass a bill providing for compulsory support of religion, Madison penned the then- anonymous Memorial and Remonstrance Against Religious Assessments. Madison objected “[b]ecause if Religion can be exempt from the authority of the Society at large, still less can it be subject to that of the Legislative Body. The latter are but the creatures and vicegerents of the former. Their jurisdiction is both derivative and limited.” James Madison, Memorial and Remonstrance Against Religious Assessments (June 20, 1785), in 5 The Founders’ Constitution 82 (Philip B. Kurland & Ralph Lerner eds., 1987). And further emphasizing the line between ecclesiastical jurisdiction and civil authority, Madison objected: 2 To take one example, the First Amendment plainly allows Congress to have a Chaplain. See Marsh v. Chambers, 463 U.S. 783 (1983). As a member of the first Congress, Madison voted for the bill that established the Chaplain. See 1 Annals of Cong. 891 (1789). Yet many years later, he expressed his personal view that the office was unconstitutional. See Elizabeth Fleet, Madison’s “Detached Memoranda,” 3 Wm. & Mary Q. 534, 558 (1946). 25  No. 19-60293 Because the Bill implies either that the Civil Magistrate is a competent Judge of Religious Truth; or that he may employ Religion as an engine of Civil policy. The first is an arrogant pretension falsified by the contradictory opinions of Rulers in all ages, and throughout the world: the second an unhallowed perversion of the means of salvation. Id. at 83. And even Thomas Jefferson—who had little or no sympathy for America’s churches—evoked ecclesiastical jurisdiction. (Query, however, whether he did so unwittingly.) In 1801, the Danbury Baptist Association wrote to President-elect Jefferson, explaining that their “[s]entiments are uniformly on the side of Religious Liberty” and expressing hope that Jefferson would recognize that religion “is at all times and places a Matter between God and Individuals.” 35 Papers of Thomas Jefferson, supra, at 407–09. Jefferson saw the letter as providing an opportunity “to reprimand his clerical and Federalist opponents and to propagate his own, profoundly anticlerical, vision of the relationship of religion to politics.” Philip Hamburger, Separation of Church and State 144 (2002). Three months later, Jefferson responded: Believing with you that religion is a matter which lies solely between Man & his God, that he owes account to none other for his faith or his worship, that the legitimate powers of government reach actions only, & not opinions, I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should “make no law respecting an establishment of religion, or prohibiting the free exercise thereof,” thus building a wall of separation between Church & State. 36 Papers of Thomas Jefferson, supra, at 258. 26  No. 19-60293 Jefferson’s wall metaphor went almost completely unnoticed in the nineteenth century. See Hamburger, supra, at 162–64. And it was generally misunderstood in the twentieth century: “[W]hat should be regarded as an important feature of religious freedom under constitutionally limited government too often serves as a slogan, and is too often employed as a rallying cry, not for the distinctiveness and independence of religious institutions, but for the marginalization and privatization of religious faith.” Richard W. Garnett, Pluralism, Dialogue, and Freedom: Professor Robert Rodes and the Church-State Nexus, 22 J.L. & Religion 503 , 504 (2006–2007). The Supreme Court invoked it, see Everson v. Bd. of Educ., 330 U.S. 1 , 16 (1947), but not without criticism, see Wallace v. Jaffree, 472 U.S. 38 , 107 (1985) (Rehnquist, C.J., dissenting) (“Whether due to its lack of historical support or its practical unworkability, the Everson ‘wall’ has proved all but useless as a guide to sound constitutional adjudication.”). And in the twenty- first century, it appears the Supreme Court has relegated Jefferson’s “wall” to dissenting opinions. See, e.g., Am. Legion v. Am. Humanist Ass’n, 139 S. Ct. 2067 , 2105 (2019) (Ginsburg, J., dissenting); Van Orden v. Perry, 545 U.S. 677 , 708 (2005) (Stevens, J., dissenting). Of interest here, however, Jefferson did not invent the metaphor. Before Jefferson, Roger Williams invoked the wall as an aspirational “image of the purity he sought in religion.” Hamburger, supra, at 38. Before Williams was Richard Hooker. See id. at 32–38 (explaining how the wall between church and state “first became widely known in England when [Anglican apologist] Richard Hooker ungenerously used it to characterize the position of Protestant dissenters who sought to purify the English church”). And before that, Christians had used the “ancient phrase,” id. at 3, since the time of Jesus. See Garnett, supra, at 507 (noting that the separation of church and state was “an ancient Western teaching rooted in the Bible” (quoting John Witte, Jr., God’s Joust, God’s Justice: Law and 27  No. 19-60293 Religion in the Western Tradition 210 (2006))). Early Christians invoked the wall to “differentiate[] between civil and ecclesiastical jurisdiction—between the powers of regnum and sacerdotium.” Hamburger, supra, at 23. And “they often took for granted that church and state were distinct institutions, with different jurisdictions and powers.” Id. at 21. II. Consistent with the history recounted above, the Supreme Court has held that the ecclesiastical-autonomy doctrine carries jurisdictional consequences. In Watson v. Jones, two competing church factions invoked civil jurisdiction to resolve their dispute over church property. 80 U.S. at 691–92. The dispositive issue was jurisdictional—namely, whether the judicial power of the United States extended to such ecclesiastical disputes. See id. at 732–33. The Court held that churches, rather than courts, have the final say over disputes implicating “theological controversy, church discipline, ecclesiastical government or the conformity of the members of the church to the standards of morals required.” Ibid. The upshot: over ecclesiastical and religious controversies, “civil courts exercise no jurisdiction.” Id. at 733. Of course, “‘jurisdiction’ . . . is a word of many, too many, meanings.” Arbaugh v. Y&H Corp., 546 U.S. 500 , 510 (2006) (quotation omitted). And the “profligate use of the term” has caused much confusion. See United Pac. R.R. Co. v. Bhd. of Locomotive Eng’r & Trainmen Gen. Comm. of Adjustment Cent. Region, 558 U.S. 67 , 81–83 (2009) (describing the general confusion caused by courts using the word “jurisdiction” to refer to various unrelated legal concepts). But the Watson Court emphasized that it really meant what it said. See 80 U.S. at 732–33. It explained that a civil court wielding the judicial power 28  No. 19-60293 to settle an ecclesiastical dispute would be tantamount to a church “try[ing] one of its members for murder, and punish[ing] him with death or imprisonment.” Id. at 733. Such a sentence would “be utterly disregarded by any civil court” because the crime of murder falls within the exclusive jurisdiction of civil authorities. Ibid. Similar, the Court explained, is the exclusive jurisdiction of a church to settle ecclesiastical or ministerial disputes. Id. at 733–34. The Supreme Court later anchored Watson’s jurisdictional holding in the First Amendment. See Kedroff v. St. Nicholas Cathedral of Russian Orthodox Church in N. Am., 344 U.S. 94 , 116 (1952) (noting that the Watson “opinion[] radiates . . . a spirit of freedom for religious organizations” and “an independence from secular control or manipulation”). And the Court reaffirmed it in 1976. See Serbian E. Orthodox Diocese for U.S. & Canada v. Milivojevich, 426 U.S. 696 , 713 (1976) (preventing courts from inquiring into church personnel decisions in observation of “the general rule that religious controversies are not the proper subject of civil court inquiry”). So far so neat. In subsequent cases, however, the Court created contrary rules. See, e.g., Jones v. Wolf, 443 U.S. 595 , 602 (1979) (explaining that “a State is constitutionally entitled to adopt neutral principles of law as a means of adjudicating a church property dispute”); Emp. Div. v. Smith, 494 U.S. 872 (1990) (purporting to exclude neutral laws of general applicability from First Amendment scrutiny). Then in Hosanna-Tabor Evangelical Lutheran Church & Sch. v. E.E.O.C., the Supreme Court unanimously rejected the proposition that cases like Smith preclude ecclesiastical exemptions to neutral laws. See 565 U.S. 171 , 189–90 (2012). At the same time, Hosanna-Tabor mentioned in a footnote that part of the ecclesiastical-autonomy doctrine “operates as an affirmative defense to an otherwise cognizable claim, not a jurisdictional bar.” Id. at 195 n.4. And while Our Lady of Guadalupe broadly reaffirmed ecclesiastical autonomy in matters of faith, ministry, doctrine, and church 29  No. 19-60293 governance, it did not have occasion to consider whether the doctrine retains jurisdictional consequences. Cf. 140 S. Ct. at 2060 (“[C]ourts are bound to stay out of employment disputes involving those holding certain important positions with churches and other religious institutions.”).3 Since Hosanna-Tabor, confusion over the ecclesiastical-autonomy doctrine has increased. Some courts still see it as jurisdictional. See, e.g., Flynn v. Estavez, 221 So. 3d 1241 , 1247 (Fla. Dist. Ct. App. 2017) (“In Florida, courts have interpreted the doctrine as a jurisdictional bar, meaning a claim should be dismissed upon a determination that it requires secular adjudication of a religious matter.”(quotation omitted)); Bigelow v. Sassafras Grove Baptist Church, 786 S.E.2d 358 , 365 (N.C. Ct. App. 2016) (noting “the ecclesiastical abstention doctrine . . . is a jurisdictional bar to courts adjudicating ecclesiastical matters of a church”); In re St. Thomas High Sch., 495 S.W.3d 500 , 506 (Tex. App.—Houston [14th Dist.] 2016), appeal dism’d sub nom. St. Thomas High Sch. v. M.F.G., 2016 Tex. App. LEXIS 5035 (Tex. App.—Houston [14th Dist.] July 12, 2016, no pet.) (noting the church- autonomy doctrine is “a threshold jurisdictional question”). Those courts think Hosanna-Tabor left Watson’s broader rule undisturbed. See, e.g., Church of God in Christ, Inc. v. L. M. Haley Ministries, Inc., 531 S.W.3d 146 , 157 3 If the ecclesiastical-autonomy doctrine retains jurisdictional consequences, it’s not clear they come from the First Amendment. After all, the text of that Amendment does not purport to limit the judicial power of the United States—unlike say the Eleventh Amendment. See U.S. Const. amend. XI (“The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”). On the other hand, the Supreme Court has made clear that States enjoy sovereign immunity outside of the Eleventh Amendment—and that immunity carries jurisdictional consequences. See, e.g., Kimel v. Fla. Bd. of Regents, 528 U.S. 62 , 72–73 (2000); Seminole Tribe of Fla. v. Florida, 517 U.S. 44 , 54, 72–73 (1996). It’s possible that the jurisdictional consequences of the ecclesiastical-autonomy doctrine likewise come from the original public meaning of Article III. 30  No. 19-60293 (Tenn. 2017) (recognizing that the “ecclesiastical abstention doctrine predates the ministerial exception by almost a century” and concluding Hosanna-Tabor “did not address” that doctrine). But others think the Hosanna-Tabor footnote necessitates a reexamination of the jurisdictional consequences of ecclesiastical autonomy. See, e.g., Doe v. First Presbyterian Church U.S.A. of Tulsa, 421 P.3d 284 , 290– 91 (Okla. 2017) (noting the church-autonomy doctrine “operates as an affirmative defense” (quoting Hosanna-Tabor, 565 U.S. at 195 n.4)); St. Joseph Catholic Orphan Soc’y v. Edwards, 449 S.W.3d 727 , 737 (Ky. 2014) (“[T]he ecclesiastical-abstention doctrine is an affirmative defense.”); Pfeil v. St. Mathews Evangelical Lutheran Church of Unaltered Augsburg Confession of Worthington, 877 N.W.2d 528 , 534–35 (Minn. 2016) (reversing course on previous holding and noting “Hosanna-Tabor leads us to conclude that the ecclesiastical abstention doctrine is not a jurisdictional bar”). Of course, it’s not our job to decide whether Watson remains binding. It remains binding on us until the Supreme Court says otherwise. See, e.g., State Oil Co. v. Khan, 522 U.S. 3 , 20 (1997) (noting “it is [the Supreme] Court’s prerogative alone to overrule one of its precedents”). And that’s reason enough to justify rehearing this case en banc. See Fed. R. App. P. 35(b)(1)(A) (listing as a ground for rehearing that “the panel decision conflicts with a decision of the United States Supreme Court”). Moreover, this case is rich with questions of exceptional importance. See Fed. R. App. P. 35(a)(2). For example, ecclesiastical jurisdiction at one time extended to certain torts, like defamation, that today seem purely secular. See 10 Edw. 2 , stat. 1 c. 4 (1316) (recognizing ecclesiastical jurisdiction over “defamations”); cf. Fuller’s Case, 12 Co. Rep. at 44 (distinguishing between secular “slander” and ecclesiastical “Heresy, Schism, and erroneous Opinions, &c.”). Does it extend to McRaney’s 31  No. 19-60293 defamation claim? If so, does ecclesiastical autonomy require dismissal of it? What do we make of the post-Hosanna-Tabor split of authority on the jurisdictional consequences vel non of the ecclesiastical-autonomy doctrine? Our refusal to grant rehearing means these questions must wait for another day. 32

2020-12-01 01:00:31.813366+00

http://www.ca5.uscourts.gov/opinions/unpub/18/18-20193.0.pdf

Case: 18-20193 Document: 00515654941 Page: 1 Date Filed: 11/30/2020 United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit FILED November 30, 2020 No. 18-20193 Lyle W. Cayce Clerk United States of America, Plaintiff—Appellee, versus George Yarbrough, Defendant—Appellant. Appeal from the United States District Court for the Southern District of Texas USDC No. 4:17-CR-411-1 Before Clement, Ho, and Duncan, Circuit Judges. Per Curiam:* In the spring of 2018, the district court sentenced George Yarbrough to a statutory maximum ten-year sentence for threatening to kill a federal judge. The sole issue of Yarbrough’s appeal is a special condition of his supervised release requiring him to take all prescribed mental health medications. The United States concedes that the condition is improper * 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: 18-20193 Document: 00515654941 Page: 2 Date Filed: 11/30/2020 No. 18-20193 because the district court did not orally pronounce it at sentencing. 1 We agree. We vacate the sentence in part and remand to the district court to amend its written judgment. In the time since the district court sentenced Yarbrough, we have clarified the governing law. When a district court imposes discretionary conditions of supervised release—those not required by 18 U.S.C. § 3583 (d)—it must orally pronounce them at sentencing. United States v. Diggles, 957 F.3d 551 , 558–59 (5th Cir. 2020) (en banc), cert. denied, --- S. Ct. ---, 2020 WL 6551832 (mem.) (Nov. 9, 2020). The court does not necessarily have to pronounce them verbatim; it is enough to adopt a document where they are listed, such as the Presentence Investigation Report (PSR) or a standing order. Id. at 561–62; United States v. Grogan, 977 F.3d 348 , 350 (5th Cir. 2020) (Clement, J.). But one thing a court cannot do is impose altogether new conditions in the written judgment. “[W]hen there is a conflict between a written sentence and an oral pronouncement, the oral pronouncement controls.” United States v. Martinez, 250 F.3d 941 , 942 (5th Cir. 2001) (per curiam) (citation omitted). Then, “any burdensome . . . restrictions added in the written judgment must be removed.” United States v. Bigelow, 462 F.3d 378 , 383 (5th Cir. 2006) (quoting United States v. Rosario, 386 F.3d 166 , 168 (2d Cir. 2004)). The written judgment here includes a discretionary condition requiring Yarbrough to pay for and take all prescribed mental health medications. See 18 U.S.C. § 3583 (d). Yet the parties agree that the district 1 Although the Government’s concession is “entitled to great weight, . . . our judicial obligations compel us to examine independently the errors confessed.” Cachoian v. United States, 452 F.2d 548 , 550 (5th Cir. 1971) (quoting Young v. United States, 315 U.S. 257 , 258–59 (1942)). 2 Case: 18-20193 Document: 00515654941 Page: 3 Date Filed: 11/30/2020 No. 18-20193 court never pronounced that requirement at sentencing. It was not in any documents available to Yarbrough before the hearing either, so we review for abuse of discretion as opposed to plain error. United States v. Rivas-Estrada, 906 F.3d 346 , 348–49 (5th Cir. 2018). Under that standard, the district court erred by imposing a new, burdensome restriction in the written judgment. See id.; Martinez, 250 F.3d at 942 . The appropriate remedy is to remove the conflicting condition from the written judgment. Bigelow, 462 F.3d at 383 . We therefore vacate the sentence in part and remand for the district court to amend its written judgment accordingly. 3

2020-12-01 01:00:32.742692+00

http://www.ca5.uscourts.gov/opinions/pub/20/20-10033-CV0.pdf

Case: 20-10033 Document: 00515655252 Page: 1 Date Filed: 11/30/2020 United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit FILED November 30, 2020 No. 20-10033 Lyle W. Cayce Clerk Amber Biziko, Plaintiff—Appellee, versus Steven Van Horne; Michelle Van Horne; A Habitat for Learning; Loving Individuals Generating Healing Today, Defendants—Appellants. Appeal from the United States District Court for the Northern District of Texas USDC No. 1:16-CV-111-C Before Clement, Ho, and Duncan, Circuit Judges. James C. Ho, Circuit Judge: A jury found Defendants liable for violations of overtime requirements under the Fair Labor Standards Act (FLSA). 29 U.S.C. § 201 et seq. On appeal, Defendants allege various errors by the district court. But every one of Defendants’ allegations of error was either unpreserved in the district court or inadequately briefed here, and therefore forfeited on appeal. We pause only to address one of those arguments—the claim that Defendants are not an “enterprise engaged in commerce” subject to the Case: 20-10033 Document: 00515655252 Page: 2 Date Filed: 11/30/2020 No. 20-10033 overtime requirements of the FLSA. Id. § 207(a)(1). In the district court, Defendants stipulated that they are “enterprises” subject to the FLSA— whereas on appeal, they deny that they are. Moreover, Defendants contend that this issue is “jurisdictional.” But they do not cite a single case relevant to whether the enterprise element under the FLSA is jurisdictional. This issue happens to be one of first impression in this circuit. We hold that the provision is not jurisdictional and therefore subject to forfeiture. In doing so, we follow the Supreme Court’s decision in Arbaugh v. Y&H Corp., 546 U.S. 500 (2006), which held that a similar requirement under Title VII is not jurisdictional—as well as the First Circuit’s decisions in Chao v. Hotel Oasis, Inc., 493 F.3d 26 (1st Cir. 2007), and Martinez v. Petrenko, 792 F.3d 173 (1st Cir. 2015), which reached the same conclusion as to the enterprise element of the FLSA. We accordingly affirm. I. Michelle Van Horne is the executive director at A Habitat for Learning (AHFL), a private, non-profit childcare provider and school. Her husband, Steven Van Horne, is AHFL’s founder and currently serves as an administrator there. Steven is also the founder of Loving Individuals Generating Healing Today (LIGHT), a charitable organization that provides services for low-income individuals who are struggling to make ends meet. Several years ago, Plaintiff Amber Biziko worked as a childcare provider and assistant director at AHFL. But for at least some of her time there, Biziko was apparently paid by both AHFL and LIGHT. According to Steven, this arrangement came about after Biziko asked him about the possibility of working overtime at AHFL. Rather than have AHFL pay Biziko overtime, Steven proposed having LIGHT provide Biziko a stipend, in exchange for Biziko “volunteering” some of her time at AHFL. Biziko went 2 Case: 20-10033 Document: 00515655252 Page: 3 Date Filed: 11/30/2020 No. 20-10033 on to perform the same duties for the same hourly rate, whether she was working for AHFL or simply “volunteering” there on behalf of LIGHT. Biziko later sued the Van Hornes, AHFL, and LIGHT, alleging that they had failed to properly calculate and pay overtime wages as required by the FLSA. 29 U.S.C. § 201 et seq. After a one-day trial, a jury returned a verdict for Biziko. Defendants now appeal, challenging several district court rulings as well as the final judgment. II. The FLSA generally guarantees overtime pay to “any . . . employee[] who in any workweek . . . is employed in an enterprise engaged in commerce or in the production of goods for commerce.” Id. § 207(a)(1). When we determine that an employer is subject to this provision of the FLSA, we typically state that the plaintiff has satisfied the Act’s “enterprise coverage” requirement. See, e.g., Martin v. Bedell, 955 F.2d 1029 , 1032 (5th Cir. 1992). The Act defines the phrase “enterprise engaged in commerce or in the production of goods for commerce” to include, among other entities, an enterprise that has both (a) “employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person,” and (b) an “annual gross volume of sales made or business done” that is “not less than $500,000.” 29 U.S.C. § 203 (s)(1)(A). On appeal, Defendants contend that they do not satisfy either of these elements. But in the district court, they said just the opposite: In a joint pretrial order filed with the district court, Defendants stipulated that AHFL and LIGHT are “enterprise[s] engaged in commerce”—and specifically, that their employees “handled, sold or otherwise utilized goods and materials and handled equipment that had been moved in or produced for such 3 Case: 20-10033 Document: 00515655252 Page: 4 Date Filed: 11/30/2020 No. 20-10033 commerce” and that they “had an annual gross income of sales made or business done of not less than $500,000.00 for the years covering the basis of this lawsuit.” We agree with Biziko that Defendants cannot “admit and stipulate” to the enterprise element, and then change their position and attempt to deny that element on appeal. Defendants have accordingly forfeited—if not waived—any claim that they are not an enterprise under the FLSA. 1 For their part, Defendants suggest that the enterprise coverage requirement is jurisdictional. In doing so, they provide no analysis or authority. Nevertheless, federal courts have “an independent duty to examine the basis of [their] jurisdiction.” Feld Motor Sports, Inc. v. Traxxas, L.P., 861 F.3d 591 , 595 (5th Cir. 2017). “[S]ubject-matter jurisdiction cannot be created by waiver or consent.” Howery v. Allstate Ins. Co., 243 F.3d 912 , 919 (5th Cir. 2001). And it is an issue of first impression in our court whether the enterprise coverage element of the FLSA is jurisdictional, as Defendants suggest. We find nothing in the text of the FLSA to indicate that the enterprise element is jurisdictional. And the lack of any such indication in the text of the FLSA is dispositive under Arbaugh. 1 Forfeiture and waiver are of course distinct concepts. “Whereas forfeiture is the failure to make the timely assertion of a right, waiver is the intentional relinquishment or abandonment of a known right.” United States v. Olano, 507 U.S. 725 , 733 (1993) (quotations omitted). See also Puckett v. United States, 556 U.S. 129 , 138 (2009) (same). But it may be that some of Defendants’ arguments—including their enterprise coverage arguments—are not just forfeited, but affirmatively waived. See SeaQuest Diving, LP v. S&J Diving, Inc., 579 F.3d 411 , 425–26 (5th Cir. 2009) (“Before the bankruptcy court, S&J stipulated that there were no genuine issues of material fact, so this argument is waived. Assuming that the argument was merely forfeited, we find no plain error.”) (emphases added) (citation omitted). Regardless of whether Defendants waived or merely forfeited their arguments, they clearly have no right to raise them now. 4 Case: 20-10033 Document: 00515655252 Page: 5 Date Filed: 11/30/2020 No. 20-10033 In Arbaugh, the Supreme Court considered whether Title VII’s “definition of ‘employer’ to include only those having ‘fifteen or more employees’” was a requirement of “federal-court subject-matter jurisdiction” or “simply an element of a plaintiff’s claim for relief.” 546 U.S. at 503, 509 (quoting 42 U.S.C. § 2000e(b)). The Court concluded that Title VII’s employee requirement is nonjurisdictional. Id. at 516. In so doing, the Court noted that the “15-employee threshold appears” in a different section than Title VII’s jurisdictional provision and “does not speak in jurisdictional terms or refer in any way to the jurisdiction of the district courts.” Id. at 515 (quoting Zipes v. Trans World Airlines, Inc., 455 U.S. 385 , 394 (1982)). We reach the same conclusion as to the enterprise element of the FLSA. To be sure, the FLSA does not have any single independent jurisdictional provision. But like Title VII’s “employer” element, the FLSA’s “enterprise” element contains no jurisdictional language, and is likewise found in the Act’s definition section. See, e.g., Minard v. ITC Deltacom Commc’ns, Inc., 447 F.3d 352 , 356 (5th Cir. 2006) (“In light of the Supreme Court’s decision in Arbaugh, we conclude that the definition section of the [Family and Medical Leave Act], which defines 13 terms used in the statute, including the term ‘eligible employee,’ is a substantive ingredient of a plaintiff’s claim for relief, not a jurisdictional limitation.”). Moreover, this does not appear to be a close call. Arbaugh established a “readily administrable bright line” rule: “[W]hen Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character.” 546 U.S. at 516 . In other words, courts should not treat a statutory provision as jurisdictional unless “the Legislature clearly states that a threshold limitation on a statute’s scope shall count as jurisdictional.” Id. at 515 (emphasis added). The Supreme Court has subsequently referred to the interpretive rule in Arbaugh as a “clear-statement rule.” See, e.g., Hamer v. Neighborhood Hous. Servs. of Chi., 5 Case: 20-10033 Document: 00515655252 Page: 6 Date Filed: 11/30/2020 No. 20-10033 138 S. Ct. 13 , 20 n.9 (2017) (confirming that the “clear-statement rule” in Arbaugh applies in all cases “not involving the timebound transfer of adjudicatory authority from one Article III court to another”). Not surprisingly, then, the only circuit to have addressed this question under the FLSA since Arbaugh has likewise concluded that the enterprise element is not jurisdictional. Shortly after Arbaugh, the First Circuit held that the annual-sales component of enterprise coverage under the FLSA is non-jurisdictional. Chao, 493 F.3d at 33 . It later assumed the same for the interstate commerce component. See Martinez, 792 F.3d at 175. We agree. “Given the ‘unfair[ness]’ and ‘waste of judicial resources’ entailed in tying the [coverage] requirement to subject-matter jurisdiction, we think it [a] sound[] course to refrain from constricting [28 U.S.C.] § 1331 or [the FLSA], and to leave the ball in Congress’ court.” Arbaugh, 546 U.S. at 515 (citations omitted). We hold that 29 U.S.C. § 203 (s)(1)(A) is non- jurisdictional. Defendants therefore forfeited any objection to FLSA enterprise coverage on appeal when they stipulated to it before the district court. Defendants’ remaining arguments are either meritless, forfeited, or both. We accordingly affirm. 6

2020-12-01 02:00:45.645243+00

https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2019cv2754-19

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA FRANKLIN SALVADOR, SR. FILED NOV 3.0 2020 Clerk, U.S. District & Bankruptcy Courts for the District of Columbia and FRANKLIN SALVADOR, JR., Plaintiffs, V. Civil Case No. 19-2754 (RJL) ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY, ALLSTATE INSURANCE COMPANY, and ALLSTATE INDEMNITY COMPANY, Defendants. Nee Nee Nee ee nee ee ee ee ee ee ee ee” ee ee” ee” ee” ee” ee” ee” ee” MEMORANDUM OPINION (November [7, 2020) [Dkt. #8] On August 13, 2019, plaintiffs Franklin Salvador Sr. and Franklin Salvador Jr. (collectively, “plaintiffs”) brought suit on behalf of themselves and a putative class in the D.C. Superior Court against defendants Allstate Property and Casualty Insurance Company, Allstate Insurance Company, and Allstate Indemnity Company (collectively, “defendants”). See Compl. [Dkt. #1-1]. Plaintiffs allege that defendants failed to reasonably compensate plaintiff Franklin Salvador Jr. for his serious and multiple injuries under the uninsured motorist coverage in his Allstate insurance policy and failed to warn consumers who purchased their insurance that Allstate would take actions aimed at denying or delaying their receipt of full uninsured motorist benefits. The defendants move to dismiss, contending that Count II of the complaint fails to state a claim; that plaintiffs’ class action allegations should be stricken or dismissed; and that the entire Complaint should be dismissed against defendants Allstate Indemnity Company and Allstate Insurance Company. Upon consideration of the briefing, the relevant law, the entire record, and for the reasons stated below, defendants’ motion is GRANTED. BACKGROUND Under District of Columbia law, any motor vehicle lability insurance policy sold in the District of Columbia must include uninsured motorist coverage of at least $25,000 per person injured in an accident or $50,000 total for all persons injured in an accident, D.C. Code § 31-2406 . The purpose of this uninsured motorist coverage is to protect an individual who is involved ina car accident with an at-fault individual who either lacks car insurance altogether or lacks insurance sufficient to cover to full cost of injuries for which the at-fault individual is responsible. See D.C. Code § 31-2401 (a)(2)(D). On August 15, 2016, plaintiff Franklin Salvador Jr. was a passenger in a vehicle driven by Javier Vivar. Compl. 96, 10. Plaintiffs allege that on that evening, Javier Vivar operated the vehicle in a negligent manner and caused a collision between his vehicle and a fire truck. Compl. § 12. As a result of the collision, plaintiff Franklin Salvador Jr. sustained serious injuries to his chest and back. Compl. 4] 13. At the time of the collision, Javier Vivar had inadequate automobile insurance to pay all the damages for injuries as a result of this collision, including plaintiff Franklin Salvador Jr.’s injuries. Compl. 4 15. 2 However, plaintiff Franklin Salvador Jr. was the beneficiary of an automobile policy issued by Allstate Property and Casualty Insurance Company to his father, plaintiff Franklin Salvador, Sr Compl. §/ 6. Plaintiffs therefore sought uninsured motorist benefits under their Allstate policy. Compl. § 6. While Allstate accepted coverage of the accident, they denied plaintiffs the full benefits that they requested. Compl. 4 7. Plaintiffs allege in Count | of their Complaint that defendants “failed and refused to reasonably compensate plaintiff for his serious and multiple injuries” under D.C. Code § 31-2406 . Compl. § 21. Plaintiffs also allege in Count II of their Complaint that defendants have failed to warn the purchasers of their insurance policies that “Allstate engages ina course of action designed to specifically deny and/or delay timely and full uninsured motorist benefits.” Compl. § 24. Plaintiffs allege that defendants failed to advise purchasers of their insurance policies, including plaintiffs, that their uninsured motorist claims “would be submitted to a computer, known as ‘Colossus,’ which would produce an evaluation of plaintiffs’ claim to such a low value as to essentially required plaintiffs to face the vagaries ofa jury trial” to obtain the full benefits. Compl. 4 28. Plaintiffs brought this case on behalf a putative class consisting of “a]ll District of Columbia Allstate policyholders or their beneficiaries who: (1) since August 13, 2016; (2) made a claim for uninsured motorist benefits with Allstate which was not paid in full; and (3) that included a claim for bodily injury.” Compl. { 9. On September 16, 2019, defendants removed this case to the U.S. District Court for the District of Columbia pursuant to 28 U.S.C. § 1332 (a) and 28 U.S.C. §§ 1332 (d), 1441(a) and (b), and 1453. See Notice of Removal [Dkt. #1]. On September 23, 2019, 3 defendants then moved to dismiss Count H of the Complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), moved to dismiss the Complaint against defendants Allstate Insurance Company and Allstate Indemnity Company, and moved to dismiss or strike plaintiffs’ class action allegations. See Defs.’ Mot. to Dismiss [Dkt. #8]. LEGAL STANDARDS AND ANALYSIS L Whether Count II of the Complaint Fails to State a Claim In Count II, plaintiffs allege that defendants failed to advise plaintiffs and the putative class that, inter alia: (a) their claims would be submitted to a computer system known as “Colossus,” which would result in underpayment of claims; (b) defendants would extend low offers and thus require plaintiffs and putative class members to engage in litigation of their claims; and (c) defendants would fail to engage in meaningful alternative dispute resolution. Compl. 9 27-32. Plaintiffs also allege that defendants have engaged in “misleading advertising campaigns” designed to encourage plaintiffs and others to purchase uninsured motorist coverage knowing they would unfairly discourage or delay prompt resolution of the claims. Compl. §§ 24-26. Defendants move to dismiss plaintiffs’ CPPA claim, asserting that plaintiffs fail to state a claim upon which relief could be granted. Under Federal Rule of Civil Procedure 12(b)(6), a federal district court must dismiss a Complaint if it does not “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. lgbal, 556 U.S. 662 , 678 (2009). ‘Factual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544 ,555 (2007). “Threadbare recitals of the 4 elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 USS. at 678. Courts must accept as true all factual allegations in the complaint and draw all reasonable inferences in favor of the plaintiffs, but need not “accept inferences unsupported by facts or legal conclusions cast in the form of factual allegations.” See City of Harper Woods Emps.’ Ret. Sys. v. Olver, 589 F.3d 1292 , 1298 (D.C. Cir. 2009), ! The District of Columbia's CPPA makes it a violation to either “misrepresent as to a material fact which has a tendency to mislead,” or “fail to state a material fact if such failure tends to mislead.” D.C.Code § 28-3904(e), (f). This prohibition applies “whether or not any consumer is in fact misled, deceived or damaged thereby|.|” /d. at § 28- 3904(a). “A person bringing suit under these sections need not allege or prove intentional misrepresentation or failure to disclose to prevail on a claimed violation,” but “must allege a material fact that tends to mislead.” Graysony. AT & T Corp., 15 A3d 219,251 (D.C.2011) (internal quotation marks omitted). “[A] claim of an unfair trade practice [under the CPPA] is properly considered in terms of how the practice would be viewed and understood by a reasonable consumer.” Pearson v. Chung, 961 A.2d 1067 , 1075 (D.C. 2008). I agree with defendants that Count II should be dismissed. First, the Complaint merely sets forth vague and conclusory allegations regarding defendants’ claim handling ' It should be noted that some courts have declined to apply Rule 9(b)’s particularity requirement to CPPA claims. See, ¢.g., MeMulleny, Syachrony Bank, 164 ¥. Supp. 3d 77, 91 (D.D.C, 2016). [need not address that question here, as Count ll of the Complaint fails to statea claim under Rule [2(b)(6), and should thus be dismissed againstall delendants, even assuming thal plainfls should not be held to Rule 9(b)’s heightened pleading standard. g a processes and policies which defendants supposedly failed to disclose. See Compl. [ff 27-32. Under Section 28-3 904(f), a plaintiff “must prove only that defendant failed to disclose a material fact,” where the omission “had the /endency to mislead” Beck v. Test Masters Educ. Serv's Inc., 994 F.Supp.2d 90 , 96 (D.D.C. 2013) (emphasis in original). As in Cannon vy. Wells Fargo Bank, N.A., 926 F. Supp. 2d 152 (D.D.C, 2013), there are no allegations about how plaintiffs responded to these purported omissions or what they would have done absent the alleged omissions. ‘The Complaint merely sets out conclusory allegations of certain purported deficiencies in defendants’ claims handling processes, without factual allegations to support how such failures tend to mislead consumers. In the absence of any allegations as to how plaintiffs would have responded absent the purportedly misleading omissions, “there are no allegations in the Complaint that the alleged omissions were in fact misleading to anyone, much less a reasonable consumer.” Jd. at 174. Second, several of plaintiffs’ allegations reflect legal assessments masquerading as purportedly omitted facts. See Compl. { 28 (alleging defendants failed to advise plaintiffs that computer generated evaluation of claims would be “such a low value as to essentially require plaintiffs to face the vagaries ofa jury trial... or be forced to accept a settlement of their claim for a sum less than the value of their accumulated medical expenses”); Compl. § 30 (alleging defendants failed to advise plaintiffs that pursuing claims over $10,000.00 would require “complete litigation... requiring extensive pre- trial proceedings and eventually a jury trial); Compl; 431 (alleging defendants failed to advise plaintiffs that they would “fail[] to engage in any meaningful alternative dispute 6 resolution process as devised by the Court”); Compl. § 32 (alleging defendants offer “low offers of settlement” and, 1f such offers are not accepted, adopt a “scorched earth litigation tactic”). Plaintiffs’ several allegations that defendants’ claims processes force plaintiffs and putative class members to litigate their claims constitute legal assessments about whether and when litigation is necessary—-not facts. Legal assessments are insufficient to state a CPPA claim. See floyd v. Bank of Am. Corp., 70 A.3d 246 , 255-56 (D.C. 2013); lgbal, 556 US. at 678 (cautioning against acceptance of “a legal conclusion couched as a factual allegation” for the purpose of evaluating whether a complaint fails to state a claim). As such, I will grant defendants’ motion to dismiss for failure to state a claim the portion of plaintiffs’ CPPA claim alleging a violation of § 28--3904(f). Finally, as to plaintiffs’ “advertising campaign” allegations, plaintiffs merely allege that defendants “have engaged in misleading advertising campaigns designed to encourage plaintiffs, and others, to purchase automobile liability insurance in compliance with applicable District of Columbia Law, including required [uninsured motorist] provisions, knowing that in the event of the assertion of a claim, as was done herein, that defendants would unfairly make the process as onerous as possible in the apparent attempt to discourage plaintiffs and/or delay reasonably prompt resolution ofa lawful claim for benefits.” Compl. § 26. These allegations, however, are as impermissibly vague and conclusory as plaintiffs’ “omission” allegations. To state a claim under § 28- 3904(e), “fa]ll that is required is ‘an affirmative or implied misrepresentation’ that ‘a reasonable consumer’ would deem misleading.” McMullen v. Synchrony Bank, 164 F.Supp.3d 77 , 94-95 (D.D.C. 2016) (quoting Saucier v. Countrywide Home Loans, 64 7 A.3d 428 , 442-43 (D.C.2013)). The bar is low, but plaintiffs do not clear it. Plaintiffs plead no facts surrounding any “advertising campaign’—-in fact, they identify no advertisements. Plaintiffs do not plead any factual allegations regarding the supposed advertising campaign, or how defendants’ actual practices render such a campaign misleading. Instead, plaintiffs make conclusory allegations that amount to little more than “a bare recitation of the elements,” without “the type of factual allegations that would render it plausible.” See Campbell v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 130 F.Supp.3d 236 , 258 (D.D.C. 2015). [will therefore GRANT defendants’ motion to dismiss for failure to state a claim the portion of plaintiffs’ CPPA claim alleging a violation of § 28-3904(e), Il. Whether the Complaint Should Be Dismissed Against Allstate Indemnity Company and Allstate Insurance Company Allstate Property and Casualty Insurance Company is the only defendant in this action to have actually issued the applicable insurance policy to plaintiffs. In a multi-defendant action or class action, the named plaintiffs must establish that they have been harmed by each of the defendants. Dash v. FirstPlus Home Loan Owner Tr. 1996-2, 248 F. Supp. 2d 489 , 504 (M.D.N.C. 2003). Defendants move to dismiss defendants Allstate Indemnity Company and Allstate Insurance Company. Plaintiffs do not contest dismissal. I will therefore GRANT defendants’ motion to dismiss the entire Complaint against defendants Allstate Indemnity Company and Allstate Insurance Company. WI. Whether Plaintiffs’ Class Action Allegations Should Be Dismissed or Stricken In determining the propriety ofa class action, the central question is whether the requirements of Federal Rule of Civil Procedure 23 are met. Lisen v. Carlisle & Jacquelin, 417 U.S. 156 ,178, 94 S.Ct. 2140 , 40 L.Ed.2d 732 (1974). Rule 23 requires a two-step analysis to determine whether class certificationis appropriate. First, plaintiffs must satisfy all four requirements of Rule 23(a): (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. See Fed. R. Civ. P. 23(a). “Failure to adequately demonstrate any of the four is fatal to class certification.” Moore v. Napolitano, 269 F.R.D. 21 ,27 (D.D.C.2010). Next, the class must fall within one of the three categories of Rule 23(b). To satisfy Rule 23(b)(3), at issue here, the court must find “that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” See Fed. R. Civ. P. 23(b)(3).? There is, of course, no formula or bright-line test for determining whether common issues predominate over individual issues. Rather, predominance ultimately depends on the degree to which resolution of the ? Defendants argue that plaintiffs will be unable to satisfy the “predominance” requirement of Rule 23(b)(3), and plaintiffs do not raise any other Rule 23(b) categories as relevant. 9 common issues might advance the overall litigation. See Sandusky Wellness Center, LLC v. ASD Specialty Healthcare, Inc., 863 F.3d 460 , 468 (6th Cir. 2017). Courts have broad discretion in determining whether to permit a case to proceed as a class action, see Hartman v. Duffey, 19 F.3d 1459 , 1471 (D.C. Cir.1994), and a defendant may move to strike class action allegations at any time, including at the pleadings stage. See LCvR 23.1(b); see also Abdul-Baagiy v. Fed. Nat'l Mortg. Ass'n, 149 F. Supp. 3d 1 , 10 (D.D.C. 2015), District of Columbia law requires that “{eJach insurer selling motor vehicle insurance in the District... shall include coverage for bodily injury or death” of at least $25,000 per person injured in an accident or $50,000 total for all persons injured in an accident “for the protection of persons insured ... who are /egally entitled to recover damages from owners or operators of uninsured motor vehicles.” D.C, Code § 31- 2406(f)(2) (emphasis added). As made clear in the statute, each claimant must be “legally entitled” to recover damages to be encompassed in this code section. To recover benefits pursuant to uninsured motorist coverage, “the insured must prove coverage under the contract.” Group Hospitalization, Inc. v. Foley, 255 A.2d 499 ,501 (D.C. 1969). Plaintiffs purport to represent a class defined as “all District of Columbia Allstate policyholders or their beneficiaries who: (1) since August 13,2016; (2) made a claim for uninsured motorist benefits with Allstate which was not paid in full; and (3) that included a claim for bodily injury.” Compl. 4/9. Defendants argue that plaintiffs will not be able to satisfy their burden to show predominance with respect to both 10 putative class members’ entitlement to uninsured motorist coverage (Count I) and plaintiffs’ CPPA claim (Count ID. I agree. With respect to Count I, defendants argue that their potential liability to any individual putative class member would turn, primarily, ona highly individualized set of determinations: “f[w]as the at-fault driver in fact uninsured? Did an uninsured driver cause the accident in which the putative class member was injured? Were the individual’s injuries a result of the accident? Were the individual’s injuries a justification for benefits higher than the insurer offered?” Defs. Mot. to Dismiss at 18. As to Count IL defendants argue that even more highly individualized questions that would have to be answered for each individual putative class member: “{w]as the individual exposed to any ‘advertising campaign’? What communications occurred between Defendants and each putative class member? Was the individual’s claim submitted to Colossus? If so, was the claim in fact underpaid? What type of offer for [uninsured motorist] coverage was extended to the individual? Was it, as Plaintiffs allege, a ‘low ball’ offer? Did the individual have to engage in litigation in connection with his or her UM claim? What, ifany, alternative dispute resolution took place, and was it ‘meaningful?’ What information did Defendants provide the individual regarding Defendants’ claim handling processes? Did Defendants advise the individual that his or her claim might be submitted to Colossus? Did the individual have a ‘small claim?” Jd. at 24-25. Defendants’ contention that these individualized issues of fact and law would necessarily predominate over any common questions not only makes sense practically, but legally as well. 1] Plaintiffs’ class action allegations are fatally deficient because individualized issues will necessarily predominate. Broadly, as to Count I, any inquiry into the entitlement of putative class members to payouts pursuant to Allstate’s uninsured motorist policy, or the sufficiency of such payouts, will necessarily require a fact finder to make individualized determinations ona number of issues as to each purported class member. See Council for Responsible Nutrition v. Hartford Cas. Ins. Co., No. Civ. A. 06-1590, 2007 WL 2020093 , at *4 (D.D.C. Jul. 12, 2007) (“The insured bears the burden of showing that the underlying complaint comes within the policy’s grant of coverage”). Plaintiffs’ proposed class includes any policyholder or beneficiary whose uninsured motorist claim involved bodily injury and was not “paid in full.” This necessarily requires individualized inquiries into whether each putative class member was actually injured, defendants’ liability, and appropriate damages. ‘The prevalence of these individualized issues defeats class certificationhere. See In re Rail Freight Fuel Surcharge Antitrust Litig., 934 F.3d 619 , 624 (D.C. Cir. 2019). As to Count JI, plaintiffs’ CPPA claim alleging misrepresentation, individualized issues will similarly predominate. Like in Count I, there can be no liability where Allstate did not, in fact, owe uninsured motorist benefits to any particular class member—an issue inherently individual to each putative class member. Moreover, plaintiffs make vague allegations about defendants’ “advertising campaign,” but point to no specific advertisement or public pronouncement by defendants that was seen by all putative class members. See Egan v. Telomerase Activation Sciences, Inc., 8 N.Y.S.3d 175 , 177 (1st Dep’t 2015) (interpreting analogous New York class certification standard), 12 Even assuming that defendants have violated the CPPA as to each putative class member, class certification cannot succeed “in the absence ofa uniform policy or practice that affects all class members.” DL v. District of Columbia, 713 F.3d 120 ,128 (D.C. Cir. 2013). Plaintiffs’ Complaint alleges no common contentions, capable of classwide resolution, that “will resolve an issue that is central to the validity of each one of the claims in one stroke.” Walmart v. Dukes, 564 U.S. 338 (2011). Rather, as in Count I, ‘mini-trials” would be required to determine lability and damages as to each individual putative class member. For both claims, significant issues of fact and law individual to each putative class member would essentially require “mini-trials” to establish liability and damages as to each individual claimant. In such a case, class certificationis inappropriate. See Does | through IIT v. District of Columbia, Civ. A. No. 02-02398, 2006 WL 2864483 at *3 (D.D.C. 2006) (rejecting certification under Rule 23(b)(3) in part because when “computation of damages will require separate mini-trials, then the individualized damages determinations predominate over common issues and a class should not be certified.”) (internal quotation and citation omitted). I therefore must GRANT defendants’ motion to strike or dismiss class allegations. 13 CONCLUSION For all the foregoing reasons, defendants’ motion to dismiss Count II for failure to state a claim, motion to dismiss the Complaint against defendants Allstate Indemnity Company and Allstate Insurance Company, and motion to strike the class action allegations are GRANTED. A separate Order consistent with this decision accompanies this iba SA RICHARD J. LEOX United States District Judge Memorandum Opinion. 14

2020-12-01 02:00:49.554223+00

https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2019cv1135-27

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA FRANCOIS OLENGA, Plaintiff, v. Civil Action No. 19-1135 (RDM) ANDREA M. GACKI et al., Defendants. MEMORANDUM OPINION In 2017, the Office of Foreign Assets Control (“OFAC”) added Plaintiff François Olenga, a military official in the Democratic Republic of the Congo (“DRC”), to its list of Specially Designated Nationals and Blocked Persons (“SDN” and “SDN List”), pursuant to the International Emergency Economic Powers Act (“IEEPA”), 50 U.S.C. § 1701 et seq. This designation froze Olenga’s assets subject to U.S. jurisdiction and forbade U.S. individuals or entities from doing business with him. OFAC designated Olenga on the ground that he directed activities of the Republican Guard, a special security force that former DRC President Joseph Kabila allegedly used to stifle political opposition and undermine democracy. On July 14, 2018, Congolese state media announced that Olenga had retired from the army and had become the Military Mission Manager for President Kabila—a position that, according to Olenga, does not include authority to direct any military activities. In part based on that change in circumstances, Olenga requested reconsideration of his designation and, while the administrative process was ongoing, filed this lawsuit. OFAC granted Olenga’s request for delisting but simultaneously re- designated him on the ground that he had both previously undermined and continues to 1 undermine democracy in the DRC, irrespective of his retirement. OFAC, in short, gave with one hand, while it took with the other. Olenga now asks the Court to overturn his re-designation. He argues that OFAC’s decision violates both the due process clause of the Fifth Amendment and the Administrative Procedure Act (“APA”), 5 U.S.C. § 701 et seq. Olenga contends that his re-designation was procedurally flawed, because the notice he received of the decision was heavily redacted, and substantively flawed, because OFAC acted illogically in granting his request for delisting but then re-designating him based on the same conduct underlying his initial designation. Pending before the Court are OFAC’s motion to dismiss or in the alternative for summary judgment, Dkt. 13, and Olenga’s cross-motion for summary judgment, Dkt. 15. For the following reasons, the Court will DENY Olenga’s motion for summary judgment, GRANT OFAC’s motion to dismiss as to Count III, and GRANT OFAC’s motion for summary judgment as to Counts I, II, and IV. I. BACKGROUND A. Statutory and Regulatory Background From the earliest days of our nation’s history, its leaders “have viewed economic sanctions as ‘the most likely means of obtaining our objects without war.”’ Rakhimov v. Gacki, No. 19-cv-2554, 2020 WL 1911561 , at *1 (D.D.C. Apr. 20, 2020) (quoting James Madison, “Political Observations,” National Archives (Apr. 20, 1795) (subsequent procedural history omitted). In 1917, six months after the United States entered World War I, Congress enacted the Trading with the Enemy Act (“TWEA”), 50 U.S.C. app. § 1 et seq., which gave the President broad authority to impose economic sanctions, including comprehensive embargoes, in response to both peacetime emergencies and times of war. See Regan v. Wald, 468 U.S. 222 , 225–26 2 (1984). Then in 1977, Congress altered the legal framework governing economic sanctions through IEEPA. The new law “limit[ed] the President’s power to act pursuant to [TWEA] solely to times of war,” but also permitted the President to declare and respond to national emergencies in times of peace. Id. at 227–28. The peacetime powers granted to the President under IEEPA are “essentially the same” as the wartime powers under TWEA, “but the conditions and procedures for their exercise are different.” Id. at 228 . Under IEEPA, the President may “declare[] a national emergency” in response to “any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States.” 50 U.S.C. § 1701 . Once such an emergency is declared, the President may, under such regulations as he may prescribe . . . investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States[.] Id. § 1702(a)(1)(B). These provisions of IEEPA “delegate[] broad authority to the President to act in times of national emergency with respect to property of a foreign country.” Dames & Moore v. Regan, 453 U.S. 654 , 677 (1981). In October 2006, pursuant to IEEPA, President Bush issued Executive Order No. 13,413, titled “Blocking Property of Certain Persons Contributing to the Conflict in the Democratic Republic of the Congo.” Exec. Order No. 13,413, 71 Fed. Reg. 64,105 (2006) (“E.O. 13,413”). The President “determine[d] that the situation in or in relation to the Democratic Republic of the Congo, which has been marked by widespread violence and atrocities that continue to threaten regional stability[,] . . . constitutes an unusual and extraordinary threat to the foreign policy of 3 the United States.” He therefore “declare[d] a national emergency to deal with that threat.” Id. In July 2014, President Obama amended E.O. 13,413 through Executive Order No. 13,671, titled “Taking Additional Steps to Address the National Emergency with Respect to the Conflict in the Democratic Republic of the Congo.” Exec. Order No. 13,671, 79 Fed. Reg. 39,947 (2014) (“E.O. 13,671”). The President imposed sanctions on the specific people listed in the Annex to the Order as well as on anyone else who met the specified criteria. Id. As relevant here, E.O. 13,671 amended E.O. 13,413 to cover any person whom the Secretary of the Treasury, in consultation with the Secretary of State, determines “to be responsible for or complicit in, or to have engaged in, directly or indirectly” either “actions or policies that threaten the peace, security, or stability of the Democratic Republic of the Congo” or “actions or policies that undermine democratic processes or institutions in the Democratic Republic of the Congo.” Id. § 1(a)(ii)(C)(1) & (2). The executive order also sanctioned any person determined “to be a leader of (i) an entity, including any armed group, that has, or whose members have, engaged in any of the activities described [in the foregoing subsections] or (ii) an entity whose property and interests in property are blocked pursuant to this order.” Id. § 1(a)(ii)(E). And the executive order further authorized the Secretary of the Treasury, in consultation with the Secretary of State, to “take such actions, including the promulgation of rules and regulations, and to employ all powers granted to the President by IEEPA . . . as may be necessary to carry out the purposes of this order.” Id. § 4. Pursuant to a redelegation of authority from the Secretary of the Treasury, see 31 C.F.R. § 547.802 , OFAC has promulgated regulations to implement these executive orders, see generally 31 C.F.R. pt. 547. An individual or entity designated by OFAC under E.O. 13,413, as amended by E.O. 13,671, is placed on the SDN List with the program code “[DRCONGO].” See 4 Note 1 to 31 C.F.R. § 547.201 (a). The regulations prohibit U.S. people or entities from engaging in transactions with SDNs. 31 C.F.R. § 547.201 . A blocked person may “seek administrative reconsideration” of his designation or may “assert that the circumstances resulting in the designation no longer apply.” Id. § 501.807; see also id. § 547.101 (incorporating OFAC’s generally applicable administrative reconsideration procedures into the regulations specifically applicable to the DRC). As part of the reconsideration process, the blocked person “may submit arguments or evidence that the person believes establishes that insufficient basis exists for the designation.” Id. § 501.807(a). The designated person “also may propose remedial steps on the person’s part, such as corporate reorganization, resignation of persons from positions in a blocked entity, or similar steps, which the person believes would negate the basis for designation.” Id. And the blocked person may request a meeting with OFAC to discuss his designation, although such meetings are not required. Id. § 501.807(c). OFAC reviews the submitted materials and “may request clarifying, corroborating, or other additional information.” Id. § 501.807(b). At the conclusion of its review of the request for reconsideration, OFAC “will provide a written decision to the blocked person.” Id. § 501.807(d). As the D.C. Circuit has observed, a “designated person can request delisting as many times as he likes.” Zevallos v. Obama, 793 F.3d 106 , 110 (D.C. Cir. 2015). B. Factual and Procedural Background On June 1, 2017, OFAC designated Olenga as an SDN, along with the Safari Beach, a resort that Olenga owned or controlled. 82 Fed. Reg. 26239 , 26,239–40 (June 6, 2017). The Office determined that Olenga met the criteria for designation as a “leader of an entity that has, or whose members have, engaged in actions or policies undermining democratic processes or institutions in the DRC.” Dkt. 13-1 at 14 (citing E.O. 13,671 § 1(a)(ii)(C)(2) & (E)). 5 Specifically, according to a press release that accompanied Olenga’s designation, OFAC determined that in his role as head of the “Maison Militaire,” or Military House of the President, Olenga oversaw the Republican Guard, an entity that “has actively disrupted the political process in the DRC, including harassing political rivals, targeting opposing political parties, and arbitrarily arresting and executing Congolese citizens.” Dkt. 19 at 17. OFAC asserted that, “[a]s of 2016, Olenga had taken a more active role in leadership of the Republican Guard,” including by “develop[ing] a plan to use the Republican Guard to disrupt [political] opposition activities and financial support.” Id. The press release provided several examples of the alleged Republican Guard activities. Id. In April 2016, for instance, “Republican Guard soldiers blocked a team of human rights observers and United Nations security officers from observing an opposition political meeting,” and “[s]ecurity forces fired tear gas at opposition members and supporters, preventing the meeting from taking place.” Id. Then, in September 2016, following “protests across the DRC capital city, Kinshasa, . . . heavily armed Republican Guard members allegedly attacked and set fire to the headquarters of several political parties with cans of gasoline, hand grenades, and rocket-propelled grenades.” Id. For these reasons, OFAC designated Olenga and blocked his assets. In a lengthy submission dated June 24, 2017, a lawyer in Brussels, Belgium purporting to represent Olenga requested reconsideration of Olenga’s designation. Id. at 18–40. 1 On January 10, 2018, OFAC sent Olenga’s current counsel a questionnaire seeking additional information 1 Later, after retaining his current counsel, Olenga advised OFAC in a follow-up letter dated October 4, 2017 that “Ferrari Legal P.C. . . . is the sole law firm authorized to provide legal representation on [his] behalf before the agency” and that no other “individual and/or law firm . . . [wa]s . . . authorized” to represent him before OFAC. Dkt. 19 at 41. The original submission was accompanied by a document ostensibly signed by Olenga authorizing the Belgian lawyer to act on his behalf. Id. at 38. 6 relevant to his delisting request. Id. at 42–43. The questionnaire sought, in particular, English translations of ordinances governing the structure of the DRC’s military as well as additional details about Olenga’s role within the military hierarchy and his relationship, if any, to the Republican Guard. Id. On February 13, 2018, Olenga submitted a request for the administrative record underlying his designation. Dkt. 15-2 at 13. Arguing that the “[m]ere disclosure of the unclassified administrative record . . . may not be enough to satisfy due process concerns,” Olenga requested either access to unclassified summaries of classified material in the record or an opportunity for his cleared counsel to review the full administrative record, including classified material. Id. (internal quotation marks omitted). On April 10, 2018, Olenga responded to OFAC’s questionnaire in a letter that addressed the Office’s questions, along with several pages of legal argument. Dkt. 19 at 44–67. Olenga acknowledged that, since 2014, he had served as “the Commander of the Military House of the President of the Republic.” Id. at 46. Quoting from DRC ordinances, he explained that his duties in this role included “keep[ing] the President abreast of the military and security situation of the [DRC],” “assist[ing] the President . . . in the design of the political and defense policy of the country,” and “the handling of all issues related to the defense and security of the [DRC].” Id. (quotation marks omitted). But Olenga nevertheless maintained that he “ha[d] no relationship with the Military High Command of the Republican Guard or with the Republican Guard.” Id. Olenga argued that he “was in no position to command or otherwise advise the Republican Guard as to actions to be taken vis-à-vis the DRC political opposition” and that he “played no role in his capacity as the Commander of the Military House in advising the Republican Guard regarding actions taken in response to protests in Kinshasa in September 2016 or in any other 7 matters.” Id. at 53. His submission concluded that because he “d[id] not exercise de facto ‘operational control’ or any other authority over the Republican Guard,” OFAC had an insufficient factual basis to support his designation. Id. On September 14, 2018, OFAC responded to Olenga’s submission with a follow-up questionnaire. Id. at 68–69. The Office noted that “[a]ccording to news reports, on July 14, 2018, Congolese state media announced a series of promotions and retirements within the Congolese National Armed Forces.” Id. at 68. Those reports indicated that Olenga had “retired from the military as a four-star general” and “had taken a new position as Military Mission Manager of the Head of State.” Id. OFAC asked Olenga to confirm his retirement from the military and to explain in detail his new role, including whether his new position had any authority over “any element of the DRC’s security forces.” Id. On October 24, 2018, Olenga responded and confirmed his retirement, providing documentation for his change in roles within the DRC government. Id. at 70–71. Olenga explained that in his new position as Chargé de Mission, he “serves as a diplomatic liaison between President Kabila and former revolutionaries.” Id. at 71. The new job “d[id] not entail any responsibility or authority with respect to security forces, whether military or civilian.” Id. at 72. Olenga argued that, “[g]iven the change in circumstances arising from [his] retirement,” he had met his burden for delisting under OFAC’s regulations governing administrative reconsideration. Id. at 74. As such, he contended that OFAC should rescind his designation “as soon as possible.” Id. On February 13, 2019, unsatisfied with the pace of OFAC’s consideration of his request, Olenga sent a follow-up letter reiterating his demand for immediate delisting and threatening to sue in the absence of prompt action. Dkt. 15-2 at 16. 8  On April 20, 2019, Olenga filed this lawsuit seeking to force his delisting. Dkt. 1. The allegations in that original complaint are now moot, however, because OFAC granted Olenga’s delisting request on August 15, 2019. Dkt. 19 at 105. As explained in a letter to Olenga’s counsel, OFAC “determined that information presented by [Olenga] demonstrates a change in circumstances that would warrant his removal from the SDN List based on the criteria originally used.” Id. Because Olenga was no longer a leader of the Republican Guard, he did not qualify for designation under § 1(a)(ii)(E) of E.O. 13,671, which applies to only the leaders of entities engaged in prohibited activities. Id. at 6. But Olenga’s victory was short-lived. At the same time it delisted Olenga under § 1(a)(ii)(E), OFAC re-designated him under § 1(a)(ii)(C)(2), which applies to individuals deemed “to be responsible for or complicit in, or to have engaged in, directly or indirectly . . . actions or policies that undermine democratic processes or institutions in the Democratic Republic of the Congo.” E.O. 13,671 § 1(a)(ii)(C)(2); see also Dkt. 19 at 105. OFAC updated the Federal Register notice of Olenga’s designation, stating only that it was re- designating Olenga “for being responsible for or complicit in, or having engaged in, directly or indirectly, actions or policies that undermine democratic processes or institutions in the Democratic Republic of the Congo.” 84 Fed. Reg. 43,259 , 43,260 (Aug. 20, 2020). On September 27, 2019, OFAC provided Olenga with a redacted, unclassified version of the administrative record for his re-designation. Dkt. 15-2 at 17. The record comprises an evidentiary memorandum that summarizes the Office’s case against Olenga, Dkt. 19 at 3–16, followed by forty supporting exhibits. Section III of the evidentiary memorandum provides relevant background and discusses, among other things, the agency’s prior listing decision based on its belief at that time that Olenga “was a leader of the Republican Guard, an entity that has, or 9 whose members have, engaged in actions or policies that undermine democratic processes or institutions in the DRC.” Dkt. 19 at 5. The memorandum explained: As described in OFAC’s press release, in 2014, [Olenga] was appointed to serve as the head of the Maison Militaire, or Military House of the President. The press release further stated that the Maison Militaire oversees the Republican Guard and that in this capacity [Olenga] had operational control over the Republican Guard. Since early 2016, Republican Guard members had monitored and threatened opposition members and critics of then-President Joseph Kabila. In his role as the head of the Maison Militaire, [Olenga] oversaw security operations on behalf of then-President Kabila’s efforts to suppress political opposition to the DRC. Id. Section III of the memorandum then explains, as noted above, that OFAC had granted Olenga’s request for delisting after Olenga demonstrated that he was “no longer a leader of the Republican Guard.” Id. at 6 . But, based on additional evidence, OFAC had re-designated Olenga under a separate provision. Id. Section IV of the evidentiary memorandum, then, summarizes the basis for the re- designation. Id. That section contains four subsections, each of which is heavily redacted. The first, titled “Actions Initiated by Olenga or the Maison Militaire,” is redacted in its entirety. Id. The second subsection, titled “While head of the Maison Militaire, [Olenga] controlled the actions of the Republican Guard,” includes two unredacted paragraphs. Id. at 7 . Those unredacted passages summarize OFAC’s correspondence with Olenga’s counsel and note that Olenga was Commander of the Military House of the President of the Republic from September 18, 2014 through July 14, 2018. Id. at 7–8. The memorandum also quotes a report, the source of which is redacted, for the proposition that as head of the Military House of the President, Olenga “control[led] the elite units and special battalions in the Congolese army, including the powerful yet brutal Republican Guard.” Id. at 8 (quotation marks omitted). The third subsection is titled: “The Republican Guard or its members have engaged in actions or policies that undermine 10 democratic processes or institutions in the DRC; as Head of Maison Militaire, [Olenga] is responsible for or complicit in, or has directly or indirectly engaged in, these actions or policies.” Id. at 9 . That subpart includes two unredacted paragraphs, both of which summarize articles that Human Rights Watch published in 2016. Because these paragraphs provide the most extensive unclassified allegations against Olenga, the Court reproduces them here in their entirety: According to a December 16, 2016 Human Rights Watch (HRW) article, during a deadly crackdown of security officials on opposition demonstrations in Kinshasa, from September 19 to 21, security forces killed at least 66 protestors. Some of those killed burned to death when the Republican Guard attacked opposition headquarters. Security forces took away the bodies of many victims. Some were thrown into the Congo River and later found washed up on its shores. Regarding the September 2016 protests and aftermath, HRW interviewed six Congolese security force and intelligence officers who said that members of the Republican Guard—including some Republican Guard units deployed in police uniforms—were responsible for much of the excessive force used during the demonstrations, firing on protestors with live ammunition and attacking at least three opposition party headquarters. ... According to a May 9, 2016 HRW report, on the morning of April 24, 2016, police and Republican Guard soldiers blocked a team of human rights observers and security officers from MONUSCO from entering Lubumbashi’s Kenya commune neighborhood, where a political meeting of the G7 was to take place. Police blocked several streets in the neighborhood, forcing opposition leader Katumbi to travel on foot rather than by vehicle, and subsequently fired teargas toward Katumbi and his supporters, preventing the meeting from taking place. Id. at 10–11. Finally, the fourth subsection, titled “Other post-designation reporting confirms that Olenga’s removal from the SDN list is not warranted,” is also redacted in its entirety. Id. at 11 . Another section of the memorandum, which is also redacted in substantial part, summarizes “Additional Information Considered by OFAC,” including “information that contradicts some of” the reporting described in the preceding section. Id. at 12 . Yet, despite these countervailing “reports and correspondence,” which apparently included information 11 provided by Olenga, OFAC “continue[d] to assess based on the totality of the evidence . . . that [Olenga] was responsible for and in control of the Republic Guard” and that, although he had retired, he remained “responsible for or complicit in, or to have engaged in, directly or indirectly, actions or policies that undermine democratic processes or institutions in the DRC.” Id. In addition, OFAC provided Olenga with one page of unclassified summaries of the classified materials in the record. Id. at 106 . The summaries refer to several other instances, mostly from 2016, in which the Republican Guard violently assaulted and suppressed protestors, and they provide additional detail regarding Olenga’s role. Id. According to these summaries, the Republican Guard “report[ed] to the head of the Maison Militaire, General Francois Olenga,” and “General Francois Olenga, Chef de la Maison Militaire, [gave] orders to the Republican Guard on a day to day basis.” Id. The unclassified summaries also report that in 2017, “the Office of the DRC President instructed Maison Militaire leadership to deploy a group of operatives to identify and entice DRC opposition leaders to abandon their opposition stances in an attempt to weaken the opposition movements,” including through bribery. Id. With respect to Olenga’s activities since his initial designation, OFAC posits that in 2019, after Olenga’s retirement from the military, he “supported offensive, violent action against Western diplomats in Kinshasa, DRC.” Id. On October 3, 2019, after receiving the administrative record, Olenga filed an amended complaint containing four claims. Dkt. 10. First, Olenga contends that OFAC provided insufficient notice of the reasons for his re-designation, in violation of the due process clause of the Fifth Amendment. Id. at 15 (Amd. Compl. ¶ 55). Next, Olenga alleges that OFAC’s re- designation decision violates the APA in three distinct ways: (1) OFAC denied him access to the factual basis for his re-designation, in violation of the APA’s due process requirements, Dkt. 10 12 at 16 (Amd. Compl. ¶ 60); (2) OFAC unlawfully withheld his removal from the SDN list in violation of 5 U.S.C. § 706 (1), Dkt. 10 at 17 (Amd. Compl. ¶ 64); and (3) OFAC’s decision to re-designate him was arbitrary and capricious in violation of 5 U.S.C. § 706 (2), Dkt. 10 at 18 (Amd. Compl. ¶ 67). In response, OFAC moved to dismiss or, in the alternative, for summary judgment, Dkt. 13, and Olenga, in turn, cross-moved for summary judgment, Dkt. 15. These motions are now ripe for decision. II. LEGAL STANDARD A. Motion to Dismiss A motion to dismiss under Rule 12(b)(1) challenges the Court’s jurisdiction to hear a claim and may raise a “facial” or a “factual” challenge to the Court’s jurisdiction. See Hale v. United States, No. 13-cv-1390, 2015 WL 7760161 , at *3 (D.D.C. Dec. 2, 2015). A facial challenge to the Court’s jurisdiction contests the legal sufficiency of the jurisdictional allegations contained in the complaint. See Erby v. United States, 424 F. Supp. 2d 180 , 182 (D.D.C. 2006). When ruling on a facial challenge, the Court must accept the allegations of the complaint as true and must construe “the complaint in the light most favorable to the non-moving party.” Id.; see I.T. Consultants, Inc. v. Republic of Pakistan, 351 F.3d 1184 , 1188 (D.C. Cir. 2003). In this sense, the Court must resolve the motion in a manner similar to a motion to dismiss under Rule 12(b)(6). See Price v. Socialist People’s Libyan Arab Jamahiriya, 294 F.3d 82 , 93 (D.C. Cir. 2002). Alternatively, a Rule 12(b)(1) motion may pose a “factual” challenge to the Court’s jurisdiction. Erby, 424 F. Supp. 2d at 182–83. For factual challenges, the Court “‘may not deny the motion to dismiss merely by assuming the truth of the facts alleged by the plaintiff and 13 disputed by the defendant,’ but ‘must go beyond the pleadings and resolve any disputed issues of fact the resolution of which is necessary to a ruling upon the motion to dismiss.’” Id. (quoting Phoenix Consulting Inc. v. Republic of Angola, 216 F.3d 36 , 40 (D.C. Cir. 2000)). In this context, the factual allegations of the complaint are not entitled to a presumption of validity, and the Court is required to resolve factual disputes between the parties. Id. at 183 . The Court may consider the complaint, any undisputed facts, and “‘the [C]ourt’s resolution of disputed facts.’” Id. (quoting Herbert v. Nat’l Acad. of Scis., 974 F.2d 192 , 197 (D.C. Cir. 1992)). A motion to dismiss for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6) meanwhile “tests the legal sufficiency of a complaint.” Browning v. Clinton, 292 F.3d 235 , 242 (D.C. Cir. 2002). In evaluating a Rule 12(b)(6) motion, the Court “must first ‘tak[e] note of the elements a plaintiff must plead to state [the] claim to relief,’ and then determine whether the plaintiff has pleaded those elements with adequate factual support to ‘state a claim to relief that is plausible on its face.’” Blue v. District of Columbia, 811 F.3d 14 , 20 (D.C. Cir. 2015) (quoting Ashcroft v. Iqbal, 556 U.S. 662 , 675, 678 (2009)) (alterations in original) (internal citation omitted). The complaint, however, need not include “detailed factual allegations” to withstand a Rule 12(b)(6) motion. Bell Atl. Corp. v. Twombly, 550 U.S. 544 , 555 (2007). A complaint may survive a Rule 12(b)(6) motion even if “recovery is very remote and unlikely,” so long as the facts alleged in the complaint are “enough to raise a right to relief above the speculative level.” Id. at 555–56 (internal quotation marks omitted). In assessing a Rule 12(b)(6) motion, a court may consider only “the facts contained within the four corners of the complaint,” Nat’l Postal Prof’l Nurses v. U.S. Postal Serv., 461 F. Supp. 2d 24 , 28 (D.D.C. 2006), along with “any documents attached to or incorporated into the complaint, 14 matters of which the court may take judicial notice, and matters of public record,” United States ex rel. Head v. Kane Co., 798 F. Supp. 2d 186 , 193 (D.D.C. 2011). B. Summary Judgment Summary judgment is appropriate under Rule 56 when the pleadings and the evidence demonstrate 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). “In a case involving review of a final agency action under the [APA], however, the standard set forth in Rule 56(a) does not apply because of the limited role of a court in reviewing the administrative record.” Kadi v. Geithner, 42 F. Supp. 3d 1 , 8 (D.D.C. 2012). In the unique context of a case brought under the APA, the district court “sit[s] as an appellate tribunal,” Marshall Cty. Health Care Auth. v. Shalala, 988 F.2d 1221 , 1222–23 (D.C. Cir. 1993), to decide “as a matter of law [whether] the agency action is supported by the administrative record and is otherwise consistent with the APA standard of review,” Coal. for Common Sense in Gov’t Procurement v. United States, 821 F. Supp. 2d 275 , 280 (D.D.C. 2011); see also Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 , 415 (1971); Sw. Merck Corp. v. NLRB, 53 F.3d 1334 , 1341 (D.C. Cir. 1995). In short, it is the role of the administrative agency to “resolve factual issues” and “to arrive at a decision that is supported by the administrative record,” while it is the role of the district court “to determine whether or not as a matter of law the evidence in the administrative record permitted the agency to make the decision it did.” Hi-Tech Pharmacal Co. v. U.S. Food & Drug Admin., 587 F. Supp. 2d 1 , 18 (D.D.C. 2008). 15  III. ANALYSIS A. Fifth Amendment Due Process Claim OFAC argues that Olenga lacks standing to pursue his claim under the Fifth Amendment because, as a non-resident alien who lacks significant contacts with the United States, he is not protected by the due process clause. Dkt. 13-1 at 23–25. In the alternative, OFAC argues that, even if Olenga can assert a Fifth Amendment claim, the Office’s “well-established” administrative procedures gave him all the process he was due. Id. at 25–32. Courts in this district have taken divergent approaches to addressing due process claims raised by individuals designated under IEEPA and similar statutes. Under Supreme Court and D.C. Circuit precedent, “non-resident aliens who have insufficient contacts with the United States are not entitled to Fifth Amendment protections.” Jifry v. FAA, 370 F.3d 1174 , 1182 (D.C. Cir. 2004) (citing Johnson v. Eisentrager, 339 U.S. 763 , 771 (1950)). But in Jifry, the D.C. Circuit declined to decide whether the plaintiffs were “entitled to constitutional protections because, even assuming that they [were], they ha[d] received all the process that they [were] due under [circuit] precedent.” 370 F.3d at 1183 . Following Jifry’s lead, this Court has often declined to decide whether foreign plaintiffs can assert rights under the due process clause where, even assuming they could, the agency had provided the requisite process. See, e.g., Fares v. Smith, 249 F. Supp. 3d 115 , 122 (D.D.C. 2017), aff’d, 901 F.3d 315 (D.C. Cir. 2018) (“[T]he Court determines that Plaintiffs have received notice and an opportunity to be heard in a manner that comports with due process, and therefore does not reach the antecedent question of whether Plaintiffs are entitled to the protections of the Due Process Clause.”); Joumaa v. Mnuchin, No. 17-cv-2780, 2019 WL 1559453 , at *10 n.13 (D.D.C. Apr. 10, 2019), aff’d, 798 F. App’x 667 (D.C. Cir. 2020); Kadi, 42 F. Supp. 3d at 28. Two recent decisions of this Court, however, have 16 taken the opposite approach, concluding that foreign plaintiffs with no documented ties to the United States lacked entitlement to the Constitution’s procedural protections. See Rakhimov, 2020 WL 1911561 , at *5; Fulmen Co. v. OFAC, No. 18-cv-2949, 2020 WL 1536341 , at *5 (D.D.C. Mar. 31, 2020). OFAC argues that the Court is required to take the latter approach. It moves to dismiss Olenga’s claims on the theory that his lack of entitlement to constitutional protection undermines his standing to sue. Dkt. 13-1 at 25. Because standing is jurisdictional, OFAC contends that the Court must resolve this argument before turning to the merits. Id. at n.7 ; see also Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 , 94 (1998). The problem for OFAC, however, is that in Jifry the D.C. Circuit held that a court need not address whether plaintiffs are “entitled to constitutional protections” where, “even assuming that they are, they have received all the process that they are due under [circuit] precedent.” 370 F.3d at 1183 . In taking that approach, the court was undoubtedly aware of the oft-stated rule that a court cannot assume jurisdiction to decide the merits of a case. The strong implication of Jifry, then, is that the matter of whether a foreign plaintiff may claim protection under the due process clause is not jurisdictional, but rather a merits issue. See Joumaa, 2019 WL 1559453 , at *10 n.13 (concluding that “the question of whether a foreign plaintiff may bring a Fifth Amendment due process claim is not a jurisdictional question” because “if it were, the Circuit’s approach in Jifry would be inconsistent with the Supreme Court’s admonition that a court may not assume jurisdiction for purposes of resolving the merits of a claim”). In any event, returning to first principles, the Court is satisfied that Olenga has standing to sue. To demonstrate standing under Article III, a plaintiff must establish three elements: an injury-in-fact that is “concrete and particularized” and “actual or imminent;” “a causal 17 connection between the injury” and “the challenged action of the defendant;” and a likelihood “that the injury will be redressed by a favorable decision.” Lujan v. Defs. of Wildlife, 504 U.S. 555 , 560–61 (1992). Although OFAC frames its motion to dismiss as an attack on Olenga’s standing, the Office’s briefing does not address—or even mention—any of those elements. Considering each element, the Court is convinced that Olenga has standing. For the purposes of assessing Olenga’s standing, the Court must assume that he will succeed on the merits of his due process claim. See U.S. House of Reps. v. Mnuchin, 976 F.3d 1 , 4 (D.C. Cir. 2020). That means assuming both that Olenga has sufficient contacts with the United States to entitle him to due process rights and that the notice OFAC provided was deficient. And, with those assumptions in mind, the Court is left with little doubt that the blocking of Olenga’s assets using allegedly faulty process constitutes an injury-in-fact, caused by OFAC’s re-designation decision, which would be redressable by an order requiring more complete notice. The question of whether Olenga has rights to assert under the due process clause is thus not jurisdictional. That leaves two questions—whether Olenga is entitled to constitutional due process protections and whether the process he received was adequate—but does not resolve which question the Court should take up first. Either path requires addressing an important constitutional question. Cf. Al Hela v. Trump, 972 F.3d 120 , 144 (D.C. Cir. 2020) (“Even if we were to assume without deciding that ‘procedural’ due process . . . applied extraterritorially, the procedural standards are not clearly settled in this specific context.”). But here, the Court will follow the D.C. Circuit’s example in Jifry by assessing whether Olenga received all the process due under the Fifth Amendment, while assuming that the due process clause applies. 370 F.3d at 1183 . That approach is more straightforward because, in the context of designations under 18 IEEPA and related statutes, the standards for determining whether an agency has afforded due process are far more developed than those for assessing whether constitutional protections apply. As noted above, “non-resident aliens who have insufficient contacts with the United States are not entitled to Fifth Amendment protections.” Jifry, 370 F.3d at 1182 ; see also People’s Mojahedin Org. of Iran v. U.S. Dep’t of State, 182 F.3d 17 , 22 (D.C. Cir. 1999) (“People’s Mojahedin I”) (“A foreign entity without property or presence in this country has no constitutional rights, under the due process clause or otherwise.”). But the D.C. Circuit “has not articulated a specific test for determining whether a foreign national residing outside the United States maintains the requisite ‘substantial connections,’” Rakhimov, 2020 WL 1911561 , at *5 (quoting Jifry, 370 F.3d at 1182 ), and, instead, has engaged in fact-dependent, case-by-case assessment, compare Nat’l Council of Resistance of Iran v. Dep’t of State, 251 F.3d 192 , 201 (D.C. Cir. 2001) (holding that two Iranian groups had sufficient contacts because of a physical presence in the National Press Building and an interest in a small bank account), with 32 County Sovereignty Comm. v. Dep’t of State, 292 F.3d 797 , 799 (finding insufficient contacts where a group’s members had post office boxes and a bank account in the United States). “Nor has the D.C. Circuit addressed whether such rights turn on the presence of property in the United States, or whether [a plaintiff] can raise certain constitutional claims, but not others.” Kadi, 42 F. Supp. 3d at 25. The exact standard that the Court would apply in deciding whether Olenga may assert due process claims is thus unsettled. The extent of Olenga’s contacts with the United States, moreover, is unclear from the record. The complaint alleges only that “all of Olenga’s property and interests in property within U.S. jurisdiction were blocked,” Dkt. 10 at 5–6 (Amd. Compl. ¶ 15), without any explanation of what, if anything, his property and interests in property might be. OFAC argues that “this 19 allegation does not indicate that Olenga in fact has property within the United States” and “is merely a description of the legal consequence of his re-designation.” Dkt. 13-1 at 24. Olenga responds by reiterating that “Olenga is a foreign national currently resident in the DRC and that his property and interests in property within U.S. jurisdiction were blocked as a result of [OFAC’s] actions,” while denying OFAC’s contention that he had acknowledged a lack of physical presence in the United States. Dkt. 15-2 at 32. Olenga’s failure to plead in greater detail his connections to the United States could on its own provide grounds for ruling in OFAC’s favor. But given the lack of clarity surrounding both the law and facts necessary to decide whether Olenga is entitled to constitutional protections, the sounder course is to first address whether OFAC provided sufficient process, even assuming he is so entitled. Turning to that question, Olenga contends that the process by which OFAC granted his request for reconsideration but nevertheless re-designated him is unintelligible; the Office has “precluded Olenga from understanding the reasons for his re-designation and from meaningfully contesting that re-designation.” Dkt. 15-2 at 30. Olenga contends that he received insufficient notice of the reasons for his re-designation because of the substantial redactions in the unclassified administrative record. Id. at 24. Focusing on Section IV of the evidentiary memorandum, which provides the “Basis for Determination,” Olenga emphasizes that most of the paragraphs were redacted, including two subsections in their entirety. Id. at 24–26 (quotation marks omitted). Under the first subsection of Section IV, which covers “Actions Initiated by Olenga or the Maison Militaire,” OFAC completely redacted all four supporting paragraphs. Id. at 24 (quotation marks omitted). Those redactions alone, Olenga contends, demonstrate that he “clearly lacks notice as to OFAC’s findings regarding actions purportedly undertaken by him or the Maison Militaire that undermine the DRC’s democratic processes or institutions.” Id. at 25. 20 As Olenga points out, OFAC also redacted six of the eight paragraphs in the second subsection, eight of ten paragraphs in the third subsection, and the fourth subsection in its entirety. Olenga argues that, taken together, “[t]he disclosed record provides no actual notice as to the reasons for his designation and thus no meaningful opportunity for him to rebut the findings made by the agency in support of its determination.” Id. at 26. Olenga also takes issue with OFAC’s unclassified summaries, “most of which are single- sentenced and broadly repetitive of each other” and which “relate information of unclear relevance to the basis for Olenga’s re-designation.” Id. Olenga faults OFAC for listing these summaries in random order without cross-referencing them with Section IV of the evidentiary memorandum or with the relevant exhibit numbers, such that it is impossible to tell whether or how these allegations form the basis for Olenga’s re-designation. Id. at 27 (“[A]bsent notice of the uses to which OFAC is marshalling its allegations, Olenga is placed at a particular disadvantage in challenging them . . . .”); see also id. at 27–28 (“[Olenga] must know not just the findings themselves but also the ways in which OFAC reasons from its findings to support its conclusions,” because “OFAC’s reasoning is as susceptible to legal challenge [under the APA] as are its findings themselves.”). Likewise, Olenga asserts that he is left to guess whether the unclassified summaries represent all of the findings underlying his designation or only a portion of them, with certain classified allegations possibly remaining entirely undisclosed. Id. at 28. In considering “whether OFAC’s designation of a plaintiff provides constitutionally adequate notice,” thereby “enabling him meaningfully to avail himself of his opportunity to be heard,” the Court must “weigh three factors under the familiar Mathews v. Eldridge balancing test.” Fares v. Smith, 901 F.3d 315 , 323 (D.C. Cir. 2018) (citing Mathews v. Eldridge, 424 U.S. 319 , 335 (1976)). The Court must consider (1) “the private interest that will be affected by the 21 official 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’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 . This is a flexible standard, and “[t]he due process clause requires only that process which is due under the circumstances of the case.” People’s Mojahedin Org. of Iran v. Dep’t of State, 327 F.3d 1238 , 1242 (D.C. Cir. 2003) (“People’s Mojahedin II”). “‘[T]he fundamental requirement of due process,’” however, “is ‘the opportunity to be heard at a meaningful time and in a meaningful manner.’” Id. at 1241 (quoting Mathews, 424 U.S. at 333 ). The D.C. Circuit considered and squarely rejected a due process argument much like Olenga’s in Holy Land Foundation for Relief and Development v. Ashcroft, 333 F.3d 156 , 163– 64 (D.C. Cir. 2003). In that case, like in this one, OFAC designated the plaintiff organization under IEEPA, based on a presidentially declared national emergency, then re-designated the plaintiff once the litigation had begun, after requesting additional information from the plaintiff. Id. There, as here, the plaintiff argued that, by relying in part on undisclosed classified information, OFAC had provided constitutionally deficient notice of the reasons for the designation. The D.C. Circuit was unpersuaded. As the court noted, IEEPA specifically provides that if a designation is “based on classified information” then “such information may be submitted to the reviewing court ex parte and in camera.” 50 U.S.C. § 1702 (c). And the court explained without qualification that notice to the designated party “need not disclose the classified information to be presented in camera and ex parte to the court under the statute.” Holy Land, 333 F.3d at 164 . Rather, “due process require[s] the disclosure of only the unclassified portions of the administrative record.” Id. (quotation marks omitted). The D.C. 22 Circuit emphasized “the primacy of the Executive in controlling and exercising responsibility over access to classified information, and the Executive’s compelling interest in withholding national security information from unauthorized persons in the course of executive business.” Id. (internal quotation marks and citations omitted). Applying these principles, the Holy Land court concluded that the plaintiff’s designation “based upon classified information to which it has not had access” comported with due process. Id. Holy Land is binding precedent, and its implications for Olenga’s due process argument are unambiguous. OFAC has disclosed the unclassified portions of the administrative record and unclassified summaries of the classified information, while submitting the classified portions for the Court’s ex parte and in camera review. 2 The public record materials provided Olenga with sufficient notice of OFAC’s reasons for re-designating him to allow for a meaningful opportunity to be heard. Under Holy Land, that is all—and, indeed, more than—IEEPA and the Constitution require. Olenga contends that a more recent decision from the D.C. Circuit takes a more generous view of the notice required when OFAC makes a designation based in part on classified information. See Fares, 901 F.3d at 323–24. In Fares, the court considered OFAC’s designation of two Panamanian men and their business under the Foreign Narcotics Kingpin Designation Act. Id. at 317. Applying the Mathews three-part framework, the D.C. Circuit stressed that “the effect of an OFAC designation on the designee’s private interests is dire” and that, “[w]hen the government freezes assets based on redacted evidence—thereby limiting the designee’s 2 It is unclear, at least from the public record, whether all the portions of the administrative record that OFAC has redacted are in fact classified, or whether some of the redacted material is “law-enforcement sensitive” but not classified. Because neither party seeks to draw any legal distinction between classified and law-enforcement sensitive information, the Court will treat all the redacted material as though it were classified. See Fares, 901 F.3d at 324–25. 23 opportunity to probe or cross-examine on that evidence—the risk of erroneous deprivation is especially high.” Id. at 323–24 (internal quotation marks omitted). But the Fares decision also recognized that the third Mathews factor—“the governmental interest at stake”—is dispositive “in the extraordinary circumstance[] where the government’s withholding is justified by ‘the privilege and prerogative of the executive’ in protecting vital national security interests.” Id. at 324 (quoting Nat’l Council of Resistance of Iran v. Dep’t of State, 251 F.3d 192 , 208 (D.C. Cir. 2001) (“NCORI”)). As the Fares court further explained: Forcing the executive branch to disclose information that it has validly classified would “compel a breach of the security which that branch is charged to protect.” NCORI, 251 F.3d at 208–09; see Holy Land, 333 F.3d at 164 ; People’s Mojahedin II, 327 F.3d at 1242 ; see also Jifry[, 370 F.3d at 1183 ]. We have “already decided . . . that due process required the disclosure of only the unclassified portions of the administrative record.” People’s Mojahedin II, 327 F.3d at 1242 . As the Ninth Circuit explained, “[g]iven the extreme importance of maintaining national security, we cannot accept [plaintiff]’s sweeping argument—that OFAC is not entitled to use classified information in making its designation determination.” Al Haramain [Islamic Found., Inc. v. Dep’t of Treasury, 686 F.3d 965 , 980–81 (9th Cir. 2012)] (collecting cases). As a consequence, in certain limited circumstances, in lieu of classified evidence the government may provide designees with sufficiently specific “unclassified summaries . . . ensuring that neither the [government]’s sources nor national security were compromised, . . . [that] provided [plaintiffs] with the ‘who,’ ‘what,’ ‘when’ and ‘where’ of the allegations.” Kiareldeen v. Ashcroft, 273 F.3d 542 , 548 (3d Cir. 2001); see Al Haramain, 686 F.3d at 982–83. Id. In short, where an OFAC determination is supported by classified information, the D.C. Circuit has “authorized” use of an alternative process of judicial review that provides the designee with notice and an opportunity to be heard but permits OFAC to submit the classified material to the court ex parte and in camera. Id. Here, Olenga does not challenge OFAC’s treatment of the withheld information as classified—and the Court’s review of the ex parte submission confirms that Olenga would have no basis to do so. As for notice, the unclassified portions of the administrative record and the 24 unclassified summaries of classified materials provide the who, what, when, and where of the allegations, as contemplated by Fares. Olenga is correct that the unclassified summaries are listed in seemingly random order, but they are relatively detailed, providing dates and locations for many of the allegations. Dkt. 19 at 106. And contrary to Olenga’s assertions, the connections between the summaries and the allegations in the evidentiary memorandum are readily apparent, even without access to the classified material. In addition to those summaries and the unredacted portions of the administrative record, moreover, OFAC also sent Olenga two sets of questions about his role within the DRC military, which gave him additional notice of what information OFAC considered important in reconsidering Olenga’s initial designation. Id. at 42–43, 68–69. Olenga is, of course, “at somewhat of a disadvantage in being unable to review the whole administrative record, in particular the classified record.” Kadi, 42 F. Supp. 3d at 23. But given the overriding governmental interest at stake in protecting classified information and the wide berth afforded the executive branch in matters relating to foreign affairs and national security, the Court concludes that OFAC has provided Olenga with sufficient notice of the reasons for his designation to comply with the due process clause of the Fifth Amendment. The Court will therefore grant summary judgment in favor of OFAC on Count I. B. APA Claims Olenga brings three claims under the APA. The Court considers each in turn. Only the third presents a substantial question. 1. APA Due Process Claim Olenga first alleges that “[b]ecause [he] has been denied access to the factual basis for his designation, [OFAC has] failed to provide him with adequate notice and ha[s] thus violated his 25 due process rights under the APA.” Dkt. 10 at 16 (Amd. Compl. ¶ 60). The exact nature of this claim is not entirely clear. The APA directs a reviewing court to “hold unlawful and set aside agency actions” that it finds to be “contrary to constitutional right, power, privilege, or immunity.” 5 U.S.C. § 706 (2)(C). But the Court has already rejected Plaintiff’s constitutional due process claim and filtering that same argument through the APA does nothing to save it. In his motion for summary judgment, Olenga frames this claim in two other ways. First, he argues that his re-designation was arbitrary and capricious because OFAC failed entirely to set forth its reasons for that decision. Dkt. 15-2 at 34–35. Insofar as this argument substantively challenges OFAC’s decision as unreasonable, it is a facsimile of Olenga’s final claim, which the Court considers below. If, instead, Olenga intends to argue that the re-designation is procedurally invalid because it was not based on any administrative record whatsoever, see Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 , 420 (1971), that argument is a nonstarter. The administrative record is heavily redacted, but it exists and sets forth the agency’s reasoning for Olenga’s re-designation. Olenga cannot force OFAC to reveal classified information under the APA any more than he can under the Constitution. Alternately, Olenga contends that OFAC violated the APA’s requirement that an agency’s denial of a party’s application or petition be accompanied by a “a brief statement of the grounds for denial.” 5 U.S.C. § 555 (e). As an initial matter, it is not clear that this provision, which governs agency denials, is applicable here, where the agency granted Olenga’s request for reconsideration, while at the same time re-designating him under a separate provision of E.O. 13,413, as amended. See Rakhimov, 2020 WL 1911561 , at *7. But, even if § 555(e) applies, “[t]his notice requirement is not onerous.” Sulemane v. Mnuchin, No. 16-cv-1822, 2019 WL 77428 , at *7 (D.D.C. Jan. 2, 2019); see also Roelofs v. Sec’y of the Air Force, 628 F.2d 594 , 601 26 (D.C. Cir. 1980) (“[I]t probably does not add to, and may even diminish, the burden put on an agency by the APA’s provision for judicial review.”). “At its core, this requirement simply forces the agency to explain why it chose to do what it did.” Ark Initiative v. Tidwell, 895 F. Supp. 2d 230 , 242 (D.D.C. 2012) (internal quotation marks and citation omitted). Here, as in Sulemane, “OFAC provided . . . much more than the ‘brief statement’ of its grounds that the statute requires.” Sulemane, 2019 WL 77428 , at *7. The unredacted portions of the evidentiary memorandum and the unclassified summaries of the classified portions of the record together provide sufficient information to clear the low bar of 5 U.S.C. § 555 (e). The Court will therefore grant summary judgment to OFAC on Count II. 2. Agency Action Unlawfully Withheld Olenga next maintains that OFAC has “unlawfully withheld the rescission of [his] designation and the removal of [his] name from the SDN List” in violation of 5 U.S.C. § 706 (1). Dkt. 10 at 17 (Amd. Compl. ¶ 64). This argument misapprehends the nature of that provision of the APA. Under 5 U.S.C. § 706 (1), a Court must “compel agency action unlawfully withheld or unreasonably delayed.” As the Supreme Court has explained, this provision applies only when “an agency failed to take a discrete agency action that it is required to take.” Norton v. S. Utah Wilderness All., 542 U.S. 55 , 64 (2004). The agency must have “a ministerial or non- discretionary duty amounting to a specific, unequivocal command.” Anglers Conservation Network v. Pritzker, 809 F.3d 664 , 670 (D.C. Cir. 2016) (internal quotation marks and citation omitted). Here, OFAC acted on Olenga’s request for reconsideration. Olenga just disagrees with the Office’s decision. A plaintiff who does not like an agency’s action cannot use § 706(1) to compel the agency to take the opposite action. Because the agency has adjudicated Olenga’s request, his claim under § 706(1) is, at best, moot. 27  The Court will therefore grant OFAC’s motion to dismiss with respect to Count III. 3. Arbitrary and Capricious Agency Action Finally, Olenga alleges that OFAC’s decision to re-designate him is arbitrary and capricious in violation of 5 U.S.C. § 706 (2)(C). Dkt. 10 at 17–18 (Amd. Compl. ¶ 65–67). The APA requires “reasoned decisionmaking.” Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 , 52 (1983). The Court must, accordingly, assess whether the agency considered “the relevant factors and whether there has been a clear error of judgment.” Id. at 43 (quotation marks omitted); see also Judulang v. Holder, 565 U.S. 42 , 53 (2011). “The scope of review under the ‘arbitrary and capricious’ standard,” however, “is narrow,” and the Court must not “substitute its judgment for that of the agency.” State Farm, 463 U.S. at 43 . Rather, the Court must “presume[] the validity of agency action.” AT&T Corp. v. FCC, 349 F.3d 692 , 698 (D.C. Cir. 2003). All that the APA requires is that “the process by which [an agency] reaches [its] result [is] logical and rational.” Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359 , 374 (1998). An agency’s decision, moreover, need not be “a model of analytic precision to survive a challenge,” and “[a] reviewing court will ‘uphold a decision of less than ideal clarity if the agency’s path may reasonably be discerned.’” Dickson v. Sec’y of Def., 68 F.3d 1396 , 1404 (D.C. Cir. 1995) (quoting Bowman Transp., Inc. v. Arkansas–Best Motor Freight Sys., 419 U.S. 281 , 286 (1974)). The Court must uphold OFAC’s action so long as it “considered the relevant factors and articulated a rational connection between the facts found and the choice made.” Nat’l Ass’n of Clean Air Agencies v. EPA, 489 F.3d 1221 , 1228 (D.C. Cir. 2007) (quotation marks and citation omitted). The Court’s review is even more deferential where matters of foreign policy and national security are concerned. The D.C. Circuit has shown “extreme” deference to blocking orders, 28 which fall “at the intersection of national security, foreign policy, and administrative law.” Islamic Am. Relief Agency v. Gonzales, 477 F.3d 728 , 734 (D.C. Cir. 2007); see also Zarmach Oil Servs. v. U.S. Dep’t of the Treasury, 750 F. Supp. 2d 150 , 155 (D.D.C. 2010) (“[C]ourts owe a substantial measure of deference to the political branches in matters of foreign policy, including cases involving blocking orders.” (internal quotation marks and citation omitted)). Applying this highly deferential standard, the Court is satisfied that OFAC’s decision to re-designate Olenga was neither arbitrary nor capricious. Even based on the unclassified administrative record alone, OFAC considered substantial information suggesting that “Olenga is responsible for or complicit in, or has engaged in, directly or indirectly, actions or policies that undermine democratic processes or institutions in the DRC.” Dkt. 19 at 6. According to the unclassified summaries of the classified portions of the administrative record, Olenga acted both before and after his initial designation to undermine democracy in the DRC. In 2016, for instance, Olenga allegedly “plan[ned]” to deploy “teams that could travel throughout the DRC to prevent opposition protests, especially those organized by the G7.” Id. at 106. Those “teams would infiltrate demonstrations to identify protest leaders, report opposition plans to Republican Guard leadership, and attempt to prevent the opposition leaders from gathering support.” Id. And in 2019, after Olenga’s initial designation, he allegedly “supported offensive, violent action against Western diplomats in Kinshasa, DRC.” Id. OFAC further concluded that, before his retirement, “Olenga gave orders to the Republican Guard on a day to day basis” and that “the Republican Guard regularly arrested protestors and assaulted them while in Republic Guard custody;” “used a variety of weapons to beat protestors;” “fired into crowds of protestors in Lubumbashi, killing two civilians;” and, while dressed in uniforms of the Congolese National Police, “used live ammunition in combating protestors.” Id. 29  To be sure, OFAC’s failure to identify the sources of this information makes it more difficult for Olenga to respond. But, under settled law, OFAC is entitled to withhold classified information, the disclosure of which could threaten national security or foreign relations, and, in any event, some of the most troubling allegations against Olenga come in two publicly available reports from Human Rights Watch, of which Olenga has had full notice. Id. at 10–11. One of those reports details a “deadly crackdown” in which “security forces killed at least 66 protestors,” some of whom “burned to death when the Republican Guard attacked opposition headquarters.” Id. at 10. The Court concludes that OFAC acted rationally in re-designating Olenga. Olenga nonetheless argues that OFAC’s reasoning was flawed in three ways. First, he contends that because he has retired as head of the Maison Militaire, he is “not engaged in any ongoing conduct that supports his re-designation.” Dkt. 15-2 at 39–40. According to Olenga, the text of E.O. 13,413, as amended, does not permit OFAC to designate someone for past conduct (or at least not for the type of past conduct alleged in this case). Id. at 42–43. And, even if it did, Olenga suggests that his re-designation for past conduct is inconsistent with OFAC’s policies and regulations. Id. at 41–42. The Court is unpersuaded. As an initial matter, Olenga is factually incorrect. As the unclassified summaries disclose, OFAC’s decision to re-designate him was based, in part, on his support, in 2019, for “offensive, violent action against Western diplomats.” Dkt. 19 at 106. That recent conduct is at odds with Olenga’s argument that his re-designation was based on only past acts. But even on their own terms, his arguments fail. The provision of E.O. 13,671 under which he was designated applies to individuals deemed “to be responsible for or complicit in, or to have engaged in, directly or indirectly . . . actions or policies that undermine democratic processes or 30 institutions in the Democratic Republic of the Congo.” E.O. 13,671 § 1(a)(ii)(C)(2) (emphasis added). Olenga argues that this language allows OFAC only “to designate persons who are engaged in ongoing conduct or have recently been engaged in ongoing conduct that undermines democratic processes or institutions in the DRC.” 3 Dkt. 15-2 at 42. The Court detects no such limitation in the text. Someone can be found “to have engaged in, directly or indirectly” an action they took in the past. As a fallback textual argument, Olenga also posits that only the phrase “engaged in” is in past tense, while “to be responsible for or complicit in” are in present tense, such that someone can be designated for past conduct only where he “engaged” in that conduct himself. Dkt. 15-2 at 42–43. Here, because OFAC contends that he was, at worst, responsible for the Republican Guard but did not himself engage in their activities, Olenga reasons, he does not fit the criteria. Id. at 43. The problem with this argument is that the Executive Order refers to activities that the blocked individual “engaged in . . . directly or indirectly.” E.O. 13,671 § 1(a)(ii)(C)(2) (emphasis added). And if Olenga was responsible for or complicit in the Republican Guard’s actions, he at least engaged in those same actions indirectly. Nothing in the text of the Executive Order prevented OFAC from re-designating Olenga based on his past conduct. Nor do OFAC’s policies or regulations stand in the way of Olenga’s re-designation. With respect to policy, as OFAC acknowledges, ‘“[t]he ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior.”’ Dkt. 16 at 30 (quoting OFAC Resource Center, Filing a Petition for Removal from an OFAC List (last updated May 2, 2017), 3 As a threshold matter, the Court is uncertain whether OFAC’s actions are reviewable under the APA for compliance with the text of E.O. 13,413, as amended by E.O. 13,671. But OFAC and Olenga seem to agree that the Executive Orders are binding on the Office and that the Court may police OFAC’s compliance with those orders. Based on that concession, the Court will consider whether OFAC has followed the President’s directives. 31 https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/petitions.aspx). Olenga’s alleged conduct in 2019, however, undermines any representations he might make of a positive change in behavior. But, even putting that basis for OFAC’s action aside, the President has broad authority under IEEPA and could reasonably conclude that the deterrence of international bad actors, at least at times, requires the imposition of sanctions on those who have retired or moved on to other pursuits. Such a determination is precisely the type of judgment that is properly left to the President and his advisors and falls outside the judicial ken. And, if Olenga has truly made a positive change in his behavior that merits relief, he can submit evidence of his good deeds to OFAC in another request for reconsideration. As for OFAC’s regulations, they permit motions for reconsideration “assert[ing] that the circumstances resulting in the designation no longer apply,” which would seem to contemplate that a change in circumstances is grounds for the withdrawal of a designation. 31 C.F.R. § 501.807 . OFAC complied with its procedures by recognizing the change in Olenga’s circumstances and granting his request for reconsideration on that basis. But the Office also found it appropriate to re-designate him under a different authority, and nothing in the regulations prevented it from doing so. Second, Olenga argues that his re-designation was a “sham” designed “solely for the purpose of evading judicial review” because the re-designation rested “on virtually the same exact factual basis upon which [OFAC] based its initial designation of Olenga.” Dkt. 15-2 at 8, 43–44. This argument is mistaken for several reasons. Again, as an initial matter, it is factually inaccurate, in part, because the re-designation was based not only on historical conduct but also on Olenga’s alleged actions in 2019. Dkt. 19 at 106. Moreover, the D.C. Circuit explicitly affirmed OFAC’s ability to re-designate someone based in part on the same evidence that supported the initial designation in Holy Land, 333 F.3d at 162 . There is nothing illogical or 32 improper about OFAC re-designating Olenga under a different provision of the executive order, as amended, now that the provision under which he was initially designated no longer applies. Third, and finally, Olenga contends that OFAC failed to consider adequately the exculpatory evidence that he presented during the administrative process, particularly concerning his lack of control or authority over the Republican Guard. Dkt. 15-2 at 47–48. As explained in the evidentiary memorandum, OFAC considered “information that contradicts . . . reporting and related assessments regarding Olenga’s roles and responsibilities over the Republican Guard while head of the Maison Militaire.” Dkt. 19 at 12. But despite that exculpatory information, “OFAC continue[d] to assess based on the totality of the evidence . . . that Olenga was responsible for and in control of the Republican Guard.” Id. In its unclassified summaries of classified materials, OFAC refers to two reports indicating that Olenga gave orders to the Republican Guard on a day-to-day basis. Id. at 106. OFAC also summarizes an analysis concluding that, “[a]lthough the [Republican Guard] is technically a unit of the [DRC military], by law it is under operational control of the Presidency,” which “essentially means that it reports to the head of the Maison Militaire, General François Olenga.” Id. Because OFAC does not— and could not—reveal the sources of its information on the public record, its rationale for deciding that the incriminating evidence outweighs the exculpatory evidence is opaque. But the record makes clear that the Office considered the competing facts, and the Court must defer to OFAC’s resolution of which pieces of evidence were most credible and convincing. See Zevallos, 793 F.3d at 114 (“[W]e agree that much of this evidence could be viewed in a light more beneficial to [the plaintiff]. However, when we evaluate agency action, we do not ask whether record evidence could support the petitioner’s view of the issue, but whether it supports the [agency’s] ultimate decision.” (internal quotation marks and citation omitted)). 33  Beyond the reasons given above, the Court concludes that the classified administrative record, which OFAC lodged with the Court for ex parte and in camera review, supports OFAC’s determination. See 50 U.S.C. § 1702 (c). The Court will therefore grant summary judgment to OFAC on Olenga’s claim in Count IV of his amended complaint. CONCLUSION Accordingly, the Court will DENY Olenga’s motion for summary judgment and will GRANT OFAC’s motion to dismiss Count III and for summary judgment as to Counts I, II, and IV. A separate order consistent with this Memorandum Opinion will issue. /s/ Randolph D. Moss RANDOLPH D. MOSS United States District Judge Date: November 30, 2020 34

2020-11-20 19:11:07.163751+00

FRANK C. GIBB and LORRAINE E. GIBB, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent. Gibb v. Commissioner Docket Nos. 5569-70 "SC" 8545-71. United States Tax Court T.C. Memo 1973-161; 1973 Tax Ct. Memo LEXIS 124; 32 T.C.M. (CCH) 784; T.C.M. (RIA) 73161; July 24, 1973, Filed J. C. Cizmadia V, for the petitioners. Jesse T. Mountjoy, for the respondent. TANNENWALD MEMORANDUM FINDINGS OF FACT AND OPINION TANNENWALD, Judge: In these consolidated cases, respondent determined the following deficiencies in petitioners' income tax: 2 Docket No.YearDeficiency 5569-70 "SC"1967$ 921.69 8545-7119681,022.22 1969277.20 The sole question presented is whether payments of United States Public Health Service funds by Ohio State University to Lorraine E. Gibb (hereinafter referred to as "petitioner") as a postdoctoral research associate in the years in question are excludable from income under section 117(a). 1 *125 FINDINGS OF FACT Some of the facts are stipulated and are so found. Petitioners are husband and wife and resided in Columbus, Ohio, at the time their petitions herein were filed. Joint Federal income tax returns were filed with the district director of internal revenue, Cincinnati, Ohio. Frank C. Gibb is a party herein solely because he filed joint returns with petitioner for 1967, 1968, and 1969. 3 In March 1966, petitioner received her Ph.D. degree in physiological chemistry from Ohio State University. Her Ph.D. matriculation consisted of four years of research and laboratory work, investigating primarily the effects of various substances on energy generation in rats, for which she received an average stipend of $234 a month for eleven months out of each year. Her Ph.D. thesis was entitled "The Effect of Deficiencies of Essential Fatty Acids in Rats." The Ohio State University Research Foundation (Research Foundation) is a non-profit educational institution, independent of Ohio State University, but with the express purpose of aiding in the development and administration of research activities and projects undertaken on behalf of the University in the pursuit of*126 that institution's academic objectives. It operates as part of the administrative structure of the University and serves as a conduit through which research contracts and grant funds are administered for the benefit of professors and others engaged in research. The Institute for Research in Vision was established at the Ohio State University in 1948 4 and is an interdepartmental unit of the University devoted to research in various phases of the process of seeing. The Institute conducts basic research of the anatomy, biochemistry, physiology, and psychophysics of vision which provides understanding for methods of diagnosis and treatment of blinding eye diseases. The administrative and fiscal aspects of the Institute are handled by and through the Research Foundation. During the years in question, the Institute was engaged in Project 1575 (Chemical Studies of the Stimulated Retina) pursuant to research contracts between the United States Public Health Service and the Research Foundation. The application of the Research Foundation for the research grant covered by Project 1575 for the period January 1 to December 31, 1967 2 was dated May 25, 1966 and listed petitioner*127 as a "Research Associate," indicating that petitioner as a "Research Associate," indicating that petitioner would devote 100 percent of her time to the project and specifying that she would receive a "salary" of $9,600 and "fringe benefits" of $643. The application was approved, and on January 11, 1967, a "Notice of Grant Awarded" was issued "under Authority of Federal 5 Statutes and Regulations, and Public Health Service Policy Statements applicable to Research Grant." In December 1967, an application was filed for renewal of the grant for Project 1575 for the three-year period 1968 through 1971. Petitioner was again listed as a "Research Associate" in the application on the same basis as previously. The application was approved for 1968 and again for 1969 3 and a similar "Notice of Grant Awarded" was issued for each year. *128 The Research Foundation was required to furnish progress reports to the United States Public Health Service and also to make the results of the research available to the scientific public. Under sponsored research contracts, the Research Foundation has no authority to administer or distribute research grant proceeds without services being performed in return or work being done. 6 Payments of research funds are made to the Research Foundation by the sponsoring Federal agencies. The research funds are then categorized according to the type of expenditures involved in the research project. That part of the research grant representing wages and salaries is transferred by the Research Foundation to its rotary account maintained by the University payroll office. All other funds from a research grant are maintained in the Research Foundation's own bank account. In the records of the Research Foundation, the payments made to research associates are not referred to as fellowships but rather as salary and wages. All persons associated with sponsored research projects administered by the Research Foundation are University employees for the purpose of administration, and not*129 Research Foundation employees. Ohio State University uses two types of appointments for persons receiving money for work performed. Regular appointments are given to most persons engaged in any classification, academic 7 or non-academic in nature, including those paid from grants administered by the Research Foundation, when such appointments are essentially permanent in nature. The regular appointments of personnel paid from grants are co-extensive with the duration of each grant renewal, usually for periods of one year. Special appointments are usually given when the appointment is temporary in nature or unusual circumstances render a regular appointment inappropriate. Those persons who receive regular appointments participate in University retirement and medical programs, taxes are withheld from money they receive under such appointment, and they are entitled to vacation and sick leave. Special appointees may or may not be subject to withholding, depending on hours worked or prior arrangement with the district director of internal revenue, no insurance premiums are paid for them, and they participate in no retirement program. Sick and vacation leave are left to the discretion*130 of the special appointee's supervisor. Persons appointed as graduate or post-graduate fellows by the board of trustees of the Ohio State University receive appointments and 8 special withholding treatment. Payments made to persons appointed as research assistants and associates usually are classified by the University as "salaries and wages." On May 1, 1966, petitioner was appointed to a non-faculty research associate position by the Research Foundation for research at the Institute on Project 1575. She received $700 per month from funds paid to her by the Graduate School at Ohio State University from the day of her appointment until December 31, 1966. From January 1967 until October 1969, petitioner worked as a research associate for the Research Foundation on Project 1575. She received a monthly salary of $814, which was increased to $854 effective July 1, 1968. She was paid by funds received by the Research Foundation from the Public Health Service with respect to Project 1575. On January 11, 1967, and again on August 22, 1969, petitioner signed an agreement with the Research Foundation entitled "Research Rules and Regulations, Research Foundation Projects," under*131 which she agreed: 9 (a) to observe University rules as to vacation, sick leave, and the like; (b) to give 30 days advance written notice of her intention to quit the project to which she was assigned; (c) to consult with her supervisor and keep him informed regarding her work; (d) to keep systematic notes properly verified and to maintain and preserve all data notes concerning her work and to deliver the same to the Research Foundation; (e) not to retain copies of such data or publish or disclose the same without the consent of the Research Foundation; (f) upon request, to prepare and submit interim and final reports; (g) to assign to the Research Foundation all her right, title, and interest in any inventions, patents, and discoveries; and (h) to observe security requirements regarding classified information. Petitioner's research on Project 1575 consisted of investigating various aspects of the biochemistry 10 of vision. More specifically, petitioner's research included conducting experiments and collecting data on the effect of detergents on the regeneration of the bovine retinal outer segments. Her research constituted an integral part of Project 1575*132 and was independent of research conducted by other Project 1575 personnel. In September 1969, petitioner submitted to the supervisor of Project 1575 a manuscript entitled "The Effect of Detergents on Regeneration of Bovine Retinal Outer Segments." The manuscript has not been published. In 1967, 1968, and 1969, the University payroll office withheld amounts for Federal income taxes from the amounts paid to petitioner. Petitioner also participated in the University Employees Major Medical and Group Life Insurance Program and the State of Ohio's Public Employees Retirement System. In her tax returns for the years 1967, 1968, and for three months in 1969, petitioner excluded $300 for each month in which she received funds from Project 1575 on the ground that she was the recipient of a postdoctoral fellowship. 11 OPINION The test of excludibility from gross income under section 117 of amounts received as a "scholarship" or "fellowship" is whether they constitute "relatively disinterested, "no strings' educational grants, with no requirement of any substantial quid pro quo from the recipients." . The ultimate question*133 is whether the raison d'etre for the payment is work or study. See , affirmed per curiam, (C.A. 4, 1967). The question is one of fact. ; . The decided cases cover the full spectrum, with all its shadings, of the elements to be taken into account in determining whether a payment should be considered a fellowship or compensation for services. We see no need to articulate all the elements revealed by the record herein which cause us to conclude that respondent's determination should be sustained. 12 We simply note in passing that among these elements are the following: 4 (1) Petitioner was expected to devote her full time to the project. . (2) The services of petitioner were directly related to the fulfillment*134 of a contractual commitment to a specifically sponsored project. . (3) Petitioner submitted a manuscript which was required, along with any other results of her research, to be made available to the scientific public. Thus, the purposes of the United States Public Health Service were directly served by her activities. Cf. ; . (4) The amount paid petitioner was unusually large compared with the amount normally awarded for fellowships. . Moreover, there is no evidence indicating the 13 amount was based on petitioner's need rather than as a measure of the value of her services. . (5) Ohio State University treated petitioner as a "regular employee," with all the fringe benefits normally associated with employment rather than scholarship. ; , is clearly distinguishable. The evidence in that case established*135 that the taxpayer was not in fact required to perform any services for the benefit of the University or the Department of Health, Education and Welfare, which provided the funds. All of the elements which pointed in the direction of compensation were dissipated by the overriding fact that the taxpayer's "efforts were directed entirely to coursework, as a student, reading, and some writing, the products of which were published in professional magazines." See . Petitioner seeks to avoid the impact of the decided cases by contending that her purpose was 14 to extend her learning. But such a purpose, even if actually implemented, cannot convert compensation into a nontaxable fellowship. See . As we said in , "the fact that [the taxpayer] was able to kill two birds with one stone - in the sense that he could derive both direct educational and financial benefit - does not mean that he was being paid to study rather than to work." Granted that there is no single mold in which to fit a "scholarship" or a "fellowship," we think it clear that petitioner*136 was being paid to work and not to study. 5 Accordingly, Decisions will be entered for the respondent. Footnotes

2020-11-20 19:31:10.324496+00

DEAUVILLE OPERATING CORPORATION, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Deauville Operating Corp. v. Commissioner Docket No. 12955-79. United States Tax Court T.C. Memo 1985-11; 1985 Tax Ct. Memo LEXIS 621; 49 T.C.M. (CCH) 464; T.C.M. (RIA) 85011; January 8, 1985. *621 Petitioner had leased a hotel to a partnership (lessee).In November of 1975 petitioner and the partnership terminated the lease, and petitioner released the partnership from all of its obligations under the lease. As of December 31, 1975, petitioner had accrued, but unpaid, rent receivables due from the partnership. Petitioner also had an accounts receivable account for its other hotel operations. Petitioner used the reserve method to determine its bad debt expense. For the short taxable year ended November 30, 1975, the partnership (lessee) incurred a loss. An additional $20,557 of partnership losses was allocated to petitioner when it was determined that the partners who were entitled to those losses could not utilize them. Petitioner held a 40-percent interest in the partnership. Held, petitioner properly accrued rental income for 1975. Held further, petitioner failed to prove that its rent receivables became worthless and is not entitled to a bad debt deduction. Held further, petitioner was not entitled to the additional partnership losses. Held further, respondent did not abuse his discretion in disallowing part of petitioner's addition to its bad debt*622 reserve. Steven S. Brown, for the petitioner. Michael B. Axman, for the respondent. *623 STERRETT MEMORANDUM FINDINGS OF FACT AND OPINION STERRETT, Judge: By notice of deficiency dated August 2, 1979, respondent determined deficiencies in petitioner's Federal income taxes for the taxable years ended December 31, 1972 and December 31, 1975 in the amounts of $66,174.22 and $18,200.00, respectively. The issues before us are: (1) whether petitioner reported excessive rental income in the amount of $701,667; (2) whether petitioner is entitled to a bad debt deduction of $151,250; (3) whether petitioner is entitled to an additional partnership loss of $20,557; and (4) whether respondent abused his discretion in disallowing part of petitioner's addition to its bad debt reserve. FINDINGS OF FACT Some of the facts have been stipulated and are so found. The stipulation of facts, together with the exhibits attached thereto, is incorporated herein by this reference. Petitioner is a corporation with its principal office at 4041 Collins Avenue, Miami, Florida. Petitioner filed its corporate income tax returns for the years 1972 and 1975 with the office of the Internal Revenue Service, Holtsville, New York. Prior to March 1957, petitioner built*624 the Deauville Hotel, which is located in Miami Beach, Florida. In March 1957, petitioner leased the Deauville Hotel. The original lease agreement set the rent obligation at $1,350,000 per year, and the lease term was to end on September 30, 1977.In 1958 the annual rental for the hotel was reduced to $1,330,000, payable in monthly installments of $110,833.33. A security deposit of $1,500,000 was required from the lessees. On April 9, 1957 the lessees of the Deauville Hotel formally entered into a partnership for the purpose of leasing and operating the hotel. The partnership agreement provided that each partner was to participate in the profits and losses according to their respective partnership interests. 1 Under the agreement, the partners could be required to provide additional capital to meet partnership rent obligations. The agreement also set forth how much each partner had to contribute towards the security deposit. While $1,500,000 was required as a security deposit, the actual money contributed by the partners and retained by petitioner was $1,348,750 (i.e., $151,250 less than the required $1,500,000*625 amount). The reason for this shortage is twofold. First, four partners each paid in $56,250 towards the security deposit and they were required to each contribute $75,000. Second, $76,250 of the contributed security deposit was refunded to two partners. With the exception of petitioner, the other members of the partnership and the partnership's CPA were not aware of these underpayments and refunds. Thus, at all times the partnership books showed a balance of $1,500,000 in the security deposit asset account. At all relevant times, petitioner and the partnership were on the accrual method of accounting. For all years prior to 1975, petitioner had annually accrued rental income in the amount of $1,330,000 and the partnership and deducted the same amount annually as an accrued rental expense. The partnership, however, did not make all the required rental payments to petitioner. As of December 31, 1974 petitioner's books showed accrued, but unpaid, rent receivables due from the partnership of $1,551,666. In the following year, numerous events occurred on November 24, 1975. Petitioner and the partnership entered into an agreement to terminate the lease, effective at*626 12:00 midnight on November 30, 1975. Under the agreement, the partnership was to transfer all of its assets, including the security deposit, to petitioner. Petitioner agreed to assume all of the partnership liabilities and to release the partnership from all obligations, including, but not limited to, the lease agreement obligations. Accordingly, petitioner and the partnership executed general releases to each other. Lastly, the partners of the Deauville Hotel executed a Dissolution of the Partnership. Under the dissolution agreement, the partnership released the partners from all obligations and/or rights enforceable against them. For the partnership's short taxable year ended November 30, 1975 petitioner accrued rental income of $1,219,167 (11 months at the stated rental) and the partnership deducted the same amount as an accrued rental expense. The partnership paid petitioner $720,416 toward the accrued rent in 1975. After these transactions, petitioner's balance in its rent receivable account was $2,050,417. 2 *627 On December 31, 1975 an adjusting journal entry was made on petitioner's books to reflect the transfer of the partnership's assets to petitioner. By virtue of this adjusting entry, the partnership was credited $550,417 towards the rent due to petitioner, reducing petitioner's rent receivables to $1,500,000 (i.e., $2,050,417 less the credit of $550,417). 3 Finally, petitioner credited the rent receivables for the security deposit in the incorrect amount of $1,500,000. Since the security deposit amount was really $1,348,750, a balance of $151,250 actually remained in petitioner's rent receivables. *628 For the short taxable year ended November 30, 1975 the partnership allocated petitioner a partnership loss of $397,055. On its corporate income tax return for the year ended December 31, 1975, however, petitioner deducted $548,305 as its loss from the partnership's operations. 4 The difference in these two amounts is $151,250. On September 21, 1976 petitioner filed an application to carry back its 1975 net operating loss to 1972. Petitioner claimed and was allowed a refund for 1972. The year 1972 is included in the instant case due to petitioner's carryback to 1972 of this net operating loss. The partnership subsequently increased petitioner's share of partnership losses $20,557 to $417,612. This increase represented partnership losses originally allocated to three other partners by the CPA who prepared the partnership's tax returns. The CPA did not realize that these partners had a zero basis in their respective partnership interests and hence could not utilize these losses. When he became aware of this fact, he reallocated the losses to petitioner. *629 The partnership agreement provided that profits and losses were to be allocated to the partners according to their respective interests in the partnership. Under this agreement, petitioner was allocated a partnership loss of $397,055 for 1975. The record is void of any evidence showing that a special allocation agreement was entered into between the partners to allocate an additional $20,557 loss to petitioner. Petitioner also had an accounts receivable account for its hotel operations (i.e., renting out of rooms to tourists, etc.). Instead of writing off the portion of receivables as a bad debt expense when they became uncollectible, petitioner used the reserve method to determine its bad debt expense. For the years prior to 1975, the percentage petitioner applied against its total receivables to arrive at the addition to its reserve was one percent. For 1975 petitioner applied a percentage of three percent against its total receivables to arrive at its claimed addition to its bad debt reserve. Petitioner's CPA testified that the general economic conditions in Miami Beach and in the travel industry in 1975 justified the increase in percentage. He did not, however, mention any*630 specific instances where petitioner had trouble collecting on its receivables. In his statutory notice of deficiency, respondent determined that the distributive share of partnership loss reported on petitioner's return should be decreased as follows: Partnership loss reported on return$548,305 Petitioner's distributed share307,055 Overstatement of partnership loss$151,250 Respondent maintains that the amount of $151,250 did not constitute an allowable loss because it represented capital contributions required to be made by several members of the partnership and deposited with petitioner as rental security which petitioner failed to collect. In the statutory notice of deficiency respondent also determined that the bad debt reserve reported on petitioner's return should be decreased by $11,285. OPINION The first issue to decide is whether petitioner's accrual of $701,667 in rental income in 1975 was proper. 5 Petitioner argues that accrual of this amount was improper because, as of the termination of the lease at midnight on November 30, 1975, it was clear that the partnership would be unable to pay its full rent for 1975. Petitioner places*631 emphasis on the fact that the termination of lease agreement provided that petitioner was to assume all the assets and liabilities of the partnership as of November 30, 1975, and that the partnership's liabilities exceeded their assets on that date. 6 In addition, pursuant to the termination of lease agreement, petitioner had given the partnership a general release from liability. Under the accrual method of accounting, income is includable in gross income when all the events have occurred which fix the right to receive such income and the amount thereof can be determined with reasonable accuracy. Section 1.451-1(a), Income Tax Regs.*632 The right to receive and not the actual receipt determines the accrual of income unless, when the right arises, there exists a reasonable doubt with respect to its collectibility. Jones Lumber Co. v. Commissioner,404 F.2d 764">404 F.2d 764, 766 (6th Cir. 1968); Harmont Plaza, Inc. v. Commissioner,64 T.C. 632">64 T.C. 632, 649-650 (1975), affd. 549 F.2d 414">549 F.2d 414 (6th Cir. 1977); Western Oaks Building Corp. v. Commissioner, 49 T.C.. 365, 372 (1968). This exception to the general rule of accrual should be applied narrowly so that the exception does not swallow up the rule. Georgia School-Book Depository, Inc. v. Commissioner,1 T.C. 463">1 T.C. 463, 469 (1943). The critical question becomes when did petitioner's right to the rental income arise. The lease agreement required annual rent of $1,330,000, payable in monthly installments of $110,833.33. As performance under the lease agreement occurred during the year, it could be determined with reasonable accuracy how much rental income petitioner had earned. Thus, generally rent, like interest, accrues from day to day, ratably over time. Hence, termination of the lease as of midnight*633 on November 30, 1975 was subsequent to petitioner's right to receive the first 11 months of rent for 1975. The fact that petitioner gave the partnership a general release from liability is irrelevant. Petitioner's cancellation of the accrued rental income does not prevent its inclusion in gross income. Philad Co. of Delaware v. Commissioner,47 B.T.A. 565">47 B.T.A. 565, 569 (1942). Subsequent uncollectibility of the rent becomes a question of whether petitioner is entitled to a deduction for worthless debts. This issue is not changed by the fact that the claimed loss relates to an item of gross income which had accrued in the same year. Spring City Foundry Co. v. Commissioner,292 U.S. 182">292 U.S. 182, 185 (1934). Petitioner next argues that it is entitled to an additional $151,250 loss from partnership operations. We fail to see how this amount can reflect a loss from partnership operations. Petitioner, as the landlord, simply failed to collect $151,250 in rent from the partnership which it had previously, properly, accrued as income. If petitioner is to be entitled to a deduction for the $151,250, it must turn, as suggested above, to section 166(a)7*634 and show that the failure to collect that sum qualifies as a deductible bad debt. To be entitled to a bad debt deduction under section 166(a), three essential requirements must be met: (1) there must be a valid debt; (2) it must be ascertained to be worthless within the taxable year; and (3) it must be charged off within the taxable year. Petitioner failed to prove that the rent receivable account became worthless in 1975. While petitioner did show that the partnership was insolvent as of November 30, 1975, and had been delinquent in making rental payments, these facts alone do not establish that the debt was worthless. Higginbotham-Bailey-Logan Co. v. Commissioner,8 B.T.A. 566">8 B.T.A. 566, 570, 580 (1927). Petitioner had the burden of showing that steps it took to collect the debt and what information and other circumstances existed which led it to believe the debt was worthless. Magnon v. Commissioner,73 T.C. 980">73 T.C. 980, 1000 (1980).*635 In the instant case, petitioner did not make an effort to collect the unpaid rent from the partnership. This is surprising because, while the partnership was possibly insolvent, the partnership had a right to require additional capital contributions from its partners to satisfy rental obligations. Despite petitioner's 40-percent interest in the partnership, this right was never exercised. Petitioner failed to establish that its rent receivables in the amount of $151,250 became worthless in 1975, and petitioner's voluntary cancellation of the rental obligation and forgiveness of the indebtedness will not give rise to a bad debt deduction. 8Estate of Liggett v. Commissioner,216 F.2d 548">216 F.2d 548, 550 (10th Cir. 1954); Roth Steel Tube Co. v. Commissioner,68 T.C. 213">68 T.C. 213, 221 (1977), affd. 620 F.2d 1176">620 F.2d 1176 (6th Cir. 1980); Cimarron Trust Estate v. Commissioner, 59 T.C.. 195, 199 (1972). *636 Petitioner next claims that it is entitled to an additional $20,557 loss from partnership operations. This claim is without merit. This amount represents losses originally allocated to three partners and later reallocated to petitioner when it was determined that the three partners had a zero basis in their respective partnership interests and could not utilize the losses. Petitioner does not contend that the losses were given to him pursuant to a special allocation agreement, nor does the record suggest that any special allocation agreement existed between the partners. Rather, the partnership agreement provided that profits and losses were to be allocated to the partners according to their respective interests in the partnership.Under this agreement, petitioner was allocated a partnership loss of $397,055 for 1975 and is not entitled to an additional $20,557 loss. See section 704(a). The final issue for our resolution is whether respondent abused his discretion by disallowing part of petitioner's addition to its reserve for bad debts for the taxable year ended December 31, 1975. *637 Section 166(c) permits, at the Commissioner's discretion, a deduction for a reasonable addition to a reserve for bad debts instead of deducting specific debts which become worthless within the taxable year. A bad debt reserve is essentially an estimate of future losses which can reasonably be expected to result from debts outstanding at the close of the taxable year. Valmont Industries, Inc. v. Commissioner,73 T.C. 1059">73 T.C. 1059, 1067 (1980); Handelman v. Commissioner,36 T.C. 560">36 T.C. 560, 565 (1961). What is a reasonable addition to the reserve is determined in light of the facts existing at the close of the taxable year of the proposed addition. The primary focus is on the total amount of debts outstanding as of the close of the taxable year, including those arising currently as well as those arising in prior taxable years, and the total amount of the existing reserve. Section 1.166-4(b)(1), Income Tax Regs. In disallowing a portion of petitioner's addition to its reserve, respondent applied the 6-year moving average formula approved by this Court in Black Motor Co. v. Commissioner,41 B.T.A. 300">41 B.T.A. 300, 303-304 (1940),*638 affd. on another issue, 125 F.2d 977">125 F.2d 977 (6th Cir. 1942). 9 The Black Motor formula is an arithmetic average of the taxpayer's total receivables and bad debt losses during 6 previous years. It is an attempt to ascertain a "reasonable" addition to a bad debt reserve in light of the taxpayer's recent charge-off history. Respondent's determination of what is a reasonable addition carries great weight because of the discretion vested in him under section 166(c). The burden placed upon taxpayers under section 166(c) is greater than that needed to overcome the presumption of correctness attaching to the ordinary notice of deficiency. Therefore, petitioner must show that its addition to its bad debt reserve was reasonable and that respondent's action in disallowing the addition was arbitrary and an abuse of discretion. Thor Power Tool Co. v. Commissioner,439 U.S. 522">439 U.S. 522, 548 (1979); Valmont Industries, Inc. v. Commissioner,supra at 1067. Petitioner proffered*639 evidence in the form of testimony by Mr. Levinson, petitioner's CPA, as to changing economic conditions in the area and in the travel industry. Petitioner sought to demonstrate that its application of a percentage of three percent against its total receivables to arrive at its claimed addition to its bad debt reserve was reasonable. Petitioner also attempted to show that respondent abused his discretion by using past bad debt experience in determining the addition to the bad debt reserve. Petitioner contends that the economic climate and related circumstances as of the end of 1975 in Miami Beach justify than an amount in excess of what respondent allowed be added to petitioner's reserve for bad debts. Petitioner only offered generalizations as to the prevailing economic conditions. 10 That is insufficient to meet his burden of proving reasonableness of his method of calculating the addition to his reserve for bad debts. Imperial Type Metal Co. v. Commissioner,106 F.2d 302">106 F.2d 302, 304 (3d Cir. 1939). Furthermore, testimony as to changing economic conditions is too speculative a factor in this case to overcome petitioner's heavy burden of proving that respondent's*640 computation was unreasonable and arbitrary. Atlantic Discount Co. v. United States,473 F.2d 412">473 F.2d 412, 415 (5th Cir. 1973). Accordingly, we find that petitioner has failed to meet its burden of proof under section 166(c). Decision will be entered for the respondent. Footnotes

2020-12-01 02:00:56.356717+00

https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2933-66

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA _________________________________________ ) AMERICAN WATERWAYS ) OPERATORS, ) ) Plaintiff, ) ) v. ) Case No. 18-cv-02933 (APM) ) ANDREW WHEELER, Administrator of the ) United States Environmental Protection ) Agency, and UNITED STATES ) ENVIRONMENTAL PROTECTION ) AGENCY, ) ) Defendants, ) ) and ) ) WASHINGTON ENVIRONMENTAL ) COUNCIL, PUGET SOUNDKEEPER, ) FRIENDS OF THE EARTH, AND ) WASHINGTON STATE DEPARTMENT ) OF ECOLOGY, ) ) Intervenor-Defendants. ) _________________________________________ ) MEMORANDUM OPINION AND ORDER I. INTRODUCTION On January 19, 2017, the Environmental Protection Agency (“EPA”), acting pursuant to Section 312(f)(3) of the Clean Water Act, authorized the State of Washington to declare the Puget Sound a “No Discharge Zone” (“NDZ”). That designation cleared the way for the State of Washington to prohibit recreational and commercial vessels from discharging sewage into the Puget Sound. As a precondition to a state establishing an NDZ, Section 312(f)(3) requires EPA to “determine[] that adequate facilities for the safe and sanitary removal and treatment of sewage from all vessels are reasonably available” for the waters at issue. 33 U.S.C. § 1322 (f)(3). EPA made such a “reasonable availability” finding for the waters of the Puget Sound. American Waterways now seeks to overturn the agency’s decision. Moving for summary judgment, it argues that EPA’s “reasonable availability” determination was arbitrary and capricious and violated Section 312(f)(3) of the Clean Water Act for multiple reasons. EPA does not seek to defend its determination. Instead, EPA now confesses legal error on one challenged ground, conceding that it erred by authorizing the Puget Sound NDZ without considering the financial costs of the action. Instead of opposing summary judgment, EPA asks the court to reconsider its earlier denial of the agency’s motion for voluntary remand. Intervenor-Defendants Washington Environmental Council, Puget Soundkeeper, Friends of the Earth, and Washington State Department of Ecology (collectively, “Intervenors”) have stepped in for the agency. They deny that EPA committed any error, defend EPA’s authorization of the Puget Sound NDZ, and cross-move for summary judgment. For the reasons that follow, the court grants in part and denies in part American Waterways’ motion for summary judgment, grants in part and denies in part Intervenors’ motion for summary judgment, and denies as moot EPA’s motion for reconsideration. II. BACKGROUND A. Legal Background This case concerns the State of Washington’s effort to prohibit recreational and commercial vessels from discharging sewage into the Puget Sound, an inlet of the Pacific Ocean along Washington’s northwestern coast. Under the Clean Water Act, EPA is required to set national “standards of performance for marine sanitation devices” that are “designed to prevent the 2 discharge of untreated or inadequately treated sewage into or upon the navigable waters.” 33 U.S.C. § 1322 (b)(1). Once EPA promulgates national standards, the standards serve as a floor, and no state is permitted to “adopt or enforce any statute or regulation” regarding marine sanitation devices that is less stringent than the national standards. See id. § 1322(f)(1). In certain circumstances, however, a state may impose greater restrictions on vessel sewage discharge in the form of a No Discharge Zone, or NDZ. Under Section 312(f)(3), “if any State determines that the protection and enhancement of the quality of some or all of the waters within such State require greater environmental protection, such State may completely prohibit the discharge from all vessels of any sewage, whether treated or not, into such waters.” Id. § 1322(f)(3). There is, of course, a catch. Before a state can create an NDZ, it must obtain approval from EPA, which must “determine[] that adequate facilities for the safe and sanitary removal and treatment of sewage from all vessels are reasonably available for such water to which such prohibition would apply.” Id. After a state applies for permission to designate an NDZ, EPA has 90 days to make its determination on the reasonable availability of adequate facilities. Id. To facilitate EPA’s decision, agency regulations require that a state’s application to create an NDZ include the following: (1) A certification that the protection and enhancement of the waters described in the petition require greater environmental protection than the applicable Federal standard; (2) A map showing the location of commercial and recreational pump-out facilities; (3) A description of the location of pump-out facilities within waters designated for no discharge; (4) The general schedule of operating hours of the pump-out facilities; (5) The draught requirements on vessels that may be excluded because of insufficient water depth adjacent to the facility; 3  (6) Information indicating that treatment of wastes from such pump-out facilities is in conformance with Federal law; and (7) Information on vessel population and vessel usage of the subject waters. 40 C.F.R. § 140.4 (a). Additionally, EPA has published extensive guidance for state and local officials that are interested in establishing NDZs under Section 312(f)(3). See A.R. at 2326–623. 1 B. Factual Background 1. Application for a Puget Sound NDZ Prior to petitioning EPA for an NDZ, the State of Washington, acting through its Department of Ecology (“Ecology”), and its partner organizations studied water quality in the Puget Sound for four years. See A.R. at 57. These studies led Ecology to conclude that federal marine discharge requirements were insufficient to protect the Puget Sound’s water quality, primarily because vessels were discharging treated sewage near shellfish beds and swimming beaches. See id. at 66 . The Puget Sound was already facing serious degradation from pollution: some of the waters of the Puget Sound were “designated as impaired waters under the Clean Water Act” because of poor water quality indicators, including “high concentrations of fecal indicator bacteria.” Id. at 67 . The Washington Department of Health ultimately closed some public swimming beaches and shut down 36,000 acres of commercial shellfish harvest beds in the Sound due to poor water quality. Id. Ecology hoped that securing an NDZ would “complement[] other, more substantive investments in sewage treatment, onsite systems, stormwater management, industrial treatment, and agricultural runoff control” that would revitalize the Puget Sound. Id. at 66 . 1 Citations to the Administrative Record (“A.R.”) can be found in the four-volume Joint Appendix, see ECF Nos. 61, 61-1, 61-2, 61-3. 4  In July 2016, Ecology requested EPA’s permission to designate the Puget Sound as an NDZ, submitting a petition that reflected water quality studies, outreach to vessel operators, and an analysis of the costs and benefits of creating an NDZ. Id. at 57, 68 . Ecology also submitted a supplement to its petition in October 2016, after EPA asked for more information on the availability of “pumpout” facilities. See id. at 127 ; id. at 128–45 (Ecology’s October 2016 supplement titled “Commercial Vessel Pumpout Availability in Puget Sound”). As the name implies, a pumpout facility removes, or “pumps out,” sewage from a vessel. On November 7, 2016, EPA published notice of its preliminary determination that adequate facilities for the safe and sanitary removal and treatment of sewage from all vessels were reasonably available in the Puget Sound. 81 Fed. Reg. 78,141 -02. The notice sought public comment, with the original deadline for comments set for December 7, 2016. Id. at 78,141 . On December 7, after receiving stakeholder requests for additional time, EPA announced that it would extend the deadline for comments to December 23, 2016. A.R. at 55541. 2. EPA’s Determination On January 19, 2017, after receiving more than 40,000 comments on Ecology’s application, id. at 33 , EPA published notice of its final determination. It found that “adequate facilities for the safe and sanitary removal and treatment of sewage from all vessels are reasonably available” in the Puget Sound, id. at 1–31. In its determination, EPA considered separately the availability of sewage pumpout facilities for recreational and commercial vessels. As to recreational vessels, EPA found that there were at most 171 recreational vessels per pumpout facility in the Puget Sound. Id. at 5–6. EPA concluded that this ratio was well below the minimum ratio of 600 recreational vessels per pumpout facility that the Fish and Wildlife Service recommended was reasonable under the Clean 5 Vessel Act, id. at 727 , and therefore determined that adequate pumpout facilities were reasonably available in the Puget Sound for recreational vessels. Id. at 6 . As for commercial vessels, EPA estimated that there were 709 such vessels operating in the Puget Sound based on a study conducted by the Puget Sound Maritime Air Forum and information provided by commenters. Id. at 7 . In reaching this total, EPA excluded “large, oceangoing transient commercial vessels that are only in Puget Sound for a short period of time.” Id. The agency did so after finding that such vessels “have large enough holding tanks to hold their waste during the time they are in Puget Sound, with some exceptions[,] . . . [and therefore] do not have a need to pumpout.” Id. EPA then subtracted additional commercial vessels, including the fleets of the Washington State Ferries, the U.S. military, and the Victoria Clipper, because they have “dedicated pumpout facilities” and would not use other facilities. Id. at 7, 9 . EPA ultimately determined that there were 631 commercial vessels operating in the Puget Sound that would require pumpout facilities. Id. at 9 . EPA then found that there were “at least 56 pumpouts available for commercial vessels” in the Puget Sound, including both stationary and mobile pumpout facilities. Id. Based on the estimated 631 vessels, this created a ratio of 11 commercial vessels per pumpout facility. Id. In addition to this 11:1 ratio, EPA “considered the fact that . . . mobile pumpouts provide service throughout Puget Sound, provide sufficient capacity for commercial vessels, and generally do not experience dock access issues.” Id. EPA also noted that such mobile pumpout services could be scheduled by appointment and that service providers had reported that they did not “experience seasonal fluctuations” in demand. Id. “Given the widespread availability and flexibility of these services and the overall ratio of 11:1, EPA determine[d] that adequate pumpout facilities for the safe and sanitary removal and treatment of sewage for commercial vessels are reasonably available 6 for the waters of Puget Sound.” Id. at 9–10. EPA’s final decision was published in the Federal Register on February 13, 2017. Id. at 45–48. With EPA’s sign off in hand, Ecology established an NDZ in the Puget Sound. See Wash. Admin. Code § 173-228-030 . Ecology established two effective dates for the NDZ. The default effective date for “all vessels” was May 10, 2018. See id. § 173-228-050. However, for “[t]ug boats, commercial fishing vessels, small commercial passenger vessels, and National Oceanic and Atmospheric Administration (NOAA) research and survey vessels,” Ecology “delayed implementation . . . [for] five years,” meaning an effective date for such vessels of May 10, 2023. Id. The members of Plaintiff American Waterways, “a national trade association for the tugboat, towboat, and barge industry,” are subject to the five-year delayed implementation. See Pl.’s Mot. for Summ. J., ECF No. 46 [hereinafter Pl.’s Mot.], at 4, 12. C. Procedural Background In December 2018, American Waterways brought this suit, alleging that EPA’s determination was arbitrary and capricious under the Administrative Procedure Act, 5 U.S.C. § 706 , and that EPA was not authorized to issue a determination on Ecology’s purportedly defective petition under Section 312(f)(3) of the Clean Water Act, 33 U.S.C. § 1322 (f)(3). Compl., ECF No. 1, ¶¶ 54–57, 61–62. Before any substantive motions were filed, EPA moved to remand without vacatur so that the agency could consider compliance costs, a factor it had eschewed in its “reasonable availability” determination. Mot. to Remand to EPA, ECF No. 25 [hereinafter First Remand Mot.]. EPA had taken the position that “neither the Clean Water Act nor EPA’s implementing regulations contemplate or require that EPA consider the cost of retrofitting vessels, the practical considerations related to retrofitting vessels to achieve compliance, or the cost of using pump-out 7 facilities.” A.R. at 15. But following American Waterways’ Complaint, EPA explained that it “now believes,” based on the Supreme Court’s decision in Michigan v. EPA, 576 U.S. 743 (2015), “that it should have considered compliance costs in making the challenged determination.” First Remand Mot. at 4. The court denied EPA’s motion. The court observed that EPA had “admit[ted] no error,” and instead had argued that, although the Clean Water Act did not necessarily require it to weigh costs, the Act could not “‘be read to prohibit EPA from doing so.’” Memo. Op. & Order, ECF No. 41 [hereinafter Remand Op.], at 5 (quoting Reply in Supp. of EPA’s Remand Mot., ECF No. 32, at 3). The court exercised its discretion to deny remand in part because no new developments rendered EPA’s determination infirm; rather, Michigan v. EPA, on which EPA based its change of heart, “was decided two years before EPA issued its decision,” and commenters had raised the issue of costs during the Section 312(f)(3) process. Id. at 5–6. The court also concluded that granting EPA’s remand request would unduly prejudice Intervenors’ environmental interests and create uncertainty for regulated parties. Id. at 7–8. EPA then tried to shore up its case for remand. On March 26, 2020, EPA issued a formal memorandum declaring that it had taken “the legally erroneous position that it was not required to, and did not, consider costs” in issuing its “reasonable availability” determination as to the Puget Sound NDZ. Cross-Mot. for Recons., ECF No. 49 [hereinafter Mot. for Recons.], Ex. 1, ECF No. 49-1 [hereinafter EPA Costs Memo], at 1. Upon further review, the agency concluded, “the Supreme Court’s decision in Michigan v. EPA . . . compels EPA to consider costs in determining whether such facilities are ‘reasonably available.’” Id. (emphasis added). EPA also promised that “the Office of Water is developing a tool to calculate the costs on the vessel community associated with the reasonable availability of facilities within a proposed no-discharge zone.” Id. at 3 . 8  Meanwhile, this litigation continued to move forward. On January 17, 2020, the court issued a scheduling order for briefing on cross-motions for summary judgment. Minute Order, Jan. 17, 2020. American Waterways filed its motion for summary judgment, as directed, on February 26, 2020. See Pl.’s Mot. That motion challenged the Puget Sound NDZ determination on four grounds, all under the APA: (1) EPA failed to determine that there were “adequate” facilities for the “treatment” of sewage, as required by Section 312(f)(3); (2) the agency failed to consider costs in determining the “reasonable availability” of facilities in the Puget Sound, as required under Michigan v. EPA; (3) EPA’s finding that pumpout facilities are “reasonably available” was flawed; and (4) the agency improperly disregarded deficiencies in Ecology’s Section 312(f)(3) petition. See Pl.’s Mot. EPA did not fully respond to American Waterways’ motion; nor did it cross move for summary judgment. Instead, the agency filed a consolidated opposition and a “Cross-Motion for Reconsideration,” in which the agency conceded error only on the Michigan v. EPA cost issue and again asked the court to remand the case in its entirety. See Mot. for Recons. The agency mounted no defense to the other three challenges but urged the court not to reach those issues, so that the agency “on remand . . . [could] reevaluate the rest of the determination.” Id. at 1 . Taking up the agency’s mantle, Intervenors defended the Puget Sound NDZ determination in full and asked the court to reject EPA’s renewed request for remand and enter summary judgment in their favor. Def.-Intervenors’ Cross-Mot. for Summ. J., ECF No. 52 [hereinafter Intervenors’ Br.]. The court heard oral argument on the parties’ motions on November 13, 2020. 9 IV. DISCUSSION The court turns first to EPA’s motion for reconsideration and then takes up the cross- motions for summary judgment. A. Motion for Reconsideration of Motion to Remand Under Rule 54(b), the court may “reconsider an interlocutory order as justice requires.” Capitol Sprinkler Inspection, Inc. v. Guest Servs., Inc., 630 F.3d 217 , 227 (D.C. Cir. 2011) (internal quotation marks omitted). “[A]sking ‘what justice requires’ amounts to determining, within the Court’s discretion, whether reconsideration is necessary under the relevant circumstances.” Cobell v. Norton, 224 F.R.D. 266 , 272 (D.D.C. 2004). The court likewise “has broad discretion to decide whether and when to grant an agency’s request for a voluntary remand.” Limnia, Inc. v. U.S. Dep’t of Energy, 857 F.3d 379 , 381 (D.C. Cir. 2017). Here, EPA does not claim that the typical triggers for remand—the occurrence of events outside the agency’s control or new evidence, Carpenters Indus. Council v. Salazar, 734 F. Supp. 2d 126 , 132 (D.D.C. 2010)—support its request for reconsideration. Rather, EPA’s request turns on its memo formalizing its new position on the impact of the Supreme Court’s 2015 decision in Michigan v. EPA. The memo states that EPA’s prior “position that it was not required to . . . consider costs in issuing its determination in 2017” was “legally erroneous” under Michigan v. EPA. EPA Costs Memo at 1. While EPA has now admitted error, the court is not convinced that justice requires granting EPA’s motion for reconsideration, which would have the effect of preempting resolution of the pending motions for summary judgment. One of the driving purposes of remanding a matter to an agency is to conserve “the courts’ and the parties’ resources.” See Ethyl Corp. v. Browner, 989 F.2d 522 , 524 (D.C. Cir. 1993); see also id. at 524 n.3 (collecting cases where remand was granted prior to significant events in the development of the case); Carpenters Indus. Council, 734 F. Supp. 10 2d at 132 (noting voluntary remand “preserves scarce judicial resources by allowing agencies to cure their own mistakes” (internal quotation marks omitted)). That objective would not be served were the court to remand this case in its present posture. The court has before it hundreds of pages of briefing on cross-motions for summary judgment. Those motions squarely present issues that go beyond EPA’s failure to consider costs. If the court were to remand to EPA for a determination of costs, EPA would lack guidance on the validity of American Waterways’ other challenges, and the parties potentially could be mired in piecemeal litigation over EPA’s determination for years to come. No one benefits from such an approach. The court therefore concludes that it is in the parties’ best interests, and that of the public, for the court to resolve the ripe cross-motions for summary judgment. As the court reaches the merits of the parties’ dispute, and will remand the matter as a remedy, EPA’s motion for reconsideration will be denied as moot. B. Cross-Motions for Summary Judgment 1. Legal Standard “[S]ummary judgment is the mechanism for deciding whether as a matter of law an agency action is supported by the administrative record and is otherwise consistent with the APA standard of review.” Louisiana v. Salazar, 170 F. Supp. 3d 75 , 83 (D.D.C. 2016). In reviewing an agency action under the APA, “the district judge sits as an appellate tribunal,” and “[t]he entire case on review is a question of law.” Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077 , 1083 (D.C. Cir. 2001) (internal quotation marks omitted). The court’s analysis must be confined to the administrative record and should involve “neither more nor less information than” was before “the agency when it made its decision.” CTS Corp. v. EPA, 759 F.3d 52 , 64 (D.C. Cir. 2014) (internal quotation marks omitted). The district court’s “review is ‘narrow’ and [it] will ‘not substitute [its] judgment for that of the agency.’” U.S. Sugar Corp. v. EPA, 830 F.3d 579 , 605 (D.C. Cir. 2016) 11 (alterations omitted) (quoting Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. (State Farm), 463 U.S. 29 , 43 (1983)). The APA requires courts to “hold unlawful and set aside agency action, findings, and conclusions” that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.” 5 U.S.C. § 706 (2)(A). “Although the arbitrary and capricious standard of review is deferential, the court will ‘intervene to ensure that the agency has examined the relevant data and articulated a satisfactory explanation for its action.’” BellSouth Corp. v. FCC, 162 F.3d 1215 , 1221–22 (D.C. Cir. 1999) (alterations omitted) (quoting Petroleum Commc’ns, Inc. v. FCC, 22 F.3d 1164 , 1172 (D.C. Cir. 1994)). An agency’s decision is arbitrary and capricious if the agency relies “on factors which Congress has not intended it to consider, entirely fail[s] to consider an important aspect of the problem, offer[s] an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.” State Farm, 463 U.S. at 43 . 2. Failure to Consider Costs The court first turns to the parties’ dispute regarding whether EPA was required to consider compliance costs under Section 312(f)(3) of the Clean Water Act. American Waterways and EPA both argue that Michigan v. EPA required the agency to consider the costs of compliance as part of the “reasonable availability” determination required under Section 312(f)(3). See Pl.’s Mot. at 20–22; Mot. for Recons. at 5–7. Intervenors dispute this, arguing that (1) the logic of Michigan does not apply to the statutory scheme at issue here, (2) the text of Section 312(f)(3) is silent as to costs, and (3) the statute prioritizes environmental protection over economic considerations. Intervenors’ Br. at 19–25. 12  Although the parties largely devote their time to parsing Michigan, the Supreme Court’s earlier decision in Whitman v. American Trucking Associations, 531 U.S. 457 (2001), is the better place to begin. In Whitman, the Court considered whether a provision of the Clean Air Act instructing EPA to set ambient air quality standards that were “requisite to protect the public health with an adequate margin of safety” required the agency to consider “the economic cost of implementing” the proposed standards. 531 U.S. at 465–66 (internal quotation marks omitted). The Court concluded that Congress’s instruction for EPA to issue “requisite” standards with an “adequate margin of safety” did not constitute a “textual commitment of authority to the EPA to consider costs” in setting air quality standards. Id. at 468 . It was “implausible,” the Court found, that by using the “modest words” “requisite” and “adequate,” Congress bestowed on EPA “the power to determine whether implementation costs should moderate national air quality standards.” Id. Rather, the text of the provision at issue, “interpreted in its statutory and historical context and with appreciation for its importance to the [Clean Air Act] as a whole, unambiguously bar[red] cost considerations from the” standard-setting process. Id. at 471 ; see also Murray Energy Corp. v. EPA, 936 F.3d 597 , 621 (D.C. Cir. 2019) (rejecting “the same argument rejected in Whitman” that costs should be considered in setting air quality standards). More than a decade later, in Michigan, the Supreme Court considered a different provision of the Clean Air Act, this time evaluating a provision that directed EPA to regulate emissions from power plants if it concluded that “regulation [wa]s appropriate and necessary.” 576 U.S. at 748. There, EPA found that it was “‘appropriate and necessary’” to regulate power-plant emissions, but the agency concluded that it was not required “to consider whether the costs of its decision outweighed the benefits.” Id. at 749–50. The Michigan Court disagreed, finding that the term “‘[a]ppropriate and necessary’” was “a far more comprehensive criterion than ‘requisite to protect 13 the public health,’” the phrase at issue in Whitman. Id. at 756 (internal quotation marks omitted). The word “‘appropriate,’” the Court reasoned, was “the classic broad and all-encompassing term that naturally and traditionally includes consideration of all the relevant factors.” Id. at 752 (internal quotation marks omitted). Cost was one such relevant factor: “Read naturally in the present context, the phrase ‘appropriate and necessary’ requires at least some attention to cost.” Id. Read together, Whitman and Michigan stand for the proposition that whether an agency is required to consider costs depends on the breadth of the statutory text and the degree to which it compels the agency to balance costs and benefits. Since the Supreme Court decided Michigan, courts in this Circuit have helpfully fleshed out the Whitman–Michigan dichotomy. For example, in Utility Solid Waste Activities Group v. EPA, the D.C. Circuit concluded that EPA was not required to consider costs when determining whether a waste site should be classified as an “open dump.” 901 F.3d 414 , 448–49 (D.C. Cir. 2018). The statute there directed EPA to determine “if there is no reasonable probability of adverse effects on health or the environment from disposal of solid waste at such facility.” Id. at 449 (emphasis omitted) (internal quotation marks omitted). The Circuit held that the statute did not contain an “explicit mention of costs,” nor was “there any flexible language such as ‘appropriate and necessary’ that might allow the EPA to consider costs in rulemaking.” Id.; see also Nicopure Labs, LLC v. FDA, 266 F. Supp. 3d 360 , 401 (D.D.C. 2017) (holding statute that said the FDA “shall” regulate products that the Secretary deemed to be tobacco products did not permit consideration of costs because “[t]he statute does not limit the Secretary’s authority to deem to when he finds it ‘appropriate and necessary’ to do so”). In contrast, in Metlife, Inc. v. Financial Stability Oversight Council, the district court determined that the Council was required to consider costs when designating Metlife for supervision by the Board of Governors of the Federal Reserve System under the Dodd–Frank Act. 177 F. Supp. 3d 219 , 14 224–25, 230 (D.D.C. 2016). The Dodd–Frank Act instructed the Council to consider ten statutory criteria in deciding whether to designate a financial institution, as well as “any other risk-related factors that [it] deems appropriate.” Id. at 225 (quoting 12 U.S.C. § 5323 (a)(2)(K)). The statute’s use of the word “appropriate,” the court held, required the Council to consider costs in making any designation. Id. at 241 . As in Michigan v. EPA, “‘[a]ppropriate’ is . . . the touchstone of the catch- all factor in Dodd–Frank Section 113,” and that “textual hook,” the court held, required the Council “to consider the cost of designating a company for enhanced supervision.” Id. at 240–41. Turning then to the present case, the court begins, as required, with the statutory text. Section 312(f)(3) provides, in relevant part, that if any State determines that the protection and enhancement of the quality of some or all of the waters within such State require greater environmental protection, such State may completely prohibit the discharge from all vessels of any sewage, whether treated or not, into such waters, except that no such prohibition shall apply until the Administrator determines that adequate facilities for the safe and sanitary removal and treatment of sewage from all vessels are reasonably available for such water to which such prohibition would apply. 33 U.S.C. § 1322 (f)(3) (emphasis added). The question before the court is whether EPA’s mandate to determine whether adequate facilities are “reasonably available” is a textual direction from Congress to EPA to consider costs. It is. Section 312(f)(3) of the Clean Water Act more closely resembles the statutes at issue in Michigan and Metlife than those at issue in Whitman and Utility Solid Waste. The term “reasonably available” is precisely the type of language that the Michigan Court held “naturally and traditionally includes consideration of all the relevant factors.” 576 U.S. at 752 (internal quotation marks omitted); see also id. at 755 (considering parenthetically the boundaries of “the expansive word ‘reasonable’”). Indeed, the Court said as much in explaining its decision: “reasonable 15 regulation ordinarily requires” an agency to consider the “advantages and the disadvantages of agency decisions.” Id. at 753 (first emphasis added) (internal quotation marks omitted); see also Int’l Union, United Auto., Aerospace & Agr. Implement Workers of Am., UAW v. OSHA, 938 F.2d 1310 , 1319 (D.C. Cir. 1991) (“‘Reasonableness’ has long been associated with the balancing of costs and benefits.”). “Reasonable availability” therefore provides the “textual hook,” Metlife, 177 F. Supp. 3d at 241, that requires EPA to consider costs when approving an NDZ. Logic likewise dictates that the agency was required to consider costs. Say, hypothetically, that the only pumpout facilities available to commercial vessels were all located in a remote portion of the Puget Sound. Even if those pumpout facilities were sufficient in number, no one would seriously contend that such facilities were “reasonably available” if they imposed significant costs on vessels to reach them. Cf. Michigan, 576 U.S. at 752 (“One would not say that it is even rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.”). There can be little doubt that Congress intended for EPA to consider the costs of accessing adequate facilities in determining whether such facilities were “reasonably available.” Intervenors launch three primary attacks against the application of Michigan to this case. First, Intervenors argue that Section 312(f)(3) requires the states that seek to create an NDZ—not EPA—to consider the costs of compliance, and Ecology did so here. Intervenors’ Br. at 20–21. Second, Intervenors argue that the relevant statutory scheme fundamentally differs from the provision in Michigan because it does not contain an explicit congressional directive to consider costs. Id. at 22–23. Third, Intervenors claim that Congress “prioritized environmental protection under § 312(f)(3)” to the exclusion of cost considerations. Id. at 23–25. None of these arguments is persuasive. 16  a. The statutory scheme Intervenors first assert that, because Section 312(f)(3) calls for states, as opposed to EPA, to regulate and limits EPA’s role to approving a state’s decision to regulate, the state, rather than EPA, should balance the costs and benefits of creating an NDZ. Id. at 21–23. But that contention cannot be squared with the plain statutory text. Section 312(f)(3) places an independent obligation on EPA to consider costs. It requires “the Administrator” of EPA to “determine[] that adequate facilities . . . are reasonably available.” 33 U.S.C. § 1322 (f)(3). Thus, the textual hook that requires consideration of all relevant factors—the “reasonable availability” of adequate facilities—is delegated directly to EPA, not to states petitioning EPA. The Administrator, having been charged with determining whether adequate facilities are reasonably available, must consider “the advantages and the disadvantages” of his decision, see Michigan, 576 U.S. at 753, regardless of whether the petitioning state also does so. b. Explicit directive Intervenors next attempt to distinguish Michigan by arguing that, while the statutory scheme in Michigan explicitly called for the considerations of costs, the same is not true here. Intervenors’ Br. at 22–23. They also contend that Congress did not intend for EPA to consider costs in Section 312(f)(3) because Congress explicitly required EPA to consider costs in making different determinations under other subsections of the same section of the Clean Water Act but did not specifically do so in Section 312(f)(3). Id. at 22 (citing 33 U.S.C. § 1322 (b)(1) (requiring EPA to promulgate regulations for marine sanitation devices “after giving appropriate consideration to the economic costs involved”); id. § 1322(n)(b)(B)(vii) (requiring consideration of “the economic costs of the installation and use of the marine pollution control device” for armed service vessels); id. § 1322(o)(B)(vii) (requiring consideration of “the economic costs of the use 17 of the management practice” in determining such practices for recreational vessels); id. § 1322(p)(6)(C)(ii)(III) (allowing exclusion of installed ballast water management systems if “with respect to the use of which[,] the environmental, health, and economic benefits would exceed the costs”)). Neither argument meaningfully distinguishes this case from Michigan. The provision at issue in Michigan no more expressly required consideration of costs than does the statutory text at issue here. Neither statutory provision explicitly mentions costs. Rather, both statutes use broad language—“appropriate and necessary” in Michigan, and “reasonably available” here—to convey consideration of cost as a factor. To read Michigan as applicable only in situations in which the statute explicitly calls for the consideration of costs would ignore the Court’s primary reason for requiring the agency to consider costs: that “it is unreasonable to read an instruction to an administrative agency to determine whether ‘regulation is appropriate and necessary’ as an invitation to ignore cost.” 576 U.S. at 753. The difference in statutory text is not a basis on which to distinguish Michigan. Moreover, the Michigan Court rejected a challenge similar to Intervenors’ assertion here that the express reference to costs in nearby statutory provisions meant that Congress did not intend for EPA to consider costs under Section 312(f)(3). In Michigan, EPA “point[ed] out that other parts of the Clean Air Act expressly mention cost,” but that the provision at issue did not. Id. at 754. The Court responded that “this observation shows only that [the statute’s] broad reference to appropriateness encompasses multiple relevant factors (which include but are not limited to cost); other provisions’ specific references to cost encompass just cost.” Id. at 755. The Court held that it was “unreasonable to infer that, by expressly making cost relevant to other decisions, the Act implicitly makes cost irrelevant to” other decisions committed to the agency. Id.; see also Metlife, Inc., 177 F. Supp. 3d at 241 (“[The Council] points to adjacent terms in Dodd–Frank that 18 expressly mention cost. But the Michigan Court considered and rejected the same argument.” (citation omitted)). Similarly here, the fact that other provisions of Section 312 explicitly require the consideration of costs does not mean cost is irrelevant to Section 312(f)(3). If anything, the emphasis on cost in these other sections, as in Michigan, “reinforces the relevance of cost” as a factor to be considered under Section 312(f)(3). 576 U.S. at 753. c. Priority of environmental protection Finally, Intervenors urge that Congress intended Section 312(f)(3) to prioritize environmental protection over all else and thus EPA was not permitted to consider costs. Intervenors’ Br. at 23–25. But the cases that Intervenors marshal in support of this argument are inapposite. For example, in Union Electric Co. v. EPA, the disputed provision of the Clean Air Act enumerated eight criteria that a state program implementing EPA’s standards needed to satisfy, and if the program satisfied the eight criteria, the statute provided that the Administrator “shall” approve the state plan. 427 U.S. 246 , 257 (1976). The Court concluded that “[t]he mandatory ‘shall’ makes it quite clear that the Administrator is not to be concerned with factors other than those specified.” Id. Likewise, the statute at issue in Whitman instructed EPA to determine the maximum concentration of certain airborne pollutants that “public health can tolerate” and to decrease that concentration to “provide an ‘adequate’ margin of safety.” 531 U.S. at 465 . The Court found EPA should not consider costs because Congress used “modest words” that limited the scope of the agency’s inquiry. See id. at 468 ; see also Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 , 411 (1971) (forbidding Secretary from approving project to use public parkland unless there was “no feasible and prudent alternative,” which the Court concluded meant that “only the most unusual situations are exempted” (internal quotation marks omitted)). In these 19 cases, Congress expressed a “priority” for environmental protection by severely restricting the factors the agency could consider and narrowly defining the scope of its review. In contrast, Section 312(f)(3)’s requirement that the Administrator determine whether adequate facilities are “reasonably available” uses language that traditionally requires “consideration of all the relevant factors,” including a balancing of costs and benefits. See Michigan, 576 U.S. at 772–73; see also Int’l Union, United Auto., Aerospace & Agr. Implement Workers of Am., UAW, 938 F.2d at 1319 ; Mingo Loan Coal Co. v. EPA, 829 F.3d 710 , 735 (D.C. Cir. 2016) (Kavanaugh, J., dissenting) (“In order to act reasonably, EPA must consider costs before exercising its Section 404(c) authority to veto or revoke a permit.”). Given Section 312(f)(3)’s capacious language, no overriding environmental-protection priority is evident in the provision. 2 * * * The court holds that EPA was required to consider the costs of compliance in determining whether adequate facilities were “reasonably available.” EPA specifically disavowed any consideration of costs, erroneously concluding that “neither the Clean Water Act nor EPA’s implementing regulations contemplate or require that EPA consider the cost” of an NDZ. A.R. at 15; see Mot. for Recons. at 1 (“EPA refused to consider costs when determining whether certain sewage facilities in Puget Sound are ‘reasonably available.’”). EPA therefore acted arbitrarily and capriciously in violation of the APA. The agency will have to consider costs on remand. 2 Intervenors also argue that requiring EPA to consider costs permits the agency “to unilaterally consider costs to industry, without considering the harm to states.” Intervenors’ Br. at 24–25. The court disagrees. Because the touchstone of EPA’s analysis is the “reasonable availability” of facilities, costs are just one factor EPA must consider in determining whether adequate facilities are reasonably available. The reasonableness of the costs of a proposed NDZ may vary depending on environmental concerns, among other factors. 20  3. Availability of Adequate Treatment Facilities American Waterways next argues that EPA acted arbitrarily and capriciously by not determining whether adequate facilities for the treatment (as opposed to the removal) of wastewater are reasonably available in the Puget Sound. Pl.’s Mot. at 14–20. Intervenors counter that EPA satisfied its obligations to verify the existence of adequate treatment facilities by requiring Ecology to certify how pumpout companies treat the waste they remove and that, by dint of a separate EPA regulatory scheme, the public treatment facilities that accept marine sewage meet federal requirements. Intervenors’ Br. at 14–15. Section 312(f)(3) requires EPA to determine whether adequate facilities are reasonably available for both the “removal and treatment of sewage.” 33 U.S.C. § 1322 (f)(3) (emphasis added). 3 EPA therefore must inquire into the reasonable availability of adequate treatment facilities and “articulate[] a rational connection” between its factual conclusions and its determination that adequate treatment facilities are reasonably available in the Puget Sound. See, e.g., Clean Wis. v. EPA, 964 F.3d 1145 , 1161 (D.C. Cir. 2020) (internal quotation marks omitted). That is, EPA must “make[] an ‘attempt at explanation or justification’” for its decision that there were adequate, reasonably available treatment facilities for marine sewage and provide this court “with a ‘way to know [its] methodology.’” Nat’l Wildlife Fed. v. EPA, 286 F.3d 554 , 564 (D.C. Cir. 2002) (quoting Engine Mfrs. Ass’n v. EPA, 20 F.3d 1177 , 1182 (D.C. Cir. 1994)); see also Chamber of Argentine-Paraguayan Producers of Quebracho Extract v. Holder, 332 F. Supp. 2d 43 , 49 (D.D.C. 2004) (noting agency’s “decisionmaking path” must be “reasonably” discernable from the record (internal quotation marks omitted)). 3 EPA’s guidance on Section 312(f)(3) applications reflects this construction. It requires applicants to “describe the waste disposal process for each pumpout facility and dump station” and “indicate that these practices comply with current Federal, state, and local regulations and, in some cases, explain how they comply.” A.R. at 2376. 21  EPA failed to meet its obligation. The record is devoid of any explanation for EPA’s finding that adequate sewage treatment facilities are reasonably available in the Puget Sound. Intervenors suggest that “EPA based [its] determination [as to treatment facilities] on the fact that the majority of pumped sewage is sent to wastewater treatment plants, and some is treated at onsite septic tanks ‘that meet federal requirements.’” Def.-Intervenors’ Reply Br., ECF No. 60 [hereinafter Intervenors’ Reply], at 2. But the portion of the record that Intervenors cite relates to only facilities that treat sewage from recreational vessels—it says nothing about treatment of sewage from all vessels, or importantly here, treatment of sewage from commercial vessels. See A.R. at 43 (discussing pumpout and treatment facilities for “the recreational vessel population” and noting “[t]he majority of pumped sewage is sent to wastewater treatment plants; however, some is sent to onsite septic tanks that meet federal requirements”); see also Intervenors’ Reply at 2 (noting EPA made separate determinations for recreational and commercial vessels in this section). Intervenors cannot point to, and the court cannot find, any similar determination by EPA with respect to facilities that deal with commercial marine sewage. If anything, the record appears to suggest that the agency deliberately avoided making a determination regarding the reasonable availability of adequate treatment facilities. In response to a comment expressing concern about “sewage facilities accepting septage,” EPA said that its “authority under . . . Section 312(f)(3) is limited to evaluating the reasonable availability of pumpout facilities” and “[a]ny considerations as to whether an individual wastewater treatment facility has the capacity to accept vessel sewage would appropriately lie within the jurisdiction of that municipality or utility.” A.R. at 31. That position cannot be squared with the clear statutory text. Congress directed EPA to consider the reasonable availability of adequate facilities to remove “and” treat sewage. 33 U.S.C. § 1322 (f)(3). While Intervenors suggested at oral argument that 22 EPA did not mean that it had eschewed all consideration of treatment facilities, the record contains no explanation or further context for this statement or, most importantly, any countervailing evidence that EPA did consider the reasonable availability of treatment facilities. On this record, the court must conclude that EPA did not make a reasoned determination as to the availability of sewage treatment facilities. See Nat’l Mar. Safety Ass’n v. OSHA, 649 F.3d 743 , 753 (D.C. Cir. 2011) (remanding where record was “almost devoid” of analysis beyond the agency’s “bare conclusion”). Intervenors’ attempts to fill the gaps in the agency’s reasoning are both impermissible and unconvincing. “[C]ourts may not accept . . . counsel’s post hoc rationalizations for agency action.” State Farm, 463 U.S. at 50 . “[A]n agency’s action must be upheld, if at all, on the basis articulated by the agency itself.” Id.; see also SEC v. Chenery Corp., 332 U.S. 194 , 196 (1947) (“[A] reviewing court, in dealing with a determination or judgment which an administrative agency alone is authorized to make, must judge the propriety of such action solely by the grounds invoked by the agency.”); Clean Wis., 964 F.3d at 1162–63 (rejecting argument because court could not “accept counsel’s post hoc rationalizations for agency action” (alteration omitted) (internal quotation marks omitted)). Having already discerned that EPA did not conduct any inquiry into the availability of treatment facilities in the Puget Sound, Intervenors’ post hoc explanation cannot stand in as surrogate for the agency’s own explanation. 4 4 In their reply brief, Intervenors also suggest that the issue of the reasonable availability of adequate wastewater treatment facilities was not raised before EPA. Intervenors’ Reply at 2, 5. “[A] party will normally forfeit an opportunity to challenge an agency [decision] on a ground that was not first presented to the agency for its initial consideration.” Advocs. for Highway & Auto Safety v. Fed. Motor Carrier Safety Admin., 429 F.3d 1136 , 1150 (D.C. Cir. 2005). Intervenors, however, first raised this argument in their reply brief, so they have forfeited their forfeiture argument. See Se. Ala. Med. Ctr. v. Sebelius, 572 F.3d 912 , 920 n.7 (D.C. Cir. 2009) (refusing to consider argument that issue that was not raised “with the agency at the appropriate time” was waived because the parties did not raise the purported waiver “with th[e] court at the appropriate time”). 23  But even if this court were to accept Intervenors’ explanation as EPA’s, the record still would be insufficient. Intervenors argue that EPA did verify the availability of treatment facilities because Ecology’s petition showed that most sewage “would be treated at publicly owned treatment works,” which are “regulated under the Clean Water Act” and must “obtain National Pollutant Discharge Elimination System permits.” Intervenors’ Br. at 14. Therefore, Intervenors suggest, EPA was certain that “publicly owned treatment works treat sewage in a safe and sanitary manner.” Id. But the only evidence of such a consideration in the record consists of Ecology’s own tables that simply list the name of the “Discharge Location” for pumpout facilities. See A.R. at 137–39 tbls. 5&6. Nowhere does the record state that EPA determined, based on Ecology’s list of discharge locations, that all sewage facilities were federally regulated and therefore there were adequate treatment facilities reasonably available in the Puget Sound. Moreover, even crediting Intervenors’ argument that the sewage would be properly treated, the record contains no evidence and reveals no consideration by EPA of whether existing treatment plants could accommodate the extra sewage that likely would need to be processed if the Puget Sound became an NDZ. Intervenors’ statement that “EPA verified that four commercial marine work companies can discharge vessel sewage to any publicly owned treatment facility located throughout Puget Sound” is likewise without basis. Intervenors’ Br. at 14. To substantiate their assertion, Intervenors identify four conversations that EPA held with commercial marine work companies. Id. at 14–15 (citing notes from conversations at A.R. 655, 657, 659, and 678). But these conversations could hardly have supported EPA’s finding regarding adequate treatment facilities. EPA’s notes from three of the conversations contain no discussion of sewage treatment. See A.R. at 655, 657, 659. And EPA’s notes from the fourth conversation include a single bullet point stating, “The same companies that come to take oil/waste streams can also take sewage waste. 24 And then take it to a municipality for disposal.” Id. at 678. This lone bullet point—in the four- volume Joint Appendix the parties submitted—reveals nothing about the capacity of the municipality to accept more marine sewage, nor does it establish that all commercial marine work companies can take marine sewage to a municipality, or that this is a routine practice. It therefore cannot save EPA’s determination. To receive this court’s deference, EPA must show its work. See Kirwa v. U.S. Dep’t of Def., 285 F. Supp. 3d 257 , 269–70 (D.D.C. 2018). EPA did not show that it considered the reasonable availability of adequate sewage treatment facilities, and its determination that such facilities exist was therefore arbitrary and capricious. On remand, EPA must explain its reasoning for its determination as to the existence of adequate, reasonably available treatment facilities in the Puget Sound, which may include additional fact finding as necessary. 5 4. EPA’s Methodology for Determining the Availability of Pumpout Facilities American Waterways next takes issue with EPA’s methodology for determining that adequate pumpout facilities are reasonably available. Pl.’s Mot. at 28–39. It argues that EPA’s determination was arbitrary and capricious because the agency (1) excluded large oceangoing vessels from its estimate when calculating a ratio of commercial vessels to pumpout facilities, id. at 28–31; (2) did not appropriately respond to a comment stating that two companies’ fleets were excluded from its estimate of vessels, id. at 31–32; and (3) did not consider characteristics of certain vessels that are relevant to determining whether such vessels can access pumpout facilities, id. at 32–39. Intervenors disagree. They respond that (1) EPA’s estimate of vessels properly excluded any vessels that would not require the use of pumpout facilities in the Puget Sound and 5 Because the court concludes that EPA did not explain its basis for determining that adequate treatment facilities are reasonably available in the Puget Sound, it does not reach American Waterways’ remaining argument on the adequacy of sewage treatment at municipalities near the Puget Sound, see Pl.’s Mot. at 18–20. 25 (2) even if more vessels should have been included in EPA’s estimate, additional vessels would have had little impact on the vessels-to-facilities ratio. Intervenors’ Br. at 25–30. Intervenors also argue that (3) EPA directly addressed comments regarding how the characteristics of certain vessels might limit access to pumpout facilities and no more was required of the agency. Id. at 30–39. The court takes each purported flaw in EPA’s methodology in turn. a. Vessels estimate American Waterways’ objections to EPA’s vessels estimate wade into waters where the agency is typically afforded the utmost deference. “[W]hen agency decisions involve complex judgments about sampling methodology and data analysis that are within the agency’s technical expertise, they receive an extreme degree of deference.” Dist. Hosp. Partners, L.P. v. Burwell, 786 F.3d 46 , 60 (D.C. Cir. 2015) (internal quotation marks omitted). “Although the plaintiff[] may disagree with the science or the methodology the [agency] elects to use, absent a statutory mandate that requires a particular methodology, the agency’s choice of methodology need only be ‘reasonable’ to be upheld.” Colo. River Cutthroat Trout v. Salazar, 898 F. Supp. 2d 191 , 209 (D.D.C. 2012) (citing Am. Wildlands v. Kempthorne, 530 F.3d 991 , 998–99 (D.C. Cir. 2008)). Even if EPA’s vessel count was ultimately “less than perfect, imperfection alone does not amount to arbitrary decision-making.” Dist. Hosp., 786 F.3d at 61. EPA offered a reasonable explanation for why it excluded large oceangoing vessels from its vessels estimate and thus its vessels-to-pumpout-facilities ratio. EPA stated in its Final Determination: The large, oceangoing transient commercial vessels that are only in Puget Sound for a short period of time . . . have large enough holding tanks to hold their waste during the time they are in Puget Sound, with some exceptions. . . . [T]hese vessels do not have a need to 26  pumpout and were not included when assessing the adequacy of pumpout facilities. A.R. at 7. In support of this conclusion, EPA pointed to information supplied by Ecology, including a 2013 survey titled Phase 2 Commercial Vessel Sewage Management and Pumpout: Puget Sound No Discharge Zone for Vessel Sewage. Id. at 22–23. 6 American Waterways nonetheless presses that EPA must count all vessels—regardless of their need to use pumpout facilities—and that some large oceangoing vessels, even those with holding tanks, may ultimately need pumpout facilities. Pl.’s Mot. at 28–30. These arguments fall flat. EPA’s obligation under Section 312(f)(3) is to determine if removal and treatment facilities are “reasonably available” in the Puget Sound. 33 U.S.C. § 1322 (f)(3). It would make no sense for EPA to develop a commercial vessels-to-facilities ratio, or otherwise tailor its methodology, to account for boats that do not require any pumpout or treatment services. Padding the vessels count with such empty numbers would not yield any additional information about the number of facilities that are required to adequately remove and treat marine sewage. EPA thoroughly explained its logic for reducing its estimate of vessels, and this court finds no fault in EPA’s conclusion. The statutory text does not compel a different result. American Waterways emphasizes Section 312(f)(3)’s reference to “all vessels,” but, read in context, that reference is to only those vessels that actually require disposal and treatment services in the Puget Sound. Before a state can completely prohibit vessels from discharging sewage in specific waters, EPA is directed to “determine[] that adequate facilities for the safe and sanitary removal and treatment of sewage 6 American Waterways argues that it was improper for EPA to rely on this survey, rather than a global survey, in reaching its determination. Pl.’s Reply at 18. EPA, however, offered a reasonable explanation for relying on Ecology’s 2013 study rather than American Waterways’ proposed global study: There was “no information to suggest that the results of the world survey are representative of vessels in Puget Sound.” A.R. at 23. Because EPA has offered a reasonable explanation for its choice, that choice is entitled to this court’s deference. See Coal. of Battery Recyclers Ass’n v. EPA, 604 F.3d 613 , 619–21 (D.C. Cir. 2010) (concluding that EPA “adequately justified” its choice of studies and deferring to that decision). 27 from all vessels are reasonably available for such water.” 33 U.S.C. § 1322 (f)(3). The statutory focus is thus on the reasonable availability of adequate facilities for vessels that actually require “safe and sanitary removal and treatment” services. It would make little sense for “all vessels” to include vessels that do not need the very facilities whose reasonable availability EPA is required to assess. Section 312(f)(3) therefore did not compel the inclusion of oceangoing vessels in EPA’s count. 7 Nor does the court find any basis to require EPA to develop a model that accommodates every contingent circumstance in which vessels that rarely need pumpout services in the Puget Sound require emergency service. EPA exercised its discretion in excluding such vessels and specifically explained that it had “confirmed that no large cruise ships” had requested authorization to directly discharge in the Puget Sound since 2012. A.R. at 27. The court cannot conclude that it was unreasonable for EPA to exclude ships that generally do not need to discharge in the Puget Sound and in practice had not had an emergency need to do so in the five years preceding the NDZ. b. EPA’s response to comments regarding excluded fleets American Waterways next asserts that EPA’s response to a comment stating that EPA had failed “to consider at least two companies’ entire fleets” was inadequate. Pl.’s Mot. at 31. The law of this Circuit is settled that an agency must “respond to ‘relevant’ and ‘significant’ public comments,” but it need not respond to comments that “do not disclose the factual or policy basis on which they rest.” Pub. Citizen, Inc. v. FAA, 988 F.2d 186 , 197 (D.C. Cir. 1993) (first quoting Home Box Office, Inc. v. FCC, 567 F.2d 9 , 35 & n.58 (D.C. Cir. 1977); then quoting id. at 35 n.58); see also Nat’l Shooting Sports Found., Inc. v. Jones, 716 F.3d 200 , 215 (D.C. Cir. 2013) 7 Notably, EPA also excluded other types of vessels in its count—including Washington State Ferries and U.S. military vessels—that have their own dedicated pumpout facilities, see A.R. 7, 9, but American Waterways registers no complaint as to these exclusions. 28 (“[C]omments which themselves are purely speculative and do not disclose the factual or policy basis on which they rest require no response.” (internal quotation marks omitted)). As EPA explained in its response to the disputed comment, the commenter did not identify the “number of additional existing vessels [that] may have been excluded.” A.R. at 22. The commenter claimed two fleets were missing but provided the number of vessels (six) for only one of the missing fleets. Id. at 21–22; see id. at 54962 . EPA’s response demonstrated that small discrepancies in the commercial vessel count, which already included more than 600 vessels, were not substantial enough to alter its analysis. Id. at 22 . And without information regarding the size of the other missing fleet or information substantiating the commenter’s claim that the “numbers should be higher,” id., EPA could not reasonably assess how its model might have fallen short and the degree to which its estimates needed to be reconsidered. In such a circumstance, no additional response was required. Moreover, minor deficiencies in an agency’s data do not provide this court with a basis to conclude that the agency acted arbitrarily and capriciously. See Dist. Hosp., 786 F.3d at 61 (holding that an agency’s reliance on an imperfect dataset “alone does not amount to arbitrary decision-making”); Catawba County v. EPA, 571 F.3d 20 , 45 (D.C. Cir. 2009) (“EPA used the best information available in making its designations, and that is all our precedent requires.”). Thus, any shortcomings in EPA’s response are not grounds for remand. See Nat’l Shooting Sports Found., Inc., 716 F.3d at 215 (“[O]nly comments which, . . . if adopted, would require a change in an agency’s proposed rule cast doubt on the reasonableness of a position taken by the agency.” (internal quotation marks omitted)). 29  c. EPA’s use of a vessels-to-facilities ratio Finally, American Waterways offers a broadside attack on EPA’s determination that adequate pumpout facilities exist, particularly contesting EPA’s use of a ratio to determine whether there were reasonably available facilities for all vessels. American Waterways first identifies multiple logistical issues that it claims EPA failed to address properly. See Pl.’s Mot. at 32–38. It then argues that EPA failed to explain why a simple ratio was helpful to its determination and why a ratio of 11 vessels to 1 pumpout facility meant that pumpout facilities were reasonably available. Id. at 38–39. First, American Waterways argues that EPA failed to consider the logistical challenges commercial vessels would face when attempting to use pumpout facilities, including concerns about large boats accessing facilities, mobile facilities gaining security access to certain docks, and the time and cost of using pumpout services. Id. at 32–36. American Waterways also argues that EPA ignored concerns about seasonal demand for services. See id. at 38. These arguments boil down to discontent with EPA’s conclusion that mobile pumpout facilities, which EPA concluded resolve many of American Waterways’ complaints, can service commercial vessels that are unable to use stationary pumpout facilities. EPA acknowledged the very same logistical challenges that American Waterways now raises and concluded that they were not prohibitive: EPA has determined that there are numerous mobile pumpout facilities with the capacity to serve large commercial vessels and that service all of Puget Sound. Among the five pumpout companies identified in Ecology’s petition, approximately 52 pumpout trucks and two mobile commercial pumpout vessels are available to service all of Puget Sound. As such, the geographic location or vessel access restrictions at the two stationary pumpout facilities in Bellingham are not determinative. A.R. at 24. The agency went on to explain precisely how mobile pumpout facilities could solve some of the challenges that vessels faced and delineated separate responses regarding the number 30 of mobile pumpout companies, services provided, capacity of mobile pumpouts, dock access and security concerns, and seasonal demand. Id. at 25–26. American Waterways may disagree with the conclusions EPA reached during notice and comment, but that does not convert EPA’s reasoned response to the type of non-response that “demonstrates that the agency’s decision was not ‘based on a consideration of the relevant factors.’” Thompson v. Clark, 741 F.2d 401 , 409 (D.C. Cir. 1984) (quoting Overton Park, 401 U.S. at 416 ). This court will not substitute its judgment for EPA’s. Second, American Waterways claims that EPA was “dismissive” of a comment from American Cruise Lines relaying concerns about pumping sewage from the American Spirit, a small cruise ship. Pl.’s Mot. at 37–38; A.R. at 54928–40. But American Waterways’ argument is based on a selective excerpt of EPA’s thorough response to American Cruise Lines. EPA’s response explained, for example, why American Cruise Lines’ concerns about pumpout times were unfounded based on its research and further explained that, while the American Spirit might need to adjust its itinerary or operations to accommodate the time needed to pump out, this did not render pumpout facilities unavailable. See A.R. at 27. There is thus no truth to American Waterways’ claim that EPA “dismiss[ed] rather than address[ed]” the issues American Cruise Lines raised. Pl.’s Mot. at 38. EPA’s response satisfies the court that the agency “examine[d] the relevant data and articulate[d] a satisfactory explanation for its action.” State Farm, 463 U.S. at 43 . Third, American Waterways argues that, particularly considering the aforementioned logistical challenges, EPA acted arbitrarily and capriciously (1) by basing its determination that facilities were reasonably available on a ratio of commercial vessels to pumpout facilities and (2) by failing to explain the relevance of that ratio. Pl.’s Mot. at 34–38. Intervenors counter that 31 EPA properly responded to these logistical concerns and that EPA considered a ratio of commercial vessels to pumpout facilities as but one factor of several in determining that adequate pumpout facilities are reasonably available in the Puget Sound. Intervenors’ Br. at 30–32, 37–39. In reviewing an agency’s use of a given model, “judicial deference . . . cannot be utterly boundless.” Chemical Mfrs. Ass’n v. EPA, 28 F.3d 1259 , 1265 (D.C. Cir. 1994). This court will find EPA’s model “arbitrary and capricious if there is simply no rational relationship between the model and . . . [the situation] to which it is applied.” Greater Yellowstone Coal. v. Kempthorne, 577 F. Supp. 2d 183 , 198 (D.D.C. 2008) (internal quotation marks omitted). “Generally, the court defers the determination of fit between the facts and the model to the EPA, so that the agency rather than the court may balance marginal losses in accuracy against marginal gains in administrative efficiency and timeliness of decision making.” Chemical Mfrs. Ass’n, 28 F.3d at 1265 . The record before the court reveals that EPA did not simply compute a ratio and call it quits. Rather, EPA reached out to multiple pumpout providers to ascertain any restrictions on vessel size, capacity, time to pump out, dock access, and seasonality. A.R. at 24–27; id. at 655–60, 668–70, 672–74, 676–79 (records of conversations with pumpout facilities). EPA explicitly stated that its determination was based, in part, on information gleaned from these conversations, which satisfied the agency that (1) “mobile pumpouts provide service throughout Puget Sound, provide sufficient capacity for commercial vessels, and generally do not experience dock access issues”; and (2) “services can be scheduled by appointment to accommodate vessel needs and itineraries, and are sufficiently diversified such that they do not experience seasonal fluctuations.” Id. at 8–9. Thus, without deciding whether a ratio by itself is a permissible methodology for determining whether facilities are reasonably available, EPA’s decision here was more nuanced than the simple 32 calculation of a ratio that American Waterways suggests. See Pub. Emps. for Env’t Resp. v. U.S. Dep’t of Interior, 832 F. Supp. 2d 5 , 24, 26 (D.D.C. 2011) (rejecting argument that agency did not show that its “observations [we]re systematic, comprehensive, or scientific” because the court was required to “defer to the agency’s chosen methodology so long as it bears a rational relationship between the method and that to which it applied” (alterations omitted) (internal quotation marks omitted)). American Waterways’ second attack on EPA’s reliance on a ratio—that EPA failed to adequately explain the relative significance of its ratio—has more teeth. See Pl.’s Mot. at 38–39. “[T]he process by which an agency reaches its decreed result must be logical and rational.” Natural Res. Def. Council, Inc. v. Rauch, 244 F. Supp. 3d 66 , 86 (D.D.C. 2017) (alterations omitted) (quoting Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359 , 374 (1998)). To demonstrate that its process was logical and rational, EPA must, “at a minimum, provide[] an explanation for adopting” a given metric. See U.S. Sugar Corp., 830 F.3d at 652. EPA, however, did not provide any explanation for how an 11:1 ratio of commercial vessels to pumpout facilities supported the conclusion that pumpout facilities were reasonably available. See A.R. at 7–10. EPA did not, for example, explain whether there was a maximum permissible ratio for approving an NDZ or even if the 11:1 ratio fell into a given range of permissible ratios for commercial vessels. By contrast, with respect to recreational vessels, EPA explained that its ratio of 171 recreational vessels to one pumpout facility was appropriate by referring to the Clean Vessel Act’s guidance that there should be “one pumpout station for every 300-600 boats.” Id. at 4–6. EPA’s lack of explanation with respect to commercial vessels stands out in comparison. Intervenors attempt to make up for this shortcoming by noting that “[p]ast affirmative determinations shed some light” on why EPA found the 11:1 ratio reasonable, but Intervenors fail 33 to identify a single page in the record in which EPA itself looked to past determinations. See Intervenors’ Br. at 38. Without an explanation for why a ratio of 11 commercial vessels to one pumpout facility is reasonable, EPA has not shown that its reliance on this ratio was rational and logical. On remand, EPA will have the opportunity to explain why the 11:1 ratio supports a “reasonable availability” determination. 5. Scrutiny of Ecology’s Petition a. Exclusion of key data American Waterways also argues that this court should vacate and remand EPA’s determination because Ecology’s petition for an NDZ did not include a map, operating hours, or draught restrictions for all facilities. American Waterways suggests that these omissions required EPA to reject Ecology’s petition. 8 Pl.’s Mot. at 39–44. Intervenors, naturally, have a different view. They argue that an appendix to Ecology’s petition provided most of the information American Waterways claims is missing and that EPA properly did not require a map of mobile pumpout facilities because they are, by definition, not fixed to a location. Intervenors’ Br. at 39–40. As a “general principle,” “it is always within the discretion of . . . an administrative agency to relax or modify its procedural rules adopted for the orderly transaction of business before it when in a given case the ends of justice require it.” Am. Farm Lines v. Black Ball Freight Serv., 397 U.S. 532 , 539 (1970) (internal quotation marks omitted). For a court to undo an agency’s action due to the agency’s deviation from its procedures, the complaining party must make a 8 American Waterways also argues that EPA should have rejected Ecology’s petition because it did not include a statement that the treatment facilities in the petition complied with federal standards. See Pl.’s Mot. at 43–44. Because this court has already concluded that EPA’s analysis of wastewater treatment was insufficient and requires remand, it need not determine whether Ecology’s failure to include a certification of compliance with respect to treatment facilities renders EPA’s decision arbitrary and capricious. 34 “showing of substantial prejudice.” Associated Press v. FCC, 448 F.2d 1095 , 1104 (D.C. Cir. 1971) (internal quotation marks omitted). American Waterways contends that the American Farm Lines rule does not apply here because EPA’s procedures “confer important procedural benefits upon individuals,” id. (internal quotation marks omitted), and “affect individuals’ rights,” see Chiron Corp. v. Nat’l Transp. Safety Bd., 198 F.3d 935 , 944 (D.C. Cir. 1999). Pl.’s Mot. at 40–42. In such situations, American Waterways argues, courts have limited an agency’s ability to deviate from its procedures. Id. But this comparison is inapt, and the court need look no further than American Waterways’ own case law to demonstrate why. American Waterways relies on Morton v. Ruiz, where the Supreme Court found that an agency distributing a federal assistance program for impoverished Native Americans needed to adhere to strict internal procedures to determine whether an applicant was entitled to benefits. 415 U.S. 199 , 231–32, 235 (1974). There, the “rights of individuals”—that is, individuals’ rights to federal benefits—were being adjudicated. Id. at 235 . In such a situation, the Supreme Court concluded that it was “incumbent upon” the agency “to follow [its] own procedures.” Id.; see also Mass. Fair Share v. Law Enf’t Assistance Admin., 758 F.2d 708 , 711–12 (D.C. Cir. 1985) (reaching a similar conclusion with respect to procedural requirements for finalizing grants to successful applicants). Here, by contrast, EPA did not adjudicate the individual rights of American Waterways’ members when it approved the Puget Sound NDZ—it merely determined that Washington may create an NDZ for those waters. Chiron Corp., 198 F.3d at 944 (“Because an NTSB investigation does not itself determine the rights of the parties . . . the Guidance cannot be viewed as a binding rule on these terms.”). The American Farm Lines rule, and not a stricter one, therefore applies. 35  Following that rule, American Waterways fails to make a “showing of substantial prejudice,” even if EPA did deviate from its own procedure. Associated Press, 448 F.2d at 1104 (internal quotation marks omitted). Although American Waterways vaguely claims that the lack of information made it difficult for the regulated community to access “the information necessary to meaningfully participate,” Pl.’s Mot. at 42–43, it offers no credible reason to believe that any person’s right to participate was impaired. First, American Waterways overstates the amount of information missing from Ecology’s petition. The petition contained a map of stationary pumpout facilities and identified where mobile pumpout facilities were based, although it did not depict the range of the mobile pumpout companies. A.R. at 111. An appendix to the petition titled “Pumpout Facility Information” further provided the hours of operation for the vast majority of pumpout facilities. See id. at 119–24. The same appendix provided the “Min Depth at Low Tide” for each of the stationary facilities, although it did not do so for mobile pumpout facilities. Id. As Ecology explained, such draught requirements would vary for mobile pumpout companies, depending on where they were providing services. See id. at 145. Second, with respect to the information that Ecology did omit from its petition, the record reveals that EPA received and responded to comments about each of the omitted issues—including the range of mobile pumpout facilities, access to such facilities, and their hours of operation. Id. at 25–26 (concluding marine work companies “will travel to the customer so that the distribution of services covers all of Puget Sound”; providing information on hours of operation in section titled “service provided”; explaining why “access to docks has not been an issue” for mobile pumpout facilities); id. at 23 (noting additional comment on lack of access to mobile facilities). American Waterways fails to identify what further comments it would have liked to offer or to 36 meaningfully address how EPA’s responses to the existing comments were insufficient to protect its interests. Moreover, EPA explained why the omissions in Ecology’s petition did not hamper its reasoned decisionmaking. It would not yield useful information, EPA explained, to require Ecology’s petition to comply with certain requirements for mobile pumpout facilities and pumper trucks because of the variable places and docks these facilities use. Id. at 18–19; see also id. at 145 (Ecology noting that “[d]ue to the nature of pumper trucks[’] geographic mobility, and ability to operate in many different locations, mapping the companies or providing size of draught limits is not practical”). EPA also concluded that, given mobile pumpout companies’ ability to travel throughout the entire Puget Sound region, “mapping the specific locations of these companies would not add to EPA’s analysis or provide any further information for the regulated community.” Id. at 19. EPA therefore concluded that, in this instance, strict adherence to the petition requirements would not be helpful in reaching its determination and therefore was unnecessary. On this record, the court concludes that it was not arbitrary or capricious for EPA to relax its requirements for Ecology’s Petition. b. Certificate of Need Finally, American Waterways challenges EPA’s NDZ determination on the basis that EPA accepted without scrutiny Ecology’s Certificate of Need, which stated that the Puget Sound required protection from marine discharges that exceeded federal standards. Pl.’s. Mot. at 44. Not so, Intervenors contend. They argue that Congress gave the states, not EPA, the authority to determine whether certain waters require greater environmental protection and that second- guessing the Certificate of Need would have exceeded EPA’s authority. Intervenors’ Br. at 40–42. Intervenors also argue that American Waterways waived this argument by previously arguing to 37 the Washington Pollution Control Hearings Board that EPA lacked authority to review Ecology’s Certificate of Need. See id. at 40, 42. Turning first to Intervenors’ argument that American Waterways adopted a contrary position prior to this litigation, “[i]t is settled law that a party that presents a winning opinion before the agency cannot reverse its position before this court.” S. Coast Air Quality Mgmt. Dist. v. EPA, 472 F.3d 882 , 891 (D.C. Cir. 2006); see also Del. Dep’t of Nat. Res. & Env’t Ctrl. v. EPA, 895 F.3d 90 , 96 (D.C. Cir. 2018) (“A petitioner may not take a position in this court opposite from that which it took below, particularly when its position has prevailed before the agency.” (internal quotation marks omitted)). In order to advance an argument on a petition for review, the party must have given “adequate notification of the general substance of the complaint” to the agency. S. Coast Air Quality Mgmt. Dist., 472 F.3d at 891. The record reveals that American Waterways’ position on EPA’s authority to review Ecology’s Certificate of Need has been inconsistent, but not fatally so. Before the Washington Pollution Control Hearings Board, American Waterways argued that the Board should stay Ecology’s Certificate until the Board could review it precisely because “EPA is only authorized to determine if adequate pump out facilities exist and will provide no substantive review of the Certificate of Need.” A.R. at 2806; see also id. at 2818 (arguing that concerns regarding the Certificate of Need “are not subject to EPA review”). During the notice-and-comment period, however, American Waterways nudged EPA to at least review Ecology’s Certificate of Need. American Waterways outlined its concerns regarding the Certificate of Need and argued, “EPA must play a role in evaluating the integrity of that certification, and should not render a final determination on adequacy of pump-out capacity since Ecology’s ‘certification’ is not based in fact.” Id. at 55273. While stopping short of asserting that EPA had an obligation to independently 38 verify the Certificate of Need, American Waterways suggested that its concerns about the Certificate “should inform EPA’s review of Ecology’s petition.” Id. at 55275. In the same paragraph, American Waterways nonetheless implied that EPA’s review was limited to determining “Ecology’s assertion that ‘the current number and location of pump-outs are sufficient’” to support an NDZ. Id. American Waterways’ position on this issue has certainly morphed depending on the audience, but its comments to EPA are not irreconcilably at odds with its position here. The court thus cannot conclude that American Waterways is precluded from challenging the Certificate of Need. See Del. Dep’t of Natural Resources & Env’t Ctrl., 895 F.3d at 96 (requiring a “clear contradiction” with a party’s position before the agency in order to foreclose judicial review). Accordingly, this court will consider whether EPA was obligated to review Ecology’s Certificate of Need. Starting, as it must, with the text of the statute, Lamie v. U.S. Tr., 540 U.S. 526 , 534 (2004), the court concludes that Congress was clear that the petitioning state—not EPA—is entrusted with determining whether enhanced protection against marine sewage discharge is necessary. Section 312(f)(3) delineates separate roles for the petitioning state and EPA. The state is entrusted with determining whether “the protection and enhancement of the quality of some or all of the waters within such State require greater environmental protection.” 33 U.S.C. § 1322 (f)(3). Following that determination, EPA’s Administrator is tasked with determining whether “adequate facilities for the safe and sanitary removal and treatment of sewage from all vessels are reasonably available.” Id. By design, the state and EPA work in separate spheres: the state identifies a need for greater protection from marine discharge, and EPA determines whether prohibition of marine 39 discharge will be feasible. The text of the statute therefore suggests EPA does not enjoy plenary review of the state’s Certificate of Need. This interpretation is consistent with the regulatory scheme Section 312(f) creates. See Nat’l Ass’n of Home Builders v. Defs. of Wildlife, 551 U.S. 644 , 666 (2007) (“It is a fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.” (internal quotation marks omitted)). In contrast to Section 312(f)(3), which creates a path for a state to regulate an NDZ with EPA’s approval, Section 312(f)(4) calls for the Administrator to determine whether greater regulation of marine sewage is necessary. Under Section 312(f)(4), “[i]f the Administrator determines upon application by a State that the protection and enhancement of the quality of specified waters within such State requires such a prohibition,” EPA must then regulate to prohibit discharge in such waters. 33 U.S.C. § 1322 (f)(4)(A) (emphasis added). Section 312(f)(4) therefore provides a useful comparison to Section 312(f)(3): Section 312(f)(4) explicitly directs the Administrator to assess the need for the protection and enhancement of water quality, and the Administrator is thereafter responsible for regulating to “prohibit the discharge from a vessel of any sewage (whether treated or not) into such waters.” Id. In contrast, under Section 312(f)(3), where the state takes primary responsibility for regulating, the Administrator’s role is limited to ensuring that “adequate facilities for the safe and sanitary removal and treatment of sewage” are available. Id. § 1322(f)(3). Based on the text of Section 312(f)(3) and its statutory context, the court concludes that EPA did not have a duty to independently verify Ecology’s Certificate of Need under Section 312(f)(3) and did not arbitrarily or capriciously accept the Certificate. 40  C. Remedy The only remaining question before the court is whether to remand with vacatur, which would have the effect of undoing the Puget Sound NDZ, or remand without vacatur, which would allow the NDZ to continue while EPA acts on remand. American Waterways requests vacatur of EPA’s determination in its entirety or “partial vacatur as to certain affected vessel classes.” See Pl.’s Suppl. Mem. of Law, ECF No. 65 [hereinafter Pl.’s Suppl. Br.], at 3. EPA and Intervenors, meanwhile, principally argue that any remand should be without vacatur. See Mot. for Recons. at 9–10; Intervenors’ Reply at 15–17. Following supplemental briefing, Intervenors restated their position that this court, if it must remand, should remand without vacatur, but requested that if the court does vacate EPA’s determination, it vacate the determination solely with respect to American Waterways’ members. Def.-Intervenors’ Suppl. Br. Opposing Vacatur, ECF No. 64, at 3–4. “While unsupported agency action normally warrants vacatur,” whether to remand a rule with or without vacatur is committed to the district court’s discretion. See Advocs. for Highway & Auto Safety v. Fed. Motor Carrier Safety Admin., 429 F.3d 1136 , 1151 (D.C. Cir. 2005) (noting “this court is not without discretion” in determining whether to vacate an agency decision); see also Heartland Reg’l Med. Ctr. v. Sebelius, 566 F.3d 193 , 198 (D.C. Cir. 2009) (“[T]he terms ‘invalid’ and ‘vacated’ are not synonyms.”). “The decision whether to vacate depends on [1] the seriousness of the order’s deficiencies (and thus the extent of doubt whether the agency chose correctly) and [2] the disruptive consequences of an interim change that may itself be changed.” Allied-Signal v. U.S. Nuclear Regul. Comm’n, 988 F.2d 146 , 150–51 (D.C. Cir. 1993) (internal quotation marks omitted). 41  1. Seriousness of the Determination’s Deficiencies Here, the court has identified at least two sizeable flaws in EPA’s decisionmaking—its failure to consider the costs of compliance and its failure to determine whether adequate facilities for the treatment of marine sewage are reasonably available. In determining whether such flaws counsel in favor of vacating, the court considers whether “there is at least a serious possibility that the [agency] will be able to substantiate its decision on remand.” See Allied-Signal, Inc., 988 F.2d at 151; see also Williston Basin Interstate Pipeline Co. v. FERC, 519 F.3d 497 , 504 (D.C. Cir. 2008) (remanding without vacatur after finding there was “a significant possibility that the [agency] may find an adequate explanation for its actions”). The court finds that there is a serious possibility that EPA will be able to substantiate its determination on remand. As to the likelihood that correcting EPA’s first flaw will alter the agency’s decision, there is no dispute that Ecology considered costs to the industry and presented EPA with an estimate of those costs in its petition. See Intervenors’ Br. at 20–21; Pl.’s Mot. at 22 n.14. Thus, at least one regulatory body, Ecology, has already concluded that the costs of the regulation do not outweigh its benefits. See A.R. at 68 (explaining Ecology’s “multifaceted effort” to determine whether an NDZ was appropriate included “evaluating impact costs and benefits,” among numerous other considerations); id. at 71 (noting one consequence of considering costs was five-year implementation delay). EPA therefore is not starting from scratch. And although the agency ultimately disregarded costs, its responses to comments reveal some awareness of the issue. See id. at 15 (noting Ecology had created a five-year delayed implementation for some vessels to ease costs and providing examples of helpful cost information for commenters to gather). There is therefore a serious possibility that EPA will reissue the same determination after fully considering costs. 42  Likewise, there is a possibility that, after EPA considers the reasonable availability of adequate treatment facilities for marine sewage, it will again green light the NDZ. Nearly all the treatment facilities that Ecology has thus far identified are public treatment facilities. See id. at 137–39. And while American Waterways makes much of the fact that two public treatment facilities operate under consent decrees, Pl.’s Mot. at 17, EPA’s guidance on this issue suggests that “[d]ischarge to a public wastewater collection system and treatment facility” is one of two “preferable” disposal methods, A.R. at 2376. EPA’s guidance and the predominance of public treatment facilities in the record suggest there is at least a “non-trivial likelihood that” EPA will again permit Ecology to designate the Puget Sound as an NDZ, supporting remand without vacatur. See WorldCom, Inc. v. FCC, 288 F.3d 429 , 434 (D.C. Cir. 2002). 2. Disruptive Consequences of an Interim Change Regarding the second Allied-Signal factor, the potential disruptiveness of vacatur, the court is concerned that vacating EPA’s determination at this juncture would have a negative impact on environmental conditions in the Puget Sound. As the D.C. Circuit has held, even where a court finds “more than several fatal flaws” in an agency action, it is nonetheless “appropriate to remand without vacatur in particular occasions where vacatur ‘would at least temporarily defeat . . . the enhanced protection of the environmental values covered by [the agency action at issue].’” North Carolina v. EPA, 550 F.3d 1176 , 1178 (D.C. Cir. 2008) (per curiam) (quoting Env’t Def. Fund, Inc. v. Adm’r of the U.S. EPA, 898 F.2d 183 , 190 (D.C. Cir. 1990)); see also Ctr. for Biological Diversity v. EPA, 861 F.3d 174 , 189 (D.C. Cir. 2017) (per curiam) (remanding without vacatur because “vacating would at least temporarily defeat . . . the enhanced protection of the environmental values covered by [the action at issue].”). As this court stated in denying EPA’s motion for remand, the Puget Sound NDZ is a significant piece of a years-long initiative in the 43 State of Washington to improve the quality of the waters of the Puget Sound. Remand Op. at 7–8. Establishing the NDZ prompted the state’s Department of Health to reopen nearly 700 acres of commercial shellfish beds, which could close again if the NDZ is vacated. Id.; Intervenors’ Reply at 16–17. Additionally, vacating the NDZ would permit new recreational boaters to discharge partially treated sewage into the Puget Sound. Intervenors’ Reply at 15–16. The court therefore concludes that enhanced protection of the environmental integrity of the Puget Sound favors remand without vacatur. The court also finds that environmental-protection concerns outweigh the potential costs to commercial vessels of keeping the determination in place during remand. Washington’s NDZ regulations mitigate such costs. Ecology has delayed implementation of the new discharge requirements for “tug boats, commercial fishing vessels, small commercial passenger vessels, and National Oceanic and Atmospheric Administration (NOAA) research and survey vessels” until May 10, 2023. A.R. at 70–71 (footnote omitted). Accordingly, such vessels have another two- and-a-half years to take whatever steps are required to prepare to comply with the NDZ. See Dep’t of Ecology, State of Wash., Puget Sound Is Now a No-Discharge Zone for Vessel Sewage, https://ecology.wa.gov/Water-Shorelines/Puget-Sound/No-discharge-zone (last visited Nov. 29, 2020). This implementation delay provides regulated parties with a buffer while EPA reconsiders its determination. American Waterways nonetheless urges the court to vacate the NDZ on the ground that its continuation even while on remand will require its members “to expend significant resources” to retrofit their vessels by May 2023. See Pl.’s Reply Mem. of Law, ECF No. 56, at 24–27. American Waterways relies on the July 30, 2019 Declaration of Timothy Stewart, a Senior Director of Fleet Engineering and Shipyards at Foss Maritime Company (“Foss”), to substantiate its position. Pl.’s 44 Reply in Further Supp. of Cross-Mot. for Remand with Vacatur, ECF No. 39, Decl. of Timothy Stewart, ECF No. 39-1 [hereinafter Stewart Decl.], ¶ 1. Stewart avers that the vessels at Foss typically undergo maintenance twice every five years—once in the third year since the last full maintenance and once in the fifth year—and that off-schedule maintenance and work is “extremely costly.” Id. ¶ 16 . According to Stewart, two ships in Foss’s fleet were scheduled to be dry docked in March and April 2020 and not again until after the effective date of the NDZ. See id. ¶ 22 . Stewart’s Declaration suggests that these vessels were scheduled for retrofitting of new tanks during those months. See id. Foss will continue to incur the expense of retrofitting other vessels in its fleet, at an average cost of $140,000. See id. Though the court recognizes that companies like Foss may continue to incur costs during the remand period, Stewart’s Declaration alone does little to establish what the overall cost is likely to be. Stewart represents only one company, and the court has before it no evidence that other companies are likely to incur retrofitting costs in the near term or how much those costs might be. Even as to Foss, because the declaration is now over a year old, it remains unclear how much additional cost Foss is likely to incur in the coming months. In short, though American Waterways’ members may face some costs of compliance during the remand period, those costs do not outweigh the potential environmental harm that would befall the Puget Sound were the court to vacate the NDZ. 3. Partial Vacatur American Waterways argues that, even if full vacatur is inappropriate, the court should at least grant partial vacatur of the determination “as to certain affected vessel classes.” Pl.’s Suppl. Br. at 3. In other words, American Waterways wants its members to be exempt from the NDZ until a final determination is made on remand. The court declines that invitation. 45  “Severance and affirmance of a portion of an administrative regulation is improper if there is ‘substantial doubt’ that the agency would have adopted the severed portion on its own.” North Carolina v. EPA, 531 F.3d 896 , 929 (D.C. Cir. 2008) (internal quotation marks omitted). Section 312(f)(3) of the Clean Water Act requires EPA to make a single determination as to “all vessels.” 33 U.S.C. § 1322 (f)(3) (emphasis added). The statute therefore gives EPA no authority to make piecemeal determinations that would affect some vessels but not others, and the court cannot conclude that EPA’s determination is segregable. The cases on which American Waterways primarily relies in requesting partial vacatur do not compel a different result. The courts in those cases ordered partial vacatur of regulations that were plainly divisible. For instance, in American Iron & Steel Institute v. OSHA, OSHA was required to investigate the feasibility of lead-exposure standards as to each specific industry to which the standard applied, and when the court found the standard was not feasible in certain industries, vacatur as to only those industries was the proper course. See 939 F.2d 975 , 979–80, 1010 (D.C. Cir. 1991). Likewise, in Petroleum Communications, Inc. v. FCC, the court vacated FCC’s cellular service regulation only as to licensees that provide coverage in the Gulf of Mexico. 22 F.3d at 1173 . The FCC regulatory scheme at issue already divided licensees into geographic regions. Id. at 1166 . And Petroleum Communications involved a special situation in which FCC had previously exempted Gulf of Mexico licensees from regulations because of the unique fact that they, unlike licensees anywhere else in the country, used towers that were attached to mobile oil and gas platforms floating in the ocean. Id. at 1167–68. Here, by contrast, Congress did not instruct EPA to make specific determinations with respect to classes of vessels. Rather, Congress commanded EPA to make a single determination taking account of “all” vessels. 33 U.S.C. § 1322 (f)(3). Partial vacatur therefore would not be appropriate. 46  * * * There remains the open question of how long EPA will be given to address deficiencies on remand. By statute, EPA must make its “determination within 90 days of the date of” a state’s application. 33 U.S.C. § 1322 (f)(3). EPA’s review should therefore be prompt. On the other hand, EPA has yet to finalize its guidance on how the agency should consider costs in making a determination under Section 321(f)(3). Mot. for Recons. at 4 (noting that “[t]he agency is now developing cost-consideration guidance”); EPA Costs Memo at 3 (noting additional guidance is forthcoming). But the lack of formal guidance should not prohibit EPA from proceeding expeditiously on remand. Congress wanted EPA to act quickly, and so does this court. Accordingly, the court will order this matter remanded without vacatur for a period of 90 days. Any request for more time must be made by motion and based on a showing of good cause for an extension. V. CONCLUSION AND ORDER For the foregoing reasons, the court (1) grants in part and denies in part Plaintiff’s Motion for Summary Judgment, ECF No. 46; (2) grants in part and denies in part Intervenors’ Cross- Motion for Summary Judgment, ECF No. 52; and (3) denies as moot EPA’s Motion for Reconsideration of Remand, ECF No. 49. The court remands the record to EPA for a period of 90 days for further consideration of the following issues, including any additional fact-gathering the agency deems necessary: (1) the costs of creating an NDZ in the Puget Sound; (2) the reasonable availability of adequate sewage treatment facilities in the Puget Sound; and (3) an explanation of EPA’s use of a ratio of commercial vessels to pumpout facilities to determine whether adequate treatment and removal 47 facilities are reasonably available in the Puget Sound. EPA’s determination is not vacated pending remand. Dated: November 30, 2020 Amit P. Mehta United States District Court Judge 48

2020-12-01 02:00:57.445897+00

https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2019cv2372-22

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA TELEMATCH, INC., Plaintiff, v. Civil Action No. 19-2372 (TJK) UNITED STATES DEPARTMENT OF AGRICULTURE, Defendant. MEMORANDUM OPINION Telematch, Inc. (d/b/a Farm Market iD) (“FMID”), collects, maintains, and analyzes agricultural data from various sources, including the federal government. It has regularly submitted FOIA requests for USDA records for over a decade. From December 2018 to March 2019, FMID submitted seven FOIA requests to USDA for specific records. These seven requests sought records that include what USDA calls “Farm Numbers,” “Tract Numbers,” and “Customer Numbers.” USDA’s FOIA office denied those requests either in part or in full. Not satisfied with the documents USDA did provide, FMID administratively appealed, but that process blew past FOIA’s statutory deadlines. So FMID sued in this Court. FMID seeks release of the remaining records they requested, as well as relief from USDA’s alleged policy of delaying its processing of FOIA requests. FMID also alleges that a now-superseded USDA FOIA regulation contradicts the FOIA statute and is arbitrary and capricious under the Administrative Procedure Act. The parties have cross-moved for summary judgment. For the reasons explained below, including that the records at issue are exempt from disclosure, the Court will grant USDA’s motion and deny FMID’s.  Background A. The Records at Issue Although FMID’s requests, detailed below, encompass various types of files maintained by the Department of Agriculture (USDA), the dispute between the parties—at least as to the question of whether USDA has improperly withheld any records—boils down to its treatment of Farm Numbers, Tract Numbers, and Customer Numbers. USDA creates Farm Numbers and Tract Numbers and assigns them to land enrolled in USDA programs. ECF No. 9-2 (“Pl.’s Stmt. Facts”) ¶ 5; ECF No. 13-2 (“Def.’s Stmt. Facts”) ¶ 22. As part of its internal operations, USDA creates a map of enrolled land that outlines farm or ranch boundaries with acreage figures. Def.’s Stmt. Facts ¶ 23. USDA then creates digitally drawn polygons on aerial photos or maps to depict these boundaries. Id. Farm and Tract Numbers correspond to these polygons. Id. The Farm Number refers to the entire farm, and Tract numbers refer to the tract units of contiguous land within that farm. Id. USDA uses Farm and Tract Numbers in various ways. USDA may use the numbers, for example, to identify the number of acres planted with a particular crop in a farm program. Id. ¶ 24. For other programs, USDA may use the numbers to identify the location of conservation practices or geographical features. Id. Customer Numbers are unique identifiers USDA assigns to individuals or entities in USDA databases. Id. ¶ 37; Pl.’s Stmt. Facts ¶ 5. USDA uses the numbers to identify program participants and to help provide and administer farm loans, crop insurance, and disaster assistance compensation. Pl.’s Stmt. Facts ¶ 5. A Customer Number, like Farm and Tract Numbers, can be used to connect other USDA data. Id. ¶¶ 5–6; Def.’s Stmt. Facts ¶¶ 27, 34. 2  B. Plaintiff’s FOIA Requests 1. Request 2019-FSA-01467-F FMID submitted FOIA request 2019-01467-F in December 2018 for two Farm Reconstitution data files consisting of Farm Numbers and Customer Numbers, as well as state and county codes. Def.’s Stmt. Facts ¶¶ 1–3; ECF No. 13-3 (“Buchan Decl.”), Ex. 4. A reconstitution occurs when a farm or tract is either divided or combined with another farm or tract. Def.’s Stmt. Facts ¶ 2. Farm Reconstitution data files show which farms or tracts underwent reconstitution and provide information on the newly constituted farms or tracts. Id.; Pl.’s Stmt. Facts ¶ 16. In March 2019, USDA provided the statistical version of the file that contained the State Code, County Code, Reconstitution Date, and Reconstitution Type. Def.’s Stmt. Facts ¶ 3. But USDA withheld the Parent Farm Number, Resulting Farm Number, Customer Number, and Resulting Customer Number as exempt under FOIA Exemptions 3 and 6. Id. 2. Request 2019-FSA-01492-F FMID submitted FOIA request 2019-FSA-01492-F in December 2018. Def.’s Stmt. Facts ¶ 4. The request sought the 2018 Conservation Reserve Program (CRP) Active Contract Names and Addresses file. Id.; Buchan Decl., Exs. 6, 7. In March 2019, citing FOIA Exemptions 3 and 6, USDA provided a statistical file with no matching name and address information. Def.’s Stmt. Facts ¶ 5. USDA also provided Name, Address, and actual CRP Payment amount information. Id. ¶ 6; Buchan Decl., Exs. 6. 3. Request 2019-FSA-01497-F FMID submitted FOIA request 2019-FSA-01497-F in December 2018 for the Business Party Share File. Def.’s Stmt. Facts ¶ 7. The Business Party Share File shows all business 3 relationships within a farming operation by linking Parent and Member Tax-ID or Core Customer ID, which are distinct from Customer Numbers. Id. ¶¶ 8, 37–38. In March 2019, USDA instead provided the Business Party Statistical Share File. Id. ¶ 9. The Statistical file does not include Parent Customer Number and Member Customer Numbers. Pl.’s Stmt. Facts ¶ 43. USDA did not explain its decision to provide the statistical file rather than the requested file. Id. ¶ 45. 4. Request 2019-FSA-01539-F FMID submitted FOIA request 2019-FSA-01539-F for the 2018 Direct and Countercyclical Payment Program (DCP) Tract Crop File in December 2018. Id. ¶ 46. The DCP Tract Crop File, which USDA now calls the Farm Tract File, contains records that include Farm Numbers and Tract Numbers. Id. ¶ 47–48; Def.’s Stmt. Facts ¶ 11. In April 2019, citing 7 U.S.C. § 8791 (“Section 8791”), USDA instead provided the Farm Tract Crop Statistical File, which does not include Farm and Tract Numbers. Def.’s Stmt. Facts ¶ 12; Buchan Decl., Ex. 11. 5. Request 2019-FSA-01562-F FMID submitted FOIA request 2019-FSA-01562-F for the 2018 Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) Program Election files, including all constituent data elements, in December 2018. Pl.’s Stmt. Facts ¶ 56. This file contains State Code, County Code, Customer Number, Farm Number, Crop Name and Program Election data. Def.’s Stmt. Facts ¶ 14. The file shows how each producer elected to enroll their land in specific programs. Id. In March 2019, USDA responded by noting that it identified two responsive records, the “Name and Address” and “Crop Election” Files. Buchan Decl., Ex. 13. The Name and Address File contains the State Code, County Code, and Customer Number fields. Buchan Decl. Ex. 13. The Crop Election File contains the State Code, County Code, Customer Number, Farm Number, 4 Crop Code, and Program Election fields. Id. USDA withheld both files, citing FOIA Exemptions 3 and 6, but asked whether it could meet FMID’s needs by providing the statistical version of the Crop Election File, which does not include Customer Numbers or Farm Numbers. Id. USDA instructed FMID to contact it immediately should the Statistical file meet FMID’s needs and committed to reopen the FOIA request and process it. Id. There is no Statistical version of the Name and Address File. Id. 6 . Request 2019-FPAC-BC-03020-F FMID submitted FOIA request 2019-FPAC-BC-03020-F for the 2018 Farm Producer File including the State and County Codes, Status Code, FSA Customer Number, Farm Number, and the Reconstitution Pending Indicator in March 2019. Def.’s Stmt. Facts ¶ 16. On March 28, 2019, USDA noted that FMID had already requested the 2018 Farm Producer File and that the agency had provided the 2018 Farm Producer Statistical File, which included the State and County Codes, Status Code, and the Reconstitution Pending Indicator. Buchan Decl., Ex. 15. USDA continued to withhold the FSA Customer Numbers and Farm Numbers in full, citing FOIA Exemptions 3 and 6. Id. 7 . Request 2019-FPAC-BC-03064-F FMID submitted FOIA request 2019-FPAC-BC-03064-F in March 2019 for 2018 Compliance Data, including State and County Codes, Status Code, Farm Number, Tract Number, Field Number, Subfield Number, Planting Period Code, Crop Field Determined Quantity, Determined Acreage Indicator, Official Measurement Code, Certification Date, Plant Pattern Type Code, Concurrent Planting Code, Disapprove Acre Indicator, Perennial Crop Year Expired, NAP Unit number, Creation Date, and Last Changed Date information. Def.’s Stmt. Facts ¶ 19. 5  In April 2019, USDA provided the 2018 Compliance Data Statistical File which did not include the Farm Number, Tract Number, or Subfield Number, citing Exemption 6 and Section 8791. Id. ¶ 21 . C. Procedural History FMID administratively appealed all seven FOIA requests in May 2019. Pl.’s Stmt. Facts ¶ 100. Throughout the summer, FMID sought status updates on its pending appeals. Id. ¶¶ 106– 110. Unsatisfied with USDA’s response to FMID’s inquiries, and because USDA had not adjudicated FMID’s appeal, FMID sued in August 2019. Id. ¶ 112 . FMID alleges three counts. In Count I, FMID alleges USDA violated FOIA by unlawfully withholding Customer Numbers, Farm Numbers, Tract Numbers, and all associational data between those data figures. ECF No. 1 (“Compl.”) ¶¶ 64–69. In Count II, FMID alleges USDA is violating FOIA by following an unlawful policy or practice of systematically failing to adhere to FOIA deadlines. Id. ¶¶ 70–75. In Count III, FMID alleges USDA violated the Administrative Procedure Act (APA) by promulgating an earlier version of 7 C.F.R. § 1.14 (a). Id. ¶¶ 76–84. Pending before the Court are cross-motions for summary judgment. ECF No. 9-1 (“Pl.’s MSJ Br.”); ECF No. 13 (“Def.’s MSJ Br.”); ECF No. 14 (“Def.’s Opp’n”); ECF No. 15 (“Pl.’s Reply”); ECF No. 16 (“Pl.’s Opp’n”); ECF No. 20 (“Def.’s Reply”). FMID argues that USDA improperly invoked Exemptions 3 and 6 to withhold the information at issue. In FMID’s view, Section 8791, the statute USDA cites to invoke Exemption 3, does not apply because USDA— not agricultural producers or owners—creates the Customer, Farm, and Tract Numbers. Pl.’s MSJ Br. at 12–14. Moreover, according to FMID, Section 8791 does not apply because the requested data are not “geospatial information” precluded from disclosure by law. Id. at 14–20. As for Exemption 6, FMID contends that the requested records are not covered under the 6 exemption because they are not “similar” files to medical or personnel files, there is no substantial privacy interest at stake, and the public interest in obtaining the requested information outweighs any purported privacy concerns. Id. at 20–29. FMID also alleges that USDA delays responding to FOIA requests and in adjudicating FOIA appeals, and that this shows that the agency has a policy or practice of disregarding FOIA deadlines. Id. at 32 . And as for FMID’s APA challenge, the parties now agree that FMID has suffered no injury from the regulation because USDA is not asserting failure to exhaust administrative remedies as a defense to this lawsuit. Pl.’s Opp’n at 25; Def.’s Reply at 8. In response to FMID’s exemption and policy or practice arguments, USDA asserts that it properly invoked Exemptions 3 and 6 and that it has no policy or practice of violating FOIA’s timeliness requirements. Def.’s MSJ Br. at 5–14. Legal Standard “[T]he vast majority of FOIA cases can be resolved on summary judgment.” Brayton v. Office of U.S. Trade Rep., 641 F.3d 521 , 527 (D.C. Cir. 2011). “Summary judgment is appropriately granted when, viewing the evidence in the light most favorable to the non-movants and drawing all reasonable inferences accordingly, no reasonable jury could reach a verdict in their favor.” Lopez v. Council on Am.–Islamic Relations Action Network, Inc., 826 F.3d 492 , 496 (D.C. Cir. 2016). “The evidence presented must show ‘that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’” Id. (quoting Fed. R. Civ. P. 56(a)). In this district, a party opposing summary judgment must accompany its opposition with “a separate concise statement of genuine issues.” LCvR 7(h)(1). “In determining a motion for summary judgment, the Court may assume that facts identified by the moving party in its statement of material facts are admitted, unless such a fact is controverted in the statement of genuine issues filed in opposition to the motion.” Id. “Requiring strict compliance with the local 7 rule is justified both by the nature of summary judgment and by the rule’s purposes.” Jackson v. Finnegan, Henderson, Farabow, Garrett & Dunner, 101 F.3d 145 , 150–51 (D.C. Cir. 1996) (citation omitted). FMID did not attach a separate statement of genuine issues to its opposition to USDA’s motion for summary judgment. The Court therefore assumes FMID admits the facts as stated in USDA’s statement of material facts. Analysis A. USDA’s Withholding of Farm and Tract Numbers under FOIA Exemption 3 and Customer Numbers under Exemption 6 (Count I) Congress enacted FOIA “to facilitate public access to Government documents.” U.S. Dep’t of State v. Ray, 502 U.S. 164 , 173 (1991). The statute was “designed to ‘pierce the veil of administrative secrecy and to open agency action to the light of public scrutiny.’” Id. (quoting Dep’t of Air Force v. Rose, 425 U.S. 352 , 361 (1976)). “FOIA ‘mandates that an agency disclose records on request, unless they fall within one of nine exemptions.’” Elec. Privacy Info. Ctr. v. U.S. Dep’t of Homeland Sec., 777 F.3d 518 , 522 (D.C. Cir. 2015) (quoting Milner v. Dep’t of Navy, 562 U.S. 562 , 565 (2011)). A court applying FOIA “must bear in mind that FOIA mandates a ‘strong presumption in favor of disclosure.’” Nat’l Ass’n of Home Builders v. Norton, 309 F.3d 26 , 32 (D.C. Cir. 2002) (quoting Ray, 502 U.S. at 173 ). Thus, the FOIA exemptions must be “narrowly construed.” Rose, 425 U.S. at 361 . The agency has the burden to justify its withholding of any documents. Ray, 502 U.S. at 173 . “The agency may carry that burden by submitting affidavits that ‘describe the justifications for nondisclosure with reasonably specific detail, demonstrate that the information withheld logically falls within the claimed exemption, and are not controverted by either contrary evidence in the record nor by evidence of agency bad faith.’” Citizens for Responsibility & 8 Ethics in Washington (CREW) v. U.S. Dep’t of Justice, 746 F.3d 1082 , 1088 (D.C. Cir. 2014) (quoting Larson v. Dep’t of State, 565 F.3d 857 , 862 (D.C. Cir. 2009)). 1. Farm and Tract Numbers – Exemption 3 FOIA’s Exemption 3 exempts records that are “specifically exempted from disclosure by statute” if, relevant here, the statute “requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue.” 5 U.S.C. § 552 (b)(3)(A)(i). In applying Exemption 3, a court first determines whether the statute is a “statute of exemption as contemplated by exemption 3” and, second, whether “the withheld material satisf[ies] the criteria of the exemption statute.” Fitzgibbon v. C.I.A., 911 F.2d 755 , 761 (D.C. Cir. 1990) (citing C.I.A. v. Sims, 471 U.S. 159 , 167 (1985)). USDA points to Section 8791 as an applicable withholding statute. That provision states that “the Secretary, any officer or employee of the Department of Agriculture, or any contractor or cooperator of the Department, shall not disclose (A) information provided by an agricultural producer or owner of agricultural land concerning the agricultural operation, farming or conservation practices, or the land itself, in order to participate in programs of the Department; or (B) geospatial information otherwise maintained by the Secretary about agricultural land or operations for which information described in subparagraph (A) is provided.” 7 U.S.C. § 8791 (b)(2)(A), (B). The Court agrees that, based on “the language of the statute on its face,” Section 8791 is a withholding statute, a point FMID does not contest. Zanoni v. U.S. Dep’t of Agric., 605 F. Supp. 2d 230 , 236 (D.D.C. 2009); Pl.’s MSJ Br. at 10. See also Central Platte Nat. Res. Dist. v. U.S. Dep’t of Agric., 643 F.3d 1142 , 1147–48 (8th Cir. 2011) (holding same). The remaining issue under Exemption 3 is whether the requested information falls within the scope of either Subparagraph (A) or (B). 9  As explained below, the Court holds that Farm and Tract Numbers constitute “geospatial information otherwise maintained by the Secretary about agricultural land or operations” and that therefore, under Subparagraph (B), they are prohibited from disclosure.1 7 U.S.C. § 8791 (b)(2)(B). Section 8791 does not define “geospatial information.” “In the absence of an express definition, [a court] must give a term its ordinary meaning.” Petit v. U.S. Dep’t of Educ., 675 F.3d 769 , 781 (D.C. Cir. 2012). And courts look to the ordinary meaning of a statute “at the time Congress enacted the statute.” Wisc. Cent. Ltd. v. U.S., 138 S. Ct. 2067 , 2070 (2018) (quoting Perrin v. United States, 444 U.S. 37 , 42 (1979)). While general-usage dictionaries “cannot invariably control [ ] consideration of statutory language,” they are a good place to start. Am. Coal Co. v. Fed. Mine Safety & Health Review Comm’n, 796 F.3d 18 , 25 (D.C. Cir. 2015); see Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S. 560 , 566–67 (2012) (looking first to dictionaries to determine ordinary meaning). Congress included Section 8791 in the Food, Conservation, and Energy Act of 2008, Pub. L. 110-234, 122 Stat. 923 (2008), so the Court looks to dictionaries from around that time. One defines “geospatial” as “relating to or denoting data that is associated with a particular location.” New Oxford American Dictionary 727 (3d ed. 2010). Another defines the term as “[o]f or relating to analysis of geographical data from multiple sources and technologies, using statistical methods and often resulting in computer visualization of locations under study.” New American Dictionary 736 (5th ed. 2011). 1 Thus, the Court need not reach the question of whether Subparagraph (A) provides a justification for withholding the Farm and Tract Numbers. The Court is skeptical that it does. As FMID points out, Farm and Tract Numbers are not information provided by agricultural producers or owners of agricultural land, as required by the statute. Pl.’s Opp’n at 6. 10  FMID suggests other definitions, as well. It identifies 2008 supplemental guidance to OMB Circular A-16 (2002) that defines “geospatial information” as “[i]nformation concerning phenomena implicitly or explicitly associated with a location relative to the Earth’s surface.” Pl.’s MSJ Br. at 18–19 (citing Federal Enterprise Architecture Geospatial Profile, ver. 2, appendix B (Glossary of terms) (2008)); see also Federal Geographic Data Committee, Lexicon of Geospatial Terminology, fgdc.gov/policyandplanning/a-16/lexicon-of-geospatial-terminology (last visited Oct. 22, 2020) (citing same). The same document defines “geospatial data” as “[d]ata with implicit or explicit reference to a location relative to the Earth’s surface; Spatial data are geographically referenced features that are described by geographic positions and attributes in an analog or computer-readable (digital) form.” Pl.’s MSJ Br. at 18–19 (citing Federal Enterprise Architecture Geospatial Profile, ver. 2, appendix B (Glossary of terms) (2008)); see also Federal Geographic Data Committee, Lexicon of Geospatial Terminology, fgdc.gov/policyandplanning/a-16/lexicon-of-geospatial-terminology (last visited Oct. 22, 2020) (citing same). FMID also argues that a 2008 USDA memorandum restricted the definition of “geospatial information” to “photographs when they contain, or are associated with, other data depicting or identifying attributes of the land, such as common land unit boundaries, but it does not include aerial photographs themselves.” Pl.’s MSJ Br. at 17–18. But FMID failed to quote the first part of the sentence at issue, which specifies that geospatial information only “includes” the above-described information. See Mem. from Boyd K. Rutherford, Ass’t Sec’y for Admin., USDA, to Agency FOIA Officers (July 30, 2008), available at https://www.dm.usda.gov/foia/2008FCEA_Section1619.pdf. Thus, the 2008 memorandum only 11 shows that the agency interpreted “geospatial information” to exclude aerial photographs, standing alone.2 In the end, the contemporary dictionary definitions and OMB supplemental guidance all teach that “geospatial information” is a broad term that includes information referring to a specific physical location on Earth. Indeed, the parties do not propose definitions to the contrary. See Pl.’s MSJ Br. at 20 (term “must include data or information that is linked with or mapped to a specific geographic location”); Def.’s MSJ Br. at 10–11 (reciting Geospatial Data Act of 2018 definition). And the handful of cases to interpret the term in the context of Section 8791 are in accord. See, e.g., Ctr. For Biological Diversity v. U.S. Dep’t of Agric., 626 F.3d 1113 , 1116 (9th Cir. 2010) (term includes GPS coordinates); Audubon Soc. Of Portland v. U.S. Natural Res. Conservation Serv., 841 F. Supp. 2d 1182 , 1187–88 (D. Or. 2012) (term includes GPS coordinates, annotated maps, and aerial photographs). 2 FMID also cites two other statutes that define “geospatial information.” The organic act for the National Geospatial-Intelligence Agency—also cited by USDA—defines the term as “[i]nformation that identifies the geographic location and characteristics of natural or constructed features and boundaries on the earth and includes (A) statistical data and information derived from, among other things, remote sensing, mapping, and surveying technologies; and (B) mapping, charting, geodetic data, and related products.” 10 U.S.C. § 467 (4). The second statute, the Geospatial Data Act of 2018, 43 U.S.C. § 2801 et seq., defines “geospatial data” as (A) “information that is tied to a location on the Earth, including by identifying the geographic location and characteristics of natural or constructed features and boundaries on the Earth, and that is generally represented in vector datasets by points, lines, polygons, or other complex geographic features or phenomena; (B) may be derived from, among other things, remote sensing, mapping, and surveying technologies; (C) includes images and raster datasets, aerial photographs, and other forms of geospatial data or datasets in digitized or non-digitized form; and (D) does not include [certain Indian tribe and national security data].” 43 U.S.C. § 2801 . While those definitions define the term for the purposes of their respective chapters, see id. (limiting definition to Tit. 43 ch. 46); 10 U.S.C. § 467 (limiting definition to Tit. 10 ch. 22), they are not authoritative definitions for the term as used in Section 8791. See United States v. E- Gold, Ltd., 550 F. Supp. 2d 82 , 92 (D.D.C. 2008) (“[I]f a word is defined to mean something particular ‘in this section,’ then it will be given that definition only in that section.”) (cleaned up) (quoting Linda D. Jellum & David Charles Hricik, Modern Statutory Interpretation: Problems, Theories, and Lawyering Strategies 137 (2006)). 12  Applying this definition, Farm and Tract Numbers are geospatial information. Like GPS coordinates, they refer to specific physical locations; in this case, they refer to polygons representing physical boundaries of plots of land on Earth. FMID argues that, because the numbers are “simply alpha-numerical codes that the USDA creates and assigns,” they are not geospatial information. Pl.’s MSJ Br. at 17. But any system of identifying specific geographic locations—including, for example, GPS coordinates—must ultimately be designed and implemented by someone. The Court holds that USDA properly invoked Exemption 3 to withhold the Farm and Tract Numbers. 2. Customer Numbers – Exemption 6 Exemption 6 provides that agencies may withhold “personnel and medical files and similar files the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.” 5 U.S.C. § 552 (b)(6). Courts follow a two-step process when considering withholdings or redactions under Exemption 6. First, they “determine whether the [records] are personnel, medical, or ‘similar’ files covered by Exemption 6.” Multi AG Media LLC v. Dep't of Agric., 515 F.3d 1224 , 1228 (D.C. Cir. 2008). The phrase “similar files” includes all information that “applies to a particular individual.” U.S. Dep't of State v. Wash. Post Co., 456 U.S. 595 , 599–602 (1982). If the records are medical, personnel, or similar files, courts “determine whether their disclosure ‘would constitute a clearly unwarranted invasion of personal privacy.’” Multi AG Media, 515 F.3d at 1228 (quoting 5 U.S.C. § 552 (b)(6)). In making the latter determination, courts must “balance the public interest in disclosure against the interest Congress intended [Exemption 6] to protect.” Dep’t of Def. v. Fed. Labor Relations Auth., 510 U.S. 487 , 495 (1994) (quoting Dep’t of Justice v. Reporters Comm. for Freedom of Press, 489 U.S. 749 , 776 (1989)). This involves a second two-step process. Courts first determine whether disclosure “would compromise a substantial, as opposed to a de minimis, 13 privacy interest.” Norton, 309 F.3d at 33 (quoting Nat’l Ass’n of Retired Fed. Emps. v. Horner, 879 F.2d 873 , 874 (D.C. Cir. 1989)). If the interest is substantial, they “weigh that interest against the public interest in the release of the records.” Id. (internal quotation marks omitted) (quoting Horner, 879 F.2d at 874 ). As the requester, FMID “bears the burden of identifying an overriding public interest and demonstrating that disclosure would further that interest.” Stein v. C.I.A., 454 F. Supp. 3d 1 , 19 (D.D.C. 2020) (citation omitted). The “only relevant ‘public interest in disclosure’ to be weighed in this balance is the extent to which disclosure would serve the ‘core purpose of the FOIA,’ which is ‘contribut[ing] significantly to public understanding of the operations or activities of the government.’” Fed. Labor Relations Auth., 510 U.S. at 495 (alteration and emphasis in original) (quoting Reporters Comm., 489 U.S. at 775 ). The requester “must show that the public interest sought to be advanced is a significant one” and “the information is likely to advance that interest.” Nat’l Archives & Records Admin. v. Favish, 541 U.S. 157 , 172 (2004) (describing Exemption 7 public interest balancing test); see also Beck v. Dep’t of Justice, 997 F.2d 1489 , 1491 (D.C. Cir. 1993) (Exemption 7 test “is applicable in the case of Exemption 6”). Courts must “focus not on the general public interest in the subject matter of the FOIA request, but rather on the incremental value of the specific information being withheld.” Schrecker v. U.S. Dep’t of Justice, 349 F.3d 657 , 661 (D.C. Cir. 2003). In the D.C. Circuit, when engaging in Exemption 6 balancing, the court “takes derivative uses into account in evaluating the impact of disclosure on the public interest” and does the same “in evaluating the impact of disclosure on personal privacy.” Am. Civil Liberties Union v. U.S. Dep’t of Justice, 655 F.3d 1 , 15 (D.C. Cir. 2011). 14  Thus, the Court proceeds to the first step, determining whether Customer Numbers are “similar files” under the statute. Exemption 6 was “intended to cover detailed Government records on an individual which can be identified as applying to that individual.” Dep’t of State, 456 U.S. at 602 (quoting H.R. Rep. No. 1497, 89th Cong., 2d Sess., 11 (1966), U.S. Code Cong. & Admin. News 1966, pp. 2418, 2428). There is no dispute that Customer Numbers apply to individuals or entities that have a record in USDA databases. Pl.’s Stmt. Facts ¶ 5. Moreover, USDA has shown that, with the aid of publicly-available information, the public can connect Customer Numbers to those individuals or entities and reveal their personal information. Def.’s Stmt. Facts ¶¶ 27, 28, 30, 34, 37. USDA explains that each Customer Number functions as “a key that connects a particular individual to other data in the public domain.” Id. ¶ 34. That data may contain a farm’s “address, legal description, or [its] latitude and longitude.” Id. ¶ 28. These records also include “USDA-sourced maps marked with farm and tract numbers and other official documents identifying acreage of the agricultural operation, crop types, legal descriptions and other identifying information.” Id. The D.C. Circuit has noted that, “in the absence of any conflicting evidence, we give some credence to the agency’s familiarity with whether a disclosure would lead to identification of the individuals in question.” Canning v. U.S. Dep’t of State, 134 F. Supp. 3d 490 , 515 (D.D.C. 2015) (quoting Carter v. U.S. Dep’t of Commerce, 830 F.2d 388 , 391–92 (D.C. Cir. 1987) (internal quotation marks omitted)). And FMID has neither disputed USDA’s representations or “presented evidence suggesting that [disclosing Customer Numbers] would not identify those individuals.” Id. (quoting Carter, 830 F.2d at 391–92) (internal quotation marks omitted). Thus, because tying Customer Numbers to these public records can reveal the above information, including “at least a portion of the [farm] owner’s personal finances,” the Court finds that they are “similar files” for the purposes of 15 Exemption 6. Multi AG Media, 515 F.3d at 1229 (quoting Nat’l Parks & Conservation Ass’n v. Kleppe, 547 F.2d 673 , 685 (D.C. Cir. 1976)).3 The second step is determining whether the Customer Numbers implicate a greater than de minimis privacy interest. For reasons largely already explained, they do. USDA represents that Customer Numbers can be connected to publicly available data to form a “comprehensive picture” of the associated businesses. Def.’s Stmt. Facts ¶ 30. And in Multi AG Media, the D.C. Circuit recognized that disclosing the data requested in that case could “allow for an inference to be drawn about the financial situation of an individual farmer” which implicated a greater than de minimis privacy interest. 515 F.3d at 1230 . True, the Customer Numbers by themselves— unlike the information at issue in Multi AG Media—disclose nothing about an individual farmer to the public, including the farmer’s identity. Nor do the numbers contain information that allows for a direct inference about different farmers’ finances. But the disclosure of the numbers, when combined with other public data, could lead to identification of individual farmers and reveal information about their farms and financial status. Def.’s Stmt. Facts ¶¶ 27, 28, 30, 34, 37. For this reason, Customer Numbers implicate a privacy interest under Exemption 6. See Multi AG Media, 515 F.3d at 1230 ; see also Horner, 879 F.2d at 878 (“Where there is a substantial probability that disclosure will cause an interference with personal privacy, it matters not that there may be two or three links in the causal chain.”). Under the third step, the Court must balance the asserted privacy interest against the public’s interest in disclosure of the information. FMID maintains that disclosing Customer 3 The Customer Numbers are “similar files” even when they apply to entities, as opposed to individuals, because “most farming operations are closely held family businesses,” Buchan Decl. ¶ 19, and revealing information about an entity would disclose information about the entity’s owner or owners. See Multi AG Media, 515 F.3d at 1228–29 (holding same). 16 Numbers, Farm Numbers, and Tract Numbers would allow the public to monitor how USDA is administering its farm programs in two ways. Pl.’s MSJ Br. at 26. First, disclosing the information would let the public determine whether USDA is overpaying program participants, and help root out possible fraud. FMID claims that some farmers are collecting extra payments through a “scheme of dividing their lands and transferring them to family members, family corporate entities, or other third parties.” Id. Obtaining this data, FMID asserts, would help the public determine whether USDA administers its payment caps properly. Id. Second, FMID argues that disclosing the information allows the public to determine whether farmers are complying with USDA program requirements. Id. at 27. In other words, its first argument focuses on the public benefit from learning if USDA is inadvertently paying farmers more than subsidy programs allow, thus revealing how well USDA is administering its programs; its second argument relates to the public benefit in learning whether the farmers themselves are adhering to program requirements. Neither succeeds in outweighing USDA’s asserted privacy interest. FMID’s first public interest justification fails for two reasons. First, FMID asserts that, “[w]ithout [the Farm, Tract, and Customer Numbers], the USDA (or the public) has no ability to determine how well the USDA is administering any farm programs.” Id. at 26. But the Court has already held that Farm and Tract Numbers are excepted from disclosure under Exemption 3 because they are geospatial information. FMID does not explain how releasing only Customer Numbers could inform the public about USDA’s program administration; all its examples rely on the release of all three numbers together.4 Pl.’s MSJ Br. at 27–28. 4 The record sheds no light on this issue either. For example, USDA represents, and FMID concedes, that the Customer Number “has nothing to do” with and “is not used” in the records FMID requested in Request 1467. Def.’s Stmt. Facts ¶ 2. And the business relationship information sought by Request 1497 is not revealed “by linking Parent and Member Customer 17  Second, there is no evidence in the record to support FMID’s allegations of fraud in USDA programs. And baseless allegations of fraud do not support finding a public interest for purposes of Exemption 6 disclosure. Consumers’ Checkbook Ctr. for the Study of Servs. v. U.S. Dep’t of Health & Human Servs., 554 F.3d 1046 , 1054 (D.C. Cir. 2009). In Consumers’ Checkbook, the requester sought Medicare claims data linked to individual physicians that, in its view, would reveal information about the Department of Health and Human Services’ “ability to root out Medicare fraud and waste.” Id. at 1050–51. The D.C. Circuit rejected the requester’s argument because its claims of fraud were unsupported by any evidence, observing that “if an unsupported suggestion that an agency may be distributing federal funds to a fraudulent claimant justifies disclosure of private information, the agency would have no defense against FOIA requests for release of private information.” Id. at 1054 . FMID makes the same ill-fated argument here. FMID claims the public interest supports disclosure because the information FMID seeks would reveal “whether the USDA is administering [] payment caps properly.” Pl.’s MSJ Br. at 26. Like its failure to provide an explanation of how the public may use Customer Numbers alone to uncover this fraud, FMID fails to provide “a scintilla of evidence” to support its claim that USDA is overpaying program participants in the ways it suggests. Consumers’ Checkbook, 554 F.3d at 1054 (quoting Ray, 502 U.S. at 179 ). Numbers, but by linking Parent and Member Tax-ID numbers or Parent and Member CCIDs.” Id. ¶ 8. The Farm Producer File at issue in Request 3020 illustrates the extent of this problem for FMID. That file “links the producer’s Customer Number to Farm Numbers, and that combination forms the basis for program payments.” Pl.’s Stmt. Facts ¶ 71. But without the Farm Numbers, the Customer Numbers cannot provide that information. Therefore, no incremental public interest exists in adding the Customer Numbers to the Farm Producer Statistical File USDA already produced. Def.’s Stmt. Facts ¶ 18. 18  FMID’s repeated invocation of Multi AG Media does not save its argument. In that case, there was a public interest in “look[ing] at the information the agency had before it when determining whether a particular farm is eligible to participate in the benefit programs in the first place so that the public can monitor whether the agency is correctly doing its job.” Consumers’ Checkbook, 554 F.3d at 1055 (quoting Multi AG Media, 515 F.3d at 1231 ) (alterations omitted). Apart from misciting the plaintiff’s argument in that case as the court’s holding, see Pl.’s MSJ Br. at 25 (quoting Multi AG Media, 515 F.3d at 1231 ), FMID does not argue that the information revealed by disclosing only the Customer Numbers—without the Farm and Tract Numbers— says anything about how USDA determines “whether a particular farm is eligible to participate in the benefit programs in the first place.” Multi AG Media, 515 F.3d at 1231 . Nor does FMID argue that disclosing the Customer Numbers will reveal how USDA uses them. See id. at 1231– 32 (recognizing public interest in learning how USDA used requested information); see also Norton, 309 F.3d at 36 (recognizing public interest in how “the Secretary and the FWS are using [program] information.”). At bottom, FMID has not demonstrated a similar benefit to the public in disclosing only Customer Numbers as the plaintiff did for the records at issue in Multi AG Media. FMID’s second argument is that there is a public interest in disclosure of Customer Numbers to assist the public in determining whether farmers are complying with program requirements. This argument fares no better than its first. The purpose of FOIA is to shed light on what the government is up to. Reporters Comm., 489 U.S. at 773 . That purpose is distinct from this asserted public interest in disclosure, which is to shed light on what USDA program participants are up to. The D.C. Circuit rejected a similar argument in Painting & Drywall Work Preservation Fund, Inc. v. Dep’t of Housing & Urban Development, 936 F.2d 1300 (D.C. Cir. 19 1991). There, a nonprofit requested certified payroll records from the Department of Housing and Urban Development to monitor federal contractors’ compliance with federal labor laws. Id. at 1301 . The records contained names, social security numbers, and addresses of individual employees. Id. The court held that, because “information that might reveal the failure of contractors to comply with relevant laws does not in itself cast light on what [the agency] is up to, [there is] no obvious public interest in its disclosure that is relevant to [the Exemption 6] analysis.” Id. at 1303 (citing Reporters Comm., 489 U.S. at 774–75). The same principle applies here. “[U]nless the public would learn something directly about the workings of the Government by knowing [Customer Numbers], their disclosure is not affected with the public interest.” Horner, 879 F.2d at 879 . Knowing how “farmers are using their land,” Pl.’s MSJ Br. at 28, or whether they are “accurately reporting data to qualify” for benefits, id., does not directly shed light on USDA’s operations or activities. And even if there is a general public interest in revealing USDA program participant conduct, “that interest falls outside the ambit of the public interest that the FOIA was enacted to serve.” Reporters Comm., 489 U.S. at 774–75. It is possible that Customer Numbers could benefit the public by revealing information about program participants combined with already publicly available information. See Ray, 502 U.S. at 181 (Scalia, J. concurring in part) (derivative use analysis must apply equally when weighing personal-privacy and public-benefits of disclosure). FMID, however, makes no argument that such retroactive matching would serve the public interest. And when analyzing an agency’s invocation of Exemption 6, a court “need not linger over the balance; something, even a modest privacy interest, outweighs nothing every time.” Horner, 879 F.2d at 879 . 20  For all these reasons, disclosure of the Customer Numbers “‘would constitute a clearly unwarranted invasion of personal privacy.’” Multi AG Media, 515 F.3d at 1228 (quoting 5 U.S.C. § 552 (b)(6)). Thus, USDA may withhold them under Exemption 6. B. FMID’s Policy or Practice Claim (Count II) FMID also seeks declaratory and injunctive relief to remedy what it identifies as USDA’s “policy and practice of failing to substantially comply with the FOIA’s mandatory deadline requirements.” Pl.’s MSJ Br. at 32. In seeking this relief, FMID requests that the court enter a nationwide injunction requiring USDA to substantially comply with FOIA deadlines nationwide. Id. To support its request, FMID points to USDA’s failure to adhere to FOIA’s twenty working- day response timeline, id. at 30–31; 5 U.S.C. § 552 (a)(6)(A)(i), and USDA’s failure to adjudicate FMID’s administrative appeal within the time specified by USDA regulations and FOIA. Pl.’s MSJ Br. at 31. FMID also cites USDA’s total FOIA and administrative appeal backlog as justification for entering a nationwide injunction. Id. at 31–32. For the reasons explained below, FMID does not have standing to pursue its policy or practice claim. Federal courts have an “independent obligation to assure themselves of jurisdiction, even where the parties fail to challenge it.” Mendoza v. Perez, 754 F.3d 1002 , 1018 (D.C. Cir. 2014). And it “is equally well established that Article III standing is a prerequisite to federal court jurisdiction.” Am. Library Ass’n v. F.C.C., 401 F.3d 489 , 492 (D.C. Cir. 2005). The standing requirement, “rooted in the traditional understanding of a case or controversy” as described in Article III of the Constitution, “serves to prevent the judicial process from being used to usurp the powers of the political branches and confines the federal courts to a properly judicial role.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540 , 1547 (2016) (cleaned up). “That the merits of a particular claim may be clear is no reason to avoid the constitutionally required inquiry into this limit on . . . jurisdiction.” Dominguez v. UAL Corp., 666 F.3d 1359 , 1362 (D.C. Cir. 2012). 21  To establish Article III standing, a “plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, 136 S. Ct. at 1547 . “Having documents improperly withheld in response to a FOIA request is a well-established cognizable injury. But because a plaintiff must have standing for each remedy sought, a plaintiff seeking prospective relief like an injunction or declaration striking down an agency’s FOIA policy must be able to point to an imminent future injury—one that is certainly impending or has a substantial risk of occurring.” Frank LLP v. C.F.P.B., 288 F. Supp. 3d 46 , 58 (D.D.C. 2017) (cleaned up). FMID’s primary problem establishing standing on its policy or practice claim is quite basic: it has not established the existence of an unlawful policy or practice. A plaintiff seeking prospective relief from an alleged government policy must first establish “the existence of the challenged policy.” Haase v. Sessions, 835 F.2d 902 , 910 (D.C. Cir. 1987). And “more than a nebulous assertion of the existence of a ‘policy’ is required to establish standing.” Id. at 911 . Here, FMID bases its policy or practice claim on “missed deadlines alone.” Am. Ctr. for Law & Justice v. FBI, No. 19-cv-2643, 2020 WL 3605624 , at *5 (D.D.C. July 2, 2020) (rejecting similar claim). It alleges that USDA has “systemically and repeatedly failed—in this case and others— to make a good faith effort to comply with the Congressional deadlines mandated by the FOIA.” Compl. ¶ 73. In its briefing, it claims that USDA disregarded FOIA deadlines in its initial responses to FMID’s requests and that its administrative appeal is long past the deadline set by USDA regulations and FOIA itself. Pl.’s MSJ Br. at 30–31. But as explained below, there is very little here to “signal the agency has a policy or practice of ignoring FOIA’s requirements.” Judicial Watch, Inc. v. United States Dep’t of Homeland Sec., 895 F.3d 770 , 780 (D.C. Cir. 2018). 22  To begin with, there is scant evidence that USDA ignored FOIA’s deadlines in this case, at least as far as its responses to FMID’s FOIA requests go. In fact, the record tells the opposite story. USDA met FOIA’s deadlines in processing at least five out of the seven requests FMID submitted to the agency, and FMID’s claims to the contrary overlook its own obligations under FOIA. Under the FOIA statute and then-existing USDA regulations, FMID’s requests were not “perfected” until USDA received 50% prepayment for requests that would incur over $250 in search costs or, in cases where the costs were less than $250, until FMID affirmed it would pay search fees on the back end. 5 U.S.C. § 552 (a)(3)(A); 7 C.F.R. § 1.15 (c), App’x A § 8(c) (2019); CREW v. Fed. Election Comm’n, 711 F.3d 180 , 185 n.3 (D.C. Cir. 2013) (FOIA deadlines “apply only once an agency has received a proper FOIA request” that complies with “the agency’s schedule of fees.”). FMID perfected two of its five December requests in late January 2019. ECF No. 9-3 (“Horst Decl.”), Ex. 4; Buchan Decl., Ex. 9. USDA gave notice that it required a time extension to complete processing those requests and issued its responses within FOIA’s extended thirty-day deadline. Horst Decl., Ex. 4; Buchan Decl., Ex. 9.; see also 5 U.S.C. § 552 (a)(6)(B)(i), (iii)(II); CREW, 711 F.3d at 184 (“[A]n agency may extend the time limit to up to 30 working days by written notice to the requester.”). FMID perfected two other December 2018 requests in March 2019. Buchan Decl. Exs., 4, 11. USDA responded to those requests within the typical twenty-day deadline. Buchan Decl. Exs., 4, 11. The record does not reveal when FMID perfected the fifth request, but USDA’s response to that request is contemporaneous with its responses to the other requests FMID perfected around that time. Horst Decl., Ex. 10; Buchan Decl., Ex. 13. Finally, the record also does not show when FMID perfected its March 2019 requests. Buchan Decl. Exs., 15, 17. Though USDA was certainly timely in responding to FMID’s first request—doing so within a week—it was potentially a few days late in responding 23 to FMID’s second request, assuming FMID perfected the request immediately. Buchan Decl. Exs., 15, 17. Thus, taken as a whole, USDA’s responsiveness “undermines the contention that [USDA] is engaged in a persistent practice” of unlawful delay, Am. Ctr., 2020 WL 3605624 , at *5, and belies any claim that it has a policy or practice of systematically ignoring FOIA’s requirements. FMID relies on Judicial Watch, Inc. v. United States Dep’t of Homeland Security, 895 F.3d 770 (D.C. Cir. 2018) to support its policy-or-practice claim, but the record here is quite different than the one before the D.C. Circuit in that case. There, the D.C. Circuit concluded that the Secret Service had adopted a practice of delay because it “repeatedly [stood] mute over a prolonged period of time and us[ed] Judicial Watch’s filing of a lawsuit as an organizing tool for setting its response priorities.” 895 F.3d at 780–81. USDA has not engaged in similar conduct here. Unlike the Secret Service in Judicial Watch, USDA responded to FMID’s requests before it filed suit, as opposed to waiting until afterward. 895 F.3d at 779. And there is no indication that USDA is using the “filing of a lawsuit as an organizing tool for setting its response priorities.” Id. at 781. Indeed, USDA’s organizing principle processing FOIA requests and appeals is to do so on a “first-in, first-out basis.” See, e.g., Buchan Decl. Ex. 4; Horst Decl., Ex. 22; see also 7 C.F.R. § 1.8 (2019) (“[P]rocessing within each track shall be based on a first-in, first-out concept, and rank-ordered by the date of receipt of the request.”). USDA’s handling of FMID’s Request 1467 exemplifies its responsiveness and good faith efforts. During the relevant time period, when USDA received a request implicating more than $250 in search costs, USDA gave the requester twenty days to affirm they would prepay 50% of the agency’s search fees. See, e.g., Buchan Decl. Ex. 4. If the requester did not respond within those twenty days, USDA closed their request. Id. Here, USDA transmitted its fee request to 24 FMID on December 19, 2018, FMID did not respond to the fee request and so USDA closed the request. Id. But in early February 2019, FMID inquired about the request’s status, and USDA responded within the hour. Id. FMID—asserting that it had never received the fee request— asked USDA if it would reopen the FOIA request, and less than fifteen minutes later, USDA agreed and sent a new fee request. Id. And the next month, USDA issued its timely response to Request 1467. Id. USDA even refunded FMID its fee payment for Request 1467 and two other “complex” requests “due to the delay from the recent lapse in Federal funding and substantial changes in the way [the agency] process[es] FOIA requests.” Buchan Decl., Exs. 3, 11, 13. This is hardly the behavior of an agency dodging its duties under FOIA. To be sure, USDA missed the statutory deadline to process FMID’s administrative appeals. FOIA requires that agencies adjudicate an appeal within twenty working days. 5 U.S.C. § 552 (a)(6)(A)(ii). USDA received FMID’s appeals on May 12, 2019, and was required to issue its determinations by June 10, 2019. By the time FMID filed suit on August 6, 2019, sixty working days had passed since USDA received the appeals. USDA offers no justification for this delay. But even so, USDA actively responded to FMID’s inquiries after FMID filed the appeal. Horst Decl., Exs. 22–24. And USDA FOIA agents corresponded with FMID by email and by telephone on multiple occasions. Horst Decl., Exs. 22–24. When the FOIA agent assigned to FMID’s appeal was out of the office for two weeks, another agent stepped in to assist in responding to FMID’s inquiries. Horst Decl., Ex. 23. Again, USDA’s behavior is a far cry from the “virtually complete passivity” alleged in Judicial Watch, 895 F.3d at 785 (Pillard, J. concurring). Looking at USDA’s record of meeting its FOIA obligations more broadly, its record is far from perfect, and this case illustrates the potential “difficulty that FOIA requests pose for 25 executive and independent agencies.” CREW, 711 F.3d at 189. Philip Buchan, a USDA Government Information Specialist who oversees the USDA Farm Services Agency (FSA) FOIA branch that responded to FMID’s requests, asserts that the FSA branch processes “simple requests on average in 4.25 days, with a median response time of one day.” ECF No. 13-4 (“Second Buchan Decl.”) ¶ 15. The branch processes “complex requests on average in 28.57 days, with a median of eleven days.” Id. The branch processed 263 complex requests in Fiscal Year 2019, of which 218 were processed within forty working days. Id. Buchan explains that FOIA litigation cases, personnel departures, and resource constraints limit his branch’s ability to cure its FOIA backlog but that the branch has made substantial progress in the past few years. Id. ¶¶ 10–36.5 But “if the speed of replying to requests in any agency is not satisfactory to Congress [or FOIA requesters], and the obvious cause is a lack of available resources . . . the equally obvious remedy is for Congress to supply the necessary resources and to designate their use for FOIA purposes.” Open Am. v. Watergate Special Prosecution Force, 547 F.2d 605 , 615 n.17 (D.C. Cir. 1976). This is not meant to “endorse or excuse . . . alleged noncompliance,” Am. Ctr., 2020 WL 3605624 , at *5, but in the Court’s view, without a policy or practice to frame FMID’s future risk of injury, exercising jurisdiction over this claim would turn the judicially- created FOIA policy-or-practice claim—intended to bypass mootness—into a mechanism to micromanage agency FOIA offices. In sum, the record does not “evidence[] a policy or practice of delayed disclosure” by USDA. Payne Enters., Inc. v. U.S., 837 F.2d 486 , 491 (D.C. Cir. 1988). USDA appears to have 5 In addition, consistent with its delay in this case, USDA’s record with processing administrative appeals leaves much to be desired. Buchan admits that, in fiscal year 2019, it took his branch an average of 342 days to process an appeal and it only processed three appeals. Second Buchan Decl. ¶¶ 25–26. 26 substantially complied with FOIA’s deadlines in this case, with the exception of FMID’s administrative appeal, which, as explained below, in any event cannot be a source of injury for FMID because the Court has held that the Farm, Tract, and Customer Numbers are exempt from disclosure. And merely that USDA has an administrative appeal backlog is not enough to show a policy or practice of unlawful delay. Thus, FMID identifies no policy or practice that threatens it with future injury. In addition, even assuming that FMID could establish a policy or practice of unlawful delay on this record, it has not shown that it will likely suffer an injury in the future as a result of that policy, as Article III standing requires, Tipograph v. Dep’t of Justice, 146 F. Supp. 3d 169 , 174–77 (D.D.C. 2015) (discussing policy or practice standing requirements). For starters, FMID cannot base any injury on USDA’s failure to timely respond to its requests relating to the Farm, Tract, and Customer Numbers, or to adjudicate its administrative appeal about those records. “D.C. Circuit cases considering FOIA policy or practice claims have all involved an agency practice that impaired or frustrated the plaintiff’s prompt access to nonexempt agency records. The injury that each injunction or order sought to remedy was an agency’s failure to release nonexempt records in a timely manner.” NRDC v. U.S. E.P.A., 383 F. Supp. 3d 1 , 13 (D.D.C. 2019) (emphasis added). But the Court has held that FMID is not entitled to the Farm, Tract, and Customer Numbers because they need not be disclosed under Exemptions 3 and 6. In other words, as far those records are concerned, FMID “has not demonstrated that the agency has been withholding information that it should be disclosing.” Cause of Action Inst. v. U.S. Dep’t of Justice, 453 F. Supp. 3d 368 , 379 (D.D.C. 2020). Thus, they cannot be the basis for any purported future injury. Id. (no standing to bring policy or practice claim where “defendant appropriately withheld information as non-responsive records”). 27  Moreover, “where a plaintiff ‘seeks prospective declaratory and injunctive relief, he must establish an ongoing or future injury that is ‘certainly impending’; he may not rest on past injury.’” Williams v. Lew, 819 F.3d 466 , 472 (D.C. Cir. 2016) (quoting Arpaio v. Obama, 797 F.3d 11 , 19 (D.C. Cir. 2015)). And as far as the non-exempt records without Farm, Tract, and Customer Numbers that FMID requested and received are concerned, Pl.’s MSJ Br. at 30–31, FMID has failed to assert that it will continue to request them in the future. To be sure, FMID represents that it, “among other things, collects, maintains, and analyzes agricultural data from a number of sources, including the federal government,” Pl.’s Stmt. Facts ¶ 1; that “[a]s part of its core research, [it] has for over a decade regularly submitted requests for USDA records pursuant to the FOIA,” id. ¶ 2 ; and that it “has submitted annual requests for records containing Customer Numbers, Farm Numbers, and Tract Numbers since before 2009,” id. ¶ 9 . But FMID never alleges that it will continue requesting the records it was provided or asserts that it will suffer future injury from a delay in USDA’s response to those hypothetical requests. See Compl. ¶¶ 1– 69, 70–75; Pl.’s MSJ Br. at 29–32; Pl.’s Opp’n at 18–23. C. APA Claim (Count III) As to Count III, FMID originally sought a declaratory judgment holding the applicable administrative appeal deadline contrary to FOIA. Pl.’s MSJ Br. at 33–35. But FMID noted that, if USDA did not raise the regulation as an affirmative defense, its claim would be moot for lack of threatened injury. Pl.’s Opp’n at 25. USDA is not using the regulation as an affirmative defense and agrees that FMID’s claim is therefore moot. Def.’s Reply at 8. Whether the claim is more appropriately described as moot or deficient for lack of injury is of little consequence because FMID submits that the “Court need not issue a merits decision on the APA claim.” Pl.’s Opp’n at 25. The Court will therefore dismiss Count III for lack of subject matter jurisdiction. 28  Conclusion For all these reasons, Defendant’s Motion for Summary Judgment, ECF No. 13, will be granted in part as to Count I, and Plaintiff’s Motion, ECF No. 9, will be denied. The Court will dismiss Counts II and III for lack of subject matter jurisdiction because FMID does not have standing to pursue them. A separate order will issue. /s/ Timothy J. Kelly TIMOTHY J. KELLY United States District Judge Date: November 27, 2020 29

2020-12-01 02:01:00.569024+00

http://cdn.ca9.uscourts.gov/datastore/bap/2020/11/30/Bral-20-1039.pdf

FILED NOV 30 2020 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL ORDERED PUBLISHED OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT In re: BAP No. CC- 20-1039-STL JOHN JEAN BRAL, Debtor. Bk. No. 8:17-bk-10706-ES STEWARD FINANCIAL, LLC, Appellant, v. OPINION JOHN JEAN BRAL, Appellee. Appeal from the United States Bankruptcy Court for the Central District of California Erithe A. Smith, Bankruptcy Judge, Presiding APPEARANCES: Tom Lallas of Levy, Small & Lallas argued for appellant; Sean A. O’Keefe of O’Keefe & Associates Law Corporation, P.C. argued for appellee Before: SPRAKER, TAYLOR, and LAFFERTY, Bankruptcy Judges. SPRAKER, Bankruptcy Judge: INTRODUCTION Steward Financial, LLC (“Steward Financial”) filed a proof of claim seeking to hold chapter 111 debtor John Jean Bral liable for his role in the 1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 , and all “Rule” references are to the Federal Rules of Bankruptcy Procedure. separate bankruptcy filing of Ocean View Medical Investors, LLC (“Ocean View”). It alleged that Bral committed abuse of process and tortiously interfered with its contractual relations by improperly placing Ocean View into bankruptcy to stop Steward Financial’s foreclosure of Ocean View’s real property. Bral objected to the claim. The bankruptcy court disallowed Steward Financial’s claim, holding that the Bankruptcy Code preempted the state law causes of action because they arose from Bral’s filing of Ocean View’s voluntary bankruptcy petition. Alternatively, the bankruptcy court ruled that Steward Financial had failed to demonstrate that Bral’s conduct caused any injury for which Steward Financial was legally entitled to recover damages. On appeal from the bankruptcy court’s order disallowing the claim, we agree with both grounds for disallowance. Accordingly, we AFFIRM. FACTS Bral and Steward Financial’s principal Barry Beitler formed Ocean View in 2005. Ocean View’s operating agreement identified Bral and Beitler as co-managers. Its sole asset was an office building located in Newport Beach, California. In October 2005, First Regional Bank loaned $4,725,000 to Ocean View, secured by the office building. Bral and Beitler later guaranteed the loan, in exchange for an extension of the loan’s maturity date. In 2012, the loan matured and Ocean View defaulted. In June 2014, 2 Beitler – through his wholly-owned entity Steward Financial – acquired the note, the deed of trust, and the guaranties. Steward Financial thereafter scheduled a nonjudicial foreclosure sale against the office building for November 21, 2014. On the morning of the scheduled foreclosure sale, Bral filed a voluntary chapter 11 bankruptcy petition on behalf of Ocean View. Unaware of Ocean View’s bankruptcy filing, the foreclosure trustee went forward with the sale and accepted Steward Financial’s $3,000,000 credit bid (the “First Sale”). After learning of the Ocean View bankruptcy filing, the foreclosure trustee vacated the First Sale.2 Beitler, as a managing member of Ocean View, moved to dismiss the bankruptcy. According to Beitler, he never signed or consented to the resolution authorizing Ocean View to commence a bankruptcy case. He argued that Bral was not authorized to file bankruptcy on behalf of Ocean View without Beitler’s authorization as co-managing member. Ocean View responded that the members of Ocean View had removed Beitler as a co- manager prior to the bankruptcy filing. The bankruptcy court found that Beitler remained a co-manager of the debtor and failed to authorize the 2 There is no indication that a trustee’s deed ever was executed or recorded in favor of Steward Financial in furtherance of the First Sale. 3 bankruptcy filing. As a result, the court granted the dismissal motion.3 A second foreclosure sale (the “Second Sale”) was held on March 20, 2015. Steward Financial again purchased the property, but this time it credit bid $4,100,000, after competing bidders raised the sales price to $4,000,000. After Steward Financial completed the Second Sale, it filed a complaint in the Orange County Superior Court against Bral and others for the difference between its cost of acquisition at the two sales. It asserted that it was harmed by the $1,100,000 differential, which it alleged resulted from Bral’s abuse of process and tortious interference with Steward Financial’s contractual relations. Bral commenced his voluntary chapter 11 case in February 2017. Steward Financial filed two proofs of claim in Bral’s case. Claim number 19 was based on the same allegations and alleged damages as set forth in Steward Financial’s state court complaint against Bral. Claim number 20 was based on Bral’s remaining liability under the guaranty as of his chapter 3 A second bankruptcy case – an involuntary case – was commenced against Ocean View in February 2015, less than two weeks after the dismissal of Ocean View’s voluntary case. Shortly thereafter, the bankruptcy court found that the involuntary case had been filed in bad faith and dismissed it with a 180-day bar to refiling. The court further found that Bral had instigated the involuntary filing. Steward Financial’s claim number 19, however, focuses on the higher purchase price it had to pay to acquire the property as a result of the invalidation of the First Sale caused by Ocean View’s voluntary bankruptcy filing. The bankruptcy court did not make any finding of bad faith when it dismissed Ocean View’s voluntary bankruptcy case. 4 11 filling. Bral objected to Steward Financial’s claim number 19. He argued that Steward Financial could not maintain a claim against him based on state law for alleged misconduct in filing Ocean View’s voluntary bankruptcy petition. As Bral put it, any such claim was barred by federal preemption. In the alternative, Bral argued that Steward Financial’s claim was barred by the “economic loss rule,” which generally bars any recovery of damages based on tort when the duty breached arose solely from contractual obligations. Bral additionally maintained that the increase in the successful bid price between the two foreclosure sales did not cause Steward Financial to suffer any legally cognizable harm or damages. Steward Financial opposed the claim objection. It argued that the Ninth Circuit’s decision in Davis v. Yageo Corp., 481 F.3d 661 (9th Cir. 2007), limited the scope of preemption to misconduct that occurred during the course of the subject bankruptcy case. Steward Financial reasoned that the relevant bankruptcy case in this instance was Bral’s case and not Ocean View’s case, because it was seeking relief from Bral’s misconduct, which occurred before he filed bankruptcy. As for the harm caused by Bral’s actions, it insisted that Bral’s filing of Ocean View’s voluntary case directly resulted in “the $1,100,000 reduction in [Bral’s] Remaining Guaranty Liability.” After holding a hearing, the bankruptcy court sustained Bral’s claim 5 objection. The court agreed with Bral that Steward Financial’s state law causes of action were preempted by the Bankruptcy Code. The court also adopted Bral’s analysis of causation and damages and concluded that Steward Financial had not established that it incurred any legally cognizable damages.4 The bankruptcy court entered its order sustaining the claim objection on February 3, 2020. Steward Financial timely appealed. JURISDICTION The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(2)(B). We have jurisdiction under 28 U.S.C. § 158 . ISSUES 1. Did the bankruptcy court correctly disallow Steward Financial’s proof of claim based on federal preemption? 2. Did the bankruptcy court err when it alternately held that Steward Financial had failed to establish any legally cognizable harm arising from Bral’s filing of a voluntary petition on behalf of Ocean View? STANDARDS OF REVIEW Whether state law is preempted by the Bankruptcy Code is a question of law we review de novo. MSR Expl., Ltd. v. Meridian Oil, Inc., 74 4 The bankruptcy court also expressed agreement with Bral’s argument based on the “economic loss rule.” Because we conclude below that the bankruptcy court’s ruling can be upheld on the alternate grounds of federal preemption and the absence of damages, we decline to address the economic loss rule. 6 F.3d 910 , 912 (9th Cir. 1996). When we review a matter de novo, we consider it as if the bankruptcy court did not previously decide it. Francis v. Wallace (In re Francis), 505 B.R. 914 , 917 (9th Cir. BAP 2014). Whether a party to a claim objection proceeding has produced sufficient evidence to carry their evidentiary burden is a question of fact reviewed under the clearly erroneous standard. Garner v. Shier (In re Garner), 246 B.R. 617 , 619 (9th Cir. BAP 2000). A bankruptcy court’s factual findings are not clearly erroneous unless they are illogical, implausible, or not supported by the record. Retz v. Samson (In re Retz), 606 F.3d 1189 , 1196 (9th Cir. 2010)). On the other hand, whether a claimant has a right under state law to recover for alleged damages is a matter of interpreting state law, which we review de novo. See Hardin v. Gianni (In re King St. Invs., Inc.), 219 B.R. 848 , 853 (9th Cir. BAP 1998). DISCUSSION A. The bankruptcy court correctly applied federal preemption. Steward Financial contends that the Bankruptcy Code does not preempt its claims against Bral for abuse of process and tortious interference arising from Ocean View’s bankruptcy filing. Because Steward Financial asserts state law claims arising from the filing of the Ocean View bankruptcy, we disagree. 1. Preemptive effect of the Bankruptcy Code and Rules. Federal preemption arises from the Constitution’s Supremacy Clause. 7 Miles v. Okun (In re Miles), 294 B.R. 756 , 759 (9th Cir. BAP 2003), aff'd 430 F.3d 1083 (9th Cir. 2005) (“Miles I”). It applies when state laws interfere with or are contrary to federal law. B–Real, LLC v. Chaussee (In re Chaussee), 399 B.R. 225 , 230 (9th Cir. BAP 2008) (citing Perez v. Campbell, 402 U.S. 637 , 652 (1971)). Deciding whether federal preemption applies is largely a question of interpreting congressional intent. Miles I, 294 B.R. at 759 (citing Maryland v. Louisiana, 451 U.S. 725 , 746 (1981)). As we explained in Miles I: Congressional intent to preempt may be inferred from a scheme of federal regulation that is so comprehensive, or where the federal interest so dominates, that the federal system may be assumed to preclude enforcement of state laws on the same subject. When a federal scheme is sufficiently comprehensive to warrant an inference that Congress “left no room” for state regulation, the “field” has been preempted. Id. (citing Hillsborough Cty. v. Automated Med. Labs., Inc., 471 U.S. 707 , 713 (1985)). On a number of occasions, the Ninth Circuit has held that the Bankruptcy Code and Rules completely preempt state law causes of action and remedies arising from the act of filing a bankruptcy (and from the act of filing other papers in the bankruptcy case.) See, e.g., Miles v. Okun (In re Miles), 430 F.3d 1083 , 1089-90 (9th Cir. 2005) (“Miles II”) (holding that § 303(i) completely preempts state law tort causes of action for damages based on the filing of an involuntary bankruptcy petition); MSR Expl., Ltd., 8 74 F.3d at 912-13 (holding that the Bankruptcy Code completely preempts state law malicious prosecution causes of action for conduct in bankruptcy court proceedings – including the allegedly wrongful filing of proofs of claim); Gonzales v. Parks, 830 F.2d 1033 , 1035-37 & n.4 (9th Cir. 1987) (holding that the Bankruptcy Code preempts state law abuse of process causes of action based on the debtor’s filing of an allegedly frivolous bankruptcy petition). This Panel similarly has held that such state law causes of action are preempted. See, e.g., In re Chaussee, 399 B.R. at 234 (holding that federal preemption barred a cause of action under the Washington State Consumer Protection Act when the cause of action was based solely on the creditor’s filing of proofs of claim in the bankruptcy court); Miles I, 294 B.R. at 758 . The above-referenced decisions have identified five considerations driving the application of federal preemption in this area: (1) the provision for uniform federal bankruptcy laws under Art. I, § 8, cl. 4 of the United States Constitution, Miles II, 430 F.3d at 1090; MSR Expl., Ltd., 74 F.3d at 913–15; (2) the congressional grant of exclusive bankruptcy jurisdiction to the federal courts, Miles II, 430 F.3d at 1090; MSR Expl., Ltd., 74 F.3d at 913; (3) Congress‘ enactment of a “complex, detailed, and comprehensive” scheme of bankruptcy laws, Miles II, 430 F.3d at 1089 (quoting MSR Expl., Ltd., 74 F.3d at 914); (4) the federal remedies Congress provided for improper conduct in bankruptcy proceedings, thereby indicating “that 9 Congress has considered the need to deter misuse of the process and has not merely overlooked the creation of additional deterrents.” Miles II, 430 F.3d at 1089 (quoting MSR Expl., Ltd., 74 F.3d at 915); and (5) the policy concern that Congress and the federal courts – rather than state courts – should decide what incentives and penalties should apply in connection with the use (and misuse) of the bankruptcy process. Miles II, 430 F.3d at 1090; Gonzales, 830 F.2d at 1036 . These five considerations are equally persuasive here and mandate a similar result. There is nothing about Bral’s conduct or the availability of remedies for Steward Financial that justifies a different result. Furthermore, applying preemption here also will help ensure that bankruptcy courts are permitted to manage the bankruptcy cases over which they preside. In the parlance of MSR Exploration, “the highly complex laws needed to constitute the bankruptcy courts and regulate the rights of debtors and creditors . . . underscore the need to jealously guard the bankruptcy process from even slight incursions and disruptions” associated with state law tort causes of action arising from alleged misuse of the bankruptcy process. 74 F.3d at 914. As we explained in In re Chaussee, in order to prevent subversion of the bankruptcy process, “[b]ankruptcy courts require full control of the remedies available for addressing improprieties occurring in the cases on their dockets.” 399 B.R. at 234 . 10  2. Steward Financial’s arguments are unpersuasive. Steward Financial argues that the above-referenced decisions do not compel a finding that its state law claims are preempted by the Bankruptcy Code for three reasons: (1) the bankruptcy court in Ocean View’s bankruptcy cases already determined that Bral’s invocation of bankruptcy court jurisdiction was unauthorized and improper; (2) neither the Bankruptcy Code nor the Rules provide a remedy for the type of misconduct Bral engaged in or for the type of harm Steward Financial allegedly suffered as a result of that conduct; and (3) this Panel should follow Davis, 481 F.3d 661 , to allow its state law claims. Each of these arguments is considered below, though we combine the discussion of the first two of them. a. Federal preemption protects not only the exclusivity of federal jurisdiction over bankruptcy cases but also the exclusivity of federal remedies for wrongful bankruptcy filings. Steward Financial vigorously maintains that Bral orchestrated two fraudulent bankruptcy filings to frustrate its foreclosure.5 It contends that Bral is liable for the additional $1,100,000 it had to pay at the Second Sale under its state law claims for abuse of process and tortious interference. 5 The bankruptcy court dismissed Ocean View’s original, voluntary bankruptcy case for lack of authorization. It dismissed the subsequent involuntary bankruptcy for bad faith. In Bral’s subsequent individual bankruptcy, the court did not consider or make any findings regarding his involvement in Ocean View’s bankruptcy filings. 11 The Ninth Circuit, however, specifically held in Gonzales that causes of action for abuse of process for a wrongfully-filed bankruptcy are preempted by the Bankruptcy Code. And, taken together, Gonzales, MSR Exploration, and Miles II make clear that preemption does not merely protect exclusive federal jurisdiction to adjudicate the propriety of bankruptcy court filings. Rather, the Ninth Circuit extended the application of preemption to ensure that the consequences arising from improper bankruptcy court filings also are exclusively controlled by federal law as applied by federal courts. In short, parties injured by wrongful bankruptcy court filings must look to the Bankruptcy Code and Rules for redress. In Gonzales, the debtors filed bankruptcy to prevent a foreclosure much as Ocean View did. The frustrated secured creditors sued the debtors in state court for abuse of process. The Ninth Circuit emphasized the exclusive jurisdiction of the federal courts to address the propriety of bankruptcy filings. However, Gonzales went further. Pertinent to Steward Financial’s current state law causes of action, the court explained: Congress’ authorization of certain sanctions for the filing of frivolous bankruptcy petitions should be read as an implicit rejection of other penalties, including the kind of substantial damage awards that might be available in state court tort suits. Even the mere possibility of being sued in tort in state court could in some instances deter persons from exercising their rights in bankruptcy. In any event, 12  it is for Congress and the federal courts, not the state courts, to decide what incentives and penalties are appropriate for use in connection with the bankruptcy process and when those incentives or penalties shall be utilized. Gonzales, 830 F.2d at 1036 . Both Miles II and MSR Exploration reiterated and reaffirmed that Congress and the federal courts exclusively control the regulation of the bankruptcy process. Both cases further clarified that federal preemption determines not only jurisdiction but also the relief available for wrongful filings. In MSR Exploration, the chapter 11 debtor brought a malicious prosecution action in federal district court against a group of creditors based on proofs of claim they filed in the bankruptcy case. 74 F.3d at 911- 12. The district court dismissed the malicious prosecution action on preemption grounds, and the Ninth Circuit affirmed. Id. MSR Exploration recognized that “[w]hether creditors should be deterred, and when, is a matter unique to the flow of the bankruptcy process itself—a matter solely within the hands of the federal courts.” Id. at 916. In support of this proposition, MSR Exploration noted the variety of federal remedies Congress enacted to prevent misuse of the bankruptcy process. From this statutory scheme, the court inferred “that Congress has considered the need to deter misuse of the process and has not merely overlooked the creation of additional deterrents.” Id. at 915. 13  Miles II most directly rejected Steward Financial’s argument that state law causes of action remain available for wrongfully-filed bankruptcies. Miles II made explicit that the Bankruptcy Code “completely preempts state law tort actions for damages predicated upon the filing of an involuntary bankruptcy petition.” 430 F.3d at 1092 (citing Koffman v. Osteoimplant Tech., Inc., 182 B.R. 115 , 124 (D. Md. 1995)). In Miles, after a husband and wife successfully dismissed ten separate involuntary bankruptcy petitions filed against them and their related businesses, the wife (in her capacity as the husband’s spouse and not as a former alleged debtor) and their children sued the petitioning creditors under various tort claims, including abuse of process. As the wife and children were third parties that lacked standing to seek damages for the bad faith filing under § 303(i), they were left without a claim against the petitioning creditors. Id. at 1094; see also Miles I, 294 B.R. at 763 (“Since all of Appellants’ claims were made in their capacities as third parties, none state a claim upon which relief can be granted.”). Contrary to Steward Financial’s arguments, this result did not affect the application of federal preemption. Rather, the Ninth Circuit proceeded to explain, “[a]llowing state court remedies for wrongful filings may well interfere with the filings of involuntary bankruptcy petitions by creditors and with other necessary actions that they, and others, must or might take within the confines of the bankruptcy process.” Miles II, 430 F.3d at 1090 (citation omitted and emphasis added). 14  Steward Financial asks that we focus on the impropriety of Ocean View’s bankruptcy cases and ignore the sweeping scope of Miles II, MSR Exploration, and Gonzales. We cannot. Those cases recognized a comprehensive federal scheme and a dominant federal interest in maintaining complete control over the bankruptcy process. The result in this instance is preemption of state law causes of action for wrongful bankruptcy filings.6 6 Nor do we agree with Steward Financial that it had no remedy under the Bankruptcy Code to address what it perceived to be a wrongful bankruptcy filing. Steward Financial argues that it was harmed when Ocean View filed bankruptcy to frustrate the First Sale, at which it purchased the office building for $3,000,000. Yet, § 362(d) permits secured creditors to annul the automatic stay in certain situations. See Fjeldsted v. Lien (In re Fjeldsted), 293 B.R. 12 , 21 (9th Cir. BAP 2003). Stay annulment is not an extreme or extraordinary remedy. Id. at 23-24 . Steward Financial took no action in Ocean View’s voluntary bankruptcy. Rather, it was Beitler, in his individual capacity, who moved to dismiss the bankruptcy. Still, at the hearing on his motion to dismiss, Beitler orally requested that the court annul the stay. The court declined to do so. Neither Beitler nor Steward Financial appealed. When asked at oral argument why it never sought to annul the stay in Ocean View’s first bankruptcy, Steward Financial responded that it did not foresee that the foreclosure sale purchase price might change or that it might be adversely affected. Beitler’s oral request to annul the stay at the hearing on the motion to dismiss deeply undercuts this explanation. But the point remains: the Bankruptcy Code provided Steward Financial with the means to validate the First Sale despite Ocean View’s bankruptcy. It did not avail itself of this remedy. 15  b. Davis does not permit Steward Financial’s state law causes of action for wrongful filing of the Ocean View bankruptcy. Steward Financial posits that this Panel should follow Davis, 481 F.3d 661 , instead of Gonzales, MSR Exploration, and Miles II. According to Steward Financial, Davis is more directly on point and is the Ninth Circuit’s latest pronouncement on federal preemption of state law causes of action based on bankruptcy misconduct. Davis involved two federal district court lawsuits arising from a complicated corporate governance dispute between minority and majority shareholders of the Long Life Noodle Company, Inc. (“LLNC”). The majority shareholder, Rextron International LTD (“Rextron”), was owned by holding companies ultimately owned by Yageo Corporation (“Yageo”). Id. at 666 . The plaintiffs were minority shareholders, or their agents and successors, who had attempted to exercise the right to select two vacant seats on LLNC’s board of directors. In response to the demands of the minority shareholders, Rextron and its representatives considered ways to prevent the minority shareholders from selecting directors, including a bankruptcy filing. Id. at 667-68 . Rather than proceed with LLNC’s annual meeting at which directors would be elected, the existing directors, each an employee of Yageo, voted to file bankruptcy. Id. at 666-67 . LLNC proceeded with the bankruptcy and 16 confirmed a plan with the assistance of a chapter 11 trustee, which preserved all existing claims and specifically assigned to the plaintiffs LLNC’s pre-petition claims against its majority shareholder, directors, and affiliates. Id. at 668 . The plaintiffs sued Rextron, Yageo, and a number of its employees and affiliates for prepetition breach of fiduciary duty, RICO violations, fraud, conspiracy to commit fraud, breach of contract, violation of state unfair competition law, and malicious prosecution. Id. at 669 .7 Most of the causes of action in the two lawsuits were winnowed out as a result of defendants’ successful pre- and post-trial motions. Still, plaintiffs prevailed on the breach of fiduciary duty causes of action arising from the resolution of LLNC’s board to file bankruptcy. Id. at 669-72 . On appeal, the defendants argued that the fiduciary duty claims were preempted by the Bankruptcy Code. Id. at 678 . The Ninth Circuit disagreed. In Davis, however, the claims for breach of fiduciary duty “concern conduct that occurred prior to bankruptcy” whereas MSR Exploration, Gonzales, and Miles II all involved “conduct that occurred during bankruptcy.” Id. at 678 (emphasis in original). Rather than the 7 Additionally, in their alleged capacity as minority shareholders (or successors to the minority shareholders), the plaintiffs filed a separate lawsuit for damages against Rextron, which was dismissed on grounds unrelated to the preemption issues raised in this appeal. Id. at 669 . 17 wrongfully-filed bankruptcies challenged in Gonzales and Miles II, or the proofs of claim challenged in MSR Exploration, the complaint in Davis “alleged that the directors and majority shareholder engaged in self- dealing to the detriment of the corporation through their decision to pursue bankruptcy and sought damages for breach of fiduciary duty under California state law.” Id. at 679 . As such, unlike Miles II, MSR Exploration, and Gonzales, the causes of action for breach of fiduciary duty were governed by state corporate governance law rather than federal bankruptcy law. Id. Thus, the prepetition fiduciary duty claims were not preempted because they were “not based on ‘activities that might be undertaken in the management of the bankruptcy process.’” Id. at 679-80 (quoting MSR Expl., Ltd., 74 F.3d at 914). Davis is not in conflict with the Ninth Circuit’s other preemption decisions. In fact, Davis reaffirmed the Ninth Circuit’s commitment to the broad application of federal preemption to bar all state law causes of action for alleged misconduct occurring as part of the bankruptcy process. Davis recognized a sharp distinction between prepetition claims and those for a wrongfully-filed bankruptcy, which accrue only upon the filing of the bankruptcy and are inextricably intertwined with the bankruptcy process. Id. at 678-79. In other words, Davis did not depart from the Ninth Circuit’s holdings in Miles II, MSR Exploration, and Gonzales. See id.; see also Nat’l Hockey League v. Moyes, No. CV-10-01036-PHX-GMS, 2015 WL 18 7008213, at *6 (D. Ariz. Nov. 12, 2015) (examining Davis and concluding that Davis does not apply when the causes of action “arise only after and because of the bankruptcy filing”) Steward Financial attempts to navigate around the holdings of Miles II, MSR Exploration, and Gonzales, and bring its state law claims within the safe harbor of Davis by noting that its claims accrued prior to Bral’s bankruptcy filing. It emphasizes that its causes of action are founded on Bral’s prepetition conduct and does not implicate the regulation of the bankruptcy process in his bankruptcy case. This argument ignores the preemption emanating from Ocean View’s bankruptcy filing. Steward Financial does not assert prepetition state law causes of action divorced from the Bankruptcy Code. Rather, its claims arose from Ocean View’s initial bankruptcy filing itself. As such, they are “completely preempted” by the Bankruptcy Code because the gravamen of Steward Financial’s causes of action is “self-consciously and entirely one which seeks damages for [papers] filed and pursued in the bankruptcy court.” MSR Expl., Ltd., 74 F.3d at 912; see also Davis, 481 F.3d at 679 . B. The bankruptcy court did not err when it held that Steward Financial failed to establish damages. The bankruptcy court also determined that Steward Financial failed to establish that it suffered any harm for which it legally is entitled to 19 recover damages.8 We agree with this alternate basis for affirmance. Steward Financial correctly points out that the automatic stay in Ocean View’s unauthorized voluntary case unequivocally caused the First Sale to be void. In turn, having been deprived of the benefit of the First Sale, Steward Financial was forced to credit bid $4,100,000 to purchase the office building at the Second Sale. It reasons that as a result of the improperly commenced Ocean View bankruptcy, it was damaged in one of two ways: (1) its guaranty claim against Bral was diminished by the $1,100,000 price differential between the two sales, and (2) it was forced to pay $1,100,000 more for the office building than it would have needed to pay at the First Sale. We are not aware of any compensable harm to Steward Financial – either as the foreclosing secured creditor or as the prevailing credit bidder at the void First Sale – arising from the $1,100,000 price differential. As a secured creditor, Steward Financial received everything it was entitled to 8 Neither party has challenged the bankruptcy court’s statement or application of the parties’ respective evidentiary burdens in a claims objection proceeding. Those burdens are correctly set forth in the bankruptcy court’s oral ruling, which is consistent with governing Ninth Circuit law. See Lundell v. Anchor Constr. Specialists, Inc., 223 F.3d 1035 , 1039-40 (9th Cir. 2000); Wright v. Holm (In re Holm), 931 F.2d 620 , 623 (9th Cir. 1991). When the objecting party points to facts or law reflecting that the claimant has omitted an essential element of its substantive claim, the objecting party satisfies its burden of production. See RW Squared Med. Grp. v. HWY Squared, Inc. (In re HWY Squared, Inc.), 208 F. App’x 581, 582–83 (9th Cir. 2006) (citing Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227 , 233 (9th Cir. BAP 2003)). This is precisely what Bral has done here by establishing Steward Financial’s lack of damages. 20 receive from a nonjudicial foreclosure when the Second Sale closed. In fact, it received a much larger recovery on its real property collateral than it would have received under the First Sale, which yielded a lower price. Thus, its argument concerning its so-called diminished guaranty claim does not even make sense. Logically, Steward Financial could not have been injured by receiving more value for its collateral. Put differently, Steward Financial had but one debt for the unpaid loan balance, and the recovery from its collateral could not by its very nature diminish its right to satisfaction of that entire debt. As such, Steward Financial has failed to state any damage in its capacity as a secured creditor. As the frustrated purchaser at the First Sale, Steward Financial understandably was upset that it did not acquire the office building at the original price, given that it had to credit bid an additional $1,100,000 roughly four months later to acquire the same property. Even so, Steward Financial concedes that its rights as a bidder at both foreclosure sales were exactly the same as any other bidder – except that it was entitled to credit bid the outstanding amount of the secured debt it was owed. See generally All. Mortg. Co. v. Rothwell, 10 Cal. 4th 1226 , 1238 (1995). Nonjudicial foreclosure sales in California are governed by a comprehensive scheme of laws enacted by the legislature. See Moeller v. Lien, 25 Cal. App. 4th 822 , 830–31 (1994). The successful bidder at a nojudicial foreclosure sale generally is entitled to have a trustee’s deed of 21 sale executed and recorded in its favor and thereby receive legal title to the property. Id. (citing Homestead Sav. v. Darmiento, 230 Cal. App.3d 424 , 431 (1991)). This right does not entitle the bidder to acquire the property – or to recover damages – when a foreclosure sale is void. See Little v. CFS Serv. Corp., 188 Cal. App. 3d 1354 , 1356 (1987); see also Moeller, 25 Cal. App. 4th at 832 (“If there is a defect in the procedure which is discovered after the bid is accepted, but prior to delivery of the trustee's deed, the trustee may abort a sale to a bona fide purchaser, return the purchase price and restart the foreclosure process.” (citations omitted)). Here, the First Sale was not merely voidable but void. In re Fjeldsted, 293 B.R. at 20 (citing Schwartz v. United States (In re Schwartz), 954 F.2d 569 , 572 (9th Cir. 1992)). Thus, as explained above, Steward Financial acquired no rights as the frustrated bidder at the void First Sale. It necessarily follows that a frustrated bidder has no legal entitlement to damages resulting from a void sale.9 In sum, the undisputed facts presented in the bankruptcy court 9 Arguably, there is an implicit premise underlying Steward Financial’s proof of claim: that it was forced to pay “too much” at the Second Sale for the office building. This premise is inconsistent with the well-established foreclosure law principle that the purchase price paid for real properly at a regularly conducted foreclosure sale establishes its value for purposes of determining the sufficiency of the sale price. See BFP v. Resolution Tr. Corp., 511 U.S. 531 , 545 (1994); see also Rothwell, 10 Cal. 4th at 1237 (“Where there is no irregularity in a nonjudicial foreclosure sale and the purchaser is a bona fide purchaser for value, a great disparity between the sales price and the value of the property is not a sufficient ground for setting aside the sale.” (quoting Moeller, 25 Cal. App. 4th at 832)). 22 demonstrated that Steward Financial did not suffer any injury for which it legally is entitled to recover damages. While it has attempted to characterize its injury as associated with its rights as a secured creditor, as the holder of Bral’s guaranty, or as the prevailing bidder at the First Sale, Steward Financial has not established legally-cognizable harm in any of these capacities. CONCLUSION For the reasons set forth above, we AFFIRM the bankruptcy court’s order disallowing Steward Financial’s claim number 19. 23

2020-12-01 06:09:35.675204+00

https://www.nebraska.gov/apps-courts-epub/public/viewOpinion?docId=N00007495PUB

Nebraska Supreme Court Online Library www.nebraska.gov/apps-courts-epub/ 12/01/2020 12:09 AM CST - 152 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 Ashley R. Smith, appellee, v. Gerald E. King, Jr., appellant. ___ N.W.2d ___ Filed November 24, 2020. No. A-19-999. 1. Child Custody: Appeal and Error. An appellate court reviews child custody determinations de novo on the record, but the trial court’s deci- sion will normally be upheld absent an abuse of discretion. 2. Judgments: Words and Phrases. An abuse of discretion occurs when a trial court bases its decision upon reasons that are untenable or unrea- sonable or if its action is clearly against justice or conscience, reason, and evidence. 3. Contracts: Compromise and Settlement. A settlement agreement is subject to the general principles of contract law. 4. ____: ____. To have a settlement agreement, there must be a definite offer and an unconditional acceptance. 5. Child Support: Appeal and Error. An appellate court reviews child support determinations de novo on the record, but the trial court’s deci- sion will be affirmed absent an abuse of discretion. 6. Paternity: Attorney Fees: Appeal and Error. An award of attorney fees in a paternity action is reviewed de novo on the record to determine whether there has been an abuse of discretion by the trial judge. Absent such an abuse, the award will be affirmed. 7. Paternity: Child Custody: Visitation: Moot Question. Any issues regarding temporary custody and parenting time become moot upon entry of the decree of paternity establishing permanent custody and par- enting time. 8. Contracts: Parties: Intent. To create a contract, there must be both an offer and an acceptance; there must also be a meeting of the minds or a binding mutual understanding between the parties to the contract. 9. Contracts: Parties. A binding mutual understanding or meeting of the minds sufficient to establish a contract requires no precise formality or express utterance from the parties about the details of the proposed  - 153 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 agreement; it may be implied from the parties’ conduct and the sur- rounding circumstances. 10. Contracts: Parties: Intent. The determination of the parties’ intent to make a contract is to be gathered from objective manifestations—the conduct of the parties, language used, or acts done by them, or other pertinent circumstances surrounding the transaction. 11. Contracts: Parties. A fundamental and indispensable basis of any enforceable agreement is that there be a meeting of the minds of the parties as to the essential terms and conditions of the proposed contract. 12. Compromise and Settlement. An alleged oral compromise and settle- ment agreement not made in open court is unenforceable where it is in violation of the statute of frauds or in violation of a court rule requiring all stipulations and agreements of counsel or parties to a suit to be in writing, signed by the parties or their attorneys. 13. ____. A settlement agreement made in open court on the record, agreed to by all of the parties to the litigation and approved by the court, is enforceable. 14. Attorney and Client: Compromise and Settlement. Although lawyers retain apparent authority to make procedural and tactical decisions through the existence of the attorney-client relationship, a lawyer cannot settle a client’s claim without express authority from the client. 15. ____: ____. Where there has been nothing beyond a mere employment or retainer of the lawyer to represent the client in a cause and the lawyer has acquired no other authority to enter into a settlement (such as acqui- escence in open court), if the lawyer seeks to enter a settlement, the opposing party should ascertain whether the lawyer has received actual authority from the client to take such action. 16. Attorney and Client: Compromise and Settlement: Appeal and Error. Disputes over a lawyer’s authority to settle are factual issues to be resolved by the trial court; however, an appellate court will not set aside a trial court’s factual findings regarding settlement disputes unless such findings are clearly erroneous. 17. Trial: Evidence: Appeal and Error. The reopening of a case to receive additional evidence is a matter within the discretion of the district court and will not be disturbed on appeal in the absence of an abuse of that discretion. 18. Trial: Time. In a case tried to the court without a jury, a motion for specific findings of fact must be made before final submission of the case to the court. 19. Child Custody. When deciding custody issues, the court’s paramount concern is the child’s best interests.  - 154 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 20. Child Support: Rules of the Supreme Court. A trial court has the authority to order a parent to pay the categories of expenses speci- fied in Neb. Rev. Stat. § 42-364.17 (Reissue 2016), in addition to the monthly child support obligation calculated under the guidelines. Appeal from the District Court for Douglas County: Gary B. Randall, Judge. Affirmed as modified. Sandra Stern for appellant. Chris Pomerleau, of Nebraska Legal Group, for appellee. Moore, Chief Judge, and Bishop and Welch, Judges. Bishop, Judge. I. INTRODUCTION Gerald E. King, Jr., appeals from the decree of paternity entered by the Douglas County District Court which granted Ashley R. Smith primary physical custody of their two chil- dren, subject to Gerald’s parenting time of every other weekend and one evening on the “off” week. Gerald assigns numerous errors related to the temporary hearing and order, the amount of parenting time he received in the decree, and the award of attorney fees to Ashley. He also challenges the district court’s decision to not grant his in forma pauperis (IFP) request for transcription of court hearings or, alternatively, to not order Ashley to pay for the same so that he could adequately prepare for his motion for new trial. We affirm as modified. II. BACKGROUND Gerald and Ashley were in a relationship for a number of years, but never married. During the course of their relation- ship, they had two children: a son, Cipher King, born in 2005, and a daughter, Phoenix King, born in 2011. The parties ended their relationship in 2014 or 2015, and they proceeded for some time without court involvement regarding custody and child support. Ashley ultimately filed a complaint for establish- ment of paternity, custody, and support in 2017.  - 155 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 1. Initial Pleadings and Temporary Hearing and Order On June 8, 2017, Ashley filed a complaint for establishment of paternity, custody, and support. She alleged that Gerald was the father of Cipher and Phoenix. Ashley sought sole legal and physical custody of the children, and she asked that child sup- port be ordered in accordance with the Nebraska Child Support Guidelines. She also asked that Gerald be required to pay her attorney fees. After a September 1, 2017, hearing on temporary matters at which Gerald appeared pro se and Ashley appeared with counsel, the district court entered an order on September 7. The court determined that Gerald was the children’s father. Ashley was awarded temporary custody of the children; how- ever, Gerald was awarded parenting time “every other weekend from [Friday] after school, or 3:00pm, whichever is earliest,” through Sunday at 7 p.m., and he was also awarded the “‘off’ Thursday evening from after school, or 3:00pm, whichever is earliest through 8:00pm.” Gerald was ordered to pay child sup- port in the amount of $706 per month, beginning September 1. He was also ordered to pay 40 percent of any noncovered med- ical expenses after Ashley had paid the first $480 per calendar year on behalf of the child and 40 percent of any work- and education-related childcare expenses. On March 8, 2018, Gerald, now with counsel, filed an answer and “cross-complaint” wherein he acknowledged his paternity and sought joint legal and physical custody of the children, with equal parenting time for the parties. He asked that child support be ordered in accordance with the Nebraska Child Support Guidelines. On March 30, Gerald filed a motion for temporary orders seeking equal parenting time pending trial. On June 6, he filed a motion asking the district court to set a trial date and to award him summer parenting time pending the trial. And on June 12, he filed a motion to amend the temporary child support order retroactive to September 1, 2017. According to the “Judges Notes” appearing in our  - 156 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 transcript, the district court denied any further temporary hear- ings pending trial. On August 2, 2018, Ashley filed a contempt action against Gerald for failure to follow the September 2017 temporary order regarding parenting time and child support. The resolu- tion of this action does not appear in our record. 2. Trial Begins Trial began on September 28, 2018, and continued on October 1. Both parties appeared with counsel. Several wit- nesses testified, and numerous exhibits were received into evidence. According to Ashley’s testimony, she and Gerald were in a relationship on and off for 11 years. They stopped living together in October 2015, but Gerald believed it was 2014. Prior to when they stopped living together, Ashley was the primary caretaker for the children. She fed them, bathed them, helped them with their schoolwork, and provided the majority of their transportation. Ashley was also paying for all of the childcare costs and children’s activities. However, according to Gerald’s testimony, they shared parenting and household duties and he also paid for household expenses; he even stated that when Phoenix was born, he was the primary caretaker because he was not working at the time. After the parties stopped living together, Ashley and the children moved in with her mother, where they have remained. Gerald stayed with a friend for a few months. Ashley stated Gerald would “just call” and ask to see the children, and “[i]t would just be kind of sporadic.” However, according to Gerald, he saw the children “daily” while staying with his friend, but he did not keep them overnight. After staying with his friend, Gerald lived in a few different places. For the first few months, Gerald had the children every weekend. Then the parties tried alternating parenting time on a daily basis, but that did not last very long. Then, beginning in February 2017, the parties alternated parenting time on a weekly basis. Ashley testified that she “never had a say in [their] arrangements”  - 157 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 during the alternating daily or weekly parenting time. Ashley filed the paternity action in June, and the temporary custody and parenting time schedule was put into place in September, wherein Ashley got primary physical custody and Gerald had parenting time every other weekend and every other Thursday. However, Gerald would occasionally keep the children beyond his parenting time without Ashley’s agreement; Ashley called the police two times and was able to get them. Gerald had also picked the children up from school on a day he did not have parenting time. Exhibit 8 contains text messages between Gerald and Ashley. We include a sampling of those text messages here, includ- ing all typographical and grammatical errors. On September 11, 2017 (year based on Ashley’s testimony), Gerald and Ashley texted: [Ashley:] . . . [I]t is not your day. If I need to get the police involved I will I will be picking cipher up when I leave here at 3. [Gerald:] You can spend ya day all mad cuz I got him and flip but that’s on you me and cipher is gonna have a good time keep ya bad vibes to yaself [Ashley:] It’s done. You did this [Gerald:] Call the cops now then save some time I wel- come you doing that while I’m with him lol Cops cops cops You think you can scare me with cops lol lol lol [Ashley:] I am not trying to scare anyone, but this is exactly why I went to court so when you do this BS I have a leg to stand on I will be there to get cipher at 3 .... [Gerald:] Bitch this is my son fuck whatever you on If I was hurting him or mistreating him or had him in danger then cool but flipping the fuck out cuz I’m simple with im yea go fuck ya self ....  - 158 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 You are a female that younger than me you have no power or authority over me I am sorry we didn’t work but you don’t get to decide when I see my kids cuz we didn’t[.] On September 12, Gerald texted, “I got one son and one daughter in this world that I helped create and bring into this world there’s no stranger thatbdont know me or my kids gonna dictate what I can and can’t do with them.” In October, the par- ties were arguing about parenting time and transportation and Gerald texted: You ain’t sacrificing shit it should be week to week this bullshit you on where you think you have the only right to OUR kids and how to raise them I don’t give two shits about a lawyer Judge or court none of them was involved in us making these kids and you can have them pump ya head but the real is you on bullshit[.] On October 11, the parties were again arguing over the parent- ing time schedule, and Ashley texted Gerald saying, “All of this is reported back to a judge.” Gerald replied: Haha report I don’t give a fuck either .... Report fuck the judge Report fuck ya lawyer Report fuck them all Report when my schedule change none of this every other week shit will apply Report these are my kids and they have zero authority over me Report how much of a bitch you are[.] During his testimony, Gerald said he sent the text messages because he was upset about the situation and wanted to spend more time with his children. Gerald agreed that he would follow court orders. However, he acknowledged that he had kept the children longer than his parenting time and that he had picked them up from school when it was not his day. Also, between September 1, 2017,  - 159 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 and June 2018, he paid a total of only around $1,050 in court- ordered child support. He said, “I had a house, kids, rent and stuff that was due. So I financially could not . . . .” He stated he also paid some money directly to the court after June 2018. (According to a Department of Health and Human Services payment history report, between June 26 and September 14, Gerald had paid $1,200; he never once paid his full monthly obligation.) Gerald acknowledged that he had not paid for any childcare; he said he did not know that child support and childcare were different. Gerald admitted receiving receipts for Phoenix’s childcare costs, but he denied receiving receipts for Cipher’s childcare costs. According to Ashley, Gerald had been physical with her on “multiple occasions.” Ashley said there had been “slaps to the face,” most recently 3 years ago, and “hair pulling,” most recently when she was 8 months pregnant with their daughter. According to Ashley, both children had witnessed incidents when Gerald was physical with her. Gerald had also called her names, like “bitch,” in front of the children. According to Gerald, there was “a lot of lies and embellishment” in Ashley’s testimony. He acknowledged that their relationship was not appropriate, and he confirmed that Ashley hit him multiple times. Ashley said she witnessed an incident when Gerald was “aggressive” and grabbed Phoenix’s arm when she tried to go to Ashley. And Cipher was crying and upset when he called and told her that Gerald “struck him for letting the dog out.” Ashley was also aware that Gerald smoked marijuana around the children; “this Sunday” Ashley picked Cipher up from Gerald’s house and “had to roll down the windows because [Cipher] reeked so heavily of marijuana.” Gerald testified that he was charged with possession of marijuana twice and con- firmed he was convicted of possession of marijuana, but he did not specify whether it was once or twice. Ashley acknowl- edged that she had smoked marijuana in the past, the last time being 4 to 5 years ago, and that at that time, she had smoked it in front of the children. Ashley also acknowledged she was  - 160 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 convicted of “DUI” 5 years ago, but said the children were not in the car at the time. Gerald testified that he has seen Ashley drive with the children after she had been drinking. Ashley’s mother, with whom Ashley and the children have lived for 4 or 5 years, testified that Ashley is an “amazing” par- ent and is “an absolutely wonderful role model.” The children are “extremely well-behaved.” As to Gerald’s temperament, Ashley’s mother said, “Numerous times I’ve heard him on the other end of a phone call conversation with Ashley knowing that the children were within earshot, and I could overhear such profanity and degrading language used to my daughter.” Ashley testified that she was asking for sole legal and physical custody. Ashley preferred that Gerald not have par- enting time on school nights because he did not have reliable transportation. She stated that when she was out of town for a week, their son was tardy three times. Additionally, it was important to Ashley that the children have consistency on school nights. However, Gerald said that “[t]here’s no concern” with him being able to get the children to school on time. He claimed it was Ashley or her mother who took the children to school late and caused them to be tardy three times during the current school year. Gerald wanted to have parenting time on an alter- nating weekly basis, like he had prior to the September 2017 temporary order. He thought it would be “fair” for both parents to have half of the time with the children because “there [were] no problems prior,” “no issues.” If the court was not inclined to give him equal parenting time, Gerald’s alternative proposal was for 6 out of every 14 nights—every other week from Friday at 8 a.m. to Wednesday at 8 a.m., and then overnight on the Tuesday of his “off week” (Tuesday at 8 a.m. to Wednesday at 8 p.m.). He also wanted parenting time on half of all school holidays and half of the summer. Gerald testified that he told Cipher what happened at court at the temporary hearing “[b]ecause his mother lies to him”; “before anything ever started,” she told Cipher everything was  - 161 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 going to stay the same. Gerald showed Cipher the affidavits that Ashley and her mother presented to the court at the tempo- rary hearing against Gerald. Text messages between Gerald and Ashley were received into evidence and reveal the following: Ashley texted Gerald, “Why would you bother cipher with our issues while he is at school, . . . [h]e is not your friend or your support - he is your child and he did not have to find out what is going on via text.” Gerald responded: He wanted to know what happened so I told him I let him read what you and ya mom said about me on the affidavit and all he should know the truth not the sugar coated lies you and ya momma tell him So when I’m. It around and he can’t come here for a week it because of you not me you did this all[.] Ashley replied, “[M]y affidavit is true.” Gerald told the children they would be testifying at trial. “What I told them is you guys need to tell the truth and this is your opportunity to express to the judge what you want. I don’t know what you want.” He said, “I did promise them that if I had more time with them then I can take more trips with them because they want to go places. And I express to them I don’t currently have the time to take them . . . .” The district court recessed for lunch on October 1, 2018, but never came back on the record that day. However, as revealed through subsequent motions and hearings, it appears that the district court met with the parties’ counsel in chambers after the lunch recess on October 1. The “Judges Notes” for October 2 appear in our transcript and state: “Matter came up for Trial, [named counsel] appeared as counsel of record. [Gerald’s counsel] to prepare a Decree.” The next action that appears in our record is a motion filed on October 5. 3. Motions and Hearing On October 5, 2018, Ashley filed a motion asking the dis- trict court to reconsider and amend its findings from the trial held on September 28 and October 1, to enlarge the record  - 162 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 to allow rebuttal witnesses and closing statements, to clarify the decision of the court, and to order a new trial. The district court and the parties’ counsel apparently met again in November 2018, but such proceedings do not appear in our record. However, the “Judges Notes” for November 16 appear in our transcript and state: “Matter came up for Motion to Clarify. Trial continued to 1/23/19 at 10a.m.” On November 28, Gerald filed a motion for entry of decree. He alleged that after trial was held on September 28 and October 1, his coun- sel was instructed to prepare a decree; his counsel forwarded a proposed decree and parenting plan to Ashley’s counsel on October 2; and Ashley filed a motion for clarification as to certain terms of the decree, which was heard before the court on November 16, and certain matters were clarified. Gerald alleged that the decree attached to his motion reflected the nature of the proceedings as well as the court’s findings and orders, with the exception that Gerald added a paragraph pro- viding that both parties shall be awarded 7 days parenting time of their choosing each year, to accommodate for special events that each parent may want to spend with the children. On November 29, 2018, Ashley again filed a motion asking the district court to reconsider and amend its findings from the trial held on September 28 and October 1, to enlarge the record to allow rebuttal witnesses and closing statements, to clarify the decision of the court, and to order a new trial. Gerald filed an objection to Ashley’s motion. At a hearing on December 4, 2018, the parties appeared on the foregoing motions. At this hearing, the district court stated, “I know we had a hearing in my office on October — I don’t know if it was October 5th or after that . . . .” Ashley’s counsel then stated, “[W]e came here [in November,] and the Court made a decision that we would schedule a two-hour opportunity for us in January [2019] to finish the testimony, not only of my client, but also of [Gerald] and allow the parties to submit their closing arguments.” Ashley’s counsel further stated, “So regarding [Gerald’s] motion to enter the decree,”  - 163 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 Ashley would object because the case has not been closed. The court stated: Well, let’s be clear. We had trial and you — the trial was not completed. We took a break. We had to get another date. I told both of you what I thought would be appro- priate based on the evidence that I’ve heard. You both then said okay. We’ll try to put together a decree. That was not on the record. And since then we’ve had another hearing in which you’ve disagreed as to what the two of you thought you had agreed to which the Court was going [sic] propose. I think that this is — I don’t think either one of you is correct a hundred percent. And appar- ently you feel like [Gerald’s counsel] is continuing to add things that your client was not willing to agree to. I think we’ll just finish the trial in January. Gerald’s counsel objected to “re-opening this matter.” The fol- lowing colloquy then took place. [Gerald’s counsel:] You’re right. We had a two-day trial. I had witnesses. [Ashley’s counsel] had witnesses. We had continued into the second day . . . . We had one more day slotted for that trial, and I had a couple wit- nesses and I was going to ask you to speak to the minor children. You told us at the beginning of the trial that you would if you deemed it to be necessary. So it wasn’t a hundred percent. It wasn’t a given. We proceeded through lunch. You called us back to your chambers and you said, Here’s what I am inclined to do. THE COURT: I said basically here’s what I’m thinking based on what I heard. [Gerald’s counsel:] Right. And based on that, I rep- resented to the Court, we’re fine with that, Your Honor. We will not present anymore witnesses. We rested. There was no request by [Ashley’s counsel] to put on additional witnesses, to present a rebuttal, to present a closing argument. In fact, [Ashley’s counsel] asked for clarifica- tion on certain things that you ordered. You were very specific in your orders. . . . You advised me [to] prepare  - 164 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 the decree. You ordered six days out of . . . 14 to [Gerald], eight days out of 14 to [Ashley]. You ordered joint custody — joint physical custody, sole legal custody to [Ashley]. You said whatever the guidelines say the guidelines say with regard to child support. . . . [T]here was a specific question about attorney’s fees. You said yes, anything related to the contempt matter. There was a specific question . . . about how much [Gerald] should pay towards arrears, and you said $300 a month, which I interpreted to be total arrears for child care and child sup- port, and we have a disagreement on what you intended. . . . I think my decree that’s submitted is 100 percent what you ordered, but for that paragraph. You said the parent- ing plan that the parties mediated. You said 50 percent of the summer. Those were all things that Your Honor stated in chambers. There wasn’t a court reporter. . . . The only arguable thing [we] didn’t do was closing, and [Ashley’s counsel] didn’t ask for it. And I highly doubt that his closing will change Your Honor’s opinion. . . . .... THE COURT: . . . . The issue is, you haven’t rested on the record. [Ashley’s counsel] wants more time. He doesn’t agree. And so I don’t think I can force the — we didn’t — we should have brought the parties out and entered the terms of that on the record, and then it would have been done. We didn’t do that. .... THE COURT: . . . . I’m just saying because it wasn’t completed in the proper way — and I’m taking responsi- bility for part of that — I think we have to finish the trial if [Ashley’s counsel] isn’t happy with it. I don’t think we have any other choice. I don’t think I can force the entry of this decree because we didn’t bring the parties out and put it on the record. And that’s on me. .... THE COURT: . . . . I mean, the bottom line is, when we had our conversation, I told you that based on what  - 165 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 I had heard because it was so close to being at the end, this is what I thought would likely happen. At that point in time, I don’t recall strong-arming anybody into saying this is what it should be, and I believe a settlement was reached. But because that wasn’t memorialized, because we didn’t come back out in the courtroom and put in on the record at that time, I don’t believe it’s enforceable by the Court. I think you get a chance to finish, if that’s what you want. [Ashley’s counsel:] It is what I want, Your Honor. And I also don’t want there to be a confusion about — it’s truly unfortunate that anybody that day thought there was a settlement. THE COURT: You said yes, I believe the case can be resolved because I told you what you [sic] thought was happening. You were in my office. It wasn’t on the record. I understand that. .... [Ashley’s counsel:] And in no way was [sic] speaking for my client agreeing to a settlement of — THE COURT: That’s why I’m not entering the decree. (Emphasis supplied.) 4. Trial Resumes Trial resumed on January 23, 2019. Gerald rested his case, with the exception that he still wanted the district court to speak to the children: “If after the case in chief you feel like you are not going to give [Gerald] at least six days out of 14, I would continue to ask you to speak with the children[,] [b]ut I will rest my case . . . .” Ashley’s counsel called Gerald to the stand. Gerald acknowledged that he and Ashley have had alterca- tions and that he has pushed her to the ground, but he claimed he pushed her in self-defense after she grabbed him by the hair and “pulled out a couple of [his] dreads.” He denied that the children witnessed the pushing incident, which he believed occurred in 2009, and he stated he had not been physical  - 166 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 with Ashley in “over seven, eight, nine years.” He also said he tries to refrain from having arguments with her via text message. Gerald testified that in September 2018, right before trial, he gave Cipher tickets to a professional football game in Kansas City, Missouri, for his birthday; the game was on October 28. The game was during Ashley’s weekend with the children, and although she said that Cipher could go, she “didn’t really specify how that was going to happen, which is what [Gerald] was trying to accomplish for months.” Because the game was at noon, Gerald wanted to pick Cipher up and drive to Kansas City the day before; Ashley said he could pick Cipher up the day of the game. When he arrived to pick Cipher up the day before the game, Ashley told Cipher that she would take him to the game, but “[Cipher] continued to proceed with me to my car. I didn’t force anything.” Gerald acknowledged that text messages received into evidence show his frustration with Ashley for changing her mind about letting Cipher go to the game. We include a portion of those text messages here, including all typographical and grammatical errors: [Ashley:] And it’s my weekend, my choice. If I said no he could not go you would have to accept that, but I am saying he can go Sunday morning drive two and a half hours to KC and be there by the 12 kickoff They are not leaving Saturday. Period [Gerald:] Watch us .... [Ashley:] It’s Sunday or nothing. .... [Gerald:] Sunday is not an option is the best way I can put it to I don’t care about the consequences will leave a Saturday[.] Gerald testified that he was frustrated that Ashley refused to work with him on their parenting schedule to accommodate  - 167 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 the trip. There was some testimony about his understanding of the parties’ parenting agreement following the second day of trial on October 1, 2018. We include the relevant exchanges here, although not necessarily in the order they occurred. Gerald’s counsel asked, “We had trial on September 28th and October 1st of 2018?” And Gerald responded, “Correct.” Gerald’s counsel further asked, “And we started a new parent- ing time schedule; is that correct?” Gerald again responded, “Correct.” Gerald’s counsel also asked him, “And the last court hearing that we had, the Court awarded you, your understand- ing was, six out of 14 days?” Gerald replied, “Correct.” During another exchange, the following colloquy was had: [Gerald’s counsel:] The last day of trial when the Court ordered that you would have this much time, you’re [sic] schedule wasn’t — [Ashley’s counsel:] Well, objection, Your Honor. That misstates facts not in evidence. The Court never ordered anything. [Gerald:] No. When the new order was put in, no. [Gerald’s counsel:] Let’s stop for a moment. Your Honor, I just want to . . . clarify for the record what the last — the previous day of trial was. I think I have it in the proposed decree, if I can look at that. October 1st. Gerald testified that he had given Cipher the football tickets as a birthday gift earlier in September, prior to trial. There was then discussion about Gerald’s plans to take Cipher to Kansas City a day earlier than Ashley desired: [Gerald’s counsel:] Okay. And there was really no Court order at that point, was there? [Gerald:] Not really. I mean, it was still confusing to me to understand what the Court order was, and I just figured we could be amicable, me and her, about the sit­ uation. She just refused to work with me. Gerald’s counsel asked, “You were going to start your week on/week off on a different weekend, but [Ashley] told you no specifically?” Gerald responded, “Correct. I tried to do that so we wouldn’t have this issue, but she made it so we would.”  - 168 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 During Ashley’s testimony, she said that when Gerald first bought the football tickets, he did not ask to purchase tickets for a game during her parenting time weekend. It was not until after Gerald gave the tickets to Cipher that Ashley realized the game fell on her weekend. “And then we went to court, and with the new arrangement, it wasn’t anything against Gerald,” but Ashley and the children had other plans that weekend; “it wasn’t intentional that I was trying to keep him away from [Cipher] on this weekend.” Ashley stated, “I have the same weekends I had before our October 1st order was put in.” Gerald testified that he took Cipher to the game and that he gave Ashley makeup parenting time the next weekend dur- ing his scheduled parenting time. Gerald said that prior to the game, he tried to work it out with Ashley “so we wouldn’t have this issue, but she made it so we would. . . . She knew we would come back here. This was all plotted.” He further stated, “I know she did it purposely. I’ve been with this woman for 11 years. I know her.” Ashley testified that she agreed Gerald could pick up Cipher the day of the game, and there was no reason they needed to leave the day before, but that is what happened. Gerald was also confronted with text messages he sent to Ashley in November 2017 wherein he used profanity, called her names, and told her to “Go suck a AIDS dick.” Again, Gerald testified that he was just upset at the time he sent the text messages. Gerald testified that he was still seeking “50/50” custody and parenting time. Gerald’s counsel asked, “[Y]our under- standing was the Court gave you six out of 14 days” after the first 2 days of trial, and Gerald responded, “Correct.” But his “preference” was still 7 out of 14 days. It was also Gerald’s understanding that Ashley would owe him child support under an “8/6” parenting time schedule. A witness testified that she had seen Gerald and Ashley argue more than once in the past year, most recently on Christmas 2018. On Christmas, Gerald and Ashley were both at her house and, according to the witness, Gerald was  - 169 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 yelling at Ashley, “Ash, why the fuck you keep taking me through this. I’m tired of going through this shit with you with the kids back and forth to court.” The witness said Ashley replied that it was Christmas and that they did not need to be arguing. The witness also confirmed that she had observed Gerald smoke marijuana around his children within the past 2 years. The witness had observed Ashley smoke marijuana around the children in the past, but not in the last 4 years. After Ashley rested her case, counsel proceeded to clos- ing arguments. 5. District Court’s Decree The district court’s decree of paternity was filed on May 8, 2019. The court ordered that Gerald was the children’s father. Pursuant to the decree and the attached parenting plan, Ashley was awarded sole legal custody and primary physical custody of the children. Gerald was awarded parenting time every other weekend from Friday at 4 p.m. until Monday at 8 a.m. and every other Thursday from 4 to 7 p.m. (before the weekend in which he does not have parenting time). Each parent was to have 2 weeks of uninterrupted parenting time during the summer. A holiday parenting time schedule was also established. Gerald was ordered to pay child support in the amount of $665 per month for the two children, beginning February 1, 2019. He was also ordered to pay 38 percent of any noncov- ered medical expenses after Ashley had paid the first $480 annually per child and 38 percent of any work-related child- care expenses. All childcare expenses that accrued during the temporary order were preserved. The court noted that Gerald had paid $1,050 as partial payment toward childcare amounts due and owing under the temporary order, but as of May 1, 2019, still owed $2,612.40 in childcare arrearages; the court ordered him to pay $200 per month toward those arrearages. The order stated, “The parties shall each purchase the chil- dren clothing in an approximately equal amount.” And Gerald was ordered to pay $2,885 of Ashley’s attorney fees within  - 170 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 30 days of the decree “due to his inability to follow the tem- porary order regarding parenting time, child support obliga- tions, and child care obligations and the legal fees incurred by [Ashley] due to same.” 6. Postdecree Motions, Hearings, and Rulings On May 15, 2019, a “Defendant’s Motion to Reconsider, Motion to Alter or Amend, Motion for New Trial” (motion to reconsider) was filed by Gerald. On June 6, Gerald filed a motion requesting the district court to “enter an IFP Order allowing him to receive a transcription of the proceedings or an order for [Ashley] to pay for transcription of these proceedings” prior to hearing and argument on his motion to reconsider. On June 28, the district court denied Gerald’s motion for a transcription of the proceedings; Gerald appealed that decision, and on August 5, Gerald’s interlocutory appeal in case No. A-19-695 was dismissed by this court for lack of jurisdiction. A hearing on Gerald’s motion to reconsider was held on September 18, 2019. During the hearing, Gerald’s counsel repeatedly contended that the district court should have spo- ken to the children prior to entering its decree. Counsel stated, “[W]hen we rested [at trial], for the record, we said we’re rested conditioned on six out of 14 days. If Your Honor is not going to order that, please set it for further hearing and speak with the children.” The court responded by stating that because it did not grant Gerald’s request, it was overruled. Counsel replied, “Okay. I did not have an opportunity to make an offer of proof because I did not know that you were going to over- rule it.” Counsel continued: I would have made an offer of proof as to what the chil- dren would testify to had I known that you were not going to order six out of 14 days and you had no intention of speaking with the children. I would have made an offer of proof and, I’ll do that today.  - 171 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 According to counsel, “[I]f Phoenix and Cipher were called to testify in chambers with no parents present and just the attor- neys and Your Honor, that Cipher and Phoenix would say that they love their father.” Counsel continued: [Not having] six out of 14 days is traumatizing to them. The testimony that mom portrayed dad to be not keeping a house, not feeding them [nutritious meals], is inaccu- rate. That he was more than loving. He’s always put their needs ahead of his own. And that it’s extremely impor- tant for them to have quality time with their father. That would be the offer of proof . . . . Gerald’s counsel also challenged the amount of parenting time awarded to Gerald and the way child support was ordered. Additionally, counsel stated, “I realize that this [is] a motion for new trial, but [Gerald] would like specific findings of fact pursuant to [Neb. Rev. Stat. §] 25-1127 [(Reissue 2016)].” Pursuant to its order filed on September 26, 2019, and its order nunc pro tunc filed on October 3, the district court denied the entirety of Gerald’s motion to reconsider, “with the exception of the following, which has been stipulated to by the Parties.” Gerald’s child support obligation under the temporary order was amended as follows: From the time period of September 1, 2017 through May 1, 2019, Gerald owes a total of $7,986.00. Said amount is calculated based upon the following: i. From September 1, 2017 through September 30, 2018, [Gerald’s] child support obligation to [Ashley] is in the amount of $650.00 per month. ii. From October 1, 2018 through May 1, 2019, [Ashley’s] child support obligation to [Gerald] is in the amount of $58.00 per month. iii. This Order does not obligate [Ashley] to any past or current child support obligation. The purpose of the description of subparagraphs i,ii, and iii is solely to explain the computation of [Gerald’s] Child Support Obligation from September 1, 2017 through May 1, 2019.  - 172 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 Commencing May 1, 2019, Gerald’s child support obligation “shall adhere to the Decree of Paternity dated May 8, 2019.” 7. Appeal Gerald now appeals the paternity decree filed on May 8, 2019, and the October 3 order nunc pro tunc denying his motion for reconsideration. III. ASSIGNMENTS OF ERROR Gerald assigns, summarized and reordered, that the district court erred (1) in various ways at the temporary hearing and in the temporary order; (2) by not enforcing the settlement of the parties that was reached in the presence of the trial court; (3) by not allowing the children to testify; (4) by not granting his request for specific findings of fact; (5) by not awarding him more parenting time; (6) by ordering him to purchase approximately one-half of the children’s clothing; (7) by order- ing him to pay a portion of Ashley’s attorney fees; and (8) by not granting his IFP request for transcription of proceedings or, alternatively, in not ordering Ashley to pay for the same so that he could prepare for his motion for reconsideration. IV. STANDARD OF REVIEW [1,2] An appellate court reviews child custody determina- tions de novo on the record, but the trial court’s decision will normally be upheld absent an abuse of discretion. Randy S. v. Nicolette G., 302 Neb. 465 , 924 N.W.2d 48 (2019). An abuse of discretion occurs when a trial court bases its decision upon reasons that are untenable or unreasonable or if its action is clearly against justice or conscience, reason, and evidence. Id. [3,4] A settlement agreement is subject to the general prin- ciples of contract law. Strategic Staff Mgmt. v. Roseland, 260 Neb. 682 , 619 N.W.2d 230 (2000). To have a settlement agreement, there must be a definite offer and an unconditional acceptance. Id. [5] An appellate court reviews child support determinations de novo on the record, but the trial court’s decision will be  - 173 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 affirmed absent an abuse of discretion. See State on behalf of Martinez v. Martinez-Ibarra, 281 Neb. 547 , 797 N.W.2d 222 (2011). [6] An award of attorney fees in a paternity action is reviewed de novo on the record to determine whether there has been an abuse of discretion by the trial judge. Absent such an abuse, the award will be affirmed. Cross v. Perreten, 257 Neb. 776 , 600 N.W.2d 780 (1999). V. ANALYSIS 1. Statute of Limitations Due to the gap in time between the children’s births (2005 and 2011) and the filing of Ashley’s complaint in this mat- ter (2017), we initially note that the procedure for obtaining a determination of paternity is set forth in Neb. Rev. Stat. §§ 43-1401 to 43-1418 (Reissue 2016 & Cum. Supp. 2018). Section 43-1411 provides that a paternity action may be insti- tuted “by (1) the mother or the alleged father of such child, either during pregnancy or within four years after the child’s birth . . . or (2) the guardian or next friend of such child or the state, either during pregnancy or within eighteen years after the child’s birth.” Paternity can also be established by a nota- rized acknowledgment of paternity. See, § 43-1409 (signing of notarized acknowledgment, whether under § 43-1408.01 or otherwise, by alleged father creates a rebuttable presumption of paternity as against alleged father); § 43-1408.01 (during period immediately before or after in-hospital birth of child whose mother not married, person in charge of hospital or designated representative shall provide mother and alleged father documents and written instructions to complete nota- rized acknowledgment of paternity; acknowledgment, if signed by both parties and notarized, shall be filed with Department of Health and Human Services at same time as certificate of live birth); Benjamin M. v. Jeri S., 307 Neb. 733 , ___ N.W.2d ___ (2020) (proper legal effect of signed, notarized acknowl- edgment of paternity is finding that individual who signed  - 174 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 as father is in fact legal father; establishment of paternity by properly executed acknowledgment is equivalent of establish- ment of paternity by judicial proceeding); Tyler F. v. Sara P., 306 Neb. 397 , 945 N.W.2d 502 (2020) (same). A notarized acknowledgment of paternity does not appear in the record before us. Furthermore, Ashley’s complaint and Gerald’s counterclaim were filed in the parties’ individual capacities and were filed outside of the 4-year statute of limi- tations set forth in § 43-1411. However, Gerald did not raise a statute of limitations defense to Ashley’s complaint, and instead, he acknowledged his paternity of the children. The statute of limitations is an affirmative defense which is waived if not asserted. See Benjamin M. v. Jeri S., supra (statute of limitations does not operate by its own force as bar, but, rather, operates as defense to be pleaded by party relying upon it and is waived if not pleaded). See, also, Manker v. Manker, 263 Neb. 944 , 644 N.W.2d 522 (2002). In Manker, a father argued that the mother of their child was barred from bringing a pater- nity action more than 4 years after the child’s birth, as set forth in § 43-1411. However, the Nebraska Supreme Court stated that “[t]he statute of limitations is an affirmative defense which is waived if not asserted by demurrer or answer.” Manker v. Manker, 263 Neb. at 952 , 644 N.W.2d at 531 . The Supreme Court pointed out that the father had acknowledged paternity and his obligation to pay support in his answer, and such an affirmative allegation was “a judicial admission which consti- tutes a waiver of all controversy with respect to those issues.” Id. at 953 , 644 N.W.2d at 531 . As such, the Supreme Court found no error in the district court’s determination that the claims were not time barred. In this case, both parties acknowledged that Gerald is the father of Cipher and Phoenix, and both parties sought a deter- mination of paternity, custody, and child support. Therefore, as in Manker v. Manker, supra, we find such acknowledgments to constitute a waiver of all controversy with respect to these issues and conclude that the claims are not time barred.  - 175 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 2. Temporary Hearing and Order [7] Gerald contends that the district court erred in various ways at the temporary hearing and in the temporary order and that such errors resulted in his not receiving a sufficient amount of parenting time. However, any issues regarding tem- porary custody and parenting time became moot upon entry of the decree of paternity establishing permanent custody and parenting time. See, State on behalf of Pathammavong v. Pathammavong, 268 Neb. 1 , 679 N.W.2d 749 (2004) (tem- porary order rendered moot when permanent custody order entered); Mann v. Rich, 18 Neb. App. 849 , 794 N.W.2d 183 (2011) (any issue relating to temporary order is moot after it is replaced by more permanent order). To the extent that Gerald takes issue with the effects of the temporary order on child support matters, the paternity decree on May 8, 2019, and the subsequent orders on September 26 and October 3 corrected the amount of Gerald’s monthly child support owed under the temporary order. And Gerald does not claim error with respect to the recalculation of the monthly child support obligation owed under the temporary order. 3. Settlement Agreement Gerald contends the district court erred by not enforcing the settlement of the parties that was reached in the presence of the trial court in chambers on October 1, 2018. As set forth previously, the district court met with the par- ties’ counsel in chambers after the lunch recess on October 1, 2018. Apparently, discussion was had as to how the court was inclined to rule based on what it had heard so far at trial, and rather than resuming trial, the parties thereafter attempted to draft a decree but could not agree on the terms they thought the court had indicated. Several motions were filed. On October 5, 2018, Ashley filed a motion for the district court “to reconsider and amend its findings from the paternity trial held September 28 and October 1 of 2018, to enlarge the record to allow rebuttal witnesses and closing statements as  - 176 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 neither were allowed, to clarify the decision of this Court, and for a new trial.” In support of her motion, Ashley stated: 16. [Gerald] is not capable of being a joint-physical custody parent and it is not in the children’s best inter- ests that the children spend almost half their time with [Gerald]. 17. The trial abruptly ended at 11:30am on October 1, 2018 in the middle of [Gerald’s] testimony after the Court had originally taken a break for lunch. 18. [Ashley] was not allowed rebuttal witnesses. 19. [Ashley] was not allowed . . . a closing argument. 20. [Gerald] is in contempt for not following the temporary order regarding parenting time, child support arrears, and child care expenses. 21. The Court did not provide a detailed purge plan and Counsel for Parties disagree as to said purge plan. 22. The Court did not provide a detailed timeline for which [Gerald] must pay a portion of [Ashley’s] attor- ney fees. 23. Clarity is needed regarding the obligation of the parents to ensure the children attend extracurricular activities. 24. The Court’s decision is not in the best interests of the minor children[.] 25. The Court’s decision regarding custody is contrary to law. The district court and parties’ counsel apparently met again in November 2018, but such proceedings do not appear in our record. However, the “Judges Notes” for November 16 appear in our transcript and state: “Matter came up for Motion to Clarify. Trial continued to 1/23/19 at 10a.m.” On November 28, 2018, Gerald filed a motion for entry of decree. Gerald alleged: [T]rial was held . . . on September 28, 2018 and October 1, 2018. [Gerald’s] counsel was instructed to prepare a Decree. [Gerald’s] counsel forwarded [Ashley’s] Counsel  - 177 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 a proposed Decree and Parenting Plan the following day on October 2, 2018. [Ashley] filed a Motion for Clarification as to certain terms of the Decree, which was heard before the Court on November 16, 2018 and certain matters were clarified. Gerald attached a proposed decree which he believed was “wholly reflective of the nature of the proceedings as well as the Court’s finding and Orders,” with the exception that Gerald added a paragraph providing that both parties shall be awarded the 7 days of parenting time of their choosing each year, to accommodate for special events that each parent may want to spend with the minor children. In relevant part, the proposed decree awarded sole legal custody to Ashley, but awarded the parties joint physical custody—Ashley was to have parent- ing time 8 out of every 14 days and Gerald was to have par- enting time 6 out of every 14 days; the parties were to have equal parenting time during the summer. On November 29, 2018, Ashley again filed a motion for the court “to reconsider and amend its findings from the paternity trial held September 28 and October 1 of 2018, to enlarge the record to allow rebuttal witnesses and closing statements as nei- ther were allowed, to clarify the decision of this Court, and for a new trial.” In support of her motion, Ashley made the same statements as in her October 5 motion. Also, on November 29, Gerald filed an objection to Ashley’s motion. At a hearing on December 4, 2018, the parties and the dis- trict court set forth their recollections of what had transpired following the lunch recess on October 1. Gerald’s counsel contended that the parties had reached a settlement in cham- bers and wanted the court to enforce the settlement and enter the proposed decree wherein the parties were to have joint physical custody—Gerald was to have parenting time 6 out of every 14 days. However, the court noted that Ashley’s counsel did not agree and wanted to finish the trial. Ashley’s coun- sel stated that in November, the court “made a decision that we would schedule a two-hour opportunity for us in January  - 178 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 [2019] to finish the testimony, not only of my client, but also of [Gerald] and allow the parties to submit their closing argu- ments,” and therefore, Ashley objected to Gerald’s motion to enter a decree. The district court recollected that when they had trial, it was not complete; that during a break, the court informed the par- ties’ counsel what it thought would be appropriate based on the evidence it had heard; and that the parties’ counsel said they would try to put together a decree, but since then counsel dis- agreed as to what they thought the court was going to propose. The court did not think “either [was] correct a hundred per- cent.” The court said that “we’ll just finish the trial in January.” Gerald objected to “re-opening this matter.” During the discus- sion that followed, the district court stated: I believe a settlement was reached [on October 1, 2018]. But because that wasn’t memorialized, because we didn’t come back out in the courtroom and put in on the record at that time, I don’t believe it’s enforceable by the Court. I think you get a chance to finish, if that’s what you want. Trial thereafter resumed on January 23, 2019. We have previously set forth the parties’ testimony from January 23, 2019. The testimony suggests that the parties had an understanding of a new parenting time arrangement after October 1, 2018, which, according to Gerald, gave him parent- ing time 6 out of 14 days. And upon our review of the record, it appears the parties started exercising an 8/6 parenting time schedule. Besides the testimony of the parties, Ashley’s coun- sel stated during closing arguments that “even after the second day of trial, [Ashley] allow[ed] [Gerald] to have six days every 14 days because it seemed as those [sic] perhaps there was something going on with the Court’s direction.” At the motion for reconsideration, the following colloquy was had: [Gerald’s counsel:] And, Your Honor, after trial, on September 28th and October 1st, you knew everything that happened at the temporary hearing. And you had  - 179 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 two days of trial and you said this man needs to have more time with his children, and you gave him six out of 14 days. Six out of 14 days. [Ashley’s counsel:] Objection, Your Honor. That mis- states facts not in evidence. There was no order. THE COURT: Sustained. [Gerald’s counsel:] Your Honor, it’s been stipulated to. It’s in all the testimony. THE COURT: No, it’s sustained. [Gerald’s counsel:] Your Honor, after October 1st of 2018, [Gerald] had six out of 14 days that’s been stipu- lated to on the record. We had a trial. [Ashley’s counsel:] Objection, Your Honor. That mis- states facts not in evidence. There’s nothing stipulated to as far as the time is concerned on the record. [Gerald’s counsel:] It’s permeated in the record, Your Honor. THE COURT: The motion is sustained. [Gerald’s counsel:] It permeates the record. THE COURT: Objection is sustained. Excuse me. Additionally, at trial, Gerald’s understanding was that Ashley would owe him child support under an 8/6 parenting time schedule. And in the district court’s order nunc pro tunc, Gerald’s temporary child support obligation was amended, in part because Ashley owed Gerald child support from October 1, 2018, through May 1, 2019. This would again suggest the parties were operating under a different parenting time arrange- ment after the first 2 days of trial. In this instance, we have Gerald, who claims there was an agreement reached in cham- bers during the break from trial on October 1, which explains why trial ceased that day and the parties started exercising par- enting time under an 8/6 schedule. The district court appears to also indicate there was a settlement agreement, but Ashley claims there was no agreement. [8-11] A settlement agreement is subject to the general principles of contract law. Strategic Staff Mgmt. v. Roseland,  - 180 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 260 Neb. 682 , 619 N.W.2d 230 (2000). To have a settlement agreement, there must be a definite offer and an unconditional acceptance. Id. See, also, Linscott v. Shasteen, 288 Neb. 276 , 847 N.W.2d 283 (2014) (to create contract, there must be both offer and acceptance; there must also be meeting of minds or binding mutual understanding between parties to contract). A binding mutual understanding or meeting of the minds suf- ficient to establish a contract requires no precise formality or express utterance from the parties about the details of the proposed agreement; it may be implied from the parties’ con- duct and the surrounding circumstances. Linscott v. Shasteen, supra. The determination of the parties’ intent to make a contract is to be gathered from objective manifestations—the conduct of the parties, language used, or acts done by them, or other pertinent circumstances surrounding the transaction. Id. A fundamental and indispensable basis of any enforceable agreement is that there be a meeting of the minds of the parties as to the essential terms and conditions of the proposed con- tract. Gibbons Ranches v. Bailey, 289 Neb. 949 , 857 N.W.2d 808 (2015). [12,13] An alleged oral compromise and settlement agree- ment not made in open court is unenforceable where it is in violation of the statute of frauds or in violation of a court rule requiring all stipulations and agreements of counsel or parties to a suit to be in writing, signed by the parties or their attor- neys. In re Estate of Mithofer, 243 Neb. 722 , 502 N.W.2d 454 (1993), citing Omaha Nat. Bank v. Mullenax, 211 Neb. 830 , 320 N.W.2d 755 (1982). Conversely, a settlement agreement made in open court on the record, agreed to by all of the parties to the litigation and approved by the court, is enforceable. In re Estate of Mithofer, supra. There is no court rule in Douglas County, which is in the Fourth Judicial District, requiring all settlements to be in writ- ing, signed by the parties or their attorneys. Compare Rules of Dist. Ct. of Fourth Jud. Dist. 4-6 (rev. 1995) (when case is resolved by settlement stipulation, case shall be placed  - 181 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 on inactive status until settlement consummated, at which time case shall be dismissed; if settlement stipulation not consum- mated, case may be reinstated to active status upon motion of any party), with Rules of Dist. Ct. of Second Jud. Dist. 2-3 (rev. 1995) (all agreements of counsel or parties to suit must be reduced to writing and signed by parties making same and filed with clerk, or they will not be recognized or considered by court), Rules of Dist. Ct. of Fifth Jud. Dist. 5-3 (rev. 2001), and Rules of Dist. Ct. of Seventh Jud. Dist. 7-3 (rev. 1995). In the present case, custody and parenting time decisions would not be subject to the statute of frauds, and there is no court rule requiring that all settlements be in writing or be made orally on the record of the court. In this case, it is alleged there was an oral agreement made in chambers, which counsel for Gerald understood to be a settlement agreement, and which the district court understood to be a settlement, but which it acknowledged had not been placed on the record. This court has previously addressed the enforcement of an oral settlement agreement. In Furstenfeld v. Pepin, 23 Neb. App. 155 , 869 N.W.2d 353 (2015), Lisa Pepin (Lisa) filed a complaint against her former husband, Justin Furstenfeld (Justin), to modify the parenting time and support provisions of their dissolution decree. During the ensuing litigation, Lisa, her counsel, and Justin’s counsel met to conduct a telephonic deposition of Justin, who was residing out of state. Instead of conducting a deposition, however, the parties, through their attorneys, engaged in settlement negotiations and an apparent agreement was reached. After reaching this agreement, coun- sel for both parties jointly contacted the district court judge to notify the court of the agreement and to remove the matter from the court’s trial calendar. Lisa’s counsel proceeded to prepare a stipulation containing the terms of the parties’ agree- ment. Justin refused to sign the stipulation. Lisa filed a motion to enforce the settlement agreement. Specifically, her motion stated that she sought to enforce the oral agreement reached by the parties.  - 182 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 At a hearing on the motion, Lisa testified as to her under- standing of what transpired at the meeting that led to the pur- ported agreement. A copy of the stipulation was received into evidence. Lisa’s counsel also called Justin’s counsel as a witness to testify in order to provide foundation for an email regarding the oral settlement agreement and to establish that Justin and his counsel engaged in communications during the settlement negotiation meeting. Justin’s counsel acknowledged that the day before the meeting, he sent an email to Lisa’s counsel which contained the terms on which Justin offered to settle the case. The next day, Justin’s counsel arrived at opposing counsel’s office to conduct a telephonic deposition of Justin. Justin’s counsel confirmed that settlement negotiations ensued, an agreement was reached, and he and Lisa’s counsel con- tacted the court to inform it that the matter had been settled. Later that day, Justin’s counsel received an email from Lisa’s counsel’s assistant which stated that it included the stipulation for modification of decree based on the agreement reached that morning. The email further stated that Lisa’s counsel would “‘work up’” a child support calculation that “‘matche[d]’” a certain figure to attach to the stipulation. Furstenfeld v. Pepin, 23 Neb. App. at 161, 869 N.W.2d at 360. Justin’s counsel sent the following response to Lisa’s assistant: “I believe this accurately reflects the agreement. I’ll send to [Justin], and once he returns to me the executed original, I will get it to [Lisa’s counsel]. The trial date has been removed from the judge’s calendar, so we’re not under a rush, although I think we told the judge we’d get it to him for approval by the end of next week. Neither party will need to appear since we’re not changing cus- tody or parenting time.” Id. On cross-examination, Justin’s counsel stated that Justin had not given him the right to sign off on anything. Later in the hearing, Justin testified that he did not authorize his attorney to make the settlement offer contained in the email.  - 183 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 The district court entered an order finding that the parties had entered into a binding settlement agreement that resolved all material terms of the dispute. The court further found that the proposed stipulation entered into evidence accurately reflected the terms of the parties’ agreement. The court approved the terms of the stipulation and directed Lisa’s counsel to prepare an order consistent with the stipulation; the court subsequently signed the prepared order. Justin appealed. On appeal, this court found that Justin had not rebutted the presumption that his attorney was authorized to make state- ments on his behalf. This court further found that the district court did not err in allowing Justin’s counsel to be questioned on a limited basis because counsel’s testimony was material and relevant to the issue being litigated and there was no other witness that could have provided the evidence. Additionally, this court found no error in the district court’s conclusion that a settlement agreement may be established by the testi- mony of the attorney of the party sought to be bound; plain statutory language supported such a result. See Neb. Rev. Stat. § 7-107 (Reissue 2012) (powers of attorneys include the power to bind client by counsel’s agreement in respect to any proceeding within scope of proper duties and powers; but no evidence of any such agreement is receivable except statement of attorney, attorney’s written agreement signed and filed with clerk, or entry thereof upon records of court). This court con- cluded the record contained sufficient evidence for the district court to have sustained Lisa’s motion to enforce the settle- ment agreement. Both Furstenfeld v. Pepin, 23 Neb. App. 155 , 869 N.W.2d 353 (2015), and one of the cases cited therein, Lennon v. Kearney, 132 Neb. 180 , 271 N.W. 351 (1937), involve a lawyer’s ­authority to enter into a settlement agreement. And both cases state, “[W]hen an attorney appears in a cause, there is a pre- sumption that the attorney has authority and that presumption continues until the want of such authority is established,” and the “burden of proof of such want of authority is upon the party asserting the same.” Furstenfeld v. Pepin, 23 Neb. App.  - 184 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 at 166, 869 N.W.2d at 363 (other case cited therein for propo- sition did not involve a settlement), citing Lennon v. Kearney, supra (two cases cited therein for proposition did not involve a settlement). However, a reading of both cases reveals that it was not the presumption of authority that actually decided the result. Rather, in both cases, it was the opposing party—i.e., the party wanting to enforce the settlement—that put on evi- dence as to the lawyer’s authority to settle. Having the oppos- ing party present evidence of a lawyer’s authority to settle is in line with the Nebraska Supreme Court’s holding in Luethke v. Suhr, 264 Neb. 505 , 650 N.W.2d 220 (2002), a case also cited in Furstenfeld v. Pepin, supra. [14-16] In Luethke v. Suhr, 264 Neb. at 513 , 650 N.W.2d at 226 , the Nebraska Supreme Court held: [A]lthough lawyers retain apparent authority to make procedural and tactical decisions through the existence of the attorney-client relationship, a lawyer cannot settle a client’s claim without express authority from the client. In other words, where there has been nothing beyond a mere employment or retainer of the lawyer to represent the client in a cause and the lawyer has acquired no other authority to enter into a settlement (such as acquiescence in open court), if the lawyer seeks to enter a settlement, the opposing party should ascertain whether the lawyer has received actual authority from the client to take such action. A party who enters a settlement agreement without verifying the opposing counsel’s actual authority to settle does so at his or her peril. Disputes over a lawyer’s authority to settle are factual issues to be resolved by the trial court; however, an appellate court will not set aside a trial court’s factual findings regarding settlement disputes unless such findings are clearly erroneous. See id. This case before us is distinguishable from Furstenfeld v. Pepin, 23 Neb. App. 155 , 869 N.W.2d 353 (2015), in that Gerald did not call Ashley’s counsel to testify regarding the settlement agreement, including any email exchanges or other written correspondence to that effect in preparation of  - 185 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 the proposed decree following the in-chambers meeting on October 1, 2018. Thus, our review is limited to the informa- tion provided in the motions filed after October 1; the hear- ing on December 4; the parties’ testimony from the third day of trial on January 23, 2019; and the proceedings and orders that followed. That limited information does not affirmatively establish that there was a meeting of the minds regarding any alleged settlement agreement in this case on October 1, 2018, or that Ashley’s counsel had received actual authority to settle based upon the discussions held in chambers between the court and the attorneys. Had Gerald’s counsel put on evidence simi- lar to that in Furstenfeld v. Pepin, supra, if such existed, and further established that Ashley’s counsel had authority to settle based on the discussions held in chambers, if that was the case, see Luethke v. Suhr, supra, we may have reached a dif- ferent decision. However, based on the limited record before us as to this issue, we cannot conclude there was an enforce- able settlement agreement following the discussions held in chambers on October 1. 4. Allowing Children to Testify Gerald contends that the district court erred by not allowing the children to testify. In determining custody and parenting arrangements, the court is to consider the best interests of the minor child, one such factor of which is “[t]he desires and wishes of the minor child, if of an age of comprehension but regardless of chrono- logical age, when such desires and wishes are based on sound reasoning.” Neb. Rev. Stat. § 43-2923 (6)(b) (Reissue 2016). While the wishes of a child are not controlling in the deter- mination of custody, if a child is of sufficient age and has expressed an intelligent preference, the child’s preference is entitled to consideration. Vogel v. Vogel, 262 Neb. 1030 , 637 N.W.2d 611 (2002). In those cases where the child’s preference was given significant consideration, the child was typically over 10 years old. See id.  - 186 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 Prior to trial, Gerald’s counsel subpoenaed Cipher and Phoenix to appear at trial on September 28, 2018. When trial began on September 28, it was noted during Ashley’s opening argument that the children were brought to court that morning. After opening arguments were completed, the district court indicated that after hearing the evidence, the attorneys could converse and decide when to arrange for the court to hear from the children. At the time of trial, Cipher was 13 years old and Phoenix was 7 years old. After questioning three witnesses, Ashley’s counsel stated that “[e]xcept for rebuttal purposes,” there were no more witnesses for Ashley. Gerald’s counsel also called three witnesses on September 28 and continuing on October 1, including Gerald and Ashley. It was agreed that Ashley’s counsel could ask rebuttal questions of Ashley, outside the scope of redirect, so that she would not have to be recalled as a witness. After Ashley was excused from the stand on October 1, 2018, the district court asked if there was any further evidence from either party. Gerald’s counsel said they were supposed to have “some witnesses” there; after being given a brief recess to look for the witnesses, counsel stated that one of the wit- nesses was “ten minutes” away and that the other could not be reached. Counsel also said: I do have a request that you speak with the children before the proceeding concludes. And I don’t really want to make closing arguments until you have spoken with the children, Your Honor. If you’re willing to entertain wait- ing until — breaking for lunch and I’ll just put on two witnesses, and then I’ll ask you to speak to the children. Ashley’s counsel objected, expressing concerns about Gerald’s admission that he had talked with the children about problems between the parties and what they have “been told to say.” Gerald’s counsel replied that Gerald just wanted his chil- dren to be heard and that he did not tell them how to testify. Counsel “respectfully request[ed] that [the court] take a few minutes” with the children. Gerald’s counsel continued, stating,  - 187 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 “[T]he parents do not need to be present. Counsel does not need to ask questions. But I would ask that Your Honor at least speak with the children in this matter.” The court indicated it would “think about that.” Trial then broke for lunch, but coun- sel met with the court in chambers. As noted previously, there were various motions filed and hearings held to determine whether the case had been resolved. But trial resumed on January 23, 2019. On January 23, Gerald’s counsel stated: I’ve decided to rest with the exception that I still would like you to speak to the children. If after the case in chief you feel like you are not going to give [Gerald] at least six days out of 14, I would continue to ask you to speak with the children. But I will rest my case, Your Honor. Ashley’s counsel proceeded to call Gerald as a witness and questioned him, in part, about events that occurred since they had last been in trial on October 1, 2018, including the situa- tion regarding the Kansas City trip. Another witness testified about a verbal altercation she witnessed between Gerald and Ashley on Christmas 2018. And Ashley was called as a rebut- tal witness to testify about the situation regarding the Kansas City trip. Counsel then rested Ashley’s case, and the attorneys proceeded to closing arguments. As set forth previously, in the May 2019 paternity decree, the district court awarded Ashley primary physical custody of the children and awarded Gerald regular parenting time every other weekend from Friday at 4 p.m. until Monday at 8 a.m. and every other Thursday from 4 to 7 p.m. (before the weekend in which he does not have parenting time). At the hearing on Gerald’s motion to reconsider, the follow- ing colloquy was had. [Gerald’s counsel:] . . . . [W]hen we rested [on January 23, 2019], for the record, we said we’re rested condi- tioned on six out of 14 days. If Your Honor is not going to order that, please set it for further hearing and speak with the children. The matter concluded on January 23rd.  - 188 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 THE COURT: And the Court overruled both your motions. .... THE COURT: Well, I didn’t grant it, so it’s overruled. [Gerald’s counsel:] Okay. I did not have an opportunity to make an offer of proof because I did not know that you were going to overrule it. The way we left things on January 23rd, [Ashley’s counsel] had submitted a pro- posed decree to you. I had submitted a proposed decree to you. And I said, Your Honor, if you’re not going to do six out of 14 days, I want you to speak to the children. And I was — THE COURT: When did the court become Let’s Make a Deal? .... THE COURT: It’s my decision whether or not I felt it was appropriate to talk with the children. [Gerald’s counsel:] I understand that. THE COURT: And it’s not Let’s Make a Deal. And you can’t say if you’re not going to do this, Judge, then you got to do that. [Gerald’s counsel:] Your Honor, I would have made an offer of proof as to what the children would testify to had I known that you were not going to order six out of 14 days and you had no intention of speaking with the children. I would have made an offer of proof and, I’ll do that today. On appeal, Gerald argues that the district court erred when it failed to hear testimony from the children. However, when the trial resumed on January 23, 2019, Gerald’s counsel stated: I’ve decided to rest with the exception that I still would like you to speak to the children. If after the case in chief you feel like you are not going to give [Gerald] at least six days out of 14, I would continue to ask you to speak with the children. But I will rest my case, Your Honor. Thus, counsel rested, but attempted to make the rest con- ditioned on how the court might decide the case, and if the  - 189 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 court was not going to rule in Gerald’s favor, counsel appar- ently expected the court to reopen the case to hear from the children. That is borne out later, at the hearing on the motion for reconsideration, when counsel addressed the district court and stated: January 23rd, through May of 2019, there was no order from Your Honor. And I was assuming that if Your Honor was going to enter less than six out of 14 days, you would have contacted [opposing counsel] and myself and said, Hey, I need to speak to the children. [17] Regardless of counsel’s assumptions or Gerald’s wishes that the court speak to the children, once the attorneys rested their cases, the matter was submitted. At that point, the court was under no obligation to reopen the case to receive testimony from the children. The court was not required to tip its hand regarding its ruling in order to allow Gerald’s counsel to decide whether or not to present more evidence through the children’s testimony before resting Gerald’s case. Because counsel rested, we cannot find any error by the district court in its determina- tion to enter its decision without reopening the case to hear from the children. The reopening of a case to receive additional evidence is a matter within the discretion of the district court and will not be disturbed on appeal in the absence of an abuse of that discretion. Myhra v. Myhra, 16 Neb. App. 920 , 756 N.W.2d 528 (2008). 5. Specific Findings of Fact and Parenting Time Gerald contends the district court erred by not granting his request for specific findings of fact and by not awarding him more parenting time. (a) Specific Findings of Fact [18] Neb. Rev. Stat. § 25-1127 (Reissue 2016) provides in relevant part, “Upon the trial of questions of fact by the court, it shall not be necessary for the court to state its find- ing, except, generally, for the plaintiff or defendant, unless one  - 190 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 of the parties request[s] it . . . .” In a case tried to the court ­without a jury, a motion for specific findings of fact must be made before final submission of the case to the court. See Stuczynski v. Stuczynski, 238 Neb. 368 , 471 N.W.2d 122 (1991). See, also, In re Estate of Wiley, 150 Neb. 898 , 36 N.W.2d 483 (1949) (after court has announced decision, request made for separate findings of fact and conclusions of law came too late). Gerald did not ask the district court to make specific findings of fact under § 25-1127 until the hearing on his motion for reconsideration. Because Gerald’s request was not made until after the case was submitted to the court, the court was not under any obligation to provide specific findings. (b) Parenting Time Gerald argues that the district court should have awarded him parenting time with his children “at least 6 out of 14 days during the school year, 1⁄2 of holidays and 1⁄2 of the summer as this was in the children’s best interest[s].” Brief for appellant at 34 (emphasis omitted). [19] When deciding custody issues, the court’s paramount concern is the child’s best interests. Citta v. Facka, 19 Neb. App. 736 , 812 N.W.2d 917 (2012). The best interests inquiry has its foundation in both statutory and case law. Section 43-2923(6) provides that in determining custody and parent- ing arrangements: [T]he court shall consider the best interests of the minor child, which shall include, but not be limited to, consid- eration of . . . : (a) The relationship of the minor child to each parent prior to the commencement of the action or any subse- quent hearing; (b) The desires and wishes of the minor child, if of an age of comprehension but regardless of chronological age, when such desires and wishes are based on sound reasoning; (c) The general health, welfare, and social behavior of the minor child;  - 191 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 (d) Credible evidence of abuse inflicted on any family or household member . . . ; and (e) Credible evidence of child abuse or neglect or domestic intimate partner abuse. Other pertinent factors include the moral fitness of the child’s parents, including sexual conduct; respective environments offered by each parent; the age, sex, and health of the child and parents; the effect on the child as a result of continuing or disrupting an existing relationship; the attitude and stabil- ity of each parent’s character; and parental capacity to provide physical care and satisfy educational needs of the child. Robb v. Robb, 268 Neb. 694 , 687 N.W.2d 195 (2004). The record reveals a contentious relationship between Gerald and Ashley. While both parents appear to love their chil- dren, Ashley appears to have a more even temperament. And Gerald has put the children in the middle of his disputes with Ashley—e.g., when he showed Cipher affidavits Ashley and her mother presented to the court and when he made Cipher choose between going to an out-of-town football game a day earlier than Ashley would allow or missing the game. Based on the evidence from trial set forth previously, we cannot say the district court abused its discretion when it awarded Gerald regular parenting time every other weekend from Friday at 4 p.m. until Monday at 8 a.m. and every other Thursday from 4 to 7 p.m. (before the weekend in which he does not have parenting time). 6. Clothing Costs Gerald argues the district court erred when it ordered him to purchase approximately one-half of the children’s clothing, even though his child support obligation was based on a sole custody calculation. We agree, as discussed below. [20] In Kelly v. Kelly, post p. 198, ___ N.W.2d ___ (2020), released the same day as this opinion, we set forth the pro- gression of the law regarding child support and various expenses considered in support orders. Prior to the Nebraska Child Support Guidelines, Nebraska statutory law addressed  - 192 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 various expenses, including clothing, to be considered in sup- port orders. See, Neb. Rev. Stat. § 42-369 (3) (Cum. Supp. 2018); Kelly v. Kelly, supra. Later, in 1987, the Nebraska Child Support Guidelines were created. See Kelly v. Kelly, supra. See, also, Neb. Rev. Stat. § 42-364.16 (Reissue 2016) (requires Nebraska Supreme Court to create guidelines that serve as rebuttable presumption in setting child support obli- gations). Then, in 2008, the Legislature passed 2008 Neb. Laws, L.B. 1014, § 33, codified at Neb. Rev. Stat. § 42-364.17 (Reissue 2016), which specifically sets forth certain categories of expenses—“necessary medical, dental, and eye care, medi- cal reimbursements, day care, extracurricular activity, educa- tion, and other extraordinary expenses of the child”—that could be considered in determining parents’ financial respon- sibilities related to their children. See Kelly v. Kelly, supra. A trial court has the authority to order a parent to pay the categories of expenses specified in § 42-364.17, in addition to the monthly child support obligation calculated under the guidelines. See Kelly v. Kelly, supra. Because the broader, more general terms contained in § 42-369(3) preceded the adoption of the ­guidelines and the passage of § 42-364.17, we construe the guidelines and § 42-364.17 to control what cat- egories of expenses can be ordered to be paid in addition to a monthly child support obligation when child support has been calculated using the basic net income and support calculation, worksheet 1. Kelly v. Kelly, supra. See Neb. Ct. R. ch. 4, art. 2, worksheet 1 (rev. 2016). As applicable here, when considering § 42-364.17 and what expenses a parent may be ordered to pay in addition to his or her monthly child support obligation which has been calculated using the basic net income and support calcula- tion, worksheet 1, the only category under which clothing could possibly qualify would be “extraordinary expenses.” As stated in Kelly v. Kelly, post at 198, ___ N.W.2d at ___, “We conclude that such expenses fall within the basic necessities intended to be covered by a monthly child support obligation  - 193 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 calculated using the basic net income and support calcula- tion, worksheet 1, and do not rise to the level of ‘extraordi- nary expenses.’” However, an order requiring Gerald to purchase one-half of the children’s clothing would have been appropriate had the court ordered joint physical custody. Neb. Ct. R. § 4-212 (rev. 2011), regarding joint physical custody, provides in relevant part: “If child support is determined under this paragraph, all reasonable and necessary direct expenditures made solely for the child(ren) such as clothing and extracurricular activities shall be allocated between the parents, but shall not exceed the proportion of the obligor’s parental contributions . . . .” But, in this case, Gerald’s child support obligation was based on Ashley’s primary custody of the children, and thus, Gerald could be required to pay for only a portion of the children’s clothing if it rose to the level of an “extraordinary expense.” And we have already determined that clothing is a basic neces- sity intended to be covered by a monthly child support obliga- tion which has been calculated using worksheet 1. The district court abused its discretion in ordering that “[t]he parties shall each purchase the children clothing in an approxi- mately equal amount.” Accordingly, we reverse this portion of the decree, and the decree is modified accordingly. 7. Attorney Fees Gerald argues that the district court erred in ordering him to pay $2,885 of Ashley’s attorney fees “in light of the fact that [he] was shorted 26 days of parenting time due to the entry of an erroneous temporary order and because he was making good faith efforts to pay financial obligations owed in the temporary order.” Brief for appellant at 49. An affidavit from Ashley’s attorney was received into evi- dence and stated that counsel had “personally spent at least 11.8 hours of work related to temporary hearing and contempt issues” and that counsel’s office had also incurred fees and expenses; counsel’s rate was $275 per hour. Counsel’s para- legal had also worked on the case for 6.4 hours at a rate of  - 194 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 $150 per hour. Ashley testified that she incurred attorney fees related to three temporary hearings—the original temporary hearing plus two additional temporary hearings requested by Gerald—and she had to file a contempt action when Gerald would not follow the temporary parenting time and child sup- port orders. Ashley was not asking that Gerald be ordered to pay for all of her attorney fees, acknowledging that she was “responsible for initiating the custody” proceedings. But she requested an award of attorney fees “to offset the charges that wouldn’t have occurred if [Gerald] would have followed the [temporary] ruling.” The district court ordered Gerald to pay $2,885 of Ashley’s attorney fees “due to his inability to follow the temporary order regarding parenting time, child support obligations, and child care obligations and the legal fees incurred by [Ashley] due to same.” The record is clear that Gerald was not prepared for the temporary hearing in September 2017, at which he appeared pro se. Following the temporary hearing and order, he failed to follow the parenting time schedule and failed to fulfill his child support obligation. After Gerald obtained counsel, he sought further temporary orders, necessitating Ashley to employ her counsel’s services. Gerald’s attempts to obtain fur- ther temporary orders regarding parenting time and child sup- port were not successful. At the time trial commenced, Gerald had not paid any of the court-ordered childcare costs and he was behind in paying child support. Between September 2017 and June 2018, Gerald paid only $1,050. Between June 26, 2018, and the completion of trial on January 23, 2019, Gerald had paid a little more than $2,000; he never once paid his full monthly obligation. By the time trial concluded, Gerald was thousands of dollars in arrears in child support (approximately $10,000 in arrears and interest as of January 23, 2019, but we recognize that the temporary child support order was modified in the final decree). Accordingly, we find no abuse of discre- tion by the trial court, and we affirm its award of $2,885 in  - 195 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 attorney fees to Ashley. See Cross v. Perreten, 257 Neb. 776 , 600 N.W.2d 780 (1999) (award of attorney fees in paternity action reviewed de novo on record to determine whether there has been abuse of discretion by trial judge; absent such abuse, award will be affirmed). 8. Transcription Costs in Preparation for Motion for New Trial Gerald contends that the district court erred by not granting his IFP request for transcription of court hearings or, alterna- tively, in not ordering Ashley to pay for the same so that he could “adequately prepare for Motion for New Trial.” Brief for appellant at 47 (emphasis omitted). After the paternity decree was filed on May 8, 2019, Gerald filed his motion to reconsider on May 15. At a hearing on May 31, Gerald’s counsel mentioned that she had previously sent a letter to the court requesting that an IFP order be entered for Gerald because he requested a “transcript” of the entirety of the proceedings so counsel could have them before the hearing on the motion to reconsider. Counsel renewed the IFP request on the record and requested that the court grant the IFP, that a “transcript be prepared,” and that the hearing be continued until counsel had the opportunity to review the transcript. On June 6, 2019, Gerald filed a “Motion for Transcript.” Gerald requested that the district court “enter an IFP Order allowing him to receive a transcription of the proceed- ings or an order for [Ashley] to pay for transcription of these proceedings” prior to his hearing and argument on his motion to reconsider. In his affidavit attached to the motion, Gerald states: In order for [him] to have procedural and substantive due process and a fair proceeding, given the unusual progres- sion and unusual length of these proceedings, counsel for [Gerald] needs to review the entirety of the over eight (8) month time period of trial and also hearings that occurred prior when [Gerald] was pro se.  - 196 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 Gerald also believed that the court needed to review the evi- dence in its entirety when making a final ruling on his motion to reconsider. A hearing was held on June 27, 2019, regarding Gerald’s request that the district court enter an IFP order for him to be able to receive “a copy of the complete transcript” or, alter- natively, to order Ashley to pay for it. Received into evidence was Gerald’s affidavit with pay stubs attached ($2,169.46 gross and $1,123.67 net from April 21 to May 18, 2019), and his 2018 W-2 wage and tax statement ($31,490.12 for the year); he claimed his monthly expenses set forth in the affidavit exceeded his income. The court noted that according to the pay stubs, Gerald was not working full time—he was working approximately 60 hours in a 2-week period. The court stated, “I have no information for why he’s not working full time. I don’t find him to be below the poverty level, and I’m not sure how it’s going to support the request to proceed IFP.” Gerald then asked the court to order Ashley to pay for the transcript. Ashley’s counsel argued she should not have to pay for it. Counsel noted that Gerald argues he does not have the ability to pay for the transcript, but he had purchased plane tickets to take the children to New York. The court stated, “I’m not going to order [Ashley to] pay for the transcript.” On June 28, 2019, the district court denied Gerald’s motion for a transcription of the proceedings. Neb. Rev. Stat. § 25-2301.01 (Reissue 2016) states: Any county or state court, except the Nebraska Workers’ Compensation Court, may authorize the commencement, prosecution, defense, or appeal therein, of a civil or crimi- nal case in forma pauperis. An application to proceed in forma pauperis shall include an affidavit stating that the affiant is unable to pay the fees and costs or give security required to proceed with the case, the nature of the action, defense, or appeal, and the affiant’s belief that he or she is entitled to redress. (Emphasis supplied.) Gerald’s desire to have the earlier pro- ceedings transcribed was not absolutely necessary to his  - 197 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports SMITH v. KING Cite as 29 Neb. App. 152 motion to reconsider, and we therefore find that it is not the type of “required” fees and costs anticipated by the statute. Additionally, we are unaware of any authority, and Gerald points us to none, that would require Ashley to pay for a tran- scription of the proceeding so that Gerald could prepare for a hearing on his own motion. VI. CONCLUSION We reverse the portion of the paternity decree which states, “The parties shall each purchase the children clothing in an approximately equal amount.” The May 8, 2018, paternity decree is modified accordingly. We otherwise affirm the pater- nity decree, as well as the October 3 order nunc pro tunc deal- ing with Gerald’s child support obligation. Affirmed as modified.

2020-12-01 06:09:39.223106+00

https://www.nebraska.gov/apps-courts-epub/public/viewOpinion?docId=N00007496PUB

Nebraska Supreme Court Online Library www.nebraska.gov/apps-courts-epub/ 12/01/2020 12:09 AM CST - 198 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 Kirsten W. Kelly, appellee, v. Gary B. Kelly, appellant. ___ N.W.2d ___ Filed November 24, 2020. No. A-20-084. 1. Divorce: Child Custody: Child Support: Property Division: Alimony: Attorney Fees: Appeal and Error. In a marital dissolution action, an appellate court reviews the case de novo on the record to determine whether there has been an abuse of discretion by the trial judge. This standard of review applies to the trial court’s determinations regarding custody, child support, division of property, alimony, and attorney fees. 2. Judges: Words and Phrases. A judicial abuse of discretion exists if the reasons or rulings of a trial judge are clearly untenable, unfairly depriv- ing a litigant of a substantial right and denying just results in matters submitted for disposition. 3. Visitation. Placing in a psychologist the authority to effectively deter- mine visitation, and to control the extent and time of such visitation, is not the intent of the law and is an unlawful delegation of the trial court’s duty. 4. Child Custody: Visitation: Stipulations. It is the responsibility of the trial court to determine questions related to custody and parenting time according to the best interests of the minor children. This is an indepen- dent responsibility and cannot be controlled by the agreement or stipula- tion of the parties themselves or by third parties. 5. Visitation: Appeal and Error. Parenting time determinations are mat- ters initially entrusted to the discretion of the trial court, and although reviewed de novo on the record, the trial court’s determination will nor- mally be affirmed absent an abuse of discretion. 6. Evidence: Appeal and Error. When evidence is in conflict, an appel- late court considers, and may give weight to, the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another.  - 199 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 7. Child Support: Rules of the Supreme Court. The Nebraska Child Support Guidelines recognize other incidents of support that are wholly or partly outside of the monthly installment, including the expenses specified in Neb. Rev. Stat. § 42-364.17 (Reissue 2016). 8. Statutes: Legislature: Intent. Components of a series or collection of statutes pertaining to a certain subject matter are in pari materia and should be conjunctively considered and construed to determine the intent of the Legislature, so that different provisions are consistent, har- monious, and sensible. 9. Child Support: Taxation: Presumptions. In general, the custodial par- ent is presumptively entitled to the federal tax exemption for a depen- dent child. 10. Child Support: Taxation: Waiver. A court may exercise its equitable powers and order the custodial parent to execute a waiver of his or her right to claim the tax exemption for a dependent child if the situation of the parties so requires. 11. Divorce: Property Division: Alimony. In dividing property and consid- ering alimony upon a dissolution of marriage, a court should consider four factors: (1) the circumstances of the parties, (2) the duration of the marriage, (3) the history of contributions to the marriage, and (4) the ability of the supported party to engage in gainful employment without interfering with the interests of any minor children in the custody of each party. In addition, a court should consider the income and earning capacity of each party and the general equities of the situation. 12. Alimony: Appeal and Error. In reviewing an alimony award, an appel- late court does not determine whether it would have awarded the same amount of alimony as did the trial court, but whether the trial court’s award is untenable such as to deprive a party of a substantial right or just result. 13. Alimony. Alimony is not a tool to equalize the parties’ income, but a disparity of income or potential income might partially justify an ali- mony award. 14. Divorce: Attorney Fees. In awarding attorney fees in a dissolution action, a court shall consider the nature of the case, the amount involved in the controversy, the services actually performed, the results obtained, the length of time required for preparation and presentation of the case, the novelty and difficulty of the questions raised, and the customary charges of the bar for similar services. Appeal from the District Court for Saunders County: Christina M. Marroquin, Judge. Affirmed in part as modi- fied, and in part vacated.  - 200 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 Mark A. Steele, of Steele Law Office, for appellant. John H. Sohl for appellee. Moore, Bishop, and Welch, Judges. Bishop, Judge. I. INTRODUCTION Gary B. Kelly appeals from the decree entered by the Saunders County District Court dissolving his marriage to Kirsten W. Kelly, awarding legal and physical custody of the parties’ three children to Kirsten, and ordering Gary to pay child support and alimony. Gary challenges decisions made related to the parenting plan, private school tuition, extracur- ricular and other expenses, tax exemptions, equalization of the marital estate, alimony, and attorney fees. We affirm in part as modified, and in part vacate. II. BACKGROUND Gary and Kirsten married in September 2007, and three children were born during the marriage: the first in 2008, the second in 2009, and the third in 2010. Kirsten separated from Gary in November 2018 and moved with the minor children out of the marital home. Kirsten then sought and obtained a protection order against Gary based on allegations of domes- tic abuse by Gary against her and the children for which he received a criminal citation and was sentenced to probation. Kirsten filed for divorce shortly after the separation in November 2018. On January 14, 2019, the district court granted Kirsten’s motion for temporary legal and physical custody. The court restricted Gary from contacting the children until the children met with a mental health professional and that pro- fessional gave a report and recommendation to the court. The temporary order required Gary to pay $2,109 per month in child support. The temporary order also required Gary to pay $3,606 per month in spousal support, to be reduced to $1,708 per month beginning in February. Gary was also responsible  - 201 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 for two-thirds of daycare and health care expenses incurred for the children. The court entered a second temporary order on February 5 concerning Gary and Kirsten’s agreement to the sale of the marital residence. On September 30, the court modi- fied the first temporary order to allow Gary to have supervised therapeutic sessions with the oldest child. Trial took place on October 24 and 25, 2019. In the analy- sis section below, we will discuss the trial evidence relevant to the errors assigned. A decree dissolving the marriage was entered by the district court on November 12. Pursuant to the decree and an order nunc pro tunc entered shortly thereafter on November 18, and another nunc pro tunc order entered on February 3, 2020, the district court awarded Kirsten legal and physical custody of the minor children, noting “there [was] credible evidence that [Gary] has perpetuated child abuse and domestic intimate partner abuse.” The court concluded that Kirsten should have sole legal and physical custody, which was “in the best interest of the minor children.” The decree established certain provisions in the parenting plan for Gary, which consists of the following four phases: PHASE 1 - THERAPUTIC VISITS: [Gary] shall have family therapy with the minor children twice a month (every-other-week). The therapeutic session shall be con- ducted by a licensed mental health practitioner designated as the therapist for the child. Family therapy sessions shall commence immediately between [the oldest child] and [Gary]. Family therapy sessions between [Gary] and the other two minor children shall commence upon the rec- ommendation of the minor children’s therapist. [Kirsten] shall sign all necessary releases to ensure that [Gary] can communicate with the children’s therapist(s). PHASE 2 - SUPERVISED VISITS: At the recom- mendation of each child’s treating therapist, visita- tion shall move to supervised visits. These shall occur every Wednesday evening from 3:30 (after school) until 7:00 p.m. and every-other Saturday from 1:00 p.m. until  - 202 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 5:00 p.m. Visits shall be supervised by [one of Gary’s adult children from a prior marriage], or another third party as agreed upon by the parties, or a professional agency at the expense of [Gary]. [Gary] shall not con- sume alcohol immediately prior to or during the visita- tion. [Gary] shall not physically discipline the minor children. Provided there are no safety concerns, visitation shall move to Phase 3 after six months. PHASE 3 - UNSUPERVISED VISITS: At the rec- ommendation of each child’s treating therapist, visita- tion shall move to unsupervised visits. These shall occur every Wednesday evening from 3:30 (after school) until 7:00 p.m. and every-other Saturday from 1:00 p.m. until 5:00 p.m. [Gary] shall not consume alcohol immediately prior to or during the visitation. [Gary] shall not physi- cally discipline the minor children. Provided there are no safety concerns, visitation shall move to Phase 4 after six months. PHASE 4 - ONGOING PARENTING PLAN: At the recommendation of each child’s treating therapist, visita- tion shall occur as follows: [Gary] shall a [sic] have parenting time every Wednesday evening from 3:30 p.m. until 7:30 p.m. [Gary] shall have every other weekend from Friday at 3:30 p.m. until Sunday at 5:00 p.m. Phase 4 of the parenting plan also included a holiday parenting time schedule. Relevant to this appeal, the decree also required Gary to pay $1,980 per month in child support for three children. The district court divided expenses such that Gary would be responsible for 70 percent of childcare and extracurricular expenses incurred on behalf of the children and 50 percent of the cost of tuition for the children to continue attending pri- vate school. Gary was also ordered to pay other miscellaneous expenses related to the children. The decree gave Kirsten the sole right to claim the children for state and federal income  - 203 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 tax purposes. As part of the division of marital property, the court ordered Gary to pay Kirsten an equalization payment of $15,841. The decree additionally required Gary to pay Kirsten $500 per month in alimony for 5 years and awarded Kirsten $8,000 in attorney fees. Following the entry of the decree, Gary filed a motion for new trial and/or reconsideration. The district court denied his motion on January 9, 2020. Gary then timely filed this appeal. III. ASSIGNMENTS OF ERROR Gary claims the district court erred by (1) formulating an unreasonably restrictive phased parenting plan, (2) requiring Gary to pay 50 percent of private school tuition for the chil- dren, (3) requiring Gary to pay 70 percent of the costs for the children’s extracurricular activities, (4) allocating solely to Kirsten the right to claim the children for state and federal income tax purposes, (5) ordering Gary to pay Kirsten a prop- erty equalization payment of $15,841, (6) ordering Gary to pay Kirsten alimony of $500 per month for 5 years, and (7) ordering Gary to pay Kirsten $8,000 for attorney fees. IV. STANDARD OF REVIEW [1,2] In a marital dissolution action, an appellate court reviews the case de novo on the record to determine whether there has been an abuse of discretion by the trial judge. Doerr v. Doerr, 306 Neb. 350 , 945 N.W.2d 137 (2020). This standard of review applies to the trial court’s determinations regarding custody, child support, division of property, alimony, and attor- ney fees. Id. A judicial abuse of discretion exists if the reasons or rulings of a trial judge are clearly untenable, unfairly depriv- ing a litigant of a substantial right and denying just results in matters submitted for disposition. Id. V. ANALYSIS 1. Parenting Plan The district court ordered the implementation of the phased parenting plan described above. Based on the evidence  - 204 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 presented at trial, the district court found the phased parent- ing plan to be in the best interests of the minor children. In its decree, the court stated that it found “by a preponderance of evidence that there is credible evidence that [Gary] perpetuated child abuse and domestic intimate partner abuse” and “limita- tion on parenting time between [Gary] and the minor children must be implemented to provide for their safety and well- being.” Notably, Neb. Rev. Stat. § 43-2932 (1) (Reissue 2016) provides that when there is evidence of child abuse or domestic intimate partner abuse, limitations on parenting time may be imposed that are “reasonably calculated to protect the child or child’s parent from harm.” There is considerable evidence in the record related to the inappropriate, harmful behaviors in which Gary engaged with either the children and/or Kirsten. It is unnecessary to detail those instances here given the limited nature of Gary’s assigned error. Gary does not argue that the phased approach to parent- ing time is by itself problematic. Rather, he contends that the “phases required the approval and recommendation for each phase by the children’s therapist and last for a period of six months between phases” and that this “restrictive parenting time . . . was arbitrary and unsupported by the evidence, and unjustifiably interferes with his parenting relationship with the minor children.” Brief for appellant at 13. He asserts that he has “taken the necessary steps to modify his behaviors and testified to his ability to interact successfully with the minor children.” Id. at 15. He further contends that “the duration of any phases should not be for definitive times; but instead moni- tored and moved forward under direct therapist supervision and recommendations.” Id. We understand Gary’s arguments as challenging the specific 6-month duration of the parenting phases and not allowing for greater flexibility; he suggests a faster progression through each phase should be permitted if recommended by the thera- pist, based upon the parenting plan being “closely monitored and supervised for cooperation and progress.” Id. We do not  - 205 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 read the parenting plan to be quite as restrictive as Gary sug- gests, at least as to Phase 2 through Phase 4. [3,4] We begin our analysis with the understanding that while it is not an abuse of discretion for a trial court to order counseling, “placing in a psychologist the authority to effec- tively determine visitation, and to control the extent and time of such visitation, is not the intent of the law and is an unlaw- ful delegation of the trial court’s duty.” Deacon v. Deacon, 207 Neb. 193 , 200, 297 N.W.2d 757 , 762 (1980), disapproved on other grounds, Gibilisco v. Gibilisco, 263 Neb. 27 , 637 N.W.2d 898 (2002). It is the responsibility of the trial court to deter- mine questions related to custody and parenting time accord- ing to the best interests of the minor children. See id. This is an independent responsibility and cannot be controlled by the agreement or stipulation of the parties themselves or by third parties. Id. Therefore, in this case, it was necessary for the district court to provide a specified duration of time for each parenting phase rather than leaving the transition from phase to phase solely at the discretion of a therapist. Such a delegation of author- ity from the district court to each child’s therapist would have constituted error whether reviewed for plain error or an abuse of discretion. See, Hajenga v. Hajenga, 257 Neb. 841 , 601 N.W.2d 528 (1999) (order that father’s parenting time would be increased at discretion of family therapist was wrongful abdication of trial court’s duty and constituted plain error; plain error affects substantial right and is of such nature that to leave it uncorrected would cause miscarriage of justice or result in damage to integrity, reputation, and fairness of judi- cial process); Deacon v. Deacon, supra (not abuse of discretion to order counseling, but portion of order effectively placing authority in psychologist to determine visitation and control extent and time of such visitation was unlawful delegation of trial court’s duty). But see In re Guardianship of K.R., 26 Neb. App. 713 , 923 N.W.2d 435 (2018) (trial court did not improp- erly delegate decisions regarding visitation, family therapy,  - 206 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 and guardianship to child’s therapist where trial court expressly reserved authority to make those decisions if and when child’s therapist stated child was ready for such steps). Accordingly, as for Phase 2 through Phase 4, the district court did not abuse its discretion in ordering fixed durations before parenting time had to transition to the next phase, in the absence of safety concerns. It was necessary for the court to impose limits on each phase so that the transitions were not left completely at the discretion of a therapist. Further, as to Gary’s argument about flexibility to allow for faster progres- sion through each phase if recommended by the therapist, we read the parenting plan to provide that flexibility. Gary’s supervised parenting time could transition to unsupervised parenting time at the recommendation of each child’s therapist, which could occur before 6 months on such a recommenda- tion. But unless there were safety concerns, the supervised parenting time had to transition to unsupervised parenting time after 6 months. The same applies to the transition from unsupervised parenting time to the ongoing parenting plan. Implicit in the plan is that if a child’s therapist determined that safety concerns still existed at the 6-month mark for the next transition, the therapist could elect to not recommend moving to the next parenting phase, and if Gary disagreed with that decision, the matter would have to return to the district court for a determination as to whether an extension of time was warranted under the parenting phase at issue. Therefore, Phase 2 through Phase 4 provided flexibility for faster progression upon the recommendation of each child’s therapist, but also limited each phase to 6 months, barring safety concerns, so that the court, not the therapist, was determining the maximum duration of those phases. However, while not specifically assigned as error by Gary, we do find plain error regarding the lack of a specified dura- tion for therapeutic visits in Phase 1, as well as the lack of a specified time for when Gary would commence family therapy sessions with the two younger children. Unlike the  - 207 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 other phases, the court delegated to each child’s therapist the discretion to determine when Gary could move from thera- peutic visits in Phase 1 to supervised visits in Phase 2. And as to the two younger children, the family therapy sessions were to commence “upon the recommendation of the minor children’s therapist.” As discussed above, this constitutes an improper delegation of authority from the district court to each child’s therapist. See Hajenga v. Hajenga, supra (order that father’s parenting time would be increased at discretion of family therapist was wrongful abdication of trial court’s duty and constituted plain error). To eliminate this improper delega- tion of authority to each child’s therapist, and considering the district court’s determination that 6-month blocks were appro- priate for the other transition phases, we modify the parenting plan to provide that transition to “Phase 2 - SUPERVISED VISITS” shall take place after 6 months of the therapeutic vis- its described in Phase 1, provided there are no safety concerns. Further, to the extent family therapy has not commenced with the two younger children, that should commence immediately, unless there are safety concerns. If safety concerns exist, given the amount of time that has already lapsed during the pendency of this appeal, the matter will need to be scheduled before the district court for further consideration of when such family therapy shall commence for the two younger children. [5,6] With regard to the district court’s determination of 6-month transitional phases rather than phases of shorter dura- tion, we cannot say the court abused its discretion, particu- larly since the parenting plan did provide the flexibility for faster progression than 6 months if recommended by a child’s therapist. Parenting time determinations are matters initially entrusted to the discretion of the trial court, and although reviewed de novo on the record, the trial court’s determina- tion will normally be affirmed absent an abuse of discretion. Bornhorst v. Bornhorst, 28 Neb. App. 182 , 941 N.W.2d 769 (2020). When evidence is in conflict, an appellate court consid- ers, and may give weight to, the fact that the trial judge heard  - 208 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 and observed the witnesses and accepted one version of the facts rather than another. Donald v. Donald, 296 Neb. 123 , 892 N.W.2d 100 (2017). Gary’s arguments focus largely on efforts he has been mak- ing to be a better parent. And while such efforts are to be commended, the district court also had to consider what was in the best interests of the children. It is evident that the court put in place a transitional schedule that will give the children sufficient time and space to heal from the past traumatic expe- riences caused by Gary’s abusive behaviors toward the children and Kirsten. As just one example of the need for caution in moving forward with parenting time, there was evidence that as a result of Gary’s interactions with one child, the child went to Kirsten crying and told her “he can’t take it anymore, he just wants to kill himself.” Given the nature of the evidence under- lying the district court’s findings related to child abuse and domestic intimate partner abuse, we cannot say a graduated parenting time schedule like the one before us, as modified, was an abuse of discretion. 2. Expenses in Addition to Monthly Child Support In calculating its order for child support ($1,980 per month) by using a basic net income and support calculation, work- sheet 1, the district court determined Gary’s gross monthly income to be $12,048.25 and Kirsten’s gross monthly income to be $5,000. See Neb. Ct. R. ch. 4, art. 2, worksheet 1 (rev. 2016). Gary claims the district court abused its discretion in ordering Gary to be responsible for 50 percent of the cost of private school tuition for the minor children in addition to the order to pay $1,980 per month in child support. Gary also con- tends the district court abused its discretion in ordering him to be responsible for 70 percent of all extracurricular expenses incurred on behalf of the minor children upon which the par- ties mutually agree in advance. Gary also takes issue with the court’s order requiring the parties to equally share “the cost of  - 209 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 school lunches (purchased from the school), required school supplies, haircuts, and items of clothing the parties expect the children to wear at both residences, i.e., winter coats, hats, mit- tens, winter boots, backpacks, and tennis shoes.” (a) Applicable Law Prior to the existence of the Nebraska Child Support Guidelines, Nebraska statutory law addressed various expenses to be considered in support orders: “A support order, decree, or judgment may include the providing of necessary shelter, food, clothing, care, medical support as defined in section 43-412, medical attention, expenses of confinement, education expenses, funeral expenses, and any other expenses the court may deem reasonable and necessary.” See Neb. Rev. Stat. § 42-369 (3) (Cum. Supp. 2018). In 1984, Congress required the states to develop guidelines for child support awards; noncompliance would result in the loss of federal funds for various programs. See Schmitt v. Schmitt, 239 Neb. 632 , 477 N.W.2d 563 (1991). Nebraska com- plied in 1985 with the passage of 1985 Neb. Laws, L.B. 7, § 18, 2d Spec. Sess. See Neb. Rev. Stat. § 42-364.16 (Reissue 2016) (requires Nebraska Supreme Court to create guidelines that serve as rebuttable presumption in setting child support obliga- tions). See, also, Schmitt v. Schmitt, supra. The Nebraska Child Support Guidelines subsequently became operative October 1, 1987. See Schmitt v. Schmitt, supra. [7] Then, in 2008, the Legislature passed 2008 Neb. Laws, L.B. 1014, § 33, codified at Neb. Rev. Stat. § 42-364.17 (Reissue 2016), which specifically sets forth certain categories of expenses that could be considered in determining parents’ financial responsibilities related to their children; it provides as follows: A decree of dissolution, legal separation, or order establishing paternity shall incorporate financial arrange- ments for each party’s responsibility for reasonable and necessary medical, dental, and eye care, medical  - 210 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 reimbursements, day care, extracurricular activity, educa- tion, and other extraordinary expenses of the child and calculation of child support obligations. The Nebraska Supreme Court has clarified that § 42-364.17 provides categories of expenses incurred by a child which can be ordered by a trial court in addition to the monthly child sup- port calculation determined under the guidelines. “The com- mon meaning of ‘support’ clearly includes all of the incidents of a child’s needs.” Caniglia v. Caniglia, 285 Neb. 930 , 934, 830 N.W.2d 207 , 211 (2013). One incident of support is the regular monthly payment established under the Nebraska Child Support Guidelines. See Caniglia v. Caniglia, supra. “But the guidelines recognize other incidents of ‘support’ that are wholly or partly outside of the monthly installment.” Caniglia v. Caniglia, 285 Neb. at 934 , 830 N.W.2d at 211. “The expenses stated in § 42-364.17—including, among others, extracurricular, education, and other extraordinary expenses— merely represent other incidents of ‘support’ to be addressed in a dissolution decree.” Caniglia v. Caniglia, 285 Neb. at 934 , 830 N.W.2d at 211. Thus, a district court has the authority to order the categories of expenses specified in § 42-364.17 in addition to the monthly child support obligation calculated under the guidelines. Notably, as applicable here, § 42-364.17 refers specifi- cally to extracurricular, education, and other “extraordinary” expenses that may be considered in addition to the monthly child support obligation, while § 42-369(3) refers more gen- erally to “necessary shelter, food, clothing, care,” and educa- tion expenses, and “any other expenses the court may deem reasonable and necessary.” Under § 42-364.17, any expense beyond “reasonable and necessary medical, dental, and eye care, medical reimbursements, day care, extracurricular activ- ity, [and] education” would have to qualify as “extraordinary.” Whereas, under § 42-369(3), expenses may include neces- sary food, clothing, and care, as well as any other expenses deemed “reasonable and necessary” by the court. The older  - 211 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 statute certainly contemplates a very broad range of expenses associated with caring for a child, while the newer statute has narrowed the types of expenses that may coincide with a calcu- lation of child support obligations. [8] To reconcile the two statutes, we note that child support statutes should be read in conjunction with the Nebraska Child Support Guidelines. See Hoover v. Hoover, 2 Neb. App. 239 , 508 N.W.2d 316 (1993). Also, components of a series or col- lection of statutes pertaining to a certain subject matter are in pari materia and should be conjunctively considered and con- strued to determine the intent of the Legislature, so that differ- ent provisions are consistent, harmonious, and sensible. Tyler F. v. Sara P., 306 Neb. 397 , 945 N.W.2d 502 (2020). Because the broader, more general terms contained in § 42-369(3) preceded the adoption of the guidelines and the passage of § 42-364.17, we construe the guidelines and § 42-364.17 to control what categories of expenses can be ordered in addition to the monthly child support obligation determined under the guidelines. Since there were no mandatory child support guide- lines in existence until the passage of the guidelines in 1987, the broader language of § 42-369(3) essentially provided for types of expenses that could be considered when determining support for children, including basic necessities such as shelter, food, and clothing. However, the adoption of the guidelines necessarily incorporated basic necessities such as shelter, food, and clothing, and the passage of § 42-364.17 further delineated specific expenses that could be ordered in addition to those basic necessities now incorporated into the guidelines. To con- strue § 42-369(3) to require a parent to pay for basic necessi- ties such as shelter, food, and clothing in addition to a monthly child support obligation which has been calculated using the basic net income and support calculation, worksheet 1, would make inexplicable what the monthly child support was other- wise intended to cover in terms of a child’s needs. However, an order requiring a parent to contribute to a child’s clothing expenses, or other reasonable and necessary  - 212 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 direct expenditures, may be appropriate in joint physical cus- tody situations. In those cases, the determination of each par- ent’s monthly child support obligation is significantly lower when using the joint physical custody child support calcula- tion, worksheet 3, due to the more equal sharing of parenting time between the parents. See Neb. Ct. R. ch. 4, art. 2, work- sheet 3 (rev. 2007). Neb. Ct. R. § 4-212 (rev. 2011), related to joint physical custody, provides in relevant part: “If child support is determined under this paragraph, all reasonable and necessary direct expenditures made solely for the child(ren) such as clothing and extracurricular activities shall be allocated between the parents, but shall not exceed the proportion of the obligor’s parental contributions . . . .” Therefore, in addi- tion to the monthly child support obligation calculated for joint physical custody, a trial court may apportion between the parents a child’s clothing and other reasonable and necessary direct expenditures. With these legal principles in mind, we now consider the expenses Gary was ordered to pay in addition to his monthly child support obligation which was calculated using the basic net income and support calculation, worksheet 1, rather than the joint physical custody child support calculation, work- sheet 3. (b) Private School Tuition During the course of the marriage, Gary and Kirsten enrolled the children in a private school. Kirsten testified that she had continued the children’s enrollment in the same private school after the parties separated and during the dissolution proceed- ings. Gary testified that he objected to having the children attend private school, but had allowed the children’s attendance during the marriage. Gary suggests the district court had the discretionary authority to provide a support order to include educational expenses pursuant to § 42-369(3); however, he claims this constitutes a deviation from the Nebraska Child Support  - 213 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 Guidelines. In response, Kirsten also directs us to § 42-364.17. Gary claims that because Kirsten “unilaterally [chose] to con- tinue to enroll the minor children in a private school” and “offered [no evidence] regarding the minor children[’s] need for such an education, or that it had any beneficial [e]ffect or consequences,” then the cost of the children’s tuition should be Kirsten’s responsibility alone. Brief for appellant at 18. He therefore contends that making him responsible for 50 percent of the cost of private school tuition for the children was an abuse of discretion. Education is one of the expenses specifically referenced in § 42-364.17, and it therefore represents a type of support the district court may award in addition to the monthly child sup- port obligation. See Caniglia v. Caniglia, 285 Neb. 930 , 830 N.W.2d 207 (2013). Private school education has been recog- nized as an expense that may be allocated separately from a monthly child support award. See Becher v. Becher, 299 Neb. 206 , 908 N.W.2d 12 (2018) (affirming district court’s order directing father to pay school tuition for children’s private school education). In light of the evidence that the children have attended the same private school throughout the marriage and the dissolu- tion process, we cannot say the district court abused its discre- tion in ordering Gary to be responsible for 50 percent of the children’s private school tuition costs. Although Gary is pay- ing $1,980 per month in child support and $500 per month in alimony ($2,480 per month total support), his gross monthly income of $12,048.25 is still much greater than Kirsten’s gross monthly income of $5,000. Even after adjusting for Gary’s outgoing support obligations and Kirsten’s incoming support amounts, Gary can afford to contribute equally with Kirsten to maintain their children in the education environments which were established during the marriage. Maintaining stability and continuity in the children’s educational routine is cer- tainly in their best interests. See State on behalf of Kaaden S. v. Jeffery T., 303 Neb. 933 , 932 N.W.2d 692 (2019) (relevant  - 214 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 considerations of child’s best interests include stability in child’s routine). (c) Extracurricular Expenses We likewise cannot say that the district court abused its discretion by making Gary responsible for 70 percent of the extracurricular expenses incurred on behalf of the children that the parties mutually agree upon in advance. As noted pre- viously, extracurricular expenses are specifically referenced in § 42-364.17; this is another type of support that may be awarded in addition to the monthly payment established by the child support guidelines. See Caniglia v. Caniglia, supra. Notably, the district court requires the sharing of only those extracurricular expenses that the parties have agreed to in advance, although the court also noted that consent should not be unreasonably withheld. This provision appears to encour- age both parents to participate in making decisions about such activities for their children. Further, with the contributions of both parents to the costs associated with such activities, they will likely be more mutually supportive of their children’s involvement in those activities. We cannot say that the district court abused its discretion in its allocation of these expenses between the parties in this manner. (d) Other Miscellaneous Expenses With respect to the part of the order requiring Gary to be responsible for half of “the cost of school lunches (purchased from the school), required school supplies, haircuts, and items of clothing the parties expect the children to wear at both residences, i.e., winter coats, hats, mittens, winter boots, back- packs, and tennis shoes,” we find the district court abused its discretion. As discussed above, § 42-364.17 sets forth those expenses which a parent may be ordered to pay in addition to his or her monthly child support obligation. These include “reason- able and necessary medical, dental, and eye care, medical  - 215 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 reimbursements, day care, extracurricular activity, education, and other extraordinary expenses of the child.” While it is con- ceivable that school lunches and school supplies might qualify as an “education” expense, we conclude that such a broad read- ing is not warranted in the present matter. With a child support award of $1,980 per month, these items can be adequately cov- ered and seem better characterized as basic necessities covered by the monthly child support obligation. As for the order’s remaining items, haircuts and clothing, the only category under which they could possibly qualify under § 42-364.17 would be “extraordinary expenses.” We conclude that such expenses fall within the basic necessities intended to be covered by a monthly child support obligation calculated using the basic net income and support calcula- tion, worksheet 1, and do not rise to the level of “extraordi- nary expenses.” The district court abused its discretion in ordering Gary to pay for these expenses, and we therefore vacate this portion of the decree. 3. Tax Dependency Exemptions Gary claims on appeal that the district court abused its dis- cretion in awarding Kirsten the sole right to claim the children for state and federal income tax purposes. For purposes of the district court’s child support calcula- tion, Gary’s gross income was calculated to be $12,048.25 per month and Kirsten’s was calculated to be $5,000 per month. The district court ordered Gary to pay additional expenses described previously in addition to the monthly child support sum of $1,980. Gary asserts that because he “is paying [his] proportion- ate share of direct living expenses for the care of the minor children through his child support obligation[,] [h]e should receive some benefit for this obligation in the form of a tax exemption.” Brief for appellant at 20-21. He further claims his marginal tax rate would be “detrimentally unfair to [Kirsten’s]  - 216 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 marginal tax rate, claiming the tax dependency credits for all three minor children.” Id. at 21. [9,10] A tax dependency exemption is an economic ben- efit nearly identical to an award of child support or alimony. Anderson v. Anderson, 290 Neb. 530 , 861 N.W.2d 113 (2015). In general, the custodial parent is presumptively entitled to the federal tax exemption for a dependent child. Id. But a court may exercise its equitable powers and order the custodial par- ent to execute a waiver of his or her right to claim the tax exemption for a dependent child if the situation of the parties so requires. Id. Although Gary claims that the district courts “have routinely equally divided the tax dependency exemptions between the parents,” brief for appellant at 21, we note that a departure from this routine does not necessarily equate to an abuse of discretion. The considerations of the district court included the totality of the facts and circumstances of the parties and were not constrained to comparisons of income and allocation of expenses. We cannot say the district court abused its discretion in granting Kirsten the sole right to claim the minor children for state and federal income tax purposes. 4. Equalization Payment Gary does not disagree with “the identification of marital assets and liabilities, nor the valuations determined by the [dis- trict court].” Brief for appellant at 22. However, he contends the district court abused its discretion in determining he owed Kirsten a payment of $15,841 to equalize the marital estate. He asserts the property division was not supported by the evidence related to the sale of the marital residence, as the division of the marital residence and all liens and encumbrances against it had been divided prior to trial and were erroneously factored into the district court’s calculations. We agree that the evidence supports Gary’s argument. While the dissolution action was pending, Kirsten motioned the district court to order the sale of the marital residence.  - 217 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 The district court granted this order. The closing on the sale occurred on May 2, 2019; trial took place in October. At the time of closing, Gary’s support obligations under the January 14 temporary order were in arrears; he owed $5,066.14 in child support and $9,819.09 in spousal support (total owed of $14,885.23). According to the closing statement for the marital home received into evidence, the sale price was $196,500. The clos- ing statement reflects that the mortgage and home equity line of credit encumbering the marital residence, as well as all other fees associated with the closing, were deducted from the sale proceeds. Also, as part of the closing costs, the combined amount of Gary’s outstanding support obligations ($14,885.23) was deducted for distribution to Kirsten. The remaining net proceeds of the sale amounted to $14,954.71 and were placed into escrow. We note that the net sale proceeds would have totaled $29,839.94 but for the payment made to pay off Gary’s outstanding support obligations. Ordinarily, such net proceeds would have been split in half, resulting in the receipt by each party of $14,919.97. However, instead of receiving his share of the net profit, Gary’s share was applied to his outstanding sup- port obligations of $14,885.23. Gary contends that the remain- ing balance of $14,954.71 constituted Kirsten’s one-half share and that this amount was distributed to Kirsten. The record is unclear as to whether the $14,954.71 was still held in escrow at the time of trial or whether those funds had actually been distributed to Kirsten as Gary indicates. The district court’s calculation error appears to stem from Kirsten’s assets and liabilities spreadsheet, offered and received as exhibit 11. The district court adopted the values, the divi- sion, and the equalization amount of $15,841 as set forth on that exhibit. However, exhibit 11 reflects both parties receiving $22,791.59 in equity from the home, which is not supported by the closing statement. Further, exhibit 11 credits Kirsten’s equity in the home with the amounts owed by Gary in child and spousal support described previously. However, as Gary  - 218 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 points out, the real estate closing document shows that these outstanding obligations were deducted from his share of the house sale proceeds at the time of closing. Kirsten’s only response to Gary’s argument is that she divided the house pro- ceeds equally on her spreadsheet and deducted the delinquent support “by showing it as a negative figure” to make sure she would not be paying for half of Gary’s outstanding support obligations. Brief for appellee at 16. She does not explain why giving her the delinquent support credits on her spreadsheet was appropriate given Gary’s share of the net proceeds from the house sale had already satisfied those delinquencies. Nor does she otherwise challenge Gary’s explanation regarding the application of his share of the home equity to those outstanding support obligations. After considering the evidence in the record, we agree with Gary that the remaining net proceeds of $14,954.71 from the sale which were placed into escrow represented Kirsten’s share of the equity in the marital home and that the amount of $14,885.23 paid to Kirsten in satisfaction of his support obliga- tions represented Gary’s share of the equity. These combined amounts represent the remaining equity in the home following the deduction of all related liens, costs, and fees from the sale price of the marital home as evidenced by the closing state- ment. Gary, instead of receiving his share of the net proceeds, had his share paid to Kirsten to satisfy his delinquent sup- port obligations. The amounts of Gary’s satisfied obligations should not have been included on the assets and liabilities spreadsheet, and the equalization calculation should be modi- fied accordingly. Before setting forth our modified calculation of the marital estate, we note that our modification assumes the net pro- ceeds of $14,954.71 from the sale of the marital home were distributed entirely to Kirsten. As noted previously, the record is unclear whether those funds were distributed to Kirsten or whether they are still in escrow. If the latter, those funds should be released entirely to Kirsten.  - 219 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 Using the asset and liability values set forth on exhibit 11, as now modified to reflect each party’s share of the net proceeds from the sale of the home, we have calculated the property equalization as follows: Kirsten Gary Net house sale proceeds $14,954.71 $14,885.23 (Gary’s share used to pay outstanding support) Other assets $   475.78 $40,304.75 Total assets $15,430.49 $55,189.98 Liabilities [$13,202.01] [$36,234.19] Net marital estate $ 2,228.48 $18,955.79 Equalization due to Kirsten $ 8,364.00 [$ 8,364.00] Equalized marital estate $10,592.48 $10,591.79 Accordingly, we modify the district court’s decree to reflect that Gary’s property equalization judgment owed to Kirsten is $8,364 rather than $15,841. 5. Alimony Gary argues on appeal that the district court abused its dis- cretion in ordering him to pay $500 per month in alimony to Kirsten for 5 years. As described previously, the district court, in calculating child support, determined Gary’s monthly gross income at the time of trial to be $12,048.25 and Kirsten’s monthly gross income to be $5,000. For the majority of the 12-year marriage until July 2016, Kirsten was employed. In July 2016, Kirsten and Gary agreed that Kirsten should quit her job to stay home with the minor children, forgoing her then-current yearly sal- ary of $89,000. Thereafter, she was not employed again until March 2019. Kirsten’s expenses at the time of trial were approximately $4,543 per month; such expenses included $950 for rent, $1,084 for groceries, $300 for her car payment, $239 for vehi- cle gas, $200 for utilities, $945 for daycare for the children, and various other expenses including cell phone payments,  - 220 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 internet, renter’s and vehicle insurance, and clothing and enter- tainment expenses for the children. Gary neither testified as to nor provided a list of his monthly expenses. As described previously, he is obligated to pay $1,980 in child support to Kirsten as well as certain other expenses. He is also required to maintain health insurance through his employer for the benefit of the children, and his weekly payroll deduction for that insurance is $42. The district court acknowledged the 12-year duration of the parties’ marriage and the parties’ three minor children. The court also identified Kirsten’s decreased income compared to her previous employment, noting that “she is not in the same advanced position she was when her employment ended” and that “it will take her several years to obtain the same respective position.” Drawing on these facts, the court ordered Gary to pay $500 per month in alimony to Kirsten for 5 years. [11-13] In dividing property and considering alimony upon a dissolution of marriage, a court should consider four fac- tors: (1) the circumstances of the parties, (2) the duration of the marriage, (3) the history of contributions to the marriage, and (4) the ability of the supported party to engage in gainful employment without interfering with the interests of any minor children in the custody of each party. Wiedel v. Wiedel, 300 Neb. 13 , 911 N.W.2d 582 (2018). In addition, a court should consider the income and earning capacity of each party and the general equities of the situation. Id. In reviewing an ali- mony award, an appellate court does not determine whether it would have awarded the same amount of alimony as did the trial court, but whether the trial court’s award is untenable such as to deprive a party of a substantial right or just result. Id. Alimony is not a tool to equalize the parties’ income, but a disparity of income or potential income might partially jus- tify an alimony award. Anderson v. Anderson, 290 Neb. 530 , 861 N.W.2d 113 (2015). Gary argues that the evidence cannot justify an award of alimony to Kirsten, as “she has funds to pay for her[] and the  - 221 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 minor children[’s] . . . normal maintenance and expenses.” Brief for appellant at 26. He further asserts that an award for alimony is not warranted because “[n]o circumstances dictate that [Kirsten] economically suffered during the marriage” and Kirsten “was not left without assets or significant earning capacity.” Id. at 27. Gary also points out that his own income is “directly reduce[d]” to the extent that factoring in Kirsten’s income and the other amounts Gary is required to pay to her, “the net difference in the available earnings [is] not substan- tially different.” Id. at 27. In addition to a significant disparity between each party’s employment income, Kirsten’s present income amounts to only approximately two-thirds of her previous income before she ended her employment in July 2016 to take care of the chil- dren, and it will take a number of years for Kirsten’s level of income to reach that same level again. While she builds up her income toward its previous level, she will also be primarily responsible for raising three children. In light of the record before us regarding the parties’ indi- vidual circumstances, we cannot say the district court abused its discretion in ordering Gary to pay $500 per month in ali- mony to Kirsten for a period of 5 years. 6. Attorney Fees Gary claims the district court abused its discretion in order- ing him to pay $8,000 in attorney fees to Kirsten. According to an affidavit for attorney fees received into evidence, Kirsten’s attorney charged her at a rate of $300 per hour. Prior to the conclusion of trial, the affidavit indicates that Kirsten had incurred $16,849.09 in attorney fees and expenses. This amount did not take into consideration the fees associated with the trial. Kirsten requested that the district court order Gary to pay for a portion, if not all, of her attor- ney fees. [14] It has been held that in awarding attorney fees in a dis- solution action, a court shall consider the nature of the case,  - 222 - Nebraska Court of Appeals Advance Sheets 29 Nebraska Appellate Reports KELLY v. KELLY Cite as 29 Neb. App. 198 the amount involved in the controversy, the services actually performed, the results obtained, the length of time required for preparation and presentation of the case, the novelty and difficulty of the questions raised, and the customary charges of the bar for similar services. Garza v. Garza, 288 Neb. 213 , 846 N.W.2d 626 (2014). Additionally, in dissolution cases, as a matter of custom, attorney fees and costs are awarded to prevailing parties. Moore v. Moore, 302 Neb. 588 , 924 N.W.2d 314 (2019). The award of attorney fees is discretionary with the trial court, is reviewed de novo on the record, and will be affirmed in the absence of an abuse of discretion. See Dooling v. Dooling, 303 Neb. 494 , 930 N.W.2d 481 (2019). The district court ordered Gary to pay $8,000 toward Kirsten’s attorney fees “[d]ue to the discrepancy in income between the parties . . . .” In light of the record before us with respect to the parties’ circumstances as previously described, we cannot say the district court abused its discretion by order- ing Gary to pay attorney fees to Kirsten. VI. CONCLUSION The district court’s decree is modified to reflect the changes to the parenting plan and the property equalization judgment as discussed above. The portion of the decree ordering Gary to pay certain expenses, as discussed above, is vacated. All other aspects of the decree are affirmed. Therefore, we affirm in part as modified, and in part vacate. Affirmed in part as modified, and in part vacated.

2020-12-01 07:01:08.267648+00

https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2019cv3050-150

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ) RICHARD ARJUN KAUL, et al., ) ) Plaintiffs, ) ) v. ) Civil Action No. 19-cv-3050 (TSC) ) FEDERATION OF STATE MEDICAL ) BOARDS, et al., ) ) Defendants. ) ) MEMORANDUM OPINION Plaintiffs Richard Kaul and Arnold Feldman, proceeding pro se, have sued over thirty companies, medical boards, and individuals, alleging violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the Clayton Act, the Sherman Act, and the Due Process Clause of the United States Constitution. Various defendants have filed five motions to dismiss (ECF Nos. 23, 67, 68, 70, & 112), a request for judicial notice (ECF No. 69), and two motions to sever Kaul’s claims and transfer them to the District Court for the District of New Jersey, or alternatively, to dismiss the claims (ECF Nos. 47 & 82). Plaintiffs oppose the first motion to sever and transfer. Feldman opposes each of the motions to dismiss his claims.1 For the reasons 1 A litigant may proceed in federal court on behalf of himself or by properly admitted counsel, see 28 U.S.C. § 1654 , but a layperson cannot represent another person in a court proceeding, see Georgiades v. Martin–Trigona, 729 F.2d 831 , 834 (D.C. Cir. 1984). Kaul did not sign the responsive filings regarding the motions to dismiss filed by Defendants California State Board of Medical Examiners, Mississippi State Board of Medical Examiners, and Richard Stanley, and no counsel has appeared on his behalf as to those motions. Feldman, as a pro se plaintiff, cannot represent Kaul. Accordingly, the court finds that Kaul did not respond to these motions. set forth below, the court will GRANT the New Jersey Defendants’2 motions to sever and transfer, (ECF Nos. 47 & 82), and will therefore DENY without prejudice the New Jersey Defendants’ motions to dismiss. (ECF Nos. 47, 67, 82, & 112). The court will also GRANT the other motions to dismiss, (ECF Nos. 23, 68, & 70), and will DENY the request for judicial notice as moot. (ECF No. 69.)3 I. BACKGROUND A. Factual Background 1. Plaintiff Kaul Plaintiff Richard Kaul was formerly a board-certified anesthesiologist licensed to practice medicine in New Jersey. (ECF No. 1, Compl. ¶ 21.) He purports to be a resident of New York.4 2 The “New Jersey Defendants” refers to all Defendants who joined in the February 13, 2020, Omnibus Motion to Sever and Transfer (ECF No. 82, Omnibus Mot.), as well as those Defendants who filed an earlier Motion to Sever and Transfer or alternatively Dismiss for Failure to State a Claim. (ECF No. 47, Allstate Mot). In Footnote 2 of the Omnibus Motion, the New Jersey Defendants note that “both sets of Defendants respectfully request that the Court decide this omnibus Motion to Sever and Transfer simultaneously with the . . . previously filed motion.” (Omnibus Mot. at 1 n.2.) Given that both motions are functionally identical, the court will proceed as requested. Thus, the “New Jersey Defendants” are: Allstate Insurance Company, Richard Crist, GEICO, GEICO Indemnity, GEICO General Ins. Co., GEICO Casualty, Fourth Edition Inc. f/k/a North Jersey Media Group Inc. (sued as North Jersey Media Group, Inc.), Lindy Washburn, Dr. Peter Staats, the American Society of Interventional Pain Physicians, the New Jersey Board of Medical Examiners (“NJBME”), Former New Jersey Governor Christopher J. Christie, Dr. Andrew Kaufman, Doreen Hafner, Eric Kanefsky, Atlantic Health System, Dr. Robert F. Heary, Dr. Marc Cohen, John P. Di Iorio, TD Bank, NA, Congress of Neurological Surgeons, Hackensack University Medical Center, Robert Garrett, Howard Solomon, Gregory Przybylski, and Steven Lomazow. 3 The court has considered the following responses filed by Plaintiffs: ECF No. 60, ECF No. 89, ECF No. 94, ECF No. 97, ECF No. 116. 4 Kaul claims to be a resident of New York, although the summonses provide a New Jersey address, and, on at least one occasion, documents mailed to Kaul by this court at his New York address of record were returned as undeliverable. (See Compl.; ECF No. 4; ECF No. 5.) 2 (Compl. ¶ 21.) Kaul’s New Jersey medical license was revoked in 2014 for performing spine surgery on eleven patients without “proper training and experience,” which “constituted gross and repeated malpractice, negligence, and incompetence.” Kaul v. Christie (“Kaul I”), No. 2:16- cv-2364, 2017 WL 2953680 , at *1 (D.N.J. June 30, 2017). Kaul alleges that Defendants have engaged in a massive conspiracy to “permanently eliminate [him] from the practice of medicine anywhere in the world.” (Compl. at 19.) He brings five claims independently and three with Feldman. In Count II, Kaul alleges that ten Defendants revoked his license in a conspiracy intended to increase their revenues, market share, and political power. (Compl. ¶ 272.) His allegations implicate former New Jersey Governor Christopher J. Christie, Dr. Andrew Kaufman (who testified against Kaul), the American Society of Interventional Pain Physicians and its former president, Dr. Peter Staats, Dr. Steven Lomazow (a business competitor), Doreen Hafner (Deputy Attorney General of New Jersey), Dr. Marc Cohen (a business competitor), the Congress of Neurological Surgeons and its president, Dr. Gregory Przybylski, and Dr. Robert Heary (attending physician at Atlantic Health System and Hackensack University Medical Center). (Compl. ¶ 269.) In Count III, Kaul claims that several Defendants conspired to destroy his reputation and medical practice so insurance companies could avoid paying him for services rendered to patients. (Compl. ¶ 362.) The allegations in Count III are directed at former Governor Christie, the GEICO Defendants,5 Allstate New Jersey Insurance Company (“Allstate”), TD Bank, NA, Daniel Stolz (an attorney whose firm served as Chapter 7 trustee for Kaul’s business’ bankruptcy 5 Plaintiffs refer to defendants Government Employees Insurance Co., GEICO Indemnity, GEICO General Insurance Company, and GEICO Casualty as GEICO. (Compl. ¶ 34.) 3 proceedings), John Di Iorio (an attorney who represented Kaul during the Chapter 7 proceedings), Richard Crist (Allstate chief operating officer), Jay Howard Solomon (administrative law judge who oversaw Kaul’s administrative proceedings), Hafner, and Judge Brian Martinotti6 (United States District Court for the District of New Jersey). (Compl. ¶ 359.) In Count IV, Kaul claims several Defendants further violated RICO by engaging in a conspiracy with the intent to destroy his practice and reputation and divert business to the Defendants’ medical facilities and physicians.7 (Compl. ¶ 459.) In Count V, Kaul alleges that four Defendants violated RICO by conspiring to destroy Kaul’s reputation and his economic standing in order to divert his patients to facilities and physicians connected with Defendants. (Compl. ¶ 564.)8 In Count VI, Kaul alleges that a number of Defendants violated the Clayton Act and Sherman Act by engaging in anticompetitive schemes intended to reduce the minimally invasive spinal surgery market. (Compl. ¶¶ 637–700.) These Defendants allegedly engaged in such schemes through fraud, political bribery, encouraging litigation or complaints by customers against doctors such as Plaintiffs, creating non-compete areas, and regulating who could perform fusion treatments. (Compl. ¶¶ 637–700.) The Complaint lists Defendants Kaufman, Staats, 6 Kaul claims that certain Defendants bribed Judge Martinotti to rule against him in a prior suit, after the original presiding judge recused himself when Kaul accused him of bias. (Compl. ¶ 53; see also Allstate Mot. at 5 n.6.) 7 Kaul brings this claim against defendants Christie, Hackensack University Medical Center and its president, Robert Garrett, Atlantic Health Systems, Hafner, Lewis Stein (New Jersey attorney), NJBME, and Eric Kanefsky (former acting director of New Jersey Division Consumer Affairs). (Compl. ¶ 459.) 8 Kaul brings this claim against Christie, Hackensack University Medical Center, Lindy Washburn (a journalist who published articles about Kaul), and North Jersey Media Group, Inc. (Compl. at 132.) 4 Przybylski, College of Neurological Surgeons, Heary, Cohen, Hackensack University Medical Center, Atlantic Health Systems, John Burdine, and Louisiana State Board of Medical Examiners (“LMB”) under Count VI, but does not allege any facts against Defendants Burdine or LMB or any events occurring outside New Jersey. (See Compl. ¶¶ 639–700.) 2. Plaintiff Feldman Plaintiff Arnold Erwin Feldman is a resident of Florida, and was formerly licensed to practice medicine in Louisiana, Alabama, Mississippi, and California. (Compl. ¶ 22.) In 2013, Feldman was investigated for violating the Louisiana Medical Practice Act. (Compl. ¶¶ 222– 244.) The investigation resulted in an administrative proceeding in 2016, in which the LMB ultimately fined Feldman and suspended his medical license. (Compl. ¶¶ 222–244.) See also Feldman v. La. State Bd. of Med. Exam’rs, No. 2018-ca-0033, 2018 WL 5830390 (La. Ct. App. Nov. 7, 2018) (affirming sanctions against Feldman). Feldman contends that the 2013 investigation and the resultant administrative proceeding violated his right to due process. (Compl. ¶¶ 222–244.) In Count I of the Complaint, Feldman asserts that Defendants violated RICO in two ways. First, Feldman claims his medical license was illegally suspended through a scheme of bribery, obstruction of justice, perjury, and fraud by Defendants LMB, Cecilia Mouton (Executive Director and Director of Investigation for LMB), John Burdine (President of LMB), and Richard Stanley (legal counsel for LMB during Feldman’s proceedings). (Compl. ¶¶ 246– 267.) Second, Feldman alleges that LMB then shared the record of his suspension via U.S. wires and mail with Defendants Federation of State Medical Boards (“FSMB”), California State Board of Medical Examiners (“CMB”), and Mississippi State Board of Medical Examiners (“MMB”) despite knowing that the suspension was illegal and fraudulent. (Compl. ¶¶ 246–267.) Feldman 5 claims in both instances that Defendants used their political power against him to eliminate competition, and that this behavior thus constitutes a “pattern of racketeering” in violation of RICO. (Compl. ¶¶ 246–267.) 3. Kaul and Feldman’s Joint Claims In Counts VII–IX, Feldman and Kaul allege that certain Defendants deprived them of their due process rights under color of law, violated the Eighth Amendment Excessive fines clause, and entered into an illegal interstate compact in violation of the Compact Clause of the United States Constitution.9 (Compl. ¶¶ 701–750.) The Complaint implicates Defendants Christie (in his official capacity), Kaufman (in his official capacity), Przybylski (in his official capacity), Solomon (in his official capacity), Hafner (in her official capacity), Allstate, GEICO, NJBME, Mouton, LMB, CMB, and MMB. (See Compl. ¶¶ 701–750.) 4. Other Related Litigation Kaul has filed multiple suits raising similar claims. In 2016, he filed a complaint in the Southern District of New York alleging similar RICO violations by the NJBME, several medical insurance companies, and individual actors, many of whom are named as Defendants in this case. Kaul I, 2017 WL 2953680 . The Southern District of New York sua sponte transferred the case to the District of New Jersey, where Kaul’s claims were eventually dismissed because they either duplicated claims raised previously in New Jersey state court, failed to state a claim, or were barred by sovereign immunity. Kaul v. Christie, 372 F. Supp. 3d 206 , 255 (D.N.J. 2019). While Kaul I was pending, Kaul filed a second complaint in the Southern District of New York, which was likewise transferred to the District of New Jersey. Kaul v. Christie (“Kaul II”), 9 Although these claims are brought by both Kaul and Feldman, Feldman’s arguments are largely outlined separately. (See, e.g., Compl. ¶¶ 702(h), 748.) 6 No. 2:18-cv-8086, 2020 WL 967886 (D.N.J. Feb. 28, 2020). The District of New Jersey found that Kaul II had “such significant overlap” with Kaul I that they were “essentially the same case.” Id. at *2 . Kaul II has been stayed until Kaul I is concluded. Id. at *7–8. A year after he filed Kaul II, Kaul filed a third case in the Southern District of New York, which was also transferred to the District of New Jersey. Kaul v. Schumer (“Kaul III”), No. 2:19-cv-13477 (D.N.J. August 5, 2020). Kaul III alleged a different conspiracy and named a different group of defendants from Kaul I and Kaul II; however, the claims in Kaul III rested on the outcome of Kaul I, so the case has likewise been stayed until Kaul I is concluded. Id. at *4–5. In 2019, Kaul joined another Plaintiff, Harshad Patel, in filing two suits in the Northern District of Georgia. The first of these raised similar conspiracy claims to those raised by Kaul in his prior suits in New York and New Jersey. See Patel v. Christ (“Patel I”), No. 1:19-cv-0612 (N.D. Ga. Mar. 26, 2019). The second suit alleged a broad conspiracy to discriminate against healthcare providers of Indian descent. See Patel v. Crist (“Patel II”), No. 1:19-cv-0739 (N.D. Ga. Apr. 2, 2019). Both cases were transferred to the District of New Jersey and subsequently dismissed for lack of subject matter jurisdiction and failure to state a claim. Patel v. Crist, No. 2:19-cv-8946, 2020 WL 6156751 (D.N.J. Oct. 20, 2020); Patel v. Crist, No. 2:19-cv-9232, 2020 WL 6156772 (D.N.J. Oct. 20, 2020). In denying Plaintiffs’ motion to amend their complaint a third time, the court noted that “Plaintiffs make virtually identical allegations” in both matters and “made no effort to address the factual shortcomings in either matter.” 2020 WL 6156751 , at *3. In addition to these five suits, Kaul has also sued Stolz, an attorney who was a member of the firm that served as the Chapter 7 Trustee’s counsel when Kaul’s business, New Jersey Spine, entered into bankruptcy proceedings. (See ECF No. 132, Ex. A.) Kaul claimed Stolz was part of 7 a large conspiracy against him and, pursuant to that conspiracy, the bankruptcy Trustee failed to collect debts from Allstate and GEICO that Kaul believed he was owed. Stolz v. Kaul, No. 20- ap-1011-JKS, ECF No. 1 (Bank. N.J.). Kaul was permanently enjoined from suing Stolz in this or any matter without leave of the Bankruptcy Court for the District of New Jersey. Stolz v. Kaul, No. 20-ap-1011-JKS (Bankr. D.N.J. February 10, 2020); In re N.J. Spine & Rehab., P.C., No. 13-bk-23366-JKS (Bankr. D.N.J. February 10, 2020). B. Procedural History 1. Motions to Sever and Transfer The New Jersey Defendants10 move to sever Kaul’s claims from Feldman’s and transfer the former to the District Court of New Jersey under Federal Rules of Civil Procedure 20(a) and 21,11 contending that the claims should be severed for failing to meet the requirements for permissive joinder under Fed. R. Civ. P. 20. (ECF No. 47-1, Allstate Br. at 8–11.) The New Jersey Defendants argue that Feldman’s and Kaul’s claims are not logically related; the claims were “brought against different Defendants and revolve around actions purportedly taken during 10 Defendants Allstate and Crist filed a Motion to Sever and Transfer on January 27, 2020 (the “first Motion to Sever and Transfer”). (Allstate Mot.) Defendants North Jersey Media Group, Inc., Washburn, Staats, American Society of Interventional Pain Physicians, GEICO, NJBME, Christie, Kaufman, Hafner, Kanefsky, American Health Systems, Heary, Cohen, and Di Iorio filed an Omnibus Motion to Sever and Transfer (the “Omnibus Motion”) the claims against them on February 13, 2020. (Omnibus Mot.) Defendants College of Neurological Surgeons and TD Bank joined the Omnibus Motion via separate Motions for Joinder. (ECF No. 66; ECF No. 79.) Defendants Hackensack University Medical Center and Garrett filed a Motion to Dismiss and joined the Omnibus Motion via a footnote in that Motion. (ECF No. 112, at 3 n.3.) Defendants Solomon, Przybylski, and Lomazow joined the Omnibus Motion via a Motion to Set Aside Default and Stay Obligations to Plead in Response to the Complaint, (ECF No. 145), which this court granted via a Minute Order on September 23, 2020. 11 In the alternative, the New Jersey Defendants move to dismiss Plaintiffs’ claims under Federal Rules of Civil Procedure 12(b)(6) for failure to state a claim. (Allstate Br. at 20–35.) 8 different time periods” and in different jurisdictions. (Allstate Br. at 8–11.) Thus, they argue, Kaul’s claim should be severed from Feldman’s. (Id. at 8–11.) The New Jersey Defendants further contend that this district is an improper venue for this case, and it would be in the interest of justice to transfer the case to the District of New Jersey. (Id. at 13–20.) 2. Motions to Dismiss for Lack of Subject Matter Jurisdiction Defendants MMB and CMB move to dismiss the claims against them for lack of subject matter jurisdiction. Defendants’ central claim concerns sovereign immunity; 12 both MMB and CMB claim to be arms of their respective state governments and thus immune from liability under the Eleventh Amendment. (ECF No. 68-1, MMB Br. at 3–9; ECF No. 70, CMB Br. at 11– 14.) 3. Motion to Dismiss for Insufficient Process and Insufficient Service of Process Defendant Stanley moves to dismiss the claims asserted against him on the basis that this court lacks personal jurisdiction as a result of insufficient service of process under Federal Rules of Civil Procedure 12(b)(4) and (5). (ECF No. 23.) Stanley contends Feldman failed to effectuate adequate service of process within 90 days of commencing the action and cannot establish proof of service. (ECF No. 23-1, Stanley Br. at 5–6.) Plaintiffs filed the Complaint on October 1, 2019. (See Compl.) In late October 2019, the court reminded Plaintiffs they had 90 days from their time of filing to effectuate service and to otherwise comply with Rule 4 requirements. (ECF No. 3, Pro Se Pl. Order.) Stanley claims the Plaintiffs have disregarded Federal Rule of Civil Procedure 4’s requirements; Plaintiffs did not serve Stanley personally and sent only a copy of the Complaint, and thus dismissal is appropriate. (Stanley Br. at 5–6.) 12 Defendant CMB’s Motion to Dismiss cites additional grounds for dismissal; lack of personal jurisdiction and failure to state a claim upon which relief can be granted. 9  II. LEGAL STANDARD The court is mindful that pro se pleadings must be liberally construed, as they are held to “less stringent standards than formal pleadings drafted by lawyers.” Budik v. Dartmouth– Hitchcock Med. Ctr., 937 F. Supp. 2d 5 , 11 (D.D.C. 2013) (quoting Erickson v. Pardus, 551 U.S. 89 , 94 (2007)) (internal quotation marks omitted). Further, “[a]t the motion to dismiss stage . . . pro se complaints[ ] are to be construed with sufficient liberality to afford all possible inferences favorable to the pleader on allegations of fact.” Settles v. U.S. Parole Comm’n, 429 F.3d 1098 , 1106 (D.C. Cir. 2005). However, this liberal standard “is not . . . a license to ignore the Federal Rules of Civil Procedure.” Neuman v. United States, 70 F. Supp. 3d 416 , 422 (D.D.C. 2014) (quotation marks and citations omitted). A. Motion to Dismiss or Transfer Based on Improper Venue A motion to dismiss under Federal Rule of Civil Procedure 12(b)(3) challenges the plaintiff’s choice of venue. A court should dismiss or transfer a complaint if the chosen venue is improper or inconvenient. Fed. R. Civ. P. 12(b)(3). To prevail on a motion to dismiss or transfer for improper venue, a defendant “must present facts that will defeat the plaintiff’s assertion of venue,” however the burden “remains on the plaintiff to prove that venue is proper when an objection is raised, since it is the plaintiff’s obligation to institute the action in a permissible forum.” Roland v. Branch Banking & Trust Corp., 149 F. Supp. 3d 61 , 67 (D.D.C. 2015) (internal quotation marks and citation omitted). A court must accept a plaintiff’s well-pled factual allegations as true, resolve any factual conflicts in plaintiff’s favor, and draw all reasonable inferences in favor of the plaintiff. Hunter v. Johanns, 517 F. Supp. 2d 340 , 342 (D.D.C. 2007); Davis v. Am. Soc’y of Civil Eng’rs, 290 F. Supp. 2d 116 , 121 (D.D.C. 2003). But 10 it need not accept a plaintiff’s legal conclusions as true. 2215 Fifth St. Assocs. v. U–Haul Int’l, Inc., 148 F. Supp. 2d 50 , 54 (D.D.C. 2001). B. Motion to Dismiss for Lack of Subject Matter Jurisdiction Federal courts are of limited jurisdiction and “may not exercise jurisdiction absent a statutory basis.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546 , 552 (2005). “Limits on subject-matter jurisdiction ‘keep the federal courts within the bounds the Constitution and Congress have prescribed,’ and those limits ‘must be policed by the courts on their own initiative.’” Watts v. SEC, 482 F.3d 501 , 505 (D.C. Cir. 2007) (quoting Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 , 583 (1999)). The law presumes that “a cause lies outside [the court’s] limited jurisdiction” unless the party asserting jurisdiction establishes otherwise. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 , 377 (1994) (citation omitted). Thus, plaintiffs bear the burden of establishing jurisdiction by a preponderance of the evidence. See Lujan v. Defenders of Wildlife, 504 U.S. 555 , 561 (1992); Shekoyan v. Sibley Int’l Corp., 217 F. Supp. 2d 59 , 63 (D.D.C. 2002). In evaluating a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), a court must “assume the truth of all material factual allegations in the complaint and ‘construe the complaint liberally, granting plaintiff[s] the benefit of all inferences that can be derived from the facts alleged.’” Am. Nat’l Ins. Co. v. FDIC, 642 F.3d 1137 , 1139 (D.C. Cir. 2011) (quoting Thomas v. Principi, 394 F.3d 970 , 972 (D.C. Cir. 2005)). But the court “need not accept factual inferences drawn by plaintiffs if those inferences are not supported by facts alleged in the complaint, nor must the Court accept [plaintiffs’] legal conclusions.” Disner v. United States, 888 F. Supp. 2d 83 , 87 (D.D.C. 2012) (quoting Speelman v. United States, 461 F. Supp. 2d 71 , 73 (D.D.C. 2006)). A motion to dismiss under 12(b)(1) “is 11 not limited to the allegations of the complaint.” Hohri v. United States, 782 F.2d 227 , 241 (D.C. Cir. 1986), vacated on other grounds, 482 U.S. 64 (1987). And “a court may consider such materials outside the pleadings as it deems appropriate to resolve the question [of] whether it has jurisdiction to hear the case.” Scolaro v. D.C. Bd. of Elections & Ethics, 104 F. Supp. 2d 18 , 22 (D.D.C. 2000) (citing, inter alia, Herbert v. Nat’l Acad. of Scis., 974 F.2d 192 , 197 (D.C. Cir. 1992)). C. Motion to Dismiss for Lack of Personal Jurisdiction A motion to dismiss under Federal Rule of Civil Procedure 12(b)(2) challenges the court’s personal jurisdiction. A plaintiff bears the burden of establishing a factual basis for the court’s exercise of personal jurisdiction over the defendants. Crane v. N.Y. Zoological Soc’y, 894 F.2d 454 , 456 (D.C. Cir. 1990). To meet this burden, a plaintiff must allege “specific acts connecting the defendant[s] with the forum,” Second Amend. Found. v. U.S. Conference of Mayors, 274 F.3d 521 , 524 (D.C. Cir. 2001), including a showing that “the procedural requirements of effective service of process are satisfied.” Gorman v. Ameritrade Holding Corp., 293 F.3d 506 , 514 (D.C. Cir. 2002). In evaluating whether a plaintiff has established personal jurisdiction, the court “may receive and weigh affidavits and other relevant matter[s] to assist in determining the jurisdictional facts.” Bigelow v. Garrett, 299 F. Supp. 3d 34 , 41 (D.D.C. 2018) (quotation marks and citations omitted). However, “when deciding personal jurisdiction without an evidentiary hearing[,] . . . the court must resolve factual disputes in favor of the plaintiff.” Livnat v. Palestinian Auth., 851 F.3d 45 , 57 (D.C. Cir. 2017). 12  III. DISCUSSION A. The New Jersey Defendants’ Motions to Sever and Transfer Kaul Claims The New Jersey Defendants move to sever Kaul’s claims from Feldman’s and to transfer the former to the District Court of New Jersey under Federal Rules of Civil Procedure 20(a) and 21. (Allstate Mot.; Omnibus Mot. at 1.) 13 1. Severance i. Legal Standard The court has the discretion to sever misjoined parties under Federal Rule of Civil Procedure 21 “to avoid prejudice to the parties or confusion to the jury.” Montgomery v. STG Int’l Inc., 532 F. Supp. 2d 29 , 35 (D.D.C. 2008). In determining whether a party is misjoined for purposes of Rule 21, courts apply the permissive joinder requirements of Federal Rule of Civil Procedure 20(a). Id. (citing Disparte v. Corp. Exec. Bd., 223 F.R.D. 7 , 12 (D.D.C. 2004)). Under that Rule, plaintiffs may be joined in one action only if: (1) their claims arise out of the “same transaction, occurrence, or series of transactions or occurrences;” and (2) “any question of law or fact common to all plaintiffs will arise in the action.” Fed. R. Civ. P. 20(a). 13 Although Kaul responded to the Allstate Motion, Plaintiffs did not respond to the omnibus motion. Pursuant to the court’s Orders from February 19, 2020, and June 25, 2020, it would be proper for this court to therefore treat these motions as conceded. (See ECF No. 84 (“Plaintiffs shall file their response no later than April 2, 2020. If the Plaintiffs do not respond by that date . . . , the court may treat the motion as conceded and sever/transfer the claims . . . .”); ECF No. 106 (resetting deadlines and admonishing that “if the Plaintiffs do not respond by [the new deadline] . . . , the court may treat the motion as conceded.”).) Plaintiffs have had ample opportunity to argue against transfer and have failed to do so. Nonetheless, the court will consider the merits of the motions to sever and transfer as to all the New Jersey Defendants. The arguments in the omnibus motion and those in the first motion to sever and transfer—to which plaintiffs have responded—are virtually identical. Moreover, the facts relevant to each of the defendants are sufficiently similar to warrant a single, unified disposition of the motions. (See Omnibus Motion at 1 n.2.) 13  To satisfy the first prong, the claims sought to be joined must be “logically related” to one another. Davidson v. D.C., 736 F. Supp. 2d 115 , 119 (D.D.C. 2010) (citing Mosley v. Gen. Motors Corp., 497 F.2d 1330 , 1333 (8th Cir.1974) (stating that “all ‘logically related’ events entitling a person to institute a legal action against another generally are regarded as comprising a transaction or occurrence”)); accord Disparte, 223 F.R.D. at 10 (citing Moore v. N.Y. Cotton Exch., 270 U.S. 593 , 610 (1926)). In order to satisfy the second prong of Rule 20(a), plaintiffs must show that there is “some common question of law or fact as to all of the plaintiffs’ claims.” Davidson, 736 F. Supp. 2d at 119–20. Each of these two prongs “are to be liberally construed in the interest of convenience and judicial economy” so as to “secure the just, speedy, and inexpensive determination” of the action. Davidson, 736 F. Supp. 2d at 119 (citation omitted). Although the rule is to be construed liberally, “it is well-settled that parties are misjoined when the preconditions of permissive joinder set forth in Rule 20(a) have not been satisfied.” Disparte, 223 F.R.D. at 12 (citation omitted). The court must remedy the misjoinder by severing “the claims brought by the improperly joined party.” Grant v. Salem, 226 F.R.D. 1 , 2 (D.D.C. 2004) (citing Brereton v. Comm’ns Satellite Corp., 116 F.R.D. 162 , 163 (D.D.C. 1987); Fed. R. Civ. R. 21). ii. Analysis The New Jersey Defendants contend that Kaul’s claims should be severed because “the Complaint fails to allege that any of Plaintiffs’ alleged injuries caused by [the purported] ‘scheme’ or ‘pattern’ arise out of any common transaction or occurrence,” as required by the first prong of Rule 20(a). (Omnibus Mot. at 11 (citing Compl. ¶¶ 249–251, 362); see also Allstate Br. at 9.) “All that each physician has alleged is that at different times and by different licensing bodies, their medical licenses were revoked. They have not alleged that anything happened to them at the same time, in the same place or by the same licensing body.” (ECF No. 134 at 3.) 14  Plaintiffs counter that the “illegal mechanism . . . of physician regulation perpetrated by all state medical boards” constitutes a “series of transactions/occurrences” “admitted to by defendant state medical boards.” (ECF No. 116, Pls. Severability Opp. at 3.) Plaintiffs further allege that “defendants, in concert and conspiracy with Defendant Federation of State Medical Boards, caused permanent injuries to the economic standing and reputations of Plaintiffs Kaul and Feldman, through the abuse of this illegal and identical series of transactions/occurrences.” (Pls. Severability Opp. at 3.) Plaintiffs fail to set forth any facts to connect the two administrative proceedings which form the basis of their separate claims—proceedings which occurred “during different time periods in different territorial jurisdictions” and at the hands of separate administrative bodies. (See Omnibus Mot. at 11; Allstate Mot. at 9; see also Compl ¶¶ 114, 243 (noting that Kaul’s medical license was revoked by the NJBME in 2014, while Feldman’s medical license was suspended by the LMB in 2016).) The fact that the state licensing board defendants are members of the Federation of State Medical Boards, without more, is not sufficient to fulfill the first prong of Rule 20(a), even if the alleged injuries are similar. “The flexibility inherent in the logical relationship test does not give the court license to disregard the ‘common transaction or occurrence’ requirement of Rule 20(a).” Davidson, 736 F. Supp. at 121 (finding that “the plaintiffs’ claims [were] improperly joined” where those claims arose “out of separate administrative proceedings” which occurred “on different dates” and involved different plaintiffs); see also Grant, 226 F.R.D. at 2 (finding that, because the events underlying plaintiffs’ claims “were performed over a period of fifteen months, under varying circumstances,” “the facts and circumstances of each plaintiff’s claim var[ied] so substantially” that they did not satisfy the transaction or occurrence requirement of Rule 20, despite a single defendant and 15 parallel legal theories). Accordingly, the court finds that Plaintiffs have not satisfied the “transaction or occurrence” requirement of Federal Rule of Civil Procedure 20(a) and are thus misjoined. 2. Transfer i. Legal Standard A plaintiff must sue “in the proper venue” to “ensure[ ] that a district with some interest in the dispute or nexus to the parties adjudicates the plaintiff’s claims.” Hamilton v. JPMorgan Chase Bank, 118 F. Supp. 3d 328 , 333 (D.D.C. 2015). Under Federal Rule of Civil Procedure 12(b)(3), “a defendant may, at the lawsuit’s outset, test whether the plaintiff ‘has brought the case in a venue that the law deems appropriate.’” Johns v. Newsmax Media, Inc., 887 F. Supp. 2d 90 , 96 (D.D.C. 2012) (quoting Modaressi v. Vedadi, 441 F. Supp. 2d 51 , 53 (D.D.C. 2006)). Venue is proper: (1) in a district where “any defendant resides, if all defendants are residents of the state in which the district is located”; (2) in a district in which “a substantial part” of the events giving rise to the suit occurred; or (3) if venue would not be proper in any district for either of those reasons, wherever the defendants are subject to personal jurisdiction. 28 U.S.C. § 1391 (b). “‘When venue is challenged, the court must determine whether the case falls within one of the three categories set out in § 1391(b). If it does, venue is proper,’ but, ‘if it does not, venue is improper, and the case must be dismissed or transferred under § 1406(a).’” King v. Caliber Home Loans, Inc., 210 F. Supp. 3d 130 , 133–34 (D.D.C. 2016) (alteration removed) (quoting Atl. Marine Const. Co. v. U.S. Dist. Ct. for W. Dist. of Tex., 571 U.S. 49 , 50 (2013)); see also 28 U.S.C. § 1404 (a) (providing that courts may transfer a civil case to a different venue “[f]or the convenience of [t]he parties and witnesses,” and “in the interest of justice”). If the court concludes that venue is improper, it must then decide whether to dismiss the action or to transfer the case to a district where it could have been brought. See Hamilton, 118 F. 16 Supp. 3d at 333 (citing 28 U.S.C. § 1406 (a)). “The Supreme Court has inferred a congressional purpose underlying section 1406(a) favoring the transfer of cases when procedural obstacles ‘impede an expeditious and orderly adjudication . . . on the merits.’” Sinclair v. Kleindienst, 711 F.2d 291 , 293–94 (D.C. Cir. 1983) (quoting Goldlawr, Inc. v. Heiman, 369 U.S. 463 , 466–67 (1962)). While “[d]ismissal, instead of transfer, is appropriate when the plaintiff’s claims suffer from significant substantive deficiencies,” whether to “dismiss or transfer the case is committed to the sound discretion of the district court.” Hamilton, 118 F. Supp. 3d at 333; see also Naartex Consulting Corp. v. Watt, 722 F.2d 779 , 789 (D.C. Cir. 1983). ii. Analysis The New Jersey Defendants aver that venue in this district is not proper under 28 U.S.C. § 1391 (b). They contend that: (1) “Section 1391(b)(1) does not apply here because not all of the defendants reside in the District of Columbia—in fact, nearly all of them reside elsewhere,” (Omnibus Mot. at 15; Allstate Br. at 14); (2) Section 1391(b)(2) likewise does not apply because “Plaintiffs have failed to allege that a substantial part of the events or omissions giving rise to their claims have any connection to the District of Columbia whatsoever,” (Omnibus Mot. at 15; Allstate Br. at 14); and (3) “Section 1391(b)(3) also does not apply because Kaul’s allegations are nothing more than a rehash of his many pending lawsuits in New Jersey,” and thus could have been appropriately brought in that district. (Omnibus Mot. at 15; Allstate Br. at 14.) Plaintiffs respond that “[t]he case is properly filed in the United States District Court for the District of Columbia, because many of the Defendants conduct their political and other business in the District of Columbia,” and the District of Columbia “was the main location in which the alleged schemes of racketeering were planned, and from which and through which they were executed, using the US mail and wires.” (Pls. Severability Opp. at 11, 13.) Plaintiffs further contend that venue in New Jersey would be improper because “the Defendants have 17 corrupted the United States District Court for the District of New Jersey and one of the Defendants is a judge in this court.” (Id. at 11.) The court is persuaded by the New Jersey Defendants’ arguments. In determining whether venue is proper under 28 U.S.C. § 1391 (b)(2), “federal courts engage in ‘a commonsense appraisal’ of ‘events having operative significance in the case.’” Exelon Generation Co. v. Grumbles, 380 F. Supp. 3d 1 , 11 (D.D.C. 2019) (quoting Lamont v. Haig, 590 F.2d 1124 , 1134 (D.C. Cir. 1978)). While “[t]his section does not require a plaintiff to bring suit in a district where every event that supports an element of the claim occurred,” it does require “a plaintiff to show that some considerable portion of the events occurred in their chosen forum.” Maysaroh v. Am. Arab Commc’ns & Translation Ctr., LLC, 51 F. Supp. 3d 88 , 93 (D.D.C. 2014). Plaintiffs argue that “[v]enue is appropriate in this District . . . because defendants reside or may be found in the District of Columbia and the alleged breaches occurred in the District of Columbia.” (Compl. ¶ 5.) This contention is demonstrably false. As Plaintiffs themselves note, the defendants in this suit reside all over the United States, “in Louisiana, Mississippi, California, New Jersey, Pennsylvania, Washington, D.C., Virginia, Maryland, Illinois and Kentucky.” (Pls. Severability Opp. at 13; see also Compl. ¶¶ 24–57.) Moreover, Plaintiffs’ Complaint alleges merely that meetings “for the purpose of ensuring the illegal elimination of Plaintiff Feldman from the minimally invasive spine surgery market” occurred “behind closed doors in California + Louisiana + Mississippi + Washington, D.C.” (Compl. ¶ 260.) This allegation does not support a finding that “events having operative significance in the case” occurred in the District of Columbia, and does not relate to Kaul’s claims at all. Plaintiffs introduce several new factual allegations in their opposition to the first motion to sever and transfer, stating that “the Defendants conduct their political and other business in the 18 District of Columbia, and their crimes were perpetrated across state lines using the US wires and mail;” that the revocation of Kaul’s New Jersey medical license “prevent[ed] Kaul from obtaining a license in any other state, including the District of Columbia;” and that the District of Columbia was the main location where the “schemes of racketeering were planned.” (Pls. Severability Opp. at 12–14.) These allegations, which appear nowhere in their Complaint, are not “well-pled,” see Sanchez-Mercedes v. Bureau of Prisons, 453 F. Supp. 3d 404 , 414 (D.D.C. 2020) (citation omitted) (“In considering a Rule 12(b)(3) motion, the court accepts the plaintiff’s well-pled factual allegations regarding venue as true . . . .”), and cannot be considered “substantial” in the face of a roughly 170-page Complaint which focused on events occurring in New Jersey, and which alleges no relevant events or occurrences in the District of Columbia. Cf. Maysaroh, LLC, 51 F. Supp. 3d at 93 (collecting cases in which venue was found improper where a negligible proportion of the plaintiffs’ overall allegations occurred in the District of Columbia). Moreover, a plaintiff may not amend a complaint by way of responsive brief. Smith v. Mayor, 191 F. Supp. 3d 114 , 116–17 (D.D.C. 2016), aff’d sub nom. Smith v. Mayor, D.C., No. 16-7109, 2017 WL 2193615 (D.C. Cir. May 19, 2017). The court thus cannot find that the allegations relating to the District of Columbia make up a substantial part of the events giving rise to Plaintiffs’ claims and venue in this district is therefore inappropriate under § 1391(b)(2). Conversely, many of the events and occurrences underlying Kaul’s claims did occur in New Jersey. Kaul was licensed to practice medicine in New Jersey, the adverse insurance judgments against him occurred in New Jersey, and his medical license was subsequently revoked in New Jersey. (Compl. ¶¶ 21, 81, 97, 109.) Moreover, many of the Defendants reside or are based in New Jersey, (Compl. ¶¶ 24–57), and conduct their business there. Venue under § 1391(b)(2) therefore would be appropriate in the District of New Jersey. 19  The other subsections of 28 U.S.C. § 1391 (b) likewise fail to support venue in this district. Under § 1391(b)(1), venue is not appropriate here because not all the Defendants reside in the District of Columbia. Furthermore, because venue in the District of New Jersey is appropriate under § 1391(b)(2), venue in this district is not appropriate under § 1391(b)(3), which only serves as a source of proper venue when “there is no district in which an action may otherwise be brought” in accordance with § 1391(b)(1) or § 1391(b)(2). When a court finds that venue is improper, “[t]he decision whether a transfer or a dismissal is in the interest of justice . . . rests within the sound discretion of the district court.” Naartex Consulting Corp., 722 F.2d at 789 . Here, there are already multiple related cases pending in the District of New Jersey, each involving overlapping allegations and actors. See supra Part 1.A.4. Moreover, New Jersey undoubtedly has a greater interest in resolving Kaul’s claims, which involve mostly New Jersey actors and events. Plaintiffs allege that the New Jersey Defendants seek severance and transfer because the District of New Jersey is “corrupted,” and, thus, “in the interests of justice the case must be litigated in the United States District Court for the District of Columbia.” (Pls. Severability Opp. at 1.) These unsupported allegations cannot be properly considered by the court. “[C]ourts have not considered judicial bias in conducting ends-of-justice analyses” relating to the transfer of an action to a proper venue. Crenshaw v. Antokol, 287 F. Supp. 2d 37 , 44 (D.D.C. 2003). And, to the extent that a plaintiff can show “such a high degree of favoritism or antagonism as to make fair judgment impossible,” he may move for recusal.14 Id. at 44–45 (quoting Liteky v. United 14 Two New Jersey District Court judges have already recused themselves in Kaul’s other actions. Judges Kevin McNulty and Brian Martinotti were not, as Plaintiffs represent, “disqualified” from Kaul’s prior cases. (See Pls. Severability Opp. at 14, 20.) Rather, Judge McNulty recused himself when Kaul sued Senator Charles Schumer, Judge McNulty’s brother- 20 States, 510 U.S. 540 , 555 (1994); then citing 28 U.S.C. §§ 144 (directing a district judge to recuse himself upon receipt of a sufficient affidavit alleging personal bias or prejudice), 455 (directing any federal judge to disqualify himself in any case where his impartiality might reasonably be questioned or where he has a personal bias or prejudice)). Therefore, instead of dismissing this action as to the New Jersey Defendants, the court will exercise its discretion and transfer the case to the District of New Jersey in the interest of justice. See 28 U.S.C. § 1406 (a) (“The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.”); Ellis-Smith v. Sec’y of the Army, 793 F. Supp. 2d 173 , 177 (D.D.C. 2011) (citing Goldlawr, Inc. v. Heiman, 369 U.S. 463 , 466–67 (1962)) (“Although the decision to transfer or dismiss is committed to the sound discretion of the district court, the interest of justice generally requires transferring a case to the appropriate judicial district in lieu of dismissal.”). B. Motions to Dismiss Feldman Claims Defendants MMB and CMB have each moved to dismiss Feldman’s claims under Federal Rule of Civil Procedure 12(b)(1), alleging lack of subject matter jurisdiction due to their Eleventh Amendment sovereign immunity from suit. Defendant Stanley has moved to dismiss Feldman’s claims for lack of personal jurisdiction due to insufficient process and insufficient service of process. in-law. (See Allstate Br. at 5 n.6.) Similarly Judge Martinotti recused himself from Kaul’s other pending cases when Kaul sued him in this case. (See Allstate Br. at 7 n.9.) 21  1. Motions to Dismiss for lack of Subject Matter Jurisdiction Due to Eleventh Amendment Sovereign Immunity i. Legal Standard The Eleventh Amendment prohibits federal courts from hearing suits brought by private citizens against state governments without the state’s consent. Hans v. Louisiana, 134 U.S. 1 , 15 (1890). Sovereign immunity applies not only to “actions in which a State is actually named as the defendant,” but also to actions “against state agents and state instrumentalities.” Regents of the Univ. of Cal. v. Doe, 519 U.S. 425 , 429 (1997); see also P.R. Ports Auth. v. Fed. Mar. Comm’n, 531 F.3d 868 , 872 (D.C. Cir. 2008). This bar is jurisdictional and precludes federal courts from entertaining suits against the state, “regardless of the nature of the relief sought.” Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89 , 100 (1984). “Whether an entity is an arm of the State for purposes of sovereign immunity under the U.S. Constitution is a question of federal law.” P.R. Ports Auth., 531 F.3d at 872 (citing Doe, 519 U.S. at 429 n.5). To determine whether an entity is an arm of the State for Eleventh Amendment sovereign immunity purposes, “the Supreme Court and [the D.C. Circuit] have generally focused on the ‘nature of the entity created by state law’ and whether the State ‘structured’ the entity to enjoy its immunity from suit.” P.R. Ports Auth., 531 F.3d at 873 (citations omitted). The D.C. Circuit has identified three relevant factors to consider in this inquiry: “(1) the State’s intent as to the status of the entity, including the functions performed by the entity; (2) the State’s control over the entity; and (3) the entity’s overall effects on the state treasury.” Id. “Under the three-factor test, an entity either is or is not an arm of the State: The status of an entity does not change from one case to the next based on the nature of the suit, the State’s financial responsibility in one case as compared to another, or other variable factors.” Id. 22  ii. Analysis 1. Mississippi State Board of Medical Examiners MMB argues that it is an arm of the state of Mississippi and thus immune from suit under the Eleventh Amendment. In response, Feldman first alleges that MMB’s immunity is limited by the Supreme Court’s decision in N.C. State Board of Dental Examiners v. FTC, 574 U.S. 494 (2015), in which the Court held that members of the state board of dental examiners were not entitled to Parker state-action immunity because they were “market participants” in the field they oversaw, and “did not receive active supervision by the State.” Id. at 504 .15 Feldman argues that MMB is likewise not entitled to such immunity, because it is not adequately supervised by the Governor. (See ECF No. 89, Pls. MMB Opp. at 2.) Second, Feldman argues that as a member of the FSMB, MMB “have aligned themselves and have been willing participants in an illegal interstate compact and have ceased to function as an independent state sovereign entity.” (Pls. MMB Opp. at 2–3 (emphasis in original).) Third, Feldman contends that MMB is “self-funded” by fines and fees, and not from the state treasury, and that the “Governor emphatically admits that the executive branch has no supervisory function over the Medical Board.” (Pls. MMB Opp. at 3–4.) Finally, Feldman reiterates his constitutional Due Process, Excessive Fines, and Compact Clause claims against MMB, and alleges a new 4th Amendment 15 Parker v. Brown, 317 U.S. 341 (1943), established that state and municipal authorities are immune from federal antitrust lawsuits for actions taken pursuant to a clearly expressed state policy that, when legislated, had foreseeable anticompetitive effects. Unlike Eleventh Amendment sovereign immunity, this doctrine may be applied to municipal as well as local authorities and has even been extended in some circumstances to cover non-state entities. See California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980); FTC v. Phoebe Putney Health Sys., Inc., 568 U.S. 216 (2013). However, unlike Eleventh Amendment sovereign immunity, Parker immunity requires that an actor be carrying out a clearly articulated state policy and that actor be “actively supervised by the State.” N.C. State Bd. of Dental Examiners, 574 U.S. at 494. Parker state-action immunity is not at issue here. 23 violation, arguing that these constitutional claims justify this court’s exercise of jurisdiction. (See Pls. MMB Opp. at 5–7.) Under the D.C. Circuit’s three-factor test, the court finds that the MMB is an arm of the state for purposes of Eleventh Amendment sovereign immunity. Plaintiffs do not dispute that “MMB was created by Mississippi statute and exists under that authority as set out in Miss. Code Ann. § 73-43-1 et seq.” (MMB Br. at 8.) See also P.R. Ports Auth., 531 F.3d at 873 (noting that the first factor to be considered is “the State’s intent as to the status of the entity, including the functions performed”). Under its enacting statute, the MMB is vested with a wide array of powers and responsibilities, including setting policies and professional standards regarding the practice of medicine, considering applications for licensure, “[i]nvestigating alleged violations of the medical practice act,” “[c]onducting hearings on disciplinary matters involving violations of state and federal law,” considering petitions for termination of medical licenses, and promulgating “reasonable rules and regulations.” Miss. Code Ann. § 73-43-11 . “Each member of the state board of medical licensure [must] take the oath prescribed by Section 268 of the Mississippi Constitution of 1890 and file a certificate thereof in the office of the secretary of state.” Miss. Code Ann. § 73-43-9 . Although the statute does not explicitly set forth MMB’s purpose, it is clear that it was created to carry out an essential governmental function—oversight of the state’s medical profession—and that this function is one “in which the state has a substantial interest due to its concern with the general welfare of its citizens.” See Williams v. Morgan, 710 F. Supp. 1080 (S.D. Miss. 1989) (finding the MMB to be immune from suit under Eleventh Amendment sovereign immunity using factors articulated by the Fifth Circuit); cf. Mothe v. La. State Bd. of Embalmers & Funeral Dirs., No. 24 19-cv-9073, 2019 WL 3753698 , at *4 (E.D. La. Aug. 8, 2019) (finding that statewide, as opposed to local, regulatory responsibilities weigh in favor of sovereign immunity). Second, Mississippi retains significant control over the MMB. See P.R. Ports Auth., 531 F.3d at 873 (noting that the second factor is “the State’s control over the entity”). The physicians on the MMB are appointed by the governor “with the advice and consent of the senate.” Miss. Code Ann. § 73-43-3 ; see also P.R. Ports Authority, 531 F.3d at 877 (“In considering this factor, we look primarily at how directors and officers . . . are appointed.”). Finally, the Board is not financially autonomous. See P.R. Ports Auth., 531 F.3d at 873 (noting that the third factor is “the entity’s overall effects on the state treasury”). Although the MMB collects licensing fees and fines, its financial decisions are “subject to the boundaries of the state budget, the controlling powers of the State Fiscal Management Board, the concerns of the state treasurer, and the review of the state auditor.” Williams, 710 F. Supp. at 1084 (citations omitted). The court thus finds that the factors outlined by the D.C. Circuit each weigh in favor of a finding that the MMB is an arm of the state entitled to Eleventh Amendment sovereign immunity. Feldman’s arguments to the contrary are unpersuasive. The Supreme Court’s decision in N.C. State Board of Dental Examiners, 574 U.S. 494 —in which the Court held that the state dental board members were not entitled to Parker state-action immunity—is inapposite. As MMB notes, it “has asserted only one basis for its dismissal in this case—Eleventh Amendment immunity, not Parker state immunity.” (ECF No. 96, MMB Reply at 2.) Although the D.C. Circuit has not had occasion to directly compare these forms of immunity, other Circuits have found that “case law implicitly recognizes that sovereign immunity and Parker immunity are separate and independent sources of immunity from private federal antitrust claims.” Rodgers v. Louisiana Bd. of Nursing, 665 F. App’x 326, 329 (5th Cir. 2016) (citations omitted); see also 25 Goldfarb v. Va. State Bar, 421 U.S. 773 , 791–92, 792 n.22 (1975) (holding that the Virginia State Bar was not entitled to Parker state-action immunity, but noting that the issue of Eleventh Amendment sovereign immunity was to be decided by the district court on remand). Feldman’s argument that MMB has violated the Compact Clause is likewise unavailing. The Supreme Court has found that the Compact Clause, though facially applicable to all interstate Compacts, only applies to compacts infringing on a power that is reserved to the federal government. See Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. 30 , 40 n.10 (1994) (“If the creation of a bistate entity does not implicate federal concerns, . . . federal consent is not required.” (citing Virginia v. Tennessee, 148 U.S. 503 , 517–520 (1893))). Establishment and enforcement of “standards of conduct . . . relative to [] health” through medical licensure is not a federal concern but is instead “a vital part of a state’s police power.” Barsky v. Bd. of Regents of Univ., 347 U.S. 442 , 449 (1954). More fundamentally, although an entity created pursuant to an interstate compact will generally not be entitled to Eleventh Amendment immunity, the member states themselves do not revoke their sovereign immunity simply by participating in such a compact. See Hess, 513 U.S. at 39–44. Feldman’s contention that the MMB is “self-funded” by fines and fees, rather than receiving funding from the state treasury, and that the “Governor emphatically admits that the executive branch has no supervisory function,” is contradicted by the MMB’s enacting statute, along with other Mississippi statutes that place fiscal control with the state Fiscal Management Board, the state treasurer, and the state auditor. See Williams, 710 F. Supp. at 1084 (citations omitted). Whether the Mississippi Governor’s Office chooses to interfere directly with MMB proceedings does not undermine this fiscal control, or the control exercised through the Governor’s appointment of MMB’s members. See Miss. Code. Ann. § 73-43-3 26  Finally, Feldman’s use of constitutional claims to justify the court’s jurisdiction in this matter is improper. (See ECF No. 89 at 5–7.) The nature of a suit against a state or an arm thereof should not be considered in assessing whether Eleventh Amendment immunity applies. “[A]n entity either is or is not an arm of the State: The status of an entity does not change from one case to the next based on the nature of the suit . . . or other variable factors.” P.R. Ports Auth., 531 F.3d at 873 ; see also White v. Wash. Metro. Area Transit Auth., 303 F. Supp. 3d 5 , 10 (D.D.C. 2018) (“[S]uits against a state (or an arm thereof) . . . are barred, regardless of the type of relief sought.”). The MMB is an arm of the state entitled to Eleventh amendment sovereign immunity, which is a bar to this court’s jurisdiction, and Plaintiffs’ claims against MMB must therefore be dismissed under Rule 12(b)(1). 2. California State Board of Medical Examiners Defendant CMB similarly argues that it is an arm of the state of California and thus immune from suit under the Eleventh Amendment, noting that federal courts have repeatedly so found. See, e.g., Forster v. Cty. of Santa Barbara, 896 F.2d 1146 , 1149 (9th Cir. 1990); Bonner v. Med. Bd. of Cal., No. 2:17-cv-00445-KJM-DB, 2018 WL 4699996 , at *5–6 (E.D. Cal. Sept. 30, 2018); Mir v. Med. Bd. of Cal., No. 12-cv-2340-GPC-DHB, 2013 WL 1932935 , at *4–5 (S.D. Cal. May 8, 2013), aff’d, 552 F. App’x. 723 (9th Cir. 2014); Yoonessi v. Albany Med. Ctr., 352 F. Supp. 2d 1096 , 1104 (C.D. Cal. 2005). It contends that the D.C. Circuit’s three-factor test warrants the same outcome. Feldman argues that “this court has subject-matter jurisdiction because the Board has shed its cloak of immunity by enforcing an unconstitutional statute.” (ECF No. 97, Pls. CMB Opp. at 5.) Citing Ex parte Young, 209 U.S. 123 (1908), he contends that “[o]ne well established nuance (or exception) to the principle of sovereign immunity under the Eleventh Amendment is a 27 suit that challenges the constitutionality of a state official’s action in enforcing an unconstitutional state law.” (Pls. CMB Opp. at 5.) As in his opposition to MMB’s Motion, Feldman contends that “the Board has entered an unconstitutional interstate compact,” (Pls. CMB Opp. at 5–6), and thus this suit falls within an exception to Eleventh Amendment sovereign immunity. As with MMB, under the D.C. Circuit’s three-factor test, the court finds that the CMB is an arm of the state for purposes of Eleventh Amendment sovereign immunity. First, the CMB was created by California statute as an entity within the Department of Consumer Affairs. Cal. Bus. & Prof. Code § 2001 , et. seq. As a “board” within this Department, CMB is defined by California law to be part of the “State,” specifically as an entity within the executive branch. See Cal. Gov’t Code §§ 900.6, 11000(a). CMB is statutorily tasked with the “[p]rotection of the public” in its exercise of “its licensing, regulatory, and disciplinary functions.” See Cal. Bus. & Prof. Code §§ 2001.1 , 2004. Under its enacting statute, an “investigation” by CMB is “deemed to refer to a joint investigation conducted by employees of the [California] Department of Justice and the [California] Health Quality Investigation Unit under the vertical enforcement and prosecution model.” Cal. Bus. & Prof. Code § 2006 . CMB is subject to laws that apply to California state agencies generally, such as the California Administrative Procedure Act and the Bagley-Keene Open Meeting Act. Cal. Bus. & Prof. Code §§ 2014 , 2018. There is thus overwhelming evidence that in creating the CMB, California intended it to serve as an arm of the State. This finding is further bolstered by the second and third factors of the D.C. Circuit test. California exercises substantial control over the CMB, which has fifteen members, seven of whom are non-physicians or “public” members. Cal. Bus. & Prof. Code § 2001 (a). The 28 governor appoints thirteen of the fifteen total members, each of whom must then be confirmed by the state senate. Cal. Bus. & Prof. Code § 2001 (b). The California Senate Committee on Rules and the Speaker of the California Assembly each appoint one of the remaining two members. Id. And CMB’s operations are closely tied to the state treasury; all payments to CMB are required by statute to go into a contingent fund within the state treasury, which may be used by CMB only upon appropriation by the legislature. Cal. Bus. & Prof. Code § 2445 . California pays for judgments against CMB as a state agency. Cal. Gov’t Code § 965; see also P.R. Ports Auth., 531 F.3d at 878 (“[T]he relevant issue is a State’s overall responsibility for funding the entity or paying the entity’s debts or judgments.”). The court thus finds that the factors outlined by the D.C. Circuit each weigh in favor of a finding that the CMB is an arm of the state entitled to Eleventh amendment sovereign immunity. Feldman’s invocation of the Ex parte Young exception is inapposite and does not impact the court’s finding. Ex parte Young provides that, while “suits against state officials seeking prospective relief for violations of federal law may be permissible in federal court, suits against a state (or arm thereof) in its own right are barred, regardless of the type of relief sought.” White, 303 F. Supp. at 10 (citing, inter alia, Ex Parte Young, 209 U.S. at 155–57; Seminole Tribe of Florida v. Florida, 517 U.S. 44 , 58 (1996)); see also Vann v. Kempthorne, 534 F.3d 741 , 749 (D.C. Cir. 2008) (“The basic doctrine of Ex parte Young can be simply stated. A federal court is not barred by the Eleventh Amendment from enjoining state officers from acting unconstitutionally, either because their action is alleged to violate the Constitution directly or because it is contrary to a federal statute or regulation that is the supreme law of the land.” (citation omitted)). CMB is an arm of the state, and Plaintiffs have not sued a state officer, but CMB as an entity. Accordingly, Plaintiffs’ claims against CMB are barred by Eleventh 29 Amendment immunity, and Plaintiffs’ claims against it must therefore be dismissed for lack of subject matter jurisdiction.16 2. Stanley Motion to Dismiss for Lack of Personal Jurisdiction Due to Insufficient Service of Process i. Legal Standard Federal courts cannot assert personal jurisdiction over a defendant “unless the procedural requirements of effective service of process are satisfied.” Gorman v. Ameritrade Holding Corp., 293 F.3d 506 , 514 (D.C. Cir. 2002). Under Federal Rule of Civil Procedure 4(c), a “summons must be served with a copy of the complaint” within the time allowed by Rule 4(m), which states: If a defendant is not served within 90 days after the complaint is filed, the court— on motion or on its own after notice to the plaintiff—must dismiss the action without prejudice against that defendant or order that service be made within a specified time. But if the plaintiff shows good cause for the failure, the court must extend the time for service for an appropriate period. Fed. R. Civ. P. 4 (emphasis added). Rule 4 also sets forth the method for effectuating service. Under Rule 4(e), service of process on an individual within the United States must be made: (1) in accordance with the law “for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made”; (2) by “delivering a copy of the summons and of the complaint to the individual personally”; (3) by “leaving a copy of each at the individual’s dwelling or usual place of abode”; or (4) by “delivering a copy of each to an agent authorized by appointment or by law to receive service.” 16 CMB also moves for judicial notice in support of its pending motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (See ECF No. 69.) CMB asks the court to take notice of five decisions and orders documenting the outcome of administrative proceedings relating to the revocation of Kaul’s medical license before CMB, LMB, and NJBME. (See id.) As the claims against CMB will be dismissed on Eleventh Amendment immunity grounds under Rule 12(b)(1), this motion will be denied as moot. 30 Fed. R. Civ. P. 4(e). A plaintiff bears the burden of establishing either proper service of process, see Light v. Wolf, 816 F.2d 746 , 751 (D.C. Cir. 1987), or “valid reason for delay” warranting an extension of time to effect service. Mann v. Castiel, 681 F.3d 368 , 375 (D.C. Cir. 2012) (internal quotation marks and citation omitted). If a plaintiff fails to show good cause for failing to meet the service deadline, “the court has a choice between dismissing the suit and giving the plaintiff more time” to properly effect service. Battle v. District of Columbia, 21 F. Supp. 3d 42 , 44–45 (D.D.C. 2014) (collecting cases). However, “dismissal of a case pursuant to Rule 4(m) is appropriate when the plaintiff’s failure to effect proper service is the result of inadvertence, oversight, or neglect, and dismissal leaves the plaintiff in the same position as if the action had never been filed.” Mann, 681 F.3d at 376 (internal quotation marks and citations omitted). ii. Analysis Stanley, an attorney in private practice in New Orleans, alleges several defects in Plaintiffs’ service. He states that, “[r]ather than serving Stanley personally or at his usual place of abode, plaintiffs sent a copy of the Complaint to Stanley’s law office, where it was delivered to an employee of his law firm,” (Stanley Br. at 5 (citing ECF No. 23-2, Kennedy Aff. ¶ 4)), which he claims is not permitted under the Federal Rules of Civil Procedure or the local rules of either the District of Columbia or Louisiana. (See Stanley Br. at 5 (citing Fed. R. Civ. P. 4; D.C. Sup. Ct. R. Civ. P. 4(e); La. C. Civ. P. arts. 1231, 1232, 1234).) Stanley also claims that Plaintiffs sent only the complaint, rather than serving the summons and complaint together. (Stanley Br. at 5.) Feldman responds that Stanley’s motion was premature, and that proof of service in the form of the process server’s sworn affidavit has since been filed, “attesting to a true and correct copy of summons in a civil action on December 11, 2019.” (ECF No. 60, Pl. Stanley Opp. at 1 31 (internal quotation marks omitted) (emphasis in original).) Feldman further contends that the summons and complaint were served on Stanley’s “authorized employee Brittany Kennedy,” who “admitted receiving the complaint on December 11, 2019 at Stanley’s law office.” (Id. at 1–2.) He cites Louisiana Code of Civil Procedure Article 1235 in support of the proposition that service of process does “not require service at home, but allows service upon a legal secretary or assistant.” (Id. at 3.) Finally, Feldman notes that, even if initial service was insufficient, “a copy of this response has been sent to Stanley’s email address at his law firm . . . so he already has a copy of the summons,” and argues that “[s]ubstituted service by . . . email . . . can be made consistent with due process and Rule 4.” (Id. at 4.) Stanley disputes Feldman’s representation that the summons was served on Kennedy, (ECF No. 78, Stanley Reply at 1–2 (citing Kennedy Aff. ¶ 6)), but notes that even if that were true, it would not constitute proper service. Stanley further contends that Feldman’s reliance on Louisiana Code of Civil Procedure Article 1235 is improper, as that provision relates to service upon a party’s legal representative, rather than service on an attorney in their capacity as a defendant. (Id. at 2.) Stanley further claims that although Feldman purports to have served Stanley “on January 22, 2020 by emailing a copy of the summons and proof of service,” this manner of service is not authorized by law, any such alleged service was not within the 90-day time limit set by Rule 4, and, regardless, Stanley never received the email. (Stanley Reply at 3 (citing ECF No. 78-1, Stanley Aff. ¶ 4).) The court is persuaded by Stanley’s argument that Plaintiffs have failed to satisfy the procedural requirements for proper service of process. Plaintiffs have not alleged that they served Stanley personally or that they left, or caused their agent to leave, a copy of the summons and complaint at Stanley’s home, and Stanley did not authorize any other individual to accept 32 service on his behalf. See Fed. R. Civ. P. 4(e). (See also Stanley Aff. ¶ 3.) Moreover, the District of Columbia rules for service of process on an individual within the United States mirror the requirements of the Federal Rules, but for the addition of service of process by registered mail or by first class mail with notice and acknowledgment, neither of which were attempted here. See D.C. Sup. Ct. R. Civ. P. 4(c), 4(e). Thus, Plaintiffs have failed to comply with either the federal or D.C. procedural requirements for adequate service of process. Moreover, neither service on a secretary at a defendant’s place of business, nor service via email are permitted under Louisiana law. See La. Code Civ. P. arts. 1231, 1232, 1234. Rather, service of process on an individual “may be either personal or domiciliary.” La. Code Civ. P. art. 1231. Despite Feldman’s contention to the contrary, the fact that Stanley is an attorney by profession does not alter this analysis. See Jefferson Cmty. Health Care Ctr., Inc. v. Roby, 180 So. 3d 585 , 587–88 (La. App. 5th Cir. 2015) (“Service of citation or other process may be either personal or domiciliary. . . . In order for this initial service of the petition at [defendant attorney]’s office to have been valid, it must have been effected on him personally because he is a party, not counsel of record.” (citations omitted)); cf. La. Code. Civ. P. art. 1235(B) (“Service on an attorney, as a representative of a client, is proper when the attorney’s secretary is served in the attorney’s office.” (emphasis added)). Feldman argues that the court should permit the alleged email to Stanley to serve as “substitute service” in lieu of service under the Federal and state rules. (See Pl. Serv. Opp. at 4– 5.) Substitute service is not appropriate here. Each of the cases upon which Feldman relies involved extraordinary extenuating circumstances and only permitted substitute service upon motion to the court. See, e.g. Jacob v. Roberts, 223 U.S. 261 , 267 (1992) (describing extensive efforts to locate and serve defendants outlined by affidavit in support of substitute service before 33 trial court authorized service by publication); Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 , 317 (1950) (approving substitute service upon defendants “missing or unknown,” “whose interests or whereabouts could not with due diligence be ascertained”). Furthermore, several of the cases Feldman proffers involved defendants located outside of the United States, for whom Rule 4 explicitly provides for alternative means of service “as the court orders.” See Fed. R. Civ. P. 4(f).17 No similarly extenuating circumstances exist here, nor does the record indicate any difficulty in locating the defendant for personal or domiciliary service, nor even any effort on the part of Plaintiffs to do so. Thus, the court need not address the parties’ factual dispute regarding whether the summons itself was included in the materials Plaintiffs claim to have served—the manner of service was ineffective in either case. Plaintiffs have not requested additional time in which to properly serve Stanley, and the court does not find that such leniency is warranted. Plaintiffs filed their Complaint on October 1, 2019. Later that same month, the court issued an Order advising Plaintiffs of their “responsibility to comply with this court’s Local Civil Rules, as well as the Federal Rules of Civil Procedure” and specifically noting that this included “Rule 4 which requires service upon 17 See, e.g., Rio Properties, Inc. vv. Rio Int. Interlink, 284 F.3d 1007 (9th Cir. 2002) (noting that “service [on an international defendant] under Rule 4(f)(3) must be (1) directed by the court; and (2) not prohibited by international agreement”); Bank Julius Baer & Co. Ltd. v. Wikileaks, No. 08-cv-00824, 2008 WL 413737 (N.D. Cal. Feb. 13, 2008) (granting request for alternate service where defendant was foreign and where plaintiffs presented evidence that a physical address could not be located after due effort); BP Products North America, Inc. v. Dagra, 236 F.R.D. 270 (E.D. Va. 2006) (finding that “service by publication to a defendant in a foreign country is an acceptable alternative means under 4(f)(3), so long as diligent attempts have been made to locate the defendant and serve process by traditional means”); Juniper Networks, Inc. v. Bahattab, No. 07-cv-1771, 2008 WL 250584 (D.D.C. Jan. 30, 2008) (finding that where “Defendant [was] a resident of Saudi Arabia” and “Plaintiff has attempted, without success, to serve the defendant via mail and personal service,” an alternative means of service was warranted). 34 each defendant within 90 days after filing the complaint.” (Pro Se Pl. Order at 1.) The Order further noted that failure to comply with the court’s orders or with the Federal Rules of Civil Procedure “may result in sanctions, up to and including dismissal of this action.” (Id. at 2 (emphasis omitted).) Although they are proceeding pro se, Plaintiffs are highly educated and experienced in utilizing the court system. Cf. Mann, 681 F.3d at 377 (finding that the latitude the court “typically affords pro se litigants to correct defects in service of process was unwarranted” where “the two pro se plaintiffs had been notified of the requirements” of Rule 4 and were not “typical, unsophisticated pro se litigants” (internal quotation marks omitted)). Plaintiffs have had ample time since they filed their Complaint to request an extension from this court in order to properly serve Stanley and have been on notice at least since Stanley’s motion was filed on January 3 of this year that their service might be defective, yet have not sought to remedy it. “[A] plaintiff’s pro se status does not constitute a license for a plaintiff filing pro se [sic] to ignore the Federal Rules of Civil Procedure or to disregard completely court orders.” Garlington v. D.C. Water & Sewer Auth., 62 F. Supp. 3d 23 , 27 (D.D.C. 2014) (internal citations and quotation marks omitted). This court will therefore dismiss the claims against Stanley for insufficient service of process. 35  IV. CONCLUSION For the foregoing reasons, the court will GRANT the New Jersey Defendants’ motions to sever and transfer, (ECF Nos. 47 & 82), and will therefore DENY without prejudice the pending motions to dismiss by the New Jersey Defendants. (ECF Nos. 47, 67, 82, & 112.) The court will also GRANT the other motions to dismiss, (ECF Nos. 23, 68, & 70), and will DENY as moot the request for judicial notice, (ECF No. 69), as moot. A corresponding order is forthcoming. Date: November 30, 2020 Tanya S. Chutkan TANYA S. CHUTKAN United States District Judge 36

2020-12-01 08:00:27.442491+00

http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2020/D11-30/C:19-2254:J:Scudder:aut:T:fnOp:N:2620480:S:0

In the United States Court of Appeals For the Seventh Circuit ____________________ No. 19-2254 UNITED STATES OF AMERICA, Plaintiff-Appellee, v. TRAVIS J. BARRETT, Defendant-Appellant. ____________________ Appeal from the United States District Court for the Northern District of Indiana, Hammond Division. No. 2:17-cr-00001 — Joseph S. Van Bokkelen, Judge. ____________________ ARGUED OCTOBER 6, 2020 — DECIDED NOVEMBER 30, 2020 ____________________ Before WOOD, BRENNAN, and SCUDDER, Circuit Judges. SCUDDER, Circuit Judge. In United States v. Flores, we ad- dressed ambiguity in our case law by announcing a clear and precise rule for resolving the all-too-common circumstance of a criminal defendant contending for the first time on appeal that a condition of supervised release is unconstitutionally vague, despite having received notice of all proposed condi- tions before sentencing and then availing himself of the op- portunity to object to other conditions. We held such a course 2 No. 19-2254 of action constitutes waiver, rendering the challenge unre- viewable on appeal. This principle requires us to affirm Travis Barrett’s sentence here. I In 2016 federal authorities found Barrett with nearly 15,000 images and 2,450 videos of child pornography. A search of his computer also turned up a “Pedophile’s Hand- book.” Barrett responded to the ensuing federal charges by pleading guilty to possessing child pornography. He did so pursuant to a plea agreement with a provision waiving any appellate challenge “on any ground” to “all components” of his sentence. Barrett confirmed that he understood the waiver during his plea colloquy. The district court sentenced Barrett to 97 months’ imprisonment followed by 10 years of super- vised release. Barrett now contends that the district court violated his First Amendment rights by imposing a condition of super- vised release that will prevent him from viewing any material depicting “sexually explicit conduct,” defined in 18 U.S.C. § 2256 (2) to include adult pornography. But Barrett never raised this challenge at sentencing, despite having a full and fair chance to do so. How this happened is worth explaining, for we have seen this exact course of conduct many times in recent years and have sought to bring its recurrence to an end. Barrett confirmed at sentencing that he had not only re- ceived advance notice of all 34 proposed conditions of super- vised release, but also discussed them with his counsel. He waived a public reading of each condition. From there the dis- trict court invited any objections, and Barrett responded with several. The objections resulted in a colloquy with the district No. 19-2254 3 court and ended with rulings on each challenged condition. The process, in short, worked as designed: Barrett raised ob- jections and explained his positions, the government re- sponded with its views, and the district court ruled on the challenges one at a time. The district judge even took care to invite further challenges to prevent Barrett from waiving any lingering objection. At no point during or in advance of sentencing, however, did Barrett or his counsel utter a word about Condition 31. Perhaps foregoing an objection was an oversight by Barrett and his counsel. Mistakes happen. Or perhaps passing on the objection reflected sound strategy, for it is easy to see why a defendant standing before a district court for sentencing on a sexual offense against children would find it unwise to ex- press future interest in viewing adult pornography. Whatever the explanation, the record is clear: Barrett expressed no res- ervation with, and asked no questions about, Condition 31. In these circumstances, and separate and apart from the broad appellate waiver he agreed to in his plea agreement, Barrett runs headlong into the rule we announced in United States v. Flores: a waiver of an objection to a condition of su- pervised release occurs “when the defendant has notice of the proposed conditions, a meaningful opportunity to object, and she asserts (through counsel or directly) that she does not ob- ject to the proposed conditions, waives reading of those con- ditions and their justifications, challenges certain conditions but not the one(s) challenged on appeal, or otherwise evi- dences an intentional or strategic decision not to object.” 929 F.3d 443 , 450 (7th Cir. 2019). Every condition identified in Flores is present here, and that reality forecloses our review of Barrett’s belated challenge to Condition 31. 4 No. 19-2254 That Barrett contests Condition 31 in the name of the First Amendment is of no moment. Pointing to United States v. Ad- kins, 743 F.3d 176 (7th Cir. 2014), he argues that we have per- mitted challenges to conditions that touch on First Amend- ment rights, even where those challenges would be otherwise waived. Barrett misunderstands our holding. We do not read Adkins as creating a general, open-ended First Amendment exception to our waiver doctrine, and certainly not after our clarifying decision in Flores. We have since underscored that Flores “was not a mistaken fluke—it is controlling law.” United States v. Anderson, 948 F.3d 910 , 912 (7th Cir. 2020). Whatever remains of any First Amendment exception pos- ited by Adkins is a question we save for another day. What is plain beyond debate here is that Barrett waived his challenge to Condition 31 by not presenting it to the district court. Make no mistake about our holding. In no way are we say- ing that criminal defendants cannot challenge conditions of supervised release as unconstitutionally vague. They surely can (and do), and our doors remain open to considering such challenges if defendants take care to present the issue to the district court in the first instance. II We close by responding to Barrett’s assignment of fault to his counsel for failing to challenge Condition 31 before or dur- ing sentencing. Barrett notes that at one point his counsel could not answer a question from the court because he was “still in shock” at the 97-month sentence. This claim sounds in ineffective assistance of counsel—a claim Barrett’s plea agreement authorizes him to pursue under 28 U.S.C. § 2255 should he wish to do so. See United States v. Cates, 950 F.3d No. 19-2254 5 453, 457 (7th Cir. 2020). We have repeatedly reminded crimi- nal defendants that collateral review, not direct appeal, is far and away the proper and best channel for raising an ineffec- tive assistance of counsel claim. See, e.g., id. at 456–57 (collect- ing cases emphasizing the same point). For these reasons, we AFFIRM.

2021-03-18 20:02:22.692535+00

http://www.courts.ca.gov/opinions/documents/A153582.PDF

Filed 2/18/21; Modified and Certified for Pub. 3/18/21 (order attached) IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE JOHN D. SWEENEY et al., Plaintiffs and Respondents, A153582 v. SAN FRANCISCO BAY (Solano County CONSERVATION AND Super. Ct. No. FCS048136) DEVELOPMENT COMMISSION et al., Defendants and Appellants. This is the first of three companion cases concerning Point Buckler (the Site), a 39-acre tract located in the Suisun Marsh, which John Sweeney purchased and subsequently transferred to Point Buckler Club, LLC (collectively Respondents).1 For months, Respondents undertook various projects at the Site, converting it from tidal marsh to a mostly dry island, and subsequently marketed it as a kiteboarding recreational area. In this case, the San Francisco Bay Conservation and Development Commission (BCDC or Commission) issued an order to Respondents, directing them to cease and 1 The other two companion cases (A153583 & A153585) concern actions taken against Respondents by the California Regional Water Quality Control Board, San Francisco Bay Region. We address the issues raised in those appeals in a separate decision also filed today. 1 desist from placing fill within the Site and from engaging in any development activities without obtaining the necessary marsh development permit. BCDC’s order assessed Respondents a civil penalty of $772,000 for violations of the McAteer-Petris Act and the Suisun Marsh Preservation Act. Respondents successfully challenged BCDC’s order in a writ proceeding which set it aside in its entirety. We reverse. BACKGROUND San Francisco Bay’s wetlands “not only serve as habitat for fish, fowl and a rich abundance of animal wildlife but also enhance water quality by absorbing and filtering pollutants, reduce the destructiveness of floods by slowing their flow, increase water supply by recharging aquifers, prevent seawater intrusion by acting as a freshwater barrier, and control erosion by preventing soil and silt from moving downstream toward the ocean. The bay and delta, especially Suisun Marsh, contain the state’s largest expanse of wetlands and yet they constitute only a fraction of the approximately 5 million acres that originally existed in California. Some 450,000 acres remain in the state, reflecting a loss of more than 90 percent, the greatest decline of wetlands in the nation.” (Hundley, The Great Thirst, Californians and Water: A History, University of California Press, Revised Edition (2001) p. 399.) The Site is an approximately 39-acre tract located in Suisun Marsh at the south end of Grizzly Bay. In response to broad public interest in the San Francisco Bay as a unique and valuable resource, in 1965, the Legislature enacted the McAteer- Petris Act (Gov. Code, § 66600–66694) in order “to create a politically- responsible, democratic process by which the San Francisco Bay and its shoreline can be analyzed, planned, and regulated as a unit.” (Gov. Code, § 2 66600.) The law created BCDC, a 27-member entity, with jurisdiction over the waters of San Francisco Bay and the surrounding shoreline, as well as portions of other waterways and uplands, including the Suisun Marsh. (Gov. Code, § 66620.) BCDC is empowered to issue or deny permits for any proposed project that involves placing fill, extracting materials or making any substantial change in use of any water, land or structure within the area of BCDC’s jurisdiction. (Gov. Code, §§ 66620, 66604.) BCDC also holds the power to order a person to cease and desist when after a public hearing it determines that a person has undertaken, or is threatening to undertake, activities that require a permit without securing one. (Gov. Code, § 66637.) In 1977, the Legislature enacted the Suisun Marsh Preservation Act (Preservation Act). (Pub. Resources Code, §§ 29000–29612.) The Preservation Act protects the valuable natural resources within the Marsh and invests BCDC with the ultimate authority over its implementation. (Pub. Resources Code, § 29000 et seq.; see also (Sustainability, Parks, Recycling & Wildlife Legal Defense Fund v. San Francisco Bay Conservation and Development Commission (2014) 226 Cal.App.4th 905 , 915–916 (Sustainability).) Pursuant to the Preservation Act, BCDC adopted the Suisun Marsh Protection Plan (Protection Plan). (Pub. Resources Code, § 29113, subd. (a).) It also certified the “local protection program,” which refers to “those provisions of general or specific plans; ordinances; zoning district maps; land use regulations, procedures, or controls; or any other programs, procedures, standards, or controls that are adopted, undertaken, or carried out by local governments, districts, or the Solano County Local Agency Formation Commission in and adjacent to the marsh, are submitted by the county to the commission . . . , and meet the requirements of, and implement, this division 3 and the Suisun Marsh Protection Plan at the local level.” (Pub. Resources Code, §§ 29111, 29400–29424.) The local protection program has a general management program prepared by the Suisun Resource Conservation District and approved by BCDC. (Pub. Resources Code, §§ 29401, subd. (d), 29412.5.) This local protection program includes an individual water management program, or IMP, for each managed wetland in private ownership within the primary management area of the Marsh and specified “all necessary development related to such management.” (Pub. Resources Code, § 29412.5.) The Site has an IMP—the Annie Mason Point Club IMP (the Mason IMP)— that was certified by BCDC in 1984. In 2011, Sweeney bought the Site. In the following years, he undertook a number of unpermitted construction and development projects there, which included restoring the Site’s exterior levee which had been breached in multiple places. These efforts largely converted the property from tidal marsh to a mostly dry island. In October 2014, Sweeney transferred title to the Point Buckler Club, LLC (Point Buckler Club), for which he was the manager and principle shareholder. He also began operating the Site as a private recreational area for kiteboarding. In November 2014, BCDC staff was concerned about unauthorized work at the Site and conducted a site visit. During the visit, BCDC staff provided Sweeney with the Mason IMP. Following the visit, BCDC staff notified Sweeney in a January 30, 2015, letter of several violations. Staff explained the regulatory framework governing the Suisun Marsh and the Site. Based on available information, the history of the Site, and the recent Site visit, BCDC staff observed that the Site had never been managed in accordance with the Mason IMP and had 4 long ago reverted to a tidal marsh due to neglect, abandonment, and/or the forces of nature. Staff directed Sweeney to stop work and informed him that a marsh development permit was required prior to developing the Site. Staff also conveyed that any work that could not be retroactively approved through the permit process would likely need to be removed and the Site restored to tidal marsh. BCDC staff recommended that Sweeney restore the Site, or apply for a marsh development permit. Sweeney was also advised that potential future enforcement could include cease and desist orders and a civil penalty. For several months, the parties exchanged correspondence regarding their divergent views about site conditions and the necessity for a permit. BCDC staff continued to investigate and made additional Site visits.2 In April 2016, BCDC’s Executive Director Lawrence Goldzband issued Executive Director Cease and Desist Order No. ECD2016.01 (Interim Cease and Desist Order). The Interim Cease and Desist Order directed Respondents to cease and desist from all unauthorized, unpermitted activities at the Site. 2 Meanwhile, in July 2015, the Regional Water Quality Control Board (Regional Board) began separate enforcement proceedings against Respondents for alleged violations of the federal Clean Water Act and the California Water Code (the Porter-Cologne Water Quality Act). In September 2015, the Regional Board issued a Cleanup and Abatement Order to Respondents, which was eventually rescinded after Respondents filed a successful writ petition to stay the order. In 2016, the Regional Board issued a new Cleanup and Abatement Order and an Administrative Civil Liability Order. Respondents successfully challenged both of those orders in the superior court. The Regional Board’s appeal of those decisions as to the 2016 Cleanup and Abatement Order and Administrative Civil Liability Order is pending before this court and decided today in Sweeney v. California Regional Water Quality Control Board, Case Nos. A153583 & A153585. 5  The Interim Cease and Desist Order was followed in May 2016 with a Violation Report/Complaint for the Administrative Imposition of Civil Penalties, and formal enforcement proceedings began against Respondents. The Violation Report/Complaint alleged numerous violations related to improperly placing fill within the Site and developing it without proper permits. It proposed a civil penalty of $952,000 for more than two dozen separate violations of state law. An enforcement hearing before BCDC’s Enforcement Committee was held in October 2016, consisting of a subset of commissioners appointed to assist BCDC in carrying out its enforcement responsibilities. The Enforcement Committee adopted the Executive Director’s recommended enforcement decision but reduced the proposed penalty to $772,000. A month later, BCDC adopted without change the recommended enforcement decision as approved by the Enforcement Committee. In November 2016, BCDC issued Cease and Desist and Civil Penalty Order No. CDO 2016.02 (BCDC Order or Order). BCDC made nearly 50 findings regarding the Site and Respondents’ activities. It ordered Respondents to cease and desist from placing any fill within the Site, or making any substantial changes to any part of the Site that was or had been subject to tidal action before Sweeney’s unauthorized work. Respondents were further ordered to refrain from engaging in any development activity at the Site without permits for any past, ongoing, or future work. In addition, Respondents were directed to submit plans to restore the Site and mitigate the impacts to wetlands due to their unauthorized activities. They were ordered to pay $772,000 in administrative penalties. In December 2016, Respondents petitioned under Code of Civil Procedure section 1094.5 for a peremptory writ of mandate to invalidate the 6 BCDC Order. The trial court granted the petition and set aside the Order. BCDC and Goldzband now appeal. DISCUSSION I. Standard of Review Challenges to BCDC’s permitting decisions or cease and desist orders are made by filing a “petition for a writ of mandate in accordance with the provisions of Section 1094.5 of the Code of Civil Procedure.” (Gov. Code, § 66639 [allowing aggrieved party to file mandamus petition with superior court to review a BCDC order]; Pub. Resources Code, § 29601 [“Any aggrieved person may seek judicial review of any decision or action of [BCDC] by filing a petition for a writ of mandate in accordance with the provisions of Section 1094.5 of the Code of Civil Procedure…”].) Code of Civil Procedure section 1094.5, our state’s administrative mandamus provision, provides the procedure for judicial review of adjudicatory decisions rendered by administrative agencies. (Topanga Assn. for a Scenic Community v. County of Los Angeles (1974) 11 Cal.3d 506 , 514.) “The inquiry in such a case shall extend to the questions whether the respondent has proceeded without, or in excess of, jurisdiction; whether there was a fair trial; and whether there was any prejudicial abuse of discretion. Abuse of discretion is established if the respondent has not proceeded in the manner required by law, the order or decision is not supported by the findings, or the findings are not supported by the evidence.” (Code Civil. Proc., § 1094, subd. (b).) “The scope of our review of a challenged permitting decision is the same as that of the trial court. [Citations.] [¶] An ‘agency’s findings and actions are presumed to be supported by substantial evidence. [Citations.] A person challenging an administrative determination bears the burden of showing the 7 agency’s findings are not supported by substantial evidence. [Citations.] When reviewing the agency’s determination, the court examines the whole record and considers all relevant evidence, including that which detracts from the administrative decision.’ [Citation.] ‘ “Although this task involves some weighing to fairly estimate the worth of the evidence, that limited weighing does not constitute independent review where the court substitutes its own findings and inferences for that of the Commission. Rather, it is for the Commission to weigh the preponderance of conflicting evidence, as [the court] may reverse its decision only if, based on the evidence before it, a reasonable person could not have reached the conclusion reached by it.” ’ ” (Sustainability, supra, 226 Cal.App.4th at p. 916.) II. Permit Requirements under the Preservation Act The Preservation Act recognizes that Suisun Marsh “represents a unique and irreplaceable resource” and that “future residential, commercial, and industrial developments could adversely affect the wildlife value of the area.” So, “it is the policy of the state to preserve and protect resources of this nature for the enjoyment of the current and succeeding generations.” (Pub. Resources Code, § 29002.) Unless an exception applies, any person wishing to perform or undertake any development3 in Suisun Marsh must obtain a marsh 3 “Development” means “on land, or in or under water, the placement or erection of any solid material or structure; discharge or disposal of any dredged material or of any gaseous, liquid, solid, or thermal waste; grading, removing, dredging, mining, or extraction of any materials; change in the density or intensity of use of land . . . , and any other division of land including lot splits . . . ; change in the intensity of use of water or in access thereto; construction, reconstruction, demolition, or alteration of the size of any structure, including any facility of any private, public, or municipal utility; and the removal or harvesting of major vegetation other than for agricultural purposes.” (Pub. Resources Code, § 29114.) 8 development permit. (Pub. Resources Code, § 29500.) Within Suisun Marsh’s primary management area, such development permits shall be obtained from BCDC. (Pub. Resources Code, § 29501.) BCDC issues the permit “if it finds that the proposed development is consistent with the provisions of the Preservation Act and the policies of the certified local protection program.” (Pub. Resources Code, § 29520.) Here, BCDC found Respondents performed work in Suisun Marsh which required a marsh development permit, which they failed to obtain. The trial court set aside the BCDC Order because it found Respondents were exempt from the marsh development permit requirement based on the “repair exception” in Public Resources Code section 29508, subdivision (b) (Section 29508(b)) and the exception for work consistent with a site’s local protection program in Public Resources Code section 29501.5 (Section 29501.5). BCDC contends neither exception applies. We agree. A. Section 29508(b) Section 29508(b) states: “[N]o marsh development permit shall be required” for “Repair, replacement, reconstruction, or maintenance that does not result in an addition to, or enlargement or expansion of, the object of such repair, replacement, reconstruction, or maintenance.” (Pub. Resources Code, § 29508, subd. (b).) The parties dispute whether Respondents’ work constituted a “repair” and whether there was even an “object of such repair” at the Site when Sweeney’s work began. Even if we assume without deciding that Respondents’ work constituted a “repair” and the breached levee was the 9 “object of such repair” within the meaning of Section 29508(b), the exception would not apply.4 Under the plain meaning of Section 29508(b), any repair or maintenance exempt from permit requirements must “not result in an addition to, or enlargement or expansion of, the object of such repair.” (Pub. Resources Code, § 29508, subd. (b), emphasis added.) Thus, any work undertaken by Respondents that went beyond fixing or maintaining the breached levee as the “object of … repair” does not qualify for the exemption. Neither would work completely unrelated to the breached levee. BCDC found Sweeney performed quite a lot of work that went well beyond levee repair or was completely unrelated to the levee. Apart from any work done to repair the breached levee, BCDC found Sweeney also removed and replaced one of the former water control structures from the Site; replaced a sunken dock located in the southeast portion of the Site with a larger dock at the same location; added roads and land bridges to the Site; excavated multiple crescent ponds in the interior of the Site; removed, mowed, grazed, or flattened tidal marsh vegetation throughout the Site interior; placed shipping containers and mobile containers on the Site; installed two helicopter pads; and began operating the site as a kiteboarding business. Substantial evidence supported each of BCDC’s findings. We have no difficulty concluding the Section 29508(b) exception for repairs did not apply and that the trial court incorrectly set aside the Order on this basis. B. Section 29501.5 Section 29501.5 provides: “Notwithstanding the provisions of Section 29500, within the primary management area no marsh development permit 4 We do not address the BCDC’s argument that Respondents failed to exhaust administrative remedies in asserting this exemption since we conclude the exemption did not apply. 10 shall be required for any development specified in the component of the local protection program prepared by the Suisun Resource Conservation District and certified by the commission pursuant to Section 29415.” (Pub. Resources Code, § 29501.5.) Under this provision, work undertaken at a site that is consistent with a site’s local protection program, or IMP, does not require a marsh development permit. The parties agree that the local protection program for the Site is the Mason IMP that was certified in 1984. BCDC staff provided a copy of it to Sweeney during the November 2014 Site visit. But the parties dispute whether the Mason IMP still applies. In BCDC’s view, the Mason IMP effectively expired because the Site’s prior owners never complied with it, and the site reverted to tidal marsh when the exterior levee was allowed to deteriorate. Since the purpose of an IMP is to provide standards for managed wetlands, the Site’s reversion to tidal marsh meant it was no longer a managed wetland and the Mason IMP no longer applied. Thus, the Commission required Respondents to procure a marsh development permit for their activities which they failed to secure. Respondents contend nothing in the Public Resources Code restricts IMPs to managed wetlands or provides for their expiration. They argue the Mason IMP continued to be valid, and the work they undertook was consistent with it and thus exempt from any permit requirement. Even if we assume the Mason IMP remains effective, Sweeney’s work was not exempt from the permit requirements in Section 29501.5. It is readily apparent the Mason IMP does not contemplate much of the work performed by Sweeney. It was prepared in 1984 for the “small lone club located on Buckley Island . . . contained with a single levee.” The Mason IMP describes two water control structures: “(a) a main flood gate on the east side 11 that functions to bring water into the club via a perimeter ditch system; and (b) a structure on the north side used to drain the club into Grizzly Bay. It identifies “Club Improvements” which include “Water Management” and “Vegetation Management.” Among the “needed improvements” contemplated for water management is “inspection and maintenance of levees, ditches, and water control structures. Ditches need to be kept clear of vegetation blockages or silt build-ups to allow circulation and drainage . . . . Levees require frequent inspection and attention prevent major breaks from occurring.” The “needed improvements” for managing vegetation entails “reduc[ing] by burning and/or discing” of the “dense growth of undesirable vegetation in the pond . . . followed by flooding.” Mowing emergent pond vegetation and levee vegetation is also allowed. BCDC found Sweeney performed a lot of work that went well beyond what was discussed in the Mason IMP. Even if some of Sweeney’s work, such as levee repair, ditch excavation, and vegetation management comported with the Mason IMP, there were various projects and construction that exceeded the type of maintenance allowed under it. As discussed above, Sweeney replaced a sunken dock located in the southeast portion of the Site with a larger one. He added roads and land bridges to the Site. He excavated multiple crescent ponds in the Site’s interior. He placed shipping containers and mobile containers on the Site. He installed two helicopter pads. He began operating the site as a kiteboarding business. All these findings were supported by substantial evidence. Many, if not most, of Sweeney’s changes had no reasonable connection to the management contemplated in the Mason IMP, and thus were inconsistent with that local protection program. 12  While Sweeney contends his activities were “nothing more than levee repair,” there is substantial evidence in support of BCDC’s findings that his work far exceeded the scope authorized in the Mason IMP. Further, even if Sweeney’s levee work was repair rather than reconstruction, and the ditch excavation, tide gate installation, and vegetation management were consistent with the Mason IMP, Sweeney’s work at the Site went well beyond these projects.5 Under the most expansive view, Sweeney’s claim that all his work was levee repair is unreasonable. The Section 29501.5 exception did not apply and the trial court’s decision to vacate the BCDC’s Order on this basis was also improper. III. Penalties BCDC assessed respondents $772,000 in civil administrative penalties. Its staff had proposed a penalty of $952,000 under the McAteer-Petris Act for multiple violations that occurred over periods from 2 months to 1.5 years. The most substantial proposed penalties were $210,000 for placing fill in the Bay to close each of seven tidal breaches of the original levee; $120,000 for excavating four crescent ponds in the Site’s interior and placing the fill adjacent to each pond; and $222,000 for placing 10 mobile trailers and storage containers on the Site. Other violations, including removal and replacement of the water control structure, development of the Site as a kiteboarding facility, and installation of two helicopter landing pads, resulted in proposed penalties each ranging from $30,000 to $60,000. BCDC’s Enforcement Committee determined that that placement of fill to close each 5 As stated above, Sweeney also built the four crescent ponds, the dock and dock expansion, construction of two land bridges, removal of a former water control structure, the seven trailers/storage containers, the two helipads, the three wind-breaks, and change in use to operation of a kiteboarding business. 13 of the tidal breaches of the former levee should be treated as single violation rather than seven and on this basis reduced the proposed penalty to $772,000, which was the penalty ultimately adopted by BCDC. The trial court found that penalty exceeded the limits imposed by the Mc-Ateer Petris Act and was unsupported by the findings. It also found it violated the Eighth Amendment prohibition on excessive fines. BCDC argues both conclusions were wrong. We agree. A. McAteer-Petris Act The Mc-Ateer Petris Act authorizes BCDC to impose civil penalties for any violation in an amount of not less than $10, but no more than $2,000 per day, up to a cap of $30,000 per violation. (Gov. Code, § 66641.5, subd. (e).) A reviewing court will not disturb an administrative penalty unless the challenger demonstrates there has been a manifest abuse of discretion. (Cadilla v. Board of Medical Examiners (1972) 26 Cal.App.3d 961 , 967.) “Neither a trial court nor an appellate court is free to substitute its discretion for that of an administrative agency concerning the degree of punishment imposed.” (Kazensky v. City of Merced (1998) 65 Cal.App.4th 44 , 53–54.) What penalty is appropriate is considered to be particularly within the agency’s discretion, dependent on the agency’s expert knowledge. (Hughes v. Board of Architectural Examiners (1998) 68 Cal.App.4th 685 , 692.) The trial court set aside the penalties and concluded BCDC abused its discretion, exceeded its jurisdiction, and did not proceed in the manner required by law. Recognizing the $30,000 cap for a single violation and BCDC’s $772,000 penalty, the trial court deduced that BCDC would had to have found at least 26 violations. According to the court, the “Order identifies only 8 violations, as listed in subparagraphs (a) through (h) of paragraph II.XX” and was thus not supported by the findings. 14  BCDC did not abuse its discretion because the penalty it imposed was readily supported by its findings.6 The “8 violations” described by the trial court referred to BCDC findings that summarized the more than two dozen separate violations BCDC had enumerated for Respondents over the course of the enforcement proceeding. The Violation Report/Complaint sent to Respondents set forth in a two-page table the penalized work undertaken by Respondents, explains the violation and number of violations for the work, and the monetary amount of each violation that went into the $952,000 proposed penalty. Over two dozen separate violations were identified for Respondents. At the enforcement hearing, the Enforcement Committee reduced the proposed penalty to $772,000 and explained it did so specifically because it counted Respondents’ repair of the seven levee breaches to be a single violation penalized at the $30,000 statutory maximum rather than seven separate violations penalized at $210,000. The Committee’s 6 Finding WW in the BCDC Order states: “Respondents have violated and continue to violate the [Act] by conducting the unpermitted activities at the Site as described herein, including but not limited to: [¶] 1. Placing fill in waters of San Francisco Bay, including tidal marsh, by constructing and rebuilding levees, excavating ditches and four crescent shaped ponds, installing a new dock in Anne Mason Slough, constructing roads, and placing numerous containers, trailers, and other structures and two helipads on tidal marsh; and [¶] 2. Making substantial changes in the use of water, land, or structures within the area of [BCDC’s] jurisdiction by: [¶] a. closing all the tidal breaches that existed in 2011 when Mr. Sweeney purchased the Site and thereby cutting off all tidal activity to the interior of the Site; [¶] b. installing a new water control structure in the western portion of the Site; [¶] c. draining the Site to further alter the pre-existing tidal marsh hydrology; [¶] d. removing or destroying tidal marsh vegetation by the placement of fill, excavation activities, mowing activities, drainage activities, and [¶] bringing goats to the Site and allowing those goats to graze on the tidal marsh vegetation; e. installing numerous trailers and containers and two mobile helipads at the Site; and [¶] f. developing and operating the Site for intensive recreational uses including but not necessarily limited to kite-boarding.” 15 recommendation to BCDC clearly explained the reduction, and BCDC adopted $772,000 as the penalty. The BCDC Order adequately reflected, categorized, and summarized the dozens of violations listed in the Violation Report/Complaint. Respondents insist that BCDC had to list in its enforcement order each of the separate violations it alleged. They add that “the absence of a clear list of violations foreclosed judicial review” of important issues. Not so. “In determining whether the decision is supported, we require findings to ‘bridge the gap between the analytical gap between the raw evidence and ultimate decision or order.” [Citation.] The findings need not be stated with the precision required in the judicial proceedings. [Citation.] They may properly incorporate matters by reference, and even omissions may be filled by such relevant references as are available in the record. [Citation.] ‘Thus, where reference to the administrative record informs the parties and reviewing courts of the theory upon which an agency has arrived at its ultimate finding and decision it has long been recognized that the decision should be upheld if the agency ‘in truth found those facts which as a matter of law are essential to sustain its . . . [decision].’ ” (Craik v. County of Santa Cruz (2000) 81 Cal.App.4th 880 , 884–885.) BCDC’s findings on its penalty determination sufficiently “bridge the gap” between the evidence and its order. The grounds for the $772,000 penalty can readily be derived from the record. Respondents further contend that the penalty should be set aside for BCDC’s failure to consider the factors in Government Code section 66641.9, for each of the violations before imposing the penalty. That provision states: “In determining the amount of administrative civil liability, [BCDC] shall take into consideration the nature, circumstance, extent, and gravity of the violation or violations, whether the violation is susceptible to removal or 16 resolution, the cost to the state in pursuing the enforcement action, and with respect to the violator, the ability to pay, the effect on ability to continue in business, any voluntary removal or resolution efforts undertaken, any prior history of violations, the degree of culpability, economic savings, if any, resulting from the violation, and such other matters as justice may require.” (Gov. Code, § 66641.9, subd. (a).) Again, the BCDC Order reflects that the Commission did sufficiently consider these factors. BCDC devoted a paragraph of analysis to each factor before imposing the penalty. There was no abuse of discretion. B. Eighth Amendment The Eighth Amendment to the United States Constitution provides: “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” (U.S. Const., 8th Amend.) The prohibition on excessive fines in the Eighth Amendment “ ‘limits the government’s power to extract payments, whether in cash or in kind, “as punishment for some offense.” ’ ” (United States v. Bajakajian (1998) 524 U.S. 321 , 328 (Bajakajian).) The California Constitution contains a similar protection. (People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2005) 37 Cal.4th 707 , 728 (R.J. Reynolds).)7 The touchstone of constitutional inquiry under the excessive fines clause is the principle of proportionality. (Bajakajian, at p. 334.) The amount of the fine must bear some relationship to the gravity of the offense that it is designed to punish, and a fine that is grossly disproportional to the gravity of the defendant’s offense violates the excessive fines clause. (Ibid.) In deciding the matter, we consider “(1) the defendant’s culpability; (2) the relationship between the harm and the 7 Article I, section 17 of the California Constitution states: “Cruel or unusual punishment may not be inflicted or excessive fines imposed.” (Cal. Const., art. I, § 17.) 17 penalty; (3) the penalties imposed in similar statutes; and (4) the defendant’s ability to pay.” (R.J. Reynolds, at pp. 728, 730.) “We review de novo whether a fine is constitutionally excessive and therefore violates the Eighth Amendment's Excessive Fines Clause.” (United States v. Lewis (9th Cir. 2003) 62 Fed.Appx. 757 , 762; see also Cooper Industries, Inc. v. Leatherman Tool Group, Inc. (2001) 532 U.S. 424 , 435–36 (Cooper).).8 The trial court concluded the fines imposed here violated the Eighth Amendment’s prohibition against excessive fines and set them aside. The court found Respondents’ culpability was low; the penalty was grossly disproportional to the harm caused; there was a gross disparity between penalties imposed by the BCDC for similar behavior; and that Respondents could not afford to pay the penalty imposed. Based on our review of the record, we reach a different conclusion as to each of these factors. Many of these factors overlap with or are similar to those considered by BCDC under the McAteer-Petris Act. BCDC’s findings characterize Respondents’ culpability as substantial. The findings state that “Respondents’ conduct at the Site was unreasonable and demonstrated a willful indifference to the regulatory permitting process that is intended to protect water quality, beneficial uses, and to prevent illegal discharges.” This characterization was based on evidence that Sweeney interacted with various government agencies with jurisdiction over Suisun Marsh and was previously found in violation for levee work he did at another property. Respondents argue there are no facts to suggest Sweeney should have known he needed a BCDC permit at the Site, which supports the trial court’s conclusion that “there is no evidence [Sweeney] should have 8 Respondents suggest we apply a substantial evidence standard in reviewing the trial court’s finding of excessiveness. But they provide no authority for this contention which goes against the weight of authority. 18 known he needed a permit from [BCDC].” The trial court’s conclusion was misplaced. It was “for the Commission to weigh the preponderance of conflicting evidence” and reversal can be justified “only if, based on the evidence before it, a reasonable person could not have reached the conclusion reached by it.” (Sustainability, supra, 226 Cal.App.4th at p. 916.) That was not the case here. Moreover, BCDC found Respondents continuously performed work at the Site after BCDC staff directed Sweeney to stop work. Respondents have not addressed these findings. The relationship between the harm and the penalty was also significant when evaluated in the context of numerous findings BCDC made as to the nature, circumstances, extent, and gravity of Respondents’ violations. BCDC explained, “Excavation of tidal marsh at the Site physically removed estuarine habitat and the placement of fill eliminated surface water and wetland habitats. The harm from Respondents’ unauthorized filling, destruction of tidal marsh, and cutting-off of tidal action at the Site was and is substantial, has adversely impacted beneficial uses of Suisun and Grizzly Bays, and likely resulted in the illegal take of threatened or endangered species protected under the California and federal Endangered Species Acts. Unauthorized filling and excavation activities occurred outside work activity windows established to protect sensitive species in the Suisun Marsh. Blocked tidal channels at the Site are preventing longfin smelt from being able to access spawning grounds, young salmonids from accessing feeding grounds, and have cut off the export of food material from the Site's interior wetlands needed to support the threatened Delta smelt.” Although Respondents dispute these findings, we have no grounds in the record to reverse them. (Sustainability, supra, 226 Cal.App.4th at p. 916 [reversal 19 proper only where “a reasonable person could not have reached the conclusion” reached by agency].) As to the penalties imposed in similar statutes, this factor has been explained as “the sanctions imposed in other cases for comparable misconduct.” (Cooper, supra, 532 U.S. at p. 435.) We disagree with Respondents’ argument that the penalty was excessive simply because it represented BCDC’s “highest penalty ever.” The penalty was large because it was based on more than two dozen violations found by BCDC to have occurred over a prolonged period of time. (See Ojavan Investors, Inc. v. California Coastal Commission (1997) 54 Cal.App.4th 373 , 398 [$9.5 million civil penalty against a developer for 73 violations of Coastal Act not excessive].) We also are not persuaded by Respondents’ contentions that the penalty was excessive because of its comparison to regulatory action or inaction undertaken by BCDC at other duck hunting clubs for levee repair and containers. None of Respondents’ points of comparison appear to represent a level of work and development similar to what Respondents undertook at the Site. BCDC considered the final factor, Respondents’ ability to pay. On this point the Order stated, “The Regional Board staff investigated and analyzed Respondents’ financial resources, and determined that Respondents have the ability to pay a substantial penalty.” The Regional Board’s ability to pay analysis estimated Respondents’ assets at $4.2 million. In light of total penalties from multiple regulatory agencies, Respondents contend the Board’s calculation was too high and misguided. But aside from their hyperbolic arguments against the penalty and Sweeney’s declarations about problems with the Regional Board’s calculation, Respondents did not include any objective information about their financial condition in the record when 20 they raised the issue in their Statement of Defense before the Enforcement Committee (e.g., financial statements, tax returns) even though they had the opportunity to do so. (Cal. Code Regs., tit. 14, § 11332 [requiring submission of all copies of documentary evidence respondent wants to be part of the record with completed statement of defense form]). When they attempted to provide such information at the full BCDC hearing, it was too late. On this record, the $772,000 penalty was not unreasonable in light of Respondents’ ability to pay. We cannot conclude that the $772,000 in civil penalties was “grossly disproportional” to the gravity of the offense so as to violate the Eighth Amendment. The penalty did not violate the excessive fines clause. IV. Vindictive Prosecution “The constitutional protection against prosecutorial vindictiveness is based on the fundamental notion that it ‘would be patently unconstitutional’ to ‘chill the assertion of constitutional rights by penalizing those who choose to exercise them.’ ” (In re Bower (1985) 38 Cal.3d 865 , 873.) When a “defendant shows that the prosecution has increased the charges in apparent response to the defendant’s exercise of a procedural right, the defendant has made an initial showing of an appearance of vindictiveness.” (People v. Puentes (2010) 190 Cal.App.4th 1480 , 1486.) “Once this prima facie case is made, the prosecution bears a ‘heavy burden’ of dispelling the appearance of vindictiveness as well as actual vindictiveness.” (Ibid.) The trial court found Respondents made such an initial showing because BCDC imposed record penalties after Sweeney filed a successful writ petition to stay the Regional Board’s 2015 Cleanup and Abatement Order. (Ante, fn. 2.) BCDC contends the trial court improperly set aside the penalties on vindictiveness grounds. We agree with BCDC. 21  As an initial matter, Respondents cite no authority, and we have found none, that applies the vindictive prosecution doctrine in a context outside of criminal proceedings. We conclude the court erred in setting aside BCDC’s civil administrative order and penalties for this reason. The vindictive prosecution doctrine has not yet been held to apply to proceedings before administrative bodies. Even if the doctrine applied, Respondents made no prima facie showing that BCDC “increased the charges” against them in response to their exercise of any procedural right against BCDC. Apart from the lawsuit underlying this appeal, there is no evidence that Respondents ever exercised a procedural right against BCDC. Respondents rely upon their 2015 writ petition to stay the Cleanup and Abatement Order but that was directed to the Regional Board, a separate regulatory agency. Also, Respondents’ assertion that BCDC imposed increased penalties on them because they filed this writ petition is simply not supported by the record. BCDC staff previewed the possibility of civil penalties and notified Sweeney it was “handling this matter as an enforcement case” in January 2015, well before Respondents’ writ petition was filed in December 2015. Prior to the December 2015 petition, BCDC had no “charges” pending against Respondents that it could increase after Respondents filed the petition. The Interim Cease and Desist Order was not issued until April 2016, and the Violation Report/Complaint for Civil Penalties was not issued until May 2016, following investigation by BCDC staff. Thus, BCDC’s only “charges” came after Respondents’ writ petition, and there is no showing penalties were ever increased on account of it. Under these facts, Respondents made no prima facie case. V. Fair Hearing 22  A. Separate Functions “One of the basic tenets of the California [Administrative Procedure Act] . . . is that, to promote both the appearance of fairness and the absence of even a probability of outside influence on administrative hearings, the prosecutory and, to a lesser extent, investigatory, aspects of administrative matters must be adequately separated from the adjudicatory function.” (Nightlife Partners v. City of Beverly Hills (2003) 108 Cal.App.4th 81 , 91, italics omitted.) “To prove a due process violation based on overlapping functions thus requires something more than proof that an administrative agency has investigated and accused, and will now adjudicate. ‘[T]he burden of establishing a disqualifying interest rests on the party making the assertion.’ … That party must lay a ‘specific foundation’ for suspecting prejudice that would render an agency unable to consider fairly the evidence presented at the adjudicative hearing … it must come forward with ‘specific evidence demonstrating actual bias or a particular combination of circumstances creating an unacceptable risk of bias’…. Otherwise, the presumption that agency adjudicators are people of ‘conscience and intellectual discipline, capable of judging a particular controversy fairly on the basis of its own circumstances’ will stand unrebutted.” (Today’s Fresh Start, Inc. v. Los Angeles County Office of Education (2013) 57 Cal. 4th 197 , 221–222.) We independently review the claim BCDC failed to afford Respondents a fair hearing. (See City of Pleasanton v. Board of Administration (2012) 211 Cal.App.4th 522 , 531 (Pleasanton); TWC Storage, LLC v. State Water Resources Control Bd. (2010) 185 Cal.App.4th 291 , 296.) The trial court found the prosecutorial and adjudicatory functions of the agency were insufficiently separate and disapproved of how the prosecution team “prepared the summary memos on which [ BCDC] relied” 23 and thus “impermissibly commingled the prosecution function with the judicial-making function.” BCDC contends the trial court erred in setting aside its Order on these grounds. We agree. 1. BCDC’s Enforcement Procedures BCDC’s adjudicatory procedures for enforcement actions are set forth in Title 14, Code of California Regulations, section 11300 et seq. Under these procedures, BCDC can hear some enforcement matters directly. But when the violations involve complex facts, its Enforcement Committee can hear a matter before BCDC as a whole considers whether to issue an enforcement order. (Cal. Code Regs., tit. 14, §§ 11310, subd. (b), 11323–11324.) In cases where BCDC staff assesses significant harm and the executive director refers a matter to the enforcement committee, formal enforcement proceedings begin with BCDC staff issuance of a violation report and complaint for civil penalties to the respondent, which is the party believed to be responsible for the alleged violation. (Cal. Code Regs., tit. 14, § 11321.) BCDC staff also send a Statement of Defense form so the responsible party can respond to the allegations. (Cal. Code Regs., tit. 14, § 11322.). Before the enforcement hearing, BCDC’s Executive Director mails the violation report, the respondent’s completed Statement of Defense form, and the Executive Director’s recommended enforcement decision to the respondent and to Enforcement Committee. (Cal. Code Regs., tit. 14, § 11324.) At the hearing, BCDC staff summarize the violation report and the recommended enforcement decision, and the respondent states his position. (Cal. Code Regs., tit.14, § 11327.) Oral testimony may be taken under oath, and cross-examination is permitted under certain circumstances. (Cal. Code Regs., tit. 14, § 11227.) A Deputy Attorney General attends the hearing to advise the Enforcement Committee on legal issues. (Cal. Code Regs., tit. 14, 24 § 11229.) The Enforcement Committee adopts a recommended enforcement decision, which may be the Executive Director’s recommendation or a modification of it. (Cal. Code Regs., tit. 14, § 11330.) The full BCDC then considers the Enforcement Committee’s recommended decision. (Cal. Code Regs., tit. 14, § 11331.) BCDC staff, the respondent, and members of the public may present arguments on the recommendation subject to reasonable time limits. (Cal. Code Regs., tit. 14, § 11332.) Thereafter, the BCDC votes to either adopt the recommended enforcement decision without change, adopt it in part, dismiss the entire matter, remand the matter for further action, or reject the recommended enforcement decision and decide the matter de novo. (Cal. Code Regs., tit. 14, § 11332.) The BCDC decision is made by majority vote of those present and voting. (Cal. Code Regs., tit. 14, § 11334.) 2. Respondents’ Hearing Based on our review of Respondents’ hearing transcript, we have no reason to conclude Respondents received an unfair hearing based on insufficiently separated functions. BCDC adhered to its procedures in the course of Respondents’ hearing, and its process was similar to the one validated in Pleasanton, supra, 211 Cal.App.4th 522 . In Pleasanton, supra, 211 Cal.App.4th 522 , the plaintiff brought a retirement pay claim before the Public Employees’ Retirement System (PERS). (Id. at p. 528.) An evidentiary hearing was held before an administrative law judge (ALJ) who denied the claim. (Id. at p. 529.) The ALJ decision was submitted to the PERS board to determine whether to adopt the ALJ decision or take other action. (Ibid.) Accompanying the proposed decision was a PERS staff report in support of the proposed ALJ decision. (Id. at pp. 529-530.) Also included was a document prepared by the 25 plaintiff’s counsel advocating for the rejection of the proposed decision. (Id. at p. 530.) The court found no due process violation merely because a staff report was included with the ALJ’s recommended decision. (Id. at pp. 531- 532.) The court explained, “As long as both sides’ arguments on the issue were presented to the board at the same time, no agency staff involved in handling [the plaintiff’s] appeal voted or acted in any supervisory capacity over voting members on the board itself, and there were no ex parte contacts between agency staff and board members about the decision, we perceive no due process problem.” (Ibid.) Here, the process conformed to the fairness principles set forth in Pleasanton. Both BCDC staff and Respondents’ counsel presented arguments at the Enforcement Committee hearing, and then presented their views on the Committee’s recommended enforcement decision to the full BCDC. Moreover, the Commissioners were the ones to vote at the Enforcement Committee hearing and then the full BCDC session. Agency staff had no vote in either proceeding, and there is no evidence that staff acted in any supervisory capacity over any of the Commissioners. Nor was there any finding by the trial court that any staff had ex parte communications with any Commissioner. BCDC staff submitted declarations to make clear they had no ex parte communications with Commissioners. Since BCDC’s prosecutorial and adjudicatory functions were appropriately separate, there was no due process violation. Respondents assert the functions were not separate because the Executive Director was part of the agency’s decision-making team as an advisor and was not independent of the agency prosecutors who prepared and sent his recommended enforcement actions to the Enforcement Committee and BCDC. Not so. The Executive Director was not a decision-maker. (See 26 Gov. Code, § 66635 [executive director is position appointed by the BCDC].) He did not vote as either a member of the Enforcement Committee or as part of BCDC. Nor did he advise the decision-makers. By statute, his role is to “administer[] the affairs of the commission, subject to the direction and policies of the commission.” (Gov. Code, § 66635.) There is no evidence the Executive Director ever appeared at either the Enforcement Committee hearing, the proceeding before BCDC, or any other proceeding in an advisory role. Further, providing a recommended enforcement decision to BCDC did not make the Executive Director an advisor. Not only were such actions prescribed by BCDC regulations, they do not raise due process concerns as stated in Pleasanton where key boundaries are observed, as they were here. (See Pleasanton, supra, 211 Cal.App.4th at p. 533 [no authority says agency decision-making body is precluded from soliciting or receiving a written analysis and recommendation from the agency’s prosecuting attorney delivered to it as part of a public agenda packet along with the adversary’s opposing analysis and recommendation”].) Respondents contend Pleasanton is distinguishable because there, the ALJ was “independent and impartial” and the respondents had a chance to submit comments to the administrative body explaining why they opposed it. We are not persuaded. In administrative proceedings, there is no requirement for an independent decision maker. “[B]y itself, the combination of investigative, prosecutorial, and adjudicatory functions within a single administrative agency does not create an unacceptable risk of bias and thus does not violate the due process rights of individuals who are subjected to agency prosecutions.” (Morongo Band of Mission Indians v. State Water Resources Control Bd. (2009) 45 Cal.4th 731 , 737 (Morongo).) Also, simply because the Enforcement Committee members were Commissioners, rather 27 than separate ALJs, does not mean they were not impartial. (See ibid. [“Unless they have a financial interest in the outcome [citation], adjudicators are assumed to be impartial.”].) There is nothing in the record to rebut the presumption that each of the Commissioners involved was a “ ‘reasonably impartial, noninvolved reviewer.’ ” (Linney v. Turpen (1996) 42 Cal.App.4th 763 , 775–777.) Finally, even if the process did not allow Respondents to submit comments alongside the Enforcement Committee’s recommended enforcement decision, BCDC regulations allow Respondents to “present their . . . arguments on the recommendation” (Cal. Code Regs., tit. 14, § 11132, subd. (a)), and they did. Again, Respondents identify no arguments they were unable to present to the BCDC that would have led to a different outcome. Lastly, Respondents claim the agency prosecutors had ex parte communications with Commissioners because the 9-page staff report “magically appeared” in the Enforcement Committee’s Recommended Decision, and that could not have happened without some ex parte communication. Not so. All were present at the hearing when the Enforcement Committee members voted its recommendation on the record. On this basis, all parties and the staff understood what the Enforcement Committee’s recommendation would be. Preparing the recommendation would not normally require any further interaction between staff and Commissioners. We have no reason to disregard the uncontested declarations from BCDC staff confirming they had no ex parte communications with Commissioners.9 9 Further, BCDC regulations required the staff to send the Enforcement Committee’s recommendation to BCDC and Respondents. (Cal. Code Regs., tit. 14, § 11331 [“At least ten (10) days prior to the Commission’s reconsideration of a recommended enforcement decision . . . the staff shall 28  2. Totality of the Circumstances Although adjudicators are presumed to be impartial, “the presumption of impartiality can be overcome” by “a particular combination of circumstances creating an unacceptable risk of bias.” (Morongo, supra, 45 Cal.4th at p. 741.) This is sometimes referred to as the “totality-of-the circumstances approach.” (Id. at p. 740.) The trial court also found Respondents’ hearing was unfair based on the totality of the circumstances. BCDC contends this too was erroneous. Again, we agree. The trial court found the hearing “appeared unfair because of the short time allowed for Plaintiffs to make their case.” Based on BCDC’s purported finding of over two dozen violations, the court deduced that “Plaintiffs had only about 2 minutes before the Enforcement Committee to make their case on each violation, and about 30 seconds before the BCDC itself” and found “these times were not sufficient for a fair trial in this case.” There is no requirement that hearings last for any particular amount of time (see Cal. Code Regs., tit. 23, § 648 et seq.), and reasonable time limitations are necessary and inevitable. (Cf. Reed v. California Coastal Zone Conservation Com. (1975) 55 Cal.App.3d 889 , 895 [petitioners who were restricted to 10 minutes’ oral argument at hearing and never objected not denied due process].) The Enforcement Committee initially gave each party 45 minutes to present at the hearing, but after Sweeny objected and asked for 75 to 90 minutes, each side was given 60 minutes. The total hearing lasted more than three hours. This was not a denial of due process. Regulations for proceedings before the full BCDC allow the parties “to present their respective arguments on the recommendation, subject to such mail the recommended enforcement decision to all respondents and to all Commissioners.”].) Staff did so. 29 reasonable time limits as the Chair may impose and subject to a prohibition against the introduction of any new evidence” except under circumstances inapplicable here. (Cal. Code Regs., tit. 14, § 11335.) Each side had 15 minutes to present its views on the Enforcement Committee recommendation to BCDC. This was reasonable in light of the hour each side was provided during the three-hour Enforcement Committee hearing. Moreover, in neither case do Respondents state what additional evidence or argument they were unable to present in the allotted time. The trial court also criticized BCDC for failing to make a legal ruling on the statutory exemptions to the permit requirement that respondents claimed for the levee repairs. The court found the hearing “appeared to be unfair because there was no ruling on the legal issues.” In the trial court’s view, BCDC’s refusal to rule on the exemptions “gave the impression that [BCDC] did not have to comply with the law.” These findings simply do not reflect the record. Section 29501.5, which exempts from permit requirements development consistent with a site’s IMP, was fully addressed during the course of the enforcement proceeding. The Enforcement Committee’s recommended enforcement decision, which BCDC voted to adopt, addressed it, stating “the Annie Mason IMP no longer applied to the site.” Finding “V” of the BCDC Order also addressed it, stating: “Even if the Annie Mason IMP still applied to the Site at the time Mr. Sweeney engaged in the above- described activities, which it did not, said activities were not described in and thus were not authorized by the Annie Mason IMP.” As to the Section 29508(b) exception for repairs, Respondents never invoked it in their Statement of Defense, so BCDC reasonably did not rule on it. Beyond the reasons set forth by the trial court, Respondents assert the unfairness finding was “supported by at least nine types of substantial 30 evidence.” We need not address these in any detail. Eight of them do not indicate bias or prejudice on the part of the decisionmaker. (See Haas v. County of San Bernardino (2002) 27 Cal.4th 1024 , 1034.) Rather, they merely rehash arguments from Respondents’ challenge to BCDC’s penalty determination, or repeat arguments we have previously addressed. The one contention that could raise potential bias is Respondents’ claim that BCDC’s expert was “hostile” to Sweeney, had “personal enmity” towards him, and was in no position to be impartial in his assessment of Sweeney’s work. Had Respondents truly believed BCDC’s expert was prejudicially biased, Respondents could have raised such an objection before the Enforcement Committee or the full BCDC, but they did not. When given an opportunity to cross-examine the expert at the Committee’s hearing, Respondents raised no question or concern about his impartiality, and did not ask him about communications he had with Sweeney. DISPOSITION The judgment on the BCDC Order in Solano County Superior Court Case No. FCS048136 is reversed, and the writ of mandate is vacated. The matter is remanded to the trial court with directions to deny Respondents’ petition for writ of mandate and request to set aside the BCDC Order, and for further proceedings consistent with this opinion. Appellants are awarded costs on appeal. 31  _________________________ Siggins, J.* WE CONCUR: _________________________ Fujisaki, Acting, P.J. _________________________ Jackson, J. * Assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. 32 Filed 3/18/21 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE JOHN D. SWEENEY et al., Plaintiffs and Respondents, A153582 v. SAN FRANCISCO BAY (Solano County CONSERVATION AND Super. Ct. No. FCS048136) DEVELOPMENT COMMISSION et al., ORDER MODIFYING OPINION AND CERTIFYING FOR Defendants and Appellants. PUBLICATION; NO CHANGE IN JUDGMENT BY THE COURT: It is ordered that the opinion filed herein on February 18, 2021, be modified as follows: At page 4, in the second full paragraph, the fourth sentence is revised to read: “In October 2014, Sweeney transferred title to the Point Buckler Club, LLC (Point Buckler Club), for which he was the manager and principal shareholder.” In addition, pursuant to rule 8.1105(b) of the California Rules of Court, the opinion in the above-entitled matter is ordered certified for publication in the Official Reports. The petition for rehearing filed by Respondents on March 5, 2021, is denied. There is no change in the judgment. 1 Dated: _______________ ____________________________ Fujisaki, Acting P.J. 2

2021-03-18 20:02:23.115996+00

http://www.courts.ca.gov/opinions/documents/A153583M.PDF

Filed 3/18/21 (unmodified opn. attached) CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE JOHN D. SWEENEY et al., Plaintiffs and Respondents, A153583, A153585 v. (Solano County CALIFORNIA REGIONAL WATER Super. Ct. Nos. FCS048136 and QUALITY CONTROL BOARD, SAN FCS048861) FRANCISCO BAY REGION et al., ORDER MODIFYING OPINION Defendants and Appellants. AND DENYING REHEARING; NO CHANGE IN JUDGMENT JOHN D. SWEENEY et al., Plaintiffs, Cross-defendants, and Respondents, v. SAN FRANCISCO BAY CONSERVATION AND DEVELOPMENT COMMISSION et al., Defendants, Cross-complainants, and Appellants. BY THE COURT: It is ordered that the opinion filed herein on February 18, 2021, be modified as follows: 1  At page 9, on the first line, “13627” is deleted, and “13267” is inserted in its place. At page 9, in the first sentence of the first full paragraph, “CAO.,” is deleted, and “CAO.” is inserted in its place. At page 14, in the fourth sentence of the first full paragraph, “13627” is deleted, and “13267” is inserted in its place. At page 17, on the first line, “damn” is deleted, and “dam” is inserted in its place. At page 25, on the fifth line, “its” is deleted. At page 41, the third full paragraph is revised to read: “The trial court also found “the evidence [was] not sufficient to support the conclusion that the levee work adversely affected beneficial uses,” nor could it “support a finding that the levee work violated requirements in the basin plan that prohibit discharges into surface waters that affect beneficial uses.” ” At page 41, in the fourth full paragraph, the first sentence is revised to read: “Had the court applied the substantial evidence standard to the Regional Board’s finding, as we do, it would have acknowledged ample evidence of the levee work’s harm to beneficial uses.” At page 44, the first full sentence on the page is revised to read: “Res judicata “ ‘preclud[es] parties from contesting matters that they have had a full and fair opportunity to litigate,’ ” and “protect[s] against ‘the expense and vexation attending multiple lawsuits, conserve[s] judicial resources, and foster[s] reliance on judicial action by minimizing the possibility of inconsistent decisions.’ ” (Taylor v. Sturgell (2008) 553 U.S. 880 , 892.)” At page 54, at the end of the Section III.E. discussion regarding “Vindictive Prosecution” and before the Section IV discussion regarding “Fair 2 Hearing (Applicable to CAO and ACL Order)” begins, the following is inserted: “F. Differentiated Civil Liabilities for Sweeney and the Club Respondents argue that liability under the ACL must be assessed differently for Sweeney and the Club. They assert, “For the ACL, the Club should be distinguished from John Sweeney[] and should not be penalized for the levee repair, which was effectively complete [citation] before the Club took ownership of the island.” In a petition for rehearing, they contend the trial court’s judgment should be affirmed to the extent it set aside the civil liabilities for the Club, even though the trial court did not do so on the basis that these liabilities were separable from the liabilities imposed upon Sweeney. We will not consider this argument. “ ‘[A]s a general rule, “issues not raised in the trial court cannot be raised for the first time on appeal.” ’ ” (Rancho Mirage Country Club Homeowners Assn. Hazelbaker (2016) 2 Cal.App.5th 252 , 264; Ochoa v. Pacific Gas & Electric Co. (1998) 61 Cal.App.4th 1480 , 1488, fn. 3 [“It is axiomatic that arguments not asserted [in the trial court] are waived and will not be considered for the first time on appeal.”].) This argument was neither raised in the trial court, nor mentioned in the trial court’s ruling, and we will not consider it in this appeal. Even if Respondents had raised this point in the trial court, we still would not consider it because Respondents have not properly briefed the matter on appeal. (See Tilbury Constructors, Inc. v. State Comp. Ins. Fund (2006) 137 Cal.App.4th 466 , 482 [matters asserted in perfunctory fashion or not adequately briefed may be passed over]; Heavenly Valley Ski Resort v. El Dorado County Bd. Of Equalization (2000) 84 Cal.App.4th 1323 , 1345, fn. 17 [“[W]e need not address contentions not properly briefed.”].) Respondents’ 3 125-page appellate brief provides only two sentences of argument on this point, without citation to authority or to the record. There is neither a factual nor legal basis presented that would permit this court to separately consider the Club’s responsibility for the imposed penalties, apart from Sweeney’s. The record shows that Sweeney transferred the Site to the Club in October 2014 and that Sweeney was the Club’s manager. But Respondents provide no citation to the record that describes the terms or substance of that transaction. Moreover, the unpermitted work at the Site may have continued well after the transfer. (See ante, Background.) These facts raise a question about whether it would be proper to limit the Club’s responsibility, and Respondents’ briefing provides no answer. The Sweeney District Court Opinion, which Respondents cited at oral argument, does not help them either. It neither supplies a legal nor factual basis for the argument that fills the void in their briefing, nor does it address administrative civil liabilities issued under state law. Accordingly, we do not address Respondents’ claims.” At page 62, in the second full paragraph, the first sentence is revised to read: “The trial court also concluded Respondents did not receive fair hearings under the totality of the circumstances.” At page 63, in the first sentence of the first full paragraph, item (c) is revised to read: “the Regional Board’s unwillingness to keep Sweeney’s private financial information confidential, combined with criticism of him for not providing more financial information,” The petition for rehearing filed by Respondents on March 4, 2021, is denied. There is no change in the judgment. 4 Dated: _______________ ____________________________ Fujisaki, Acting P.J. 5 Filed 2/18/21 (unmodified opinion) CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE JOHN D. SWEENEY et al., Plaintiffs and Respondents, A153583 v. CALIFORNIA REGIONAL WATER (Solano County QUALITY CONTROL BOARD, SAN Super. Ct. No. FCS048136) FRANCISCO BAY REGION et al., Defendants and Appellants. JOHN D. SWEENEY et al., Plaintiffs, Cross-defendants, and Respondents, A153585 v. (Solano County SAN FRANCISCO BAY Super. Ct. No. FCS048861) CONSERVATION AND DEVELOPMENT COMMISSION et al., Defendants, Cross-complainants, and Appellants. Point Buckler (the Site) is a 39-acre tract located in Suisun Marsh. John Sweeney purchased the island and subsequently transferred ownership to Point Buckler Club, LLC (Club) (Sweeney and the Club are collectively 1 referred to as Respondents). For months, Respondents undertook various unpermitted development projects at the Site, which included the restoration of an exterior levee surrounding it that had been breached in multiple places. These consolidated appeals concern two administrative orders issued by the Regional Water Quality Control Board, San Francisco Bay Region against Respondents. The first order was a cleanup and abatement order which found Respondents’ development activities were unauthorized and had adverse environmental effects. These included impacts to tidal marshlands, fish migration, and aquatic habitat. The cleanup and abatement order directed Respondents to implement corrective actions to address the effects of their work. The second order imposed administrative civil liabilities and required Respondents to pay approximately $2.8 million in penalties for their violations of environmental laws and regulations. Respondents successfully challenged both orders in writ proceedings in the superior court. Appellants Regional Water Quality Control Board, San Francisco Bay Region and its Executive Officer, Bruce Wolfe (collectively referred to as Regional Board or Board) contend the trial court made numerous legal and factual errors leading it to improperly set aside the orders. We agree with the Regional Board and reverse both trial court judgments. BACKGROUND The Site is located in Suisun Marsh at the south end of Grizzly Bay, a portion of the San Francisco Bay. In 2011, Sweeney bought the Site, which appears to have been previously operated as a managed wetland for duck hunting. When Sweeney purchased the property, the levee which had circumscribed the island had degraded and breached in multiple places. Following his purchase, Sweeney 2 undertook a number of unpermitted construction and development projects, which included restoring the Site’s exterior levee. In October 2014, Sweeney transferred title of the Site to the Club, for which he was the manager and president. He began operating the Site as a private recreational area for kiteboarding. Sweeney also wanted to restore the Site as a duck hunting club. In November 2014, staff from the San Francisco Bay Conservation and Development Commission (BCDC), a state agency with jurisdiction over the waters of the San Francisco Bay including Suisun Marsh, inspected the Site. BCDC staff notified Sweeney about their concerns with unauthorized work occurring there and identified multiple violations. They observed the levee construction work had removed tidal flow to the Site’s interior and dried out tidal marsh areas. Addressing Sweeney’s view that the island was a managed wetland and his stated intent to restore the island to that use, they indicated that based on available information, the history of the Site and the recent Site visit, the Site never functioned as a managed wetland and had long reverted to a tidal marsh due to neglect, abandonment, or the forces of nature. Sweeney was directed to stop work and informed that a marsh development permit was required prior to developing the Site. In addition, BCDC staff conveyed that any work that could not be retroactively approved through the permit process would likely need to be removed and the Site restored to tidal marsh. BCDC was handling the matter as an enforcement case, and potential future enforcement against Sweeney could include cease and desist orders and a civil penalty.1 1 In November 2016, BCDC issued a cease and desist and civil penalty order which ordered Respondents to cease and desist from placing any fill within the Site, or making any substantial changes to any part of the Site that was or had been subject to tidal action before their unauthorized work. 3  The Regional Board commenced separate enforcement proceedings against Respondents. In July 2015, the Board issued a Notice of Violation for Respondents’ unauthorized filling of federal and state waters in violation of the federal Clean Water Act and the California Water Code. Several months later, the Board issued Cleanup and Abatement Order No. R2-2015- 0038 (2015 CAO) to Respondents. In October 2015, Regional Board staff inspected the Site with representatives from other agencies, including BCDC, the U.S. Environmental Protection Agency, and the U.S. Army Corp of Engineers (Corps). The agencies wanted to better understand the nature and extent of Respondents’ development activities, including the volume of fill placed for construction of the levee, and to understand the impacts of the development on tidal marsh habitat. During this inspection, BCDC staff observed that additional work had been performed since their initial November 2014 inspection. According to Sweeney, worked stopped two months earlier when Respondents first learned of the regulatory agency objections. In December 2015, Respondents filed a petition for writ of mandate and a complaint for injunctive and declaratory relief challenging the 2015 CAO. The court granted Respondents’ request to stay the 2015 CAO and enjoined the Board from enforcing the order pending a preliminary injunction hearing. In January 2016, in order to address Sweeney’s procedural due process Respondents were further ordered to refrain from engaging in any development activity at the Site without permits. They were directed to submit plans to restore the Site and mitigate the impacts of their unauthorized activities and ordered to pay $772,000 in administrative penalties. In a separate opinion filed today in the companion case of Sweeney v. San Francisco Bay Conservation and Development Commission, Case No. A153582, we reversed the trial court’s order invalidating the action taken by the BCDC. 4 concerns, the Regional Board rescinded the 2015 CAO without prejudice to its ability to issue a new order. In the ensuing months, state agencies conducted more inspections. In February 2016, the Regional Board conducted a boat survey around the Site to assess conditions and observed additional development on the island since the October 2015 multi-agency inspection. In March 2016, after securing an inspection warrant, the Regional Board conducted another Site inspection. The results of the inspection were compiled into an Inspection Report, which provided a summary of inspection activities, water quality sampling results, staff observations, and photographs. In May 2016, an expert retained by the Regional Board issued the “Point Buckler Technical Assessment of Current Conditions and Historic Reconstruction Since 1985” (Technical Assessment). The Technical Assessment was a 400-plus-page report based on examinations of conditions at the Site over time that reported Respondents’ development activities and their impacts. Shortly after release of the Technical Assessment, the Regional Board commenced new formal enforcement proceedings against Respondents. On May 17, 2016, the Board issued a tentative cleanup and abatement order and Administrative Civil Liability Complaint No. R2-2016-1008 (ACL Complaint). The ACL Complaint proposed a $4.6 million penalty for Respondents’ alleged violations. A hearing on the tentative cleanup and abatement order was held on August 10, 2016. The Board unanimously adopted and issued Cleanup and Abatement Order No. R2-2016-0038 (CAO). The Board made dozens of findings in the CAO regarding Respondents’ unauthorized activities at the Site and the environmental harm resulting from the activities. The Board 5 found Respondents’ activities had adverse impacts on tidal marshlands, estuarine habitat, fish migration, the preservation of rare and endangered species, fish spawning, wildlife habitat, and commercial and sport fishing. The Board concluded Respondents’ activities violated the Water Quality Control Plan for the San Francisco County Basin (Basin Plan), which prohibits the discharge of fill material in quantities sufficient to harm surface waters or to adversely affect or threaten beneficial uses. The Board also found Respondents’ work violated section 301 of the Clean Water Act which prohibits the discharge of pollutants in state and federal waters without a permit, and section 401, which prohibits dredge and fill activities in state and federal waters without a water quality certification. The Board ordered Respondents to submit certain technical reports and to clean up the discharged waste, abate its effects, and take corrective actions that would restore tidal circulation and marsh habitat to the Site. A hearing was held on the ACL Complaint on December 14, 2016. The Board issued Administrative Civil Liability Order No. R2-2016-0008 (ACL Order). Respondents were found in violation of the Basin Plan and Clean Water Act and assessed $2.8 million in penalties, rather than $4.6 million as proposed. Respondents challenged the orders in separate lawsuits. In December 2016, they petitioned under Code of Civil Procedure section 1094.5 for a peremptory writ of mandate to set aside the CAO. In May 2017, Respondents filed a second petition for a peremptory writ of mandate under Code of Civil Procedure section 1094.5 contesting the ACL Order. In May 2017, the Attorney General’s Office, representing the Board, filed a cross-complaint seeking to enforce both orders. 6  The trial court granted Respondents’ motion to stay the accrual of civil penalties while the appeal was pending. The court also stayed substantive portions of the CAO through judgment until an appeal was filed, or the time to appeal had run. In October 2017, the trial court heard the challenges to the CAO and ACL Order. In separate statements of decisions, the trial court granted Respondents’ motions and set aside both Regional Board orders. The court also declared the Regional Board’s cross-complaint seeking to enforce the CAO and ACL Order was moot. The court entered judgment in favor of Respondents, issued peremptory writs of mandate in each matter, and remanded the proceedings to the Regional Board with a directive to set aside the orders. The Regional Board and its Executive Director Bruce Wolfe separately appealed each judgment. In July 2018, we consolidated the Board’s appeal from the ACL Order judgment (Case No. A153583) and its appeal from the CAO judgment (Case No. A153585) for all purposes. We received briefing on Respondents’ behalf from amicus curiae California Construction and Industrial Materials Association. While the consolidated appeal was pending, the United States District Court for the Eastern District of California issued its opinion in United States v. Sweeney (Sept. 1, 2020 E.D. Cal.) ___ F.Supp.3d ___ [ 2020 WL 5203474 ] (the Sweeney District Court Opinion), which adjudicated the federal government’s claims against Respondents for their activities at the Site under the Clean Water Act. (Id. at *1.) We granted the Regional Board’s request for supplemental briefing on the possible res judicata effect of the federal district court’s opinion on this appeal, and received briefing from the parties. 7  DISCUSSION I. APPLICABLE LAW “A party aggrieved by a final decision or order of a regional board . . . may obtain review of the decision or order of the regional board in the superior court by filing in the court a petition for writ of mandate.” (Wat. Code, § 13330, subd. (b).) Code of Civil Procedure section 1094.5, our state’s administrative mandamus provision, provides the procedure for judicial review of adjudicatory decisions rendered by administrative agencies (Topanga Assn. for a Scenic Community v. County of Los Angeles (1974) 11 Cal.3d 506 , 514) and governs challenges to regional board orders. (Wat. Code, § 13330, subd. (e) [“Except as provided in this section, Section 1094.5 of the Code of Civil Procedure shall govern proceedings for which petitions are filed pursuant to this section.”].) “The inquiry in such a case shall extend to the questions whether the respondent has proceeded without, or in excess of, jurisdiction; whether there was a fair trial; and whether there was any prejudicial abuse of discretion. Abuse of discretion is established if the respondent has not proceeded in the manner required by law, the order or decision is not supported by the findings, or the findings are not supported by the evidence.” (Code Civil. Proc., § 1094, subd. (b).) Here, the trial court ultimately concluded the Regional Board abused its discretion in issuing the CAO and ACL Order. Because the Regional Board’s consolidated appeals of the court’s decisions present myriad issues, each with distinct standards of review, we shall discuss the governing law and review standards during our analysis of each respective order. II. THE CLEANUP AND ABATEMENT ORDER The court set aside the CAO on multiple grounds. Among its reasons, it found the Regional Board violated the requirements of Water Code section 8 13627, the CAO failed to satisfy the criteria for enforcement actions contained in the Porter-Cologne Water Quality Control Act, and the CAO conflicted with the Suisun Marsh Preservation Act. The Regional Board contends none of these reasons have merit. We agree. A. CAO Standard of Review The parties do not dispute the applicable standards of review for the CAO., Nor do we. Pursuant to Water Code section 13330, subdivision (e), the independent judgment standard applies to the trial court’s review of a cleanup and abatement order. (See Tesoro Refining & Marketing Co. LLC v. Los Angeles Regional Water Quality Control Bd. (2019) 42 Cal.App.5th 453 , 466–467 [“Section 13330, subdivision (e) requires the trial court to exercise its independent judgment in reviewing the CAO issued by the Regional Board.”].) Under the independent judgment standard, “ ‘the trial court begins its review with a presumption that the administrative findings are correct[.] [I]t does not defer to the fact finder below and accept its findings whenever substantial evidence supports them. Instead, it must weigh all the evidence for itself and make its own decision about which party’s position is supported by a preponderance. [Citation.] The question is not whether any rational fact finder could make the finding below, but whether the reviewing court believed the finding actually was correct.’ ” (Coastal Environmental Rights Foundation v. California Regional Water Quality Control Bd. (2017) 12 Cal.App.5th 178 , 187 (Foundation); see also Fukuda v. City of Angels (1999) 20 Cal.4th 805 , 817 (Fukuda) [under independent judgment standard a trial court must afford a strong presumption of correctness concerning the administrative findings].) “[T]he party challenging the administrative 9 decision bears the burden of convincing the court that the administrative findings are contrary to the weight of the evidence.” (Fukuda, at p. 817.) There is also no dispute about the standard of review we must employ on appeal. The parties agree that on factual matters, this court reviews the trial court’s decision on the CAO for substantial evidence supporting the trial court’s findings. We, too, agree. (See Fukuda, supra, 20 Cal.4th at p. 824 [“Where, ‘as here, the trial court is required to review an administrative decision under the independent judgment standard of review, the standard of review on appeal of the trial court’s determination is the substantial evidence test.’ ”].) “In substantial evidence review, the reviewing court defers to the factual findings made below. It does not weigh the evidence presented by both parties to determine whose position is favored by a preponderance. Instead, it determines whether the evidence the prevailing party presented was substantial—or, as it is often put, whether any rational finder of fact could have made the finding that was made below. If so, the decision must stand.” (Alberda v. Board of Retirement of Fresno County Employees’ Retirement Assn. (2013) 214 Cal.App.4th 426 , 435 (Alberda), italics omitted.) Also, the parties agree, as do we, that we review issues of law de novo. (Foundation, supra, 12 Cal. App.4th at p. 190.) “We are not bound by the legal determinations made by the state or regional agencies or by the trial court. [Citation.] But we must give appropriate consideration to an administrative agency’s expertise underlying its interpretation of an applicable statute. (Building Industry Assn. of San Diego County v. State Water Resources Control Bd. (2004) 124 Cal.App.4th 866 , 879 (Building Industry).) B. The Porter-Cologne Water Quality Control Act 10  The Porter-Cologne Water Quality Control Act (Porter-Cologne or the Porter-Cologne Act) (Wat. Code, § 13000 et seq.) expresses the public’s “primary interest in the conservation, control, and utilization of the water resources of the state,” and intends to advance that interest by ensuring the protection of the “quality of all the waters of the state” for the public’s use and enjoyment. (Wat. Code, § 13000.) Porter-Cologne was enacted in order “to attain the highest water quality which is reasonable, considering all demands being made and to be made on those waters and the total values involved, beneficial and detrimental, economic and social, tangible and intangible.” (Wat. Code, § 13000; City of Burbank v. State Water Resources Control Bd. (2005) 35 Cal.4th 613 , 619.) The Porter-Cologne Act recognizes that the protection of water quality can best be accomplished by statewide regulation with regional administration. Thus, under the act, the State Water Resources Control Board (State Board) and nine regional boards are the principal state agencies charged with enforcing state water pollution law. (See WaterKeepers Northern California v. State Water Resources Control Bd. (2002) 102 Cal.App.4th 1448 , 1452.) Each of the nine regional boards has a responsibility to “formulate and adopt water quality control plans” within their region and, through those plans establish water quality objectives that will “ensure the reasonable protection of beneficial uses [of waters of the state] and the prevention of nuisance.” (Wat. Code, §§ 13200, 13240–13241.) The regional board that issued the CAO here oversees the San Francisco Bay Region, and it adopted the Basin Plan as its water quality control plan under the Porter-Cologne Act. The Board found Respondents violated the Basin Plan and Porter-Cologne. 11  In addition, through Porter-Cologne, the regional boards implement the federal Clean Water Act ( 33 U.S.C. § 1251 et seq.). (Conway v. State Water Resources Control Bd. (2015) 235 Cal.App.4th 671 , 675.) The Clean Water Act prohibits the discharge of pollutants into any waters of the United States without a permit. ( 33 U.S.C. § 1311 .) 1. Regional Board Investigation Under Section 13267 Porter-Cologne includes Water Code section 13267 (Section 13267). This provision authorizes a regional board to investigate the quality of the waters of the state within the region subject to its authority. (Wat. Code, § 13267, subd. (a).) The Regional Board’s investigative power includes the right to ask anyone who has discharged waste that could affect the quality of waters of the state to provide the water board “technical or monitoring program reports” under penalty of perjury. (Wat. Code, § 13267, subd. (b)(1).) Section 13267 states: “The burden, including costs, of these reports shall bear a reasonable relationship to the need for the report and the benefits to be obtained from the reports. In requiring those reports, the regional board shall provide the person with a written explanation with regard to the need for the reports, and shall identify the evidence that supports requiring that person to provide the reports.” (Wat. Code, § 13267.) The trial court set aside the CAO for the Board’s failure to comply with the requirements of Section 13267. The court reasoned the CAO had only “a conclusory statement asserting that it complie[d] with § 13267, but [did] not include the written explanation or otherwise explain why the burden bears a reasonable relationship to the need.” The Regional Board contends the court misinterpreted the duty imposed by Section 13267 and there was no violation of Section 13267 that would warrant setting aside the order. 12  The parties have not cited, nor have we found, any case that construes the requirements of Section 13267. Regardless, its plain language makes clear that in order to require a discharger to provide the Board with any technical report, the Board must (1) provide “a written explanation with regard to the need for the reports;” and (2) “identify the evidence that supports requiring that person to provide the reports.” (Wat. Code, § 13267.) Here, the CAO explained the need for the reports and identified the evidence supporting the Board’s demand. The CAO included dozens of findings to explain the need for the technical reports. The Board concluded Sweeney had engaged in numerous unauthorized activities at the Site related to his unauthorized levee construction. The Board found these unauthorized construction activities removed crucial tidal flow to the Site’s interior, and caused its tidal marsh areas to dry out and vegetation to die off. The Board found Sweeney, without authorization, discharged fill material into tidal waters at the Site. It further found Sweeney’s unauthorized activities “adversely impacted beneficial uses at the Site including estuarine habitat, fish migration, preservation of rare and endangered species, fish spawning, wildlife habitat, and commercial and sport fishing.” These findings were the basis for the Regional Board requirement that Respondents “submit technical reports and undertake corrective action to clean up the waste discharged and abate its effects.” They also served as the basis for its determination that “[t]he burden of preparing technical reports required pursuant to section 13267, including costs, bears a reasonable relationship to the need for the reports and the benefits to be obtained from the reports, namely the restoration of beneficial uses at the Site.” Accordingly, the CAO provided Respondents with an adequate “written explanation regarding the need for technical reports,” and it “identif[ied] the evidence that support[ed] requiring 13 that person to provide the reports.” Nothing more was required under Section 13267, and the trial court erred in concluding otherwise. Even if the Board was not required under Section 13267 to conduct a formal cost-benefit analysis before seeking the reports, Respondents argue there was nothing in the record about the burden of producing the reports, and “nothing comparing the burden to the benefits.” They say the CAO violated Section 13267 for this reason because it failed to provide sufficient evidence to support its conclusion that the reports bear a reasonable relationship to the need for them and the benefits to be obtained from them. Not so. We recognize that Section 13627 requires the burden of conducting site investigations and producing reports to be reasonable in light of the benefits to be obtained. But Section 13267 contains no requirement that a CAO include any type of weighing or cost-benefit analysis. A plain reading of the CAO shows that the Regional Board was aware of the requirement that the burden of reports be proportional to their anticipated benefit. Even a brief review of the descriptions of the technical reports ordered by the Board indicates as much. For example, one report ordered was a “Point Buckler Restoration Plan” which was to set forth the “corrective actions designed to restore . . the water quality functions and value of the tidal marsh . . . existing prior to [Respondents’] unauthorized activities.” The Board’s findings warrant the inference that the Board understood the burden of preparing such reports were reasonably related to the benefits it aimed to accomplish, namely, the restoration of beneficial uses at the Site. Voices of the Wetlands v. State Water Resources Control Board (2011) 52 Cal.4th 499 , cited by both the trial court and Respondents in support of their argument on this point, does not apply. That case discussed the cost-benefit analysis of a project required under section 316(b) of the Clean Water Act (33 14 U.S.C. § 1326 (b)). (Id. at p. 507.) It requires that “the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact.” (Id. at pp. 507–508; see also 33 U.S.C. § 1326 (b).) The case has nothing to do with the Regional Board’s requirements for ordering technical reports under Section 13267. 2. Regional Board Enforcement Action Under Section 13304(a) When a regional board discovers a potential violation of Porter Cologne or the Clean Water Act, it can pursue an enforcement action. One of its tools is issuance of a cleanup and abatement order requiring the violator to develop and execute a remedial plan. Water Code section 13304, subdivision (a) (Section 13304(a)) establishes a regional board’s authority to issue a cleanup and abatement order to any person “who has caused or permitted, causes or permits, or threatens to cause or permit any waste to be discharged or deposited where it is, or probably will be, discharged into the waters of the state and creates, or threatens to create, a condition of pollution or nuisance.” (Wat. Code, § 13304, subd. (a).) Upon order of a regional board, the discharger shall “clean up the waste or abate the effects of the waste, or, in the case of threatened pollution or nuisance, take other necessary remedial action.” (Wat. Code, § 13304, subd. (a).) The trial court found the conditions for issuing a CAO were not satisfied. As we will explain, the trial court erred. It either drew erroneous conclusions on issues of law, or its factual findings were unsupported by substantial evidence. a. Waste The trial court concluded that Respondents did not discharge “waste” as the term is used in Section 13304(a). In the trial court’s view, the “dirt 15 used to repair the levee” was not waste but rather “a valuable building material, not something discarded as worthless or useless.” We conclude the trial court employed an overly restrictive interpretation of the term “waste” as it is used in Section 13304(a) to conclude the requirements for a cleanup and abatement order under Porter-Cologne were not met. Because the Porter-Cologne Act is a law “ ‘providing for the conservation of natural resources,’ ” it is “ ‘of great remedial and public importance and thus should be construed liberally’ [citation] so as to promote the general object sought to be accomplished.” (Coastside Fishing Club v. California Resources Agency (2008) 158 Cal.App.4th 1183 , 1202; United Artists Theatre Circuit, Inc. v. California Regional Water Quality Control Bd. (2019) 42 Cal.App.5th 851 , 866–867; cf. County of Los Angeles v. State Water Resources Control Bd. (2006) 143 Cal.App.4th 985 [court defers to regional board expertise in construing language which is not clearly defined in statutes].) Porter-Cologne defines “waste” as “sewage and any and all other waste substances, liquid, solid, gaseous or radioactive, associated with human habitation, or of human or animal origin, or from any producing, manufacturing, or processing operation of whatever nature prior to, and for purposes of, disposal.” (Wat. Code, § 13050, subd. (d).) Here, the parties do not dispute what fill material was used to reconstruct the levees at the site. Respondents used spoils from trenches excavated at the site to build up the levees. Accordingly, whether reconstruction of the levees involved the discharge of waste is a legal issue we review de novo. A leading case construing the term “waste” under Porter-Cologne is Lake Madrone Water Dist. v. State Water Resources Control Bd. (1989) 209 Cal.App.3d 163 (Lake Madrone). There, a State Board abatement order 16 required a damn operator to refrain from flushing accumulated sediment into a creek and to submit a plan for its cleanup. (Id. at p. 167.) The released sediment was deposited in the creek up to 18 inches deep, and “chok[ed] [the creek’s] pools and shoreline . . . clogging its spawning areas so heavily as to destroy fish and aquatic life.” (Id. at p. 166.) The dam operator challenged the State Board’s view that the accumulated sediment passing through the dam’s gate valve was “waste” within the meaning of Porter-Cologne. (Id. at pp. 168–169.) Citing the legislative intent behind Porter-Cologne and prior Attorney General Opinions,2 the court concluded, “There is no doubt that concentrated silt or sediment associated with human habitation and harmful to the aquatic environment is ‘waste’ under the statute.” (Id. at p. 169.) Acknowledging the silt was “innocuous in its unconcentrated form,” it explained that “by furnishing a man-made artificial location for its concentration, the innocuous substance [was] changed into one . . . deadly to aquatic life.” (Id. at pp. 169–170.) It found the concentrated sediment clogging the creek associated with human habitation, as well. (Ibid.) Here, there is no dispute that Respondents used the fill material to replace a breached levee in order to facilitate kiteboarding or duck hunting club purposes. Thus, the act of placing the fill in tidal marsh and tidal waters associated the fill material with human habitation and activities. Even though there is no claim that the fill material was contaminated or harmful in a general sense, it was harmful as used in reconstructing the levee in tidal wetlands. Respondents’ discharge of fill material resulted in 2 The Regional Board requests we take judicial notice of the following two Attorney General Opinions: 27 Ops.Cal.Atty.Gen. 182 (No. 55-236, March 30, 1956) and 63 Ops.Cal.Atty.Gen. 51 (No. 79-906, January 25, 1980) [ 1980 WL 96799 ], both of which were cited in Lake Madrone, supra, 209 Cal.App.3d 163 . (See id. at p. 170.) Respondents do not oppose these requests. We grant them. 17 excess sedimentation that smothered estuarine habitat, blocked tidal flows and direct overland tidal flooding, restricted the beneficial uses of habitat by fish and endangered and rare species, caused the dieback of tidal marsh vegetation, degraded habitat for waterfowl, and resulted in excessive salinity, turbidity and discoloration of the Site’s interior waterways. In exercising its independent review, the trial court found the fill material created no such harm and agreed with Respondents that their levee work did not “unreasonably affect beneficial uses.” But this finding was not supported by substantial evidence as no rational fact finder could have reached such a decision on the basis of the evidence in the administrative record. When the Board responded to Respondents’ opposition to the tentative cleanup and abatement order, the Board’s evidence demonstrated that the Site had been a tidal marsh before the levee repair. The Board’s expert identified the harms resulting from converting the Site from tidal marsh to a largely dry island. There were adverse impacts to the vegetation and soil on the island. The Technical Report documented “a mass dieback” of marsh vegetation throughout the diked interior of the island resulting in “growth-inhibited marsh vegetation.” The Board’s expert also presented evidence of harm to wildlife that occurred because the levee cut off tidal connectivity to the island. Suisun Bay including the Site was designated critical habitat for Delta smelt and Chinook salmon, and the drainage and diking of the Site risked reductions in food and precluded access to tidal channels for foraging. This evidence of harm associated with Respondents’ use of the fill material made it “waste” within the meaning of Porter-Cologne. Our interpretation aligns with the intent behind Porter-Cologne to preserve natural resources and protect the environment. (Cf. Lake Madrone, supra, 209 Cal.App.3d at p. 169 [observing that waste could encompass discharged 18 fine-grained materials into a stream used for fishing and fish spawning if fishery were adversely affected].)3 Respondents seek to distinguish Lake Madrone based on the value of the fill material which they used to make “a valuable improvement to the property,” in contrast to the sediment flow released from the dam in that case, noting the sediment “was of no value to the dam operators, who were discarding it as valueless.” The trial court agreed, albeit incorrectly, that the fill material could not be waste because it was being used as a valuable building material and not “something discarded as abandoned or useless.” But the fact that a particular material may have commercial value does not preclude it from being waste under the Porter-Cologne Act. We follow Lake Madrone which clearly instructs that Porter-Cologne does not require “waste” to be sewage or some sort of worthless byproduct. Its characterization did not turn on the purported value of the discharged material but rather the harm it caused to the environment. (See Lake Madrone, supra, 209 Cal.App.3d at p. 170.) Thus, despite the seemingly benign character of the fill material used by Respondents, it could still be waste if it was harmful when used to repair the levee. Waste Management of the Desert, Inc. v. Palm Springs Recycling Center, Inc. (1993) 7 Cal.4th 478 , cited by Respondents for the proposition that the 3 The Regional Board requests we take judicial notice of the following orders: State Water Resources Control Board Order No. WQ 77-5, State Water Resources Control Board Water Quality Order No. 2004-004-DWQ. They contend these orders are relevant to the issue of whether earthen materials, dredge or fill material, or sediment constitutes waste under Porter-Cologne. Respondents oppose these requests. We deny the Regional Board’s requests as to these matters because they are unnecessary to resolve the issues before us. (See Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057 , 1063 (Mangini) [“ ‘Matters otherwise subject to judicial notice must be relevant to an issue in the action.’ ”].) 19 fill used here cannot be waste because it was useful material intentionally deposited, is also distinguishable. There, our Supreme Court interpreted the definition of “solid waste” in the California Integrated Waste Management Act (Pub. Resources Code, § 40191), a statute that addresses whether the owner of recyclable materials could sell them to someone other than “the exclusive franchisee” selected by a city to provide “solid waste handling services.” (Id. at p. 481.) In that context, whether the recyclable materials could be considered waste turned on whether the owner of the materials elected to sell them as recyclables rather than just throw them away. (Id. at p. 486.) The court concluded that recyclables were not waste until they were actually discarded. (Id. at p. 484.) We decline to define “waste” as the term is used in Porter-Cologne based upon whether a material is worthless or useless in an economic sense from the owner’s perspective. Such a construction would not be consistent with the policy of environmental protection that is to animate the Porter-Cologne Act. The federal district court opinion Respondents cite, Tahoe-Serra Preservation Council, Inc. v. Tahoe Regional Planning Agency (D.Nev. 1999) 34 F.Supp.2d 1226 , 1254, is neither controlling nor applicable. There, the court acknowledged “waste” could include sediment generated during home construction. (Id. at pp. 1251–1254.) Its holding was that the act of building houses was not a “discharge” or “disposal” of waste that could create a nuisance. (Ibid.) The district court never concluded that fill material was not waste, and its holding has no bearing on the question before us. Respondents’ final argument on this point is that the Corps has opined that the “definition of waste does not include discharges of dredge or fill material.” We are not persuaded. The Corps opinion Respondents rely upon was made in a comment letter from an official in a regional Corps office 20 to the State Board. As such, it lacks the force of law and does not warrant any deference. (Christensen v. Harris County (2000) 529 U.S. 576 , 587 [interpretations contained in an opinion letter lack force of law and do not warrant deference]).4 For the aforementioned reasons, we also decline the invitation of amicus to hold that the definition of waste cannot include earthen material such as soil, sand and gravel. As the authorities make clear, it is not the character of a material that makes a substance, organic or otherwise, waste under Porter-Cologne, it is the uses to which the material is employed. Moreover, not all fill material is created equal or suitable for all purposes, and approved wetland fill may require specific properties. (Cf. Sierra Club v. U.S. Army Corps of Engineers (11th Cir. 2007) 508 F.3d 1332 , 1336.) b. Discharge The trial court also concluded Respondents’ activities did not constitute “discharges” under Porter-Cologne. Because the term “discharge” is not defined in Porter-Cologne, the trial court relied on dictionary definitions of “discharge” that stated the term meant “[t]o allow (a liquid, gas, or other 4 We are also not persuaded that the opinion presents the official position of the Corps, since it is inconsistent with its frequently enforced and longstanding position that discharged sediment constitute “pollutants” under the Clean Water Act. (See, e.g., Borden Ranch Partnership v. U.S. Army Corps of Engineers (9th Cir. 2001) 261 F.3d 810 , 814–815, aff’d 537 U.S. 99 (2002); Rybachek v. U.S. E.P.A. (9th Cir. 1990) 904 F.2d 1276 , 1285-1286; United States v. Deaton (4th Cir.2000) 209 F.3d 331 , 335-336.) Indeed, the Corps reached that conclusion with respect to the fill material Respondents used here. Following the October 2015 Site inspection, the Corps prepared a record memorandum which stated, “Field findings confirmed that an unauthorized discharge of fill had occurred within waters of the U.S.” under the Clean Water Act. On that basis, the United States sued Respondents, and the trial court found the fill material Respondents were pollutants under the Clean Water Act. (See Sweeney District Court Opinion, supra, 2020 WL 5203474 , at pp. *22-*25.) 21 substance) to flow out from where it has been confined,” “to give outlet or vent to,” and “[to] emit.” The court concluded that in its ordinary meaning, “ ‘discharge’ . . . does not include a removal.” It observed that “[a]mong the unauthorized activities” identified in the CAO were “the excavation of ditches and the removal of vegetation.” As the court concluded these removals of fill material were not “discharges” within the meaning of Porter-Cologne, the Board had no authority to regulate Respondents’ activities under the CAO. The parties do not dispute this common sense meaning of “discharge” as applied to Porter-Cologne, and neither do we. Rather, whether this element of the statute was met does not present a legal issue but a factual one. Factually, the court erred. Its decision impliedly found that the only activities regulated under the CAO were Respondents’ excavation of ditches and removal of vegetation. However, no rational fact finder could have made such a finding. Indeed, the court readily acknowledged that ditch excavation and vegetation removal were “[a]mong the unauthorized activities” identified in the CAO. (Emphasis added.) Numerous activities not addressed by the trial court qualified as discharges. In their response to the 2015 CAO, Respondents acknowledged they placed fill materials into waters at the Site in constructing and replacing the levees. Sweeney admitted discharges by stating the following in his declaration accompanying Respondents’ challenge to the tentative cleanup and abatement order: “I dug out material from an artificial ditch inside the levee and placed the material on the existing levee. Some material was placed where the levee had been breached . . .” The trial court’s conclusion that there were no discharges at the Site because the unauthorized activities consisted solely of removals of fill material was error because it completely disregarded the evidence and significance of discharges of large amounts of fill to build and replace levees. 22  c. Waters of the State The trial court also concluded the Board’s issuance of the CAO did not satisfy the requirement under Porter-Cologne that Respondents’ waste be discharged into “waters of the state.” The court found the Regional Board’s consultants were not credible because they initially said the Site interior was inundated with tides on a daily basis but changed their positions when Sweeney testified that he had never seen the interior inundated, except for water in the channels and ditches. The trial court also found “the interior of the [Site] (except for the channels and ditches) was dry land rather than waters of the state,” and that most of Respondents’ work occurred on dry land. Again, the court erred. Porter-Cologne defines “waters of the state” as “any surface water or groundwater, including saline waters, within the boundaries of the state.” (Water Code, § 13050, subd. (e).) There is no real dispute that a significant portion of Respondents’ discharges of fill material occurred in waters of the state. The trial court’s finding that “the interior of the island (except for the channels and ditches) was dry land rather than waters of the states” recognizes that the Site’s “channels and ditches” were bodies of water. These were waters of the state. Respondents do not disagree. Respondents’ Brief addresses the Regional Board’s contentions on this point under the heading “Most Activities Were Not In ‘Waters of the State.’ ” We consider this an acknowledgement that at least some of Respondents’ activities were in waters subject to Porter-Cologne jurisdiction. Nor do Respondents dispute the Board’s expert opinion that the island’s channels and ditches were subject to daily tidal action, thus refuting any finding that the Site consisted of only dry land. We do not see how Respondents could credibly claim that repair and replacement of segments of the outer levee and restriction of tidal flow into 23 some areas of the Site did not occur in waters of the state. Because significant waters of the state were affected by Respondents’ activities, this element of Porter-Cologne was satisfied, and the trial court’s decision to set aside the CAO on this ground was erroneous. d. Condition of Pollution Finally, the trial court concluded Respondents’ activities did not create a “condition of pollution” at the Site under Porter-Cologne. As we discussed in our analysis of the “waste” element, the trial court rejected the Regional Board’s finding that Respondents’ levee work unreasonably altered water quality so as to alter beneficial uses of the water at the Site, and found there was no direct evidence of harm to the environment. Accordingly, it concluded Respondents’ levee work “did not unreasonably affect beneficial uses.” The trial court went on to find the levee work actually promoted the beneficial uses of the Site’s waters by aiding in the restoration of functioning duck ponds. Again, the court made factual and legal errors. Factually, the findings of no harm to beneficial uses at the Site were unsupported by substantial evidence as no rational trier of fact could have reached that conclusion as we explained in Section II.B.2.a., ante. Legally, the court construed the “condition of pollution” element of Porter-Cologne far too narrowly. A regional board is authorized to issue a cleanup and abatement order to a discharger who “creates, or threatens to create, a condition of pollution or nuisance.” (Wat. Code, § 13304, subd. (e).) “Condition of pollution” is defined as “an alteration of the quality of the waters of the state by waste to a degree which unreasonably affects the waters for beneficial uses.” (Wat. Code, § 13050, subd. (l)(1).) Notably, under Section 13304(a), a cleanup and abatement order can be issued when the discharger “creates” a pollution condition or “threatens to 24 create” a condition of pollution. (Wat. Code, § 13304, subd. (a), emphasis added.) Under the court’s interpretation, the CAO could only issue if Respondents’ waste created or was creating a condition of pollution. The court found “the levee work did not unreasonably affect” waters for beneficial uses and its “the asserted harm to fish was unquantified and uncertain,” so it set the CAO aside. The trial court’s statutory analysis failed to recognize that threat of a condition of pollution can justify issuance of a cleanup and abatement order. (See Wat. Code, § 13304, subd. (a), (e).) Even if we were to accept the court’s finding that the “asserted harm to fish was unquantified and uncertain,” the finding would not conflict with issuance of the CAO so long as Respondents’ discharges threatened to create a condition of pollution. There was ample evidence in the Board expert’s Technical Assessment and response to Respondents’ submissions of likely, potential, or threatened harm to habitat and species that the trial court could not legitimately disregard. On this basis Porter-Cologne was satisfied, and the trial court’s decision to set aside the CAO because there was no showing of a condition of pollution was erroneous. The Regional Board also argues the trial court committed legal error by disregarding an independent basis for upholding the CAO unrelated to the “condition of pollution” element in Section 13304(a). Read fully, the Board argues that Water Code section 13304, subdivision (a) also allows a regional board to issue a cleanup and abatement order when discharges of waste into jurisdictional waters occur “in violation of [a] waste discharge requirement or other order or prohibition issued by a regional board or the state board.” (Wat. Code, § 13304, subd. (a).) The Regional Board contends Respondents’ violation of a discharge prohibition in the Basin Plan independently justified 25 the CAO. In light of the conclusions we reach on the CAO, we need not consider this argument for purposes of our CAO analysis.5 C. Suisun Marsh Preservation Act In 1977, the Legislature enacted the Suisun Marsh Preservation Act (Preservation Act or Act), codified in Division 19 of the Public Resources Code. The Preservation Act protects valuable natural resources within the Suisun Marsh, and charges BCDC with the ultimate authority over its implementation. (Pub. Resources Code, § 29000 et seq.; see also Sustainability, Parks, Recycling & Wildlife Legal Defense Fund v. San Francisco Bay Conservation and Development Commission (2014) 226 Cal.App.4th 905 , 915–916.) As directed under the Act, BCDC prepared and adopted the Suisun Marsh Protection Plan (Protection Plan) to “preserve the integrity and assure continued wildlife use of the Suisun Marsh.” (Pub. Resources Code, § 29113, subd. (a).) The Protection Plan was intended to “preserve and enhance the quality and diversity of the Suisun Marsh aquatic and wildlife habitats and to assure retention of upland areas adjacent to the Marsh in uses compatible with its protection.” (BCDC, Protection Plan (Dec. 1976) [as of Feb 18, 2021] (SMPP).)6 Section 29302, subdivision (a) (Section 29302(a)) of the Preservation Act “imposes a judicially enforceable duty on state agencies to comply with, and to carry out their duties and responsibilities in conformity 5 The Regional Board requests we take judicial notice of Regional Water Board Cleanup and Abatement Order No. R2-2017-1021 and Regional Water Board Cleanup and Abatement Order No. R2-2016-1038. They contend these orders are other issues related to the Regional Board’s authority to issue the CAO. Respondents oppose these requests. We deny the Regional Board’s requests as to these matters because they are unnecessary to resolve the issues before us. (See Mangini, supra, 7 Cal.4th at p. 1063.) 6 We take judicial notice on our motion of the Protection Plan. (Evid. Code, § 452, subdivision (c).) 26 with, this this division and the policies of the protection plan.” (Pub. Resources Code, § 29302, subd. (a).) The trial court concluded the Preservation Act imposed a restraint on the Board’s authority and that the Board failed to “act[] in conformity with the Preservation Act and the policies of the Protection Plan” in violation of Section 29302(a) when it issued the CAO. It reached this conclusion after finding Respondents’ “levee and excavation work was done to restore the duck ponds at Point Buckler and provide waterfowl with food and habitat, and that [both orders] harm[] waterfowl and their food supply and habitat by prohibiting [Respondents] from repairing the levee, establishing duck ponds, and planting duck food.” In issuing the CAO, the trial court determined the Board undermined the policy and intent of the Protection Plan to preserve and protect duck hunting clubs as a legitimate use for wetlands, thus, according to the trial court, the CAO was invalid. It made no matter to the trial court that the CAO could also be authorized under Porter-Cologne. In the trial court’s view, Porter-Cologne’s remedial directives should have been harmonized to account for the preference for duck clubs expressed in the Protection Plan and thereby comply with Section 29302(a). The court made a point of observing, “[T]he Regional Board can comply with the requirements of the Preservation Act without violating the Porter Cologne Act, and that the two statutes are not in conflict here.” The Regional Board contends issuance of the CAO did not violate the Preservation Act. The Board first argues that the court’s ruling is based upon a misreading of the Act. The Board argues that in context, Section 29302(a) does not apply to enforcement actions taken by state agencies under authorizing provisions of state law. We agree. A reading of Section 29302(a) 27 in context confirms that it applies to agency development or control over wetlands, not an agency’s exercise of police power. While subsection (a) provides that agencies must act in conformity with the Preservation Act, subsection (b) exempts agencies from the permit process for wetland development and subsection (c) exempts agencies from specific water quality standards or delta outflow requirements. (Pub. Resources Code, § 29302, subds. (a),(b), (c).) Moreover, section 29301 makes clear that the Preservation Act “does not increase, decrease, duplicate, or supersede the authority of any existing state agency.” (Pub. Resources Code, § 29301.) As part of the same statutory scheme, section 29301 and 29302 should be read together and each section given its intended meaning and operable effect. (See Sangster v. California Horse Racing Bd. (1988) 202 Cal.App.3d 1033 , 1039, fn. 10 [noting “settled principle” that “ ‘[f]or purposes of statutory construction, the various pertinent sections of [the statute] must be read together and harmonized if possible’ ”].) A proper reading of Section 29302 makes clear that it has no impact on the regulatory authority of the Board over wetlands, and it should not have been relied upon by the trial court to invalidate the CAO. But even if Respondents are correct that the Board’s enforcement actions were subject to the Preservation Act, there still would be no violation. The trial court’s conclusion that the Preservation Act and Porter-Cologne are not in conflict was correct as far as it goes. But as we will explain, the court’s ruling that the Regional Board “failed to act in conformity with the Preservation Act and policies of the Protection Plan” was error. The trial court’s conclusion was premised, in part, on its view that the Regional Board’s regulatory authority over illegal discharges in the marsh was constrained by the Preservation Act, and that the Act exempted 28 Respondents from compliance with other pollution laws. Section 29301 of the Preservation Act makes clear neither is the case. It states, “Except as otherwise expressly provided in this division, enactment of this division does not increase, decrease, duplicate, or supersede the authority of any existing state agency.” (Pub. Resources Code, § 29301, emphasis added.) The trial court did not consider the effect of section 29301, and Respondents have not identified any provision in the Preservation Act which expressly changes the authority of the Regional Board, nor have we. Section 29006, subdivision (c) of the Act supports our view of the Board’s authority. It states: “No provision of [the Preservation Act] is a limitation on . . . the power of the Attorney General to bring an action in the name of the people of the state on his own motion or at the request of any state agency having standing under provisions of law other than this division, to enjoin any waste or pollution of the marsh.” (Pub. Resources Code, § 29006, subd. (c).) Thus, the Preservation Act allows the Attorney General, at the Regional Board’s request, to pursue actions to stop pollution of wetlands. Indeed, the Attorney General’s cross-complaint against Respondents to enforce the CAO is an exercise of such authority. Nor does the Preservation Act exempt Respondents from compliance with other water quality laws including Porter-Cologne and the Clean Water Act. Section 29500 of the Preservation Act establishes that any entity seeking to undertake a development project in the marsh “shall obtain a marsh development permit,” which is “[i]n addition to obtaining any other permit required by law from any local government or from a state, regional, or local agency.” (Pub. Resources Code, § 29500, emphasis added.) This is another provision of the act that does not appear to have been considered by the trial court. 29  Respondents have not identified any provision in the Preservation Act that impairs the Regional Board’s authority to require discharge permits, or to bring enforcement actions to curtail or remediate unlawful discharges. Since it is clear the Preservation Act does not undercut the Regional Board’s regulatory authority, we will address the “judicially enforceable duty” the trial court concluded Section 29302(a) imposes on state agencies. The trial court’s finding that Respondents’ “levee and excavation work was done to restore duck ponds at [the Site] and provide waterfowl with food and habitat” and that the CAO “harmed waterfowl and their food supply and habitat by prohibiting [Respondents] from repairing the levee, establishing duck ponds, and planting duck food” demonstrated the court’s view that the Preservation Act favored the restoration of duck hunting clubs over any other purposes that were intended to be served when the Regional Board issued the CAO. According to the trial court, by issuing a CAO which undermined duck habitat restoration and therefore harmed waterfowl and their food supply, the Regional Board failed to comply with its “judicially enforceable duty” under the Preservation Act. This was another error. Section 29302(a) does not mandate the Regional Board comply with any enforceable duty Respondents claim. “Courts have delineated what is necessary to establish a mandatory duty. ‘First and foremost, ... the enactment at issue [must] be obligatory, rather than merely discretionary or permissive, in its directions to the public entity; it must require, rather than merely authorize or permit, that a particular action be taken or not taken.’ [Citation.] ‘It is not enough, moreover, that the public entity or officer have been under an obligation to perform a function if the function itself involves the exercise of discretion.’ [Citation.] Moreover, ‘[c]ourts have . . . [found] a mandatory duty only if the 30 enactment “affirmatively imposes the duty and provides implementing guidelines.” ’ [Citation.] ‘ “ ‘[T]he mandatory nature of the duty must be phrased in explicit and forceful language.’ [Citation.] ‘It is not enough that some statute contains mandatory language. In order to recover plaintiffs have to show that there is some specific statutory mandate that was violated by the [public entity].” ’ ” (State Dept. of State Hospitals v. Superior Court (2015) 61 Cal.4th 339 , 348–349 (State Hospitals).) Whether a particular statute imposes “a mandatory duty, rather than a mere obligation to perform a discretionary function, is a question of statutory interpretation for the courts.” (Creason v. Department of Health Services (1998) 18 Cal.4th 623 , 631.) Section 29302(a) sets forth no mandatory duty directing state agencies to carry out activities in a manner favorable to duck hunting clubs. In fact, Section 29302(a) makes no reference to such clubs. Rather, it provides that state agencies must carry out their responsibility in conformity with “this division and the policies of the protection plan.” (Pub. Resources Code, § 29302.) Such broad language did not impose a specific mandatory duty on the Regional Board. (See State Hospitals, supra, 61 Cal.4th at p. 350 [“A mandatory duty is created only when an enactment requires an act that is clearly defined and not left to the public entity’s discretion or judgment.”].) Section 29302(a)’s reference to “this division” refers to the Preservation Act, and the Act does not specify any mandatory duty or fealty to duck clubs. The Preservation Act is codified in seven chapters of the Public Resources Code and consists of scores of statutory provisions reflecting multiple objectives and directives for the protection of Suisun Marsh. (See Pub. Resources Code, §§ 29000–29612.) The trial court did not identify or discuss any provision in the Preservation Act that would obligate the Regional Board 31 to exercise its enforcement authority in a manner friendly to duck clubs. Respondents suggest such a duty is imposed by section 29002 of the Act. But that provision is an all-encompassing statement of legislative findings7 that describes the marsh and its role as critical habitat for waterfowl and other wildlife. (Pub. Resources Code, § 29002.) It states “ the policy of the state to preserve and protect resources of this nature for the enjoyment of the current and succeeding generations” but it does not establish a clearly defined duty that prescribes how a state agency must carry out its enforcement duties in service of such policies. Nor does it elevate the preservation of duck hunting clubs over tidal wetlands or instruct the agency to prioritize habitat for waterfowl over other wildlife, including endangered species. 7 Public Resources Code section 29002 states in full: “The Legislature hereby finds and declares that the Suisun Marsh, consisting of approximately 55,000 acres of marshland and 30,000 acres of bays and sloughs, and comprising almost 10 percent of the remaining natural wetlands in California, plays an important role in providing wintering habitat for waterfowl of the Pacific Flyway; that during years of drought the area becomes particularly important to waterfowl by virtue of its large expanse of aquatic habitat and the scarcity of such habitat elsewhere; that the area provides critical habitat for other wildlife forms, including such endangered, rare, or unique species as the peregrine falcon, white-tailed kite, golden eagle, California clapper rail, black rail, salt-marsh harvest mouse, and Suisun shrew; that the existence of this wide variety of wildlife is due to the relatively large expanse of unbroken native habitat and the diversity of vegetation and aquatic conditions that prevail in the marsh; that man is an integral part of the present marsh ecosystem and, to a significant extent, exercises control over the widespread presence of water and the abundant source of waterfowl foods; that the Suisun Marsh represents a unique and irreplaceable resource to the people of the state and nation; that future residential, commercial, and industrial developments could adversely affect the wildlife value of the area; and that it is the policy of the state to preserve and protect resources of this nature for the enjoyment of the current and succeeding generations.” (Pub. Resources Code, § 29002.) 32  The “policies of the Protection Plan” do not contain any clearly defined duty to promote duck hunting clubs to the exclusion of all other Suisun Marsh policies.8 There are more than 50 enumerated policies across a half dozen areas in the Protection Plan, and there is no indication that certain policies take precedence over others. Respondents contend that notwithstanding its multiple objectives, the Preservation Act “was enacted to preserve duck clubs and duck habitat.” Respondents rely on two Plan policies to support this proposition. First, they cite the “Land Use and Marsh Management” policy which states “managed wetlands . . . should be included in a primary management area” and within such area, “existing uses should continue.” They note that duck clubs are managed wetlands and further observe certain findings under this policy endorse the “[p]rovision of habitat attractive to waterfowl” and the “[i]mprovement of water distribution and levee systems.” The second policy they cite is a Recreation and Access policy which states, “Continued recreational use of privately-owned managed wetlands should be encouraged.” It is possible that these two policies would be served by the duck hunting club Respondents endeavored to restore, but they are not the Protection Plan’s only policies or anywhere designated as its most important 8 The “policies of the protection plan,” a defined term, refers to “the policies set forth in Part II . . . of the protection plan.” (Pub. Resources Code, § 291113, (b).) Part II of the Protection Plan sets forth myriad “Findings and Policies” in several different categories. For examples, under the category “Environment,” four policies are enumerated. Under the category “Water Supply and Water Quality,” twelve distinct policies are identified. Under the category “Natural Gas Resources,” six policies are listed, one which has four subsections and another which has ten. The “Utilities, Facilities and Transportation” has ten policies. The “Recreation and Access” category list five policies. Under the “Water-Related Industry” category, there are seven policies. In the “Land Use and Marsh Management” category, 17 policies are enumerated. (See generally SMPP, supra.) 33 ones. Other Plan policies, many of which appear to have equal value as beneficial uses that would be served by implementation of the CAO, were simply not considered by the court. The Plan contains no directives to state agencies charged with implementing a statutory scheme that seeks to advance more than 50 policy objectives that they are to favor any single objective over any other. Nor is there any instruction for how state agencies subject to the Preservation Act are to weigh policies which conflict or compete with each other. Absent such specific directives, entities subject to the Plan or charged with enforcing it are given considerable discretion in how they carry out their activities in conformity with the Plan’s policies. The Preservation Act did not impose a mandatory duty on the Regional Board to follow any particular policy supportive of duck clubs when pursuing an enforcement action. III. ACL ORDER The trial court also set aside the ACL Order on multiple grounds. Among other reasons, it found the ACL Order violated the Eighth Amendment’s prohibition against excessive fines, was in conflict with the Preservation Act, and was the result of a vindictive prosecution. Throughout its analysis, it found the Regional Board’s findings were not supported by the evidence. The Regional Board contends none of these reasons were valid or justified discarding the ACL Order, and the assessed penalties were proper. As we will explain, we agree. A. Standard of Review In contrast to their agreement on the standards of review that applied to the CAO, the parties disagree on the standards of review applicable to the ACL Order. 1. The Trial Court’s Review of ACL Order 34  The first dispute focuses on whether the trial court applied the proper standard in its review of the ACL Order. The Regional Board asserts that “the trial court was to review the findings in the [ACL Order] under the substantial evidence standard” but failed to do so. Respondents contend that each of the issues they raised to challenge the ACL Order requires a different standard of review. They contend “the trial court should have applied its independent judgment” to review of the Board’s findings, but acknowledge “the applicable standard is not clear.” We conclude the trial court should have reviewed the Regional Board’s findings for substantial evidence. As here, when a party challenges a final regional board order in a petition for writ of mandate under Code of Civil Procedure section 1094.5, abuse of discretion is established and a writ of mandate should issue if an agency either failed to proceed in the manner required by law, did not support its decision with adequate findings, or if its findings are not supported by the record. (Wat. Code, § 13330, subd. (b); Code Civ. Proc., § 1094.5, subd. (b).) Section 1094.5, subdivision (c) presents two distinct standards of review a trial court is to use when determining whether an agency abused its discretion: “Where it is claimed that the findings are not supported by the evidence, in cases in which the court is authorized by law to exercise its independent judgment on the evidence, abuse of discretion is established if the court determines that the findings are not supported by the weight of the evidence. In all other cases, abuse of discretion is established if the court determines that the findings are not supported by substantial evidence in the light of the whole record.” (Code Civ. Proc., § 1094.5, subd. (c).) As directed by Water Code section 13330, subdivision (e), the trial court’s review of an administrative civil liabilities order is governed by the 35 substantial evidence standard. “For the purposes of subdivision (c) of Section 1094.5 of the Code of Civil Procedure, the court shall exercise its independent judgment on the evidence in any case involving the judicial review of . . . a decision or order of a regional board for which the state board denies review under Section 13320, other than a [civil liability] decision or order issued under Section 13323.” (Wat. Code, § 13330, subd. (e), emphasis added; see Wat. Code, § 13323, subd. (a) [“any executive officer of a regional board may issue a complaint to any person on which administrative civil liability may be imposed pursuant to this article”].) Thus, a trial court does not exercise its independent judgment on the evidence when it reviews administrative civil liability orders as it would if it were reviewing cleanup and abatement orders. (Ante, Section II.A.) Accordingly, while the trial court could exercise its independent judgment in reviewing the CAO, its standard for the ACL Order was substantial evidence. “In substantial evidence review, the reviewing court defers to the factual findings made below. It does not weigh the evidence presented by both parties to determine whose position is favored by a preponderance. Instead, it determines whether the evidence the prevailing party presented was substantial—or, as it is often put, whether any rational finder of fact could have made the finding that was made below. If so, the decision must stand.” (Alberda, supra, 214 Cal.App.4th at p. 435 ; see also Marina County Water Dist. v. State Water Resources Control Bd. (1984) 163 Cal.App.3d 132 , 138 [under substantial evidence review, superior court’s “task would have been merely to determine whether there was substantial evidence in the record, taken as a whole, to support the Board’s action, whether the court itself would have come to the same conclusion on that evidence or not”].) 36  Respondents argue that because the Regional Board’s decision affected a fundamental vested right “the trial court should have applied its independent judgment” to the evidence. Generally, “[i]f the administrative decision involved or substantially affected a ‘fundamental vested right,’ the superior court exercises its independent judgment upon the evidence disclosed in a limited trial de novo in which the court must examine the administrative record for errors of law and exercise its independent judgment upon the evidence. [Citations.] The theory behind this kind of review is that abrogation of a fundamental vested right ‘is too important to the individual to relegate it to exclusive administrative extinction.” (JKH Enterprises, Inc. v. Department of Industrial Relations (2006) 142 Cal.App.4th 1046 , 1056–1057 (JKH Enterprises).) “On the other hand, ‘[w]here no fundamental vested right is involved, the superior court’s review is limited to examining the administrative record to determine whether the adjudicatory decision and its findings are supported by substantial evidence in light of the whole record.’ ” (Id. at p. 1057.) We recognize that “[a]s a general rule, ‘[u]nless expressly provided, statutes should not be interpreted to alter the common law, and should be construed to avoid conflict with common law rules.’ ” (California Assn. of Health Facilities v. Department of Health Services (1997) 16 Cal.4th 284 , 297.) But here, Water Code section 13330, subdivision (e) expressly rejects the independent judgment standard as the basis for the trial court’s review of administrative civil liability orders, and Code of Civil Procedure section 1094.5, subdivision (c) directs trial courts to review such decisions for substantial evidence. 37  2. This Court’s Review of the Trial Court Decision Next, we move to the standard of review we are to employ on appeal, which the parties also contest. The Regional Board argues that we apply the same substantial evidence standard the trial court should have applied, “giving no deference to the trial court and reviewing de novo whether the Board’s findings in the ACL were supported by substantial evidence in the entire record.” Respondents, on the other hand, assert that “this Court reviews the trial court’s findings for substantial evidence.” We will apply the same standard the trial court should have applied and review the Board’s findings for substantial evidence. (See Fort Mojave Indian Tribe v. Department of Health Services (1995) 38 Cal.App.4th 1574 , 1590 [“[I]f the court should have employed the alternative, substantial evidence test, its determinations would be subject to review by applying the same test, de novo, to the administrative record.”]; cf. Ogundare v. Department of Industrial Relations (2013) 214 Cal.App.4th 822 , 828 [“ ‘Regardless of the nature of the right involved or the standard of judicial review applied in the trial court, an appellate court reviewing the superior court’s administrative mandamus decision always applies a substantial evidence standard.’ ”].) In doing so, “[w]e review the administrative record to determine whether the agency’s findings were supported by substantial evidence, resolving all conflicts in the evidence and drawing all inferences in support of them.” (JHK Enterprises, supra, 142 Cal.App.4th at p. 1058.) Of course, we review the trial court’s legal determinations under the de novo standard. (Building Industry, supra, 124 Cal.App.4th at p. 879; Foundation, supra, 12 Cal.App.4th at p. 190; Imperial Irrigation Dist. v. State Water Resources Control Bd. (1990) 225 Cal.App.3d 548 , 553.) This means “we are not bound by the legal determinations made by the state or regional 38 agencies or by the trial court . . . [b]ut we must give appropriate consideration to an administrative agency’s expertise underlying its interpretation of an applicable statute.” (Building Industry, supra, at p. 879.) B. The Basin Plan and Clean Water Act The ACL Order was premised on discharges in violation of the Regional Board’s Basin Plan and the Clean Water Act. The Regional Board alleged two violations in its ACL Complaint. The first alleged was that Respondents violated Discharge Prohibition No. 9 (Prohibition 9) in the Basin Plan and section 301 of the Clean Water Act ( 33 U.S.C. § 1311 ) for the discharge and continued placement of approximately 8,500 cubic yards of fill into waters of the State and the United States. The second violation alleged that Respondents failed to obtain a certification for the discharge of dredged or fill material into navigable waters of the United States as required by section 401 of the Clean Water Act (Section 401 Certification). The ACL Order issued based on these discharges. The trial court concluded the Regional Board’s findings that justified the ACL Order were not supported by substantial evidence. Several of its reasons were not rooted in considerations of substantial evidence, but whatever the reasons, the trial court erred. 1. Grounds for Decision The Regional Board adopted the Basin Plan pursuant to Water Code section 13240, as the “legal, technical, and programmatic bases of water quality regulation in the [r]egion.” (Wat. Code, § 13240; Basin Plan, § 1.4 < https://www.waterboards.ca.gov/sanfranciscobay/basin_planning.html> (as of Feb. 18, 2021) (Basin Plan).)9 To protect water quality, the Basin Plan includes 18 discharge prohibitions that apply throughout the region, and 9 The Regional Board requests we take judicial notice of the Basin Plan prohibition it found Respondents violated. Respondents do not oppose this request. We grant the request. 39 must be met at all times. (Id., § 4.2.) Prohibition 9 forbids the discharge of “[s]ilt, sand, clay, or other earthen materials from any activity in quantities sufficient to cause deleterious bottom deposits, turbidity or discoloration in surface waters or to unreasonably affect or threaten to affect beneficial uses.” (Id., Table 4-1: Discharge Prohibitions.) Section 301 of the Clean Water Act prohibits the discharge of pollutants into any waters of the United States without a permit. ( 33 U.S.C. § 1311 .) To discharge fill into waters of the United States, one must apply to the Corps for a Clean Water Act section 404 dredge and fill permit (404 Permit) or a Rivers and Harbors Act section 10 permit (for pier construction). ( 33 U.S.C. §§ 1344 , 403.) In order to receive a 404 Permit, the applicant, unless exempt, must obtain a Section 401 certification from the state where the discharge originates or construction occurs. ( 33 U.S.C. § 1341 (a)(1).) Applications for such certification in California are filed with a regional board’s executive officer. (Cal. Code Regs., tit. 23, § 3855.) The 404 Permit cannot issue unless the regional board provides a water quality certification. ( 33 U.S.C. § 1341 (a).) The certification may add conditions to the Corps’ permit to ensure that the proposed activity will comply with water quality standards and “any other appropriate requirement of State law.” ( 33 U.S.C. § 1341 (d).) Under Water Code section 13385, subdivision (a), a person who violates Clean Water Act sections 301 or 401 “shall be liable civilly.” (Wat. Code, § 13385, subd. (a)(5).) In its statement of decision, the trial court expressed multiple, overlapping reasons why, even without issuance of a permit or certification, Respondents did not violate the Basin Plan or the Clean Water Act. As discussed below, none of its reasons justified setting aside the ACL Order. a. Waters of the United States 40  Just as in its CAO decision, the trial court concluded the ACL Order was invalid because the Regional Board did not demonstrate that Respondents’ fill material was discharged into “waters of the United States.” It found “the evidence would not be enough to establish that the island (other than interior channels and ditches) is waters of the United States.” As with the CAO, the court’s rationale overlooks the fact that at least some of Respondents’ discharges of fill material occurred in waters of the United States. The trial court’s finding that “the evidence would not be enough to establish the island (other than the interior channel and ditches) is waters of the United States” recognizes that the island’s water filled “channels and ditches” were jurisdictional waters. Respondents do not disagree. Because at least some waters of the United States were impacted by Respondents activities, the trial court erred in setting aside the ACL Order on this ground. b. Harm to Beneficial Uses The trial court also found “the evidence [was] not sufficient to support the conclusion that the levee work adversely affected beneficial uses”, nor could it “support a finding that that the levee work violated requirements in the basin plan that prohibit discharges into surface waters that affect beneficial uses.” Had the court applied the substantial evidence standard to the Regional Board’s findings, as we do, it would have acknowledged ample evidence of the levee work’s harm beneficial uses. In the Board’s response to Respondents’ opposition to the ACL Complaint, the Board’s expert presented evidence and opinions similar to those presented in support of the CAO. His reports provided evidence the Site was tidal marsh before Respondents’ levee construction. He also identified the harm that resulted from converting the 41 Site, which included the loss of food production into the surrounding channels where fish feed and the loss of shallow water habitat in the island’s tidal channels where fish would spawn. The expert also presented evidence that mass vegetation die-off occurred and endangered fish were harmed because the levee cut off tidal connectivity to the island. There was ample evidence that Respondents’ activities unreasonably affected or threatened to affect beneficial uses. c. Whether Findings Support the Decision In an apparent reference solely to the Basin Plan violation, the court concluded “[t]here is no finding about which requirements are at issue, and no reference to the administrative record that makes the reference clear.” The grounds for the Basin Plan violation are in the ACL Complaint, which states Respondents “discharged and the Club permitted continued placement of approximately 8,586 cubic yards of fill into waters of the State and United States, violating Basin Plan Prohibition No. 9 and Clean Water Act section 301. The fill remains in waters of the State and United States, and is contributing to the ongoing degradation of approximately 27.1 acres of surface water and wetlands at the Site.” The analysis accompanying the ACL Complaint further explains the reasons for the Basin Plan violation with reference to the administrative record. Over the course of the enforcement proceeding, the Board submitted evidence supporting the factual bases for these violations. The ACL Order was sufficiently supported by the Board’s finding that Respondents’ activities violated Prohibition 9. d. Number of Discharges The trial court also concluded that the evidence did not support the Regional Board’s conclusion that the violation was continuous and had exceeded 1,000 days by the time of the ACL hearing. In the court’s view, 42 “[b]ecause the violation requires a discharge, and the discharge requires an addition, the violation ended when the addition stopped.” The Regional Board argues the trial court erred when it rejected the number of days Respondents were in violation of the law as the basis for calculating the penalty. From the time levee construction began in early 2014 through the date of the ACL hearing in December 2016, the Regional Board determined Respondents’ violation had occurred for 1,013 days and was continuing. The number of days the condition existed was used as a multiplier to determine Respondents’ maximum liability prior to any adjustments. We see no reason to address the legal issue that would require us to define the temporal nature of discharges. Generally, courts decide actual controversies rather than academic propositions. (Bell v. Board of Supervisors (1976) 55 Cal.App.3d 629 , 636–637.) At the ACL hearing, a member of the Regional Board prosecution team who worked on the penalty determination explained the basis for the penalty imposed, saying: “The $4.6 million penalty corresponds to the base liability related to volume of fill discharge, and does not include liability for days of violation.” Thus, while the continuous nature of the violation factored into initial liability calculations, the daily tally was not used to calculate the $4.6 million penalty that was ultimately proposed. Accordingly, it was not relevant or material to the $2.8 million ACL Order the Board ultimately assessed. We later address the propriety of the ACL Order’s penalty amount. (See post, Sec. III.C.3.) 2. Issue Preclusion In supplemental briefing, the Regional Board contends that legal conclusions and factual findings recently made by the district court in a separate enforcement action against Respondents control issues in this case 43 related to the Clean Water Act under issue preclusion principles of res judicata. Res judicata “ ‘preclud[es] parties from contesting matters that they have had a full and fair opportunity to litigate,’ ” and “protect[s] against ‘the expense and vexation attending multiple lawsuits, conserve judicial resources, and foster reliance on judicial action by minimizing the possibility of inconsistent decisions.’ ” (Taylor v. Sturgell (2008) 553 U.S. 880 , 892.) In the Sweeney District Court Opinion, supra, 2020 WL 5203474 , the district court entered judgment in favor of the plaintiff United States against Respondents. (Id. at p.*44.) The district court determined “Sweeney violated and remains in violation of the Clean Water Act . . . as a result of unpermitted, non-exempt construction of a levee and other additions of pollutants (dredged or fill material) . . . to waters of the United States . . . on Point Buckler Island. . .” (Ibid.) The court also found the Club in violation of the Clean Water Act for Sweeney’s actions. (Id. at p. *45.) In reaching its decision, the district court made several factual findings. It found that Respondents’ levee blocked tidal flow into the island resulting in the destruction of wetlands vegetation and harm to water quality and aquatic habitat that adversely affected fish. (Id. at pp. *16–18.) In determining that Respondents violated the Clean Water Act, the court concluded as a legal matter that Respondents’ discharges occurred in “waters of the United States” because “at the time [Respondents] initiated their activities, Point Buckler Island consisted almost entirely of tidal-water channels and marsh wetlands abutting tidal waters . . . and [Respondents] discharged pollutants into those aquatic waters.” (Id. at pp.*26–32.) The Regional Board contends the doctrine of issue preclusion applies to the district court’s determination that Respondents violated Clean Water Act section 301. 44  There is no need for us to analyze the application of issue preclusion in this case. Our conclusions that the ACL Order is supported by substantial evidence and that none of the other grounds asserted in the court’s decision for setting aside the ACL Order were correct obviates any need to apply the federal findings.10 C. Eighth Amendment The Eighth Amendment to the United States Constitution provides: “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” (U.S. Const., 8th Amend.) The Eighth Amendment prohibition on excessive fines “ ‘limits the government’s power to extract payments, whether in cash or in kind, “as punishment for some offense.” ’ ” (United States v. Bajakajian (1998) 524 U.S. 321 , 328 (Bajakajian).) The California Constitution contains a similar protection. (People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2005) 37 Cal.4th 707 , 728 (R.J. Reynolds).) The touchstone of constitutional inquiry under the excessive fines clause is proportionality. (Bajakajian, at p. 334.) The amount of the fine must bear some relationship to the gravity of the offense that it is designed to punish, and a fine that is grossly disproportional to the gravity of the defendant’s offense violates the excessive fines clause. (Ibid.) In deciding the matter, we consider “(1) the defendant’s culpability; (2) the relationship between the harm and the penalty; (3) the penalties imposed in similar statutes; and (4) the defendant’s ability to pay.” (R.J. Reynolds, at pp. 728, 730.) 10 Respondents make several requests for judicial notice in association with their opposition to the Regional Board’s res judicata arguments. Since we need not address the res judicata argument, we deny the Respondents’ requests as unnecessary to resolve the issues before us. (See Mangini, supra, 7 Cal.4th at p. 1063.) 45  “We review de novo whether a fine is constitutionally excessive and therefore violates the Eighth Amendment’s Excessive Fines Clause.” (United States v. Lewis (9th Cir. 2003) 62 Fed.Appx. 757 , 762; see also Cooper Industries, Inc. v. Leatherman Tool Group, Inc. (2001) 532 U.S. 424 , 435–36 (Cooper).). Factual findings made by the trial court in conducting the excessiveness inquiry, of course, must be accepted unless clearly erroneous.” (Bakakajian, supra, 524 U.S. at pp. 434436, fn.10.) The trial court found the penalty was “grossly disproportional to the gravity of Plaintiffs’ offense.” This was because it considered Respondents’ culpability to be low; the penalty was grossly disproportional to the harm caused; there was a gross disparity between penalties imposed by the Regional Board for similar behavior; and Respondents could not afford to pay the penalty imposed. The Board contends the penalty was not constitutionally excessive. We agree with the Board. The trial court’s findings were based on the improper exercise of its independent judgment, so we will disregard them. There was substantial evidence in the administrative record to support the Board’s findings that bear on each prong of the constitutional analysis. We also reach different legal conclusions than the trial court. 1. Respondents’ culpability The trial court found Respondents’ culpability was low. It based this conclusion largely on Sweeney’s testimony. Sweeney said that he contacted certain state agencies before beginning work and “came away with the understanding that no permits were needed.” The court also credited Sweeney’s testimony regarding his belief that permits were needed only for islands submerged by the tides whereas the Site was “high and dry” as well as his ignorance about the need for “[Clean Water Act section] 401 46 certifications” from the Regional Board. The court also found no evidence that marsh landowners commonly understood levee work requires permits or that Clean Water Act certifications were common knowledge. Because the court’s findings were based improperly on its exercise of independent judgment and weighing of the evidence, we do not accept them. Had the court correctly applied the substantial evidence standard to the Regional Board’s findings, as we do, it would have acknowledged ample evidence of Respondents’ high culpability. Years before his purchase of the Site, Sweeney had experience with various government agencies with jurisdiction over Suisun Marsh at another property he owned. His levee work there resulted in illegal discharges of fill contrary to permit conditions and direction from the relevant agencies, and he was found in violation for his work. Sweeney had also been involved with other duck hunting clubs in Suisun Marsh and had prior experience securing permits for maintenance activities that would discharge fill into the marsh. He had previously communicated by email with state agencies for permits to repair a levee breach at one of those clubs. In addition, there was ample evidence that Sweeney continuously performed work at the Site after regulators directed him to stop. These experiences sufficiently demonstrated Sweeney’s willful indifference toward the regulatory process and a knowing rejection of the need to apply for permits in order to work at the Site. These facts demonstrated Sweeney’s high culpability. 2. Relationship between the harm and the penalty The trial court also concluded the penalty was “grossly disproportional to the harm.” It based this conclusion on a finding that the Regional Board had not established that fish used the channels at the Site or that there was harm to any specific endangered species of fish. The court, on the other hand, 47 viewed the benefits to the environment of duck ponds over tidal marsh were “clear and definite.” It found that had Respondents’ been allowed to complete their levee work, they would have “created a net benefit for the environment rather than a harm.” Again, the court’s improper exercise of its independent judgment led it to err, and we cannot validate its finding. Had the court applied the substantial evidence standard to the Regional Board’s finding, as we do, it would have acknowledged that the substantial penalty correlated with the major harm caused by Respondents’ activities. The Board’s expert presented ample evidence that Respondents’ levee construction converted the Site from tidal marshland and adversely impacted beneficial uses at the Site including estuarine habitat, fish migration, preservation of endangered species, fish spawning, and wildlife habitat. (See ante, Section III.B.1.b.) In consideration of these impacts, the Board categorized the harm caused by Respondents as “major” when determining the penalty. Since there was substantial evidence to support this assessment in the record, we conclude Respondents caused significant harm and it was reasonably related to the significant penalty imposed. 3. Penalties imposed in similar statutes This factor has been explained “as the sanctions imposed in other cases for comparable conduct.” (Cooper, supra, 532 U.S. at p. 435.) The trial court found “a great disparity between the non-existent or modest penalties the Regional Board has imposed for similar behavior, and the severe penalty imposed here.” It observed that the “top-ten Regional Board penalties have generally been reserved for discharges of millions of gallons of untreated sewage and discharges resulting in hundreds of observably dead fish,” and this case posed “no threat to public health or observably dead fish.” It also 48 observed that “there is no evidence that the Regional Board has ever imposed any penalties on duck clubs in [the] Marsh for levee work.” We are not persuaded that the $2.8 million penalty was not comparable to other cases or unreasonable. The ACL Complaint originally proposed a $4.6 million penalty for Respondents’ alleged unauthorized discharges. It included a 14-page exhibit explaining its method for arriving at the proposed penalty in accordance with the State Board’s Water Quality Enforcement Policy methodology for assessing civil liabilities. The prosecution team considered, and explained, how it considered numerous statutory criteria to determine the liability including the nature and extent of Respondents’ violations; the degree of toxicity of the discharge; the economic benefits to Respondents from the discharges; and other factors similar to the ones considered in our constitutional analysis here. The $4.6 million penalty originally proposed fell between the maximum liability amount of $39,211,860 and the minimum amount of $1,550,859 and reflected the continuing and harmful nature of Respondents’ violations. (See Ojavan Investors, Inc. v. California Coastal Com. (1997) 54 Cal.App.4th 373 , 398 [$9.5 million civil penalty against a developer for 73 violations of Coastal Act not excessive].) While significant, the $4.6 proposed penalty already reflected reductions recommended by the prosecution on the basis of factors as justice required. A member of the Board’s prosecution team testified that one adjustment was made to be consistent with earlier Regional Board orders involving a single entity’s dredging and fill. Even at the proposed $4.6 million, the prosecution team found it to be “in line with other actions taken by this Regional Water Board and the resulting harm caused by Dischargers’ conduct.” At the ACL hearing, a prosecution team member compared the proposed $4.6 million penalty to a $5 million settlement the Regional Board 49 had recently entered with a municipal entity “for a similar discharge and fill, Clean Water Act violations.” This is enough to satisfy us that the $2.8 penalty that was ultimately imposed was not disproportionately high. 4. Ability to pay The trial court concluded that Respondents could not afford to pay the $2.8 million penalty. Based on “evidence from Sweeney and a financial expert,” the court found the Regional Board overestimated Respondents’ net worth by not accounting for “obvious liabilities,” including the costs of compliance imposed by the CAO (which it had concurrently set aside). The court’s conclusion again resulted from its improper exercise of independent judgment, and we cannot accept the court’s findings. Had the court applied the substantial evidence standard to the Regional Board’s findings, as we do, it would have acknowledged substantial evidence of Respondents’ ability to pay. The Regional Board prosecution staff completed just such an analysis in support of the proposed $4.6 million penalty. It considered Respondents’ net cash flow and net worth. The analysis acknowledged that the most complete and accurate accounting of such information comes from an entity’s own disclosures, which Respondents did not provide. Absent such direct disclosures from Respondents, the prosecution team reviewed public records for assets belonging to Respondents which included other property Sweeney purchased. It also considered other assets, such as Point Buckler, duck club membership sales, and funds from a Tiburon property Sweeney recently sold. Based on the available information and the lack of any objective financial information from Respondents refuting its analysis, the prosecution team concluded Respondents could pay the original proposed penalty. (Cf. State of California v. City and County of San Francisco (1979) 94 Cal.App.3d 522 , 530–531 [once evidence established a 50 statutory violation under Water Code provision, defendant had burden to establish the court should impose penalty less than statutory maximum].) The Board itself recognized it “did not have sufficient evidence to do any adjustments based on the ability to pay. . . . [b]ecause we, at the end of all of this, [did] not have documented evidence of Mr. Sweeney’s net worth or cash flow, or anything close.” On this record, there was sufficient evidence supporting Respondents’ ability to pay the penalty. Moreover, the trial court’s findings were clearly erroneous and could not survive any standard of review. The evidence from Sweeney consisted of a declaration attesting to the lack of net taxable income, but he failed to provide any objective information about Respondents’ financial condition that could support his conclusion (e.g., financial statements, tax returns) even though he had the opportunity to do so. The evidence from the financial expert was also weak. The expert, a Certified Public Accountant, opined that Sweeney had a negative net worth, after reviewing the prosecution team’s analysis and information told to him by Sweeney. But he made clear “there [had] been no verification of any of the information provided by Mr. Sweeney.” This evidence provides no support for the court’s inability to pay finding. In light of our analysis, we cannot conclude the $2.8 million assessed in civil penalties was “grossly disproportional” to the gravity of the offense so as to violate the Eighth Amendment’s proscription against excessive fines. D. Suisun Marsh Preservation Act Just as it did with the CAO, the trial court concluded when the Regional Board issued the ACL Order, it failed to “act[] in conformity with the Preservation Act and the policies of the Protection Plan” in violation of Section 29302(a). The court employed the same Preservation Act analysis it 51 had used to set aside the CAO to set aside the ACL Order for violating Section 29302(a). We incorporate our earlier analysis here (see ante, Section II.C.) and for the same reasons conclude that the trial court’s determination that issuance of the ACL Order violated Section 29302(a) was error. E. Vindictive Prosecution “The constitutional protection against prosecutorial vindictiveness is based on the fundamental notion that it ‘would be patently unconstitutional’ to ‘chill the assertion of constitutional rights by penalizing those who choose to exercise them.’ ” (In re Bower (1985) 38 Cal.3d 865 , 873.) When a “defendant shows that the prosecution has increased the charges in apparent response to the defendant’s exercise of a procedural right, the defendant has made an initial showing of an appearance of vindictiveness.” (People v. Puentes (2010) 190 Cal.App.4th 1480 , 1486.) “Once this prima facie case is made, the prosecution bears a ‘heavy burden’ of dispelling the appearance of vindictiveness as well as actual vindictiveness.” (Ibid.) We review the trial court’s factual findings for substantial evidence and its legal determinations de novo. (People v. Sanchez (2020) 49 Cal.App.5th 961 , 983.) In its statement of decision invalidating the ACL Order, the trial court observed that the parties had not identified any civil case in which the vindictive prosecution doctrine was applied, but nonetheless concluded, “It may be the rare civil case in which a party can make the prima facie showing needed, but in this case the showing has been made.” The court found the penalties were “imposed in retribution for [Respondents’] lawsuit challenging the Regional Board’s September 2015 order.” It further chided the Board for making no attempt to show the penalties were not imposed for vindictive reasons and said the Board “ha[d] not met its burden of dispelling the appearance of vindictiveness as well as actual vindictiveness.” The Regional 52 Board contends there was no basis for the vindictive prosecution finding. We agree. As an initial matter, Respondents cite no authority, and we have found none, that applies the vindictive prosecution doctrine outside of criminal proceedings. We conclude the court erred in its novel application of the doctrine and in setting aside the ACL Order for this reason. The vindictive prosecution doctrine has also not yet been held to apply to proceedings before administrative bodies. Even if we assume, without deciding, that the doctrine can apply and that Respondents made a prima facie case, there was substantial evidence disregarded by the trial court that rebutted the presumption. The Regional Board had contemplated imposing civil liability on Respondents months before Respondents filed the petition for writ of mandate that led to the stay of the 2015 CAO and the Board’s eventual decision to rescind it. In July 2015, Respondents’ conduct was internally referred to the Board’s enforcement unit for preparation of an administrative civil liability complaint. That same month, the initial notice of violation was served on Respondents and informed them that “[a]ny person who violates is . . . subject to administrative civil liability.” The 2015 CAO also informed Respondents that their “failure to comply [with the CAO] may result in the imposition of civil liabilities.” Thus, civil liabilities against Respondents were considered by the Board well before Respondents filed suit over the 2015 CAO. This evidence was sufficient to dispel the appearance of vindictiveness. There was also substantial evidence to dispel actual vindictiveness. As discussed in our Eighth Amendment analysis (see ante, Section III.C.), the record included the Board’s detailed analysis showing how it arrived at the proposed penalty in accordance with the State Board’s Water Quality 53 Enforcement Policy methodology for assessing civil liabilities. The prosecution team considered and explained how its application of numerous statutory criteria to determine Respondents’ liability including the nature and extent of the violations; the degree of toxicity of the discharge; the economic benefits to Respondents from the discharges; and other factors. The eventual $4.6 million proposed penalty corresponded to the base liability calculation related to volume of fill discharged by Respondents. Thus, the record included clear analysis regarding the grounds for and amount of the ACL Order, which was plainly connected to the continuing and harmful nature of Respondents’ violations, and not vindictiveness or retaliatory intent. IV. FAIR HEARING (APPLICABLE TO CAO AND ACL ORDER) Code of Civil Procedure section 1094.5, subdivision (b)’s “requirement of ‘a fair trial’ means that there must have been ‘a fair administrative hearing.’ ” (Lateef v. City of Madera (2020) 45 Cal.App.5th 245 , 252; Code Civ. Proc., § 1094.5, subd. (b) [inquiry in administrative mandamus cases extends to the question “whether there was a fair trial”].) Because the ultimate determination of procedural fairness presents a question of law, we “review the fairness of the administrative proceeding de novo.” (Doe v. University of Southern California (2016) 246 Cal.App.4th 221 , 239; TWC Storage, LLC v. State Water Resources Control Bd. (2010) 185 Cal.App.4th 291 , 296.) The trial court concluded that Respondents did not receive a fair trial in either the CAO or ACL hearing. The Regional Board contends the proceedings were fair. We agree with the Board. As we will explain, the trial court again erred. Moreover, Respondents’ additional arguments on appeal do not persuade us otherwise. A. Separate Functions 54  “One of the basic tenets of the California [Administrative Procedure Act] . . . is that, to promote both the appearance of fairness and the absence of even a probability of outside influence on administrative hearings, the prosecutorial and, to a lesser extent, investigatory, aspects of administrative matters must be adequately separated from the adjudicatory function.” (Nightlife Partners v. City of Beverly Hills (2003) 108 Cal.App.4th 81 , 91, italics omitted; Govt. Code § 11425.10, subd. (a)(4) [“The governing procedure by which an agency conducts an adjudicative proceeding is subject to [the requirement that] [t]he adjudicative function . . . be separated from the investigative, prosecutorial, and advocacy functions within the agency . . .”].) “[B]y itself, the combination of investigative, prosecutorial, and adjudicatory functions within a single administrative agency does not create an unacceptable risk of bias and thus does not violate the due process rights of individuals who are subjected to agency prosecutions.” (Morongo Band of Mission Indians v. State Water Resources Control Bd. (2009) 45 Cal.4th 731 , 737 (Morongo).) “The due process right to an impartial administrative decisionmaker is protected when staff counsel performing a prosecutorial role are distinct from counsel playing an advisory role in the same matter and the counsel are screened from each other.” (Drakes Bay Oyster Co. v. California Coastal Com. (2016) 4 Cal.5th 1165 , 1175.) “To prove a due process violation based on overlapping functions thus requires something more than proof that an administrative agency has investigated and accused, and will now adjudicate. ‘[T]he burden of establishing a disqualifying interest rests on the party making the assertion.’ . . . That party must lay a ‘specific foundation’ for suspecting prejudice that would render an agency unable to consider fairly the evidence presented at the adjudicative hearing … it must come forward with ‘specific evidence 55 demonstrating actual bias or a particular combination of circumstances creating an unacceptable risk of bias’…. Otherwise, the presumption that agency adjudicators are people of ‘conscience and intellectual discipline, capable of judging a particular controversy fairly on the basis of its own circumstances’ will stand unrebutted.” (Today’s Fresh Start, Inc. v. Los Angeles County Office of Education (2013) 57 Cal.4th 197 , 221–222.) The trial court ruled that Respondents did not receive a fair hearing, in part, because the Regional Board failed to separate functions. Observing the Board had identified a prosecution team and an advisory team, the court suggested impropriety because the CAO and ACL Order were written by the prosecution team rather than the advisory team.11 The court added that the “advisory team did not take an active role in the judicial decision-making function on the substantive legal and factual issues in dispute,” and thus “relied on the prosecution team, which was biased in favor of its own positions.” For these reasons, the court found the Regional Board “appeared to be biased in favor of the prosecution team, and against [Respondents].” In their appellate brief, Respondents describe the Board as simply “rubber- stamping” the prosecution team’s proposed orders as a form of improper separation. They also assert functions were not separated because “Bruce Wolfe, the Board’s Executive Officer, commingled prosecutor and decision- making functions.” 11 It is customary for the prevailing party in litigation to provide the decision-maker with a proposed decision. (See Cal. Rules of Court, Rule 3.1312.) That appears to be just what happened in each of these companion cases in the trial court, and we are not aware of any authority that concludes it is a violation of due process for the decision maker to adopt a proposed decision in an administrative or judicial proceeding as its final ruling. Respondents cite no authority that suggests simply the adoption of a proposed decision is improper. 56  We have no reason to conclude Respondents received unfair hearings because the agency purportedly shirked an obligation based on insufficiently separated functions. The evidence shows the Board’s duties were separated. The hearing procedures for both the CAO and ACL explained: “To help ensure the fairness and impartiality of this proceeding, the functions of those who will act in a prosecutorial role by presenting evidence for consideration by the Regional Water Board (Prosecution Team) have been separated from those who will provide advice to the Regional Water Board (Advisory Team).” After identifying the specific individuals in each team, the Board further explained: “Any members of the Advisory Team who normally supervise any members of the Prosecution Team are not acting as their supervisors in this proceeding, and vice versa. Members of the Prosecution Team may have acted as advisors to the Regional Water Board in other, unrelated matters, but they are not advising the Regional Water Board in this proceeding. Members of the Prosecution Team have not had any ex parte communications with the members of the Regional Water Board or the Advisory Team regarding this proceeding.” At the outset of both hearings, the Board Chair repeated this separation of functions. The separation of prosecution and advisory roles was followed in both proceedings. Further, the trial court concluded there was no separation of powers but identified no threat to fairness that occurred as a result. The trial court’s findings were based on the appearance of bias but lacked “ ‘specific evidence demonstrating actual bias or a particular combination of circumstances creating an unacceptable risk of bias.’ ” (Morongo, supra, 45 Cal.4th at p. 741; see also Andrews v. Agricultural Labor Relations Bd. (1981) 28 Cal.3d 781 , 792 [“ ‘Bias and prejudice are never implied and must be established by clear averments.’ ”].) Respondents’ contention that the Board merely “rubber- 57 stamped” the tentative cleanup and abatement order is also unsupported by any evidence. The record shows, and Respondents do not dispute, that the Board adhered to its procedures governing adjudicatory hearings before the Board. (See Cal. Code. Regs., tit. 23, § 648 et seq.) Absent such evidence of actual bias or evidence that the Board failed to maintain internal separation and created a risk of bias, we presume the Board evaluated the factual and legal arguments on their merits. Respondents’ reference to the Board’s Executive Officer Bruce Wolfe does not provide evidence of improper separation. Initially, they claim that the Board’s failure to separate functions when Wolfe issued the 2015 CAO constitutes a due process violation. The Regional Board does not dispute that prosecutorial and advisory functions were not separated when Wolfe issued the 2015 CAO. But the 2015 CAO was rescinded, and was no longer at issue. The Board’s functions were separated for the enforcement actions at issue in this appeal. Although Respondents point to Wolfe’s addition to the advisory team in these enforcement actions, they objected to his participation, and by early June 2016—within a month of the objection—the Board Chair agreed to remove him from the advisory team. There is no indication he participated in either a prosecutorial or advisory capacity at either hearing. Indeed, at the CAO hearing, the Board chair expressly acknowledged someone had “stepped into the role that Bruce Wolfe would normally serve.” As an indicator of Wolfe’s ongoing involvement, Respondents refer to the CAO which required Respondents to submit various corrective action plans “acceptable to the Executive Officer.” We are not persuaded. By that time, the CAO had been adjudicated without Wolfe’s participation. B. Board Rulings 58  The trial court also found Respondents received unfair CAO and ACL hearings because the Board purportedly failed to decide all the issues needed to resolve the dispute and failed to consider factual and legal issues raised by Respondents. In their appellate brief, Respondents say they contested the CAO with “29 pages of legal arguments [to which] the Board said absolutely nothing.” They allude to the same perceived deficiency in the ACL hearing process. We have no reason to conclude Respondents received unfair hearings because the agency shirked a purported obligation to decide every legal and factual issue raised by Respondents. As the trial court recognized, the California Administrative Procedure Act only requires that an administrative decision following an adjudicative proceeding “shall be in writing and shall include a statement of the factual and legal basis for the decision.” (Gov. Code, § 11425.50, subd. (a).) There is no requirement that the agency provide a written response to every issue raised by the parties. Here, the CAO included over 75 findings, and the ACL Order included over a dozen findings and an extensive analysis explaining its methodology for determining the civil liabilities imposed. Both asserted facts and made findings in support of the violations found and attendant penalties. This satisfied Respondents’ entitlement to due process. C. Insufficient Trial Time The trial court found Respondents received unfair hearings because the Board did not allow sufficient time for trial. For the CAO hearing, Respondents had been given one hour to present their case, which the court found was “not enough to try a case as complex as this one” and insufficient to give Respondents “a fair opportunity to present their opening statement, examine their percipient witnesses, cross-examine the prosecution team’s 59 witnesses, and make their closing argument.” The court further found “the short time gave the appearance that the Regional Board was not interested in determining the truth, but rather . . . it intended and expected to rely on staff, as it usually did, to provide the facts and law.” The court observed that Respondents were allowed “two hours” for the ACL hearing but deemed it inadequate for “[a] case of this complexity,” which “calls for sufficient time so that the Regional Board can do more than decide how much of a penalty to impose.” Respondents assert the insufficient trial time in both proceedings rendered the Board incapable of resolving the factual issues they raised. We have no reason to conclude Respondents received unfair hearings because of inadequate time. There is no requirement that hearings last for any particular amount of time (see Cal. Code Regs., tit. 23, § 648 et seq.), and reasonable time limitations are necessary and inevitable. (Cf. Reed v. California Coastal Zone Conservation Com. (1975) 55 Cal.App.3d 889 , 895 [petitioners who were restricted to 10 minutes’ oral argument at hearing and never objected not denied due process].) Here, the Board doubled the amount of time originally allotted to each party in advance of the CAO hearing so that each party had one hour. The CAO hearing lasted for almost 4 hours and included extensive questioning of both sides by Board members. Similarly, the Board doubled the amount originally allotted to each party in advance of the ACL hearing so that each party had two hours. In both hearings, the time allotment was reasonable and did not offend due process. Further, in adopting the CAO and issuing the ACL Order, the Board made dozens of findings of fact addressing the disputes between the parties. D. Submission of Evidence and Arguments In their appellate brief, Respondents contend the Board’s procedures “condoned staff sandbagging.” In their view, they were “sandbagged” because 60 the Board submitted their evidence and arguments in reply to the Respondents’ oppositions to the proposed enforcement orders. This was not evidence of unfairness. Again, the record shows, and Respondents do not dispute, that the Board adhered to procedures governing adjudicatory hearings before the Board. (See Cal. Code. Regs., tit. 23, § 648 et seq.) The authority Respondents rely on pertaining to summary judgment procedures in litigation does not apply. E. Availability of Hearing In their appellate brief, Respondents assert the Board “showed disrespect for due process and the rule of law” because the Board did not provide “either a pre-deprivation or post-deprivation hearing on the [2015 CAO].” This argument is borderline frivolous. The Board rescinded its 2015 CAO, and it is no longer at issue. Respondents received full hearings prior to the issuance of both the CAO and ACL Order. F. The Regional Board’s Expert In their appellate brief, Respondents assert “the Board’s principal expert was biased against John Sweeney,” and offer this as another reason the hearings were unfair. The expert at issue was Stuart Siegel. Both Sweeney and the Board considered retaining Siegel as an expert, and the Board eventually retained him. He was the principal author of the Board’s Technical Assessment. Respondents describe personal animosity between Sweeney and Siegel, and at one point after being retained by the Board, Siegel emailed several people the following: “BE CAREFUL in dealing with Sweeney. I’ve been doing a little recently. . . . HIGH RISK situation.” Respondents contend Siegel’s personal animosity towards Sweeney and “financial interest in discrediting Mr. Sweeney’s accusations of fraud, which could have threatened his consulting practice” evidenced bias. They also 61 argue the “great deference” the Board accorded Siegel for both his assessments and legal analysis demonstrated bias. These contentions do not present evidence of bias, nor do they describe circumstances that create an unacceptable risk of bias. As Respondents recognize, Siegel was the expert for the prosecution team, not a part of the advisory team or the Board. As such, he was a witness not a decisionmaker and any animosity he had towards Sweeney was irrelevant to whether Respondents received a fair hearing from the Board. Also, since Siegel was not an adjudicator, his purported “financial interest” is not the type of “pecuniary interest” that establishes the improper bias that affects adjudication. (See Haas v. County of San Bernardino (2002) 27 Cal.4th 1017 , 1025 [financial interest of adjudicator raises due process concerns].) Respondents’ deference argument is not supported by evidence or authorities, so we will not entertain it. (See, e.g., Nickell v. Matlock (2012) 206 Cal.App.4th 934 , 947 (Nickell) [conclusory assertions in brief unsupported by citations to evidence or legal authority are forfeited].) G. Totality of the Circumstances The trial court also concluded Respondents received did not receive fair hearings under the totality of the circumstances. Although adjudicators are presumed to be impartial, “the presumption of impartiality can be overcome” by “a particular combination of circumstances creating an unacceptable risk of bias.” (Morongo, supra, 45 Cal.4th at p. 741.) This is sometimes referred to as the “totality-of-the circumstances approach.” (Id. at p. 740.) Since we have concluded none of the individual grounds Respondents asserted for an unfair trial was proper, we conclude there was no particular combination of those circumstances that created an unacceptable risk of bias. Under the 62 totality of the circumstances, neither the CAO nor ACL Order should have been set aside. H. Additional Fairness Issues Related to ACL Hearing In its ACL decision, the court noted “other evidence of unfairness” Respondents argued to the trial court, including “(a) ex parte communications by a Regional Board member who was eventually disqualified, (b) testimonials by Regional Board members during trial endorsing the prosecution team, (c) the Regional Board’s unwillingness to keep Sweeney’s private financial information confidential, combined with his criticism of him for not providing more financial information, (d) reliance by Regional Board members on incorrect personal knowledge, (e) unawareness by Regional Board members of Plaintiff’s arguments, (f) blindness of Regional Board members to weaknesses in the prosecution’s team’s arguments, and (g) evidence that the Regional Board does not fairly interpret and apply the law, but rather interprets it to support the decisions.” Beyond identifying these arguments, the trial court did not address, analyze, or otherwise rule on these contentions. In their appellate brief, Respondents argue all points as further evidence of unfair hearings. Except for the first issue regarding ex parte communications, we shall not consider these additional arguments. These arguments either present issues rejected elsewhere in the parties’ briefs and in our opinion, or they are unsupported by any authority establishing such conduct as bias or evidence of an unfair hearing. (See Nickell, supra, 206 Cal.App.4th at p. 947.) Respondents proffer two incidents of ex parte communications involving a Board member which they say reinforced the appearance of unfairness and created an appearance of bias. First, they claim the Board member “initiated a secret communication with the prosecution team about 63 the merits of the case.” Second, they assert the same Board member, in communicating with an environmental group which had appeared before the Board against Sweeney, described a statement Sweeney made on social media as “a lie.” The “secret communication” was a one-way communication by the Board member to a prosecution team member expressing his view that the ACL penalty was too high. The statement the Board member said was a “lie” was a comment Sweeney made on social media that the Board member, who was also a member of BCDC, had “succeeded in getting the act of kiteboarding in public waters a fine of $30k.” Even if we assume these communications were prohibited, they do not overcome the presumption of impartiality afforded the adjudicators. At the outset of the ACL hearing, the Board member at issue recused himself, left the hearing, and took no part in deciding the ACL Order. In light of his recusal, Respondents have not persuaded us that the hearing was unfair. V. OTHER ISSUES In both of its decisions, the trial court made rulings on additional issues not otherwise addressed in our analysis. In its CAO decision, the trial court (1) sustained Respondents’ objections to portions of the administrative record submitted by the Regional Board; (2) denied the Regional Board’s motion to strike Respondents’ opening brief; and (3) denied the Regional Board’s motion to enforce the CAO. Likewise, in reviewing the ACL Order, the trial court (1) denied the Regional Board motion to strike Respondents’ opening brief, and (2) sustained Respondents’ objections to portions of the administrative record submitted by the Regional Board. The trial court also expressly declined to rule on “several requests for judicial notice, to augment the record, and to correct the record” on the grounds that such requests “appear[ed] unnecessary to resolve the principal issues in this case.” The Regional Board 64 challenges several of these issues on appeal. Because we reverse the judgments on substantive grounds and shall direct the trial court to deny Respondents’ motions for writs of mandate with respect to both the CAO and ACL Order, we need not resolve these issues, which are unnecessary to our decision. DISPOSITION The judgment on the CAO in Solano County Superior Court Case No. FCS048136 and the judgment on the ACL Order in Solano County Superior Court Case No. FCS048861 are reversed, and the writs of mandate are vacated. The matters are remanded to the trial court with directions to deny Respondents’ petitions for writs of mandate and requests to set aside the CAO and ACL Order, and for further proceedings consistent with this opinion. The Regional Board’s cross-complaint seeking to enforce the CAO and ACL Order is reinstated. Appellants are awarded costs on appeal. 65  _________________________ Siggins, J.* WE CONCUR: _________________________ Fujisaki, Acting P.J. _________________________ Jackson, J. * Assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. 66 Trial Court: Solano County Superior Court Trial Judge: Hon. Harry S. Kinnicutt Counsel: Xavier Becerra, Attorney General, Robert W. Byrne, Senior Assistant Attorney General, Annadel A. Almendras, Supervising Deputy Attorney General, Matthew G. Bullock, Daniel S. Harris, Deputies Attorney General, Joshua Patashnik for Appellants. John Briscoe, Lawrence S. Bazel, Briscoe Ivester & Bazel, LLP, for Respondents Kerry Shapiro, Martin Patrick Stratte, Jeff Mangels Butler & Mitchell, LLP. Amicus for Respondents. 67

2020-12-01 11:08:32.589528+00

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2020-03-05 19:15:56.182494+00

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IN THE TENTH COURT OF APPEALS No. 10-18-00058-CV TEXAS MIDSTREAM GAS SERVICES, L.L.C., Appellant v. DR. BANGALOR V. RAMAKRISHNA, Appellee From the 18th District Court Johnson County, Texas Trial Court No. C201100498 MEMORANDUM OPINION Appellant, Texas Midstream Gas Services, L.L.C., appealed the trial court’s Final Judgment signed on January 21, 2018 in favor of appellee, Dr. Bangalor V. Ramakrishna. The parties have now filed an Agreed Motion to Vacate and Dismiss Appeal asserting that the parties have reached a settlement and wish to dismiss and vacate the appeal. The Agreed Motion is granted, and this appeal is dismissed. See TEX. R. APP. P. 42.1(a). There being no agreement of the parties as to costs, it is further ordered that costs of this appeal are taxed against appellant. TOM GRAY Chief Justice Before Chief Justice Gray, Justice Davis, and Justice Scoggins1 Appeal dismissed Opinion delivered and filed March 4, 2020 [CV06] 1 The Honorable Al Scoggins, Senior Justice of the Tenth Court of Appeals, sitting by assignment of the Chief Justice of the Texas Supreme Court. See TEX. GOV’T CODE ANN. §§ 74.003, 75.002, 75.003. Tex. Midstream Gas Servs., L.L.C. v. Ramakrishna Page 2

2020-06-05 07:03:10.567083+00

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THIRD DIVISION MCFADDEN, C. J., DOYLE, P. J., and HODGES, J. NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. Please refer to the Supreme Court of Georgia Judicial Emergency Order of March 14, 2020 for further information at (https://www.gaappeals.us/rules). June 3, 2020 In the Court of Appeals of Georgia A20A0337. BROWN v. THE STATE. DO-013 C DOYLE, Presiding Judge. Following a jury trial, Maverick Brown was convicted of trafficking in marijuana,1 possession of marijuana with intent to distribute (two counts),2 conspiracy to commit a violation of the Georgia Controlled Substances Act,3 and possession of a firearm by a convicted felon.4 Brown now appeals from the denial of his motion for new trial, contending that (1) the evidence was insufficient to support the guilty 1 OCGA § 16-13-31 (c) (1). 2 OCGA § 16-13-30 (j). 3 OCGA § 16-13-33. 4 OCGA § 16-11-131 (b). For purposes of sentencing, the two possession with intent to sell counts and the conspiracy to commit a violation of the Georgia Controlled Substances Act merged into the trafficking count. verdict, (2) the jury’s verdict is contrary to and strongly against the weight of the evidence, and (3) the trial court committed plain error by failing to instruct the jury that knowledge of the weight of marijuana was an essential element of the trafficking offense. Finding no reversible error, we affirm. Construed in favor of the verdict,5 the evidence shows that the Georgia Bureau of Investigation conducted a video and telephone surveillance operation of Tyson Brown (Maverick’s son), who was suspected of trafficking in marijuana. After viewing activity and intercepting conversations indicating that Tyson6 was selling marijuana from his house and using another location as a “stash house,” officers executed search warrants on the same day at the two residences: 102 King Bee Drive (stash house) and 117 Jim Lee Drive (Tyson’s house) in Floyd County. At the Jim Lee location, officers encountered Tyson in the process of flushing marijuana down the toilet and throwing a one-pound bag out a bathroom window; officers also found approximately $37,000 in cash in a bag under Tyson’s bed. At the King Bee location, officers encountered Maverick Brown in the interior hallway of the two-bedroom house that smelled of marijuana. In the master bedroom night stand, officers 5 See Short v. State, 234 Ga. App. 633 , 634 (1) (507 SE2d 514) (1998). 6 For clarity, we refer to the Brown family members by their first names. 2 discovered Maverick’s identification card, prescription pills, and mail — all of which identified the King Bee location as his address. In the master bedroom closet, officers found two handguns, ammunition, and a safe that was “stuffed pretty full” of bundles of cash totaling approximately $90,000. In the closet of the spare bedroom at the King Bee residence, officers found two duffel bags containing a total of fourteen plastic bags containing a total of twelve pounds of marijuana. Based on the investigation and the results of the search warrants, Maverick was charged as part of a multi-count indictment accusing Maverick, Tyson, and a local police officer7 of conspiring to traffic in marijuana. Following a jury trial, Maverick was found guilty of trafficking in marijuana, possessing marijuana with intent to distribute, possessing more than one ounce of marijuana, conspiring to traffic in marijuana, and possessing a firearm while a convicted felon. Maverick unsuccessfully moved for a new trial, and after the trial court granted his motion for an out-of-time appeal, he filed this appeal. 1. Maverick contends that the evidence was insufficient to support the verdict, making several arguments: (a) there was insufficient evidence of possession of the 7 Tyson was accused of bribing the police officer to apprise him of police activity and avoid detection. 3 marijuana and guns because others had equal access to them, (b) the State failed to prove his knowledge of the weight of the marijuana, and (c) there was no evidence that he was part of a conspiracy. None of these arguments warrant reversal. When an appellate court reviews the sufficiency of the evidence, the relevant question is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. This familiar standard gives full play to the responsibility of the trier of fact fairly to resolve conflicts in the testimony, to weigh the evidence, and to draw reasonable inferences from basic facts to ultimate facts. Once a defendant has been found guilty of the crime charged, the factfinder’s role as weigher of the evidence is preserved through a legal conclusion that upon judicial review all of the evidence is to be considered in the light most favorable to the prosecution.8 (a) Evidence of marijuana possession despite equal access by others. Maverick contends that the State failed to prove that he possessed the marijuana, particularly in light of equal access to the house by others including his wife. We disagree. [If, as here] the State provides no direct evidence of actual possession, a conviction may be sustained with proof of constructive possession. A finding of constructive possession must be based upon 8 (Citation omitted; emphasis in original.) Jackson v. Virginia, 443 U.S. 307 , 319 (III) (B) (99 SCt 2781, 61 LE2d 560) (1979). 4  some connection between the defendant and the contraband other than mere spatial proximity. Constructive possession exists [if] a person though not in actual possession, knowingly has both the power and the intention at a given time to exercise dominion or control over a thing. If the State presents evidence that a defendant owned or controlled premises where contraband was found, it gives rise to a rebuttable presumption that the defendant possessed the contraband. Although this presumption may be rebutted by showing that others had access to the premises, the equal access doctrine applies to rebut the presumption of possession only [if] the sole evidence of possession of contraband found on the premises is the defendant’s ownership or possession of the premises. Although mere presence at the scene is not sufficient to convict one of being a party to a crime, criminal intent may be inferred from conduct before, during, and after the commission of a crime.9 At the outset, we note that there was direct evidence that Maverick lived at the King Bee residence and slept in the master bedroom, which had a closet where the safe and guns were found. To rebut the presumption that he possessed the contraband in the house, Maverick points out that other family members had access to the home, and his wife’s belongings were found along with his in the master bedroom and closet area. Thus, he argues, they had equal access to the contraband in the house, and the 9 (Punctuation omitted; emphasis supplied.) Winn v. State, 345 Ga. App. 359 , 361-362 (1) (813 SE2d 400) (2018), quoting Johnson v. State, 338 Ga. App. 500 , 502 (790 SE2d 291) (2016). 5 State did not prove his possession of the contraband.10 But there was evidence connecting Maverick to the contraband other than his mere presence at the residence. For example, Maverick strenuously objected when police attempted to open the safe found in his closet. This conduct was direct evidence that Maverick asserted control or dominion over the safe and that he knew it contained incriminating evidence — approximately $90,000 in cash from drug transactions. Further, the safe and guns were found along with Maverick’s clothing in his personal closet adjoining the bedroom where he slept.11 In this way, the evidence differs from other cases in which the only evidence of possession was the defendant’s mere presence in a house with nothing more connecting him to the contraband found elsewhere in the house.12 Moreover, there was direct video evidence showing Maverick making a delivery of 10 See, e.g., Stevens v. State, 245 Ga. App. 237 , 238-239 (1) (537 SE2d 688) (2000). 11 Cf. Mantooth v. State, 335 Ga. App. 734 , 736 (1) (a) (783 SE2d 133) (2016) (“As long as there is slight evidence of access, power, and intention to exercise control or dominion over the contraband, the question of fact regarding constructive possession remains within the domain of the trier of fact.”). 12 Compare Stevens, 245 Ga. App. at 238 (1) (reversing a drug possession conviction because “[t]he room where Ms. Stevens was found asleep contained nothing more than a ‘couple of baby items’; [n]o drugs were found on her person or in the room; [and t]he residence was not leased in her name.”). 6 a bag to Tyson’s house shortly after Tyson requested that marijuana be retrieved from the stash house. Although police did not verify the contents of the particular bag, the bag was similar to other duffel bags containing marijuana found at the stash house. Thus, taken as a whole and viewed in the light most favorable to the verdict, the evidence sufficiently connected Maverick to the cash, weapons, and marijuana to authorize a finding that he constructively possessed them.13 (b) Knowledge of the weight of marijuana. Maverick was accused of trafficking in marijuana that requires possessing an amount exceeding ten pounds,14 and the indictment alleged that Maverick “knowingly possess[ed] more than 10 pounds and 13 See Blair v. State, 216 Ga. App. 545 , 546 (1) (455 SE2d 97) (1995) (“If the totality of the evidence is sufficient to connect defendant to possession of drugs, even though there is evidence to authorize a contrary finding, the conviction will be sustained.”) (punctuation omitted). See also Clewis v. State, 293 Ga. App. 412 , 415 (2) (667 SE2d 158) (2008) (“[T]he equal access doctrine applies to rebut the presumption of possession only [if] the sole evidence of possession of contraband found on the premises is the defendant’s ownership or possession of the premises.”) (emphasis in original ); Howard v. State, 291 Ga. App. 386 , 388 (662 SE2d 203) (2008) (explaining that for a conviction based on circumstantial evidence, “the proved facts shall not only be consistent with the hypothesis of guilt but shall exclude every other reasonable hypothesis save that of the guilt of the accused. Whether or not in a given case circumstances are sufficient to exclude every reasonable hypothesis save the guilt of the accused is primarily a question for determination by the jury.”) (citation, punctuation, and emphasis omitted). 14 See OCGA § 16-13-31 (c). 7 less than 2,000 pounds of marijuana. . . .” Based on this, Maverick argues that the State failed to prove that he knew that he possessed more than ten pounds of marijuana. But OCGA § 16-13-54.1 provides that if an offense in this part measures a controlled substance or marijuana by weight or quantity, the defendant’s knowledge of such weight or quantity shall not be an essential element of the offense, and the [S]tate shall not have the burden of proving that a defendant knew the weight or quantity of the controlled substance or marijuana in order to be convicted of an offense. Therefore, Maverick’s knowledge of the specific weight of the marijuana was not an essential element,15 and based on the analysis above in Division 1 (a), the evidence was sufficient to support a finding that Maverick knowingly possessed the marijuana found at his residence. That it turned out to be 12 pounds sufficed to support a finding of guilt for possessing a trafficking amount under OCGA § 16-13-31 (c). 15 See Scott v. State, 295 Ga. 39 , 41-42 (2) (757 SE2d 106) (2014) (explaining that in 2013, the General Assembly deleted the word “knowingly” from OCGA § 16- 13-31). The offense in this case was committed in 2017. The indictment alleged that the date of the offense was an essential element, but it did not allege that knowledge was an essential element. Maverick makes a separate argument about the wording of the indictment and the jury instructions, which we address below in Division 3. 8  (c) Evidence of Maverick’s participation in a conspiracy. Maverick also challenges the sufficiency of the evidence that he was part of a conspiracy to traffic in marijuana. We disagree. A person commits the offense of conspiracy to commit a crime [if] he together with one or more persons conspires to commit any crime and any one or more of such persons does any overt act to effect the object of the conspiracy. In order for a conspiracy to exist, there must be an agreement between two or more persons to commit a crime. Such agreement need not be express, nor does it require a “meeting of the minds” to the same degree necessary to form a contract; all that is required is a tacit mutual understanding between persons to pursue a common criminal objective. In the context of narcotics trafficking, courts have sometimes inferred such a tacit agreement even [if] participants had no direct contact with one another, [if] there was evidence that each defendant knew or had reason to know the scope of the criminal enterprise[] and had reason to believe that their own benefits derived from the operation were dependent upon the success of the entire venture.16 As noted above, the evidence supported a finding that Maverick knowingly helped store a large quantity of marijuana at his residence, and there was other evidence that his son Tyson admitted to police that he used the King Bee residence 16 (Citations and punctuation omitted.) Griffin v. State, 294 Ga. 325 , 327 (751 SE2d 773) (2013). 9 as a stash house. Further, there was evidence that Maverick helped respond to a request by Tyson to bring a bag containing approximately a pound of marijuana to Tyson’s residence. Thus, there was evidence that Maverick actively participated in an ongoing trafficking operation by warehousing the marijuana at his residence and providing it to his son for sale. 2. Maverick also makes a perfunctory argument that the guilty verdict was contrary to the principles of justice and decidedly and strongly against the weight of the evidence. It is well settled that, even [if] the evidence is legally sufficient to sustain a conviction, a trial judge may grant a new trial if the verdict of the jury is contrary to the principles of justice and equity, or if the verdict is decidedly and strongly against the weight of the evidence. [If] properly raised in a timely motion, these grounds for a new trial — commonly known as the general grounds — require the trial judge to exercise a broad discretion to sit as a “thirteenth juror.” Further, in exercising that discretion, the trial judge must consider some of the things that he cannot when assessing the legal sufficiency of the evidence, including any conflicts in the evidence, the credibility of witnesses, and the weight of the evidence. Although the discretion of a 10  trial judge to award a new trial on the general grounds is not boundless it nevertheless is, generally speaking, a substantial discretion.17 Here, the trial court’s order reflects that it considered the entirety of the trial evidence and appropriately exercised its discretion in denying Maverick’s motion for new trial on the general grounds.18 Accordingly, this enumeration is without merit. 3. Last, Maverick contends that the trial court committed plain error by failing to instruct the jury that his knowledge of the specific weight of the marijuana was not an essential element of the offense. In light of the clear wording of OCGA § 16-13- 54.1, which states that knowledge of weight is not an essential element of the offense of trafficking, we disagree. With respect to the trafficking count, the court instructed the jury by reading the indictment: [T]he grand jury accuses Maverick Brown . . . with the offense of trafficking in marijuana, for that the said accused on the 8th day of March, 2017, said date being a material element of the offense, in [Floyd County], did unlawfully then and there knowingly possess more than 10 17 (Citations and punctuation omitted.) Tripp v. State, 349 Ga. App. 164 , 173 (3) (825 SE2d 560) (2019). 18 See id. at 174 (3). 11  pounds and less than 2,000 pounds of marijuana, contrary to the laws of this State. Based on OCGA § 16-13-54.1, the court also instructed the jury that: As to the element of weight of marijuana alleged . . . the State likewise has the burden of proof. But, when an offense measures . . . marijuana by weight or quantity, the defendant’s knowledge of such weight or quantity shall not be an essential element of the offense, and the State shall not have the burden of proving that a defendant knew the weight or quantity of the . . . marijuana in order to be convicted of an offense. Relying on the wording of the indictment, Maverick argues that the trial court committed plain error by not instructing the jury that the State had to prove that he knew the amount of marijuana he possessed. To demonstrate plain error, Maverick must meet the following test. First, there must be an error or defect — some sort of deviation from a legal rule — that has not been intentionally relinquished or abandoned, i.e., affirmatively waived, by the appellant. Second, the legal error must be clear or obvious, rather than subject to reasonable dispute. Third, the error must have affected the appellant’s substantial rights, which in the ordinary case means he must demonstrate that it affected the outcome of the trial court proceedings. Fourth and finally, if the above three prongs are satisfied, the appellate court has the discretion to remedy the error — discretion which ought to be exercised only if the 12  error seriously affects the fairness, integrity or public reputation of judicial proceedings.19 Here, as a threshold matter, it is clear that under OCGA § 16-13-54.1, Maverick’s knowledge of the weight of marijuana that he possessed was not a material element of the crime of trafficking. Even so, it is true that, as Maverick argues, an unnecessary description of an unnecessary fact averred in an indictment need not be proved, [but] in criminal law even an unnecessarily minute description of a necessary fact must be proved as charged. If the indictment sets out the offense as done in a particular way, the proof must show it so. No averment in an indictment can be rejected as surplusage which is descriptive either of the offense or of the manner in which it was committed. All such averments must be proved as laid.20 In this case, the indictment does not add a specific knowledge element or description; rather, it stated that Maverick’s possession had to be knowing. This is 19 (Punctuation and emphasis omitted.) State v. Kelly, 290 Ga. 29 , 33 (2) (a) (718 SE2d 232) (2011), quoting Puckett v. United States, 556 U.S. 129 , 135 (II) (129 SCt 1423, 173 LE2d 266) (2009). 20 (Punctuation omitted.) Whaley v. State, 337 Ga. App. 50 , 56-57 (3) (785 SE2d 685) (2016), quoting Ford-Calhoun v. State, 327 Ga. App. 835 , 836 (1) (761 SE2d 388) (2014). 13 demonstrated by the language of the indictment, which expressly made the date of the offense a material element of the offense but did not make the specific knowledge of weight a material element — “. . . for that the said accused on the 8th day of March, 2017, said date being a material element of the offense, in [Floyd County], did unlawfully then and there knowingly possess more than 10 pounds . . . of marijuana, contrary to the laws of this State.” The separation of the date from the descriptor “knowingly” shows that the indictment did not impose a knowledge element specific to the weight of marijuana. Consistent with this, the trial court’s instructions properly recounted the elements of the offense and explained that specific knowledge of the weight was not an element of the offense. There was no risk that the jury would conclude that an otherwise material element did not have to be proved.21 Accordingly, 21 Compare Quiroz v. State, 291 Ga. App. 423 , 427 (3) (662 SE2d 235) (2008) (reversing the denial of a motion for new trial because the trial court’s instruction “could have led the jury to conclude that [an] allegation of the indictment, even though material in the eyes of the law, did not have to be proven beyond a reasonable doubt”). 14 because there was no “clear or obvious” legal defect in the proceedings,22 Maverick cannot demonstrate plain error warranting reversal. Judgment affirmed. McFadden, C. J., and Hodges, J., concur. 22 See Cheddersingh v. State, 290 Ga. 680 , 684-685 (2) (724 SE2d 366) (2012) (“[T]he United States Supreme Court has said that plain error includes that which is so plain the trial judge and prosecutor were derelict in countenancing it, even absent the defendant’s timely assistance in detecting it.”). 15

2020-01-17 22:01:32.016247+00

Lansdon

*1339OPINION. Lansdon : The petitioner contends that the payments made to her sons in 1921 were in compensation for services rendered in connection with the management and oversight of her property and the production of her income, and should be allowed as ordinary and necessary business expenses. The record here does not support this contention. She was not engaged in business. The two enterprises from which she received the greater part of her income were concerns that had been long established and each of which had its own executives and employed personnel. There is not the slightest evidence that either of the sons rendered any service to the North & East Steamboat Co. The younger son was an employee of the Harlem & Morrisiana Truck Lines, and as he was not the manager his salary of not less than $100 per week can hardly be regarded as nominal. The older son devoted some time to the oversight of the real estate and security investments, but his mother’s total income from this source was less than $3,000. The oral contract of employment which it is alleged the petitioner made with her sons appears to have been a rather elastic agreement. The sons could render such service as the exigencies of the estate required and their own engagements permitted, and the mother could place her own estimate of value thereon and pay whatever she thought was right. There seems to have been no legal obligation either for the sons to serve or the mother to pay. It is also to be noted that the petitioner, at the most, was only a life tenant of the corpus of the income-producing property, which at her death is to be divided equally between the sons. If the services in question were necessary to the conservation of the corpus of the estate, they were at least as valuable to the sons as to the mother, and can not be regarded a business expense incurred by her in the production of income. The petitioner cites the decision in K. Threefoot, 9 B. T. A. 499, and contends that it should govern here. In that case a father was engaged in the active operation of several large business enterprises, and was the owner of the property involved as well as the recipient of any income resulting therefrom. He was growing old and was failing in health. He employed his sons, who rendered continuous *1340and substantial service in connection with the operations of his business and the production of his income. The facts there have no significant similarity to the situation here, and our decision in that proceeding establishes no rule applicable to the contention of the petitioner. In our opinion the payments here are without reasonable relationship to the value of services rendered or the amount of income produced, and in substance may be regarded as gifts of income after receipt. Such payments are not deductible from the income of the petitioner in 1921 as reasonable compensation for services rendered in connection with business operations. Decision will he entered for respondent.

2020-01-17 22:01:32.087619+00

Love

*1344OPINION. Love: The respondent, through his attorney, contends that under the facts above set forth, the petitioners have sustained no deductible loss under the Revenue Act of 1921, and cites the provisions of section 202 thereof, as follows: (c) For the purposes of this title, on an exchange of property, real, personal or mixed, for any other such property, no gain or loss shall be recognized unless the property received in exchange has a readily realizable market value; but even if the property received in exchange has a readily realizable market value, no gain or loss shall be recognized. * * * * * * * (2) When in the reorganization of one or more corporations a person receives in place of any stock or securities owned by him, stock or securities in a corporation a party to or resulting from such reorganization. The word “ reorganization ” as used in this paragraph, includes a merger or consolidation (including the acquisition by one corporation of at least a majority of the voting stock and at least a majority of the total number of shares of all other classes of stock of another corporation, or of substantially all the properties of another corporation), recapitalization, or mere change in identity, form, or place of organization of a corporation, (however effected); ******* (e) Where property is exchanged for other property which has no readily realizable market value, together with money or other property which has a readily realizable market value, then the money or the fair market value of the property having such readily realizable market value received in exchange shall be applied against and reduce the basis, provided in this section, of the property exchanged, and if in excess of such basis, shall be taxable to the extent of the excess; but when property is exchanged for property specified in paragraphs (1), (2), and (3) of subdivision (c) as received in exchange, together with money or other property of a readily realizable market value other than that specified in such paragraphs, the money or the fair market value of such other property received in exchange shall be applied against and reduce the basis, provided in this section, of the property exchanged, and if in excess of such basis, shall be taxable to the extent of the excess. We do not agree with the conclusion at which the respondent has arrived. We are of the opinion that in this case it is clear that within the meaning and intent of section 202 (c) there was in 1921 no reorganization, merger, consolidation, recapitalization, nor mere change in identity, form, or place of organization of the Security Rank. The Security Bank found itself in grave financial difficulties in the spring of 1921, and went into voluntary liquidation; but it never was reorganized and it never lost its identity nor its independence by merger, consolidation or in any other manner until later it became defunct by inoperation. *1345The only witness was Cullen F. Thomas, one of the petitioners herein. Mr. Thomas is a lawyer and was one of the attorneys for the bank of which he was also a director and vice president. • His character and his reputation for fairness, admitted in the record by the attorney for the respondent, are such that his testimony stands unchallenged; no attempt whatever being made on behalf of the respondent to rebut or discredit it. From the record it appears that in the crisis confronting the Security Bank, precipitated by its financial difficuties, the directors decided to incorporate a new bank, the Southwest National, and to sell to it all the assets of the Security Bank except its corporate name and charter in consideration of the assumption by the new bank of all the obligations of the Security Bank, except its capital liabilities. This was done and in the agreement of July 19, between the two banks, this transaction is expressly designated as a sale of the assets of the Security Bank. The transaction has none of the characteristics of a “ reorganization ” as defined in section 202 (c) of the Revenue Act of 1921, or as that word is generally understood. No new capital, money or resources of any kind were contributed to it by its directors or other stockholders, nor was any attempt whatever made to revive an organization recognized as being in extremis; but a successor bank was created with a new charter, new capital and a new management, which engaged actively in the banking business; while the moribund Security Bank, having sold and disposed of all but its name, its charter, and its capital liability, was permitted quietly to breathe its last. The essential elements of a “ reorganization ” seem altogether to be lacking here; nor is that fact altered in our opinion, by the admission in the pleadings of the petitioners and in the testimony of Mr. Thomas that the Southwest Bank was organized “ for the purpose of taking over the assets and liabilities of the Security National Bank and carrying on the banking business at said bank,” and that “ part of the plan was, of course, that the new bank would succeed to the depositors in the old.” The old bank was dead and the Southwest Bank was a new bank. Immediately after the organization of the Southwest Bank, the petitioners found themselves in this situation: They had disposed of their 210 shares of stock of the Security Bank which had cost them $31,500, and had received in their place 52½ shares of the stock of the new Southwest Bank, and a certificate of some sort from the Liberty Investment Co. representing their equity (157½ shares or parts) in those assets which had been conveyed for liquidation to that corporation as liquidating agent. It is not clear, from the record, just what the above “ certificate ” was. In several places, references are made to it as a “ stock certifi*1346cate ” or as a “ certificate of stock ” in the Liberty Investment Co. for 157½ shares, but that does not appear to be its true nature, though the witness, Thomas, himself, occasionally so speaks of it. But from the fact that the first reference to it was as a “ certificate of interest ” in the three-fourths of the assets of the Security Bank that were turned over to the Liberty Investment .Co., not in its own right but as “ liquidating agent,” and as its exact nature is not material to this issue, no violence will be done either to the petitioners or the respondent if we speak of it in that way. At this point, then, the petitioners having parted with their 210 shares of stock in the Security Bank which had cost them, subsequent to March 1, 1913, at $150 per share, $31,500, were in possession, in place of them, of 52½ shares of stock in the Southwest Bank, representing one-fourth of their former interest in the Security Bank, which stock had at that time a fair market valúe of $150 per share or $7,875; and a certificate of undetermined value, from the Liberty Investment Co., representing the cost to them of the remaining three-firarths of their former interest in the Security Bank, or $23,625, which they had not surrendered, but which had been placed with an agent for liquidation for their account and benefit. Clearly there had been so far neither “ gain derived nor loss sustained,” under the law by the petitioners through this transaction. If the matter had stopped there we would have no alternative but to sustain the contention of the respondent, but it did not stop there. In December of the same year (1921) the petitioners sold for $1 their entire interest in the remaining assets of the Security National Bank held for their account, use and benefit by the Liberty Investment Co. as liquidating agent and represented by a certificate of that corporation for 157½ shares or equal parts in such assets; claiming as a deductible loss in their income-tax returns for 1921, the difference between the cost to them, $23,625, of their undivided interest in such remaining assets, and the sum of $1 which they realized from the sale. We are of the opinion that the deduction is a proper one. It is not of moment that after the Southwest Bank had made its selections from the assets of the Security Bank, those remaining which were turned over to the liquidating agent were regarded by the petitioners as being of no value whatever. The fact is that they had never until December, 1921, parted with their title to those remaining assets in such a way as legally to determine and establish their value. It is true that they formed a part of “ all ” the assets of the Security Bank that were sold to the Southwest Bank under the contract of sale of July 19, 1921; but that sale was made with certain reservations and stipulations clearly set forth in the contract under which the title to those assets “ selected ” by the Southwest *1347Bank passed to it when the selections were made; but the undivided interest of the stockholders of the Security Bank in the assets remaining after those selections had been made and segregated never was lost to them pending some subsequent act. In the instant case that subsequent act was consummated in the sale by the petitioners of all their right, title and interest in such remaining assets for the con-consideration of $1, in December, 1921. The respondent contends further that these petitioners are barred from claiming this loss (the reality of which is nowhere denied) as legally deductible by the language of section 202 (e) of the Revenue Act of 1921, supra. We are not of that opinion. The respondent contends that the admitted and undisputed opinion and belief of these petitioners that these remaining assets were without a readily realizable market value at the time that the Southwest Bank was created and their continuing interest in those assets turned over for liquidation to the Liberty Investment Co., preclude them from claiming a lawful loss when their interest in those assets was disposed of and the amount of their loss actually determined thereby; but the fact here is that by the sale in December, 1921, of their entire interest in these remaining assets, these petitioners did “ realize,” determine, and sustain an actual loss of $23,624 in amount. We find for the petitioners in the full amount of their claim. It appears from the record that an error of some kind, the nature and effect of which is not apparent, was made in the preparation of the petitioners’ income-tax returns for 1921. This will be corrected in the recomputation of the tax. Judgment will be entered under Rule 50.

2020-01-17 22:01:32.119976+00

Love

*1349OPINION. Love: The basis for this proceeding is alleged to be a notice of deficiency mailed December 14,1926. The notice of deficiency in evidence before us was mailed on the specified date but it notifies the petitioner of a deficiency for the year 1921, only. It does not appear that the additional taxes for 1922, recommended by a deputy collec*1350tor have been the subject of a final determination. We have no jurisdiction in this proceeding over the year 1922, and so far as the appeal relates to that year, it is dismissed. See Franklin H. Moyer, 1 B. T. A. 75; Frost Suferior Fence Co., 1 B. T. A. 1096. The petitioner realized no taxable income on the sale by him as trustee for his brother, of the royalty interest in section 6-18-35. In the first issue for 1921, the petitioner contends for the allowance as deductions from income of losses in value of what are described orally by the petitioner on the stand as “ oil royalty rights.” It appears that all but one of the rights were purchased in the first part of the taxable year, either by the individual partners who turned them over to a partnership, or by the partnership directly. A short time later, with the one exception, they were turned over to a corporation for stock and after a few months existence, the corporation was dissolved and the rights were distributed to the stockholders. At the end of the same taxable year the rights were deemed valueless according to the testimony of the petitioner. But he still owned those rights, and it does not appear whether such rights ran indefinitely with the land, or were limited in duration. If, in fact, they ran with the land, then no loss was realized, because they had not been disposed of. As title to royalty rights in oil leases, unless limited by contract, constitutes title to the reality itself, and is not subject to forfeiture, as oil and gas leases, we must hold in this case that they ran with the land and are yet undisposed of. The situation here is different from the situation in the case of B. G. Adams, 5 B. T. A. 113, where the petitioner acquired a royalty interest in a specific oil lease. Under such a situation, the lease being subject to forfeiture, and the lease having been abandoned, the royalty rights terminated with the lease. In other words, the royalty rights were limited and did not run with the land, as they apparently do in the instant case. This case is also different from an ordinary oil lease, which is subject to forfeiture, or abandonment, as was determined in Appeal of A. L. Huey, 4 B. T. A. 370. Moreover, in all but one of such transactions, the acquisition of those rights by petitioner passed through several mutations, in all of which he participated. There may be situations wherein a consideration of the net result of the several transactions mentioned is all that is necessary, due to the fact that they all occurred within the same taxable year and the algebraic sum of the several gains or losses would reflect a final loss to the petitioner. This condition does not exist in this case for the reason that originally the petitioner owned one-half interests in all of the partnership assets while at the end we find him possessed of entire interests in some of the assets. Half interests of the partners have been the subject of indirect exchange. Complete details of the distribution by the corporation *1351are lacking. Without a full disclosure of all of the facts it is impossible to ascertain what was the cost to the petitioner and, therefore, the losses, if any, can not be ascertained. With respect to all such royalty rights, the respondent contends, and we agree with him, that if the interest runs with the land, no loss is realized until the interest is disposed of; it is not realized by an arbitrary conclusion that it is worthless. Cf. A. J. Schwarzler Co., 8 B. T. A. 535. It is not here shown and we can not assume that a right was forfeited, or ever was forfeitable. There is nothing to do but sustain the respondent. Judgment will he entered under Bule 50.

2021-01-26 17:08:55.059354+00

http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00396.htm

People v Bean (2021 NY Slip Op 00396) People v Bean 2021 NY Slip Op 00396 Decided on January 26, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 26, 2021 Before: Gische, J.P., Kern, Moulton, Shulman, JJ. Ind No. 99055/17 Appeal No. 12944 Case No. 2018-2720 [*1]The People of the State of New York, Respondent, v Michael Bean, Defendant-Appellant. Robert S. Dean, Center for Appellate Litigation, New York (Nicole P. Geoglis of counsel), for appellant. Darcel D. Clark, District Attorney, Bronx (Christopher Michael Pederson of counsel), for respondent. Order, Supreme Court, Bronx County (Raymond L. Bruce, J.), entered on or about April 27, 2018, which adjudicated defendant a level three sexually violent predicate sex offender pursuant to the Sex Offender Registration Act (Correction Law art 6-C), unanimously affirmed, without costs. The court correctly assessed 30 points for a prior sex offense based on defendant's California conviction. To determine whether a foreign conviction is the equivalent of a New York State offense for SORA purposes, a court first compares the elements of the foreign statute with the analogous New York offense (People v Perez, 35 NY3d 85, 93-94 [2020]; North v Board of Examiners of Sex Offenders of State of N.Y., 8 NY3d 745, 753 [2007]). Where the offenses overlap but the foreign offense also criminalizes conduct not covered by the New York statute, the court reviews the conduct underlying the foreign conviction to determine whether that conduct is, in fact, within the scope of the New York offense (Perez, 35 NY3d at 95). Here, defendant was convicted of a California felony that could be committed by having consensual sex with a person under the age of 18, whereas in New York a person who is 17 years old is capable of consent (Penal Law § 130.05[3][a]). In defendant's California case, the victim was 17 years old, and thus was not a person deemed incapable of consent in New York. However, in the SORA proceeding, the People established by clear and convincing evidence, including reliable documentary proof (see People v Mingo, 12 NY3d 563, 573-574 [2009]), that the oral sexual conduct was committed by forcible compulsion, in that defendant tied the victim's hands and threatened to harm her. Therefore, he engaged in oral sexual conduct by forcible compulsion, a felony sex offense in New York (see Penal Law § 130.50[1]). While defendant argues that he was charged with and pleaded guilty to a purely statutory offense in California that did not require any showing of force, that conviction was properly considered by the SORA court because "the ultimate and paramount concern of the SORA risk-level assessment is an accurate determination of the risk a sex offender poses to the public" (Perez, 35 NY3d at 94 [internal quotation marks omitted]). Accordingly, the court correctly assessed 30 points for a prior sex crime, and also applied the automatic override to level three. The court correctly assessed 15 points under the risk factor for a history of drug or alcohol abuse. While defendant asserts that his drug use was too remote to support the assessment of points, the case summary indicates that his drug use has continued. In any event, defendant's California conviction subjects him to the automatic override to level three regardless of his point score. The court properly exercised its discretion when it declined to grant a downward departure (see People v Gillotti, 23 NY3d 841 [2014]). There were no mitigating factors that were not adequately taken into account by the guidelines[*2], or outweighed by serious aggravating factors. THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 26, 2021

2021-01-26 17:08:55.306183+00

http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00392.htm

Pace v Horowitz (2021 NY Slip Op 00392) Pace v Horowitz 2021 NY Slip Op 00392 Decided on January 26, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 26, 2021 Before: Gische, J.P., Kern, Moulton, Shulman, JJ. Index No. 161206/18 Appeal No. 12951 Case No. 2020-02054 [*1]Meghan Pace etc., et al., Plaintiffs-Appellants, v Steven A. Horowitz, Defendant, Henry Klosowski et al., Defendants-Respondents. Blank Rome LLP, New York (Martin S. Krezalek of counsel), for appellants. L'Abbate, Balkan, Colavita & Contini, LLP, Garden City (Marian C. Rice and Meredith D. Belkin of counsel), for respondents. Order, Supreme Court, New York County (O. Peter Sherwood, J.), entered on or about January 20, 2020, which, insofar as appealed from as limited by the briefs, granted defendants' motion to dismiss plaintiff estate's fifth cause of action for legal malpractice and the beneficiaries' sixth cause of action for unjust enrichment against defendant law firm, unanimously affirmed, without costs. The court correctly determined that plaintiffs failed to show that there is an issue of fact as to whether the legal malpractice claim was timely filed based on the application of the continuous representation doctrine toll (see Marzario v Snitow Kanfer Holzer & Millus, LLP, 178 AD3d 527, 528 [1st Dept 2019]). The continuous representation doctrine toll does not apply based merely on the existence of an ongoing professional relationship, but only where the particular course of representation giving rise to the particular problems resulting in the alleged malpractice is ongoing (see Matter of Lawrence, 24 NY3d 320, 341 [2014]; Williamson v PricewaterhouseCoopers LLP, 9 NY3d 1 [2007]). Here, while plaintiffs allege that defendant law firm provided continuing estate administration work as part of an ongoing professional relationship of estate administration, they do not adequately allege that the particular course of representation regarding the sale of estate assets in 2007, which gave rise to the malpractice allegations, continued through February 2015, so as to make the instant malpractice claim timely filed. The court also properly dismissed the cause of action for unjust enrichment. The claim is redundant of the legal malpractice claim, inasmuch as they arise from the same allegations and seek identical relief (see RJR Mech. Inc. v Ruvoldt, 170 AD3d 515 [1st Dept 2019]).THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 26, 2021

2021-01-26 17:08:55.569225+00

http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00391.htm

Omega Diagnostic Imaging PC v Attica Constr. Corp. (2021 NY Slip Op 00391) Omega Diagnostic Imaging PC v Attica Constr. Corp. 2021 NY Slip Op 00391 Decided on January 26, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 26, 2021 Before: Gische, J.P., Kern, Moulton, Shulman, JJ. Index No. 154562/19 Appeal No. 12955-12955A Case No. 2020-02371 [*1]Omega Diagnostic Imaging PC, et al., Plaintiffs-Appellants, v Attica Construction Corp., et al., Defendants-Respondents, Westchester LLA, LLC as Successor in Interest to Attica Construction Corp., Defendant. Aboulafia Law Firm, LLC, White Plains (Jack Glanzberg of counsel), for appellants. Traub Liberman Straus & Shrewsberry LLP, Hawthorne (Cheryl P. Vollweiler of counsel), for ATTICA Construction Corp., respondent. Littleton Park Joyce Ughetta & Kelly LLP, Purchase (Robert L. Joyce of counsel), for Siemens Medical Solutions USA, Inc., respondent. Appeal from order, Supreme Court, New York County (Andrew Borrok, J.), entered on or about January 8, 2020, which granted defendants Attica Construction Corp. and Siemens Medical Solutions USA, Inc.'s separate motions for summary judgment and to dismiss the amended complaint as untimely, deemed an appeal from the judgment, same court and Justice, entered January 23, 2020 (CPLR 5520[c]), dismissing the complaint, and, as so considered, said judgment unanimously affirmed, with costs. The motion court properly dismissed the complaint as untimely. "A cause of action arising out of defective construction accrues upon completion of the contractual work" (Town of Oyster Bay v Lizza Indus., Inc., 22 NY3d 1024, 1029 [2013]). This is so "no matter how a claim is characterized in the complaint because all liability for defective construction has its genesis in the contractual relationship of the parties" (id. at 1030 [internal quotation marks omitted]). This rule has been extended to nonparties to the contract in the "functional equivalent of privity" with the defendant (City School Dist. of City of Newburgh v Stubbins & Assoc., Inc., 85 NY2d 535, 539 [1995] [internal quotation marks omitted]), "even if the claimed defect is latent" (Rite Aid of N.Y., Inc. v R.A. Real Estate, Inc., 40 AD3d 474, 474 [1st Dept 2007]). Here, although plaintiff Omega Diagnostic Imaging PC and its landlord plaintiff H.P.M.L. Realty Corporation (HPML) contend that they are entirely separate entities and therefore the motion court erred in finding that HPML was in the functional equivalent of privity with defendants, plaintiffs' principal submitted an affidavit averring that he was the principal of both entities, was aware of the work, and signed a document entitled "Consent & Waiver by Owner, Landlord or Mortgagee of Real Estate" in his capacity as principal of HPML. Accordingly, there is no basis to depart from the rule that "where the plaintiff is not a stranger to the contract," and "plaintiffs, at the very least, consented to" the work, the statute of limitations begins to run at the completion of the work (Town of Oyster Bay, 22 NY3d at 1030-1031 [internal quotation marks omitted]). Here, because the work was completed by defendants in September 2012, and the action was not commenced until May 2019, the motion court properly determined that the action was untimely.THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 26, 2021

2021-03-18 20:02:23.411484+00

http://www.courts.ca.gov/opinions/documents/A157962.PDF

Filed 3/18/21 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE SHANNON EYFORD et al., Plaintiffs and Appellants, A157962 v. JIM NORD, as Trustee, etc., et al., (Napa County Super. Ct. No. 17PR000071) Defendants and Respondents. Shannon Eyford and Erin Johnson appeal from a judgment entered after the trial court denied their petition to invalidate their grandmother’s trust, which disinherited them. Appellants contend the court should have invalidated the trust pursuant to Probate Code section 6100.5, subdivision (a)(2),1 because their grandmother had delusions that negated her testamentary capacity. We affirm. FACTUAL AND PROCEDURAL BACKGROUND Catherine Pearson, known as “Kay,” died in December 2016 at the age of 90 years.2 In a trust instrument she executed on February 24, 2016, she named St. Jude Children’s Research Hospital (St. Jude) the sole beneficiary of her estate, which was worth approximately $2 million. In that trust 1 All further statutory references are to the Probate Code. 2 The decedent was referred to simply as “Kay” throughout the trial court proceedings. We will refer to her in the same manner here. 1 instrument, she disinherited her surviving son and her two granddaughters (appellants Eyford and Johnson). In April 2017, appellants filed a petition contesting the validity of the trust instrument on the ground that Kay had a mental disorder with symptoms including delusions or hallucinations that allegedly caused Kay to devise her property in a way she would not otherwise have done. (§ 6100.5, subd. (a)(2) (“6100.5(a)(2)”).) As relevant here, the petition named St. Jude and Jim Nord, in his capacity as trustee, as respondents.3 The matter was tried before the court. Ultimately, the court found that appellants failed to carry their “burden of proving that Kay was suffering from a delusion within the meaning of . . . section 6100.5(a)(2) at the time she executed the [t]rust.” The following is a summary of the trial evidence and proceedings relevant to this appeal. Early Background Kay was born in September 1926. She had two children, Cathy Noyes and John Noyes, Jr., with her first husband, John Noyes, Sr.4 In the early 1960s, after about 17 years of marriage, Kay and John Sr. divorced but remained friends and in contact for the rest of her life. In the 1970s, Kay married Robert Pearson, known as “Bob.” After her divorce from John Sr., Kay and her son became estranged. Kay, however, remained close with her daughter, Cathy, who married Buzz 3 The petition also alleged that Kay lacked testamentary capacity on grounds of undue influence by her accountant, Joan Sturges, and claimed that Sturges had converted trust assets. Nord, as trustee, settled the conversion claim against Sturges. The trial court’s rejection of the undue influence claim is not contested on appeal and will not be discussed further. 4 For the sake of brevity, and clarity due to shared last names, we will refer to Cathy Noyes as Cathy, and John Noyes, Sr., as John Sr. After initial reference to Robert Pearson, below, we will refer to him as Bob. 2 Kane. Cathy and Kane had two daughters, appellants Eyford and Johnson. Bob and Kay frequently visited and corresponded with Cathy’s family in Washington state, where they lived. Various witnesses described the relationship between Kay and appellants as close and loving. In 2013, Cathy was diagnosed with cancer. After undergoing surgery, Cathy lived with Eyford, who helped care for her until her death from cancer in June 2014. Around the time of Cathy’s death, Kay told numerous people that her estate was going to appellants. But the day after Cathy’s death, Kay told a longtime friend, Roberta McCully, that appellants had caused Cathy’s death by repositioning her in bed the night of her surgery against a doctor’s orders. Later in 2014, Kay also told her friend Vicki Barrios that appellants caused Cathy’s death by repositioning her in bed. At trial, appellants denied moving Cathy in her hospital bed contrary to doctor’s orders. Bob’s Death and Kay’s Hospitalization In August 2014, Kay and Bob moved to a senior living community in Napa called “The Meadows.” The Meadows offers different accommodations to residents depending on the level of care they might need, from independent living, to assisted living, skilled nursing, and memory care. One cannot live in independent living with a diagnosis of dementia, and Kay stayed in independent living until her death in December 2016. Eyford visited Bob and Kay for the Super Bowl in 2014 and in January 2015. Appellants both visited in 2015 for Mother’s Day. Johnson and her son visited in August 2015. In September 2015, Eyford visited while Bob was ill and staying in a rehabilitation facility at The Meadows. Bob died on October 1, 2015. Within weeks, Kay called John Sr. and said she was confused and alone. She also said that she did not know what she was doing and that Bob had taken care of everything. Indeed, during their marriage, Kay had little or no knowledge 3 of her financial affairs, including where she banked, and she had never signed a check. Believing Kay was acting irrationally, John Sr. told her to go to the hospital and asked appellants to help her. On October 22, 2015, Kay was admitted to the hospital and treated for anemia and a urinary tract infection (UTI). Kay’s medical records indicated she presented with confusion likely secondary to the UTI, and the confusion had “cleared” in the hospital. Johnson spent two nights at the hospital with Kay and later testified that Kay was combative and disoriented at the hospital and that she pulled out her intravenous lines and said she saw Bob above her bed. In the hospital, Johnson suggested that Kay put Bob’s contacts in Kay’s phone, then turn off Bob’s phone. Kay did not like this idea and seemed attached to Bob’s things. Johnson realized Kay “wasn’t ready.” The Days Immediately Following Kay’s Hospitalization On October 25, 2015, Kay was discharged from the hospital, and Johnson drove her home. John Sr. and Eyford were present when Kay arrived at The Meadows. After Kay expressed concern about her finances, with Kay’s consent and in her presence, John Sr. and Johnson (but not Eyford) went through Kay’s records. They shredded outdated checks and records, and found documentation of an account worth $2.4 million, which Kay said she had no prior knowledge of. On October 26, 2015, Eyford took Kay to Ole Health Clinic for cognitive testing. Eyford testified that the hospital had scheduled the appointment because The Meadows required an evaluation to determine if Kay needed changes to her living arrangements. At the clinic, Kay underwent a “mini mental status exam” which indicated she was experiencing mild to moderate cognitive impairment. Staff at the clinic scheduled another appointment to 4 fill out paperwork for The Meadows and to determine whether Kay needed to move from independent living to assisted living. That evening, Eyford went out alone in Napa to get some food and a drink, and Kay became very agitated, pacing and stating that Eyford was acting like a “ ‘floozy’ ” and “ ‘no woman should go out in town alone.’ ” On October 27, 2015, appellants, John Sr., and Kay went to Kay’s bank, and Kay put appellants on her account so they could help with her banking. On the same day, Kay also signed a will and a power of attorney that appellants obtained from the internet. The notarized power of attorney form named Eyford as Kay’s attorney-in-fact, giving her power to make financial decisions for Kay, and it named Johnson the successor attorney-in-fact. The will Kay signed named appellants as Kay’s sole beneficiaries. Concerned about the validity of that will, John Sr. advised Kay to consult an attorney. On October 28, 2015, Johnson and John Sr. left town. Eyford stayed and took Kay to an estate planning attorney, James Watson, for purposes of preparing a trust naming appellants as her sole beneficiaries. Watson planned to have the documents ready for signing by November 9, 2015. Eyford and Kay returned to the Ole Health Clinic that day. Eyford told medical staff that Kay did not recall being there two days prior. Eyford also expressed concern about Kay leaving The Meadows unassisted and uncertainty whether Kay truly needed assisted living. Kay’s records from that visit indicate that she presented as confused and disoriented, that she was unable to leave the facility unassisted, and that she was unable to manage her own cash. Another appointment was scheduled for mid- November for further mental health testing. Around this time, Eyford told Wayne Panchesson, director of The Meadows, that she did not think Kay should be driving. Eyford testified she told Kay to “please not drive the car,” 5 to which Kay responded by begging to keep her right to drive and becoming paranoid about where her keys were.5 During a dinner on October 28, 2015, Kay accused Eyford of being sent by John Sr. and Johnson to do the “dirty work,” i.e., take away her independence, put her in assisted living, and take her car. Kay also accused Eyford of never visiting her at The Meadows. Kay pleaded with Eyford not to take her car or make her leave her apartment. Eyford tried to explain that she had in fact visited, and also that they “would let her maintain as much independence as [they] could.” The next morning, Kay had no recollection of leveling these accusations at Eyford and affirmed her intention to keep her estate in the family. Eyford obtained Kay’s permission to record part of this conversation. This was the last time Eyford saw or conversed with Kay. Kay’s February 24, 2016 Trust On November 2, 2015, John Sr. returned to Napa and drove Kay to see attorney Watson without an appointment to try to move up the signing date for the trust. At that meeting, Kay told Watson that appellants had been “barging” into her home, and that she did not want to give her estate to them though she did not talk about any other potential beneficiaries. Watson felt uncomfortable executing Kay’s trust and said he would follow up in a month. On December 16, 2015, Watson again met with Kay. This time, Kay was accompanied by her accountant, Joan Sturges, and she expressed concern about appellants taking her money. Because this was the third meeting in less than two months, with different companions accompanying Kay each time, Watson was uncomfortable executing documents without a 5 Kay’s friend Roberta McCully testified Eyford called her and told her she was taking Kay’s car. It is unclear when exactly this call occurred, but McCully indicated this was one of the bases for Kay’s complaints against appellants after Bob died. 6 capacity declaration and was concerned about protecting both Kay and his office. Kay dismissed Watson after this meeting because she did not like him. After dismissing Watson, Kay retained attorney Lori Hunt. Before seeing Hunt, Kay told Sturges she wanted her estate to go to “sick babies,” but did not mention a particular charity or institution. On February 10, 2016, Hunt met with Kay and suggested St. Jude as a potential beneficiary; Kay loved the idea. When asked why she was disinheriting appellants, Kay replied that she felt she and Bob had given them enough through the years, that what she had was attributable to Bob, and that Bob loved helping sick babies, so she wanted to leave her estate to a charity that benefited sick babies to honor him. On February 24, 2016, Kay signed a trust that named St. Jude as her sole beneficiary and expressly disinherited her son and appellants. In July and August 2016, Kay signed amendments to the trust concerning the successor trustee, ultimately naming Jim Nord, a professional fiduciary, as the first successor trustee. Hunt indicated that at no time during her meetings with Kay did she form the impression Kay might have cognitive or mental problems. Kay’s Accusations Against Appellants and Other Evidence of Her State of Mind Multiple witnesses testified that starting in November 2015, Kay began making accusations against appellants. On November 4 and 5, 2015, Kay told Cole Hornstein, staff at The Meadows, that Eyford was trying to sell her car and had keys to her apartment, threatening to come in. Kay stated she was afraid of Eyford. Kay said that appellants were interested only in her money, that they were trying to say she had cognitive issues and could not handle her own affairs, and that Kay did not want to associate with Eyford. Kay also reported that someone had closed her bank account which had a zero balance. Hornstein, a 7 mandatory reporter, filed a report with an ombudsman in Napa, Adult Protective Services, and the police. Kay later told Hornstein that she had closed the bank account. Officer Jarett Haggmark of the Napa Police Department interviewed Kay. Kay said that after Bob died, appellants went through her paperwork and tried to take her to an attorney and doctor. Kay also stated that Eyford was still in Napa staying with her. Officer Haggmark called Eyford who said she was at home, in Washington state. Officer Haggmark told Eyford it was best not to further contact Kay. Officer Haggmark testified that Kay seemed “out of it” and that Hornstein said he thought Kay was in the early stages of dementia. At trial, Hornstein denied saying this. Johnson spoke to Kay over the phone several times in November 2015. During these calls, Kay called Eyford a “floozy,” and said Eyford was no longer welcome at The Meadows because Kay did not feel safe and Eyford stole money and a bracelet from her. Johnson eventually tried to challenge Kay and explained she shredded Kay’s papers, not Eyford, which caused Kay to become argumentative and end the conversation. During their final phone conversation, Kay accused Johnson of being in “cahoots” with Eyford and cut off contact with her as well. In early November 2015, Kay saw her long-time accountant, Sturges, for the first time since Bob’s death and accused appellants of stealing cash that Bob had stashed around the apartment and a bracelet. Sturges testified that during this first visit, Kay was underweight, nervous, paranoid, afraid, and confused. After November, Kay did not discuss appellants a lot. That said, Kay was afraid of “everything.” She would not allow handymen into her home and was afraid of appellants being in town. Around June 2016, and once or twice before, Kay said she thought appellants were back in town or 8 back at her door. In June 2016, Sturges, who was unsure if Kay meant “at her door” literally, asked Hunt for a referral to an attorney to get a restraining order. In spending time with Kay, Sturges observed Kay had memory issues. Of about 30 visits with Kay, Sturges noticed Kay having good days with no memory problems about six times, bad days about six times, and the remainder were somewhere in between. Sturges testified the day Kay signed the subject trust was a “good day,” and Kay was clear-headed and expressed things to her that caused Sturges to believe Kay knew what she was doing. In November and December 2015, Kay began making similar accusations about appellants to her friends Sharon Steele, Roberta McCully, and Vicki Barrios. Steele testified that during five separate visits she had with Kay after December 2015, Kay talked about appellants’ misdeeds. During one visit in February 2016, Kay told Steele she changed her will because of their misbehavior, i.e., she believed they stole cash and a bracelet, took and waved her keys in her face, and wanted to get rid of her car. Once, Kay told Steele she was afraid she would be pushed over the balcony. McCully, who spoke to Kay by phone every day, testified that for about six months after late-2015, Kay said numerous times she believed Eyford wanted to kill her. In addition to accusing appellants of taking cash and a bracelet, Kay told Barrios, whom she usually saw twice a month, that appellants “ransacked” her home looking for cash and that Eyford caused a disturbance while drunk in the lobby at The Meadows. Kay also claimed that when she confronted Eyford after finding her shredding documents in Bob’s office, Eyford allegedly tried to lead her out on a balcony, causing Kay to fear for her life and to think that appellants wanted to push her off. Kay believed Eyford 9 took Bob’s keys and could access Kay’s apartment, and she was afraid Eyford might harm her. After December 2015, Kay repeated these stories to Barrios from time to time. Kay also told Barrios after Bob’s death that she changed the beneficiary of her estate to St. Jude because Bob always wanted that, that she had been the one to talk Bob into giving the money to family, and that she changed her mind. Kay said Eyford and Johnson came around only because they wanted money, and while she was sick with an infection, they took her to a doctor to deem her incompetent and also took her to a bank and to an attorney with “a very tight agenda around her assets.” Moreover, although Kay was sick, grieving, and tired, Eyford kept trying to bait her into talking about money, and at one point Kay thought Eyford recorded their conversation. Kay told Barrios that all appellants had to do was be patient, but they got greedy, so they would get nothing and “[s]he didn’t want them to have one thin dime.” Steele, McCully, and Barrios all testified that Kay always dressed very well, that her home was always clean, and that she never displayed confusion, disorientation, or memory issues after Bob’s death. Kay’s doctors testified in accord. Dr. Margaret Poscher, Kay’s internist, testified that she never noticed Kay exhibit delusions or paranoia, and that she never formed any concern that Kay might have dementia. Dr. Yelena Krijanovsky, Kay’s hematologist/oncologist, also never noticed any cognitive decline or delirium in Kay. The parties presented competing expert testimony concerning Kay’s mental condition. 10  DISCUSSION Appellants argue principally that the trial court erred in rejecting their claim of testamentary incapacity under section 6100.5(a)(2) by wrongly selecting a single false belief Kay had about appellants—i.e., that appellants “wanted her out of the way in order to get her money”—and then wrongly determining it was not a delusion. Instead, appellants claim, the court should have found that Kay’s multiple false beliefs about appellants all constituted delusions negating Kay’s testamentary capacity. Appellants contend that but for her delusions, Kay would not have executed the 2016 trust disinheriting appellants. A. Governing Law “As a general proposition, California law allows a testator to dispose of property as he or she sees fit without regard to whether the dispositions specified are appropriate or fair. [Citations.] Testamentary competence is presumed.” (Estate of Sarabia (1990) 221 Cal.App.3d 599 , 604, italics added.) Section 6100.5(a)(2) provides that “[a]n individual is not mentally competent to make a will if, at the time of making the will, . . . [¶] . . . [¶] . . . [t]he individual suffers from a mental health disorder with symptoms including delusions or hallucinations, which delusions or hallucinations result in the individual’s devising property in a way that, except for the existence of the delusions or hallucinations, the individual would not have done.”6 6 By its terms, section 6100.5 applies only to wills. Relying on Andersen v. Hunt (2011) 196 Cal.App.4th 722 , appellants contend section 6100.5 also applies to trusts or trust amendments that, in content and complexity, closely resemble a will or codicil. (Andersen, at p. 731.) We agree and see no reason why section 6100.5 should not apply where, as here, a trust amendment reallocates the trust estate by disinheriting one set of possible beneficiaries and giving the entire estate to another beneficiary. (See Lintz v. Lintz (2014) 11  In this context, a delusion “has been defined to be the conception of a disordered mind which imagines facts to exist of which there is no evidence and the belief in which is adhered to against all evidence and argument to the contrary, and which cannot be accounted for on any reasonable hypothesis. ‘One cannot be said to act under an insane delusion if his condition of mind results from a belief or inference, however irrational or unfounded, drawn from facts which are shown to exist.’ ” (Estate of Putnam (1934) 1 Cal.2d 162 , 172.) “If there is any evidence, however slight or inconclusive, which might have a tendency to create a belief, such belief is not a delusion.” (Estate of Alegria (1948) 87 Cal.App.2d 645 , 655.) “Capricious and arbitrary likes, dislikes and mistrusts are not evidence of unsoundness of mind.” (Ibid.) “Care must be taken to differentiate between mere unreasonable opinions and mental derangements. Testamentary capacity does not depend upon the testatrix’ ability to reason logically or upon her freedom from prejudice. A belief may be illogical or preposterous, but it is not, therefore, evidence of insanity.” (In re Estate of Perkins (1925) 195 Cal. 699 , 708 (Perkins).) “The presumption is always that a person is sane, and the burden is always upon the contestants of the will to show affirmatively, and by a preponderance of the evidence, that the testatrix was of unsound mind at the time of the execution of the will.” (Perkins, supra, 195 Cal. at p. 703.) “[T]he standard for testamentary capacity is exceptionally low.” (In re Marriage of Greenway (2013) 217 Cal.App.4th 628 , 642.) “A person challenging the validity of a trust instrument on the grounds that the trustor lacked capacity 222 Cal.App.4th 1346 , 1352.) Respondents do not contest Andersen’s applicability here. 12 to execute the document . . . carries the heavy burden of proving such allegations.” (Doolittle v. Exchange Bank (2015) 241 Cal.App.4th 529 , 545.) B. Standard of Review As a preliminary matter, we address the appropriate standard of review. Respondents contend the substantial evidence standard of review applies to the trial court’s determination as to whether Kay had a mental health disorder and an associated delusion sufficient to invalidate the trust. Appellants argue the de novo standard applies because the trial court referenced only one disputed issue of fact in its decision, “i.e., whether or not the name of St. Jude’s as the beneficiary of the trust came from CPA Joan [Sturges] or attorney Lori Hunt,” and the court’s resolution of that disputed fact is neither relevant nor contested on appeal. Generally, “the application of a statutory standard to undisputed facts is reviewed de novo.” (Harustak v. Wilkins (2000) 84 Cal.App.4th 208 , 212.) That said, “ ‘[w]here the ruling that is the subject of appeal turns on the trial court’s determination of disputed facts, the appropriate standard of review on appeal is “sufficiency of the evidence.” ’ ” (Cochran v. Rubens (1996) 42 Cal.App.4th 481 , 486.) Here, the ruling upholding the trust’s validity turned on the trial court’s determination of whether, at the time she executed her trust, Kay had a mental health disorder with symptoms including delusions or hallucinations that caused her to disinherit appellants. There appears no doubt that the relevant facts concerning Kay’s mental state and mental condition were in dispute, and the parties presented conflicting evidence over the course of trial. For example, witnesses Hunt, Steele, McCully, and Barrios testified that Kay never appeared disoriented or confused or to be having mental trouble in 2016, while witnesses Sturges and John Sr. testified 13 differently. The parties also presented competing experts who provided different opinions about Kay’s mental condition when she executed the trust. Under these circumstances, we decline to conduct a de novo review. Instead, we will review the trial court’s determination for substantial evidence. C. Testamentary Capacity Section 6100.5(a)(2) provides that an individual is not mentally competent to make a will “if at the time of making the will,” the individual has “a mental health disorder with symptoms including delusions or hallucinations.” (Italics added.) In its statement of decision, the trial court found that Kay was not experiencing delusions within the meaning of section 6100.5(a)(2) at the time she executed her trust. Thus, the court implicitly determined Kay did not have the requisite mental health disorder at the time she executed her trust. Although the court acknowledged that Kay had delusions in late October 2015 while hospitalized for UTI, it determined her delusions ended shortly after her discharge from the hospital and were not operational when she signed the trust. The court further indicated that the medical experts opined Kay had moderate cognitive impairment, but “[o]ther than that, there is no evidence that Kay had dementia or any other mental condition that becomes worse over time. The only evidence regarding Kay’s cognition, in addition to the mental health status exam at Ole Health, is that she had acute confusion in October 2015 secondary to a urinary tract infection and again likely in April and June 2016. Many of the witnesses . . . testified that they had no concerns regarding her mental capacity from November 2015 through her death a year later.” The record discloses substantial evidence supporting the trial court’s determination. Dr. Angelone, an expert in neuropsychology, testified there 14 was no objective evidence that Kay had a mental disorder as required by section 6100.5(a)(2). Both Dr. Angelone and Dr. Cheyette, an expert in psychiatry, testified that Kay did not have delusional disorder. Likewise, Dr. Angelone testified there was nothing in Kay’s medical records indicating she had dementia. Dr. Poscher—Kay’s internist who saw her once in 2011, three times in 2012, twice in June and November 2014, and then the last time in October 2016—testified she never formed any concern that Kay might have dementia. Similarly, Dr. Krijanovsky—Kay’s hematologist/oncologist who saw Kay about a dozen times from 2011 to November 2016, including in March and September 2014, and October and November 2016—testified she never noticed signs of cognitive impairment and never formed any concern that Kay might have dementia. Even Dr. Spar, appellants’ expert who opined Kay had delusions arising from a mental disorder when she signed her trust, testified the “second best” explanation for why Kay changed her estate plan did not involve any delusions: specifically, it was possible that appellants upset Kay when they “swept” into her life after her hospitalization, and that she did not want to give her money to them.7 Dr. Spar acknowledged, after hearing all the evidence in the case, that a trier of fact could reasonably reach a different conclusion than the one he espoused. Dr. Cheyette opined there was evidence that Kay had “mild cognitive impairment”—which is a slow decline of memory or other cognitive functions common among older people—but he testified delusions are very rarely 7 Indeed, Johnson herself testified about her concern that all of the things they did in October 2015 might have been too much for Kay at that time, given Bob’s recent death and her medical condition. Kay’s estranged son, John Noyes, Jr., similarly testified that Eyford and Johnson overstepped and did too much. 15 associated with mild cognitive impairment. Similarly, but more strongly, Dr. Angelone testified that mild cognitive impairment means a person has memory issues, but that delusions do not result from this condition. Dr. Angelone also testified that “mild cognitive impairment” is not a mental disorder in the “DSM.”8 The record does establish that Kay had delirium in late 2015. Both Dr. Cheyette and Dr. Angelone opined that Kay developed delirium, which is a transient mental disorder, around the time of Bob’s death and her hospitalization for UTI.9 Both of the doctors indicated that delirium typically continues for short periods and clears with proper treatment. Both testified there was no evidence that Kay had recurrent UTIs. This and other evidence, such as the testimony of Kay’s long-time accountant, Sturges, and her attorney, Hunt, supports the trial court’s conclusion that Kay’s delirium was not ongoing when she executed her trust in February 2016. Sturges, who witnessed Kay sign the trust instrument, indicated that Kay had good days and bad days with regard to her memory and her mental state. Sturges testified that the day Kay signed the trust was “one of her good days,” because Kay was clear-headed and had expressed things reflecting she knew what she was doing. Hunt—who had many years 8 While Dr. Angelone testified that “mild cognitive impairment” is not in the DSM, he acknowledged that “minor neurocognitive disorder” is in the DSM. But Dr. Angelone never opined that Kay had a minor neurocognitive disorder. When asked about the mini mental status exam Kay took at the Ole Health Clinic, Dr. Angelone said her score showed she was experiencing moderate cognitive impairment. He explained, however, that this just captured her mental status on a particular day and was not a diagnosis of a mental disorder. 9 The expert testimony established that infections, such as UTI, in elderly people commonly lead to delirium. 16 of experience in estate planning and experience with clients with questionable mental capacity—met with Kay both before and when she executed the trust and the two subsequent trust amendments. Hunt never observed Kay to be forgetful or confused or cognitively impaired. Kay never exhibited paranoia or having delusions about appellants, and Hunt never believed Kay had a mental deficit. (Estate of Hansen (1940) 38 Cal.App.2d 99 , 115 [when an attorney who draws a will and becomes a witness to the instrument testifies that the testator appeared to be of sound mind and memory, such testimony is entitled to serious consideration though is not conclusive when other witnesses have testified to the contrary].) Other witness testimony, including testimony from Kay’s longtime friends Barrios, Steele, and McCully, also generally supports that Kay was lucid in the period when she signed her trust. On this record, substantial evidence supports the determination that appellants fell short of establishing that Kay was living with a mental health disorder at the time she executed her trust. In reaching this conclusion, which is dispositive, we note that in their opening brief, appellants never argue Kay had a “mental health disorder” at the time she executed her trust, and they omit all mention of Dr. Angelone. But in their reply brief, apparently in response to respondents’ argument that Kay had no mental health disorder, appellants argue that “[c]ase law does not require a specific finding of mental disorder; the determinant factor is whether the trustor was delusional at the time the testamentary document was signed.” This argument fails for a number of reasons. First, arguments made in a reply brief for the first time are too late. (Bell v. H.F. Cox, Inc. (2012) 209 Cal.App.4th 62 , 80, fn. 7.) Second, even if we set aside its untimeliness, we are not persuaded by appellants’ sole authority in support of the aforequoted 17 argument, Goodman v. Zimmerman (1994) 25 Cal.App.4th 1667 , which never examined whether section 6100.5(a)(2) requires a finding of a mental health disorder. (See Goodman, at pp. 1674–1678.) Third, appellants’ interpretation would render the portion of the statute requiring that delusions stem from a mental health disorder mere surplusage, contrary to fundamental precepts of statutory interpretation. (Bay Guardian Co. v. New Times Media LLC (2010) 187 Cal.App.4th 438 , 453–454.) Before concluding, we briefly address appellants’ other arguments. First, appellants contend that the trial court erred in finding Kay had testamentary capacity by selecting a single false belief Kay had about appellants—i.e., that appellants “wanted her out of the way in order to get her money”—and determining it was not a delusion. We see no error. Reading the statement of decision as a whole, the court found that Kay had several false beliefs and that such beliefs were tethered to facts and therefore not delusions,10 and also that Kay had some delusions in October 2015 or 10 Specifically, in the part of its decision preceding its analysis of appellants’ testamentary capacity claim, the trial court discussed Kay’s various beliefs regarding appellants, observing: “[t]here was little evidence Kay’s negative thoughts and claims about [appellants] were true. In fact, most of her claims were demonstrably false. [Appellants] did not steal her money or jewelry. They did not make any transactions on her bank accounts. They shredded outdated documents only with her consent. They did not shred photographs. They put their names on her bank account only with her consent. They prepared powers of attorney only with Kay’s consent. Shannon did not push her on the balcony or any other place. They did not pressure her to name them as her beneficiaries and agents against her will. They did not want her dead. They did not show up in the parking lot or at her apartment trying to get in. They did not attempt to have her deemed incompetent. They did not try to sell her car. They did not do anything to cause the death of their mother Cathy. They did not harass her in any way.” Following this recitation of Kay’s beliefs regarding appellants, the court nonetheless rejected the testamentary capacity claim upon finding that Kay 18 shortly thereafter which were not operational when Kay signed her trust in February 2016. While the court specifically addressed Kay’s belief that appellants “wanted her out of the way in order to get her money” and whether it constituted a delusion, it is evident that the court was not indicating this was the only false belief or alleged delusion at issue. Second, appellants argue the trial court committed reversible error by not specifically addressing whether each alleged false belief was a delusion as they claimed. This argument, however, is unaccompanied by citation to authority. (Badie v. Bank of America (1998) 67 Cal.App.4th 779 , 784–785.) Respondents cite to Muzquiz v. City of Emeryville (2000) 79 Cal.App.4th 1106 , which provides that “[a] statement of decision need not address all the legal and factual issues raised by the parties. . . . [A] trial court rendering a statement of decision is required only to set out ultimate findings rather than evidentiary ones.” (Id. at p. 1125, citations omitted.) Appellants do not disagree with Muzquiz, and instead explain that “[w]hat they are complaining about is the trial court’s complete failure to recognize that there was no evidence supporting a dozen or so of Kay Pearson’s oft expressed beliefs about facts—not motives or attitudes, but hard facts for which there was zero evidence in the real world. These imagined facts influenced Kay’s decision to disinherit her granddaughters.” Understood as an argument that the court erred by failing to find that all of Kay’s false beliefs about appellants were delusions (including the false belief that appellants “wanted her out of the way in order to get her money”), we need not and do not address that argument. As discussed, there was substantial evidence that Kay did not have “a mental health disorder” as had “irrational and false beliefs” but they could be accounted for by a reasonable hypothesis. (See Estate of Putnam, supra, 1 Cal.2d at p. 172.) 19 contemplated in section 6100.5(a)(2) at the time she executed the trust instrument. This is dispositive under the statute and renders unnecessary further analysis of whether her false beliefs were not delusions because they resulted from “ ‘a belief or inference, however irrational or unfounded, drawn from facts which are shown to exist.’ ” (Estate of Putnam, supra, 1 Cal.2d at p. 172.) For the same reasons, we also decline to address appellants’ claim that, as a policy matter, the court should not allow appellants’ actions, done with good intentions to assist Kay, to support a “reasonable hypothesis” to preclude a false belief from being a delusion. In closing, we recognize the result here is likely a very disappointing one for appellants. Nevertheless, we are bound to apply the law (People v. Mowatt (1997) 56 Cal.App.4th 713 , 720) and, under the substantial evidence standard, our role is circumscribed. We cannot reweigh the evidence; we determine only if there is any substantial evidence, contradicted or uncontradicted, which will support the judgment. (Estate of Sapp (2019) 36 Cal.App.5th 86 , 104.) DISPOSITION The judgment is affirmed. Respondents shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).) 20  _________________________ Fujisaki, Acting P.J. WE CONCUR: _________________________ Petrou, J. _________________________ Jackson, J. A157962 21 EYFORD et al. v. NORD et al. (A157962) Trial court: Napa County Trial Judges: Hon. Diane M. Price Attorneys: Stephen H. Fredkin for Plaintiffs and Appellants. Tara L. Cooper; Epstein & Holtzapple, Robert F. Epstein, Robyn B. Christo; Bien & Summers, Elliot L. Bien for Defendants and Respondents. 22

2021-03-18 20:02:25.139972+00

http://www.courts.ca.gov/opinions/documents/B304964.PDF

Filed 3/18/21 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SIX THOMAS FELKAY, as 2d Civil No. B304964 Trustee, etc., (Super. Ct. No. 17CV03351) (Santa Barbara County) Plaintiff and Respondent, v. CITY OF SANTA BARBARA, Defendant and Appellant. Before seeking damages for a governmental taking of property through inverse condemnation, the property owner must generally submit more than one proposal to the permitting authority seeking zoning variances or reducing environmental impacts to the extent necessary to allow at least some economically beneficial or productive use of the property. Here we hold that multiple applications are not required where the permit denial makes clear that no development of the property would be allowed under any circumstance. The City of Santa Barbara appeals from a judgment following jury trial awarding Thomas Felkay, as trustee of the Emprise Trust (Felkay), damages for inverse condemnation, and an order after judgment awarding attorney and expert fees. The city contends Felkay’s claim was not ripe for adjudication and that he failed to exhaust his administrative and judicial remedies. We affirm. FACTUAL AND PROCEDURAL BACKGROUND Application for Coastal Development Permit In 2006, Felkay purchased an ocean-front residential lot in Santa Barbara (“the property”) for $850,000. The property was a “flag lot” consisting of a narrow driveway from the street to the remainder of the property, which then sloped downward toward the ocean, ending in a sheer cliff above the beach. Felkay submitted a proposal to build a 3,101 square foot single-family residence to the city’s Pre-Application Review Team. He submitted studies that concluded that the top of the bluff was located at 51 feet of elevation. After receiving comments from the city’s Single Family Design Board, he applied for a coastal development permit for a slightly smaller residence of 2,789 square feet. A city planning commission staff report concluded that the bluff top was located at 127 feet of elevation. Because the proposed construction site was located seaward of this elevation, the proposal was inconsistent with City of Santa Barbara Local Coastal Plan Policy 8.2, which prohibits, with exceptions not relevant here, development on a bluff face. Staff concluded that except for Policy 8.2, the proposed project would conform to all applicable zoning and building ordinances. The report also concluded that the area above 127 feet was “not developable.” The report stated that an area above the 127-foot elevation and adjacent to the driveway “does not meet factors of safety for geologic stability” and “there is no 2 feasible alternative location on the property for the proposed level of development.” Staff recommended that the planning commission approve the application notwithstanding the inconsistency with Policy 8.2 to avoid an unconstitutional taking. The planning commission rejected the permit because it violated Policy 8.2. City council appeal Felkay appealed to the city council. He agreed to mitigation measures recommended by city staff. He contested the city’s determination as to the location of the top of the bluff. He also contended that the refusal to approve the project deprived him of all economic use of the property.1 The Council Agenda Report included an option to approve the permit to avoid a taking, despite the inconsistency with Policy 8.2. The city council rejected this option and denied the permit. The council declined to state that its denial was without prejudice. The council made factual findings that Felkay failed to show that the proposed development: (1) was not on a bluff face, (2) was compatible with the prevailing character of the neighborhood (it was substantially closer to the ocean), (3) would be geologically stable, and (4) was based on a reasonable investment-backed expectation. It also found that a takings 1 Planning division staff advised the city council that a small residence could be built in the area above the 127-foot elevation and adjacent to the driveway with about 200 square feet of living area on the ground floor and 600 square feet on the second floor. A third floor of 600 square feet potentially could be added but would require modification of parking requirements and might be incompatible with the neighborhood and reduce public ocean views. 3 determination was not ripe because Felkay had not investigated other potential uses of the land including development of the area above the 127-foot elevation, agricultural or educational uses, or merging the property with the adjoining lot he owned. Petition for administrative mandamus and complaint Felkay filed a consolidated petition for writ of administrative mandamus (Code Civ. Proc., § 1094.5) and complaint for inverse condemnation. He alleged four causes of action: (1) administrative mandamus, (2) inverse condemnation by regulatory action, (3) temporary inverse condemnation by regulatory action, and (4) inverse condemnation by physical taking. The first cause of action sought an order compelling the city to approve the project. It did not assert that the city acted unlawfully or abused its discretion when it declined to excuse compliance with Policy 8.2 to avoid a taking. The inverse condemnation causes of action sought monetary damages. The city demurred to the second, third, and fourth causes of action. The trial court overruled the demurrer to the second and third causes of action, rejecting the city’s contentions that the claims were not ripe and that Felkay had not exhausted his administrative remedies. The court sustained the demurrer to the fourth cause of action for inverse condemnation by a physical taking. The parties stipulated, and the court ordered, that “the matters to be adjudicated by the Court on the hearing on the Writ of Mandate shall be those specific issues set forth” in the Determinations and Conclusions of Law section of the city council’s resolution denying the appeal, namely, whether the project: (a) is consistent with the policies of the California Coastal Act and the Local Coastal Plan, (b) will be located on the 4 bluff face where it will have adverse effects on coastal resources, (c) minimizes risks in an area of high geologic hazard and assures stability and structural integrity, (d) is compatible with the prevailing character of the neighborhood, and (e) is inconsistent with Policy 8.2. The stipulated order provided that all issues pertaining to the second and third causes of action for inverse condemnation be determined at trial following hearing on the writ of mandate. Writ proceedings The trial court denied the petition for writ of mandate. After a hearing, it concluded that substantial evidence supported the finding that the top of the bluff was located at the 127-foot elevation. The court noted that Public Resources Code2 section 30010 authorizes a local government to approve a project that violates coastal restrictions in order to avoid an unconstitutional taking. The court noted that Felkay had not presented evidence supporting the factors noted in McAllister v. California Coastal Com. (2008) 169 Cal.App.4th 912 , 940 (McAllister), i.e., “‘that the property was purchased with the expectation of residential use, that such expectation was reasonable, that the investment was substantial, and that the proposed development was commensurate with the reasonable investment-backed expectations for the site.’” Accordingly, the Court deemed the taking claim abandoned for purposes of the writ petition. Trial Pursuant to the parties’ stipulation, the court then commenced the liability phase of the inverse condemnation 2All subsequent undesignated statutory references are to the Public Resources Code. 5 claims. A land surveyor testified that based on the city’s determination of the location of the bluff top, construction would be allowed in only a 265-square-foot area above the 127-foot elevation and below a sewer easement. A geotechnical engineer/geophysicist testified that even that area was not buildable because stabilizing the property would require cement caissons that could damage the sewer line, and tiebacks that would intrude into neighboring properties. A land use consultant testified that the area above the 127-foot elevation was unbuildable. Project Planner Kathleen Kennedy testified as an expert for the city. She authored “most or all” of the planning commission staff report for the project. She said that the proposed project violated Policy 8.2, which prohibits any development on the bluff face regardless of size, and that Felkay had asked the city council to invoke section 30010 and approve the project to avoid a taking. She testified that “since we have been telling the Applicant all along that development was not allowed on the bluff face for years,” the city would not anticipate that he would return with another proposal to build below the 127-foot line. When asked whether, “as you sit here today,” it was “the City’s position . . . that there can be no development . . . below the bluff edge,” she replied, “I would say that they received a denial for that, so that’s the case.” The court later asked Kennedy why the city did not just tell Felkay at the beginning that “8.2 trumps whatever you might submit. We’re not going to allow anything on the bluff face. Don’t submit anything. . . . [¶] Sounds to me that’s where the City was at . . . I’m puzzled.” Notwithstanding this expression of the court’s interpretation of 6 the evidence, the city did not present any witness to testify otherwise. The court issued a statement of decision that found: (1) Felkay’s claims were ripe, (2) he sought a variance or modification pursuant to section 30010, (3) he was not required to pursue futile applications, (4) denial of the permit rendered the property unbuildable and deprived Felkay of all economic benefit of the property, and (5) the denial constituted a total taking of the property. The court held that a de facto taking occurred because the only remaining use of the property was as vacant land for recreation, parking, or to preserve views. The trial court rejected the city’s argument that “there must be more than one reasonable opportunity for a public agency to consider a meaningful project,” and concluded that there would have been no point in Felkay going back to the city to pursue a different project. After the court found there had been a taking, it afforded the city the opportunity to either (1) rescind the decision denying the permit, or (2) proceed to jury trial on the amount of damages as just compensation for permanent taking of the property. The city chose the second option, stating it elected to “‘treat this matter as a permanent taking of the value of the property and not rescind its Permit denial to constitute a temporary taking.’” After a damages trial, a jury found the city was liable to Felkay for the fair market value of $2.4 million. After judgment, the trial court ordered the city to pay attorney and expert fees of $1,007,397. (Code Civ. Proc., § 1036.) 7  DISCUSSION Inverse condemnation The state and federal constitutions prohibit the government from taking private property without payment of just compensation. (U.S. Const., 5th Amend.; Cal. Const., art. I, § 19.) A government taking occurs when application of a “regulation denies all economically beneficial or productive use of land.” (Lucas v. South Carolina Coastal Council (1992) 505 U.S. 1003 , 1015; Healing v. California Coastal Com. (1994) 22 Cal.App.4th 1158 , 1169.) The California Coastal Act (Pub. Resources Code, div. 20 (§ 30000 et seq.)) governs land use planning for the coastal zone. (Pacific Palisades Bowl Mobile Estates, LLC v. City of Los Angeles (2012) 55 Cal.4th 783 , 793.) Because the city had a certified local coastal program, it had the authority to review applications for new development in its coastal area. (§ 30519, subd. (a).) Section 30010 “establish[es] a narrow exception to strict compliance with restrictions on uses in habitat areas based on constitutional considerations.” (McAllister, supra, 169 Cal.App.4th at p. 939.) The statute provides: “The Legislature hereby finds and declares that this division is not intended, and shall not be construed as authorizing the commission, port governing body, or local government acting pursuant to this division to exercise their power to grant or deny a permit in a manner which will take or damage private property for public use, without the payment of just compensation therefor. This section is not intended to increase or decrease the rights of any owner of property under the Constitution of the State of California or the United States.” 8  Pursuant to section 30010, where a restriction would require denial of a permit that would deprive the owner of the economic benefit or productive use of the property, the local agency “has two options: deny the permit and pay just compensation; or grant the permit with conditions that mitigate the impacts that limitations were designed to prevent.” (McAllister, supra, 169 Cal.App.4th at p. 939.) The government entity may “‘limit application of the resource protection policies to the extent necessary to allow a property owner a constitutionally reasonable economic use of his or her property.’” (Ibid.) Ripeness The city contends that the inverse condemnation claim was not ripe because after the city denied his permit application, Felkay did not submit a revised application. We disagree. “‘[A] claim that the application of government regulations effects a taking of a property interest is not ripe until the government entity charged with implementing the regulations has reached a final decision regarding the application of the regulations to the property at issue,’” i.e., when “there has been a ‘final, definitive position regarding’ how the regulations will be applied to the land.” (Hensler v. City of Glendale (1994) 8 Cal.4th 1 , 10 (Hensler).) Ripeness is a question of law we review de novo. (Communities for a Better Environment v. State Energy Resources Conservation & Development Com. (2017) 19 Cal.App.5th 725 , 732.) “[B]efore an inverse condemnation action is ripe, a landowner must have made at least one development proposal that has been thoroughly rejected by land use authorities and have prosecuted at least one meaningful application for a zoning 9 variance, which has been finally denied.” (County of Alameda v. Superior Court (2005) 133 Cal.App.4th 558 , 567-568.) The landowner must follow “reasonable and necessary steps to allow regulatory agencies to exercise their full discretion in considering development plans for the property, including the opportunity to grant any variances or waivers allowed by law.” (Palazzolo v. Rhode Island (2001) 533 U.S. 606 , 620-621 (Palazzolo).) As we held in Long Beach Equities, Inc. v. County of Ventura (1991) 231 Cal.App.3d 1016 , 1032, ripeness requires “at least one meaningful application for a zoning variance, or something similar, which has been finally denied.” Once “the permissible uses of the property are known to a reasonable degree of certainty, a takings claim is likely to have ripened.” (Palazzolo, at p. 620; Howard v. County of San Diego (2010) 184 Cal.App.4th 1422 , 1430 (Howard).) In Palazzolo, the claim was ripe based on the city’s decisions that “ma[de] plain” that the landowner could not fill or develop any of the wetlands property. (Palazzolo, supra, 533 U.S. at p. 621.) Similarly here, the city rejected a variance or waiver based on section 30010, and “made plain” that no development would be permitted below the 127-foot elevation. Accordingly, the claim was ripe. “[U]nder the ‘futility exception’ to the requirement of a final decision . . . the submission of another development plan is excused if such an application would be an ‘“idle and futile act.”’” (Toigo v. Town of Ross (1998) 70 Cal.App.4th 309 , 327.) “‘[T]he futility exception . . . relieves a developer from submitting “multiple applications when the manner in which the first application was rejected makes it clear that no project will be approved.”’” (County of Alameda v. Superior Court, supra, 133 10 Cal.App.4th at pp. 568-569, italics omitted.) Whether submission of an additional application would have been futile is a question of fact we review for substantial evidence. (Howard, supra, 184 Cal.App.4th at p. 1431.) “Under this deferential standard of review . . . we consider the evidence in the light most favorable to the prevailing party, drawing all reasonable inferences in support of the findings.” (Thompson v. Asimos (2016) 6 Cal.App.5th 970 , 981.) The trial court found the city’s expert, Kennedy, to be “a defining witness in the case” who “convinced [the court] that there would be NO POINT in going back to seek mitigation.” The court did not err in crediting her testimony. (Cf. Benson v. California Coastal Com. (2006) 139 Cal.App.4th 348 [commission not estopped by staff member’s telephone call that applicant need not attend hearing].) Felkay was not required to submit a second proposal because the city “made plain” it would not allow any development below the 127-foot elevation, and because the area above that elevation was “not buildable.” This case is not like Toigo v. Town of Ross, supra, 70 Cal.App.4th 309 . There, after denial of a five-lot subdivision application, the applicant failed to show that it would have been futile to propose an alternative plan that would reduce the adverse environmental impacts. (Id. at pp. 324-332.) Here, substantial evidence established that the city would not permit any development below the 127-foot elevation, and that the limited area above that elevation was unbuildable. Exhaustion of administrative remedies Closely related to ripeness is the requirement that applicants exhaust their administrative remedies unless it would be futile to do so. “A final administrative decision includes 11 exhaustion of any available review mechanism.” (Hensler, supra, 8 Cal.4th at p. 12.) We review for substantial evidence whether Felkay’s actions exhausted his administrative remedies. (SJCBC LLC v. Horwedel (2011) 201 Cal.App.4th 339 , 345.) Felkay appealed the planning commission’s denial of the permit to the city council. As discussed above, substantial evidence establishes that it would have been futile to submit modified plans because “the agency’s decision [was] certain to be adverse.” (Howard, supra, 184 Cal.App.4th at p. 1430.) The city was not denied “the opportunity to amend the agency decision and/or grant a variance” to avoid liability for taking private property. (Hensler, supra, 8 Cal.4th at p. 11.) The planning commission and the city council were presented with the option to waive the full impact of Policy 8.2 by invoking section 30010. They declined to do so. As provided in Hensler, after the court found a taking occurred, it again gave the city both options. (Id. at pp. 13-14.) The city again declined to issue a permit, with or without conditions, and chose to proceed to trial on damages. Exhaustion of judicial remedies The city contends that Felkay failed to litigate his writ petition to conclusion because he did not argue the section 30010 claim in those proceedings. We disagree. “Failure to obtain judicial review of a discretionary administrative action by a petition for a writ of administrative mandate renders the administrative action immune from collateral attack, either by inverse condemnation action or by any other action.” (Patrick Media Group, Inc. v. California Coastal Com. (1992) 9 Cal.App.4th 592 , 608.) The writ requirement applies whether the petitioner claims the agency’s action was 12 invalid and should be cancelled, or seeks compensation for taking of property. (Ibid.) Felkay filed his petition for writ of administrative mandamus together with his inverse condemnation complaint. (Hensler, supra, 8 Cal.4th at p. 14.) In the writ proceedings, Felkay challenged the city’s determination of the location of the bluff top. On administrative mandamus, the court may review a decision whether to waive an environmental policy pursuant to section 30010 for abuse of discretion. (Code Civ. Proc., § 1094.5, subd. (b); Topanga Assn. for a Scenic Community v. County of Los Angeles (1974) 11 Cal.3d 506 , 514-515.) The city argues that Felkay’s failure to challenge on mandamus the city’s decision declining to waive the requirements of Policy 8.2 pursuant to section 30010 estopped him from seeking damages for inverse condemnation. (See Mola Development Corp. v. City of Seal Beach (1997) 57 Cal.App.4th 405 , 410-413 (Mola) [plaintiff’s dismissal of mandamus petition made city’s denial of proposal res judicata and precluded action for damages]; Briggs v. City of Rolling Hills Estates (1995) 40 Cal.App.4th 637 , 645-646 [failure to seek administrative mandamus to challenge permit condition precluded action for injunction or civil rights damages].) The city is estopped from making this argument by its stipulation that limited the issues to be heard on mandamus, which reserved the inverse condemnation claims for trial. “Trial courts have inherent and statutory authority to devise and utilize procedures appropriate to the specific litigation before them.” (Weiss v. People ex rel. Department of Transportation (2020) 9 Cal.5th 840 , 863; Code Civ. Proc., § 187.) The city forfeited the issue by failing to object to the apportionment of issues between the writ proceedings and trial. (Bains v. Department of 13 Industrial Relations (2016) 244 Cal.App.4th 1120 , 1126-1128.) The city may not gain an advantage by taking a position incompatible with the stipulation it entered in the trial court. (Civ. Code, § 3512; People v. Castillo (2010) 49 Cal.4th 145 , 154- 155.) Following the ruling on mandamus, and by virtue of the parties’ stipulation, Felkay had the right to proceed to trial to determine if the city was liable for a taking, and, if so, a jury trial on the amount of compensation. (Cal. Const., art. I, § 19, subd. (a); Hensler, supra, 8 Cal.4th at p. 15; Weiss v. People ex rel. Department of Transportation, supra, 9 Cal.5th at pp. 853-855 & fn. 4.) This case is unlike Hensler, in which the landowner did not seek a variance, did not pursue an administrative appeal, and did not seek administrative mandamus. (Hensler, supra, 8 Cal.4th at pp. 25-26.) It is also unlike Mola, where the plaintiff filed a petition for writ of administrative mandamus but dismissed it before hearing. (Mola, supra, 57 Cal.App.4th at p. 410.) Here, the administrative mandamus petition proceeded to a ruling, and the city proceeded to trial without objecting that a trial was barred by a deficiency in the mandamus proceedings. The city was not prejudiced by the failure to litigate denial of the variance in the writ proceedings, because the issue was heard immediately thereafter by the same judge in the court trial. Unlike Hensler and Mola, the court gave the city the opportunity to rescind its denial of the permit (Hensler, supra, 8 Cal.4th at p. 26) and “to change its mind ‘rather than pay compensation for a taking.’” (Mola, supra, 57 Cal.App.4th at p. 14 410.) There was no failure to exhaust judicial remedies.3 DISPOSITION The judgment and fee award are affirmed. Respondent shall recover his costs on appeal. CERTIFIED FOR PUBLICATION. TANGEMAN, J. We concur: GILBERT, P. J. YEGAN, J. 3The city appealed from the award of attorney and expert fees in the event it prevailed on the merits of the appeal. Because we affirm the judgment and the city does not otherwise challenge the fee award, it too is affirmed. 15  Thomas P. Anderle, Judge Superior Court County of Santa Barbara ______________________________ Ariel Pierre Calonne, City Attorney, Tom R. Shapiro and Philip A. Seymour, Assistant City Attorneys; Best, Best & Krieger and Bruce W. Beach for Defendant and Appellant. Xavier Becerra, Attorney General, Daniel A. Olivas, Assistant Attorney General, Andrew M. Vogel and Steven W. Kerns, Deputy Attorneys General, for California Coastal Commission as Amicus Curiae on behalf of Defendant and Appellant. Law Offices of Joseph Liebman and Joseph Liebman for Plaintiff and Respondent.

2021-03-18 20:02:25.478269+00

http://www.courts.ca.gov/opinions/documents/B308909.PDF

Filed 3/18/21 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR CITY OF LOS ANGELES, B308909 Petitioner, (Super. Ct. No. 20STCV08168) v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent, BARBARA WONG, Real Party in Interest. ORIGINAL PROCEEDINGS; petition for writ of mandate. Petition granted; alternative writ discharged. Daniel S. Murphy , Judge. Office of the City Attorney, Michael N. Feuer, City Attorney, Kathleen A. Kenealy, Chief Deputy City Attorney, Scott Marcus, Blithe S. Bock and Shaun Dabby Jacobs, City Attorneys for Petitioner. No appearance for Respondent. McNicholas & McNicholas, Matthew S. McNicholas, Courtney C. McNicholas; Esner, Chang & Boyer, Stuart B. Esner for Real Party in Interest.  INTRODUCTION Plaintiff Barbara Wong alleges that her husband, Los Angeles Police Department (LAPD) officer Franklin Chen, contracted typhus from unsanitary conditions in and around the Central Community Police Station where he worked. Wong alleged that several months after Chen first became ill, she contracted typhus as a result of sharing a living space with Chen. Wong sued the City of Los Angeles, alleging negligence and a dangerous condition of public property under Government Code section 835.1 The City demurred to Wong’s complaint, asserting that because Wong did not allege that she had contact with the property at issue, the City did not owe Wong a duty of care with respect to the condition of its property. The City also contended it was immune from liability under section 855.4, which bars claims relating to a “decision to perform or not to perform any act to promote the public health of the community by preventing disease or controlling the communication of disease within the community.” (§ 855.4, subd. (a).) The trial court overruled the City’s demurrer, and the City filed a petition for writ of mandate. We issued an alternative writ, and now grant the City’s petition. A public entity’s liability must be based on statute, and section 835 does not extend liability to members of the public whose alleged injuries do not arise from use of the property at issue or any adjacent property. In addition, the immunity in section 855.4 bars liability for decisions affecting public health. 1 All further statutory references are to the Government Code unless otherwise indicated. 2  FACTUAL AND PROCEDURAL BACKGROUND A. First amended complaint Wong filed her first amended complaint on July 15, 2020 alleging two causes of action: “liability for dangerous condition of public property pursuant to Government Code § 835,” and “negligence for personal injuries.” Wong alleged that her husband, Franklin Chen, was an LAPD officer assigned to the Central Community Police Station (Central Division). Wong alleged that the “Central Division encompasses Bunker Hill/Historic Core, Central City East, Chinatown, Civic Center, City Hall, City Hall East, Downtown Los Angeles, Fashion District, Jewelry District, Little Tokyo, Old Bank District, Solano Canyon, South Park-Entertainment, and the Toy District (collectively, the ‘Subject Premises’).” She asserted that “LAPD Central Division officers, including Chen, are required to engage and interact on a regular basis with the homeless population that live[s] in downtown Los Angeles,” and “[t]he encampments of the homeless population within Central Division are unsanitary, unhygienic, unclean, rat-infested, and flea-infested.” Wong further alleged that “Cal-OSHA has also deemed the Central Division Police Station, located at 251 East 6th Street, Los Angeles, CA 90014, as unsanitary, unhygienic, unclean, rat- infested, flea-infested, and/or otherwise unfit to be occupied by humans, including City and LAPD employees. Cal-OSHA issued citations to the City of Los Angeles Police Department Central Division and ordered the City to vacate and abate the unsanitary, unhygienic, unclean, rat-infested, and flea-infested conditions on the City’s property at 251 East 6th Street, Los Angeles, CA 90014.” “Despite the direction of Cal-OSHA, the City failed to abate, maintain, upkeep, oversee, manage, repair, mend, 3 renovate, overhaul, clean, sanitize, disinfect, sterilize, decontaminate, wash, and otherwise preserve the properties and premises within Central Division, including, but not limited to, Central Division Police Station where Chen was assigned to work.” Wong alleged that “[t]he accumulation of the waste and lack of maintenance, upkeep, cleaning, and/or abatement of the unsanitary and unhygienic conditions allowed the City premises to become infested with rats and mice which carried fleas infected with the typhus virus. The typhus-infected fleas continued to spread to City properties and premises, including Central Division Police Station and its surrounding areas where Chen was assigned to work.” Wong alleged that Chen became ill in spring 2019, and was diagnosed in June 2019 with typhus; she alleged he contracted typhus while working on City property in and around Central Division. Wong and Chen “resided in the same house where they shared meals, bathrooms, and common living areas and had ongoing physical contact with one another.” In October 2019, Wong was also diagnosed with typhus, and alleged that she “is informed and believes, and thereon alleges, that she was infected with typhus as a result of the unsafe, unsanitary, and dangerous conditions that existed on City property.” Wong alleged that the City “knew of the unsanitary hazardous conditions at Central Division Police Station and in the areas it served and permitted the conditions to remain unabated and to increase in severity despite the threat to the health, safety and welfare of Plaintiff.” The City had a duty to “maintain, upkeep, oversee, manage, repair, mend, renovate, overhaul, clean, sanitize, disinfect, sterilize, decontaminate, wash 4 and otherwise preserve the properties and premises within Central Division, including, but not limited to, Central Division Police Station,” and it breached that duty. In the cause of action for dangerous condition of public property, Wong alleged that the City “knew of the dangerous condition (i.e., the unsanitary, unhygienic, rat-infested, and flea- infested condition) of the Subject Premises,” knew or should have known the dangerous condition would cause injury or death, but failed to abate the dangerous condition. She asserted that “[p]rior to Spring 2019, [the City] had actual and/or constructive notice that the Subject Premises was the subject of a typhus epidemic and that proactive conduct was required in order to ensure safety.” Wong alleged that the City, “in violation of California Government Code § 815.2, failed to exercise reasonable care,” and “allowed the dangerous condition to remain in violation of Government Code § 835, thus posing a hazard to persons such as [Wong] who would foreseeably come in contact with the typhus virus even when acting with due care.” She also alleged that the City “failed to remedy the dangerous condition to discharge [its] mandatory duty as required by Government Code § 815.6.” In her cause of action for negligence, Wong alleged that the City negligently failed to maintain the subject premises, causing injury to Wong. Wong prayed for damages including general and special damages, medical expenses, and costs. B. Demurrer The City demurred on the basis that it was immune from liability relating to the control of disease under section 855.4; Wong failed to allege facts sufficient to state a cause of action 5 because she did not allege a cognizable duty; and a public entity may not be liable under common law theories of negligence. The City asserted that it was immune from liability because the “failure to keep public property germ and virus free does not make the City subject to liability for [a] dangerous condition of public property.” The City relied on section 855.4, which provides that a public entity is not liable “for an injury resulting from the decision to perform or not to perform any act to promote the public health of the community by preventing disease or controlling the communication of disease . . . if the decision . . . was the result of the exercise of discretion vested in the public entity . . . , whether or not such discretion be abused.” (§ 855.4, subd. (a).) The City also cited Wright v. City of Los Angeles (2001) 93 Cal.App.4th 683 (Wright), which we discuss more fully below. In short, Wright held that under section 855.4, a public entity could not be held liable for the presence of germs or viruses on publicly owned property. The City argued that the same reasoning barred Wong’s claims. The City also contended that Wong’s cause of action for dangerous condition of public property failed because she alleged she contracted typhus from Chen in their home—not directly from the allegedly dangerous property. The City argued that it could not be liable for any injury occurring on private property. The City further asserted that Wong failed to allege that the City had a mandatory duty relating to the property, as required under section 815.6. It asserted that any “citation” or “order” from Cal-OSHA did not “impose a mandatory duty to guarantee the safety of [Wong] or her husband.” Finally, the City asserted that liability against a public entity must be based on 6 statute, but there was no statutory basis for Wong’s claim of negligence.2 C. Opposition and reply In her opposition, Wong asserted that immunity under section 855.4 was not applicable. She argued that section 855.4 requires public health decisions to “be made in due care,” and “once the decision has been made, there is no immunity from liability for negligence in carrying it out.” She argued that the City “did not act with due care in omitting to respond to Cal- OSHA violations.” Wong also argued that the City owed her a duty to provide disease-free conditions of public properties, which was “a duty separate and distinct from its duty as [Wong’s] husband’s employer.” Wong rejected the City’s contention that it could not be liable because Wong contracted typhus in her own home, asserting that her illness was proximately caused by the dangerous conditions of public property. The City filed a reply reiterating its arguments from the demurrer. 2The City further asserted that Wong’s claims were barred by workers’ compensation exclusivity, which bars derivative injury claims by non-employee third parties. The City requested judicial notice of a workers’ compensation award to Chen, acknowledging an illness that arose out of the scope of employment and a lifetime disability of two percent. The City asserted that the Workers’ Compensation Appeals Board had exclusive jurisdiction of the matter. The City does not assert these contentions on appeal. 7 D. Hearing and decision The trial court issued a tentative ruling overruling the demurrer. The court found that Wong’s claim of exposure to typhus was similar to “take-home exposure” to asbestos discussed in Kesner v. Superior Court (2016) 1 Cal.5th 1132 , 1140 (Kesner). In that case, the Supreme Court held, “Where it is reasonably foreseeable that workers, their clothing, or personal effects will act as vectors carrying asbestos from the premises to household members, employers have a duty to take reasonable care to prevent this means of transmission.” In addressing the City’s demurrer, the trial court found that Wong, “like the plaintiff in Kesner, suffered a distinct and separate [injury] from her husband, Chen.” The court also found that the City was not immune under section 855.4. The court noted that “[t]here is very little case law concerning Government Code § 855.4.” The court quoted a California Law Revision Commission comment stating, “Public health officials and public entities should not be liable for determining whether to impose quarantines or otherwise take action to prevent or control the spread of disease, where they have been given the legal power to determine whether or not such action should be taken. Where the law gives a public employee discretion to determine a course of conduct, liability should not be based upon the exercise of that discretion in a particular manner, for this would permit the trier of fact to substitute its judgment as to how the discretion should have been exercised for the judgment of the person to whom such discretion was lawfully committed. But when a public official has a legal duty to act in a particular manner, he should be liable for his wrongful or negligent failure to perform the duty; and his 8 employing public entity should be liable if such failure occurs in the scope of his employment.” (4 Cal. Law Rev. Comm. Reps. 801 (1963) pp. 830-831, [as of March 16, 2021], archived at .) The court stated that the City had a legal duty toward Wong “[a]s set forth in Kesner,” and could be liable for any injury caused by lack of due care under section 855.4, subdivision (b). Because Wong “clearly alleges that [the City] negligently carried out and/or failed to maintain a disease-free area in Central Division,” the immunity in section 855.4 “does not apply.” The court further found that the factual allegations of the first and second causes of action were sufficient, and therefore stated that it intended to overrule the demurrer. At the hearing on the demurrer on September 21, 2020, counsel for the City argued that the court’s tentative ruling was erroneous in that it found that immunity under section 855.4 did not apply. The court asked, “When does 855.4(b) – when does that trigger? Because 855.4(b) specifically says the public entity has to act with due care.” Counsel for the City asserted that immunity must be broad, because if “the court finds liability, the court is then exercising judgment on how the entity should have exercised discretion, which is not proper.” Counsel for the City also suggested that the court was “saying that the City did not exercise . . . due care,” and the court responded, “I’m basically saying there’s enough facts at this phase of the case. I’m not inclined to dismiss it. [¶] I think either a summary judgment or a trial is necessary.” The court adopted its tentative ruling as the final order on the demurrer. The City filed a petition for writ of mandate with 9 this court on November 19, 2020. We issued an alternative writ requiring the superior court to vacate its ruling on the basis that Wong’s complaint is barred by governmental immunity, or show cause why a writ of mandate should not issue. Wong filed a return asking that the demurrer ruling be upheld. The superior court held a hearing on an order to show cause on January 28, 2021, but did not change its ruling. DISCUSSION The City asserts that the trial court erred in finding that immunity did not bar Wong’s action. It asserts that it cannot be liable for an allegedly dangerous condition of property with which Wong had no contact, and that under section 855.4 it is immune for allegedly failing to prevent Wong’s exposure to illness. Wong asserts that direct contact with the dangerous condition on the property was not required because the cause of her illness is clear, and that governmental immunity is not evident from the facts alleged in her complaint, so the demurrer was correctly overruled. Wong’s premises liability claim under section 835 and the City’s immunity contention under section 855.4 arise from the Government Claims Act, section 810, et seq. (the Act). “Enacted in 1963, the Government Claims Act is a comprehensive statutory scheme governing the liabilities and immunities of public entities and public employees for torts.” (Quigley v. Garden Valley Fire Protection Dist. (2019) 7 Cal.5th 798 , 803.) “The basic architecture of the Act is encapsulated in Government Code section 815. Subdivision (a) of that section makes clear that under the [Act], there is no such thing as common law tort liability for public entities; a public entity is not liable for an injury ‘[e]xcept as otherwise provided by statute.’” (Id. at p. 803, 10 citing § 815 and Guzman v. County of Monterey (2009) 46 Cal.4th 887 , 897.) “But even when there are statutory grounds for imposing liability, subdivision (b) of section 815 provides that a public entity’s liability is ‘subject to any immunity of the public entity provided by statute.’” (Quigley, supra, 7 Cal.5th at p. 804.) Generally, we review a demurrer de novo, and “give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law.” (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859 , 865.) In addition, because “all governmental tort liability is based on statute, the general rule that statutory causes of action must be pleaded with particularity is applicable. Thus, ‘to state a cause of action against a public entity, every fact material to the existence of its statutory liability must be pleaded with particularity.’” (Lopez v. Southern Cal. Rapid Transit Dist. (1985) 40 Cal.3d 780 , 795 (Lopez).) A. Wong has not alleged a cognizable duty Wong alleged causes of action for a dangerous condition of public property and common law negligence due to the City’s alleged failure to maintain the subject property. “The sole statutory basis for imposing liability on public entities as property owners is Government Code section 835.” (Cerna v. City of Oakland (2008) 161 Cal.App.4th 1340 , 1347.) Section 835 states, “Except as provided by statute, a public entity is liable for injury caused by a dangerous condition of its property if the plaintiff establishes that the property was in a dangerous condition at the time of the injury, that the injury was proximately caused by the dangerous condition, that the 11 dangerous condition created a reasonably foreseeable risk of the kind of injury which was incurred, and that . . . [t]he public entity had actual or constructive notice of the dangerous condition under Section 835.2 a sufficient time prior to the injury to have taken measures to protect against the dangerous condition.” (§ 835, subd. (b).) The City asserts that because Wong never visited the property at issue, it owed no duty to Wong with respect to the property and cannot be liable for her injuries.3 Wong accuses the City of “mixing apples and oranges,” and asserts that duty is irrelevant because she can prove her injuries were proximately caused by the dangerous condition of the property. We agree with the City that duty must be considered. “When addressing the Act’s application, we have consistently regarded actionable duty and statutory immunity as separate issues, holding that in general, an immunity provision need not even be considered until it is determined that a cause of action would otherwise lie against the public employee or entity.” (Caldwell v. Montoya (1995) 10 Cal.4th 972 , 985 (Caldwell); see 3The City also contends that the trial court erred in finding that the City and Wong were in a “special relationship” giving rise to potential liability. This contention is somewhat perplexing, because although the trial court found a duty, it did not state that a special relationship existed. (See, e.g., Regents of University of California v. Superior Court (2018) 4 Cal.5th 607 , 620-622 [discussing the features of a special relationship].) Wong pointed this out in her return, but the City reiterates its argument in its reply. Because the trial court did not conclude that a special relationship existed and neither party suggests that a special relationship exists here, we do not address the City’s arguments on the issue. 12 also Creason v. Department of Health Services (1998) 18 Cal.4th 623 , 630 [when considering liability under section 815.6, “the question of possible statutory liability for breach of a mandatory duty ordinarily should precede the question of statutory immunity”].) We therefore consider the City’s contention that it did not owe Wong a duty under section 835 because she never visited the property at issue. “Our fundamental task in interpreting a statute is to determine the Legislature’s intent so as to effectuate the law’s purpose. We first examine the statutory language, giving it a plain and commonsense meaning. We do not examine that language in isolation, but in the context of the statutory framework as a whole in order to determine its scope and purpose and to harmonize the various parts of the enactment. If the language is clear, courts must generally follow its plain meaning unless a literal interpretation would result in absurd consequences the Legislature did not intend. If the statutory language permits more than one reasonable interpretation, courts may consider other aids, such as the statute’s purpose, legislative history, and public policy.” (Coalition of Concerned Communities, Inc. v. City of Los Angeles (2004) 34 Cal.4th 733 , 737.) Section 835 “imposes a duty on public entities not to maintain property in a ‘dangerous condition.’” (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112 , 1134 (Zelig).) However, section 835 does not expressly state to whom that duty is owed. The City points out that authorities discussing dangerous conditions of public property focus on either the “use” of the property or harm to adjacent property. For example, a dangerous condition of public property is defined as “a condition of property 13 that creates a substantial (as distinguished from a minor, trivial or insignificant) risk of injury when such property or adjacent property is used with due care in a manner in which it is reasonably foreseeable that it will be used.” (§ 830, subd. (a).) The Supreme Court has stated that “[p]ublic property is in a dangerous condition within the meaning of section 835 if it ‘is physically damaged, deteriorated, or defective in such a way as to foreseeably endanger those using the property itself.’” (Cordova v. City of Los Angeles (2015) 61 Cal.4th 1099 , 1105; quoting Bonanno v. Central Contra Costa Transit Authority (2003) 30 Cal.4th 139 , 148 (Bonanno).) The City asserts that Wong never visited or “used” the property at issue, and there is no authority supporting a finding of liability for a dangerous condition of public property with which the plaintiff has had no contact. Wong contends that physical contact with the property is not required, because causation can be established nonetheless. She asserts, “There is nothing in section 835 (nor any case interpreting that section) negating liability if a dangerous condition caused the plaintiff’s injuries just because the plaintiff happened not to be on the government’s property when he or she was injured.” She relies on cases such as Osborn v. City of Whittier (1951) 103 Cal.App.2d 609 (Osborn), in which the plaintiff alleged that the defendant city “maintained [a] rubbish disposal dump in a dangerous condition, permitting the continued burning of rubbish therein, under all weather conditions, without supervision.” (Id. at p. 612.) “On June 22, 1949, a fire started in the rubbish disposal dump and spread through and over surrounding property to plaintiff’s property, burned and destroyed 248 avocado trees, full grown and bearing, and the crops thereon, damaged the sprinkler system and fence 14 posts, and destroyed 750 tree props.” (Id. at p. 613.) The defendant city argued that it could not be liable to the plaintiff, because her property was located several miles from the dump where the fire began. The Court of Appeal, relying on “the Public Liability Act of 1923 and The Claims Act of 1931” (Osborn, supra, 103 Cal.App.2d at p. 613), rejected this contention. It found that the fire could be deemed a proximate cause of the damage to the plaintiff’s nearby property, because “[g]enerally, a fire, however far it may go, is one continuous fire—the same fire—and is the proximate cause of all the injuries and damage it may produce in its destructive march, whether it goes to abutting property or several miles.” (Id. at p. 618.) The court continued, “We hold, therefore, that liability is not, as a matter of law, dependent upon proximity of the damaged property to the dangerous condition, but is dependent upon the dangerous condition being a proximate cause of the damage, and that the question is one of fact.” (Ibid.) More recent cases decided under the current Government Claims Act have found that liability may be found where a dangerous condition of public property causes personal injuries to occur on an adjacent property. (See, e.g., Bonanno, supra, 30 Cal.4th at p. 151 [transit authority could be held liable when pedestrians were injured on adjacent property while attempting to reach bus stop in an allegedly dangerous location].) Similarly, liability may be found when adjacent property creates a dangerous condition on the subject public property. (See, e.g., Carson v. Facilities Development Co. (1984) 36 Cal.3d 830 , 841 [liability may exist under section 835 when “a sign located on property adjacent to a City intersection allegedly obstructed the view and rendered the intersection dangerous”]; Bakity v. County 15 of Riverside (1970) 12 Cal.App.3d 24 , 30 [dangerous condition may exist where trees on private property obscured the view of approaching vehicles at an intersection].) In these cases, however, the plaintiffs have been injured on or near the public property, while using or attempting to use the public property. Even in Osborn, which was decided before the enactment of the Government Claims Act, liability arose from the fact that the dangerous condition escaped the public property and reached the plaintiff’s nearby property. Wong cites no case, and we have found none, finding liability under section 835 where the plaintiff has had no physical contact with the dangerous condition on the subject property or on any adjacent property. Wong also contends that the trial court was correct to rely on Kesner, supra, 1 Cal.5th 1132 , to find that the City owed her a duty of care for “take-home” exposure to typhus. In Kesner, the Supreme Court found that “the duty of employers and premises owners to exercise ordinary care in their use of asbestos includes preventing exposure to asbestos carried by the bodies and clothing of on-site workers. Where it is reasonably foreseeable that workers, their clothing, or personal effects will act as vectors carrying asbestos from the premises to household members, employers have a duty to take reasonable care to prevent this means of transmission.” (Id. at p. 1140.) The court relied on the factors articulated in Rowland v. Christian (1968) 69 Cal.2d 108 , 113 (Rowland) and Civil Code section 1714, subdivision (a), which states in part, “Everyone is responsible, not only for the result of his or her willful acts, but also for an injury occasioned to another by his or her want of ordinary care or skill in the management of his or her property or person.” (Kesner, supra, 1 Cal. 5th at p. 1143.) The court noted that “‘the general duty to 16 take ordinary care in the conduct of one’s activities’ applies to the use of asbestos on an owner’s premises or in an employer’s manufacturing processes,” and considered whether property owners and employers should be liable to “individuals who were exposed to asbestos by way of employees carrying it on their clothes or person.” (Id. at p. 1144.) Kesner involved two different plaintiff families. One family, the Havers, asserted a premises liability claim, contending that the wife, Lynne, developed mesothelioma as a result of exposure to asbestos on the clothing of her husband, Mike. (Kesner, supra, 1 Cal. 5th at p. 1158.) The defendant, BNSF, asserted that such a claim could not lie where the plaintiff’s “‘only connection to the property at issue is an encounter with someone who visited the site.’” (Id. at p. 1159.) The court rejected this argument: “Although this last statement is superficially correct, it misconstrues the Havers’ theory of negligence. It is not Lynne’s contact with Mike that allegedly caused her mesothelioma, but rather Lynne’s contact with asbestos fibers that BNSF used on its property.” (Ibid. [emphasis in original].) The court noted that “liability for harm caused by substances that escape an owner’s property is well established in California law.” (Ibid., citing Sprecher v. Adamson Companies (1981) 30 Cal.3d 358 [uphill landowner had a duty to correct or control a landslide condition that damaged the adjacent downhill home]; Davert v. Larson (1985) 163 Cal.App.3d 407 [landowner could be held liable for an escaped horse that collided with the plaintiffs’ car]; Curtis v. State of California ex rel. Dept. of Transportation (1982) 128 Cal.App.3d 668 [upholding verdict finding the state negligent in constructing defective fences that permitted a cow to escape and create a dangerous condition by 17 entering a public highway].) The court held that because “BNSF’s predecessors are alleged to have engaged in active supervisory control and management of asbestos sources, the Havers’ premises liability claim is subject to the same requirements and same duty analysis that apply to a claim of general negligence.” (Id. at p. 1161.) Here, the trial court held, “In the case before this court, plaintiff claims that she was exposed to typhus as a result of take-home exposure from her husband’s work at the City of Los Angeles police station and City buildings. As set forth in Kesner, plaintiff may bring a take home exposure action against her husband’s employer, the City of Los Angeles.” The court also stated multiple times in its ruling that the City owed a duty to Wong, “as set forth in Kesner.” The City contends that the court’s reliance on Kesner was inappropriate, in part because Kesner involved private companies rather than public entities. We agree. The Supreme Court in Kesner relied on Civil Code section 1714 and the Rowland factors, but pursuant to the Act, liability for a public entity must be based on statute. The Supreme Court has “declined to hold that ‘public entity liability under [Government Code] section 835 is coextensive with private liability for maintaining property in an unsafe condition.’” (Vasilenko v. Grace Family Church (2017) 3 Cal.5th 1077 , 1093, quoting Bonanno, supra, 30 Cal.4th at p. 152.) In Zelig, supra, 27 Cal.4th at p. 1132, another case involving a claim of a dangerous condition of public property, the Supreme Court stated, “To the extent the Court of Appeal determined that the provisions of Civil Code section 1714 properly may be applied to extend the liability of a public entity in this setting beyond the usual reach of the ‘dangerous condition’ 18 provisions of Government Code section 835, we conclude that the appellate court was in error. Such a determination by the court ignores the general rule that the government does not, by assuming responsibility for providing police services, impose upon itself a legal duty that would give rise to civil liability.” And the Supreme Court in Eastburn v. Regional Fire Protection Authority (2003) 31 Cal.4th 1175 , 1183, stated, “[D]irect tort liability of public entities must be based on a specific statute declaring them to be liable, or at least creating some specific duty of care, and not on the general tort provisions of Civil Code section 1714.” Thus, the trial court erred in relying on Kesner’s negligence analysis to find a duty on the part of the City, a public entity. In addition, the Supreme Court in Kesner pointed out that the plaintiffs’ liability allegations were not premised on the wife’s contact with the husband, but instead on the wife’s contact with the hazardous condition from the defendant’s premises that had been carried home on the husband’s clothing. Here, by contrast, Wong has not alleged that Chen brought home infected fleas or rodents, thus exposing Wong to the conditions of the property. Instead, Wong alleges that she contracted typhus from Chen, months after Chen first became ill. Thus, the basis for premises liability the Supreme Court relied upon in Kesner—that a private premises owner may be held liable for hazardous substances that have escaped the property and caused harm offsite—is not applicable here. Thus, because Wong had no contact with the subject property and she has not alleged exposure to any condition of the subject property, Wong has not alleged facts to support a finding that the City had a duty to her. The demurrer should have been 19 sustained on this basis. But even if the City had a duty toward Wong, it was nevertheless immune from liability under section 855.4. B. The City has immunity under section 855.4 “[T]he immunity of section 855.4 is applicable to causes of action for alleged dangerous conditions of public property under section 835.” (Wright, supra, 93 Cal.App.4th at p. 688.) This is consistent with “[t]he Act’s purpose that specific immunities should prevail over general rules of actionable duty.” (Caldwell, supra, 10 Cal.4th at p. 985 [emphasis in original].) Section 855.4 states in full: “(a) Neither a public entity nor a public employee is liable for an injury resulting from the decision to perform or not to perform any act to promote the public health of the community by preventing disease or controlling the communication of disease within the community if the decision whether the act was or was not to be performed was the result of the exercise of discretion vested in the public entity or the public employee, whether or not such discretion be abused. “(b) Neither a public entity nor a public employee is liable for an injury caused by an act or omission in carrying out with due care a decision described in subdivision (a).” By its plain language, section 855.4, subdivision (a) immunizes any “decision” relating to the control of the communication of disease that is “the result of the discretion vested in the public entity.” Such a “decision” is immune, “whether or not such discretion [was] abused.” Under subdivision (b), immunity attaches to any act or omission performed while carrying out such a decision, as long as the act or omission was performed with due care. 20  This reading of section 855.4 is in accord with the California Law Revision Commission cited by the trial court: “Public health officials and public entities should not be liable for determining whether to impose quarantines or otherwise take action to prevent or control the spread of disease, where they have been given the legal power to determine whether or not such action should be taken. . . . But when a public official has a legal duty to act in a particular manner, he should be liable for his wrongful or negligent failure to perform the duty; and his employing public entity should be liable if such failure occurs in the scope of his employment.” (4 Cal. Law Rev. Comm. Reps., supra, at pp. 830-831, [as of March 16, 2021], archived at .) The City asserts that the trial court erred in finding that section 855.4 did not provide governmental immunity for Wong’s claims. The City relies on Wright, supra, 93 Cal.App.4th 683 , the only published case to analyze the application of that statute.4 In Wright, the Wright family lived in a mobile home on property 4 One other published case briefly addressed the application of section 855.4. In Sava v. Fuller (1967) 249 Cal.App.2d 281 , a state-employed botanist was hired to analyze a plant substance a child may have ingested; the botanist incorrectly concluded that the substance was toxic. The child’s parents sued, alleging that the child died as a “proximate result of the incorrect analysis because the treatment by the physician was thereafter based upon the misinformation that ingestion of toxic materials rather than bronchopneumonia was the child’s ailment.” (Id. at p. 283.) The court rejected the botanist’s assertion of immunity under section 855.4, finding simply that “[t]he acts charged here were not within the purview of that section.” (Id. at p. 292.) 21 owned by the City of Los Angeles and leased to Inyo County. (Id. at p. 685.) The property included “a municipal airport with runways, terminals, parking and other miscellaneous related structures, as well as an old, abandoned hospital building, a pump house, a communications center, and several mobilehomes.” (Ibid.) The abandoned hospital building was “located between 60 and 100 yards from their home. Being in such close proximity to her home, Misty, the Wrights’ daughter, would often explore in and around the old hospital building and she would remove some old records from that building. Shortly after an excursion into the old hospital building in June 1999, Misty contracted hantavirus pulmonary syndrome . . . and died on June 21.” (Id. at pp. 685-686.) The Court of Appeal noted that the “The hantavirus is spread via contact with infected deer mice feces and dried urine.” (Id. at p. 686, fn. 2.) The Wrights sued the City for wrongful death, and the trial court sustained the City’s demurrer “on the ground that the [wrongful death] cause of action failed to state facts sufficient to constitute a cause of action in light of the immunity granted by section 855.4.” (Id. at pp. 686-687.) The Court of Appeal affirmed. The court first rejected the Wrights’ contention that section 855.4 was inapplicable to a cause of action involving a dangerous condition of public property. The court stated, “Utilizing the clear language in the statute, the immunity of section 855.4 is applicable to causes of action for alleged dangerous conditions of public property under section 835.” (Wright, supra, 93 Cal.App.4th at p. 688.) The court also stated that sections 835 and 855.4, read together, “[make] it clear that the immunity provided in section 855.4 prevails over the liability established in section 835.” (Id. at p. 689.) 22  The court next held that 855.4 applies “‘where a public entity’s substandard maintenance of public property is the sole cause in fact of an individual[’]s exposure to and contraction of a deadly disease.’” (Wright, supra, 93 Cal.App.4th at p. 689.) The court quoted with approval the City’s argument that “‘[t]he presence of germs, bacteria and viruses and the like, many of which are microscopic, and which may or may not be contained in saliva, animal droppings, or any multitude of other forms, upon the vast public property of this state, cannot . . . be viewed as liability events, without some specifically stated intent of the [L]egislature.’” (Id. at p. 690 [alterations in Wright].) The court added, “Although the Wrights argue that City is responsible for maintaining a dangerous condition of property by failing to rid the property of the virus-infected mice, the fact remains that the property involved in this case included old, abandoned, buildings that were not open to the public. Given that fact alone, City should not be held liable for its ‘omissions relating to . . . the prevention or control of’ the hantavirus.” (Ibid., quoting § 855.4, subd. (a).) The City asserts that “Wright compels the conclusion that section 855.4 immunizes the City from Wong’s lawsuit.” It argues that the cases are extremely similar in that both Wong and the Wrights alleged illness spread by rodents, and lack of action on the part of the City to maintain the property where the infection occurred. We agree that much of the Wright court’s reasoning is applicable here. As in Wright, Wong has alleged infection from the presence of viruses in infected fleas on rodents on City property, and that the City allowed the disease to spread by failing to maintain the property adequately. Moreover, the spread of hantavirus in Wright and the spread of typhus here fall 23 directly within the language of section 855.4 addressing the “public health of the community by preventing disease or controlling the communication of disease within the community.” And we agree with the Wright court’s statement that section 855.4 applies “‘where a public entity’s substandard maintenance of public property is the sole cause in fact of an individual[’]s exposure to and contraction of a deadly disease.’” (Wright, supra, 93 Cal.App.4th at p. 689.) The trial court dismissed the reasoning of Wright because that case involved an abandoned building, and, “In the present case, unlike the abandoned hospital building, Central Division Police Station was not an abandoned building, closed off to the public.” We disagree that this distinction is relevant. Nothing in section 855.4 suggests that its application is limited to abandoned buildings, and although the Wright court mentioned the building was abandoned, that factor was not the basis for most of its reasoning. Wong asserts that Wright does not support the City’s position, because “at no point did [the Wright court] analyze just what a defendant must prove to establish an exercise of discretion sufficient to trigger” section 855.4. She argues that before a public entity defendant may assert section 855.4 immunity, it must show that there was “an exercise of discretion sufficient to trigger the application” of section 855.4. Wong relies on cases interpreting section 820.2, which states in full, “Except as otherwise provided by statute, a public employee is not liable for an injury resulting from his act or omission where the act or omission was the result of the exercise of the discretion vested in him, whether or not such discretion be abused.” Wong contends that because both section 855.4 and 24 section 820.2 include the language “was the result of the exercise of the discretion vested in” the public employee or entity, we should interpret section 855.4 similarly. Section 820.2 codified a longstanding rule to ensure that “‘public employees will continue to remain immune from liability for their discretionary acts within the scope of their employment.’” (Caldwell, supra, 10 Cal.4th at p. 980 [emphasis added].) Thus, in determining whether immunity applies under section 820.2, courts often attempt to “draw[ ] the line between the immune ‘discretionary’ decision and the unprotected ministerial act.” (Johnson v. State of California (1968) 69 Cal.2d 782 , 793 (Johnson).) The Supreme Court has stated that “a ‘workable definition’ of immune discretionary acts draws the line between ‘planning’ and ‘operational’ functions of government. [Citation.] Immunity is reserved for those ‘basic policy decisions [which have] . . . been [expressly] committed to coordinate branches of government,’ and as to which judicial interference would thus be ‘unseemly.’” (Caldwell, supra, 10 Cal.4th at p. 981, quoting Johnson, supra, 69 Cal.2d at pp. 793-794 (italics in Johnson).) On the other hand, “lower-level, or ‘ministerial,’ decisions that merely implement a basic policy already formulated” are not immune under section 820.2. (Caldwell, supra, 10 Cal.4th at p. 981; see also Elton v. County of Orange (1970) 3 Cal.App.3d 1053 , 1057 [“Immunity is not achieved because the acts complained of are not ‘discretionary acts’ within the meaning of” section 820.2]; Lopez, supra, 40 Cal.3d at p. 794 [“an individual bus driver’s decision concerning what form of protective action to take in a particular case” was “the kind of ministerial, ‘operational’ action . . . that is not immunized by Government Code section 820.2.”].) 25  Although section 820.2 and 855.4 include similar language, there are important differences between them. Section 820.2 addresses only public employees, while section 855.4 addresses both public employees and public entities. In general, the Act “establishes the basic rules that public entities are immune from liability except as provided by statute (§ 815, subd. (a)), [and] that public employees are liable for their torts except as otherwise provided by statute (§ 820, subd. (a)).” (Caldwell, supra, 10 Cal.4th at p. 980 [emphasis in original].) In addition, section 820.2 addresses only the “act or omission” of a public employee, while section 855.4 applies to a public employee’s or entity’s “decision to perform or not to perform any act.” These distinctions are relevant to the scope of liability, and as such we find cases interpreting section 820.2 are not directly on point. But even if we were to accept Wong’s contention that the statutes should be treated similarly, we find no support for her contention that the City was required to prove at the demurrer stage that immunity applies. She argues that the demurrer should have been overruled, because “there is nothing on the face of [the] complaint establishing that either the condition of the subject property generally or the transmission of typhus specifically was the result of a consciously made exercise of discretion as to a basic policy decision.” However, “[s]ince all California governmental tort liability flows from the California [Government] Claims Act [citations], the plaintiff must plead facts sufficient to show his [or her] cause of action lies outside the breadth of any applicable statutory immunity. [Citations.] He [or she] must plead ‘with particularity,’ ‘[e]very fact essential to the existence of statutory liability.’” (Keyes v. Santa Clara Valley Water Dist. (1982) 128 26 Cal.App.3d 882 , 885-886; see also Giannuzzi v. State of California (1993) 17 Cal.App.4th 462 , 467 [same]; Nealy v. County of Orange (2020) 54 Cal.App.5th 594 , 602 [same].) Thus, to allege a viable cause of action against the City, Wong was required to allege facts showing that the City’s actions did not fall within the statutory immunity in section 855.4. She did not do so. Section 855.4, subdivision (a) immunizes “the decision to perform or not to perform any act to promote the public health of the community by preventing disease or controlling the communication of disease.” Wong’s allegations fall squarely within this section. She alleged that the City had actual or constructive notice that the property “was the subject of a typhus epidemic and that proactive conduct was required in order to ensure safety,” but the City “permitted the conditions to remain unabated.” Any such “decision” on the part of the City falls under the immunity in section 855.4, subdivision (a). Wong did not allege that the City failed to comply with a non-discretionary, ministerial duty. Although she alleged that the City failed to comply with directives from Cal-OSHA, the City points out that such a failure cannot serve as a basis for liability. (See, e.g., Ruiz v. Herman Weissker, Inc. (2005) 130 Cal.App.4th 52 , 64 [although Labor Code section 6400, subdivision (b) provides that Cal-OSHA may cite an employer for exposing employees to a hazard, “this statute does not create civil liability on the part of specified ‘employers’ to injured employees, for breach of a nondelegable duty or otherwise”].) Wong does not contradict this contention. Wong alleged that the City “failed to remedy the dangerous condition to discharge their mandatory duty as required by Government Code § 815.6.” However, section 815.6 does not 27 impose any mandatory duty; it simply states that a public entity may be liable if it fails to comply with an existing mandatory duty.5 Wong has not identified any mandatory duties the City violated with respect to its decisions relating to the spread of typhus on City property. Thus, Wong has not alleged facts sufficient to demonstrate that the City’s actions or omissions do not constitute a “decision to perform or not perform any act” to “control[ ] the communication of disease within the community” which was within “the discretion vested in” the City. Wong asserts that even if the immunity in section 855.4, subdivision (a) applies, she alleged that the City “acted without due care in implementing” its decision, and therefore the City’s actions fall outside the immunity provisions in section 855.4, subdivision (b). However, Wong did not allege facts in her complaint that the City carried out any particular “act or omission” without due care. To the contrary, she alleged that the decision itself—to not abate the allegedly dangerous condition of the property—was the cause of her injury. As such, Wong failed to allege facts demonstrating that the immunity under section 855.4, subdivision (b) does not apply.6 5 Section 815.6 states in full, “Where a public entity is under a mandatory duty imposed by an enactment that is designed to protect against the risk of a particular kind of injury, the public entity is liable for an injury of that kind proximately caused by its failure to discharge the duty unless the public entity establishes that it exercised reasonable diligence to discharge the duty.” 6For the first time at oral argument, Wong requested leave to amend her complaint to address any ambiguities in her pleadings. An amendment would not change Wong’s basic 28  DISPOSITION Let a peremptory writ of mandate issue directing the respondent court to vacate its order overruling the City’s demurrer, and enter a new order sustaining the demurrer. The alternative writ is discharged. The City is entitled to recover its costs in this original proceeding. CERTIFIED FOR PUBLICATION COLLINS, J. We concur: MANELLA, P. J. WILLHITE, J. allegations against the City, however, or resolve the issues of duty or immunity, which, as discussed herein, are fatal to her causes of action. We therefore deny Wong’s request. 29

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http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=42801&Index=%5c%5coca%2dpsql12%2ecourts%2estate%2etx%2eus%5cTamesIndexes%5ccoa10%5cOpinion

IN THE TENTH COURT OF APPEALS No. 10-18-00217-CR LORI ANN OWENS, Appellant v. THE STATE OF TEXAS, Appellee From the County Court at Law No. 1 McLennan County, Texas Trial Court No. 2017-0831-CR1 MEMORANDUM OPINION Lori Ann Owens was convicted of driving while intoxicated and sentenced to 180 days in jail. See TEX. PENAL CODE ANN. § 49.04(a), (c). The trial court suspended Owens’s sentence and placed her on community supervision for 15 months. Because the trial court did not abuse its discretion in denying Owens’s motion for mistrial and motion for new trial, and because Owens’s complaint regarding the limiting of cross-examination was not preserved, the trial court’s judgment is affirmed. MOTION FOR MISTRIAL In her first issue, Owens argues that the trial court abused its discretion in overruling her motion for mistrial based on a perceived violation of Owens’s motion in limine. Specifically, she contends a question asked by the State violated the limine order and the trial court’s instruction to disregard could not cure the harm caused by the violation.1 Prior to trial, the parties agreed to, and the trial court granted, Owens’ motion in limine which required the State not to “mention, allude to, or refer to, directly or indirectly, during any stage of this trial…[a]ny reference to the numeric result of the portable breath test (PBT) administered by the officer in this case[,]” until a hearing outside of the jury’s presence was held to determine the admissibility of “such testimony.” (Emphasis added). On direct examination, the State asked DPS Trooper Jeff Wachtendorf about whether the portable breath test (PBT) Owens blew into confirmed his belief that Owens was “impaired.” The trooper replied, “Yes, it did.” The State also asked if the trooper heard defense counsel say during counsel’s opening statement that the PBT only shows whether or not a person has alcohol in the person’s system. The trooper replied, “Yes.” The State then specifically asked, “But, without going into it, that PBT gives you a 1 An objection that the motion in limine has been violated is insufficient to preserve error for appeal. Harnett v. State, 38 S.W.3d 650 , 655 (Tex. App.—Austin 2000, pet ref’d). See Brazzell v. State, 481 S.W.2d 130 , 132 (Tex. Crim. App. 1972). The preserved issue in this appeal is the denial of the motion for mistrial. See Fuller v. State, 827 S.W.2d 919 , 926 (Tex. Crim. App. 1992) (“the most important procedure is to press the specific objection to the point of obtaining an adverse ruling, be that to the objection, the request for an instruction, or the motion for mistrial.”). Owens v. State Page 2 number, doesn’t it?” Owens asked to approach the bench and a conference was held in chambers with the parties outside the presence of the jury. In the conference, Owens objected that the State had violated the limine order. Owens moved for a mistrial which the trial court promptly denied. After much debate, because the State did not think it violated the limine order and Owens believed that not only was there a violation, but that the violation could not be cured, Owens ultimately agreed to an instruction to disregard by the trial court. Twenty-five minutes after the conference began, the trial court instructed the jury, “I'm going to ask the jury to disregard the last question and have it struck from the record.” We review a trial court's denial of a motion for mistrial under an abuse of discretion standard. Archie v. State, 340 S.W.3d 734 , 738-39 (Tex. Crim. App. 2011). Mistrial is the appropriate remedy when the objectionable events are so emotionally inflammatory that curative instructions are not likely to prevent the jury from being unfairly prejudiced against the defendant. Id. at 739. The asking of an improper question will seldom call for a mistrial, because, in most cases, any harm can be cured by an instruction to disregard. Ladd v. State, 3 S.W.3d 547 , 567 (Tex. Crim. App. 1999). On appeal, we generally presume that the jury followed the trial court's instructions. See Thrift v. State, 176 S.W.3d 221 , 224 (Tex. Crim. App. 2005); Waldo v. State, 746 S.W.2d 750 (Tex. Crim. App. 1988) (jury presumed to follow instruction to disregard evidence). This presumption is refutable; but to do so, the appellant must point to evidence in the record indicating that the jury failed to follow the trial court's instructions. Thrift, 176 S.W.3d at Owens v. State Page 3 224. In this case, although the State's question violated the order on the motion in limine, no number was actually given in response to the question and there was other evidence that the results of the PBT confirmed the Trooper’s belief that Owens was “impaired.” Further, twenty-five minutes had elapsed between the statement and the instruction, and the trial court was careful not to refresh or reinforce the jury's memory of the content of the question. Finally, Owens attached an affidavit from one of her trial counsel to her Motion for New Trial stating that after the trial was over, one juror asked trial counsel what the “number” was, because “it was obvious there was a number.” That is no evidence to rebut the presumption and show that the jury did not follow the trial court’s instruction. It would require speculation to conclude from this statement that the jury’s curiosity lead them to violate the trial court’s instruction to disregard the question. Even if the hearsay statement is evidence that the jury discussed whether there was a “number,” it does not rebut the presumption and we must still presume they followed the trial court’s instruction and disregarded the question when reaching their verdict. See Colburn v. State, 966 S.W.2d 511 , 520 (Tex. Crim. App. 1998). Accordingly, the instruction to disregard was effective, and the trial court did not abuse its discretion in denying Owens’s motion for mistrial. Her first issue is overruled. MOTION FOR NEW TRIAL Owens argues in her third issue that the trial court abused its discretion in denying Owens’s motion for new trial because the trial court erred in denying her motion for mistrial. Owens relies on her argument from her first issue, that the trial court abused its Owens v. State Page 4 discretion in denying Owens’s motion for mistrial, in support of her third issue. We review a trial court's denial of a motion for new trial for an abuse of discretion, and we will only reverse if the trial court's decision was "clearly erroneous and arbitrary." Riley v. State, 378 S.W.3d 453 , 457 (Tex. Crim. App. 2012); Horne v. State, 554 S.W.3d 809 , 813 (Tex. App.—Waco 2018, pet. ref’d). We cannot substitute our own judgment for that of the trial court and must uphold the trial court's ruling if it is within the zone of reasonable disagreement. Riley, 378 S.W.3d at 457 ; Horne, 554 S.W.3d at 813 . Because we found that the trial court did not abuse its discretion in denying Owens’s motion for mistrial, we do not find that the trial court’s decision to deny Owens’s motion for new trial was “clearly erroneous and arbitrary” and an abuse of discretion. Accordingly, Owens’s third issue is overruled. LIMITING CROSS-EXAMINATION In her second issue, Owens complains that the trial court improperly limited her cross-examination of the State’s sole witness, Trooper Wachtendorf, concerning part of Owens’s defensive theory. The following exchange is the basis of Owens’s complaint on appeal: Q. When do you draw the blood? A. I mean, it varies from case to case. There are a lot of different variables each day or each night. Q. Okay. On average. STATE: Objection, Your Honor, I'm not sure what relevance "on average." COURT: Sustained. Owens v. State Page 5  Q. You have gotten many blood warrants in the past, have you not? A. I've gotten several. Q. Okay. How does that process go about? STATE: Your Honor, again, we're going to object to relevance. That didn't take place in the case. DEFENSE: And I think the jury is entitled to why and how hard it is. STATE: I think that perhaps the foundation can be laid. But that question, in particular, I object to relevance. COURT: Sustained as to the general process of all blood warrants. The proponent of evidence ordinarily has the burden of establishing the admissibility of the proffered evidence. White v. State, 549 S.W.3d 146 , 152 (Tex. Crim. App. 2018); Lester v. State, 366 S.W.3d 214 , 215 (Tex. App.—Waco 2011, pet. ref’d). To preserve a complaint on appeal, “the record must show that the party ‘stated the grounds for the ruling that [he] sought from the trial court with sufficient specificity to make the trial court aware of the complaint.’” Reyna v. State, 168 S.W.3d 173 , 177 (Tex. Crim. App. 2005) (quoting TEX. R. APP. P. 33.1(a)(1)). The proponent, if the losing party, must have told the trial court why the evidence was admissible. Id. at 177. Thus, it is not enough to simply tell the trial court that evidence is admissible. Id. Here, Owens only stated that “the jury is entitled to why and how hard it is.” This is not enough. Owens argues on appeal that the trial court should have known Owens was pursuing this line of questioning in support of a defensive theory that Trooper Wachtendorf conducted an insufficient investigation by failing to secure a blood draw warrant and that by sustaining the State’s objections, Owens’s cross-examination Owens v. State Page 6 concerning that theory was improperly limited.2 But as a part of error preservation, Owens must let the trial court know what she wants, why she thinks she is entitled to it, and to do so clearly enough for the court to understand her at a time when the court is in the proper position to do something about it. See Golliday v. State, 560 S.W.3d 664 , 670 (Tex. Crim. App. 2018). She did not. She cannot expect the trial court to understand her complaints when they were not specifically raised. Accordingly, because Owens did not articulate a sufficient reason why the answers to her questions were admissible and did not bring the specific complaint that she asserts on appeal to the trial court's attention at a time when the trial court could do something about it, Owens’s second issue is not preserved and is overruled. CONCLUSION Having overruled each issue on appeal, we affirm the trial court’s judgment. TOM GRAY Chief Justice Before Chief Justice Gray, Justice Davis, and Justice Neill Affirmed Opinion delivered and filed March 4, 2020 Do not publish [CR25] 2 Owens stated in her opening that the trooper had the option of getting a warrant and that he failed to conduct a thorough investigation. In the exchange quoted, the State seems to concede that Owens might be able to lay a predicate for going into the issue; but based on the trial at that point, the question as asked, without more, was objectionable. Owens v. State Page 7

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http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=42793&Index=%5c%5coca%2dpsql12%2ecourts%2estate%2etx%2eus%5cTamesIndexes%5ccoa10%5cOpinion

IN THE TENTH COURT OF APPEALS No. 10-20-00026-CV EX PARTE LOWELL QUINCY GREEN Original Proceeding OPINION AND PREFILING ORDER Dear Mr. Green: By many different documents you have sent to this Court, it appears you have attempted to sue someone for damages.1 You have sent these documents directly to this Court making a variety of claims against a variety of persons. But this Court, the Tenth Court of Appeals, is an appellate court. We have repeatedly told you, and held in countless opinions, that we only have jurisdiction as an appellate court to review a final judgment of a trial court. 1 In this proceeding, we are unable to determine who you have attempted to sue for $15,000,000. You mention four names: Governor Greg Abbott, Attorney General Ken Paxton, Attorney Courtney Brooke Corbellas, and District Judge Matt Johnson. We are unable to determine which, if any, of these people should be identified as a defendant, appellee, or real party in interest. Accordingly, we have styled this as an original proceeding to facilitate the processing of this proceeding.  When you file a claim directly with this Court seeking damages from someone, we have no choice but to dismiss your claim because we have no jurisdiction to decide the issue. You have done this so often, and we dismissed so many of your proceedings, that you cannot believe that this type of complaint is going to be considered by this Court. There is simply no good faith basis for you to believe that we can or will render a judgment on the merits of your claim. In the past, we have even asked for clarification of your pleading or an explanation of why we would have jurisdiction to consider it. We have never received a response that is helpful for us to understand the basis of your claims or your repeated filing of such claims directly in this Court. This Court has been extraordinarily patient with you. But this is the end. Your document, which appears to have been signed on January 5, 2020 and which we received on January 14, 2020, is the last such “complaint” that this Court will file. As with so many other complaints that you have filed here, we dismiss this one also because there can be no final judgment because you never filed this complaint in the trial court. Accordingly, this proceeding is dismissed for want of jurisdiction. Pursuant to our inherent authority, the Court orders the Clerk of this Court to not file any new claims, appeals, or other proceedings received from you until it has been approved for filing by the Chief Justice of this Court or the designee of the Chief Justice of this Court. The Clerk of this Court is further ordered to create a miscellaneous documents file in which anything we receive from you will be placed after it is received Ex Parte Green Page 2 and reviewed, unless the Chief Justice or the designee of the Chief Justice orders it filed as a new proceeding.2 Your repeated action of filing numerous wholly frivolous claims that have no basis in law or fact and asking this Court to take any action thereon leaves us no available alternative.3 We find your repeated action in filing these frivolous proceedings has no legitimate basis and is for the sole purpose of wasting this Court’s time and other resources and to harass both this Court and the litigants that you purport to make claims against. The manner and method of your conduct in filing these meritless proceedings here may not fit within the statutory definition of a vexatious litigant, but by every non- statutory definition, we find that is precisely what you are. In summary, the Clerk of this Court will no longer file your documents, or create a new proceeding with you as the appellant/relator/petitioner/applicant, unless and until the Chief Justice of this Court or the designee of the Chief Justice of this Court has reviewed it and determined that it should be filed. We take no pleasure in taking this action. But at some point, we must take some 2 This process will be utilized on your document dated January 14, 2020 and received on January 21, 2020 in which you appear to complain about and seek discovery from a number of persons and entities including UTMB-CMC-TDJC, Texas Tech, Ken Paxton, Courtney Brooke Corbellas, Greg Abbott, Pamela Theikle, Bryan Collier, Lorie Davis, Polunsky Unit, LVN A. Lindley, LVN Kim Rend Fleisch, Dr. Carter, Dr. Baker, Dr. Marks, Matt Johnson, and Jon Gimble. 3 Attached to this Opinion and Prefiling Order is a copy of a prior order of the Court issued in another proceeding on October 1, 2019 which lists the many proceedings that you have previously filed. Ex Parte Green Page 3 action to protect our limited resources from waste and abuse so that persons with non- frivolous claims may obtain the review to which they are entitled. You have the right to explain in a motion for rehearing why you feel we should not take the above described actions at this time in response to what you have filed in this proceeding and in previous proceedings filed in this Court. Your motion for rehearing or a motion for extension of time to file a motion for rehearing must be filed by March 19, 2020. PER CURIAM Before Chief Justice Gray, Justice Davis, and Justice Neill Pet. dismissed Opinion delivered and filed March 4, 2020 [OT06] Ex Parte Green Page 4  APPENDIX TENTH COURT OF APPEALS Chief Justice McLennan County Courthouse Tom Gray 501 Washington Avenue, Rm. 415 Clerk Justices Waco, Texas 76701-1373 Nita Whitener Rex D. Davis Phone: (254) 757-5200 Fax: (254) 757-2822 John E. Neill October 1, 2019 Lowell Quincy Green TDCJ #00518622 Polunsky Unit 3872 FM 350 S Livingston, TX 77351 RE: Court of Appeals Number: 10-16-00438-CR, 10-16-00439-CR, 10-16-00440-CR Trial Court Case Number: 2012-709-C2, 2012-790-C2, 2012-791-C2 STYLE: Ex parte Lowell Quincy Green On September 6, 2019, we received a document filed by Lowell Quincy Green in appellate cause numbers 10-16-00439-CR and 10-16-00440-CR. We received an additional filing from Green in appellate cause number 10-16-00438-CR, on September 16, 2019. It is not clear from either of these documents as to the nature of Green’s complaints. Nevertheless, below is what we believe is a complete list of the proceedings that Green has initiated in this Court: Cause Number Style of the Case Tenth Court of Appeals Mandate Issued Judgment issued 10-16-00409-CV Green v. Honorable Matt December 21, 2016 May 8, 2017 Johnson 10-16-00421-CV Green v. District Attorney January 11, 2017 May 8, 2017 Abel Reyna & Sterling Harmon 10-16-00422-CV Green v. State of Texas, January 11, 2017 May 8, 2017 Lorie Davis, David Gutierrez, and Warden Kato 10-16-00438-CR Ex parte Green January 11, 2017 April 11, 2017 10-16-00439-CR 10-16-00440-CR Ex Parte Green Page 5  10-17-00004-CV Green v. Honorable Matt March 15, 2017 May 16, 2017 Johnson, City of Waco, Detective Manuel Chavez, Officer Jason Davis, Officer Erin Newton, Office Craig Stone, District Attorney Abel Reyna, Brandon Luce, and Lawrence E. Johnson 10-17-00010-CV Green v. Lorie Davis & March 8, 2017 May 9, 2017 David Gutierrez 10-17-00024-CV Green v. Lawrence E. February 15, 2017 May 18, 2017 Johnson & Stan Schwieger 10-17-00066-CV In re Green March 22, 2017 N/A 10-17-00198-CV Green v. Lorie Davis & September 6, 2017 December 27, 2017 David Gutierrez 10-17-00304-CR Green v. The State of October 25, 2017 December 22, 2017 Texas 10-17-00327-CR & Ex parte Green October 25, 2017 December 22, 2017 10-17-00328-CR 10-17-00362-CV Green v. Lorie Davis & December 13, 2017 April 16, 2018 Davis Gutierrez 10-17-00367-CV In re Green November 22, 2017 N/A 10-17-00423-CR In re Green January 3, 2018 N/A 10-18-00045-CV Green v. The Honorable Case transferred to 12th Matt Johnson Court of Appeals 10-18-00248-CV In re Green Case transferred to 12th Court of Appeals 10-19-00017-CR In re Green January 30, 2019 N/A 10-19-00046-CV Green v. The Department March 20, 2019 May 21, 2019 of Corrections 10-19-00047-CV Green v. Stan Schwieger & April 3, 2019 June 4, 2019 Lawrence E. Johnson 10-19-00055-CV In re Green February 27, 2019 N/A 10-19-00056-CV Green v. The State of April 3, 2019 June 4, 2019 Texas, et al. 10-19-00100-CV Green v. Brandon Luce, April 3, 2019 June 4, 2019 Abel Reyna, Landon Ramsey & Lawrence E. Johnson 10-19-00101-CV Green v. Courtney Brooke April 3, 2019 June 4, 2019 Corbello, Greg Abbott, & W. Ken Paxton 10-19-00106-CV Green v. Lawrence April 3, 2019 June 4, 2019 Johnson, the City of Waco, Jon Gimble, McCreary, Veselka, Braggs & Allen, P.C., Robert L. Meyer & Linda Barnes Ex Parte Green Page 6  As shown above, appellate cause numbers 10-16-000438-CR, 10-16-00439-CR, and 10- 16-00440-CR were dismissed for want of jurisdiction on January 11, 2017, and the mandate issued on April 11, 2017. Despite this, Green has made it a habit to continually raise the same incoherent and incomprehensible issues in appellate cause numbers that have been resolved and closed. We have informed Green on numerous occasions that we lack jurisdiction over suits originally filed in this Court. See, e.g., Green v. State, No. 10-19-00056-CV, 2019 Tex. App. LEXIS 2657, at **1-2 (Tex. App.—Waco Apr. 3, 2019, no pet.) (mem. op.). However, Green has responded by repeatedly filing additional original suits in this Court raising the same incoherent and incomprehensible issues, but merely changing the parties in the style of the case. These actions do not change the fact that we lack jurisdiction over Green’s original petitions filed in this Court. See Gregory v. Foster, 35 S.W.3d 255 , 257 (Tex. App.—Texarkana 2000, no pet.) (citing N.E. Indep. Sch. Dist. v. Aldridge, 400 S.W.2d 893 , 895 (Tex. 1966) (noting that only final decisions of a trial court are appealable); see also Lehmann v. Har-Con Corp., 39 S.W.3d 191 , 195 (Tex. 2001) (holding that an appeal may be taken only from a final judgment and certain interlocutory orders identified by statute). Furthermore, these actions have continued for the past three years and have wasted countless hours of scarce Court time and other resources. Therefore, we find Green’s actions to have caused a complete waste of judicial resources as to constitute an abuse of the judicial process for which Green may be sanctioned. See, e.g., Green, 2019 Tex. App. LEXIS 2657, at **3-4. In accordance with our April 3, 2019 opinion, we hereby order the Clerk to provide notice of this order to the appropriate offices at the Texas Department of Criminal Justice, including the Correctional Institutions Division and the Parole Division, for consideration of the forfeiture of Green’s good-time credits pursuant to section 498.0045(b) of the Texas Government Code. See id. at **4-5 (citing TEX. GOV’T CODE ANN. § 498.0045(b) (West 2012); Johnson v. Peeples, 399 S.W.3d 348 , 352 (Tex. App.—Waco 2013, no pet.)). In addition to the foregoing, we inform Green that, absent legitimate claims, we will take no further action on any future filings. We will no longer respond to any of Green’s filings, absent any legitimate claims he may file. It is so ordered. NITA WHITENER, CLERK By: Jessica Breda, Deputy Clerk CC: Hon. Matt Johnson (DELIVERED VIA E-MAIL) Barry N. Johnson (DELIVERED VIA E-MAIL) Jon Gimble (DELIVERED VIA E-MAIL) Bryan Collier Lorie Davis Pamela Thiekle Ex Parte Green Page 7

2021-03-18 20:02:28.061971+00

http://www.courts.ca.gov/opinions/documents/D076079.PDF

Filed 3/18/21 CERTIFIED FOR PUBLICATION COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA VENDOR SURVEILLANCE D076079 CORPORATION, Plaintiff and Appellant, v. (Super. Ct. No. 37-2016-00037096- CU-MC-CTL) PATRICK W. HENNING, JR., as Director, etc., et al., Defendants and Respondents. APPEAL from a judgment of the Superior Court of San Diego County, Timothy B. Taylor, Judge. Affirmed. Request for judicial notice granted in part and denied in part. Ogletree, Deakins, Nash, Smoak & Stewart, Jack S. Sholkoff and Tracie Childs for Plaintiff and Appellant. Xavier Becerra, Attorney General, Lisa W. Chao, Assistant Attorney General, Brian D. Wesley, Tim Nader and Anna Barsegyan, Deputy Attorneys General, for Defendants and Respondents. Vendor Surveillance Corporation (VSC) appeals from an adverse judgment in its action seeking refund of $278,692 in unemployment insurance taxes assessed by the California Employment Development Department (EDD). The outcome turns on whether project specialists hired by VSC between January 1, 2011 and December 31, 2013 (the audit years) are classified as employees or independent contractors. The first-impression legal issue is whether in making that determination, the court should apply (1) the ABC test announced in Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903 , 956‒957 (Dynamex) and later codified in the Labor Code; or instead (2) the Borello factors (S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (Borello)), codified in an EDD regulation, California Code of Regulations, title 22, section 4304-1 (hereafter regulation 4304-1). With little case law for guidance and an eye on appeal, the trial court prudently analyzed the evidence alternatively under each standard and determined that project specialists are VSC’s employees. We hold that Borello provides the applicable standard in assessing unemployment insurance taxes during the audit years. Because the court’s findings under that standard are supported by substantial evidence and its qualitative weighing of the Borello factors was an appropriate exercise of the court’s discretion, we affirm. FACTUAL AND PROCEDURAL BACKGROUND A. Source Inspection Aerospace manufacturers use component parts made by others (suppliers) that must be fabricated to exacting specifications. Disaster can ensue if a defective part escapes detection and is installed in an aircraft. To help ensure that such tragedies do not occur, the manufacturer inspects the part at the supplier’s facility. The industry calls this source inspection. 2 B. Verify, VSC, and VTR Verify, Inc. (Verify) provides management services, including source inspection, to aerospace and defense manufacturers. VSC is a wholly owned subsidiary of Verify. VSC maintains a database of persons qualified to perform source inspection, called project specialists. It also recruits and screens individuals to add to that database. During the audit years, the database contained more than 300 California-based project specialists. When a Verify customer requests a source inspection, Verify negotiates the services to be performed and the corresponding fee. If the customer requires part-time, project-based on demand source inspection, Verify subcontracts with VSC to provide a qualified project specialist. After identifying qualified project specialists from the database, VSC contacts each to determine their interest in the work. A project specialist is free to decline work and there are no negative repercussions for doing so. VSC submits resumes of interested project specialists to Verify, which forwards them to its customer to choose from. VTR, Inc. is a “staffing subsidiary” of Verify. If Verify’s customer needs full time work (including but not limited to source inspection) in one location exceeding three months, Verify subcontracts with VTR to provide qualified personnel. VSC classifies its source inspectors as independent contractors; VTR classifies its personnel as employees. C. The Contractual Relationship Between VSC and Project Specialists VSC engages project specialists under an “Independent Contractor Agreement” (Agreement). The Agreement characterizes their relationship as that of independent contractor, stating: 3  “[I]t is mutually understood and agreed that Contractor is at all times acting and performing his/her duties and functions in the capacity of an independent contractor; that it is Contractor who enters into this Agreement; and that no provision in this Agreement shall imply or create an employer-employee relationship . . . . Further, it is mutually understood and agreed that VSC shall neither have the right to exercise, nor shall VSC exercise, direction or control over the detail, manner, means or method which Contractor or his agents and employees use in performing his/her duties under this Agreement . . . .” VSC presents the Agreement on a take-it-or-leave-it basis. The only negotiable term is the project specialist’s hourly rate. A project specialist is free to accept work from VSC’s competitors; however, the Agreement prohibits soliciting employment from Verify’s “customer or a supplier.” VSC may terminate the Agreement “for cause” and also without cause on 30 days’ notice. For each project, VSC and the project specialist also agree to an addendum containing details of the assignment and the project specialist’s hourly rate. The addendum requires the project specialist to invoice time and expense charges, “using the prescribed forms,” which as a practical matter is Verify’s computer system. The addendum also requires the project specialist to provide VSC and the customer with an inspection report and “detailed narrative” using “prescribed forms.” D. The Legal Landscape—Empire Star Mines, Borello and Dynamex Some legal background is helpful in placing the remaining litigation history in context. California has an unemployment insurance program providing benefits for “ ‘persons unemployed through no fault of their own, and to reduce involuntary unemployment and the suffering caused thereby to a minimum.’ ” (Air Couriers International v. Employment Development Dept. (2007) 150 Cal.App.4th 923 , 931‒932 (Air Couriers).) Tax contributions from 4 employers fund this program. (Id. at p. 932.) However, a hirer is required to pay the tax only for its employees, not for independent contractors. (Ibid.) In Empire Star Mines Co., Ltd. v. California Employment Commission (1946) 28 Cal.2d 33 (Empire Star Mines) the California Supreme Court held that in distinguishing an employee from an independent contractor for purposes of unemployment insurance tax, “the most important factor is the right to control the manner and means of accomplishing the result desired.” (Id. at p. 43.) “Other factors to consider” are: “(a) whether or not the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.” (Empire Star Mines, at pp. 43‒44.) In Borello, the California Supreme Court applied the Empire Star Mines factors in the context of worker’s compensation. As a result, they are now commonly known as Borello factors. (Borello, supra, 48 Cal.3d at pp. 350‒351.) And for many years, California courts “applied the test articulated in Borello, supra, 48 Cal.3d 341 to determine whether a worker is an employee or an independent contractor.” (Gonzales v. San Gabriel Transit, Inc. (2019) 40 Cal.App.5th 1131 , 1151, review granted Jan. 15, 2020, No. S259027 (Gonzales).) Then in 2018, Dynamex addressed application of the Borello test in the context of a wage-and-hour lawsuit in which delivery drivers alleged they had been misclassified as independent contractors. On 5 the wage order claims, the court declined to apply Borello in favor of a “simpler” three-part “ABC” test.1 (Dynamex, supra, 4 Cal.5th at p. 950, fn. 20.) “Under the ABC standard, the worker is an employee unless the hiring entity establishes each of three designated factors: (a) that the worker is free from control and direction over performance of the work, both under the contract and in fact; (b) that the work provided is outside the usual course of the business for which the work is performed; and (c) that the worker is customarily engaged in an independently established trade, occupation or business.” (Ibid.) E. EDD Determined that VSC Misclassified Project Specialists Having classified project specialists as independent contractors, VSC did not pay unemployment insurance tax on their earnings. After a project specialist sought unemployment insurance benefits, EDD conducted an audit of VSC. In the audit, EDD found that with one exception, project specialists did not operate an established business of their own. They did not have their own clients, advertise, or hold themselves out as self-employed. EDD also found that project specialists had a “continuous” relationship with VSC. “They would get assignments and then get new assignments when the assignments were completed.” The audit further determined that source inspection “was an integral part” of VSC’s business. EDD concluded that “[w]ithout these workers, there is no business.” Based on these and related 1 The Industrial Welfare Commission (IWC) promulgates wage orders “fixing for each industry minimum wages, maximum hours of work, and conditions of labor” “Consequently, wage and hour claims are today governed by two complementary and occasionally overlapping sources of authority: the provisions of the Labor Code, enacted by the Legislature, and a series of 18 wage orders, adopted by the IWC.” (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004 , 1026.) 6 findings, EDD determined that VSC’s project specialists are “[c]ommon [l]aw [e]mployees” under Unemployment Insurance Code section 621, former subdivision (b) (hereafter, section 621(b))2 and regulation 4304-1. In April 2014, EDD assessed VSC $1,046,578.35 for unemployment insurance, state disability insurance, and personal income tax, plus approximately $48,000 in interest. After VSC’s administrative challenges, EDD reduced the assessment to $278,692.45. VSC paid the tax and filed this action for refund. F. Superior Court Litigation Although Dynamex dealt with wage orders and did not exist during the audit years, at trial in 2019 EDD asserted that Dynamex applied retroactively to unemployment insurance assessments. VSC maintained that Borello applied. Ten representative project specialists testified. On several Borello factors, the evidence was largely undisputed. For example, VSC paid all the project specialists hourly. The witnesses also agreed that source inspection requires highly skilled individuals. Many of the project specialists had a longstanding relationship with VSC—some had been working for VSC between 20 and nearly 30 years. All the project specialists believed they were independent contractors. On other factors, however, the testimony varied and in some respects conflicted. For example, one project specialist operated under a corporate entity with its own business license. However, several others worked for VSC in their individual capacities. Some who created a corporate entity for VSC work had no other employees and no client besides VSC. 2 Undesignated statutory references are to the Unemployment Insurance Code. 7  There was also a range of evidence regarding the extent of VSC’s supervision and control. In addition to VSC’s right to terminate without cause, there was evidence that a project specialist encountering a problem or concern on the job “could initially go to their Verify project leader who could coordinate help, bringing the expertise that’s required.” VSC measures a project specialist’s performance by the number of defective parts escaping detection. It will compel a project specialist who allows an excessive number of “escapes” to redo the work without pay. G. Statement of Decision In a detailed statement of decision, the court stated it was “manifestly unfair” to apply the ABC test, which was “unknown to all parties at the time of the [project specialist] contracts at issue, the audit, and the administrative proceedings.” Nevertheless, noting that judicial decisions are generally applied retroactively, and that Dynamex is concerned with a hiring business evading its “fundamental responsibilities,” the court “reluctantly” applied Dynamex. In doing so, the court found that VSC’s only client is Verify, and source inspection is “at the core” of what “the Verify group of companies” provides. Accordingly, the court determined the project specialists are VSC’s employees because VSC failed to establish “part B of the Dynamex test: that the worker performs work that is outside the usual course of the hiring entity’s business.” Alternatively, recognizing that “a reviewing court might conclude . . . that the court should have used the Empire Star[/][Borello] criteria,” the court reached the same result, finding: 1. VSC retained “control over the details of a critical part of the work” by (1) mandating the form project specialists use to report inspection results; and (2) having the right to terminate without cause on 30 days’ notice. Also, 8 VSC employees “could be contacted in the event of questions or problems” and VSC provided ethics and safety training. 2. Project specialists were not engaged in a separately established occupation or business. 3. Neither VSC nor the project specialists provided the tools, instruments, and place of work. 4. Many project specialists had ongoing long-term relationships with VSC. 5. VSC paid project specialists hourly. 6. The Verify group of companies provides source inspection. The court rejected VSC’s “strained effort to portray itself as just a database manager.” 7. VSC is a business enterprise. 8. Source inspection requires highly skilled and experienced workers. 9. Under the Agreement, the parties believed they were creating an independent contractor relationship. The court gave the greatest weight to findings that “the project specialists are absolutely critical to VSC’s success” and “ ‘active instruments’ ” of VSC’s enterprise. DISCUSSION The single issue presented to the trial court for decision—and thus the single issue we review—is whether EDD properly characterized VSC’s project specialists as employees for purposes of work they performed during the audit years 2011‒2013. This requires that we answer two questions: (1) for purposes of assessing unemployment insurance tax, what is the appropriate test for determining whether a worker was an employee or independent contractor for work performed during that period; and (2) did the trial court correctly apply the appropriate test in reaching its decision? We ultimately 9 determine that, with one minor exception that does not affect the result, the trial court properly applied the Borello factors to conclude that the project specialists were employees. Addressing VSC’s remaining arguments, we explain the trial court did not make and was not obligated to make the additional findings that VSC objects to. A. Borello Applies to Unemployment Insurance Taxes Assessed for Work Performed Before January 1, 2020. VSC contends that as a matter of law, Borello applies in determining liability for unemployment insurance tax for work performed during the audit years. VSC also asserts that its due process rights would be violated by applying Dynamex retroactively. As explained below, we agree with the first contention, making it unnecessary to consider the second. 1. The Holding in Dynamex Applies Only to Alleged Violations of Wage Orders and Related Labor Code Claims. Whether certain workers should be classified as employees or independent contractors presents a question of law that we review de novo. (Air Couriers, supra, 150 Cal.App.4th at p. 932.) In Dynamex, this classification question arose in the context of alleged violations of a California wage order. (Dynamex, supra, 4 Cal.5th at pp. 913–914.) The wage order defined “ ‘ “[e]mploy” ’ ” as including to “ ‘ “suffer, or permit to work.” ’ ” (Dynamex, at p. 926.) A wage order ensures that workers are paid enough to maintain at least a subsistence standard of living. The court concluded that these objectives supported “a very broad definition of the workers who fall within the reach of the wage orders.” (Id. at p. 952.) In light of those policies, Dynamex “liberally construed” the “suffer or permit to work standard” to apply to all workers who “can reasonably be viewed as ‘working in the hiring entity’s business.’ ” (Id. at p. 953.) The Court found it to be “appropriate and most consistent with the history and purpose of the suffer or permit to work 10 standard in California’s wage orders” to require the hiring entity to establish that the person is an independent contractor under the ABC test. (Id. at pp. 956‒957.) At the same time, “Dynamex did not purport to replace the Borello standard in every instance where a worker must be classified as either an independent contractor or an employee for purposes of enforcing California's labor protections.” [Citation.] To the contrary, the Supreme Court recognized that different standards could apply to different statutory claims.” (Garcia v. Border Transportation Group, LLC (2018) 28 Cal.App.5th 558 , 570 (Garcia).) For example, in Garcia, this court held that although Dynamex applied to the plaintiff’s wage order claims, Borello applied to non-wage-order claims involving overtime, wrongful termination, and waiting time penalties. (Garcia, at p. 571.) Similarly, in Gonzales, the court held that “statutory claims alleging misclassification not directly premised on wage order protections and which do not fall within the generic category of ‘wage and hour laws’ are appropriately analyzed under . . . the ‘Borello’ test.” (Gonzales, supra, 40 Cal.App.5th at p. 1140.) Unlike Dynamex, this case does not involve alleged violations of a wage order or related claims. Rather, it concerns VSC’s statutory obligation to pay unemployment insurance tax for work performed during the audit years. Also unlike Dynamex, the definition of employee for purposes of unemployment insurance tax is not whether the hirer suffered or permitted the person to work. Rather, during the audit years, section 621, former subdivision (b) defined employee as “[a]ny individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee.” (Stats. 2010, ch. 522 (Sen. Bill 11 No. 1244), § 1, italics added.)3 Thus, to determine if VSC’s project specialists are employees for unemployment insurance tax purposes, we look not to the wage order definition—“suffer or permit to work”—that was central in Dynamex, but instead to a statute Dynamex had no occasion to address and the definition in section 621, former subdivision (b) that requires application of “the usual common law rules.” 2. The “Usual Common Law Rules” Under Section 621, Former Subdivision (b) Are the Borello Factors and Not the Dynamex Test. Beginning in 1981 and continuing to present, regulation 4304-1 has defined “the usual common law rules” under section 621, former subdivision (b): “Whether an individual is an employee for purposes of Section[] 621[,] [former subdivision] (b) . . . will be determined by the usual common law rules applicable in determining an employer-employee relationship. Under those rules . . . the most important factor is the right of the principal to control the manner and means of accomplishing a desired result. If the principal has the right to control the manner and means of accomplishing the desired result, whether or not that right is exercised, an employer-employee relationship exists. Strong evidence of that right to control is the principal’s right to discharge at will, without cause. “(a) If it cannot be determined whether the principal has the right to control the manner and means of accomplishing a desired result, the following factors will be taken into consideration: 3 Effective January 1, 2020, the Legislature amended section 621(b) to delete “the usual common law rules” and replace it with the ABC test. (Stats. 2019, ch. 296, § 5.) In this opinion unless otherwise indicated, references to section 621(b) are to section 621, former subdivision (b), as quoted in the text immediately above. 12  “(1) Whether or not the one performing the services is engaged in a separately established occupation or business. “(2) The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of a principal without supervision. “(3) The skill required in performing the services and accomplishing the desired result. “(4) Whether the principal or the person providing the services supplies the instrumentalities, tools, and the place of work for the person doing the work. “(5) The length of time for which the services are performed to determine whether the performance is an isolated event or continuous in nature. “(6) The method of payment, whether by the time, a piece rate, or by the job. “(7) Whether or not the work is part of the regular business of the principal, or whether the work is not within the regular business of the principal. “(8) Whether or not the parties believe they are creating the relationship of employer and employee. “(9) The extent of actual control exercised by the principal over the manner and means of performing the services. “(10) Whether the principal is or is not engaged in a business enterprise or whether the services being performed are for the benefit or convenience of the principal as an individual.” ( Cal. Code Regs. tit. 22, § 4304 - 1.) In both purpose and effect, the regulation restates the Borello factors. It “lists the same factors to be considered in applying the right-to-control test that the Borello court listed.” (Espejo v. The Copley Press, Inc. (2017) 13 Cal.App.5th 329 , 351 (Espejo).) Therefore, in determining whether VSC’s project specialists are employees or independent contractors, the threshold 13 inquiry is: in what legal context is the classification being made? If the context is the hirer’s obligation to pay unemployment insurance taxes during the audit years, section 621, former subdivision (b) and regulation 4304-1 compel applying Borello. This conclusion is unaffected by Dynamex’s retroactive application because Dynamex simply does not apply to classification issues involving unemployment insurance taxes for work performed during the audit years. In concluding otherwise, the trial court erred. Focusing on section 621, former subdivision (b)’s reference to the “common law”—a body of law derived from judicial decisions rather than from statutes or constitutions—EDD contends that the Dynamex ABC test should nonetheless apply notwithstanding regulation 4304-1 and the caselaw construing it. EDD notes the “inherent capacity for growth and change” in the common law (Messenger Courier Assn. of Americas v. California Unemployment Ins. Appeals Bd. (2009) 175 Cal.App.4th 1074 , 1090), and suggests that even if Borello was “the usual common law rule” under section 621, former subdivision (b) during the audit years, by the time of trial the common law had “evolve[d]” in Dynamex. EDD’s “evolution” argument disregards the effect of regulation 4304-1 in defining the statutory term, “usual common law rules.” “Given the importance of certainty in tax law” (Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1 , 23 (conc. opn. of Mosk, J.)), the regulation provides necessary guidance for taxpayers and is inconsistent with an intent to leave the classification of workers as employees or independent contractors under section 621, former subdivision (b) to case-by-case determinations and evolving judicial doctrine. 14  EDD’s position also ignores the context in which Dynamex was decided. As the Supreme Court’s very recent Vazquez decision makes clear, prior to Dynamex the Supreme Court had never spoken on the employee/independent contractor classification question in the specific context of wage order claims and related Labor Code violations. (Vazquez v. Jan-Pro Franchising International, Inc. (2021) 10 Cal.5th 944 , 952 (Vazquez) [“Dynamex presented a question of first impression concerning how a wage order's suffer or permit to work standard should apply in the employee or independent contractor context.”]; id. at p. 953 [“Borello was not a wage order case and that decision did not purport to determine who should be interpreted to be an employee for purposes of a wage order. We resolved this question for the first time in Dynamex.”]; see also Gonzales, supra, 40 Cal.App.5th at p. 1157 [“Dynamex did not reach the question of whether the ABC test applies to nonwage order related Labor Code claims.”].) It was for this reason that the holding in Dynamex applied retroactively. As to wage order and related Labor Code violations, Dynamex “did not change a settled rule on which . . . parties . . . had relied.” (Vazquez, supra, 10 Cal.5th at p. 948.) But the same cannot be said of the classification question in the context of unemployment insurance, where the usual common law classification rules were clearly articulated by the Supreme Court in Empire Star Mines—rules that later became known as the Borello standard. (Empire Star Mines, supra, 28 Cal.2d at pp. 43–44.) Significantly, Dynamex did not purport to overrule Empire Star Mines. (Vazquez, supra, at p. 952 [noting that Dynamex “did not overrule any prior California Supreme Court decision”].) Consistent with both preexisting law as well as the Supreme Court’s most recent exposition on the topic in Vazquez, Dynamex does not represent an evolution of the employee/independent contractor classification analysis in the context of 15 assessing unemployment insurance taxes under section 621, former subdivision (b). 3. Recent Legislation Confirms the Borello Factors Apply In Assessing Unemployment Insurance Taxes for Work Performed Prior to January 1, 2020. EDD further asserts that the enactment of Assembly Bill No. 5 (2019‒2020 Reg. Sess.) (Assembly Bill 5) in 2019 “unequivocally” demonstrates that “Dynamex is the appropriate test” to evaluate project specialists’ work in the audit years. To the contrary, however, this recent legislation reflects an express legislative understanding that for purposes of calculating unemployment insurance taxes, EDD would transition from applying the Borello factors to utilizing the Dynamex ABC test only for work performed on or after January 1, 2020. After Dynamex was decided, the Legislature enacted Assembly Bill 5 (Stats. 2019, ch. 296), which amended both the Labor Code and Unemployment Insurance Code.4 The stated legislative purpose in enacting Assembly Bill 5 was to “codify” the Dynamex decision and to “clarify” the decision’s application in state law. (Stats. 2019, ch. 296, § 1(d).) To do so, among other things, it added former section 2750.3 to the Labor Code.5 4 VSC’s unopposed request for judicial notice of Assembly Bill 5 is granted. (St. John’s Well Child & Family Center v. Schwarzenegger (2010) 50 Cal.4th 960 , 969, fn. 9 [taking judicial notice of a Senate Bill].) 5 Effective September 4, 2020, Labor Code section 2750.3 was repealed and was transferred without substantive changes to Labor Code sections 2775, subdivision (b)(1) and 2785. Because the later nonsubstantive recodification is not relevant for our purposes, we discuss the substantive changes in the context of former Labor Code section 2750.3 as they became effective on January 1, 2020. Necessarily, all references to Labor Code section 2750.3 are intended as references to former Labor Code section 2750.3. 16 Subdivision (a)(1) of this statute codified the Dynamex ABC test (1) “[f]or purposes of the provisions of this [Labor] code”; (2) “the Unemployment Insurance Code”; and (3) for “the wage orders of the Industrial Welfare Commission.” (Stats. 2019, ch. 296, § 2.) Assembly Bill 5 also amended section 621, which as we have already discussed previously distinguished in former subdivision (b) between employees and independent contractors based on the “usual common law rules.” The bill deletes “usual common law rules” in section 621, former subdivision (b) and, effective January 1, 2020, replaces it with the ABC test.6 Thus, “while the Dynamex court repeatedly emphasized that the controversy before it—and implicitly its holding—was limited to the wage and hour context [citation], the Legislature made clear that it was broadly adopting the Dynamex holding for purposes of all benefits to which employees are entitled under the Unemployment Insurance Code, 6 Effective January 1, 2020, section 621 now reads: “Employee” means all of the following:” [¶] . . . [¶] “(b) Any individual providing labor or services for remuneration has the status of an employee rather than an independent contractor unless the hiring entity demonstrates all of the following conditions: “(1) The individual is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact. “(2) The individual performs work that is outside the usual course of the hiring entity’s business. “(3) The individual is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.” (Stats. 2019, ch 296, § 5.) 17 the Labor Code, and all applicable wage orders.” (People v. Uber Technologies (2020) 56 Cal.App.5th 266 , 277 (Uber).) In expanding the Dynamex ABC test to unemployment insurance tax assessments, the Legislature also specifically addressed retroactivity. Former Labor Code section 2750.3, subdivision (i)(1) provides that the ABC test in subdivision (a) of the statute “does not constitute a change in, but is declaratory of, existing law,” but only “with regard to wage orders of the Industrial Welfare Commission and violations of the Labor Code relating to wage orders.” (Italics added.) Conspicuous by its omission in this subdivision is any assertion that the ABC test was also declaratory of existing law with regard to unemployment insurance.7 The inescapable inference is that the Legislature recognized that adopting the ABC test was in that context a change in existing law (i.e., a change in section 621, former subdivision (b) and regulation 4304-1), and as such, should not be applied retroactively with respect to unemployment insurance. If anything more were needed, subdivision (i)(3) of former Labor Code section 2750.3 states that except as provided in (i)(1) and (i)(2) (that is, except with respect to applying the ABC test to wage orders and Labor Code violations),8 “the provisions of this section of the Labor Code shall apply to work performed on or after January 1, 2020.” Nowhere in subdivisions (i)(1) or (i)(2) is there any mention of unemployment insurance taxes. 7 As we have already explained, any such contention would have been disingenuous in light of the Supreme Court’s Empire Mines decision, which was the governing law when section 621, former subdivision (b) was adopted and which is the basis for regulation 4304-1. 8 Subdivision (i)(2) of former Labor Code section 2750.3, not relevant here, provides that insofar as the statute would “relieve an employer from liability,” those subdivisions apply retroactively to existing claims. 18  These express legislative directives limiting retroactivity of Assembly Bill 5’s amendment to section 621 convincingly refute EDD’s contention that Assembly Bill 5 should be given retroactive effect here because the intent of the bill was to “clarify” the application of the Dynamex test.9 There is a critical difference between legislation that clarifies the meaning of an existing statute (applied retroactively because the clarification simply declares what was always intended) and that which clarifies the application of case law by expanding it to different contexts (applied prospectively).10 As we have explained, Dynamex adopted the ABC test and applied it to wage order violations and related Labor Code claims. Assembly Bill 5 codified Dynamex in those contexts, but also expanded application of the ABC test to the assessment of unemployment insurance taxes. And it made clear that 9 EDD also asserts that statutory exemptions in Assembly Bill 5 for certain businesses (former Labor Code, § 2750.3, subds. (c)‒(h)) indicate the Legislature understood Dynamex to apply retroactively because “[i]f Dynamex is only prospective, there would have been no need to actually scale back the scope of its holding.” As we have already explained, it was for the Supreme Court to decide the retroactive effect of Dynamex, which it did in Vazquez. Moreover, the existence of statutory exemptions in Assembly Bill 5 is irrelevant to deciding whether or to what extent the Legislature understood Dynamex to be retroactive. 10 Although it cites no authority in support of its argument, EDD presumably refers to the principle that where courts “have not yet finally and conclusively interpreted a statute and are in the process of doing so, a declaration of a later Legislature as to what an earlier Legislature intended is entitled to consideration.” (McClung v. Employment Development Dept. (2004) 34 Cal.4th 467 , 473.) In this way, the Legislature might help “clarify” the meaning of existing law where there is uncertainty or controversy in the courts as to what was originally intended. This principle has no application here because Assembly Bill 5 contains no provisions clarifying what an earlier Legislature meant by the phrase “usual common law rules” in section 621, former subdivision (b). 19 this expanded treatment would be prospective, applicable to work performed on and after January 1, 2020.11 Thus, we hold that with respect to unemployment insurance taxes for work performed before January 1, 2020, the “usual common law rules” within the meaning of section 621, former subdivision (b) are the Borello factors. For work performed on and after January 1, 2020, the ABC test applies under current section 621(b) as amended by Assembly Bill 5, as well as under current Labor Code sections 2775, subdivision (b)(1) and 2785, subdivisions (a) and (c). B. Substantial Evidence Supports the Trial Court’s Finding of an Employee Relationship Under the Borello Factors. 1. The Standard of Review is Substantial Evidence Determining whether a person is an employee or an independent contractor is generally a question of fact if it depends on resolving disputes in the evidence, but it can be decided as a matter of law if the evidence supports only one credible conclusion. (Borello, supra, 48 Cal.3d at p. 349.) “As a result, appellate case law in this area arises primarily in the context of 11 The prospective-only application of the ABC test to unemployment insurance is confirmed by Assembly Bill 5’s legislative history. A bill summary noted that applying the ABC test to determine unemployment tax “represents a change from how [EDD] has conducted employment status determinations previously (which were based on common law).” (Sen. Com. on Appropriations, Rep. of Assem. Bill 5 (2019‒2020 Reg. Sess.) July 11, 2019, p. 6, italics added.) Similarly, an Assembly Committee analysis noted that applying the ABC test in the unemployment insurance context would result in “more workers classified as employees” when compared “to EDD’s current practice.” (Assem. Com. on Appropriations, Analysis of Assem. Bill 5 (2019‒2020 Reg. Sess.) May 16, 2019, p. 3.) Legislative history of Assembly Bill 5 can be found at [as of Mar. 16, 2021], archived at . 20 substantial evidence review of the determinations of the relevant fact finder.” (Cristler v. Express Messenger Systems, Inc. (2009) 171 Cal.App.4th 72 , 78 [collecting cases].) VSC does not dispute that if Borello applies, the trial court considered the correct factors. Rather, it contends the court misapplied those factors to undisputed evidence. As a result, it asserts that the appropriate standard of review is de novo. This case involves evidence that must be weighed by a trier of fact. For example, VSC contends that the court made a “fundamental error” in determining that VSC has the right to control the project specialists because VSC does not direct how project specialists conduct source inspection. However, the evidence on VSC’s control was not one-sided. If a Verify customer is dissatisfied with a project specialist, VSC had the right to (and would) investigate the complaint and initiate corrective action. VSC was able to terminate a project specialist for any reason, even apart from a customer’s complaint. It could also compel a project specialist to work without pay under certain circumstances. VSC further required project specialists to input results of source inspections on VSC’s computer system. A VSC group leader will respond to a project specialist’s request for assistance. Project specialists are required to remain in contact with VSC during an assignment. A former Verify vice president testified that customers expected Verify to supervise the project specialists. There was also conflicting evidence on whether project specialists were engaged in a separately established business. Some had established corporate entities for VSC work. Others had not. And even some who had established a corporation or limited liability company had no clients besides VSC, did no advertising, had no website and no business card. 21  Accordingly, determining whether project specialists are VSC’s employees or independent contractors is a factual issue, and the trial court’s finding must be upheld if supported by substantial evidence. (Borello, supra, 48 Cal.3d at p. 349.) 2. Although VSC Has Forfeited the Substantial Evidence Issue, There is No Prejudice to EDD and We Will Consider the Point. VSC stakes its appeal on a de novo standard of review. The opening brief devotes 26 pages in arguing that “[i]ndependent review of the evidence reveals that the trial court’s analysis of the Empire Star/Borello/[regulation] 4304-1 factors was deeply flawed.” Because the substantial evidence standard applies instead, it is unnecessary to consider this argument. Alternatively, VSC contends, “Should the [c]ourt conclude the proper standard of review be the substantial evidence test, the [c]ourt should still reverse.” This argument is less than one page in VSC’s opening brief. It contains no record citations and no legal analysis. VSC simply asserts, as if self-evident, that “there is no substantial evidence to support the trial court’s ruling of employee status. The evidence shows that the [p]roject [s]pecialists are independent contractors, providing on demand source inspection services for a variety of military and aerospace contractors.” “ ‘An appellant challenging the sufficiency of the evidence to support the judgment must cite the evidence in the record supporting the judgment and explain why such evidence is insufficient as a matter of law. [Citations.] An appellant who fails to cite and discuss the evidence supporting the judgment cannot demonstrate that such evidence is insufficient. The fact that there was substantial evidence in the record to support a contrary finding does not compel the conclusion that there was no substantial evidence to support the judgment.’ ” (Verrazono v. Gehl Company (2020) 50 Cal.App.5th 636 , 652.) Accordingly, a party challenging the judgment for 22 lack of substantial evidence must “ ‘set forth, discuss, and analyze all the evidence on that point, both favorable and unfavorable.’ ” (Pope v. Babick (2014) 229 Cal.App.4th 1238 , 1246.) “Unless this is done the error is deemed to be waived.” (Ibid.) By failing to cite evidence supporting the judgment and explain why such evidence is insufficient, VSC has forfeited the substantial evidence issue. Nevertheless, we exercise our discretion to consider the point because EDD (1) has not argued forfeiture, and (2) is not prejudiced, having fully briefed the Borello factors and cited the evidence it contends supports the findings. We deem VSC’s arguments challenging the Borello findings on a de novo standard of review to encompass an alternative claim that each is also unsupported by substantial evidence. 3. The Trial Court’s Finding of an Employee Relationship is Supported by Substantial Evidence. a. VSC had the right to control and exercised actual control Under regulation 4304-1, “the most important factor” in distinguishing an employee from independent contractor is the employer’s right “to control the manner and means of accomplishing a desired result.” Substantial evidence supports the court’s finding that VSC had the requisite right to control. VSC determined the manner and means of reporting source inspection results. It also provided supervision and advice upon a project specialist’s request. A former VSC vice president testified that customers expected supervision. Moreover, “the strongest evidence of the right to control is whether the hirer can discharge the worker without cause, because ‘[t]he power of the principal to terminate the services of the agent gives him the means of controlling the agent’s activities.’ ” (Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522 , 531 (Ayala).) Under the Agreement, VSC is authorized to terminate the project specialist without cause. 23  Citing Varisco v. Gateway Science & Engineering (2008) 166 Cal.App.4th 1099 (Varisco), VSC claims that all it did was “connect the [p]roject specialists with suppliers and primary contractors” and “[t]he fact that VSC . . . required the [p]roject [s]pecialists to report their inspection” in a particular manner is insufficient to establish an employer-employee relationship. It asserts that “[w]hat matters is whether the principal oversees the actual work” and not, as the trial court believed, whether it controls the reporting of the work. However, the facts in Varisco, supra, 166 Cal.App.4th 1099 are significantly distinguishable. In Varisco, a company providing quality assurance services, called Gateway, hired an inspector to check construction undertaken by a school district. (Id. at p. 1102.) Gateway paid the inspector by the hour and sent him to the job site. That is all Gateway did. (Id. at p. 1105.) Gateway did not train the inspector. (Ibid.) If questions arose, the inspector addressed them to the school district, not to Gateway. (Ibid.) The inspector reported results to the school district on its forms, not Gateway’s. (Id. at p. 1106.) He supplied his own tools and equipment. (Id. at p. 1105.) On these undisputed facts, the court determined that the inspector was an independent contractor. (Ibid.) VSC’s project specialists are unlike the Varisco inspector in a number of significant respects: • VSC provided customer orientation to project specialists. • A Verify program leader instructed project specialists how to use suppliers’ reporting systems. • Using Verify educational materials, VSC mandated that project specialists pass an ethics test based on VSC’s code of ethics. 24  • VSC required that project specialists pass a safety test based on educational materials used by both Verify and VSC. • VSC arranged work-related travel for project specialists. • VSC provided project specialists with VSC branded business cards. • VSC trained project specialists on certain international regulations. • Customers expected Verify to supervise, oversee, and manage project specialists. • VSC provided software for project specialists to record time and upload the results of the source inspection. VSC also contends that its right to terminate without cause does not evidence control because the Agreement requires 30 days’ notice. However, the notice period is not dispositive. The right to discharge is probative of a right to control because instructions “ ‘ “ ‘would have to be obeyed’ ” ’ on pain of at-will ‘ “ ‘discharge[] for disobedience.’ ” ’ ” (Ayala, supra, 59 Cal.4th at p. 533.) Project specialists work only when VSC contacts them about a potential project. Even with a 30-day notice period, a right to discharge without cause would reasonably be expected to compel a project specialist desiring future assignments to obey VSC’s directives. In Espejo, supra, 13 Cal.App.5th 329 , this court considered whether newspaper carriers were employees or independent contractors under a contract that was terminable without cause on 30 days’ notice. (Id. at p. 346.) The trial court in Espejo relied on the termination provision, among other factors, to determine the carriers were employees. (Ibid.) Applying the Borello test this court affirmed, stating that the right to “terminate the contract on 30 days’ notice” evidenced the hirer’s right to control under regulation 4304-1. (Espejo, at pp. 348, 351.) 25  In a related argument, VSC contends that under the Agreement, project specialists also have a right to terminate without cause. Citing Beaumont-Jacques v. Farmers Group, Inc. (2013) 217 Cal.App.4th 1138 , Ayala, supra, 59 Cal.4th 522 , and Perguica v. Industrial Accident Commission (1947) 29 Cal.2d 857 , it maintains that a mutual at-will termination provision indicates an independent contractor relationship. But the problem with this argument lies in its premise. VSC project specialists do not have a right to terminate without cause. Although the Agreement provides that “[e]ither party may terminate this Agreement at any time and for any reason, without [c]ause,” the same sentence contains an exception. The exception is that a project specialist “may not terminate without [c]ause after [he or she] has accepted a project until [the project specialist] has completed the project or [the project specialist] shall be financially responsible for any additional costs incurred to complete the project.” Because VSC hires project specialists on a project-by-project basis, a right to terminate without cause only after the project is complete is effectively no right to terminate at all.12 12 Citing Ayala, supra, 59 Cal.4th at page 531, footnote 2, VSC also contends that a worker who is required to finish a project before terminating a contract of hire “is an independent contractor.” However, Ayala merely states that such facts are “relevant,” not dispositive. It also confirms that the “strongest evidence of the right to control is whether the hirer can discharge the worker without cause.” (Id. at p. 531.) Consistent with Ayala, the trial court considered VSC’s right to terminate without cause as an important but not determinative factor in its analysis. 26  b. Project Specialists are not engaged in a distinct business The trial court found that some project specialists had created their own business entities, but others did not. It concluded that this factor “slightly favors EDD” because “even those who had created their own entities really were not doing much with them outside of their work for VSC.” VSC contends “the undisputed evidence” is otherwise. The record supports the trial court’s finding. Patrick L. testified that his business entity has no website, no e-mail address, no business cards, and no employees except himself. Elizabeth M. similarly testified that her business entity has no other employees, no clients besides VSC, no website, does no advertising, and has no business cards. Other project specialists had not created separate entities. John B. testified that has worked only for VSC and has no independent business. Val S. has no separate business entity and has worked almost exclusively for VSC for 20 years. The trial court could properly evaluate this evidence as providing some support for a finding that project specialists were employees. c. There was no evidence on whether the work is usually done in the locale without supervision The trial court found that the parties offered “very little evidence” on whether source inspection is “usually” done without supervision. Elaborating on this factor, the court noted: “There was no expert testimony addressing whether, in Southern California, source inspection is typically done using the business model used by VSC and its competitors, or rather done by employees of prime contractors. The standard of practice in the industry was argued, but not really developed factually by either side.” (Italics added.) 27 Determining that “the evidence on this factor really favors neither side,” the court concluded that “EDD prevails on this issue” because VSC bore the burden of proof. VSC contends the court erred because the “only evidence” is that project specialists “were not supervised while conducting inspections.” However, the argument misses the target. This factor focuses on how the work “is usually done” in a given locale, not how the work was done in this particular case. Evidence that VSC did not supervise in a hands-on manner during source inspections sheds light on VSC’s practices, but without more does not demonstrate how source inspection “is usually done” in the locale by others performing similar tasks. d. Project specialists are highly skilled Source inspection requires highly skilled labor. The trial court acknowledged that many project specialists had “years if not decades of experience,” and the court found this factor favored VSC. e. Neither VSC nor project specialists supplied the tools and instruments The trial court found that measuring instruments used in source inspection are supplied by neither VSC nor the project specialists, but instead by the supplier. The court determined this factor “slightly favored EDD” because a “true independent contractor would invest heavily in his/her own measuring equipment and keep it calibrated.” VSC contends the court erred because suppliers are contractually required to provide the measuring instruments, which must be calibrated to precise specifications. We agree with VSC. In distinguishing employee from independent contractor, ownership of tools is probative because ownership implies a right to control their use. Here, however, neither VSC nor the project specialists 28 own the instruments, nor as a practical matter could they. Accordingly, this factor does not apply here.13 f. The work is continuous The trial court found that many project specialists had ongoing long- term relationships with VSC. Several worked “near full time 40 hour weeks.” The court determined this factor “easily favored EDD” and indicated “an employment [rather] than an occasional independent contractor relationship.” VSC contends this finding is erroneous because (1) the Agreement provides, “Continuity of relationship . . . is not contemplated”; (2) project specialists testified they could (and did) decline work without negative repercussions; and (3) some project specialists choose to work only part time. However, there was also evidence that project specialists had worked exclusively for VSC for 11, 18, 20, and even for 28 years. The evidence VSC relies on might support a different finding, but it does not establish a lack of substantial evidence to support the finding made. g. Project specialists are paid by the hour, not by the job VSC paid project specialists by the hour, which is the industry standard. There was no contrary evidence. The trial court determined this factor favored an employee relationship because “[a] true independent contractor would be able to develop and charge a flat fee per visit to a supplier site.” VSC contends there was “no evidence” that a true independent contractor would charge a flat fee for source inspection. Citing National Elevator Services, Inc. v. Department of Industrial Relations (1982) 136 13 We will consider whether this error was prejudicial after analyzing the remaining Borello factors. (See post, at part B(3)(k).) 29 Cal.App.3d 131 , VSC asserts that historically, hourly wages indicated an employer-employee relationship; however, modernly, “there is no logical connection” between hourly pay and distinctions between employee and independent contractor. (Id. at pp. 170‒171.) VSC points out that attorneys, quintessential independent contractors, customarily bill by the hour. VSC’s argument is not unreasonable. Receiving hourly wages is not a completely reliable guide to distinguishing between employee and independent contractor. But common experience teaches that a worker who receives hourly wages is likely (but not necessarily) an employee, and a worker who receives payment by the task is likely (but not necessarily) an independent contractor. Accordingly, the court did not err in considering this factor as tilting towards employee status. h. Source inspection is a part of VSC’s regular business VSC asserts the evidence was “undisputed” that its business is maintaining a database of highly skilled self-employed project specialists, and VSC does not do source inspections. The trial court disagreed. It found that “VSC’s only client is Verify, and Verify’s clients are the aerospace and defense contractors who benefit from the labor provided by project specialists.” The court concluded that “the work in question, principally source inspections, is at the core of what the Verify group of companies provides to its aerospace customers.” By way of comparison, the court noted that a “caterer brought in to serve dinner at Verify’s holiday party would be an independent contractor” as would an “asphalt company brought in to re- surface the parking lot at Verify’s headquarters” and a “plumber brought in to repair a leak in the executive washroom in Verify’s offices.” VSC contends the court erroneously determined that project specialists are “part of VSC’s database business.” However, this misstates the court’s 30 finding. The court “reject[ed] [VSC’s] strained effort to portray itself as just a database manager.” Rather, the court found that VSC “is part of a unitary business providing staffing solutions to its aerospace clients.” To the extent VSC’s argument encompasses a challenge to that determination, we reject it. Although the trial court did not have the benefit of Uber, supra, 56 Cal.App.5th 266 , the analysis in that case supports the court’s conclusions here. Uber offers a mobile phone application that matches those in need of a ride to drivers available to give them rides using their own vehicles. (Uber, supra, 56 Cal.App.5th at p. 278.) VSC is similar—it offers a database to match those in need of a source inspection with a project specialist available to do so. The contracts between Uber and its drivers provide that the relationship is not one of employment, but instead as “independent business enterprises, each of whom operates a separate and distinct business enterprise that provides a service outside the usual course of business of the other.” (Id. at pp. 278‒279.) Similarly here, the Agreement characterizes the relationship as that of independent contractor. Uber drivers need not accept any minimum number of rides to use the platform, are free to work for competitors (such as Lyft) and to decline work. (Id. at p. 279.) Uber monitors its drivers and may use low ratings to “deactivate” them. (Id. at p. 280.) Similarly, project specialists are free to decline offered work, and VSC monitors its project specialists’ performance and in response to customer complaints, can terminate a project specialist and remove the person from the database. Uber asserted that it was not in the business of providing rides, but instead merely provides a platform to connect drivers and riders. (Uber, supra, 56 Cal.App.5th at pp. 280‒281.) VSC’s claim—that it is not in the 31 business of providing project specialists, but instead merely a database to connect project specialists with customers—is strikingly similar. The court in Uber recognized that Uber’s business model was “different from that traditionally associated with employment, particularly with regard to drivers’ freedom to work as many or as few hours as they wish, when and where they choose.” (56 Cal.App.5th at p. 294.) It nonetheless concluded that the drivers performed services in the regular course of Uber’s business. The court reasoned that “the parties’ characterization of their relationship is not dispositive because their ‘actions determine the relationship, not the labels they use.’ ” (Id. at p. 295.) Similarly here, all of VSC’s revenue comes from providing project specialists from its database to Verify. Like Uber, VSC screens potential candidates, collects information on their job performance, and may use negative customer reports to discipline and even terminate a project specialist. Also like Uber, VSC’s business differs from traditional employment, particularly with regard to the project specialist’s freedom to decline work and work as many or few hours as he or she chooses. Such facts did not compel a finding of independent contractor status in Uber and similarly fail to do so here. i. The parties believed they were creating an independent contractor relationship The Agreement specifies the relationship between VSC and a project specialist is that of independent contractor. Project specialists all testified they believed they were independent contractors and many enjoyed the flexible working hours that relationship afforded. Apart from noting this evidence, VSC makes no argument about its significance. The trial court found this factor “easily favored” VSC. Obviously, VSC does not challenge that finding. As even the Supreme Court in Borello 32 recognized, however, “[t]he label placed by the parties on their relationship is not dispositive.” (Borello, supra, 48 Cal.3d at p. 349.) Courts ignore the parties’ characterization if their actual conduct establishes a different relationship. (Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1 , 10‒11.) j. VSC operates as a business, not an individual VSC acknowledges that it operates as a business and this factor “leans” towards establishing an employer-employee relationship. k. The Borello weighing and harmless error “[T]he process of distinguishing employees from independent contractors is fact specific and qualitative rather than quantitative.” (State Compensation Ins. Fund v. Brown (1995) 32 Cal.App.4th 188 , 202.) “ ‘ “[T]he significance of any one factor and its role in the overall calculus may vary from case to case depending on the nature of the work and the evidence.” ’ ”14 (Uber, supra, 56 Cal.App.5th at p. 276.) Here, the trial court determined that the two factors favoring an independent contractor relationship—the skilled nature of the work, and the parties’ belief they were creating an independent contractor relationship— “should be accorded less weight in light of the evidence of right to control and 14 VSC requests judicial notice of four Unemployment Insurance Appeals Board decisions finding certain VSC project specialists to be independent contractors. EDD opposes this request, noting that the court sustained objections to these documents and contending, in any event, that the decisions are not relevant. The Unemployment Insurance Appeals Board designates certain of its decisions as “precedent decisions.” (§ 409.) Decisions by the Unemployment Insurance Appeals Board that have no precedential effect are not subject to judicial notice. (Employment Development Department v. California Unemployment Ins. Appeals Bd. (2010) 190 Cal.App.4th 178 , 188, fn. 4.) VSC concedes that the decisions attached to its request for judicial notice are not precedential decisions. Therefore, the request for judicial notice of exhibits 1 through 4 is denied. 33 in light of the fact that the project specialists are absolutely critical to VSC’s success.” Accordingly, it found that VSC failed to carry its burden to establish that the employee classification was erroneous. As we have indicated in discussing the individual Borello factors, the court’s qualitative weighing of those factors was appropriately within the boundaries of its discretion. We have recognized that the trial court made one error in considering the tools-and-instruments factor as indicating an employee relationship. However, this error is prejudicial only if it is reasonably probable that a result more favorable to VSC would have been reached absent the error. (See Red Mountain, LLC v. Fallbrook Public Utility Dist. (2006) 143 Cal.App.4th 333 , 348.) We comfortably conclude this single error is not prejudicial for three reasons. First, the court found this factor weighed only “slightly” in EDD’s favor. Second, although this factor does not favor EDD, it also does not favor VSC. Thus, even if the court had correctly determined that this factor was inapplicable, there would still be only two Borello factors favoring an independent contractor relationship. Third, the court stated the most significant factor was that the project specialists are “ ‘active instruments’ ” of VSC’s enterprise and provide an “ ‘indispensable’ ” service to VSC. As discussed above, the evidence fully supports that finding. C. The Trial Court Did Not Make, Nor Was It Required to Make, the Additional Findings That VSC Purports to Challenge. The only issue litigated at trial was whether project specialists were VSC’s employees or independent contractors. VSC’s trial brief asserts, “The single issue to be tried here is whether Project Specialists in California between 2011 and 2013 are independent contractors or employees, and if so, [sic] is entitled to a full refund of tax and interest paid.” EDD’s attorney 34 agreed, asserting in opening statement, “The issue in this case, as counsel indicated, is whether EDD and the Unemployment Insurance Appeals Board were mistaken in determining that the workers at issue here . . . are, in fact, employees.” Notwithstanding this apparent agreement, VSC contends that trial court erred in failing to make findings on whether VSC and Verify were “unitary businesses” for purposes of section 135.2 and whether VSC was a “leasing” or “loaning” employer pursuant to section 606.5. Neither of these issues was presented to the court for decision. The first mention of section 135.2 at trial was after VSC rested and EDD brought a motion for judgment under Code of Civil Procedure section 631.8. In asserting that project specialists are “integral to the work of VSC,” EDD’s lawyer noted “[p]reliminarily” that “VSC and Verify are a unitary business. They have largely the same officers, they have the same objective. They work hand in glove. Verify gets the clients. VSC supplies the project specialists. And the concept of what’s called a unified business enterprise or unitary business is made applicable . . . [by] . . . section 135.2 and it certainly applies here.” Later during closing argument, EDD’s attorney made the same observation, mentioning section 135.2 once. Without citing the statute, the court’s statement of decision contrasted VSC’s contention that its business “is simply to maintain and manage [a database]” with EDD’s position that VSC and Verify “are a unitary business providing a range of staffing solutions.” It added, “The evidence easily preponderates in favor of EDD’s view.” This does not amount to a finding for purposes of section 135.2 that VSC and Verify constituted “one employing unit.” Indeed, the statement of decision nowhere mentions the statutory term, “one employing unit.” Although the court described Verify, VSC, and VTR as a “unitary business,” that was only for purposes of determining whether source inspection is part 35 of VSC’s regular business under Borello—a distinctly different issue from whether the requisite control has been exercised to sustain a finding of “one employing unit” under section 135.2.15 The fact that VSC objected to the court’s proposed statement of decision by requesting that the court rule on this issue16 does not change the fact that the statutory issue was not before the court, nor can it compel the court to make specific findings pursuant to section 135.2 that were not otherwise required. For similar reasons, the court was not required to make statutory findings as to whether VSC was a “leasing” or “lending” employer within the meaning of section 606.5. Again, this was not an issue presented to the court for resolution. VSC references the fact that section 606.5 was mentioned several times in the court’s statement of decision. But the court did not cite or otherwise rely on section 606.5 in addressing the issue it was required to decide—application of the Borello factors to determine that an employer- employee relationship exists between VSC and project specialists for work performed during the audit years. Accordingly, it is unnecessary to consider this point and we express no opinion on it. 15 To the extent VSC is challenging the factual basis for the court’s reasoning, there is more than substantial evidence. Several individuals have dual roles in both VSC and Verify. For example, Bernard Fallon, who founded VSC, is a VSC officer and on Verify’s board of directors. James McIntosh serves as president of both Verify and VSC. Andrew Wright is VSC’s chief financial officer (CFO). He is also CFO for Verify and VTR. All of VSC’s revenue is from supplying project specialists to Verify. Wright testified that Verify and VSC have an “arm’s length” agreement for those VSC services. Wright negotiated that agreement as a member of both Verify and VSC. The same people were on both sides of this “arm’s length” negotiation. 16 The trial court overruled the objection, explaining that “a court’s statement of decision is sufficient if it fairly discloses the court’s determination as to the ultimate facts and material issues in the case.” 36  DISPOSITION The judgment is affirmed. Respondents are entitled to costs on appeal. DATO, J. WE CONCUR: HALLER, Acting P. J. O’ROURKE, J. 37

2021-03-18 20:02:28.382737+00

http://www.courts.ca.gov/opinions/documents/D075577.PDF

Filed 3/18/21 CERTIFIED FOR PUBLICATION COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA ROSARIO CONTRERAS-VELAZQUEZ, D075577 Plaintiff and Appellant, v. (Super. Ct. No. 37-2014- 00026469-CU-WT-CTL) FAMILY HEALTH CENTERS OF SAN DIEGO, INC., Defendant and Appellant. APPEALS from a judgment and a postjudgment order of the Superior Court of San Diego County, Jeffrey B. Barton, Judge. Affirmed. Mulvaney Barry Beatty Linn & Mayers, John A. Mayers, Patrick L. Prindle; Law Offices of Mary A. Lehman and Mary A. Lehman, for Defendant and Appellant. Law Office of Martin N. Buchanan, Martin N. Buchanan; Hogue & Belong, Jeffrey L. Hogue and Tyler Belong, for Plaintiff and Appellant. I INTRODUCTION Rosario Contreras-Velazquez (Velazquez) sued her former employer, Family Health Centers of San Diego, Inc. (Family Health), alleging disability discrimination and related causes of action after she suffered a work-related injury and Family Health terminated her employment. A jury found Family Health not liable, but the trial court ordered a new trial as to three of Velazquez’s causes of action after finding the evidence was insufficient to support the jury’s verdict—a ruling we affirmed in a prior appeal. (Contreras-Velazquez v. Family Health Centers of San Diego, Inc. (Aug. 9, 2017, D071083) [nonpub. opn.] (hereafter, Velazquez I).) At the ensuing retrial, a jury found in favor of Velazquez. The jury awarded her $915,645 in compensatory damages and $5 million in punitive damages. However, the trial court granted in part a motion for judgment notwithstanding the verdict (JNOV) and reduced the punitive damages award to $1,831,290 (a 2:1 ratio of punitive to compensatory damages). The court reasoned a punitive damages award equal to twice the compensatory damages award was the maximum amount permissible under the due process clause of the Fourteenth Amendment to the United States Constitution. Family Health appeals the judgment and contends certain special verdict findings returned by the first jury estopped Velazquez from prevailing at the retrial under the issue preclusion doctrine. Family Health also appeals the JNOV order on the basis that the reduced punitive damages award remains grossly excessive in violation of Family Health’s due process rights. Family Health requests the punitive damages award be further reduced to $915,645 (a 1:1 ratio of punitive to compensatory damages). Velazquez cross-appeals the JNOV order and requests reinstatement of the $5 million punitive damages award. We conclude the first jury’s special verdict findings did not constitute a final adjudication of any issue and, therefore, the trial court correctly ruled that the issue preclusion doctrine did not require entry of judgment in Family 2 Health’s favor. Further, we conclude the trial court properly reduced the punitive damages award to an amount equal to twice the compensatory damages award—and no further. Therefore, we affirm both the judgment and the JNOV order. II BACKGROUND A Velazquez’s Termination From 2003 to 2006, Velazquez worked as a medical records clerk and a patient service representative for Family Health, a non-profit organization that operates community health clinics. She stopped working for Family Health in 2006, but was rehired to Family Health’s medical records department in 2008. In 2012, Velazquez suffered a work-related repetitive stress injury to her right upper arm. She underwent surgery to treat the injury, but the surgery was not effective. Velazquez returned to work after her surgery and, in December 2013, was transferred to Family Health’s call center to work as an appointment technician. In her new position, Velazquez was required to use a headset and a computer mouse repetitively for approximately 6–8 hours per day. Family Center provided Velazquez a right-handed computer mouse and a pull-out tray for her mouse situated on the right side of her desk. Within days of beginning her new position, Velazquez experienced pain in her right arm. She told her supervisor about her condition and requested an accommodation such as a left-handed mouse or a roller mouse. Family Health provided Velazquez a roller mouse, but it did not function properly. A week and a half after Velazquez began her new position, Velazquez’s 3 supervisor instructed her to stop coming into work, schedule an appointment with her doctor, and provide a doctor’s report before returning to work. The next day, Velazquez saw her doctor, who prepared a report indicating Velazquez complained of pain on both sides, did not feel able to do her usual job duties, and wanted to be taken completely off work because of significant discomfort. Nonetheless, the report indicated she could return to modified work with four restrictions: (1) “Limited use of right upper extremity”; (2) “Repetitive hand, wrist and keyboard work limited to 10 minutes per hour”; (3) “No overhead lifting or reaching with the right upper extremity”; and (4) “No forceful pushing and pulling with the right upper extremity.” The report stated Velazquez was “eventually going to wind up with some fairly profound limitations in the long run” and Family Health should contact her doctor to discuss her work status because “whatever they have her doing at work is just aggravating everything, which is going to be to nobody’s advantage.” A few days after the doctor’s visit, Velazquez provided the doctor’s report to her supervisor and spoke with a human resources representative regarding her injury. The human resources representative instructed Velazquez to refrain from coming into work and to continue seeing her doctor. For the next three months, Velazquez did not come into work per her instructions. She visited her doctor once per month and provided Family Health a doctor’s report after each visit. Family Health did not contact Velazquez’s doctor to discuss possible work arrangements to accommodate her injury. However, one of Family Health’s human resources representatives searched online for employment positions that were available and suitable for Velazquez given her 4 qualifications and work restrictions. She was unable to identify a position appropriate for Velazquez. Family Health terminated Velazquez’s employment in April 2014. In two separate conversations, Velazquez told one of Family Health’s human resources representatives she wanted to remain employed and asked whether there were any job positions available for her. The human resources representative stated Family Health could not accommodate Velazquez’s disability and could no longer employ her. B The First Trial Velazquez sued Family Health alleging six causes of action under the Fair Employment and Housing Act (FEHA): disparate treatment based on physical disability (Gov. Code, § 12940, subd. (a)); failure to accommodate physical disability (id., § 12940, subd. (m)); failure to engage in the interactive process (id., § 12940, subd. (n)); hostile work environment (id., § 12940, subd. (j)); retaliation (id., § 12940, subd. (h)); and failure to prevent discrimination (id., § 12940, subd. (k)); as well as a cause of action for wrongful termination in violation of public policy. The case proceeded to a jury trial resulting in a verdict in favor of Family Health on all seven causes of action. For the disparate treatment and failure to accommodate causes of action, the jury returned special verdict findings that Velazquez was unable to perform essential job duties with reasonable accommodation for her physical disability. For the interactive process cause of action, the jury returned a special verdict finding that Family Health did not fail to participate in a timely, good-faith interactive process with Velazquez to determine whether a reasonable accommodation could be made. For the failure to prevent discrimination cause of action, the 5 jury returned a special verdict finding that Family Health did not fail to take all reasonable steps to prevent discrimination. The jury found Family Health not liable on the remaining causes of action for reasons not pertinent to this appeal. After the court entered judgment in favor of Family Health, Velazquez moved for a new trial on grounds that the evidence was insufficient to justify the verdict. In her motion, she did not limit the scope of her request for a new trial; therefore, she presumably sought a new trial as to all seven causes of action. However, in a supplemental brief filed with the court’s permission, Velazquez limited the scope of her new trial request to three causes of action—the FEHA causes of action for failure to accommodate, failure to engage in the interactive process, and failure to prevent discrimination. The court granted the motion for a new trial as limited by Velazquez in her supplemental brief. The new trial order stated in relevant part as follows: “It is not only the right, but the duty of the trial court to grant a new trial when, in its opinion, the court believes the weight of the evidence to be contrary to the finding of the jury. [Citation.] [¶] [Velazquez] has met her burden on this motion. [¶] The weight of the evidence in this case was that (1) [Family Health] failed to participate in a timely, good faith interactive process with [Velazquez] to determine whether reasonable accommodation could be made; (2) [Velazquez] was able to perform essential job duties with reasonable accommodation for the physical disability; and (3) [Family Health] failed to provide reasonable accommodation for [Velazquez].” Based on these findings, the court ordered a new trial for the failure to accommodate, failure to engage in the interactive process, and failure to prevent discrimination causes of action. 6  C The First Appeal Family Health appealed the order granting a partial new trial. It argued among other things that substantial evidence did not support the trial court’s reasons for granting a new trial. We rejected Family Health’s sufficiency of the evidence argument and affirmed the partial new trial order. (Velazquez I, supra, D071083.) In relevant part, we concluded as follows: “The [trial] court found the weight of the evidence showed Velazquez was qualified for and could perform the appointment technician position with reasonable accommodation…. There is substantial evidence to support the [trial] court’s determination. [¶] . . . [¶] “Regarding the existence of a reasonable accommodation, the evidence showed Velazquez could perform the job with her left hand if she had an operational roller mouse. [Citation.] Family Health provided her with a defective roller mouse and, when Velazquez pointed this out to Family Health, Family Health indicated it would try to get her a new mouse, but there is no evidence it did so…. “Regarding Family Health’s engagement in the interactive process, the evidence shows Family Health engaged in the process until Velazquez aggravated her injury working as an appointment technician. At that point, Family Health believed no further accommodations for the appointment technician position could reasonably and effectively be made because Family Health mistakenly believed Velazquez was restricted from using both of her hands repetitively. [Citation.] Family Health based its mistaken belief on limitations specified in admittedly vague doctor’s reports, the import of which Family Health did not attempt to clarify with Velazquez’s doctor despite language in one of the reports inviting a conversation between the doctor and Family Health to discuss Velazquez’s limitations. [¶] . . . [¶] 7  “As there is substantial evidence to support the [trial] court’s reasons for granting a new trial, we conclude the court did not abuse its discretion in doing so. We, therefore, affirm the order.” (Velazquez I, supra, D071083.) D The Retrial On remand, Family Health moved for summary judgment on grounds that issue preclusion foreclosed Velazquez from prevailing on any of the three causes of action that were the subject of the partial new trial order. Family Health asserted that all three causes of action required Velazquez to show that she was able to perform her essential job duties with reasonable accommodation for her disability. According to Family Health, the first jury resolved this issue against Velazquez when it returned its special verdict finding Family Health not liable for disparate treatment based on physical disability. As noted, Velazquez did not pursue—and the trial court did not grant—a new trial for Velazquez’s disparate treatment cause of action. The trial court denied Family Health’s motion for summary judgment, reasoning as follows: “The issue of whether Plaintiff could have performed her essential job duties with reasonable accommodation as it related to the three causes of action remaining has not been finally adjudicated and collateral estoppel, therefore, does not bar [Velazquez] from proceeding on the three pending causes of action.” The court added that it “saw no persuasive authority to support [Family Health’s] position … that because a trial court granted a new trial on less than all the causes of action (thereby simply reducing [Velazquez’s] claims) that [Velazquez] nevertheless had to proceed to overturn the jury’s findings as to any cause of action containing a common element.” 8  Family Health repeated its issue preclusion argument in a pretrial motion in limine and a motion for judgment on the pleadings. The court denied the motion in limine without elaboration. It is not apparent from the appellate record whether the trial court adjudicated Family Health’s motion for judgment on the pleadings.1 At the retrial, a jury found in favor of Velazquez on all three causes of action. It awarded Velazquez $915,645 in compensatory damages consisting of $115,645 for past economic loss, $50,000 for future economic loss, $450,000 for past non-economic loss, and $300,000 for future non-economic loss. It also returned a special verdict finding Family Health engaged in conduct with malice, oppression, or fraud. Following a bifurcated trial on the issue of punitive damages, the jury awarded Velazquez $5 million in punitive damages. The court entered judgment in favor of Velazquez in the amount of $5,915,645. Thereafter, Family Health filed a motion for JNOV arguing, among other things, that the punitive damages award was grossly excessive in violation of Family Health’s due process rights. The court granted the motion in part. It found, on the one hand, that Family Health’s conduct “appear[ed] to be the product of neglect as opposed to intentional malice,” the compensatory damages award was “substantial,” and the award for noneconomic damages appeared to contain a “punitive element,” factors that weighed in favor of a reduced punitive damages award. It found, on the other hand, that Family Health’s conduct was at least moderately reprehensible because it caused Velazquez physical harm in the form of emotional distress, Velazquez was financially vulnerable, and Family Health engaged in a 1 Family Health states without record support that the trial court denied its motion for judgment on the pleadings. 9 “course of conduct showing a conscious disregard [for] the health, safety and rights of [Velazquez],” factors that weighed against a reduction of the punitive damages award. Based on these findings, the court determined a 2:1 ratio of punitive to compensatory damages was the maximum constitutionally-permissible ratio for any punitive damages award. It therefore reduced the punitive damages award from $5 million to $1,831,290. The court subsequently awarded Velazquez attorney fees and costs totaling approximately $1.1 million. III DISCUSSION A Issue Preclusion Did Not Require Entry of Judgment in Favor of Family Health2 Family Health contends the trial court erred in declining to give preclusive effect to the findings of the first jury—which it returned as part of its special verdict on Velazquez’s disparate treatment cause of action—that Velazquez was not able to perform the essential duties of her job with reasonable accommodation for her disability. According to Family Health, this ability-to-perform issue was an essential element of all three of the causes of action in the retrial. Family Health asserts the issue preclusion doctrine, properly applied as to the ability-to-perform issue, required the trial court to enter judgment in Family Health’s favor as to all three of the causes of action for which a new trial was ordered. 2 The terms “issue preclusion” and “collateral estoppel” are sometimes used interchangeably. The Supreme Court “use[s] ‘issue preclusion’ in place of ‘direct or collateral estoppel[.]’ ” (Samara v. Matar (2018) 5 Cal.5th 322 , 326.) We will follow the Supreme Court’s lead and use the term “issue preclusion” to refer to the preclusion doctrine under discussion here. 10  Velazquez asserts Family Health waived or forfeited its issue preclusion argument by failing to raise it in the Velazquez I appeal.3 To the extent the argument is adequately preserved, Velazquez contends the argument is meritless because the first jury did not finally adjudicate Velazquez’s ability to perform, issue preclusion does not apply to proceedings in the same litigation, the ability-to-perform issue was not an essential element of all three causes of action in the retrial, and the public policies underpinning the equitable issue preclusion doctrine did not support the application of issue preclusion in this case. 1 Legal Principles Issue preclusion “precludes relitigation of issues argued and decided in prior proceedings. [Citation.] Traditionally, we have applied the doctrine only if several threshold requirements are fulfilled. First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. Second, this issue must have been actually litigated in the former proceeding. Third, it must have been necessarily decided in the former proceeding. Fourth, the decision in the former proceeding must be final and on the merits. Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding. [Citations.]’ ” (Hernandez v. City of Pomona (2009) 46 Cal.4th 501 , 511.) “Besides the classic five criteria for applicability, ‘[t]here is an equitable component to [issue preclusion]’ as well. [Citation.] ‘ “[E]ven where the 3 In connection with this argument, Velazquez seeks judicial notice of appellate briefing and the appellate docket from the Velazquez I appeal. Because we conclude Family Health’s collateral estoppel argument fails on the merits, we deny the request for judicial notice as unnecessary to the disposition of this appeal. 11 technical requirements are all met, the doctrine is to be applied ‘only where such application comports with fairness and sound public policy.’ ” ’ ” (Union Pacific Railroad Co. v. Santa Fe Pacific Pipelines, Inc. (2014) 231 Cal.App.4th 134 , 185.) Thus, a court must consider whether application of the issue preclusion doctrine would comport with the doctrine’s core policies, namely the preservation of the integrity of the judicial system, the promotion of judicial economy, and the protection of litigants from harassment by vexatious litigation. (Lucido v. Superior Court (1990) 51 Cal.3d 335 , 343 (Lucido).) 2 Application Velazquez asserts several arguments as to why issue preclusion did not bar her causes of action in the retrial. We do not address all of Velazquez’s arguments because one will suffice: the first jury’s findings concerning Velazquez’s ability to perform was not preclusive because it was not final. After the first jury returned its verdict and the trial court entered judgment in Family Health’s favor, the court granted a partial new trial as to three causes of action. “When [the] court grant[ed] [the] partial new trial, ‘the new trial order ha[d] the effect of vacating the entire judgment and holding in abeyance the portions which [were] not subject to a new trial until one final judgment [could] be entered.’ ” (Newstart Real Estate Investment LLC v. Huang (2019) 37 Cal.App.5th 159 , 163–164, quoting Beavers v. Allstate Ins. Co. (1990) 225 Cal.App.3d 310 , 329 (Beavers).) Thus, “there was no final judgment; it was vacated by operation of law” when the trial court granted the partial new trial. (Newstart, at p. 164; see Ferraro v. Pacific Finance Corp. (1970) 8 Cal.App.3d 339 , 345 [an “order granting a limited new trial ha[s] the effect of vacating the earlier judgment.”].) And, our 12 subsequent affirmance of the partial new trial order guaranteed that “the underlying judgment [was] ‘absolutely vacated.’ ” (Pacific Corporate Group Holdings, LLC v. Keck (2014) 232 Cal.App.4th 294 , 304 (Keck), italics added.) Because the entire judgment entered on the first jury’s special verdict was vacated and held in abeyance, the first jury’s ability-to-pay findings were not final when Family Health tried to invoke the issue preclusion doctrine. Family Health asserts three arguments concerning the alleged finality of the first jury’s ability-to-pay findings. First, it argues an aggrieved party can always appeal a portion of a judgment unaffected by a partial new trial order; therefore, Family Health claims the first jury’s ability-to-perform findings became final when Velazquez did not appeal the judgment entered on the first jury’s verdict. In support of this argument, Family Health cites language from two decisions, Baker v. American Horticulture Supply, Inc. (2010) 186 Cal.App.4th 1059 (Baker) and Prichard v. Liberty Mutual Ins. Co. (2000) 84 Cal.App.4th 890 (Prichard), suggesting a party can “attack even those parts of [a] judgment that [are] not subject to [a] new trial order” on appeal after an order granting a partial new trial. (Prichard, at p. 901; see Baker, at p. 1071, fn. 5.) We are not persuaded. The Baker and Prichard decisions both cite another decision, Beavers, supra, 225 Cal.App.3d 310 , for the proposition that a party can challenge on appeal the parts of a judgment not subject to a partial new trial order. (Prichard, supra, 84 Cal.App.4th at p. 901; Baker, supra, 186 Cal.App.4th at p. 1071, fn. 5.) In Beavers, the court articulated the general rule, discussed above, “that a partial new trial order vacates and holds in abeyance the entire judgment.” (Beavers, at p. 330.) It then recognized an exception to the general rule, stating that “ ‘when an appeal is taken from [a new trial] order the vacating effect is suspended, and the judgment remains effective for the 13 purpose of an appeal from the judgment.’ ” (Ibid., quoting Spencer v. Nelson (1947) 30 Cal.2d 162 , 164.) Baker and Prichard cite the Beavers exception without further elaboration. (Prichard, at p. 901; Baker, at p. 1071, fn. 5.) The exception referenced in Beavers merely stands for the proposition that a protective cross-appeal may be filed by a party whose motion for a new trial has been granted. (Keck, supra, 232 Cal.App.4th at p. 304.) “The cross- appeal is ‘protective’ because it ensures the right to obtain appellate review of the judgment if the order granting a new trial is reversed. [Citations.] [¶] ‘The cross-appeal from the judgment is only operative if the order granting the new trial is reversed thus reinstating the judgment.’ [Citation.] ‘The reviewing court will first consider the main appeal from the order granting a new trial and will decide the cross-appeal from the judgment only if it reverses the order. [Citations.] But if, as is usual, the order granting a new trial is affirmed, the effect is that there is no longer a final judgment.” (Grobeson v. City of Los Angeles (2010) 190 Cal.App.4th 778 , 798–799.) As this court has recognized, the availability of a protective cross- appeal does not—as the Baker and Prichard decisions might be read to suggest—supplant “the ‘settled’ rule … that where a reviewing court affirms an order granting a partial new trial, issues that are unrelated to the new trial order must await review in an appeal from the final judgment.” (Keck, supra, 232 Cal.App.4th at p. 305, italics added.) Pursuant to this settled rule, we reject Family Health’s claim that a party can always seek immediate review of any portion of a judgment unaffected by a partial new trial order. Next, Family Health argues that even if a partial new trial order may vacate the entire judgment in some circumstances, it does not (or should not) vacate the entire judgment in other circumstances—where, as here, the new trial order mandates a retrial for some causes of action and does not require a 14 retrial for other causes of action. Under this theory, Family Health contends a portion of the underlying judgment—the portion finding Family Health not liable as to certain causes of action—was left untouched by the partial new trial order and became final when Velazquez did not appeal the judgment entered on the first jury’s verdict. Family Health’s argument reflects a misunderstanding concerning the reason why the entire judgment is vacated when a partial new trial is ordered. When a new trial is granted in part, the entire judgment is vacated so as to avoid a possible violation of the one final judgment rule. (Beavers, supra, 225 Cal.App.3d at p. 329; Love v. Wolf (1967) 249 Cal.App.2d 822 , 840.) Vacatur of the entire judgment guarantees that if a partial new trial order is affirmed, “ ‘there will be no final judgment until the [re]trial … ends …..’ ” (Beavers, at p. 329.) “Were the rule otherwise, two appealable judgments would be entered in violation of the one judgment rule.” (Ibid.) That is precisely the problematic outcome that would occur here if we were to adopt Family Health’s novel argument. Under Family Health’s theory, it would be acceptable for one judgment to be entered as to a subset of Velazquez’s causes of action and a second judgment to be entered (after affirmance of the partial new trial order and the retrial) as to her remaining causes of action. This would violate the one final judgment rule, which states that “ ‘ “an appeal may be taken only from the final judgment in an entire action.” ’ ” (In re Baycol Cases I & II (2011) 51 Cal.4th 751 , 756; see Kurwa v. Kislinger (2013) 57 Cal.4th 1097 , 1107 [“The one final judgment rule does not permit parties ‘to separate [their] causes of action into two compartments for separate appellate treatment at different points in time.’ ”].) Thus, we decline to adopt Family Health’s theory of appealability. 15  Finally, Family Health contends the first jury’s special verdict findings were sufficiently final even if Velazquez did not yet have an opportunity to appeal them. There is no merit to this claim. An adjudication is final for issue preclusion purposes if it is “free from direct attack ….” (Lucido, supra, 51 Cal.3d at p. 342; Mueller v. J.C. Penney Co. (1985) 173 Cal.App.3d 713 , 719 [“For purposes of [issue preclusion], a judgment free from direct attack is a final judgment.”].) An adjudication is not final “if an appeal is pending or could still be taken.” (Riverside County Transportation Com. v. Southern California Gas Co. (2020) 54 Cal.App.5th 823 , 838; People v. Burns (2011) 198 Cal.App.4th 726 , 731 [“the judgment is not final and preclusive if it is still subject to direct attack”].) Here, the first jury’s special verdict findings remained vulnerable to direct attack at the time Family Health tried to invoke collateral estoppel because Velazquez still could have challenged the findings on appeal from the final judgment after the retrial. Because an appeal of the first jury’s findings was still possible when Family Health sought to invoke collateral estoppel, the jury’s findings were not a final adjudication entitled to a preclusive effect. Given the absence of finality, the trial court properly declined to apply issue preclusion to the first jury’s ability-to-pay findings.4 B The Reduction to the Punitive Damages Award was Proper Family Health also appeals the partial JNOV order reducing the punitive damages award from $5 million to $1,831,290 (a 2:1 ratio of punitive 4 Family Health claims for the first time in its reply brief that the first and second juries’ verdicts are irreconcilable. Because Family Health failed to raise its inconsistent verdicts argument in its opening brief, the argument is forfeited. (High Sierra Rural Alliance v. County of Plumas (2018) 29 Cal.App.5th 102 , 111, fn. 2.) 16 to compensatory damages). It contends any punitive damages award exceeding $915,645 (a 1:1 ratio of punitive to compensatory damages) violates its federal due process rights. Velazquez cross-appeals the partial JNOV order and asserts the jury’s original punitive damages award of $5 million (a 5.46:1 ratio of punitive to compensatory damages) was constitutionally permissible. On this basis, Velazquez seeks reinstatement of the original $5 million punitive damages award. 1 Legal Principles “In our judicial system, ‘[a]lthough compensatory damages and punitive damages are typically awarded at the same time by the same decisionmaker, they serve distinct purposes. The former are intended to redress the concrete loss that the plaintiff has suffered by reason of the defendant’s wrongful conduct. [Citations.] The latter ... operate as “private fines” intended to punish the defendant and to deter future wrongdoing.’ ” (Nickerson v. Stonebridge Life Ins. Co. (2016) 63 Cal.4th 363 , 371 (Nickerson I); State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408 , 416 (State Farm) [“ ‘Punitive damages may properly be imposed to further a State’s legitimate interests in punishing unlawful conduct and deterring its repetition’ ”].) “States necessarily have considerable flexibility in determining the level of punitive damages that they will allow in different classes of cases and in any particular case.” (BMW of N. Am., Inc. v. Gore (1996) 517 U.S. 559 , 568 (Gore).) However, “[t]he due process clause of the Fourteenth Amendment to the United States Constitution places constraints on state court awards of punitive damages.” (Roby v. McKesson Corp. (2009) 47 Cal.4th 686 , 712 (Roby).) In particular, due process prohibits the imposition 17 of grossly excessive or arbitrary punitive damages awards, “ ‘for due process entitles a tortfeasor to “ ‘fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose.’ ” ’ [Citation.]” (Roby, at p. 712.) The U.S. Supreme Court has articulated “a set of substantive guideposts that reviewing courts must consider in evaluating the size of punitive damages awards: ‘(1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.’ ” (Nickerson I, supra, 63 Cal.4th at pp. 371–372, quoting State Farm, supra, 538 U.S. at p. 418.) “A trial court conducts this inquiry in the first instance; its application of the factors is subject to de novo review on appeal.” (Nickerson I, supra, 63 Cal.4th at p. 372.) “This ‘[e]xacting appellate review’ is intended to ensure punitive damages are the product of the ‘ “ ‘application of law, rather than a decisionmaker’s caprice.’ ” ’ ” (Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159 , 1172 (Simon).) “[F]indings of historical fact made in the trial court are still entitled to the ordinary measure of appellate deference” and form the basis for a reviewing court’s punitive damage analysis so long as substantial evidence supports the trial court’s findings. (Ibid.) 18  2 Application i Reprehensibility Of the three guideposts articulated by the U.S. Supreme Court, “the most important is the degree of reprehensibility of the defendant’s conduct.” (Roby, supra, 47 Cal.4th at p. 713; see State Farm, supra, 538 U.S. at p. 418.) In assessing reprehensibility, we must consider the following five factors: “whether ‘[1] the harm caused was physical as opposed to economic; [2] the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; [3] the target of the conduct had financial vulnerability; [4] the conduct involved repeated actions or was an isolated incident; and [5] the harm was the result of intentional malice, trickery, or deceit, or mere accident.’ ” (Roby, at p. 713, quoting State Farm, at p. 419.) The first reprehensibility factor is present here because, as the trial court found, Family Health’s conduct caused Velazquez physical harm in the form of emotional and mental distress. (See Roby, supra, 47 Cal.4th at p. 713; Tilkey v. Allstate Ins. Co. (2020) 56 Cal.App.5th 521 , 559 (Tilkey) [“Harm is physical when it affects emotional and mental health and is not purely economic.”].) Witnesses testified Velazquez suffered depression, anxiety, sleep loss, and suicidal thoughts due to the termination of her employment and the resulting financial insecurity she experienced. Further, Velazquez claimed noneconomic damages for mental suffering, loss of enjoyment of life, inconvenience, grief, anxiety, humiliation, and emotional distress, and the jury awarded her $750,000 in noneconomic damages. Under these circumstances, the first reprehensibility factor weighs in favor of an aggravated punitive damages award. 19  The second reprehensibility factor is present as well. Family Health reasonably could have foreseen its discriminatory conduct “would affect [Velazquez’s] emotional well–being, and therefore [its] ‘conduct evinced an indifference to or a reckless disregard of the health or safety of others.’ ” (Roby, supra, 47 Cal.4th at p. 713.) Velazquez was a physically-disabled, middle-aged immigrant who did not have a college degree. After Family Health told her of its decision to terminate her employment, she literally begged Family Health to continue employing her because “it was very necessary for [her] to continue at work” and she “need[ed] [her] job.” Despite these pleas, Family Health proceeded with its discriminatory termination of Velazquez’s employment, thereby depriving her of a vital source of income. Family Health asserts it terminated Velazquez’s employment not out of indifference for her health and safety, but rather to protect her from suffering further work-related injuries. In asking us to accept this farfetched assertion, Family Health ignores that the trial court made an express finding—a finding well supported by the evidence—that its conduct “show[ed] a conscious disregard of the health, safety, and rights of [Velazquez].” It is not our role to “reweigh the evidence, evaluate the credibility of witnesses or indulge in inferences contrary to the findings of the trial court.” (In re Michael G. (2012) 203 Cal.App.4th 580 , 589; see Bankhead v. ArvinMeritor, Inc. (2012) 205 Cal.App.4th 68 , 77 [“[W]e, as an ‘appellate court[,] cannot reweigh the credibility of witnesses or resolve conflicts in the evidence.’ ”].) Family Health also claims the second reprehensibility factor is not present because it never disregarded the health or safety of persons other than Velazquez. However, the second reprehensibility factor may be present where, as here, the defendant has indifferently or recklessly disregarded the health and safety of the plaintiff alone. (See, e.g., Roby, supra, 47 Cal.4th at 20 p. 713; Colucci v. T-Mobile USA, Inc. (2020) 48 Cal.App.5th 442 , 457 (Colucci); Nickerson v. Stonebridge Life Insurance Co. (2016) 5 Cal.App.5th 1 , 17 (Nickerson II); Century Surety Co. v. Polisso (2006) 139 Cal.App.4th 922 , 965.) Because the trial court found that Family Health acted in conscious disregard for Velazquez’s health, safety, and rights, and Family Health does not challenge the sufficiency of the evidence supporting the court’s finding, we conclude the second reprehensibility factor is present. The third reprehensibility factor is present as well because Velazquez was a financially vulnerable victim. The evidence showed Velazquez remained unemployed for three and a half years after Family Health terminated her employment despite a concerted effort to obtain a new job. There was also evidence indicating Velazquez depleted her savings during this timeframe, became indebted, and was homeless for a period of time. Regarding the fourth reprehensibility factor, there was “scant evidence [Family Health engaged in] repeated misconduct of the sort that injured” Velazquez. (State Farm, supra, 538 U.S. at p. 423.) Velazquez introduced some evidence showing that over a span of several years a handful of Family Health’s approximately 1,500 employees filed lawsuits or administrative complaints alleging Family Health engaged in discriminatory conduct against the complainants. Nevertheless, Velazquez’s evidence disclosed virtually no information pertinent to the complainants’ allegations or the veracity of the complaints. On this record, we cannot conclude Family Health engaged in repeated acts of misconduct of the sort that harmed Velazquez. Velazquez notes that Family Health did not adopt written policies pertaining to its interactive process, which threatened harm to other employees. She also argues there was evidence high-level Family Health employees participated in, or were aware of, the termination of her 21 employment. Even if true, these issues are inapposite to the fourth reprehensibility factor, which “considers whether the tortfeasor was recidivist, i.e., whether its conduct involved repeated actions or was an isolated incident.” (Nickerson II, supra, 5 Cal.App.5th at p. 19.) Because Velazquez did not establish that Family Health engaged in repeat acts of misconduct, we conclude the fourth reprehensibility factor is absent. The fifth reprehensibility factor “is of little value in assessing a California punitive damages award because ‘accidentally harmful conduct cannot provide the basis for punitive damages under our law.’ ” (King v. U.S. Bank National Assn. (2020) 53 Cal.App.5th 675 , 729.) Nonetheless, we note that the trial court made findings and observations concerning Family Health’s mental state that cut both ways. On the one hand, the court found, and we agree, that many of Family Health’s actions appeared to be the product of “neglect as opposed to intentional malice, such as [Family Health’s] failure to provide [Velazquez] with a proper mouse.” Indeed, there is no suggestion in the JNOV order, the parties’ briefs, or any portion of the appellate record of which we are aware suggesting Family Health deliberately shirked its duties to accommodate and engage in the interactive process. Rather, Family Health incorrectly believed it satisfied its legal obligations merely by providing Velazquez a defective roller mouse and searching online for substitute employment positions for her. On the other hand, the court noted there was evidence of deceit when Family Health filled out employment separation forms falsely stating Velazquez resigned—thus obscuring the real reason why her employment was terminated. The totality of Family Health’s conduct suggests the fifth reprehensibility factor is present but only to a minor degree. 22  In sum, some reprehensibility factors are present, while others are absent or present only to a small extent. On balance, we agree with the trial court’s assessment that Family Health’s conduct was moderately reprehensible. ii Disparity Between Compensatory Damages and Punitive Damages The second guidepost governing the constitutionality of a punitive damages award is “the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award.” (State Farm, supra, 538 U.S. at p. 418, citing Gore, supra, 517 U.S. at p. 575.) The U.S. Supreme Court has refrained from “identify[ing] concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff and the punitive damages award.” (State Farm, supra, 538 U.S. at p. 424; see Gore, supra, 517 U.S. at p. 582 [“we have consistently rejected the notion that the constitutional line is marked by a simple mathematical formula, even one that compares actual and potential damages to the punitive award”].) Nonetheless, it has “establish[ed] a type of presumption: ratios between the punitive damages award and the plaintiff’s actual or potential compensatory damages significantly greater than 9 or 10 to 1 are suspect and, absent special justification … cannot survive appellate scrutiny under the due process clause.” (Simon, supra, 35 Cal.4th at p. 1182.) “Multipliers less than nine or 10 are not, however, presumptively valid” under the due process clause. (Simon, supra, 35 Cal.4th at p. 1182.) “When compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee.” (State Farm, supra, 538 U.S. at p. 426; see Bridgeport Music, Inc. v. Justin Combs Pub. (6th Cir. 2007) 507 F.3d 470 , 487 [“a ratio in 23 the range of 1:1 to 2:1 is all that due process will allow” when only one reprehensibility factor is present and there is already a substantial compensatory damages award].) A lesser ratio may also be warranted where the compensatory damages award appears to contain a punitive element—for example, a substantial award of emotional distress damages. (State Farm, at p. 426; accord Simon, at p. 1189.) Ultimately, the precise amount of an award “must be based upon the facts and circumstances of the defendant’s conduct and the harm to the plaintiff.” (State Farm, at p. 425.) Here, the jury awarded Velazquez $915,645 in compensatory damages consisting of $165,645 for economic losses and $750,000 for noneconomic losses including pain and suffering. In our view, there can be no reasonable dispute the compensatory damages award was substantial, or as the trial court put it, “quite a handsome recovery.” Further, it is apparent the compensatory damages contain a punitive element. While the record supports a finding that Velazquez suffered noneconomic losses, the sheer amount of the damages that were awarded for noneconomic losses—$750,000, or 4.5 times the amount of Velazquez’s total economic losses—shows the compensatory damages award is to some extent duplicative of the punitive damages award. These factors warrant a lower ratio of punitive to compensatory damages. Family Health contends the maximum permissible ratio is 1:1 and, therefore, the trial court erred in reducing the punitive damages award only down to a 2:1 ratio. We disagree. Certainly, a 1:1 ratio of punitive to compensatory damages can in some cases—or perhaps in many cases where the compensatory damages award is substantial—be the constitutional maximum. (See, e.g., Roby, supra, 47 Cal.4th at pp. 718–720; Johnson v. Monsanto Co. (2020) 52 Cal.App.5th 434 , 462.) However, “there is no fixed 24 formula that requires a court to set punitive damages equal to compensatory damages” whenever compensatory damages are substantial. (Johnson, at p. 462; see Bullock v. Philip Morris USA, Inc. (2011) 198 Cal.App.4th 543 , 549 (Bullock) [“we do not regard the amount of compensatory damages as a fixed upper limit where damages are ‘substantial’ ”].) Because multiple reprehensibility factors are present in this case, we believe the circumstances dictate a constitutional maximum exceeding a 1:1 ratio. (See Colucci, supra, 48 Cal.App.5th at pp. 459–460 [1.5-to-one ratio was the constitutional maximum where the compensatory damages award was substantial and defendant’s conduct had a “low to moderate degree of reprehensibility”].) Velazquez also disputes the trial court’s determination that the maximum constitutionally-permissible ratio is 2:1, but unlike Family Health she argues a larger ratio—5:1, or at minimum 4:1 or 3:1—is the correct ratio. She asserts Family Health was in excellent financial condition and, given Family Health’s wealth, a larger ratio is necessary to vindicate the state’s interest in punishment and deterrence. “Because a court reviewing the jury’s award for due process compliance may consider what level of punishment is necessary to vindicate the state’s legitimate interests in deterring conduct harmful to state residents, the defendant’s financial condition [is] a legitimate consideration in setting punitive damages.” (Simon, supra, 35 Cal.4th at p. 1185.) “ ‘[O]bviously, the function of deterrence ... will not be served if the wealth of the defendant allows him to absorb the award with little or no discomfort.’ ” (Ibid.; see Bullock, supra, 198 Cal.App.4th at p. 570 [the state’s “interests are not served if the amount awarded is so small in relation to the defendant’s wealth as to constitute only a nuisance or a routine cost of doing business”].) “On the other hand, ‘the purpose of punitive damages is not served by 25 financially destroying a defendant.’ ” (Simon, at p. 1185; see Grassilli v. Barr (2006) 142 Cal.App.4th 1260 , 1290 [“A punitive damages ‘award should not be so high as to result in the financial ruin of the defendant.’ ”].) According to Family Health’s financial statements, Family Health had a net worth of approximately $213 million at the end of fiscal year 2017– 2018. Accepting for purposes of this appeal Velazquez’s assessment that this figure represented Family Health’s financial condition, we conclude the trial court’s decreased punitive damages award vindicates the state’s interests. The punitive damages award, even as reduced by the trial court, was still $1,831,290—quite a large figure. This cannot be characterized as a mere cost of doing business, especially given Family Health’s status as a non-profit organization and the substantial amounts Family Health was ordered to pay in compensatory damages ($915,645) and attorney fees costs (approximately $1.1 million). (See Walker v. Farmers Insurance Exchange (2007) 153 Cal.App.4th 965 , 974 [“Paying $1.5 million over and above the nearly $1.7 million in compensatory damages and attorney fees cannot, as respondent[ ] contend[s], be put down ‘simply [as] just another cost of doing business.’ ”].) Further, the state’s interests in punishment and deterrence are lesser here than they might otherwise have been if Family Health had engaged in exceptionally reprehensible or recalcitrant behavior—which, as previously discussed, it did not. (See Simon, supra, 35 Cal.4th at p. 1187.) Given the sizable compensatory damages award as well as the state’s relatively diminished interests in punishment and deterrence, we conclude 26 Family Health’s financial condition does not warrant a punitive damages award exceeding a 2:1 ratio of punitive to compensatory damages.5 iii Comparable Civil Penalties The final guidepost requires a comparison of the punitive damages award and civil penalties authorized or imposed in comparable cases. (State Farm, supra, 538 U.S. at p. 428.) Neither party draws our attention to any civil penalties authorized or imposed in comparable cases. Therefore, “we do not consider this guidepost in ‘the calculus of the constitutional maximum of punitive damages.’ ” (Nickerson II, supra, 5 Cal.App.5th at p. 23; see Tilkey, supra, 56 Cal.App.5th at p. 559 [considering only first two guideposts where parties agreed there were no corresponding civil penalties].) iv Conclusion Family Health engaged in misconduct that can be characterized as somewhat or moderately reprehensible. It caused physical harm to a financially vulnerable victim in a foreseeable manner. On the other hand, it was not recalcitrant in its misconduct and much of its behavior appears to have been the product of mere neglect or accident. Further, the jury awarded Velazquez a substantial compensatory damages award that appears to contain a punitive element. Given all these factors, we conclude the trial court did not err in determining the constitutional maximum ratio for a 5 Family Health contends Velazquez exaggerates its financial condition and claims a portion of its alleged net worth was earmarked for various upcoming projects. We need not address this contention because, even accepting Velazquez’s assessment of Family Health’s financial condition, we conclude the punitive damages award imposed by the trial court vindicates the state’s goals of punishment and deterrence. 27 punitive damages award was twice the amount of the compensatory damages award and therefore reducing the punitive damages award to $1,831,290. IV DISPOSITION The judgment and the order granting partial JNOV are affirmed. The parties shall bear their own costs on appeal. McCONNELL, P. J. WE CONCUR: BENKE, J. IRION, J. 28

2021-03-18 20:02:29.896138+00

http://www.courts.ca.gov/opinions/documents/E074759.PDF

Filed 3/18/21 CERTIFIED FOR PARTIAL PUBLICATION* IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION TWO PLANET BINGO LLC, Plaintiff and Appellant, E074759 v. (Super.Ct.No. PSC 1600461) THE BURLINGTON INSURANCE OPINION COMPANY, Defendant and Respondent. APPEAL from the Superior Court of Riverside County. David M. Chapman, Judge. Reversed and remanded with directions. Angelo & Di Monda and Joseph Di Monda for Plaintiff and Appellant. Greenberg Traurig and Thomas Holden for Defendant and Respondent. An electronic gaming device designed and supplied by Planet Bingo, LLC (Planet Bingo) caused a fire in the United Kingdom. Several third parties made demands that Planet Bingo pay their damages resulting from the fire. However, the Burlington * Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is certified for publication with the exception of part V. 1 Insurance Company (Burlington), Planet Bingo’s liability insurer, denied coverage. Planet Bingo therefore filed this action for breach of contract and bad faith against Burlington. In a previous appeal, we held that Burlington’s policy did afford coverage, though only if one of the third-party claimants filed suit against Planet Bingo in the United States or Canada. Lo and behold, just such a suit was then filed. Burlington accepted the defense and managed to settle the suit for its policy limits. In this action, the trial court granted summary judgment for Burlington; in essence, it ruled that Burlington had provided all of the benefits due under the policy. Planet Bingo appeals. It contends that Burlington conducted an inadequate investigation. It also contends that Burlington wrongfully failed to settle the third-party claims; instead, Burlington denied coverage, in the hope that the claimants would sue Planet Bingo in the United Kingdom, which would have let Burlington off the coverage hook. Planet Bingo asserts (and Burlington does not dispute) that it lost profits because the fire claims remained pending and unsettled. We will hold that Planet Bingo made out a prima facie case that Burlington is liable for failure to settle. (See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826 , 845 [party can defeat summary judgment by making “a prima facie showing of the existence of a genuine issue of material fact”].) Even though none of the claimants made a formal offer to settle within the policy limits, one subrogee sent a subrogation demand letter; according to Planet Bingo’s expert witness, in light of the standards of the 2 insurance industry, this represented an opportunity to settle within the policy limits. We therefore do not address Planet Bingo’s claim that Burlington conducted an inadequate investigation. We also do not decide whether lost profits are recoverable as damages, because this issue was not raised below. Finally, in the unpublished portion of this opinion, we will reject Burlington’s contention that the statute of limitations had run. I STATEMENT OF FACTS The following facts are taken from the separate statements of material fact and the supporting evidence filed in connection with the motion for summary judgment. “We accept all facts listed in [Burlington’s] separate statement that [Planet Bingo] did not dispute. We also accept all facts listed in [Burlington’s] separate statement that [Planet Bingo] did dispute, to the extent that (1) there is evidence to support them [citation], and (2) there is no evidence to support the dispute [citation]. Finally, we accept all facts listed in [Planet Bingo’s] separate statement, to the extent that there is evidence to support them. [Citation.]” (Doe v. California Lutheran High School Assn. (2009) 170 Cal.App.4th 828 , 830-831.) Planet Bingo supplies handheld gaming devices. It designs them, has another company manufacture them to its specifications, and ships them. Leisure Electronics Limited (Leisure) distributed Planet Bingo’s devices in the United Kingdom. The distribution agreement between them provided that any legal proceeding involving the agreement would be brought in England. Leisure leased some 3 of the devices to Beacon Bingo, a/k/a Riva Gaming (Beacon), which operated a bingo hall in London. Burlington insured Planet Bingo under a commercial general liability policy. The policy applied to an occurrence in the United States or Canada; it also applied to an occurrence elsewhere, but only if (among other things) Planet Bingo’s liability was determined either (1) “in a ‘suit’ on the merits” in the United States or Canada, or (2) “[i]n a settlement [Burlington] agree[d] to.” On September 12, 2008, at 2:40 a.m., there was a fire in the bingo hall. On or before March 26, 2009, Planet Bingo gave Burlington notice of the fire. Burlington started an investigation under a reservation of rights. At that time, however, it did not actually perceive any coverage issue. Burlington’s “P[lan] O[f] A[ction]” was to obtain whatever evidence Leisure and Bingo had and to determine whether any other parties were potentially liable; it added, “we will then consider having our own I[ndependent] A[djuster] investigate & get our own C[ause] & O[rigin] expert in the UK.” Accordingly, it asked Bingo and Leisure to provide proof that Planet Bingo was liable, including all forensic evidence, along with proof of their damages. It also asked them to preserve all the evidence. Meanwhile, Burlington looked into whether another party (such as Beacon, the manufacturer of the devices, or a parts supplier) might be liable. 4  In June 2009, Leisure notified Burlington that, in its view, Planet Bingo was liable. It cited two items of evidence: (1) The video: Security video showed that the fire started in the racks where the devices were being charged overnight (although the actual ignition point was hidden behind a partition). (2) The Fire Brigade report: Immediately after the fire, experts representing the London Fire Brigade, Leisure, and Beacon had conducted a joint forensic examination. They concluded that “the most likely cause of the fire” was the failure of a lithium battery in one of the devices. Leisure noted that at that time, Beacon was not “actively pursu[ing]” its claim, probably because it was still waiting to see what its total losses were. In response, Burlington asked Beacon to send it the video along with any forensic evidence. Again, it asked “the parties to preserve all evidence.” In November 2009,1 Beacon notified Burlington that its damages totaled £1.6 million (approximately $2.6 million). It claimed there was “substantial evidence in support of this amount.” At that point, Burlington retained a London-based independent adjuster. In January 2010, Leisure and Beacon assured Burlington that Beacon’s experts still had the device that allegedly caused the fire. 1 The email from Beacon to Burlington is dated August 2009. Burlington’s claims file, however, indicates that it was received in November 2009. 5  In April 2010, Burlington realized for the first time that it had possible grounds to deny coverage: Its policy applied to the fire only if suit was brought in the United States or Canada, whereas the distribution agreement between Planet Bingo and Leisure required any suit to be brought in England.2 Meanwhile, Leisure and Beacon still had not provided Burlington with any forensic evidence nor with any documentary support of their losses. Thus, also in April 2010, Burlington hired its own cause and origin expert. In May 2010, Burlington’s expert issued his report. He had reviewed the video and had spoken to one of the experts responsible for the Fire Brigade report. He conceded that “no physical evidence was found to indicate the precise cause of the fire.” Nevertheless, based on the video, and after ruling out other possible causes, he concluded “that the fire started as a result of a fault with the [devices] or their charging racks.”3 In June 2010, he reiterated that there was no possible ignition source other than the devices. From its expert, Burlington learned for the first time that the London Fire Brigade had disposed of the remains of the devices back in September 2009. In August 2010, Burlington finally received the Fire Brigade report (from its expert, not from Leisure or Beacon). The report concluded that “the balance of probabilities suggests that the fire was caused by a defective lithium ion battery pack in 2 Beacon, of course, was not a party to the distribution agreement. Moreover, the distribution agreement did not purport to be binding on Leisure’s insurers (although they might nevertheless be bound as subrogees). 3 Planet Bingo supplied the charging racks. 6 one of the [devices].” In September 2010, Burlington received a copy of the video (again, from its expert, not from Leisure or Beacon). In September 2010, Burlington concluded — with no explanation — that Planet Bingo was not liable. It also noted that there were “coverage issues,” and that Leisure (or its insurer) did not seem to be pursuing the claim. However, it did not communicate these conclusions to Planet Bingo. Nine months went by, during which Leisure and Beacon did not file suit, and Burlington conducted little further investigation. During this time, Planet Bingo complained to Burlington repeatedly that it was losing business because the fire claim remained unpaid — that Planet Bingo “was getting known as a deadbeat . . . .” In June 2011, Burlington notified Planet Bingo that “[t]here does not appear to be any further pursuit against you for the damages,” and therefore Burlington was closing its file. There was a three-year lull. In July 2014, attorneys representing AIG Europe Ltd. (AIG) wrote to Planet Bingo. They reported that Leisure had settled with Beacon for £1.6 million and that AIG was Leisure’s insurer. They demanded that Planet Bingo pay the £1.6 million. They also stated: “With the objective of avoiding the costs of litigation, our client is prepared to 7 enter into alternative forms of dispute resolution. . . . [T]he options available . . . are discussions and negotiations or mediation. Please confirm which option you agree to.”4 Planet Bingo’s expert on insurance claim handling testified that “[s]uch a letter is routine in industry practice and offers a clear invitation to negotiate a settlement for less than that amount . . . .” Moreover, there is a “very well[-]known industry custom in such subrogation claims of accepting policy limits for a full release o[f] the insured.” Planet Bingo immediately notified Burlington of the claim. In August 2014, Burlington responded by denying coverage, on the grounds that (1) the fire did not occur in the United States or Canada and (2) Planet Bingo had not been sued in the United States or Canada. In February 2016, Planet Bingo filed this action. The trial court entered judgment on the pleadings for Burlington, on the ground that there was no coverage because the fire had occurred outside the United States or Canada. Planet Bingo appealed. We held that, when Burlington denied coverage, there was at least a potential for coverage, because it was still possible that Planet Bingo might be sued in the United States or Canada. Hence, we reversed and remanded. 4 Planet Bingo asserts that the letter did not demand full payment of the £1.6 million. That is an unreasonable interpretation. The letter stated: “Leisure . . . settled [Beacon’s] claim and now seeks to recover its outlay from Planet Bingo.” “We are instructed to recover our client’s outlay . . . .” It itemized Leisure’s “outlay,” which totaled £1.6 million. Clearly it did demand full payment, albeit without ruling out the possibility of a settlement. 8  Meanwhile, Planet Bingo’s attorneys contacted AIG and convinced it to sue Planet Bingo in the United States rather than in London. Accordingly, in June 2018, AIG sued Planet Bingo in Riverside Superior Court. Burlington accepted the defense of that action, subject to a reservation of rights. In March 2019, Burlington settled with AIG for $1 million — the policy limits. In the settlement agreement, AIG released any and all claims against Planet Bingo. Planet Bingo’s expert witness testified that the failure to promptly pay the fire claim damaged Planet Bingo’s business reputation and ultimately caused its entire business in the United Kingdom to fail; as a result, it suffered lost profits of over $9.3 million. Burlington did not dispute this. II STATEMENT OF THE CASE Planet Bingo filed this action against Burlington in February 2016.5 The operative (second amended) complaint asserted causes of action against Burlington for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief. Thereafter, Burlington defended the suit by AIG and settled that suit for the policy limits. This mooted Planet Bingo’s claims, to the extent that they were based on failure 5 The complaint also named Planet Bingo’s insurance brokers as defendants. Planet Bingo eventually settled with them. 9 to defend or failure to indemnify.6 It left only claims arising out of Burlington’s prelitigation claims handling — namely, for lost profits based on inadequate investigation and failure to settle. Burlington filed a motion for summary judgment. In it, Burlington argued, among other things: (1) The action was barred by the statute of limitations. (2) Burlington had no prelitigation duty to investigate. (3) Burlington conducted a reasonable investigation. (4) Burlington’s allegedly inadequate investigation did not deprive Planet Bingo of any of the benefits of the policy. (5) Burlington had no prelitigation duty to settle because it never received an offer to settle within the policy limits. After hearing argument, the trial court granted the motion. It agreed that Burlington was not liable for failure to settle. It also agreed that Burlington’s investigation did not deprive Planet Bingo of any policy benefits. Regarding the statute of limitations, it ruled, “This argument would have merit but for the fact that Burlington 6 Planet Bingo did not argue, in opposition to the motion for summary judgment or on appeal, that it should be allowed to proceed on a claim for the attorney fees it had had to incur to obtain the eventual defense and indemnity. (See generally Brandt v. Superior Court (1985) 37 Cal.3d 813 .) Thus, it has forfeited any such contention for purposes of this appeal. We do not decide whether it has forfeited it for purposes of further proceedings. 10 waived the defense by not properly pleading it.” It therefore entered judgment against Planet Bingo and in favor of Burlington. III STANDARD OF REVIEW “Summary judgment is appropriate only ‘where no triable issue of material fact exists and the moving party is entitled to judgment as a matter of law.’ [Citation.]” (Regents of University of California v. Superior Court (2018) 4 Cal.5th 607 , 618.) “There is a triable issue of material fact 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.” (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 850, fn. omitted.) A moving defendant has the “burden” to “show[] that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2).) “Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Ibid.) “Courts deciding motions for summary judgment or summary adjudication may not weigh the evidence but must instead view it in the light most favorable to the opposing party and draw all reasonable inferences in favor of that party. [Citations.]” (Weiss v. People ex rel. Department of Transportation (2020) 9 Cal.5th 840 , 864.) 11  “Whether the trial court erred by granting [the] motion for summary judgment is a question of law we review de novo. [Citation.]” (Samara v. Matar (2018) 5 Cal.5th 322 , 338.) IV PRELITIGATION FAILURE TO SETTLE Planet Bingo contends that there is a triable issue of fact as to whether Burlington is liable for its prelitigation failure to settle. “[A] liability insurance policy’s express promise to defend and indemnify the insured against injury claims implies a duty to settle third party claims in an appropriate case. [Citations.]” (Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390 , 401.) “Although an insurance policy normally only carries an express statement of a duty to defend, an insurer’s duty to settle is derived from the implied covenant of good faith and fair dealing which is part of any contract [citations].” (Commercial Union Assurance Companies v. Safeway Stores, Inc. (1980) 26 Cal.3d 912 , 917.) “[T]he insurer, when determining whether to settle a claim, must give at least as much consideration to the welfare of its insured as it gives to its own interests.” (Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809 , 818.) In the paradigm case of an insurer’s failure to settle, the third-party claimant makes a reasonable settlement offer within the policy limits; the insurer rejects it; the third-party claimant goes to trial; and the trial results in a judgment in excess of the 12 policy limits. In this situation, the insurer becomes liable for the entire excess judgment. (E.g., Samson v. Transamerica Ins. Co. (1981) 30 Cal.3d 220 , 237.) This case is different, in two respects. First, a settlement offer within the policy limits was never actually on the table. In July 2014, AIG demanded payment of £1.6 million — an amount well in excess of the policy limits. It did also offer to participate in alternative dispute resolution; nevertheless, it never committed to accept any lesser amount. Second, there was never any excess judgment. AIG did eventually sue, but Burlington managed to settle that action for the policy limits. Nevertheless, Planet Bingo claims it was damaged because Burlington’s failure to settle before litigation was filed damaged its business reputation and ultimately destroyed its business in the United Kingdom. In its motion for summary judgment, Burlington argued only the first distinction — the absence of an offer to settle within the policy limits. It did not rely on the second distinction — the absence of an excess judgment. It also did not argue that lost profits were not recoverable.7 Thus, it would not be appropriate for us to decide these questions. We leave it open to the trial court to decide whether Planet Bingo can recover lost profits, 7 Burlington did request summary adjudication that it was not liable for Planet Bingo’s claimed lost profits. In its memorandum of points and authorities, however, its only argument regarding lost profits was that they were barred by the statute of limitations. 13 rather than an excess judgment, based on failure to settle.8 We focus instead on whether it matters that there was no offer to settle within the policy limits. “An insurer does not breach the duty to settle if it never had an opportunity to settle. . . . [T]he opportunity to settle is typically shown by proof that the injured party made a reasonable settlement offer within the policy limits and the insurer rejected it. [Citation.]” (Howard v. American National Fire Ins. Co. (2010) 187 Cal.App.4th 498 , 525.)9 For example, in Heredia v. Farmers Ins. Exchange (1991) 228 Cal.App.3d 1345 , a third-party claimant was suing the insureds along with two other alleged joint tortfeasors. (Id. at p. 1349.) He offered to settle for the policy limits; however, because he wanted to avoid a “‘empty chair defense’” by the other two defendants, his offer required that the insureds remain parties through trial, and that the insurer continue to provide them with defense counsel. (Id. at pp. 1349-1350.) The insureds’ attorney made a counteroffer to pay the policy limits and to have the insureds participate at trial, either as witnesses or as 8 Planet Bingo cites and relies extensively on Bodenhamer v. Superior Court (1987) 192 Cal.App.3d 1472 . Bodenhamer, however, goes to whether an insurer can be liable for lost profits and lost reputation based on its failure to settle in the absence of an excess judgment, a question that, as we have concluded, is not raised in this appeal. 9 Planet Bingo cites Insurance Code section 790.03, which requires an insurer, among other things, to “attempt[] in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.” (Id., subd. (h)(5).) However, this statute does not create a private right of action. (Moradi- Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287 , 292, 294, 304.) 14 parties without counsel. (Id. at p. 1350.) The claimant refused this counteroffer. (Ibid.) Eventually, the claimant won an excess judgment. (Id. at p. 1351.) In the subsequent bad faith action, the trial court ruled for the insurer on the ground that there had been no offer to settle within the policy limits. (Heredia v. Farmers Ins. Exchange, supra, 228 Cal.App.3d at p. 1353.) The appellate court agreed that the settlement offer was in excess of the policy limits, because it required the insurer not only to pay the policy limits, but also to continue to provide a defense. (Id. at pp. 1354-1358.) Most important for our purposes, it also agreed that, as a result, the insurer could not be liable for failing to accept the offer. (Id. at pp. 1354-1355.) Walbrook Ins. Co. v. Liberty Mutual Ins. Co. (1992) 5 Cal.App.4th 1445 similarly held that “the duty of good faith compels acceptance of a settlement offer only if the offer is within the insurer’s policy limits [citations] . . . .” (Id. at p. 1457.) Therefore, in assessing bad faith, it ignored a settlement offer the claimant had made that was in excess of the policy limits; it considered only the claimant’s earlier offers, which had been within the policy limits. (Id. at pp. 1457-1458; see id. at pp. 1451-1452; see also McLaughlin v. National Union Fire Ins. Co. (1994) 23 Cal.App.4th 1132 , 1145-1146 [“Plaintiffs cannot prove a pivotal element of their [bad faith] case — namely, a settlement offer within policy limits . . . .”].) Thus, it has been said that “[a]n insured’s claim for bad faith based on an alleged wrongful refusal to settle first requires proof the third party made a reasonable offer to 15 settle the claims against the insured for an amount within the policy limits. [Citation.]” (Graciano v. Mercury General Corp. (2014) 231 Cal.App.4th 414 , 425.) Despite this flat statement in Graciano, however, Boicourt v. Amex Assurance Co. (2000) 78 Cal.App.4th 1390 held that an insurer can be liable for failure to settle even in the absence of a formal offer to settle within the policy limits. There, the claimant asked the insurer to disclose its policy limits. The insurer refused to do so (and did not ask its insured for permission to do so), explaining that it “had a ‘policy not to disclose the amount of the policy limits.’” (Id. at p. 1393.) The claimant then filed suit against the insured and recovered an excess judgment. (Ibid.) He later testified that he would have been willing to settle for the policy limits, had he known what they were. (Ibid.) The appellate court held that a bad faith claim can be based on an insurer’s prelitigation refusal to disclose the policy limits. (Boicourt v. Amex Assurance Co., supra, 78 Cal.App.4th at pp. 1393-1399.) It explained that, in that situation, there is a conflict of interest between the insurer and the insured. (Id. at pp. 1397-1399.) “A conflict of interest can indeed develop without a formal settlement offer being made by the claimant.” (Id. at p. 1397.) “[A] liability insurer ‘“is playing with fire’” when it refuses to disclose policy limits. Such a refusal ‘“cuts off the possibility of receiving an offer within the policy limits’” by the company’s ‘“refusal to open the door to reasonable negotiations.’” [Citation.]” (Id. at p. 1391.) Thus, the court also held that “a formal settlement offer is not an absolute prerequisite to a bad faith action . . . .” (Id. at p. 1399.) 16  Boicourt has been read broadly, as standing for the proposition that “[a] formal settlement demand is not an absolute prerequisite to a bad faith action when the insurer engages in conduct that prevents settlement opportunities from arising . . . .” (Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2020) ¶ 12:293, p. 128- 17 (Croskey); see also Reid v. Mercury Ins. Co. (2013) 220 Cal.App.4th 262 , 266, 272.) We need not decide whether this broad reading is correct, however, because we can decide the case on a narrower ground. At a minimum, Boicourt means that the existence of an opportunity to settle within the policy limits can be shown by evidence other than a formal settlement offer. In Boicourt itself, the claimant’s request for disclosure of the policy limits suggested an interest in settling within those limits. As the court stated, “the relevance of disclosure of policy limits to the settlement of an underlying claim cannot be gainsaid.” (Boicourt v. Amex Assurance Co., supra, 78 Cal.App.4th at p. 1393, italics omitted.) The claimant testified that he would have settled for the policy limits. (Ibid.) The court left to be determined, on remand, “Whether [the] request for policy limits represented a genuine opportunity to settle an excess claim within policy limits . . . .” (Id. at p. 1399.) It is significant that AIG was claiming as subrogee, and its letter was a subrogation demand letter. Planet Bingo’s expert witness testified that a subrogation demand letter “offers a clear invitation to negotiate a settlement for less than that amount . . . .” She also testified that there is a “very well[-]known industry custom in such subrogation 17 claims of accepting policy limits for a full release o[f] the insured.”10 This raised a triable issue of fact as to whether the letter represented an opportunity to settle within the policy limits. Rather than respond to the letter, less than a month later, Burlington denied coverage. As we held in the previous appeal, this denial of coverage was improper. There was at least a potential for coverage, depending on whether Planet Bingo was ultimately sued in the United States or Canada. The policy specifically stated that, even before any suit was filed, Burlington would cover an occurrence in the United Kingdom, provided Planet Bingo’s liability was determined “[i]n a settlement [Burlington] agree[d] to.”11 Planet Bingo also contends that there is a triable issue of fact as to whether Burlington is liable for conducting an inadequate prelitigation investigation. We do not address this contention. What we have already said means that Burlington was not entitled to summary judgment. It did not move for summary adjudication, except on whether it could be liable for punitive damages. (See Cal. Rules of Court, rule 3.1350(b) 10 This is not a case in which the offer to settle was ambiguous or incomplete. (Cf. Betts v. Allstate Ins. Co. (1984) 154 Cal.App.3d 688 , 708, fn. 7; Allen v. Allstate Ins. Co. (9th Cir. 1981) 656 F.2d 487 , 490.) AIG’s demand was what it was — and it was over the policy limits. The only uncertainty was not as to the demand itself, but only as to whether further negotiation might produce a new and different demand, within policy limits. Thus, Burlington cannot be liable for failure to seek clarification. 11 We agree that Burlington cannot be liable for failing to settle during the period from March 2009 through July 2014. During that time, Burlington never received an offer to settle that was within the policy limits. Leisure and Beacon consistently demanded at least $2.6 million (and sometimes more). 18 [motion for summary adjudication must specify “the specific cause of action, affirmative defense, claims for damages, or issues of duty”].) Moreover, a motion for summary adjudication may be granted “only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1).) Our holding means that Burlington was not entitled to summary adjudication on any entire cause of action on the ground that it was not liable for failure to settle. Thus, the trial court erred by granting summary judgment on this ground. V THE STATUTE OF LIMITATIONS “‘We affirm the trial court’s decision if it is correct on any ground the parties had an adequate opportunity to address in the trial court, regardless of the reasons the trial court gave.’ [Citation.]” (Wolf v. Weber (2020) 52 Cal.App.5th 406 , 410.) Burlington therefore contends that, even if there is a triable issue as to breach of contract or bad faith, those causes of action are barred by the statute of limitations. The trial court ruled that Burlington had forfeited the statute of limitations as a defense by not properly pleading it in its answer. We will assume, without deciding, that this was incorrect and this defense was not forfeited. Planet Bingo filed this action in February 2016. The limitations period for a cause of action for breach of an insurance policy is four years. (Code Civ. Proc., § 337, subd. (a); Croskey, ¶ 12:1138, p. 120-10.) The limitations period for a cause of action for breach of the implied covenant of good faith and fair dealing is four years, if contract 19 damages are sought (Archdale v. American Internat. Specialty Lines Ins. Co. (2007) 154 Cal.App.4th 449 , 471), or two years, if tort damages are sought. (Code Civ. Proc., § 339, subd. 1; Richardson v. Allstate Ins. Co. (1981) 117 Cal.App.3d 8 , 13.) As we held in part IV, ante, there is evidence that Burlington wrongfully failed to settle in August 2014. Accordingly, this action, filed less than two years later, was timely on either theory. Planet Bingo first noticed that it was starting to lose business, allegedly due to Burlington’s failure to settle, in 2010 or 2011. Burlington therefore argues that that was when Planet Bingo’s claim accrued. To the extent that Planet Bingo’s causes of action sound in contract, it could ignore any breaches in 2010 and 2011 and sue only when the contract was definitively breached in 2014. “[W]hen there are ongoing contractual obligations the plaintiff may elect to rely on the contract despite a breach, and the statute of limitations does not begin to run until the plaintiff has elected to treat the breach as terminating the contract. [Citation.]” (Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479 , 489.) To the extent that Planet Bingo’s causes of action sound in tort, Planet Bingo argues that it is entitled to equitable tolling. It has been held that “[t]he statute of limitations for actions on insurance claims is equitably tolled from the time the insured notifies the insurer of the claim until coverage is denied. [Citation.]” (Marselis v. Allstate Ins. Co. (2004) 121 Cal.App.4th 122 , 124.) Burlington raises several arguments as to why such equitable tolling does not apply here. 20  We need not decide the equitable tolling question. We may assume that Planet Bingo’s tort claim for damages between March 2009 and August 2014, to the extent that it is based on either a failure to settle or an inadequate investigation, is time-barred.12 Even if so, Burlington committed a new and independent tort by failing to settle in August 2014. The record shows that Planet Bingo continued to lose business in the United Kingdom from 2014 through 2019. Thus, at a minimum, Planet Bingo’s tort claim, to the extent that it is based on this failure to settle, is not time-barred. Burlington also argues that Planet Bingo’s original complaint did not allege any lost profits or any damages to its business reputation; it alleged these for the first time when it filed its second amended complaint, in April 2019. According to Burlington, these allegations do not relate back to the original complaint, and therefore any claim for such damages is time-barred. Burlington did not raise this argument in its motion for summary judgment. It raised it for the first time in its reply brief, and then only in a footnote. Planet Bingo never had an opportunity to respond to it. Accordingly, this argument is not properly presented. (Paramount Petroleum Corp. v. Superior Court (2014) 227 Cal.App.4th 226 , 244.) But it lacks merit in any event. 12 As we held in part IV, ante, Planet Bingo cannot recover lost profits during this period on a failure to settle theory, even aside from the statute of limitations. 21  “The relation-back doctrine allows an amendment filed after the statute of limitations has run to be deemed filed as of the date of the original complaint ‘“provided recovery is sought in both pleadings on the same general set of facts.”’ [Citation.] ‘In order for the relation-back doctrine to apply, “the amended complaint must (1) rest on the same general set of facts, (2) involve the same injury, and (3) refer to the same instrumentality, as the original one.”’ [Citation.]” (Bridgeman v. Allen (2013) 219 Cal.App.4th 288 , 296.) In this context, there is a difference between an injury and the damages that flow therefrom. “A claim for different damages does not indicate there are different injuries. Rather, injuries may encompass the same primary rights. [Citation.]” (Honig v. Financial Corp. of America (1992) 6 Cal.App.4th 960 , 966.) Thus, “an amendment seeking new damages relates back to the original complaint if such damages resulted from the same operative facts — i.e., the same misconduct and the same injury — previously complained of. [Citation.]” (Amaral v. Cintas Corp. No. 2 (2008) 163 Cal.App.4th 1157 , 1200.) The injuries here were the injuries to Planet Bingo’s primary rights under the policy and under the implied covenant of good faith and fair dealing. They are the flip side of Burlington’s alleged misconduct — its inadequate investigation and its failure to settle. Thus, the lost profits alleged in the second amended complaint resulted from the same misconduct and the same injuries that were alleged in the original complaint. 22  We therefore conclude that Burlington was not entitled to summary judgment based on the statute of limitations. VI DISPOSITION The judgment is reversed. Because the trial court granted summary judgment, it never ruled on Burlington’s request for summary adjudication “that [Burlington] cannot be liable for punitive damages.” On remand, the court is directed to rule on this aspect of the motion. It may, in its discretion, receive additional briefing, evidence, or argument; however, it is not required to do so. (See City of Los Angeles v. Shell Oil Co. (1971) 4 Cal.3d 108 , 128.) It is directed either (1) to set a briefing and/or hearing schedule or (2) to order that the motion for summary adjudication is submitted, within 90 days after our remittitur issues; it may extend this deadline, on a party’s motion or on its own motion, for good cause shown. Planet Bingo is awarded costs on appeal against Burlington. CERTIFIED FOR PARTIAL PUBLICATION RAMIREZ P. J. We concur: McKINSTER J. SLOUGH J. 23

2021-03-18 20:02:33.258598+00

https://www.courts.ca.gov/opinions/nonpub/B300586.PDF

Filed 3/18/21 Walstad v. Maloney CA2/6 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SIX DAVID WALSTAD, 2d. Civil No. B300586 (Super. Ct. No. 56-2016- Plaintiff and Appellant, 00479026-PR-TR-OXN) (Ventura County) v. EILEEN MALONEY et al., as Trustees, etc., Defendants and Respondents. Eileen Maloney and Patricia Farber are co-trustees of the Lambert Loucks Trust. In May 2017, the co-trustees petitioned for approval of the Trust accounting covering the period from November 2006 to March 2017. Trust beneficiary David Walstad objected. The probate court overruled Walstad’s objections, approved the accounting, and entered judgment. Walstad contends: (1) the co-trustees charged the Trust unreasonable fees, (2) the co-trustees should have rented out a residence owned by the Trust during the eight years prior to selling it, (3) we should order disgorgement of all co-trustee fees, (4) he is entitled to double damages and attorney fees, and (5) the probate court should have admitted an appraiser’s estimate into evidence.1 We affirm. FACTUAL AND PROCEDURAL HISTORY A. The Trust Loucks executed the Trust in July 1981. He amended it several times, including to appoint Maloney (his daughter-in- law) and Carol Milligan (his longtime bookkeeper) as co-trustees. Milligan served in that role until her death in 2014, at which time Farber (Loucks’s former accountant) became a co-trustee. She and Maloney continue to serve as co-trustees. As a co-trustee, Maloney regularly met with Trust administrators, including financial advisors, attorneys, accountants, and bookkeepers. She compiled materials for the Trust’s estate tax return, provided input to those managing Trust assets, paid utilities on Trust properties, and sorted through Trust possessions. She received monthly trustee fees for performing these duties from January 2007 (two months after Loucks’s death) to April 2015. In total, she was paid nearly $275,000 in fees (about $2,700 per month). The Trust paid Milligan $800 in monthly bookkeeping fees, the same amount Loucks had paid her during his lifetime. In total, the Trust paid Milligan $76,100 between December 2006 and August 2014. Farber has never been paid for her services as a co- trustee. 1 Walstad also urges us to disregard Maloney’s testimony as not credible. That argument was for the probate court, not us. (People v. Superior Court (Keithley) (1975) 13 Cal.3d 406 , 410.) 2  B. The residence When Loucks died in 2006, Trust assets were valued at nearly $9 million. Among the Trust’s properties was Loucks’s Camarillo residence. The residence was built in the 1950s, and was virtually unchanged over the next six decades: The carpet was worn, the walls were “dripping with . . . nicotine” from cigarette smoke, the septic tank was unusable, and the plumbing and electrical systems needed to be replaced. There was no hot water, no heat, and no air conditioning. The exterior of the residence was similarly dilapidated. There was fungus and dry rot around the eaves. Shrubs and trees were overgrown. Rodent holes riddled the backyard. The pool—which was just inches from the residence— had begun to sink. 1. Delays in selling the residence Maloney engaged a realtor in early 2007 to evaluate the residence for sale. The realtor told Maloney that the residence would need extensive repairs before it could be sold: a new septic tank, new plumbing, a new hot water heater, a new furnace, new electrical and ducting systems, new carpet and paint, new pool equipment, and extensive landscaping. The realtor estimated that the market value would be between $630,000 and $660,000 after these repairs were completed. It would be difficult to sell the residence—even for a significantly reduced price—without completing the repairs. Maloney asked about renting out the residence, and the realtor said that could only be done after the repairs were completed. The following year, Maloney hired an independent appraiser to estimate the value of the Camarillo residence for the 3 Trust’s tax return. The appraiser determined that the residence was worth $1,265,000 on the date of Loucks’s death. Over the next four years, the realtor regularly visited the residence and updated Maloney on developments in the housing market. In her view, the market had deteriorated so significantly that selling the residence would net the Trust hundreds of thousands of dollars less than what it was worth— even after spending $80,000 to $100,000 on repairs. Renting out the residence would require the same repairs, but even if Maloney was able to find suitable tenants the unsecured swimming pool would pose major safety and liability concerns. Even then, the most the co-trustees could expect potential tenants to pay was about $1,800 to $2,100 per month—meaning it would take years before the Trust could recoup the cost of repairs. Maloney and her co-trustee decided to wait to sell or rent out the residence. Maloney maintained the residence until 2014. She tended to the irrigation system and avocado groves surrounding the property. She provided access to gardeners and pool maintenance workers. She secured several bids for the repair work. Walstad occasionally asked Maloney about plans to sell the residence. Maloney told him that they had delayed doing so due to its dilapidated condition and the collapsing housing market. Walstad never asked Maloney to sell or rent the residence. He did not request an accounting or to see any Trust records prior to 2014. 2. The residence sells in 2015 By 2014, Maloney and the realtor had determined that the housing market had improved enough that it made sense 4 to renovate the residence and list it for sale. Maloney oversaw the repairs, which cost $82,000 and took eight months to complete. Maloney spent several hours each day on the renovation and repair project, but received no compensation for her work. The residence sold in January 2015 for $1,050,000. Maloney received no compensation in connection with the sale. Afterward, Walstad thanked her for a “job well done” and congratulated her “on the success of [her] tireless efforts.” C. The accounting Walstad filed a petition for an accounting in March 2016. The probate court granted Walstad’s petition in March 2017.2 In May, the co-trustees petitioned for approval of the accounting covering the period from November 2006 to March 2017. Walstad objected to the co-trustees’ petition. The matter went to trial in February 2019. Walstad’s expert witness testified that the Trust could have earned more than $330,000 from renting out the residence from 2007 through 2014. He testified that the residence would have sold for $1.2 million in “as is” condition on the date of Loucks’s death. He based his estimate, in part, on that of the appraiser Maloney hired in 2008 to assist with the Trust’s tax return, which Walstad moved to admit into evidence. The probate court took Walstad’s motion under submission. 2 Walstad requests that we take judicial notice of the order granting his petition. We grant this request insofar as Walstad asks us to notice the existence of the order (Evid. Code, § 452, subd. (d)), but deny it insofar as he requests us to notice the findings underlying it (People v. Superior Court (Vasquez) (2018) 27 Cal.App.5th 36 , 69, fn. 21). 5  The court issued its tentative decision in June. The court found that the co-trustees’ compensation was not excessive, and that it was reasonable to wait for the housing market to improve before renting or selling the residence. The tentative decision did not resolve Walstad’s request to admit the appraiser’s estimate into evidence. Walstad did not object to the tentative decision, and the court adopted it as the final decision. DISCUSSION Trustee fees Walstad first contends the probate court erred when it determined that the fees paid to the co-trustees were reasonable. We disagree. A trustee may be entitled to compensation for performing trust duties. (Estate of McLaughlin (1954) 43 Cal.2d 462 , 467.) The reasonableness of that compensation depends on the circumstances of each case. (Id. at pp. 467-468.) Among the factors the probate court should consider include the success of the trustee’s administration, whether that administration involved routine work or unusual skill and expertise, the fidelity shown by the trustee, and the time the trustee spent performing their duties. (Cal. Rules of Court, rule 7.776.) We review for substantial evidence. (Estate of Gilliland (1971) 5 Cal.3d 56 , 59.) Substantial evidence supports the probate court’s determination that the co-trustees’ fees were reasonable. The residence sold for more than $1 million—more than 60 percent higher than the realtor’s estimated value in 2007. The co-trustees showed dedication to the Trust, performing significant work over the years: Maloney regularly met with Trust administrators, compiled materials and documents, and sorted through and disposed of Trust property. She spent hundreds (if 6 not thousands) of hours managing the residence and its surrounding grounds, including a nearly year-long stint overseeing a significant repair and renovation project—a project for which she received no compensation. Milligan remained similarly dedicated to the Trust and its administration, continuing to act as Trust bookkeeper after Loucks’s death. These factors support the probate court’s determination that the co-trustees’ fees were reasonable. Renting the residence Walstad next contends the probate court erred when it concluded that the co-trustees reasonably declined to rent out the residence during the eight years prior to its sale. We again disagree. A trustee has the duty to “invest and manage trust assets as a prudent investor would,” exercising “reasonable care, skill, and caution” in doing so. (Prob. Code,3 § 16047, subd. (a).) This includes the duty to “make the trust property productive under the circumstances and in furtherance of the purposes of the trust.” (§ 16007.) But even if a trustee fails to perform these duties, a probate court may excuse that failure if it determines that they “acted reasonably and in good faith under the circumstances.” (§ 16440, subd. (b).) We review for substantial evidence. (Orange Catholic Foundation v. Arvizu (2018) 28 Cal.App.5th 283 , 292 (Orange Catholic).) Substantial evidence supports the probate court’s determination that the co-trustees acted reasonably and in good faith when they declined to rent out the residence between 2007 and 2014. The evidence admitted at trial showed that the residence was uninhabitable and in need of more than $80,000 in 3 Unlabeled statutory references are to the Probate Code. 7 repairs. Those repairs would have had to be completed before the residence could be rented. And once completed, there remained safety and liability concerns due to the unsecured pool at the residence. Walstad’s conclusory assertions to the contrary notwithstanding, these circumstances support the determination that the co-trustees acted properly when they decided to wait for the housing market to recover before undertaking the necessary repairs. (Orange Catholic, supra, 28 Cal.App.5th at pp. 294-295.) Disgorgement Next, Walstad claims we should order the co-trustees to disgorge and repay all the fees they earned from the Trust because they “stipulated” that his 2016 petition for accounting was granted in “all respects.” But he cites nothing in the record to support this claim. (Cf. Alki Partners, LP v. DB Fund Services, LLC (2016) 4 Cal.App.5th 574 , 590, fn. 8 [declining to consider assertion unsupported by citation to record]; Cal. Rules of Court, rule 8.204(a)(1)(C) [briefs must “[s]upport any reference to a matter in the record by a citation to the volume and page number of the record where the matter appears”].) Nothing in the probate court’s ruling on his petition suggests that it was granted in “all respects.” Walstad moved the court to consolidate his petition for an accounting and the co-trustees’ petition for approval of the accounting for trial. Consolidation would have been unnecessary had the probate court granted his petition in “all respects.” Double damages and attorney fees Walstad next invites us to order the co-trustees to pay double damages to the Trust, plus his attorney fees. We decline this invitation. 8  A person who files a petition pursuant to section 850 may recover double damages from “a person [who] has in bad faith wrongfully taken, concealed, or disposed of property belonging to . . . a trust” plus their attorney fees and costs. (§ 859.) But Walstad points to nothing in the record showing that he filed a section 850 petition. And even if he did, he points to nothing in the record showing that he provided the co-trustees with 30 days’ notice of his request (§ 851, subd. (a)) or a description of the relief he sought (id., subd. (c)(2)). The probate court thus did not abuse its discretion when it denied Walstad’s request for section 859 relief.4 (Estate of Roberts (1990) 225 Cal.App.3d 1017 , 1020-1022 [abuse of discretion to grant motion that does not comply with statutory requirements].) The appraiser’s estimate Finally, Walstad contends the probate court erred when it did not rule on his request to admit into evidence the appraiser’s estimate of the residence’s value. But Walstad did not object to the court’s tentative decision or otherwise point out the court’s omission of his request. His contention is forfeited. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130 , 1133-1134.) It also lacks merit. The appraiser’s estimate was hearsay (In re Marriage of Smith (1978) 79 Cal.App.3d 725 , 752- 753), and Walstad cites no authority for his claim that it was admissible pursuant to Evidence Code section 1222 as the statement of a party-opponent. And even if it were, exclusion of 4 We also reject Walstad’s argument, made for the first time on appeal, that we should direct the probate court to exercise its equitable powers and order the co-trustees to pay his attorney fees. (Willden v. Washington Nat. Ins. Co. (1976) 18 Cal.3d 631 , 636, fn. 5.) 9 the appraisal was clearly harmless: The probate court knew that Maloney had obtained the appraisal, and Walstad’s own expert discussed it as the basis for his valuation of the residence. Moreover, information “identical” to that in the appraisal was admitted into evidence as part of the Trust’s estate tax return. It is thus not reasonably probable that admission of the original appraisal would have affected the probate court’s decision. (In re Marriage of Smith, at p. 751.) DISPOSITION The judgment is affirmed. Maloney and Farber shall recover their costs on appeal. NOT TO BE PUBLISHED. TANGEMAN, J. We concur: YEGAN, Acting P. J. PERREN, J. 10  Kevin G. DeNoce, Judge Superior Court County of Ventura ______________________________ Catanese & Wells, T. Randolph Catanese and Douglas R. Hume for Plaintiff and Appellant. Ferguson Case Orr Paterson, David B. Shea and Joshua S. Hopstone for Defendants and Respondents.

2021-03-18 20:02:33.903629+00

https://www.courts.ca.gov/opinions/nonpub/A159455.PDF

Filed 3/18/21 P. v. Valiente CA1/5 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 FIVE THE PEOPLE, A159455 Plaintiff and Respondent, (Solano County v. Super. Ct. No. VCR232201) ALEXANDER GALVEZ VALIENTE, Defendant and Appellant. Alexander Galvez Valiente appeals his conviction for two counts of lewd acts on a child under the age of 14 (Pen. Code, § 288, subd. (a)), contending that the evidence was insufficient to support his convictions. Because his appeal lacks merit, we affirm. BACKGROUND Valiente’s convictions are based on two incidents involving his niece, M.H. When she was in her twenties, M.H. reported that Valiente had molested her when she was a child. The incidents occurred at a house in Vallejo, California (“Vallejo house”) where Valiente had resided, and where M.H. attended family gatherings and occasionally slept overnight. In addition to Valiente, M.H.’s aunt and grandparents resided in the home. 1  According to M.H., in one of the incidents (the living room incident), Valiente approached her when she was laying on her stomach in the living room at the Vallejo house, watching cartoons one morning after having slept over. M.H. was wearing pink pajamas with flowers on them, and Valiente was wearing olive green plaid pajama pants. Valiente flipped her over onto her back by grabbing her torso on the sides of her stomach, and then lay on top of her, thrusting his penis against her vaginal area through her clothes. She felt Valiente’s body weight on top of hers and felt a lot of pressure from his penis against her vagina. Because it hurt, M.H. said “owe,” and Valiente stopped and got off of her. The incident lasted for about a minute. M.H. testified inconsistently about her age when the incident happened, stating at various points that she was six, seven, or eight at the time. In the other incident (the sleeping bag incident), M.H. had slept overnight in a sleeping bag on the floor of the master bedroom of the Vallejo house. After her aunt woke up and left the room, Valiente got into M.H.’s sleeping bag behind her, in a spooning position. The two were laying on their left sides. Valiente brushed his right hand along M.H.’s body, from her right calf to her hip to her vagina. He touched her vagina through her clothes for a few seconds. M.H. was between the ages of seven and ten at the time. Valiente testified at trial and denied the allegations. After the jury returned guilty verdicts, the trial court sentenced Valiente to a total of eight years in prison, suspended the sentence, and placed Valiente on three years of probation. The court sentenced Valiente to serve 364 days in custody and imposed $1,070 in fines and fees. 2  DISCUSSION In considering Valiente’s contention that there was insufficient evidence to support his convictions, we review the record for substantial evidence from which a reasonable trier of fact could have found the essential elements of the crime beyond a reasonable doubt. (People v. Morales (2020) 10 Cal.5th 76 , 88.) We “ ‘review the evidence in the light most favorable to the prosecution and presume in support of the judgment the existence of every fact the [trier of fact] could reasonably have deduced from the evidence.’ ” (People v. Lee (2017) 11 Cal.App.5th 344 , 353 (Lee).) We may not resolve credibility issues or evidentiary conflicts because those are “ ‘the exclusive province of the trier of fact.’ ” (People v. Gomez (2018) 6 Cal.5th 243 , 280-281 (Gomez).) Applying these standards, we affirm the convictions. A. Pointing to M.H.’s conflicting testimony about her age at the time of each incident, Valiente contends there was insufficient evidence to support his convictions. We disagree. Although M.H. was uncertain about how old she was when the incidents of abuse occurred, she was certain that they took place while Valiente resided at the Vallejo house.1 She testified that the living room incident happened when she was about six years old, when she was “about seven,” or when she was seven or eight years old. She also testified that she thought she was in the first or second grade at the 1In light of M.H.’s consistent testimony that both incidents occurred at the Vallejo house, we reject Valiente’s suggestion that the Solano County Superior Court did not have jurisdiction over the case because the incidents may have occurred while he resided in Marin County. 3 time. With respect to the sleeping bag incident, M.H. estimated that she may have been seven, eight, or nine at the time, or possibly as old as 10 years old. M.H. indicated that she could “not exactly” remember what her age was at the time of the two incidents and that they happened “a while ago.” She also testified that notwithstanding her inability to remember exactly old she was, she was “a hundred percent confident” that Valiente got on top of her and tried to “dry hump” her in the living room. Likewise, although she could not remember her exact age, she testified that she was “a hundred percent confident” that Valiente got into her sleeping bag and touched her leg and vagina. She described the incidents of molestation in detail, including the time of day, the exact location inside the house, the duration, Valiente’s actions, and her body position relative to his. The inconsistencies concerning M.H.’s age do not undermine the convictions here. First, we disagree with Valiente’s assertion that the living room incident described by M.H. was impossible or highly improbable because he did not move into the Vallejo house until February of 2003. (See Gomez, supra, 6 Cal.5th at p. 281 [appellate court must defer to trier of fact’s resolution of inconsistencies in testimony “in the ‘absence of patent falsity, inherent improbability, or other reason to question [the testimony’s] validity’ ”].) At that time, M.H. would have been eight years old, which was consistent with her testimony at one point that she was seven or eight years old at the time of the living room incident. Contrary to Valiente’s claim, M.H. never testified that she was five years old at the time of the living room incident. She testified that instances of inappropriate conduct by 4 Valiente occurred when she was between the ages of five and twelve. When defense counsel asked her directly what happened when she was five years old, she testified that no specific incident occurred at that time, but she “felt that he was always looking for me.” Second, M.H.’s precise age was immaterial so long as she was younger than age 14, as required for a conviction under Penal Code section 288, subdivision (a). The prosecution charged both counts of lewd acts as having occurred between July 29, 1999 and July 28, 2007, and M.H.’s testimony was not only consistent with the charged time period, but established that the acts occurred when she was younger than 14. (See People v. Garcia (2016) 247 Cal.App.4th 1013 , 1022 [“ ‘The law is clear that, when it is charged that an offense was committed “on or about” a named date, the exact date need not be proved unless the time “is a material ingredient in the offense” (Pen. Code, § 955), and the evidence is not insufficient merely because it shows that the offense was committed on another date.’ ”].) Third, although M.H. provided inconsistent testimony about her age, it was the jury’s role to evaluate her credibility – not ours. By the time of trial, well over a decade had passed since the time of the incidents, and it would not have been unreasonable for the jury to conclude that M.H. could remember the incidents themselves without remembering the precise timing. For example, in People v. Mejia (2007) 155 Cal.App.4th 86 , the court rejected the defendant’s challenge to the sufficiency of the evidence where the victim testified that defendant molested her more than two times in one month, but later testified that he molested her “ ‘about once’ ” that month and that she could not remember much about that month. (Id. at pp. 98-99.) In 5 such circumstances, “a reasonable juror could have understood her as merely explaining that she could not recall the precise number of times she suffered abuse at defendant’s hands during that month, which was consistent with her prior testimony that there had been at least two instances of abuse that month.” (Ibid.) Ultimately, “the contradictions in the victim’s testimony did not render it impossible to believe or obviously false, but merely presented the jury with a credibility determination that is not reviewable on appeal.” (Id. at p. 99; see also, e.g., People v. Tompkins (2010) 185 Cal.App.4th 1253 , 1261 [“Even though [the victim’s] testimony at trial was somewhat inconsistent” concerning the number of incidents, “the inconsistency went only to the weight and credibility of the evidence and, on appeal, we do not disturb the jury's resolution of that inconsistency.”].) B. We likewise reject Valiente’s contention that otherwise accepting M.H.’s testimony concerning the sleeping bag incident as true, the incident she described was physically impossible. According to M.H., she and Valiente were both were laying on their left sides in the sleeping bag, facing the same direction. Valiente was behind M.H. in a spooning position, with his groin area touching her buttocks. M.H.’s right leg was on top of her left. Valiente touched M.H.’s right calf with his right hand and brushed his hand along her body. As M.H. described, Valiente “started with my right calf and then he scooted his fingers up on my hips and went over my vaginal area.” Valiente touched her vagina through her clothes for “a couple of seconds.” 6  We disagree with Valiente’s assertion that “[a]natomically speaking,” he could not have touched M.H.’s vagina as she described. It would have been entirely reasonable for the jury to conclude that since Valiente was laying on his left side, close behind M.H., he could have reached toward her right calf with his right hand, moved his hand upward along her body toward her right hip, and then moved his hand from her right hip to her vaginal area, between her legs. Although M.H. did not provide a second-by-second account of every place on her body that Valiente touched when moving his hand from her right hip to her vaginal area, we must “ ‘presume in support of the judgment the existence of every fact the [trier of fact] could reasonably have deduced from the evidence.’ ” (Lee, supra, 11 Cal.App.5th at p. 353.) C. Finally, we are unpersuaded by Valiente’s argument that the evidence supporting the convictions was insufficient because the prosecution did not introduce evidence other than M.H.’s testimony to corroborate her account. Although Valiente emphasizes that there was no physical or medical evidence, he does not explain why such evidence would be expected in a case involving lewd touching of a child through her clothes, where the offenses were not reported until over a decade later. In any event, and as Valiente acknowledges, the testimony of a single eyewitness is generally sufficient to support a conviction. (See Gomez, supra, 6 Cal.5th at p. 281). Corroboration of a child victim’s “testimony is not a necessary element of proof in a prosecution for lewd acts on a child under 14.” (People v. Harlan (1990) 222 Cal.App.3d 439 , 451.) 7  DISPOSITION The judgment is affirmed. 8  _______________________ BURNS, J. We concur: ____________________________ NEEDHAM, ACTING P.J. ____________________________ SELIGMAN, J.* A159455 * Judge of the Superior Court of Alameda County, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. 9

2020-01-17 22:01:32.613466+00

Phillips

*1433OPINION. Phillips : The first allegation of error is that the Commissioner included as taxable income for 1920 an amount of $9,362.36 which was, in fact, earned in previous years. The respondent concedes that such an error was made and that taxable income for 1920 was overstated by that amount. A second group of errors assigned arises out of recoveries made in the taxable years from debts previously charged off. During 1920 the petitioner made recoveries on items previously charged off as follows: (1) Knadler & Lucas_$2,100.00 (2) Louisville Brick Co_ 2,120. 00 (3) Louisville College of Dentistry_ 212.20 (4) American Standard Asplialt Co- 4,160.00 (5) Highland Park Bank_ 150.92 (6) Fred G. Jones Lumber Co_ 7, 500.00 In 1921 it made such recoveries as follows: Louisville Brick Co_ 1, 636.92 Highland Park Bank_ 30.19 The Commissioner included the amount of such recoveries as income for the respective years. The respondent conceded that the amount recovered from the American Standard Asphalt Co. in 1920 was not income, leaving for determination the question whether the balance of the recoveries should be included in computing income. The evidence shows that petitioner’s vice president had charge of its loan department and that it was his practice to charge off all overdue accounts, as soon as they became past due. From the record it appears that the debts in question were not worthless when they were charged off, nor had there been any ascertainment of worthlessness. Prior to 1921 there was no provision for charging off a debt which was worthless in part. The statute is specific in the statement that debts are to be deducted in the year when ascertained to be worthless. No option is allowed to deduct them at any other time. In such circumstances no deduction could properly be claimed or allowed in these earlier years. Greenville Textile Supply Co., 1 B. T. A. 152; Steele Cotton Mill Co., 1 B. T. A. 299; First National Bank of Durant, Okla., 6 B. T. A. 545; Houck Co., Ltd., 7 B. T. A. 670. *1434This case does not fall within the regulation of the Commissioner that where debts have been ascertained to be worthless and charged off, any collection is to be included in income, and we are not called upon to discuss the soundness of that regulation. Here there was no ascertainment of worthlessness and consequently no proper deduction in the former year. There is no charge and no evidence that there was any fraud or misrepresentation in connection with the deductions claimed in the earlier years. The mistakes made in claiming and allowing the deductions for prior years may not be corrected by including the amounts collected as income in the year of collection. The proper remedy is to adjust the tax for such prior years. It is suggested that the period within which any additional taxes for such prior years may be assessed has expired. With respect to the situation created by the expiration of the statutory period, we said in Macmillan Company, 4 B. T. A. 251: * * * We can n0£ concede, however, that the filing of amended returns, showing correct computations of net income for prior years, can be made a condition to correct determination of a taxpayer’s liability for income and profits taxes for subsequent years. The fact that a taxpayer has paid lower taxes for prior years than those which were rightfully due, because of erroneous computations of taxable income, and that the statute of limitations now bars the assessment and collection of any deficiency for those years, does not justify any erroneous computation of its tax liability for any subsequent year. Appeal of Goodell-Pratt Co., 3 B. T. A. 30. Income and profits taxes are levied with respect to annual periods, and each annual period must necessarily stand by itself. Appeal of Atkins Lumber Co., 1 B. T. A. 317. We are of the opinion that the Commissioner was in error in ■adding to taxable income the amount received in 1920 and 1921 from the above mentioned accounts. The petitioner further contended that its invested capital for 1920 has been improperly reduced by $33,746, being the amount of certain debts erroneously written off in prior years as follows: (1) Knadler & Lucas_$2,100.00 (2) Louisville Brick Co_ 5,374. 02 (3) Louisville College of Dentistry_ 14, 930. 00 (4) American Standard Asphalt Co_ 4,160. 00 (5) Highland Park Bank_ 226. 38 (6) Fred G. Jones Lumber Co_ 7,500.00 (7) International Traction Co_ 3,000. OO (8) S. Lilienthal- 1, 455.60 The respondent admits error in reducing invested capital by the items identified above as (4), (7), and (8). The remaining items are those which we have discussed above. They had not been ascertained to be worthless prior to the taxable year involved and were therefore improperly excluded from the computation of invested capital. For 1921 the Commissioner reduced invested capital by *1435$19,502.88 on account of some of these same items. For the reasons given above such reduction was erroneous. It is alleged that the Commissioner erred in refusing to allow as deductions expenditures of $5,497 and $6,125.96 in the years 1920 and 1921, respectively, for savings banks which were used as advertising novelties. These were in the form of miniatures of the Liberty Bell. The evidence shows that the “ Liberty Bell Banks ” were distributed by petitioner for three purposes; to obtain new depositors, to advertise petitioner’s business and name, and to stimulate and encourage thrift in the community. Solicitors were engaged to call from house to house and offer a bank to those who opened new accounts with petitioner. Advertisements depicting the banks and offering to give them to new depositors were displayed in newspapers. These banks could not be opened unless they were brought to petitioner’s place of business or unless they were forcibly broken open. A supply of these banks was on hand at the close of each of the years involved and, as no record of their number was kept, it is not possible to determine the cost of those distributed. On this basis alone it might be necessary to approve the Commissioner, but we prefer to rest our decision on a broader ground. In several cases we have pointed out that expenditures for advertising and promotion may create or increase the value of an asset in the nature of a trade name or good will. We have pointed out that in such cases it would be proper to capitalize that portion of such expenditures that can properly be said to be directed toward such an object. Northwestern Yeast Co., 5 B. T. A. 232; Richmond Hosiery Mills, 6 B. T. A. 1247; aff'd. 29 Fed. (2d) 262. The difficulty is a practical one in determining what portion represents a current expense of the business of the year and what portion is properly to be attributed to future years. We are satisfied that in the instant case the usefulness of these banks as an advertisement for the petitioner did not cease with the taxable year. The Commissioner has allowed 25 per cent of their cost to be written off each year until the whole is recovered. There is nothing which would lead us to believe that this is not a proper period over which to distribute the cost of these banks. The remaining contention of petitioner is that debts of the Kentucky Wagon Manufacturing Co. and the Wolke Lead Batteries Co. were recoverable only in part in 1921 and that a deduction should be allowed. The Revenue Act of 1921 provided in section 234(a) that there should be allowed as deductions: .(5) Debts ascertained to be worthless and charged oft during the taxable year (or in the discretion of the Commissioner a reasonable addition to a reserve for bad debts) ; and when satisfied that a debt is recoverable only in part the Commissioner may allow such debt to be charged off in part. *1436The revenue acts prior to that of 1921 had allowed as deductions only “ debts ascertained to be worthless and charged off during the taxable year.” Under such prior acts no deductions were allowed for reserves for debts which were worthless in part. It was only when the debt was ascertained to be wholly worthless that a deduction could be allowed. We must assume that Congress did not intend that a deduction should be allowed for a part of a debt, in the year in which it became worthless in part, and for the whole debt when it was ascertained to be wholly worthless and charged off. A literal construction of the statute might lead to that result. The proper interpretation would seem to be that the partial indebtedness must be ascertained and the amount charged off during the taxable year. In other words, the amount charged off is to be allowed as a deduction if, in fact, the charge-off is justified by an ascertainment that the debt is worthless to the extent written off. This is the interpretation placed upon the statute by regulations and in effect accepted by Congress by reenacting the section without change in subsequent acts. We are, therefore, of the opinion that it is incumbent upon the petitioner to establish not only that the debts were worthless in part, but that they were charged off. The evidence shows that at the beginning of the taxable year petitioner had on its books an account known as “ Contingent Fund for Losses ” in which there was a credit of $20,000. On July 30, 1921, this was increased by $30,000 and on December 31, 1921, by $45,000, making a balance of $95,000 in this account at the close of 1921. These increased amounts were charged into the undivided profits account. The effect was to set aside a part of the undivided profits as a contingent fund to cover prospective losses. The testimony is that the official who directed these entries had in mind the anticipated loss on the two accounts in question. On the balance sheet of the petitioner, the amount of this account was deducted from its securities, although there had been no loss from this source. No deduction was claimed in preparing petitioner’s income-tax return. The reserve so set up was available for the purpose of meeting any loss which might be sustained. Furthermore, it appears that when the notes of the Kentucky Wagon Manufacturing Co. were later determined to be worthless they were charged directly into the undivided profits account, and not into this reserve fund, although this reserve was at the same time decreased in amount by charging a part of it back into undivided profits. All the circumstances considered, we are of the opinion that the debts in question were not charged off in part and that the deduction now claimed can not be allowed. Reviewed by the Board. Decision will be entered under Rule 50. Marquette did not participate. *1437Smith, dissenting: Under a taxing statute the ascertainment of the worthlessness of a debt must be by the taxpayer. United States v. Frost, Federal Case 15172. If there has been an ascertainment of worthlessness by the taxpayer and that has been made in good faith the respondent may not disallow the deduction. In its income-tax returns in years prior to the taxable years the petitioner filed returns in which it deducted from gross income debts which it alleged had been ascertained by it to be worthless. In the audit of such returns the respondent allowed the deductions to stand. In my view of the case the taxpayer is now estopped to deny that the debts were ascertained to be worthless in the years for which they were claimed as deductions from gross income.

2020-01-17 22:01:32.619672+00

árundell

ÁRUNdell, dissenting: I can not agree with the treatment in the prevailing opinion of the amounts charged off as bad debts and allowed as deductions in the years prior to 1920 and 1921 and on which there were recoveries in the taxable years. While, as stated in the Macmillan Company decision, “income and profits taxes are levied with respect to annual periods, and each annual period must necessarily stand by itself,” it does not follow that in determining the tax liability of the current year that the course of conduct of a taxpayer during past years in his dealings with the United States should be entirely disregarded. The limitation on the making of additional assessments for the years 1916 to 1919, inclusive, has admittedly expired, but petitioner seeks to retain the benefit of its own acts and at the same time avoid the consequences thereof. The respondent under such circumstances invokes the doctrine of estoppel and it would seem that the necessary elements of an estoppel are here present. That this doctrine has been recognized in tax cases may be seen from an examination of the case of McDonald Coal Co. v. Seiner, 9 Fed. (2d) 992. The petitioner herein had not ascertained the accounts to be worth-iess but represented to the respondent that it had. With respect to at least some of the items petitioner knew, or at any rate had abundant reason to believe, that they were not worthless. For instance, in the case of the Louisville Brick Co. item petitioner obtained within the year new notes given by the president of the company and secured by mortgages. As to the notes of W. E. Grant and the Louisville College of Dentistry, petitioner held a mortgage against the indebtedness of the college, and so it must have known that the college had some property to which it could look for- payment. The Commissioner is not chargeable with knowledge of the facts pertaining to the financial condition of petitioner’s debtors and no duty is -imposed upon him by law to acquaint himself with the *1438facts. It is the intention of the statute that returns shall be honestly made and if the Commissioner so desires he may rely on the statements made in them. If it were otherwise the Commissioner would be obliged to examine with suspicion every return filed and be required to make an independent investigation of every fact stated despite the oath of the taxpayer. It was stipulated by the parties that the “ returns for 1916, 1917, 1918, and 1919 were examined and audited by the respondent,” and petitioner quotes this in its argument against the working of an estoppel. How far the examination and audit went is not shown, but it is unbelievable that these deductions would have been allowed if the facts as now asserted by petitioner had been made known to the respondent. It is to be remembered that the real party in interest is not the Commissioner of Internal Kevenue but the United States, and that the petitioner by taking the deduction for bad debts was benefited by reductions of its taxes which it would not have received but for its erroneous claims, and the United States was correspondingly damaged. The petitioner argues that it was mathematically impossible for the United States to have suffered any pecuniary prejudice on account of the deductions taken for 1919 because in that year petitioner had a net loss of approximately $16,000 and the bad debt deductions amounted to but $7,801.81. In making this argument petitioner fails to take into account the net loss provision of the statute under which a taxpayer obtains the benefit of a net loss as a deduction against income of another year. It is, therefore, my opinion that the position of the respondent is well taken and that petitioner is estopped to now say that he erred in taking the deductions claimed in 1916, 1917, 1918, and 1919. If I am correct in this view, it follows that invested capital can not now be increased because of the claim that the deductions were erroneously taken. In other words, the petitioner must abide by its acts, which acts were the cause of the reduction in invested capital. Finally, as to the inclusion in income of the amounts recovered in 1920 and 1921. If my view of the application of the doctrine of estoppel is correct, the result is the same as if the deductions taken for bad debts were proper deductions, and consequently any recoveries in subsequent years constitute income. Nott-Atwater Co. v. Poe, — Fed. (2d) — (Dist. Ct., W. Dist. Wash., Oct. 10, 1928). Cf. Chicago, Rock Island & Pacific Ry. Co., 13 B. T. A. 988. Trussell agrees with this dissent.

2021-03-18 20:02:34.781729+00

https://www.courts.ca.gov/opinions/nonpub/F077693.PDF

Filed 3/18/21 P. v. Lopez CA5 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIFTH APPELLATE DISTRICT THE PEOPLE, F077693 Plaintiff and Respondent, (Super. Ct. No. F17905818) v. CEASAR WILLIAM LOPEZ, OPINION Defendant and Appellant. THE COURT* APPEAL from a judgment of the Superior Court of Fresno County. Timothy A. Kams, Judge. Eric E. Reynolds, under appointment by the Court of Appeal, for Defendant and Appellant. Xavier Becerra, Attorney General, Lance E. Winters, Chief Assistant Attorney General, Michael P. Farrell, Assistant Attorney General, Julie A. Hokans and Clara M. Levers, Deputy Attorneys General, for Plaintiff and Respondent. -ooOoo- * Before Peña, Acting P.J., Smith, J. and DeSantos, J.  Defendant Ceasar William Lopez stands convicted of making criminal threats, resisting an executive officer by threats or violence, and resisting a peace officer. On appeal, he contends (1) the matter should be remanded for the trial court to assess his eligibility for participation in the mental health diversion program and (2) the trial court should have stayed the sentence on the resisting a peace officer conviction pursuant to Penal Code section 654.1 In supplemental briefing, the parties agree that defendant’s one-year prior prison term enhancement should be stricken pursuant to section 667.5, subdivision (b), as amended by Senate Bill No. 136 (2019–2020 Reg. Sess.) (Senate Bill 136). We conditionally reverse the judgment, strike the prior prison term enhancement, and remand to the trial court for further proceedings. PROCEDURAL SUMMARY On February 23, 2018, the Fresno County District Attorney filed an information charging defendant with making criminal threats (§ 422; count 1), resisting an executive officer by threats or violence (§ 69; count 2), and resisting a peace officer (§ 148, subd. (a)(1); count 3). The information further alleged that defendant had suffered a prior felony “strike” conviction within the meaning of the “Three Strikes” law (§§ 667, subds. (b)–(i), 1170.12, subds. (a)–(d)) and had served five prior prison terms (§ 667.5, subd. (b)). On May 4, 2018, the jury found defendant guilty on all counts. On May 7, 2018, in a bifurcated hearing, the trial court found true that defendant had suffered a prior strike conviction and had served five prior prison terms. The prior prison terms found true were served for convictions of receiving stolen property (§ 496, subd. (a)), burglary (§ 459), petty theft (§ 666), driving under the influence of alcohol (Veh. Code, § 23153, subd. (a)), resisting an executive officer (§ 69), dissuading a witness (§ 136.1, subd. (c)(1)), and committing domestic violence (§ 273.5, subd. (a)). 1 All further statutory references are to the Penal Code unless otherwise stated. 2.  On June 21, 2018, the trial court declined to strike defendant’s prior strike conviction pursuant to section 1385, subdivision (a) and People v. Superior Court (Romero) (1996) 13 Cal.4th 497 . On the same day, the court sentenced defendant to eight years four months in prison as follows: on count 1, six years (the upper term of three years doubled due to the prior strike); on count 2, one year four months (one-third of the middle term of two years doubled due to the prior strike) consecutive to the sentence on count 1; and on count 3, 365 days in jail, concurrent with the sentence on count 1. The trial court also imposed a one-year prior prison term enhancement based on defendant’s first prison term for convictions of receiving stolen property, burglary, and petty theft. On the same day, defendant filed a notice of appeal. FACTUAL SUMMARY Prosecution Case On October 2, 2017, Yadira G. and her husband Armando L. were defendant’s next-door neighbors. Yadira and Armando returned home at about 9:00 p.m. or 10:00 p.m. They went to their backyard to feed their dog, gather the laundry and take out the garbage. Armando noticed that defendant was in defendant’s backyard. As they returned to the house, defendant directed a flashlight at Armando. Armando believed that defendant wanted to talk so he and Yadira approached the chain link fence that separated their properties. Defendant also approached the fence. Defendant said to Armando, “ ‘Hey, you f***ing a**hole …. I’ll kill you.’ ” He then said several times, either “If you don’t step in, I’m going to kill [Armando]” or “[G]o inside or I’ll kill your dog or [Armando].” 2 Defendant then attempted to jump over the fence. Armando and Yadira then went into their house and Yadira called 911. 2 Armando spoke and understood little English. Yadira spoke and understood more English than Armando. Defendant spoke to Armando in English and Yadira translated part of defendant’s statement to him. 3.  Fresno Police Officers Yessie Hernandez and Jason Laird responded to the 911 call. Yadira told Hernandez about defendant’s threats. The officers then contacted defendant’s brother who told them defendant was not home. As the officers spoke with defendant’s brother, Hernandez noticed defendant standing near the carport to defendant’s home. Hernandez directed his flashlight at defendant and defendant became confrontational. Hernandez commanded defendant to get on the ground. Defendant approached Laird quickly, kicked a bucket of water at him, and wrapped a belt around his fist. Hernandez believed defendant intended to use the belt to fight Laird. Laird drew his taser and commanded defendant to get on the ground. Defendant then took his shirt off and told the officers to “ ‘[g]et the f*** out of [his] yard.’ ” He then faced Laird and turned his back to Hernandez. Hernandez tackled defendant and attempted to place him in handcuffs. Defendant resisted Hernandez, grabbing and pulling his vest and attempting to bite his face. During the struggle Hernandez’s shin was injured and his radio and body camera were broken as defendant kicked and flailed his arms. Soon after the struggle between defendant and Hernandez began, Laird and other officers helped Hernandez subdue defendant. Defendant was then handcuffed. Hernandez conducted an in-field identification. Yadira identified defendant as the assailant. Defense Case Hernandez was asked about one of Armando’s statements to law enforcement during an interview. Armando told Hernandez and Laird that defendant told him that “he wanted to kill the dog .…” Armando also told Hernandez that he did not hear defendant’s threats, but Yadira told him defendant wanted to kill him. Hernandez understood that defendant told Armando that he wanted to kill Armando, Yadira, and their dog. 4.  Margarita Reyes was a defense investigator. She interviewed Yadira at her place of work. Yadira said that she reported that defendant was disrespectful, but she did not seem afraid of him. DISCUSSION A. Mental Health Diversion Defendant contends this action must be remanded for the trial court to determine his eligibility for mental health diversion. We agree. Defendant was sentenced on June 21, 2018. Six days later, section 1001.36 became effective, creating a diversion program for defendants who suffer from medically recognized mental disorders, “including, but not limited to, bipolar disorder, schizophrenia, schizoaffective disorder, or post-traumatic stress disorder .…”3 (§ 1001.36, subd. (b)(1)(A); Stats. 2018, ch. 34, §§ 24, 37.) Section 1001.36 applies retroactively to all cases not yet final on appeal on its effective date. (People v. Frahs (2020) 9 Cal.5th 618 , 632–637.) Conditional limited remand for the trial court to consider a defendant’s eligibility for diversion is warranted when “the record affirmatively discloses that the defendant appears to meet at least the first threshold eligibility requirement for mental health diversion—the defendant suffers from a qualifying mental disorder (§ 1001.36, subd. (b)(1)(A)).” (Frahs, at p. 640.) As defendant correctly notes, the record—specifically, defendant’s statement of mitigation—contains evidence tending to indicate he suffered from bipolar disorder and schizophrenia, both qualifying mental disorders. Defendant’s judgment of conviction 3 In addition to requiring that a defendant be diagnosed with a qualifying mental disorder, for a defendant to be eligible for mental health diversion: the court must conclude the mental disorder played a significant role in the commission of the charged offense; a mental health expert must opine the defendant’s symptoms of the mental disorder will respond to treatment; the defendant must consent to diversion and waive the right to a speedy trial; the defendant must agree to comply with treatment; and the trial court must be satisfied defendant will not pose an unreasonable risk of danger to public safety. (§ 1001.36, subd. (b).) 5. was not final on the effective date of section 1001.36. Therefore, we conditionally reverse defendant’s conviction and remand for the trial court to determine defendant’s eligibility for mental health diversion. B. Section 654 Defendant was sentenced to 16 months for resisting an executive officer by threats or violence on count 2 (to run consecutively to the sentence on count 1) and 365 days for resisting a peace officer on count 3 (to run concurrently with the sentence on count 1). Defendant contends the trial court erred in failing to stay the term on count 3. The People disagree; they argue “[s]ection 654 does not apply … because appellant had separate criminal objectives, which he renewed through multiple acts of violence, that were directed at multiple victims.” We agree with the People. Section 654, subdivision (a) provides that “[a]n act or omission that is punishable in different ways by different provisions of law shall be punished under the provision that provides for the longest potential term of imprisonment, but in no case shall the act or omission be punished under more than one provision.” The inquiry to determine whether separate sentences can be imposed pursuant to section 654 is “[w]hether a course of criminal conduct is divisible and therefore gives rise to more than one act.” (Neal v. State of California (1960) 55 Cal.2d 11 , 19; People v. Correa (2012) 54 Cal.4th 331 , 335– 336.) That inquiry turns on “the intent and objective” of the defendant. (Correa, at p. 336.) “ ‘If all of the offenses were incident to one objective, the defendant may be punished for any one of such offenses but not for more than one.’ ” (Ibid.) “In such a case, the proper procedure is to stay execution of sentence on one of the offenses.” (People v. Monarrez (1998) 66 Cal.App.4th 710 , 713.) However, “section 654 does not prohibit multiple punishments where the defendant’s … conduct results in crimes of violence against multiple victims.” (People v. Cardenas (2015) 239 Cal.App.4th 220 , 230; accord, People v. Oats (2004) 32 Cal.4th 1048 , 1063.) “Under the multiple victim exception, ‘ “ ‘even [if] a defendant entertains 6. but a single principal objective during an indivisible course of conduct, he [or she] may be convicted and punished for each crime of violence committed against a different victim.’ ” ’ ” (Cardenas, at p. 230.) Crimes that do not contain violence as an element are still considered crimes of violence for purposes of section 654 if the defendant committed the crime in a violent manner. (See Ibid. [“Burglary may also be treated as a crime of violence when the defendant personally used a firearm in committing the offense.”]; People v. Centers (1999) 73 Cal.App.4th 84 , 100.) “The question of whether section 654 is factually applicable to a given series of offenses is for the trial court, and the law gives the trial court broad latitude in making this determination. [Citation.] Its findings on this question must be upheld on appeal if there is any substantial evidence to support them.” (People v. DeVaughn (2014) 227 Cal.App.4th 1092 , 1113.) “ ‘ “We must ‘view the evidence in a light most favorable to the respondent and presume in support of the [sentencing] order the existence of every fact the trier could reasonably deduce from the evidence. [Citation.]’ ” ’ ” (Ibid.) Here, viewing the record in the light most favorable to the conviction, when defendant first encountered the officers, he refused to comply with their commands and he shouted for them to “ ‘[g]et the f*** out of [his] yard.’ ” He then kicked a bucket of water at Laird, wetting him. Defendant wrapped a belt around his fist and took off his shirt to prepare to fight one or both of the officers. After Hernandez tackled defendant, defendant pulled on Hernandez’s vest and attempted to bite him. Defendant then kicked and flailed his arms as Hernandez, Laird, and other officers attempted to subdue him. The section 69 offense, resisting an officer by force or threats, is facially a crime of violence—it has use of force or threats as an element of the offense. The record supports the conclusion that defendant committed that offense when he pulled and attempted to bite Hernandez (and also when he kicked and flailed his arms as Hernandez, Laird, and other officers attempted to subdue him). The section 148 offense, resisting an officer, is not facially a crime of violence—it does not have use of force as an element of 7. the offense. However, the manner in which defendant resisted the officers, separate from the violent conduct against Hernandez that supported the section 69 conviction, included violence. Defendant kicked a bucket of water at Laird and flailed and kicked at Laird and other officers as they attempted to subdue him. The record supports the conclusion that defendant committed the section 148 offense in a violent manner. Because the trial court could have concluded from the record that defendant committed two crimes of violence against different victims, it did not err in imposing, rather than staying, the sentence on the section 148 conviction. C. Senate Bill 136 Defendant argues his prior prison term enhancement must be stricken based on the retroactive application of Senate Bill 136. The People agree, as do we. Effective January 1, 2020, Senate Bill 136 amended section 667.5, subdivision (b) to limit application of prior prison term enhancements to only prior prison terms that were served for sexually violent offenses as defined by Welfare and Institutions Code section 6600, subdivision (b). (§ 667.5, subd. (b).) (Stats. 2019, ch. 590, § 1.) That amendment applies retroactively to all cases not yet final on Senate Bill 136’s effective date. (People v. Lopez (2019) 42 Cal.App.5th 337 , 341–342, citing In re Estrada (1965) 63 Cal.2d 740 , 742.) Here, the trial court imposed one one-year section 667.5, subdivision (b) prior prison term enhancement. The trial court specified that it imposed the enhancement for the first alleged prior prison term of defendant’s five prior prison terms. That term was served for convictions of receiving stolen property (§ 496, subd. (a)), burglary (§ 459), and petty theft (§ 666), none of which is a sexually violent offense as defined in Welfare and Institutions Code section 6600, subdivision (b).4 On January 1, 2020, defendant’s 4 The trial court indicated at the sentencing hearing that, despite finding defendant had suffered five prior prison terms, it was imposing only one enhancement based on “the first prison prior alleged.” We noted that defendant’s other prior prison terms were 8. case was not yet final. Therefore, as the parties agree, defendant is entitled to the ameliorative benefit of Senate Bill 136’s amendment to section 667.5, subdivision (b). Where an appellate court strikes (or orders stricken) a portion of a sentence, remand for “ ‘a full resentencing as to all counts is [generally] appropriate, so the trial court can exercise its sentencing discretion in light of the changed circumstances.’ ” (People v. Buycks (2018) 5 Cal.5th 857 , 893.) However, remand is unnecessary where the trial court has imposed the maximum possible sentence. (People v. Lopez, supra, 42 Cal.App.5th at p. 342.) Here, defendant was sentenced to the maximum possible sentence on each count5 so resentencing is not required if the conviction is reinstated. We therefore strike defendant’s prior prison term enhancement and direct the trial court to reinstate the sentence, as modified by this opinion, on condition that defendant is not granted mental health diversion, or is granted diversion but does not successfully complete the program. DISPOSITION The judgment is conditionally reversed. The matter is remanded to the trial court with directions to hold a diversion eligibility hearing under section 1001.36. If the court finds defendant eligible under that statute, it may grant diversion. If defendant then satisfactorily performs in diversion, the court shall dismiss the charges. (§ 1001.36, subd. (e).) However, if the court does not grant diversion, or it grants diversion, but defendant fails to satisfactorily complete it (§ 1001.36, subd. (d)), then the court shall served for convictions of driving under the influence of alcohol (Veh. Code, § 23153, subd. (a)), resisting an executive officer (§ 69), dissuading a witness (§ 136.1, subd. (c)(1)), burglary (§ 459), and committing domestic violence (§ 273.5). None of those offenses is a sexually violent offense as defined in Welfare and Institutions Code section 6600, subdivision (b). 5 The trial court did not impose four of the five proved prior prison term enhancements. However, those prior prison term enhancements could not be imposed now as a result of Senate Bill 136. (See fn. 4, supra.) 9. reinstate defendant’s conviction, reimpose the sentence as modified by this opinion, and forward a certified copy of the resulting amended abstract of judgment to the appropriate entities. 10.

2021-03-18 20:02:35.975542+00

https://www.courts.ca.gov/opinions/nonpub/C090483.PDF

Filed 3/18/21 P. v. Espinoza 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 (Tehama) ---- THE PEOPLE, C090483 Plaintiff and Respondent, (Super. Ct. No. NCR83573) v. GEORGIANN PATRICIA ESPINOZA, Defendant and Appellant. Defendant Georgiann Patricia Espinoza appeals from an order that extends for two years her commitment to the state mental hospital pursuant to Penal Code section 1026.5.1 The parties agree that we should dismiss defendant’s appeal because it is non- justiciable and vacate the superior court’s order because it was premature. We will dismiss the appeal. 1 Undesignated statutory references are to the Penal Code. 1  I. BACKGROUND In 2012, defendant entered a plea of not guilty by reason of insanity to the charge of arson of an inhabited structure or property (§ 451, subd. (b)), and the trial court found that she had been insane at the time of her crime. On June 8, 2012, the superior court committed defendant to Napa State Hospital for a maximum term of eight years, with 94 days of custody credit. On May 15, 2019, the district attorney’s office filed a petition to extend defendant’s commitment. Finding that defendant posed a substantial danger of physical danger to others, the superior court extended the commitment by two years, to August 16, 2021. Defendant filed a timely notice of appeal. II. DISCUSSION The attorney general contends, and defendant agrees, that this appeal must be dismissed because the case is not justiciable. We agree. “A criminal defendant who pleads [not guilty by reason of insanity] and who is found legally insane at the time of the offense may be committed to a state medical facility for a period as long as the maximum sentence that could have been imposed for the underlying offense.” (People v. Tran (2015) 61 Cal.4th 1160 , 1165, citing § 1026.5, subd. (a)(1).) Except as provided in section 1026.5, a “person may not be kept in actual custody longer than the maximum term of commitment.” (§ 1026.5, subd. (a)(1).) The phrase “maximum term of commitment” means “the longest term of imprisonment which could have been imposed for the offense or offenses of which the person was convicted, including the upper term of the base offense and any additional terms for enhancements and consecutive sentences which could have been imposed less any applicable credits as defined by Section 2900.5, and disregarding any credits which could have been earned pursuant to Article 2.5 (commencing with Section 2930) of Chapter 7 of Title 1 of Part 3.” (§ 1026.5, subd. (a)(1).) By statute, “[t]ime spent on outpatient status, except when 2 placed in a locked facility at the direction of the outpatient supervisor, shall not count as actual custody and shall not be credited toward the person’s maximum term of commitment or toward the person’s term of extended commitment.” (§ 1026.5, subd. (b)(8).) In consideration of the opinion of the medical director of the facility or hospital to which the defendant has been committed, a prosecutor “may [] file a petition with the superior court seeking to extend the defendant’s commitment by two years.” (People v. Tran, supra, 61 Cal.4th at p. 1165; see § 1026.5, subds. (b)(2), (b)(8).) The medical director’s report must be submitted to the prosecutor “[n]ot later than 180 days prior to the termination of the maximum term of commitment,” and the prosecuting attorney must file a petition to extend the commitment “no later than 90 days before the expiration of the original commitment unless good cause is shown.” (§ 1026.5, subd. (b)(2).) Here, the petition to extend defendant’s commitment was filed prematurely because she had—and still has—years left on her original maximum term of commitment. The court’s order had the practical effect of impermissibly shortening defendant’s requisite term of commitment in contravention of section 1026.1, subdivision (b), and the intent of section 1026.5, subdivision (a). The record shows that defendant’s original maximum term of commitment will not expire until on or about October 6, 2022. On June 8, 2012, the court committed defendant to Napa State Hospital for a maximum term of eight years, with 94 days of credit for time served. After defendant was credited 94 days for time served, her maximum term of commitment was 2,826 days. On August 26, 2015, defendant was conditionally released to outpatient status through the Conditional Release Program (CONREP). Assuming June 8, 2012, is the operative date from which to calculate the service of commitment, defendant had served 1,174 days of her maximum term of commitment of 2,826 days, with 1,652 days remaining. Nothing in the record shows that she was “placed in a locked facility at the direction of [an] outpatient supervisor.” (See §§ 1026.5, subd. (b)(8), 1600.5) On 3 March 29, 2018, defendant was readmitted to Napa State Hospital after revocation of her conditional outpatient release. Based on this readmission date, defendant spent 946 days on outpatient release and still had to serve 1,652 days of her maximum term of commitment. Between the date of her readmission to the hospital and the filing of the petition to extend her commitment on May 15, 2019, defendant served an additional 412 days. Thus, she had served a total of 1,586 days against her maximum term of commitment of 2,826 days, with 1,240 days remaining. Thus, her maximum term of commitment does not expire until approximately October 6, 2022. This appeal from the superior court’s order extending defendant’s unexpired term thus presents a nonjusticiable case or controversy. “It is a fundamental principle of appellate practice that an appeal will not be entertained unless it presents a justiciable issue.” (In re I.A. (2011) 201 Cal.App.4th 1484 , 1489.) “When the court cannot grant effective relief to the parties to an appeal, the appeal must be dismissed.” (Id. at p. 1490.) That is the case here because this court cannot grant any effective relief to defendant even if it rules entirely in her favor on the merits. Defendant’s original maximum term of commitment will not expire until October 2022, no matter how this court resolves her appeal of the order granting the premature petition to extend her commitment. Accordingly, defendant’s appeal is not justiciable and should be dismissed. If left in place, the court’s order extending defendant’s commitment period to August 16, 2021, would have the effect of reducing her maximum term of commitment by over one year. Section 1026.1 provides the only three ways in which a court may release a defendant committed to a state hospital pursuant to section 1026. (People v. Soiu (2003) 106 Cal.App.4th 1191 , 1195.) Relevant here, section 1026.1, subdivision (b) permits a court to release such a committed person “[u]pon expiration of the maximum term of commitment as provided in subdivision (a) of Section 1026.5, except as such term may be extended under the provisions of subdivision (b) of Section 1026.5.” Thus, 4 the trial court’s order mistakenly reducing defendant’s maximum term of commitment by over one year must be vacated. III. DISPOSITION The appeal is dismissed. The matter is remanded to the superior court for further proceedings consistent with this opinion, and the court is directed to vacate its order extending defendant’s commitment to August 16, 2021. /S/ RENNER, J. We concur: /S/ BLEASE, Acting P. J. /S/ DUARTE, J. 5

2020-12-01 12:01:16.895786+00

http://www.jag.navy.mil/courts/documents/archive/2020/SIMON_201900198_UNPUB.pdf

This opinion is subject to administrative correction before final disposition. Before MONAHAN, STEPHENS, and DEERWESTER Appellate Military Judges _________________________ UNITED STATES Appellee v. Kyle M. SIMON Sergeant (E-5), U.S. Marine Corps Appellant No. 201900198 Decided: 30 November 2020 Appeal from the United States Navy-Marine Corps Trial Judiciary Military Judge: John P. Norman (arraignment) Nute A. Bonner (motions and trial) Sentence adjudged 20 March 2019 by a general court-martial con- vened at Marine Corps Base Camp Pendleton, California, consisting of officer and enlisted members. Sentence approved by the convening authority: reduction to pay-grade E-1 and a bad-conduct discharge. For Appellant: Lieutenant Gregory Hargis, JAGC, USN For Appellee: Lieutenant Kimberly Rios, JAGC, USN Lieutenant Commander Timothy C. Ceder, JAGC, USN Senior Judge STEPHENS delivered the opinion of the Court, in which Chief Judge MONAHAN and Judge DEERWESTER joined.  United States v. Simon, NMCCA No. 201900198 Opinion of the Court _________________________ This opinion does not serve as binding precedent, but may be cited as persuasive authority under NMCCA Rule of Appellate Procedure 30.2. _________________________ STEPHENS, Senior Judge: Appellant was convicted, contrary to his pleas, of assault consummated by a battery and unlawful entry, in violation of Articles 128 and 134, Uniform Code of Military Justice [UCMJ]. 1 Appellant asserts three assignments of error [AOE], which we have combined and renumbered: (1) Appellant received ineffective assistance of counsel when his trial defense counsel [TDC] did not oppose the admission into evidence of a $2,500 payment Appellant made to his victim; and (2) Appellant’s conviction for unlawful entry was factually insufficient because Appellant reasonably believed he was permitted to climb through the victim’s barracks room window. We find no prejudicial error and affirm. I. BACKGROUND A. Appellant and Corporal Lima’s Relationship Appellant and Corporal [Cpl] Lima 2 had an “on and off” 3 romantic rela- tionship that lasted approximately a year and a half. While they were a couple, Appellant would regularly make unannounced visits to Cpl Lima’s first floor barracks room by climbing through her window. Once inside, she would tell Appellant if she was okay with him being there. The romantic relationship ended when Cpl Lima learned Appellant had been unfaithful to her. The two remained friendly, continuing to communi- cate through social media. They also occasionally spent time together, doing such things as getting food together and practicing sword manual. However, 1 10 U.S.C. §§ 928 , 934. 2 All names in this opinion, other than those of Appellant, the judges, and coun- sel, are pseudonyms. 3 R. at 254. 2  United States v. Simon, NMCCA No. 201900198 Opinion of the Court after their breakup Cpl Lima never again permitted Appellant to enter her room uninvited. B. 29 May Incident Over a month after their breakup, on the evening of 29 May 2018, Cpl Lima lay on her bed scrolling through her phone when Appellant climbed through her open window. Not wanting him in her room, she reacted angrily. Appellant responded by taking her phone and locking himself in her bathroom. A few minutes later he opened the door and, without saying anything to Cpl Lima, grabbed her full-length mirror and broke it in her bathroom. The two then argued and even physically fought, with Cpl Lima trying to push Appellant out of her room. The altercation ended when Cpl Lima left the room to retreat to her car. C. 29 June Incident and Aftermath About a month later, on 29 June 2018, Appellant and Cpl Lima exchanged brief texts and said goodnight to each other. Appellant knew Cpl Lima had been drinking alcohol that evening. After texting her goodnight, he sent her several subsequent text messages offering her Pedialyte, wishing her “sweet dreams,” apologizing for “blowing [her phone] up,” and telling her “stay safe and have fun.” 4 She did not reply to any of Appellant’s texts. Cpl Lima was later awakened by Appellant when he once again climbed through her window. She told him she did not want him there and their conversation quickly turned to his infidelity. The argument escalated into a physical altercation when she tried to push Appellant out of the room. When they slapped and pushed each other, Appellant threw Cpl Lima against a wall, causing her head to hit the sharp edge of the air conditioning unit. After Appellant eventually left, Cpl Lima discovered her head was bleeding. She took a shower and went back to sleep. The next day, Appellant texted Cpl Lima to ask how she was. She re- sponded by sending him pictures of her bloody shower water. The day after that, she texted him to tell him to stop messaging her family. She described the extent of her injuries and demanded he “just stay away from [her].” 5 Appellant replied with a long apology, which went unanswered. 4 Pros. Ex. 9 at 2-3. 5 Id. at 6. 3  United States v. Simon, NMCCA No. 201900198 Opinion of the Court A few hours later, Appellant texted her, asking if she received the $2,500 he had sent her electronically. Cpl Lima told Appellant, twice, that she neither wanted nor needed the money. But after Appellant urged her to use the money to pay for an attorney to help her gain custody of her younger sister, Cpl Lima told him she would deposit the funds into a savings account. At trial, she testified that she never asked Appellant for this money. A few days later Cpl Lima told a close friend about the incident, which led to a report of the fight to Appellant’s chain of command and eventually to the Naval Criminal Investigative Service [NCIS]. Cpl Lima’s initial report included an allegation of a sexual touching for which Appellant was acquitted. After the report was made to NCIS, Appellant’s mother contacted Cpl Lima and asked her to return the $2,500. She told Cpl Lima the money was for Appellant’s son. Cpl Lima immediately returned it. D. Litigation Concerning the Money Transfers During pretrial litigation, the Government moved the military judge to admit evidence of Appellant’s $2,500 payment to Cpl Lima. It argued this was admissible under Mil. R. Evid. 404(b) to show his consciousness of guilt. Appellant’s TDC responded in writing that he was “not opposing the government’s 404(b) motion.” 6 At an Article 39(a), UCMJ, session, the TDC confirmed the evidence was admissible and that he had no objection to the Government’s motion. II. DISCUSSION A. Waiver Whether an appellant has waived an issue is a legal question this Court reviews de novo. 7 “Waiver is different from forfeiture. Whereas forfeiture is the failure to make the timely assertion of a right, waiver is the intentional relinquishment or abandonment of a known right.” 8 The Court of Appeals for the Armed Forces [CAAF] recently emphasized the waiver doctrine in United 6 App. Ex. III at 3. 7 See United States v. Ahern, 76 M.J. 194 , 197 (C.A.A.F. 2017). 8United States v. Gladue, 67 M.J. 311 , 313 (C.A.A.F. 2009) (internal quotation marks and citation omitted). 4  United States v. Simon, NMCCA No. 201900198 Opinion of the Court States v. Davis 9 when trial defense counsel stated he had “no objection” to a military judge’s proposed instructions. CAAF stated that the appellant had “directly bypassed an opportunity to challenge and perhaps modify the instructions” and in so doing, “waived any objection” leaving “nothing left for us to correct on appeal.” 10 Appellant urges us to consider that the issue was not waived because his TDC failed to recognize it in the first place. Appellant argues that despite the TDC waiving any objection to the use of the evidence of the money transfer under Mil. R. Evid. 404(b) as “consciousness of guilt,” he never considered, and thus never objected—or waived any objection—to the evidence’s admission under Mil. R. Evid. 408 as evidence of a compromise offer or negotiation. Appellant points to a CAAF case, United States v. Ahern, 11 where an appellant affirmatively stated he had no objection to the admission of a surreptitiously-recorded phone call where he did not deny any wrongdoing. On appeal, he argued that the rule under which it was offered, Mil. R. Evid. 304, prohibited the government from arguing that his lack of a denial constituted an admission to the truth of the allegations. Under Mil. R. Evid. 304(a)(2), such a “failure to deny” is not an admission if an accused is “under investigation.” He argued that he was indeed under investigation, though unaware of it, when he made the statements. CAAF did not reach the appellant’s question. Instead, it held that appellant waived this under Mil. R. Evid. 304(f)(1), “Failure to so move or object constitutes waiver of the objection.” CAAF added that this was “not a case where the rule uses the word ‘waiver’ but actually means ‘forfeiture.’ ” 12 Appellant distinguishes Ahern as a “rule-based waiver” arguing that Mil. R. Evid. 408 has no corresponding internal waiver rule. We disagree with Appellant’s contention that the waiver at trial was somehow incomplete because TDC only waived objection under Mil. R. Evid. 404(b), but did not deliberately consider and then intentionally abandon his right under Mil. R. Evid. 408. When TDC stated he did not oppose the 9 79 M.J 329 (C.A.A.F. 2020). Davis was issued eight days after Appellant filed his Brief and Assignments of Error. 10 Id. at 331 . 11 76 M.J. 194 (C.A.A.F. 2017). 12 Id. at 197 . 5  United States v. Simon, NMCCA No. 201900198 Opinion of the Court admission of the evidence, even if it was offered under Mil. R. Evid. 404(b), he waived all objections to its admission at trial and agreed the Government would be able to use it to show consciousness of guilt. Because we find that Appellant validly waived objection to the admission of the evidence, there is “nothing left for us to correct on appeal.” 13 B. Military Rule of Evidence 408 Assuming arguendo that Appellant did not waive his objection to the admission of the evidence, through the application of the doctrine of forfeiture we would review for non-constitutional plain error. We review for plain error de novo. 14 An appellant must demonstrate “(1) an error was committed; (2) the error was plain, clear, or obvious; and (3) the error resulted in material prejudice to substantial rights.” 15 Under such an analysis, we would find no error, as Mil. R. Evid. 408 does not prohibit its admission. 1. Military Rule of Evidence 408 does not prohibit admission of the evi- dence Mil. R. Evid. 408 prohibits the use of offers to compromise or evidence of negotiations to prove or disprove the amount or “validity” of a “disputed claim.” 16 A military judge may admit such evidence for other purposes, such as “proving an effort to obstruct a criminal investigation or prosecution.” 17 But for this Rule to be in effect, there must be a “disputed claim.” For example, when a Korean prostitute and her representative negotiated with American soldiers for payment in lieu of her taking a complaint of sexual assault to Korean civil and criminal officials, this fell within Mil. R. Evid. 408. This was because it was evidence of a claim for $2,500 in alleged damages to the prostitute that was negotiated down to $800. 18 Likewise, evidence of a malpractice settlement under the Federal Tort Claims Act by the United States on behalf of Navy doctors who treated an appellant’s child 13 Davis, 79 M.J. at 331. 14 United States v. Mullins, 69 M.J. 113 , 116 (C.A.A.F. 2010). 15 United States v. Patrick, 78 M.J. 687 , 699 (N-M. Ct. Crim. App. 2018) (internal citation omitted). 16 Mil. R. Evid. 408(a). 17 Mil. R. Evid. 408(b). 18 United States v. Jensen, 25 M.J. 284 (C.M.A. 1987). 6  United States v. Simon, NMCCA No. 201900198 Opinion of the Court victim would be considered evidence of a disputed claim being settled. 19 So would an appellant’s admission and agreement to compensate a bank for money he was accused of stealing from a friend’s account at that same bank. 20 A civilian case involving the identically-worded Federal Rule of Evidence 408, United States v. Davis, 21 is also an example of an offer to settle a disputed claim. When a treasurer for a national fraternity was suspected of embezzling, he was confronted by his successor. Davis offered to pay his successor a fraction of the allegedly embezzled amount to “make [the] situation go away.” 22 The government improperly used this to show his consciousness of guilt, or as the U.S. Court of Appeals for the D.C. Circuit put it, “in the words of Rule 408(a), [appellant’s] ‘liability.’” The Rule “is meant to promote settlements” 23 even if the counterparty flatly rejects the offer to settle the claim or even the possibility of negotiating the claim. This is so a party offering to negotiate is not beaten with his own his olive branch in court. Though the Rule, as in Davis, does prohibit using such evidence to prove “consciousness of guilt” of liability for a disputed claim, the Rule specifically allows the military judge to admit such evidence for another purpose, such as when an accused attempts to “buy off” a witness to his crime. The Rule only prohibits the use of compromise offers when the offers go toward a disputed amount or a disputed claim. Cpl Lima never asked for any money, twice rejected it when tendered, and returned it when Appellant’s mother asked for it back. There was no claim here, so there was no corresponding compromise offer to prohibit. 19 Flynn v. United States, 2008 CCA LEXIS 194 (N-M. Ct. Crim. App. May 22, 2008) (unpublished op.) (denial of writ of error coram nobis for post-trial discovery that Government settled malpractice claims for physicians who treated petitioner’s child-victim because evidence of settlement would have been prohibited at trial under Mil. R. Evid. 408). 20 United States v. Cook, 2005 CCA LEXIS 56 (N-M. Ct. Crim. App. Feb. 28, 2005) (unpublished op.) (error to admit agreement between appellant and Naval Federal Credit Union manager to pay back money he allegedly took from another Marine’s account). 21 596 F.3d 852 (D.C. Cir. 2010). 22 Id. at 854 . 23 Id. at 859 . 7  United States v. Simon, NMCCA No. 201900198 Opinion of the Court 2. Appellant’s counsel was not ineffective Appellant argues that his TDC was ineffective when he failed to object to the use of the evidence on the grounds that its use was prohibited by Mil. R. Evid. 408. We review claims of ineffective assistance of counsel de novo. 24 In Strickland v. Washington, 25 the Supreme Court laid out the test that guides our analysis. In order to prevail on such a claim, “an appellant must demonstrate both (1) that his counsel’s performance was deficient, and (2) that this deficiency resulted in prejudice.” 26 The Appellant bears the “burden of establishing the truth of factual matters relevant to the claim.” 27 Only after an appellant has met his burden and has demonstrated both deficiency and prejudice can we find in the appellant’s favor on an ineffective assistance of counsel claim. Given the above analysis of Mil. R. Evid. 408, we find that had Appel- lant’s TDC objected and raised this issue at trial, it would have had no “reasonable probability” 28 of success sufficient to “undermine confidence in the outcome.” 29 We find no ineffective assistance of counsel. C. The Conviction for Unlawful Entry is Factually Sufficient 1. Standard of review and the law The test for factual sufficiency is whether “after weighing the evidence in the record of trial and making allowances for not having personally observed the witnesses, [this Court is] convinced of Appellant’s guilt beyond a reasonable doubt.” 30 In conducting this unique appellate function, we take “a fresh, impartial look at the evidence,” applying “neither a presumption of innocence nor a presumption of guilt” to “make [our] own independent 24 United States v. Harpole, 77 M.J. 231 , 236 (C.A.A.F. 2018). 25 466 U.S. 668 (1984). 26 United States v. Green, 68 M.J. 360 , 361 (C.A.A.F. 2010) (citing Strickland, 466 U.S. at 687 ). 27 Denedo v. United States, 66 M.J. 114 , 128 (C.A.A.F. 2008), aff’d, 556 U.S. 904 (2009). 28 United States v. Jameson, 65 M.J. 160 , 163 (C.A.A.F. 2007). 29 Strickland, 466 U.S. at 694 . 30 United States v. Rosario, 76 M.J. 114 , 117 (C.A.A.F. 2017) (emphasis omitted) (quoting United States v. Oliver, 70 M.J. 64 , 68 (C.A.A.F. 2011)). 8  United States v. Simon, NMCCA No. 201900198 Opinion of the Court determination as to whether the evidence constitutes proof of each required element beyond a reasonable doubt.” 31 When conducting this review, we are “limited to the evidence presented at trial.” 32 Proof beyond a reasonable doubt does not mean, however, that the evidence must be free from conflict. 33 To sustain a conviction for unlawful entry under Article 134, the Govern- ment must prove beyond a reasonable doubt that Appellant: (1) entered the real property of another which amounts to a structure usually used for habitation; (2) that such entry was unlawful; and (3) that under the circum- stances, Appellant’s conduct was prejudicial to good order and discipline or of a nature to bring discredit on the armed forces. Where raised by the evidence, as here, the Government must also disprove the defense of mistake of fact beyond a reasonable doubt. “Unlawful entry is a general intent crime, requiring no specific intent on the part of an accused to support any guilty finding.” 34 Any mistake of fact must have “existed in the mind of the accused and must have been reasonable under all the circumstances.” 35 2. The evidence of unlawful entry was factually sufficient The main thrust of Appellant’s argument is mistake of fact. Appellant argues that when he climbed through Cpl Lima’s barracks room window— even though he was mistaken that she consented to that entry—his belief that she did consent was reasonable. Appellant asserts that even after their breakup, he had a practice of entering Cpl Lima’s barrack’s room window. He did so, reasonably confident in her consent, because she would “let him know if it was okay” 36 after he climbed through the window. In late June, Appellant climbed into Cpl Lima’s room through the window with a bottle of water. He argues that he believed she knew he might be bringing her some water or Pedialyte. Appellant also points out that 31 United States v. Washington, 57 M.J. 394 , 399 (C.A.A.F. 2002). 32 United States v. Pease, 75 M.J. 180 , 184 (C.A.A.F. 2016) (quoting United States v. Beatty, 64 M.J. 456 , 458 (C.A.A.F. 2007)). 33 United States v. Goode, 54 M.J. 836 , 841 (N-M. Ct. Crim. App. 2001). 34 United States v. Martinez, 1998 CCA LEXIS 106 , at *17-18 (N-M. Ct. Crim. App. Feb. 13, 1998) (unpublished op.) (rev’d on other grounds) ( 50 M.J. 344 (C.A.A.F. 1998)). 35 Rule for Courts-Martial 916(j)(1). 36 R. at 256. 9  United States v. Simon, NMCCA No. 201900198 Opinion of the Court Cpl Lima herself testified that he seemed surprised or confused that his entry was without her consent. “He didn’t know, like, why I didn’t want him there.” 37 Finally, Appellant argues that his entry into Cpl Lima’s room on 29 May and 29 June were essentially identical in nature, except that there is even less evidence of unlawful entry for the latter visit because he had a reason, which he believed was known to Cpl Lima, for the visit. Appellant was acquitted of unlawful entry for the May visit. The Government counters that the standing invitation for Appellant to enter Cpl Lima’s barracks room ended when they broke up. By late-June, they had been broken-up for two months and she had tried to “veer away from him.” 38 On that specific night, she had not replied to any of his several text messages after they said good night. Appellant never asked or expressed a desire to Cpl Lima to visit her room that evening. From the record, the only other time Appellant made an unannounced entry into Cpl Lima’s room after their break-up was in May—about a month before the unlawful entry in question. That unannounced entry—though the members acquitted Appellant of unlawful entry for that visit—ended in a verbal and physical fight. Cpl Lima fled to her car. This is compelling evidence that Appellant’s [mistaken] belief that Cpl Lima consented to his June 29 entry was an unreasonable one. But we also evaluate the reasonableness of Appellant’s mistaken belief by considering the text messages from earlier that evening. Appellant had texted Cpl Lima, saying he wanted to ask her something. She responded that another Marine had pulled the fire alarm in the building. Appellant: Why Hopefully they can turn it off quick so people can sleep Cpl Lima: idk he always wanted to and we thought he was joking but he f[***]ing pulled it Appellant: Goodnight Cpl Lima: Night But he continued to text her. 37 Id. at 270. 38 Id. at 258. 10  United States v. Simon, NMCCA No. 201900198 Opinion of the Court Appellant: if they don’t you can sleep here if you want Hopefully they don’t know it was him Well, I still have your pedialyte and water if you need it in the morning Can you not talk for a minute Alright Sweet dreams You officially hate me lol Okay. Well sorry for blowing you up. All I’m going to say is stay safe and have fun. I care That’s all 39 Cpl Lima did not respond to any of these later texts. When Appellant entered her barracks room through the window, she was asleep. From this, it is easy to conclude that Appellant was not in any way invit- ed to her room. He also did not even ask if he could come to her room. Given that the romantic break-up—and the ending of the implied consent—was about two-months old, as well as the negative outcome from Appellant’s previous unannounced visit, we find that his mistake of fact was not reasonable under the circumstances. Appellant had the duty to ascertain the true nature of Cpl Lima’s consent and in doing so, to not exhibit “negligence or carelessness.” 40 Appellant’s “ignorance in this regard would hardly be that of a prudent person.” 41 To the extent Appellant was seeking an invitation or consent to visit, he received no answer. To a prudent person, that means there was no consent and under the circumstances, no reasonable belief in consent. We find the conviction for unlawful entry to be factually sufficient. 39 Pros. Ex. 9 at 2-3. 40United States v. True, 41 M.J. 424 , 426 (C.A.A.F. 1995) (citing 1 Wharton, Criminal Law and Procedure § 157 at 382 (1957); 22 C.J.S. Criminal Law § 47 at 182; 15 Am Jur, Criminal Law § 306 at 9). 41 United States v. Mease, 57 M.J. 686 , 691 (N-M. Ct. Crim. App. 2002). 11  United States v. Simon, NMCCA No. 201900198 Opinion of the Court III. CONCLUSION After careful consideration of the entire record of trial, and the briefs from both parties, we have determined the approved findings and sentence are correct in law and fact and find no error materially prejudicial to Appellant’s substantial rights occurred. 42 Accordingly, the findings and sentence as approved by the convening authority are AFFIRMED. Chief Judge MONAHAN and Judge DEERWESTER concur. FOR THE COURT: RODGER A. DREW, JR. Clerk of Court 42 UCMJ arts. 59, 66. 12

2020-06-05 07:03:17.458517+00

https://efast.gaappeals.us/download?filingId=cbd91c1c-b0ac-4521-a7fd-bf121e7caa9d

SECOND DIVISION MILLER, P. J., MERCIER and COOMER, JJ. NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. Please refer to the Supreme Court of Georgia Judicial Emergency Order of March 14, 2020 for further information at (https://www.gaappeals.us/rules). June 3, 2020 In the Court of Appeals of Georgia A20A0004. JOSHUA DAVID MELLBERG, LLC et al. v. THE IMPACT PARTNERSHIP, LLC et al. MILLER, Presiding Judge. This appeals stems from a defamation lawsuit which The Impact Partnership, LLC, Tree Fine, and Jovan Will (collectively “Impact”) filed against Joshua David Mellberg and Joshua David Mellberg, LLC (collectively “Mellberg”).1 Mellberg appeals from the trial court’s order denying its motion to dismiss the lawsuit, arguing that the trial court erred in determining that the revised anti-SLAPP (“Strategic Lawsuit Against Public Participation”) statute did not apply retroactively to bar Impact’s defamation claim and that the trial court erred by not striking Impact’s 1 Another defendant in the lawsuit, Christ Stanton, is not a party to this appeal. complaint. Because the revised anti-SLAPP statute does not apply retroactively to bar Impact’s defamation claim, we affirm the denial of Mellberg’s motion to dismiss. “On appeal, we conduct a de novo review of the denial of a motion to dismiss. In reviewing the trial court’s order, we construe the pleadings in the light most favorable to the plaintiff with any doubts resolved in the plaintiff’s favor.” (Citation and punctuation omitted.) Emory Univ. v. Metro Atlanta Task Force for the Homeless, Inc., 320 Ga. App. 442 , 443 (740 SE2d 219) (2013). According to the complaint, which was filed in April 2014, the Impact Partnership, LLC offers services to assist financial advisors and agents in relation to insurance and annuity products. Impact alleged that Mellberg published and distributed a defamatory press release concerning Impact. Mellberg filed a motion to dismiss the lawsuit pursuant to former OCGA § 9-11-11.1, arguing in part that (1) the anti-SLAPP statute applied because the press release concerned a lawsuit in Arizona and was therefore a written statement made in connection with an issue under consideration or review by a judicial body; and (2) the claim should be dismissed because the press release was privileged and therefore the lawsuit was falsely 2 verified.2 In February 2015, the trial court denied Mellberg’s motion to dismiss after a hearing, concluding that the former anti-SLAPP statute did not apply to the press release. More than three years after the trial court denied the initial motion to dismiss, Mellberg filed a motion to dismiss or strike the complaint pursuant to the revised anti- SLAPP statute, which became effective on July 1, 2016. Mellberg argued that the revised anti-SLAPP statute applies retroactively and that the press release is considered protected speech under the “broad reaching scope” of the revised statute. Mellberg argued that, under the revised statute, the plaintiff has the burden of demonstrating a probability of prevailing on the claim and that Impact lacked a factual or legal basis for its defamation claim. The trial court denied the motion, 2 Under former OCGA § 9-11-11.1 (b), claims that fell under the anti-SLAPP statute required a “written verification” certifying that the claim was well grounded in fact and [was] warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; that the act forming the basis for the claim [was] not a privileged communication. . . ; and that the claim [was] not interposed for any improper purpose such as to suppress a person’s or entity’s right of free speech or right to petition government, or to harass, or to cause unnecessary delay or needless increase in the cost of litigation. 3 determining that Mellberg was attempting to seek a substantive benefit from the revised statute; that the substantive provisions of the statute could not be applied retroactively in the absence of a provision allowing such treatment; and that because the lawsuit was filed more than two years before the statute was amended, Mellberg could not avail itself of any new substantive provisions of the revised statute.3 This appeal followed. In related enumerations of error, Mellberg argues that the trial court erred in ruling that the revised anti-SLAPP statute does not apply retroactively to Impact’s defamation claim and that the trial court erred by not striking Impact’s complaint under the revised anti-SLAPP statute. We discern no reversible error. “‘Strategic lawsuits against public participation,’ or ‘SLAPPs,’ are meritless lawsuits brought not to vindicate legally cognizable rights, but instead to deter or punish the exercise of constitutional rights of petition and free speech by tying up their target’s resources and driving up the costs of litigation.” Wilkes & McHugh, P.A. 3 Impact has filed a motion to dismiss, arguing that this Court lacks jurisdiction because Mellberg’s second motion to dismiss was actually a motion for reconsideration, the denial of which is not subject to direct appeal. Mellberg’s second motion to dismiss cannot properly be understood as a motion for reconsideration because Mellberg sought the application of new law. Accordingly, we deny Impact’s motion to dismiss this appeal. 4 v. LTC Consulting, L.P., 306 Ga. 252 , 257 (2) (830 SE2d 119) (2019). Thus, anti-SLAPP statutes “typically provide for an early means of testing the bona fides of the plaintiff’s claim. . . .” (Citation and emphasis omitted.) Atlanta Humane Society v. Harkins, 278 Ga. 451 , 452 (1) (603 SE2d 289) (2004). Under the revised anti- SLAPP statute, “the analysis of an anti-SLAPP motion involves two steps. First, the court must decide whether the party filing the anti-SLAPP motion (usually, the defendant) has made a threshold showing that the challenged claim is one ‘arising from’ protected activity.” Wilkes & McHugh, P.A., supra , 306 Ga. at 261-262 (2) (b) (citing OCGA § 9-11-11.1 (b) (1)). “If a court concludes that this threshold showing has been made, it must proceed to the second step of the analysis and decide whether the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (Punctuation omitted.) Id. at 262 (2) (b) (citing OCGA § 9-11-11.1 (b) (1)). A claim that satisfies both prongs of the anti-SLAPP statute is subject to being stricken. Id. at 262 -263 (2) (b). As relevant to Mellberg’s second motion to dismiss, the revised statute differs from the old one in the following ways: (1) it contains a reconfigured scope of protected speech (OCGA § 9-11-11.1 (c) (1) - (4)); (2) the General Assembly has now directed that the Code section is to be construed broadly (OCGA § 9-11-11.1 (a)); and 5 (3) the probability-of-prevailing standard described above has been added to the statute (OCGA § 9-11-11.1 (b) (1)), and the written verification requirement has been removed. The revised statute itself is silent on the issue of retroactivity. OCGA § 9- 11-11.1. As to whether a statute applies retroactively, the rule is that “legislation which involves mere procedural or evidentiary changes may operate retrospectively; however, legislation which affects substantive rights may only operate prospectively. The distinction is that a substantive law creates rights, duties, and obligations while a procedural law prescribes the methods of enforcing those rights, duties, and obligations.” (Citations omitted.) Fowler Properties, Inc. v. Dowland, 282 Ga. 76 , 78 (1) (646 SE2d 197) (2007). The Georgia appellate courts have not engaged in extensive analysis regarding whether the statute (or parts thereof) is procedural or substantive so as to dictate whether retroactive application is appropriate.4 Recently, in Rogers v. Dupree, 349 Ga. App. 777 , 778, n.1 (824 SE2d 823) (2019), we noted that although the statute has been revised, the former version of the anti-SLAPP statute applied to the case because 4 We have recognized that the former statute is both procedural and substantive in nature, though our decisions to this effect were not made in relation to retroactive/prospective application. See, e.g., Atlanta Humane Society, supra , 278 Ga. at 454 (1); Hindu Temple & Community Center of High Desert, Inc. v. Raghunathan, 311 Ga. App. 109 , n.1 (714 SE2d 628) (2011). 6 the lawsuit was filed several years before the revision of the statute. Mellberg contends, however, that the Rogers decision does not evince that the parties were contesting retroactivity, and he maintains that the anti-SLAPP statute is a procedural mechanism which operates retroactively to bar Impact’s defamation claim. Nonetheless, Mellberg has failed to demonstrate that Impact’s complaint should be dismissed under the revised statute. Even assuming, arguendo, that the revised anti-SLAPP statute (or parts thereof) could operate retroactively, “to apply a procedural statute retroactively generally does not mean that it applies with respect to prior filings, proceedings, and occurrences, but rather that the procedural change affects future court filings, proceedings, and judgments that arise from prior occurrences.” Murphy v. Murphy, 295 Ga. 376 , 378 (761 SE2d 53) (2014). As explained above, anti-SLAPP statutes customarily “provide for an early means of testing the bona fides of the plaintiff’s claim. . . .” (Emphasis omitted.) Atlanta Humane Society, supra , 278 Ga. at 452 (1). And here, Impact filed its complaint and the trial court tested the bona fides of Impact’s claim years before the revised statute became effective. The trial court examined Impact’s filings (including its complaint and written verification), held a hearing, and ruled that the former anti-SLAPP statute did not apply to bar Impact’s complaint. By urging the 7 retroactive application of the revised statute to prompt a dismissal of Impact’s claim, Mellberg effectively seeks to both re-engage the anti-SLAPP vetting process that occurred prior to the statute’s revision and subject Impact to an evidentiary burden that did not exist when it filed its complaint. This does not comport with Georgia law. See Murphy, supra , 295 Ga. at 378 (retroactive application of new statute was not grounds to dismiss appeal because the filing of the action, issuance of the order sought to be appealed, and filing of the notice of appeal, occurred prior to the effective date of the amendment).5 Accordingly, the revised anti-SLAPP statute could not apply to effectuate a dismissal of Impact’s defamation claim, and we affirm the trial court’s denial of the motion to dismiss or strike under the revised statute. Judgment affirmed. Mercier and Coomer, JJ., concur. 5 Relying on Rosser v. Clyatt, 348 Ga. App. 40 , 42 (2) (a) (821 SE2d 140) (2018) (physical precedent only), Mellberg contends that the revised statute applies retroactively to statements made before July 1, 2016. This argument does not aid Mellberg’s position. In Rosser, at the time that the complaint was filed and the trial court assessed the bona fides of the plaintiff’s claim, the revised statute was already in effect. Id. at 44 (2) (b). 8

2020-01-17 22:01:32.965768+00

Lansdon

*201OPINION. Lansdon: On its income-tax return petitioner failed to include in gross income exempt interest in the amount of $25,000.26. From the amount returned as gross income it deducted $25,000.26 exempt interest. The respondent allowed the deduction but recomputed *202gross income, including the exempt interest therein, as provided for in section 244 (a) of the Revenue Act of 1924, which follows: In the case of a life insurance company the term “ gross income ” means the gross amount of income received during the taxable year from interest, dividends, and rents. It is clear that exempt interest is to be included in gross income and the respondent’s action in adding the amount thereto is approved. In computing petitioner’s net income under section 245 of the Revenue Act of 1924, the respondent has allowed, among other things, deductions of $25,000.26, the amount of exempt interest, and $96,585.92, which is 4 per cent of the mean of the reserve funds required by law and held at the beginning and end of the taxable year, diminished by the amount of exempt intereát. Section 245 (a) provides: In the case of a life insurance company the term net income ” means the gross income less— (1) The amount of interest received during the taxable year which under paragraph (4) of subdivision (b) of section 213 is exempt from taxation under this title; (2) An amount equal to the excess, if any, over the deduction specified in paragraph (1) of this subdivision, of 4 per centum of the mean of the reserve funds required by law and held at the beginning and end of the taxable year, plus (in ease of life insurance companies issuing policies covering life, health, and accident insurance combined in one policy issued on the weekly premium payment plan, continuing for life and not subject to cancellation) 4 per centum of the mean of such reserve funds (not required by law) held at the beginning and end of the taxable year, as the Commissioner finds to be necessary for the protection of the holders of such policies only. Our decision as to this question is controlled by the decision of the Supreme Court in National Life Insurance Co. v. United States, 48 Sup. Ct. 591; 211 U. S. 508, where it was held with regard to the identical section of the Revenue Act of 1921 that the provision of the Act which undertook to abate the 4 per cent deduction by the amount of interest received from tax-exempt securities was without effect. Petitioner is entitled to the 4 per cent deduction undiminished by the amount of interest received from tax-exempt securities. The petitioner’s third contention is that there should be included as reserves required by law in computing net income under section 245(a) (2) of the Revenue Act of 1924, above quoted, the amount of $100,000 deposited with the Commissioner of Insurance of South Dakota as a condition precedent to doing business within the State. Section 9351, Revised Code of Laws of South Dakota (1919) provides: *203§ 9351. Capital Required,, Investment, Securities Deposited, Exchange, Interest Withdrawals. — No stock life, health or accident company of this state shall do business in this state or elsewhere, and no other stock life, health or accident insurance company, except as provided in this article, shall do business ⅛ this state unless it has at least one hundred thousand dollars of paid-up capital stock and shall have at least one hundred thousand dollars invested in United States or state securities or mortgages on unincumbered real property, situated in the state where its principal place of business is located or, in case of a foreign company, where its principal place of business for this country is located, worth at least double the amount loaned thereon, exclusive of improvements ; such securities, in case of companies incorporated under this article, must be deposited with the commissioner of insurance of this state and, in case of foreign companies, with the proper officer of some state for the benefit of all its policyholders in the United States, and the fact that the company has such a sum on deposit must be certified to the commissioner of insurance by the officer holding such deposit in trust. But nothing herein contained shall be construed to invalidate the agency of any company incorporated in another state, by reason of such company having from time to time exchanged the securities so deposited with the commissioner of insurance, controller or chief financial officer of the state in which such company is located, for other bonds or securities authorized by this article, or by reason of such company having drawn its interest and dividends from lime to time for such bonds and securities. The fund herein involved is a deposit of capital to guarantee the performance by insurance companies of contracts entered into. It has no relation to the net value of outstanding policies and is not a fund reserved from premiums to meet policy obligations at maturity. We are of the opinion that it is not a reserve required by law within the meaning of the Revenue Act. Old Line Insurance Co., 13 B. T. A. 758. The remaining question for determination is whether petitioner is entitled to a deduction in the amount of $62,902.12 for debts ascertained to be worthless and charged off during the taxable year, or as a loss sustained during the year. Petitioner maintained a large part of its reserves in demand deposits with banks throughout the territory in which it operates. During the year 1925, 'a number of these banks were closed and certificates of deposit in closed banks not being allowable as admissible assets by the Insurance Commissioner of South Dakota, the amounts were charged off by petitioner. At that time the amount of the dividend which would be paid by the receiver in each case could not be ascertained. Petitioner contends that it has since returned the amount of such dividends as income for the year in which paid. The revenue acts provide a special method for taxing insurance companies. The report of the House Committee on Ways and Means, with regard to the Revenue Act of 1921, contains the following statement: The provisions of tbe present law applicable to insurance companies are imperfect and productive of constant litigation. Moreover tbe taxes paid by *204insurance companies are inadequate. It is accordingly proposed in lieu of all oilier taxes to tax life insurance companies on the basis of their investment income from interest, dividends and rents, with suitable deductions for expenses fairly chargeable against such investment income. (Italics ours.) The plan adopted for taxing insurance companies other than life is on a different basis. Sections 246 and 247 of the Revenue Acts. The cases, therefore, cited by petitioner in support of its contention which involve the tax liability of insurance companies other than life have no bearing on the decision in the instant case. Sections 242, 243, 244 and 245 of the Revenue Act of 1924, pertaining to the tax liability of life insurance companies, contain no provision allowing a deduction for bad debts or losses. Petitioner contends that nevertheless it is entitled to a deduction under section 234 (a) (4) and (5) which provides as follows: (a) In computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions: * ⅜ * ⅛ ⅜ * * (4) Losses sustained during the taxable year and not compensated for by insurance or otherwise. * * * (5) Debts ascertained to be worthless and charged off within the taxable year (or in the discretion of the Commissioner, a reasonable addition to a reserve for bad debts) ; and when satisfied that a debt is recoverable only in part, the Commissioner may allow such debt to be charged off in part. We need not determine here whether section 234 (a) (4) and (5) applies to life insurance companies for in any event petitioner has failed to establish its right to the deduction. We have repeatedly held that the charging off of an amount pursuant to orders or instructions of an official of the State or National Government is not sufficient to establish that the debt was ascertained to be worthless. First National Bank, Parkers Landing, 12 B. T. A. 1387; West Lafayette Bank, 12 B. T. A. 1356; Prescott State Bank, 11 B. T. A. 147; Continental Trust Co., 7 B. T. A. 539; Farmers and Traders Bank, 4 B. T. A. 753; Murchison National Bank, 1 B. T. A. 617. The facts in the instant case establish merely that certain banks in which petitioner had deposits were closed and that certificates of deposit in such banks were excluded from admissible assets by the Insurance Commissioner of South Dakota. There is nothing in the record upon which we can determine the extent, if any, of petitioner’s loss. Reviewed by the Board. Decision will be entered under Bule 50.

2020-12-01 12:01:17.951891+00

http://www.jag.navy.mil/courts/documents/archive/2020/HALFACRE_201900210_PUB.pdf

This opinion is subject to administrative correction before final disposition. Before MONAHAN, STEPHENS, and STEWART Appellate Military Judges _________________________ UNITED STATES Appellee v. Calvin HALFACRE Logistics Specialist Chief (E-7), U.S. Navy Appellant No. 201900210 Decided: 30 November 2020 Appeal from the United States Navy-Marine Corps Trial Judiciary Military Judge: Arthur L. Gaston Sentence adjudged 14 March 2019 by a general court-martial con- vened at Naval Support Activity Naples, Italy, consisting of a military judge sitting alone. Sentence approved by the convening authority: confinement for 30 months and a bad-conduct discharge. For Appellant: Philip D. Cave, Esq. (argued) Lieutenant Commander Christopher Riedel, JAGC, USN (on brief) For Appellee: Lieutenant Jennifer Joseph, JAGC, USN (argued) Lieutenant Joshua C. Fiveson, JAGC, USN (on brief) _________________________  United States v. Halfacre, NMCCA No. 201900210 Opinion of the Court Senior Judge STEPHENS delivered the opinion of the Court, in which Chief Judge MONAHAN and Judge STEWART joined. _________________________ PUBLISHED OPINION OF THE COURT _________________________ STEPHENS, Senior Judge: Pursuant to his pleas, Appellant was convicted of three specifications of patronizing a prostitute in violation of Article 134, Uniform Code of Military Justice [UCMJ]. 1 Appellant now raises three assignments of error [AOE]: (1) the military judge abused his discretion in admitting and considering evidence of Appellant’s alleged sexual assaults against the prostitutes; (2) the military judge abused his discretion by permitting one of the prostitutes to offer an unsworn statement as a “victim”; 2 and (3) the confinement for 30 months was inappropriately severe. After careful review, we affirm his convictions and sentence. I. BACKGROUND While Appellant was stationed in Bahrain, he patronized prostitutes three different times. Appellant frequented local bars known to traffic in prostitution. Each time, he negotiated with a prostitute and brought her back to his apartment for sex. But according to the prostitutes, there was more than just sex. They each alleged that Appellant anally raped them. The women, all from Thailand, sought out another woman to assist them as a translator, and then reported these assaults to the Naval Criminal Investiga- tive Service [NCIS]. Based on these allegations, the Government charged Appellant with the three specifications of patronizing a prostitute, to which he ultimately pleaded guilty, but also with three specifications of sexual assault. 1 10 U.S.C. § 934 . 2 The military judge admitted portions of the victim impact statement only as evidence in aggravation under Rule for Courts-Martial [R.C.M.] 1001(b)(4). Therefore, we do not write separately from the first AOE about this AOE. See United States v. Matias, 25 M.J. 356 , 363 (C.M.A. 1987), cert. denied, 485 U.S. 968 (1988). 2  United States v. Halfacre, NMCCA No. 201900210 Opinion of the Court After an Article 32, UCMJ preliminary hearing, Appellant entered into a pretrial agreement. He agreed to plead guilty before a military judge sitting alone to the three specifications of patronizing a prostitute. In exchange, the convening authority agreed to withdraw the sexual assault charges and to disapprove a dishonorable discharge if it was awarded and instead approve a bad-conduct discharge. 3 He also agreed to a maximum confinement of 30 months. Prior to his guilty plea, the Government moved to admit evidence of the sexual assault allegations. Specifically, the Government moved to admit two video-recorded interviews of the details of the prostitutes’ sexual assault allegations and a victim impact statement from one of them. The Government argued that the video interviews were admissible under Rule for Courts- Martial [R.C.M.] 1001(b)(4) as evidence in aggravation of the offense for which Appellant was convicted, and that the victim impact statement was admissible under R.C.M. 1001A as evidence of the harm to one of the prostitutes. Appellant countered by arguing the women were not “victims” of prostitution and that aggravation evidence stemming from uncharged misconduct is limited to “same or similar” crimes. Appellant also argued the probative value of the evidence was substantially outweighed by its unfairly prejudicial impact. 4 In the video interviews, the prostitutes—through the translator— described how Appellant met them in a local bar, paid them, and then took them to his off-base apartment where they engaged in sexual intercourse. All three stated that during intercourse, Appellant also forced his penis or a sex toy into their anuses. Each of the women claimed to have objected and each claimed they were forced. They detailed how Appellant prevented their escape, pinned them down, and strangled or smothered them to muffle their cries. According to at least one of the women, Appellant engaged in vaginal intercourse after sexually assaulting her. One of the women also described how Appellant, after the sexual assault, locked her outside of his apartment, thereby requiring her to find her own way home, only to find Appellant had stolen the money he had paid her. The 3 R. at 235. 4 Appellant also argued that (1) the prostitutes were engaged in illegal activity in Bahrain and therefore, had motives to fabricate, and (2) the woman who translated for them, as seen in the NCIS video, had a motive to fabricate due to her involvement as a co-conspirator in a separate court-martial alleging human trafficking. The translator was also an NCIS cooperating informant. 3  United States v. Halfacre, NMCCA No. 201900210 Opinion of the Court translator explained to NCIS that a local cab driver had told her several other prostitutes had been sexually assaulted by Appellant in this manner. After hearing argument from counsel, the military judge ruled the videos and the victim impact statement were admissible for purposes of “accuracy in the sentencing process by permitting the Judge to fully understand the true plight of the victim in each case.” 5 He also noted on the record that he was only considering these “for the purposes of evidence in aggravation to be considered in sentencing the accused for the offense that he’s pled guilty for.” 6 He based his decision on R.C.M. 1001(b)(4) and not on the Government’s alternative basis, R.C.M. 1001A. 7 He specifically did not consider any accusations that the translator heard from the taxi driver about other prostitutes. 8 The military judge then went on to filter the evidence through Military Rule of Evidence [Mil. R. Evid.] 403, finding the evidence probative enough to outweigh the danger of unfair prejudice. Finally, the military judge articulat- ed that he would only consider the video interviews for “the offenses for each one of these individuals at issue” and recognized that he could “only sentence the accused for what he’s pled and been found guilty of, not for any offense that the government has now withdrawn from consideration.” 9 After the military judge articulated his ruling, the trial counsel argued for the maximum punishment 10 as the appropriate sentence, not just because Appellant had been found guilty of prostitution but because Appellant used prostitution as a “vessel by which he was able to commit other crimes.” 11 The trial counsel highlighted the allegations of sexual assault from the prosti- tutes. The trial defense counsel argued for a sentence of reduction to E-6 and confinement for 89 days. The military judge announced a sentence of confinement for 30 months and a dishonorable discharge. 5 R. at 280. 6 Id. (emphasis added). 7 Id. at 281. 8 Id. at 286. 9 Id. at 282. 10 Reduction to E-1, confinement for 36 months, and a dishonorable discharge. 11 R. at 318. 4  United States v. Halfacre, NMCCA No. 201900210 Opinion of the Court Appellant argues the military judge abused his discretion in admitting the videos and the written statement because they were not “directly related to or resulting from” the offense of patronizing a prostitute. II. DISCUSSION A. The Evidence in Aggravation was Admissible 1. Standard of review and the law We review the decision of a military judge to admit aggravation evidence at sentencing for an abuse of discretion. 12 “Where the military judge conducts a proper [Mil. R. Evid.] 403 balancing on the record, we will not overturn his ruling unless we find a clear abuse of discretion.” 13 The Government is entitled to offer evidence in aggravation at sentencing under R.C.M. 1001(b)(4) to show “any aggravating circumstances directly relating to or resulting from the offenses of which the accused has been found guilty.” 14 Aggravation includes evidence of the impact “to any person or entity who was the victim of an offense committed by the accused . . . .” 15 This information assists the sentencing authority to place the offense “in context, including the facts and circumstances surrounding the offense.” 16 The link between R.C.M. 1001(b)(4) evidence of uncharged misconduct and the crime “must be direct as the rule states, and closely related in time, type, [and] often outcome, to the convicted crime.” 17 Evidence in aggravation must not be so attenuated from the offense for which an accused was convicted as to be unfairly prejudicial, irrelevant, or merely inflammatory. 12 United States v. Ashby, 68 M.J. 108 , 120 (C.A.A.F. 2009). 13 Id. (citing and quoting United States v. Stephens, 67 M.J. 233 , 235 (C.A.A.F. 2009)). 14 R.C.M. 1001(b)(4) (emphasis added). 15 Id. 16 United States v. McCrary, 2013 CCA LEXIS 387 (A.F. Ct. Crim. App. May 7, 2013) (unpublished op.) (citing United States v. Mullens, 29 M.J. 398 , 400-01 (C.M.A. 1990); United States v. Vickers, 13 M.J. 403 , 406 (C.M.A. 1982); United States v. Nourse, 55 M.J. 229 , 232 (C.A.A.F. 2001); United States v. Buber, 62 M.J. 476 , 479 (C.A.A.F. 2006)). 17 United States v. Hardison, 64 M.J. 279 , 282 (C.A.A.F. 2007). 5  United States v. Halfacre, NMCCA No. 201900210 Opinion of the Court Evidence offered in aggravation often highlights “same course of conduct” misconduct of an accused. It has included circumstances in which an accused was convicted of sexually abusing his children at one duty station, but stipulated to almost identical, though uncharged, misconduct at another duty station. 18 It has also included circumstances where a military recruiter was convicted of four specifications of helping potential recruits cheat on military entrance examinations, but had evidence admitted during sentencing indicating he did this “twenty or thirty” times; 19 evidence that an accused distributed a far greater amount of drugs than the amount to which he stipulated; 20 and evidence of additional thefts by an accused of property from a local sheriff’s office beyond that for which the accused was convicted. 21 Evidence showing continued drug use after the drug offenses for which an accused was convicted has also been held to be proper evidence in aggrava- tion. 22 Evidence in aggravation can also show uncharged misconduct which is qualitatively different from the offense for which an accused was convicted. This most often comes in the form of a victim providing a more complete picture of circumstances surrounding the misconduct to which the accused was convicted. For example, when an accused pleaded guilty to unlawful entry of a home and committed an assault consummated by a battery against a woman, the woman testified at sentencing about how he sexually assaulted her after entering the home, including his later admission to her that he “raped” her. 23 For the purposes of R.C.M. 1001(b)(4), “the meaning of ‘directly related’ . . . is a function of both what evidence can be considered and how strong a connection that evidence must have to the offense of which the accused has been convicted.” 24 18 Mullens, 29 M.J. at 398-401. 19 United States v. Ross, 34 M.J. 183 , 184 (C.M.A. 1992). 20 United States v. Shupe, 36 M.J. 431 , 432-36 (C.M.A. 1993). 21 United States v. Nourse, 55 M.J. 229 , 230-32 (C.A.A.F. 2001). 22 United States v. Moore, 68 M.J. 491 (C.A.A.F. 2010). 23 United States v. Terlep, 57 M.J. 344 , 347 (C.A.A.F. 2002). 24 Hardison, 64 M.J. at 281. 6  United States v. Halfacre, NMCCA No. 201900210 Opinion of the Court 2. Analysis Appellant argues that patronizing a prostitute has a qualitative difference from sexual assault. He posits it is unfair for Appellant to be convicted of patronizing prostitutes, but essentially be sentenced for sexually assaulting them. While we agree with that premise, that is not what happened in this case. Appellant was convicted of three specifications of patronizing a prostitute, which carried a maximum confinement of 36 months. Three specifications of sexual assault under these circumstances would carry a maximum confinement of 90 years. Appellant patronized three prostitutes, but, given their statements, they were not run-of-the mill transactions, but rather extremely aggravated events that left each of the three women with significant physical and emotional harm. The aggravation evidence provides context for the offenses for which Appellant was convicted. This gave the military judge a more complete picture of the facts and circumstances of Appellant’s misconduct. We reject Appellant’s argument that aggravation evidence of uncharged misconduct may not be admitted if it is not of the same “type” as the convicted offenses. Evidence of a sexual assault may be used as aggravation evidence to show the extent of an assault consummated by a battery. In United States v. Terlep, the appellant was charged with burglary and rape when he broke into a home and raped a woman. 25 He eventually pleaded guilty to only unlawful entry and assault consummated by a battery. The woman, as a victim of an assault—though under Article 128 and not Article 120—was permitted to testify about being raped. This allowed the military judge to “fully appreciate the true plight of the victim in each case.”26 But then Appellant also argues that the prostitutes were not “victims” and therefore, the Government may not use evidence in aggravation that flows from them, the way that the prosecution used evidence in aggravation from the bona fide victim in Terlep. We disagree. Assuming without deciding the prostitutes are not “victims” but rather co-participants in a “victim-less crime,” the evidence of Appellant’s alleged sexual assaults during the course of his adjudicated misconduct are nevertheless “circumstances surrounding the offense” of patronizing a prostitute. 25 57 M.J. 344 . 26 Id. at 350 . 7  United States v. Halfacre, NMCCA No. 201900210 Opinion of the Court In United States v. Glazier, the appellant and a fellow Soldier took a joyride in an Army truck while they drank alcohol. 27 As a result, the appellant crashed the vehicle and caused such severe injuries to his passenger that he died. The government charged Glazier with involuntary manslaughter, negligent damage to a government vehicle, willfully disobey- ing an order of a commissioned officer, wrongful appropriation of a govern- ment vehicle, and wrongful use of marijuana. The charges of involuntary manslaughter and wrongful appropriation of a military vehicle were dismissed due to insufficient evidence. The appellant eventually pleaded guilty to the remaining charges and entered into a stipulation of fact. Part of that stipulation stated that the passenger “suffered injuries which resulted in his death later that night.” 28 The appellant objected at trial, not to the truth of the stipulated fact, but to its admissibility as proper evidence in aggrava- tion. The military judge admitted it and the Court of Military Appeals held that it was admissible under R.C.M. 1001(b)(4) because it was “directly related to the charged offenses and thus admissible.” 29 In Glazier, the passenger was a victim of the appellant’s actions, but was not a victim of the offense for which the appellant was convicted. If the passenger had merely sustained serious injuries and had lived to testify, he could surely have testified about the incident to provide the sentencing authority a more complete picture of what happened, even if he were not a bona fide victim. The type of misconduct for which Glazier was convicted— disobeying an officer, negligently damaging an Army truck, and smoking marijuana—were relatively minor, especially compared to involuntary manslaughter. And the passenger was certainly not a victim of any of the convicted offenses. But the misconduct was much more aggravated than just a typical joyride and it was proper for the sentencing authority to have the whole picture, including the facts and circumstances that were part-and- parcel of the convicted offenses, in particular the negligent damage to the government vehicle in which the passenger was riding. The same holds true for Appellant. He was only convicted of patronizing prostitutes. The prostitutes were arguably not his victims vis-à-vis the crime of prostitution, and the allegations of sexual assault were as qualitatively different from patronizing prostitutes as involuntary manslaughter was to 27 26 M.J. 268 (C.M.A. 1988). 28 Id. at 269 . 29 Id. at 271 (citing Vickers, 13 M.J. at 406). 8  United States v. Halfacre, NMCCA No. 201900210 Opinion of the Court negligent damage of a government vehicle. But the aggravation evidence was proper in both cases because it was inextricably interwoven with the facts and circumstances of the convicted offenses and painted a complete picture for the sentencing authority. 3. The military judge conducted a proper balancing test The military judge conducted a thorough balancing test under Mil. R. Evid. 403. Evidence in aggravation may be excluded if “its probative value is substantially outweighed by a danger of . . . unfair prejudice.” 30 A military judge enjoys “wide discretion” in applying this rule. As long as the military judge conducts a proper balancing test and places that analysis on the record, the ruling will not be overturned unless there is a clear abuse of discretion. 31 The military judge found that the probative value was not outweighed by the danger of unfair prejudice to Appellant. In doing so, he also reiterated that he would only consider each of the prostitute’s statements as it pertained to her, that the evidence would only be considered as evidence in aggravation, and that Appellant would only be sentenced for the offenses for which he was convicted. We recognize the inherent danger of evidence in aggravation that appears to be qualitatively different from the offenses for which an accused was convicted. An accused is “not responsible for a never-ending chain of causes and effects.” 32 The government should be cautious in attempting to use such evidence in aggravation. Any evidence that is so unfairly prejudicial that the unfairness substantially outweighs the probative value may not be admit- ted. 33 This was not the case here as the statements of the prostitutes were not some unfair piling-on of bad character evidence by the Government. The statements also did not describe some attenuated event that was “so unrelated to the offense charged as to be irrelevant.” 34 30 Mil. R. Evid. 403. 31United States v. Manns, 54 M.J. 164 , 166 (C.A.A.F. 2000) (citing United States v. Ruppel, 49 M.J. 247 , 250 (C.A.A.F. 1998). 32 United States v. Rust, 41 M.J. 472 , 478 (C.A.A.F. 1995) (citing United States v. Witt, 21 M.J. 637 , 640 n. 3 (A.C.M.R. 1985). 33 Mil. R. Evid. 403. 34 United States v. Bono, 26 M.J. 240 , 242 (C.M.A. 1988) (finding ineffective assistance of counsel to not object to admission of an appellant’s confession to totally unrelated misconduct from that for which he pleaded guilty). 9  United States v. Halfacre, NMCCA No. 201900210 Opinion of the Court B. Appellant’s Sentence was Appropriate Appellant also argues his sentence to 30 months’ confinement for patron- izing prostitutes is inappropriately harsh. We review the appropriateness of a sentence de novo. 35 This Court “may affirm only such findings of guilty and the sentence or such part or amount of the sentence, as it finds correct in law and fact and determines, on the basis of the entire record, should be approved.” 36 “Sentence appropriateness involves the judicial function of assuring that justice is done and that the accused gets the punishment he deserves.” 37 The analysis requires “ ‘individualized consideration’ of the particular accused ‘on the basis of the nature and seriousness of the offense and the character of the offender.’ ” 38 In determining sentence appropriate- ness, we may not engage in exercises of clemency. 39 Appellant negotiated with the convening authority to disapprove con- finement in excess of 30 months. They did not negotiate any protection from a punitive discharge. The military judge properly ensured the pretrial agreement was entered into voluntarily and by the Appellant’s own free will 40 and also asked whether the Defense wished to withdraw from the agree- ment. 41 Appellant received the benefit of his bargain, but now contends the length of the sentence combined with the dishonorable discharge to evoke “immediate surprise” 42 and to be “excessive [in] nature,” 43 arguing the sentence was in fact for the previously dismissed sexual assault charge and specifications. We disagree and find the adjudged sentence appropriate. Weighing the gravity and circumstances of this misconduct, particularly when considering the properly admitted evidence in aggravation against his record of service 35 United States v. Lane, 64 M.J. 1 , 2 (C.A.A.F. 2006). 36 UCMJ art. 66(c). 37 United States v. Healy, 26 M.J. 394 , 395 (C.M.A. 1988). 38 United States v. Snelling, 14 M.J. 267 , 268 (C.M.A. 1982) (quoting United States v. Mamaluy, 27 C.M.R. 176 , 180-181 (C.M.A. 1959)). 39 Healy, 26 M.J. at 395-396. 40 R. at 235-38. 41 Id. at 278, 282-83. 42 App. Brief dated 2 March 2020 at 4. 43 App. Supp. Brief dated 13 August 2020 at 9. 10  United States v. Halfacre, NMCCA No. 201900210 Opinion of the Court and the other evidence in extenuation and mitigation, we are convinced that justice was done and Appellant received the punishment he deserves. 44 III. CONCLUSION After careful consideration of the record and briefs of appellate counsel, we have determined that the approved findings and sentence are correct in law and fact and find no error materially prejudicial to Appellant’s substan- tial rights occurred. 45 Accordingly, the findings and sentence as approved by the convening authority are AFFIRMED. Chief Judge MONAHAN and Judge STEWART concur. FOR THE COURT: RODGER A. DREW, JR. Clerk of Court 44 See Healy, 26 M.J. at 395. 45 UCMJ arts. 59, 66. 11

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http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00389.htm

Martinez v Ghorta (2021 NY Slip Op 00389) Martinez v Ghorta 2021 NY Slip Op 00389 Decided on January 26, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 26, 2021 Before: Gische, J.P., Kern, Moulton, Shulman, JJ. Index No. 25388/16E Appeal No. 12948 Case No. 2020-02916 [*1]Longino Martinez, Plaintiff-Respondent, v Jaswinder Singh Ghorta et al., Defendants-Appellants, Custom Built Homes, Inc., et al., Defendants. Sol Kodsi, New York, for appellants. Wingate, Russotti, Shapiro & Halperin, LLP, New York (David M. Schwarz of counsel), for respondent. Order, Supreme Court, Bronx County (Lucindo Suarez, J.), entered December 13, 2019, which, to the extent appealed from as limited by the briefs, granted plaintiff's motion for partial summary judgment on the Labor Law § 240 (1) claim as against defendants Jaswinder Singh Ghorta and Maddelena Fasano, unanimously affirmed, without costs. Plaintiff established prima facie defendants' liability under Labor Law § 240(1) by showing that his injuries resulted "directly from the application of the force of gravity to the [metal jack]" he was using, which toppled over, struck him in the head and knocked him to the ground, and that he had not been provided with an adequate safety device (see Runner v New York Stock Exch., Inc., 13 NY3d 599, 604 [2009]). In opposition, defendants failed to raise a material issue of fact. They argue that the record is unclear as to what actually struck plaintiff. However, the notation in the unsworn hospital record that plaintiff was hit by a pipe is not inconsistent with his testimony, which described the jack as a pipe-like structure, and there is no evidence that plaintiff was struck by a portion of a nearby pipe scaffolding. In any event, whether plaintiff was struck by an unsecured jack that fell while he was attempting to lift a steel beam or by a steel beam that fell while being hoisted by the unsecured jack is immaterial, as the uncontradicted evidence shows that the furnished elevation-related safety device, the jack, was inadequate to shield plaintiff from harm "directly flowing from the application of the force of gravity to [the jack]" (Ross v Curtis-Palmer Hydro-Elec. Co., 81 NY2d 494, 501 [1993]; see Gordon v Eastern Ry. Supply, 82 NY2d 555, 561-562 [1993]; Luongo v City of New York, 72 AD3d 609 [1st Dept 2010]; Arnaud v 140 Edgecomb LLC, 83 AD3d 507 [1st Dept 2011]). Contrary to defendants' contention, plaintiff was not required to show that the unsecured jack was defective, since his testimony establishes that it failed to perform its function (Arnaud, 83 AD3d at 508; Avila v St. David's Sch., 187 AD3d 460 [1st Dept 2020]). If, as defendants contend, plaintiff failed to wait for assistance from his boss, who was talking on his cell phone, or installed the jack improperly, then plaintiff was, at most, comparatively negligent, which is not a defense to section 240(1) liability (Blake v Neighborhood Hous. Servs. of N.Y. City, 1 NY3d 280, 290 [2003]; Pierrakeas v 137 E. 38th St. LLC, 177 AD3d 574 [1st Dept 2019]).THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 26, 2021

2021-01-26 17:08:56.330778+00

http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00390.htm

MTGLQ Invs., L.P. v Vazquez (2021 NY Slip Op 00390) MTGLQ Invs., L.P. v Vazquez 2021 NY Slip Op 00390 Decided on January 26, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 26, 2021 Before: Gische, J.P., Kern, Moulton, Shulman, JJ. Index No. 810148/12 Appeal No. 12961 Case No. 2019-05488 [*1]MTGLQ Investors, L.P., Plaintiff-Respondent, v James Vazquez Also Known as James Vasquez , Defendant-Appellant, City of New York Environmental Control Board, et al., Defendants. Jones Law, P.C., Warwick (Douglas M. Jones of counsel), for appellant. Friedman Vartolo LLP, New York (Ronald P. Labeck of counsel), for respondent. Order and judgment (one paper), Supreme Court, New York County (Lynn R. Kotler, J.), entered September 24, 2019, which granted plaintiff's motion for final judgment of foreclosure and sale and denied defendant's motion to vacate, unanimously affirmed, with costs. Plaintiff MTGLQ Investors, L.P. established prima facie entitlement to summary judgment in this foreclosure action. MTGLQ established standing to bring the action by showing that its predecessor in interest had physical possession of the note prior to the commencement of the action, as evidenced by its attachment of the note to the summons and complaint at the time the action was commenced (see MTGLQ Invs., L.P. v Collado, 183 AD3d 414 [1st Dept 2020]; see also Deutsche Bank Natl. Trust Co. v Umeh, 145 AD3d 497 [1st Dept 2016]). MTGLQ also submitted an affidavit of a vice president of its loan servicer, Rushmore Loan Management Services, LLC, who averred that MTGLQ was the current holder of the note under an assignment executed in December 2014 (see Aurora Loan Servs., LLC v Taylor, 25 NY3d 355 [2015]). Defendant's attempts to attack the affidavits submitted in support of plaintiff's motion and his claims of fraud, forgery, and improper assignment are unavailing. To begin, defendant is precluded from supporting his arguments with the evidence that this Court had previously excluded in Amtrust-NP SFR Venture, LLC v Vazquez (140 AD3d 541 [1st Dept 2016]) (see Kenney v City of New York, 74 AD3d 630, 630-631 [1st Dept 2010], citing J-Mar Serv. Ctr., Inc. v Mahoney, Connor & Hussey, 45 AD3d 809, 809 [2007]). In any event, defendant failed to make more than a bald assertion that the signatures on the note and mortgage are forgeries (Banco Popular N. Am. v Victory Taxi Mgt., 1 NY3d 381, 384 [2004]; cf. Millennium BCPBank, N.A. v. Kal-Pak Realty, LLC, 99 AD3d 976 [2d Dept 2012]). Moreover, defendant's signature on the mortgage was notarized, and he failed to rebut the presumption that this signature is, thus, genuine (see Seaboard Sur. Co. v Earthline Corp., 262 AD2d 253 [1st Dept 1999]). Finally, defendant had ratified the debt by making payments on the mortgage for over one year without any apparent protest (see Confidential Lending, LLC v Nurse, 120 AD3d 739 [2d Dept 2014]). Defendant's other arguments regarding plaintiff's ownership of the note are undermined by the affidavit of MTGLQ's loan servicer and the assignments contained in the record. THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 26, 2021

2020-12-01 12:13:28.750629+00

http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=19326&Index=%5c%5c10%2e20%2e4%2e7%5cTamesIndexes%5ccoa04%5cOpinion

Fourth Court of Appeals San Antonio, Texas MEMORANDUM OPINION No. 04-20-00077-CV THE CITY OF SAN ANTONIO, Appellant v. Suzanne L. SMITH and Claudia Acevedo, Appellees From the 408th Judicial District Court, Bexar County, Texas Trial Court No. 2018CI19949 2018CI22682 Honorable Larry Noll, Judge Presiding Opinion by: Sandee Bryan Marion, Chief Justice Sitting: Sandee Bryan Marion, Chief Justice Rebeca C. Martinez, Justice Irene Rios, Justice Delivered and Filed: November 25, 2020 REVERSED AND RENDERED The City of San Antonio (“City”) appeals from an order denying its plea to the jurisdiction seeking dismissal of a personal injury lawsuit brought against it by appellees Suzanne L. Smith and Claudia Acevedo (collectively, “Appellees”). We reverse the trial court’s order and render judgment dismissing Appellees’ lawsuit for lack of jurisdiction. BACKGROUND At approximately 3:00 am the morning of September 30, 2017, two paramedics with the San Antonio Fire Department responded to a 911 call at an apartment complex near Fredericksburg  04-20-00077-CV Road. The call was a “Code 3,” indicating an emergency warranting the use of the ambulance’s lights and siren while in transit. Michael Miller, the paramedic who drove the ambulance, parked it in an alley behind the apartment complex to reduce the likelihood of it being struck by passing vehicles. He left the ambulance’s emergency lights on to warn passersby of its presence, and left it idling so that the lights would not drain the vehicle’s battery. Miller and the second paramedic, John Tamez, left the ambulance unlocked so that they could make a swift departure in the event they needed to quickly transport a critical patient. Neither Miller nor Tamez had heard of an idling ambulance being stolen while the paramedics attended to a patient, and neither thought anything about the location in which they left the ambulance indicated a risk of such a theft. Miller and Tamez proceeded to a second-story apartment, where they assessed the condition of the patient and determined that he could safely be transported to the hospital by taxi rather than by ambulance. While they were preparing a taxi voucher, they heard “chatter” on their radio concerning their ambulance and received a call from dispatch asking where they were. Apparently the vehicle’s GPS system had alerted dispatch that it was on the move, but the paramedics had not reported that they had left the scene of the call. The two then discovered that the ambulance was missing. They later learned that an unknown person had stolen the ambulance and driven it at a high rate of speed down Fredericksburg Road, where it collided with two cars, one occupied by Suzanne Smith and the other occupied by Claudia Acevedo. Both were injured. Smith filed suit against the City, alleging that its immunity was waived under the Texas Tort Claims Act (“TTCA”) because her injuries arose from the operation or use of a motor vehicle or were caused by a condition or use of tangible personal property. See TEX. CIV. PRAC. & REM. CODE ANN. § 101.021. Smith alleged that the City was negligent in allowing the ambulance to be left unattended and running, in violation of section 545.404 of the Texas Transportation Code, and -2-  04-20-00077-CV in failing to use an anti-theft device that would have prevented the theft of a vehicle left unattended and running. Acevedo filed a separate suit against the City and two other defendants, but later nonsuited all but the City. Acevedo alleged in an amended petition that the City’s immunity was waived because her injuries arose from the operation or use of a motor vehicle. She did not assert the “condition or use of tangible personal property” waiver of immunity or otherwise raise the failure to use an anti-theft device. Smith’s and Acevedo’s lawsuits were ultimately consolidated into one action. The City filed a plea to the jurisdiction in which it asserted that (1) an emergency exception in the TTCA overrides any waiver of immunity; (2) Appellees’ claims do not fall within the “operation or use of a motor vehicle” waiver of immunity because no City employee was operating or using the ambulance at the time of the accident; (3) neither the City nor the paramedics were a proximate cause of the accident; (4) there is no waiver of the City’s immunity because the paramedics are shielded by official immunity; and (5) Appellees’ claims do not fall within the “condition or use of tangible personal property” waiver of immunity because Appellees allege only nonuse of property. Appellees filed a joint response to the plea to the jurisdiction, in which they asserted that (1) the emergency exception on which the City relies does not apply because the paramedics violated a traffic law by leaving the ambulance running and unattended, and because they acted recklessly or with conscious indifference; (2) the “operation or use of a motor vehicle” waiver applies because the paramedics left the ambulance running; (3) the City’s failure to equip the ambulance with a specific anti-theft device, and the paramedics’ decision to leave the ambulance running and unlocked, were proximate causes of the accident; (4) the paramedics do not have official immunity because they acted recklessly and with conscious indifference; and (5) the “use -3-  04-20-00077-CV or condition of tangible personal property” waiver applies because the ambulance lacked an integral safety component. Appellees’ response was accompanied by exhibits including an affidavit from Robyn McKinley, a firefighter and paramedic in Memphis, Tennessee, who Smith designated as an expert, and the depositions of Miller and Tamez. 1 McKinley, in her affidavit, and Appellees, in their questioning of Miller and Tamez, specifically advocated for the use of an anti-theft device manufactured by a company called Tremco. This device apparently is designed to make it difficult to put a vehicle into gear even though the vehicle has been left running. The trial court denied the plea to the jurisdiction by written order dated January 24, 2020. ISSUES The City raises five issues on appeal, asserting that the trial court erred by denying its plea to the jurisdiction because (1) the “operation or use of a motor vehicle” waiver of immunity does not apply; (2) the “condition or use of tangible personal property” waiver of immunity does not apply; (3) two statutory emergency exceptions do apply; (4) the City, if it were a private citizen, would not be liable at common law; and (5) the paramedics have official immunity, which preserves the City’s immunity. STANDARD OF REVIEW “[S]ubject-matter jurisdiction is essential to a court’s power to decide a case.” Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547 , 553 (Tex. 2000). Whether a court has subject matter jurisdiction is a question of law and is, therefore, subject to de novo review. Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217 , 226 (Tex. 2004). When a plea to the jurisdiction challenges the pleadings, the reviewing court determines whether the plaintiff has alleged facts affirmatively 1 The City filed objections to Appellees’ evidence which were denied by the trial court. -4-  04-20-00077-CV demonstrating the court’s jurisdiction. Miranda, 133 S.W.3d at 226; Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440 , 446 (Tex. 1993). The court construes the pleadings liberally in favor of the plaintiff and looks to the plaintiff’s intent. Miranda, 133 S.W.3d at 226. When a plea to the jurisdiction challenges the existence of jurisdictional facts, the reviewing court considers relevant evidence submitted by the parties to resolve the jurisdictional issues. Id. at 227. “If the evidence creates a fact question regarding the jurisdictional issue, then the trial court cannot grant the plea to the jurisdiction, and the fact issue will be resolved by the fact finder. However, if the relevant evidence is undisputed or fails to raise a fact question on the jurisdictional issue, the trial court rules on the plea to the jurisdiction as a matter of law.” Id. at 227-28. The applicable standard generally mirrors that of a summary judgment, so that the court indulges every reasonable inference and resolves any doubts in the nonmovant’s favor. Id. at 228. DISCUSSION Waiver of immunity generally Immunity from suit bars an action against a governmental entity unless the entity has expressly consented to the suit, either by statute or express legislative permission. Tex. Dep’t of Transp. v. Jones, 8 S.W.3d 636 , 638 (Tex. 1999); see Lubbock Cty. Water Control & Imp. Dist. v. Church & Akin, L.L.C., 442 S.W.3d 297 , 300 (Tex. 2014) (recognizing governmental immunity of local governmental entities). It is the plaintiff’s burden to establish such consent. Jones, 8 S.W.3d at 638. A municipality is afforded governmental immunity for actions arising out of the performance of its governmental functions, absent a clear and unambiguous legislative waiver of immunity. Worsdale v. City of Killeen, 578 S.W.3d 57 , 62 (Tex. 2019); see Wasson Interests, Ltd. v. City of Jacksonville, 559 S.W.3d 142 , 146 (Tex. 2018). The TTCA contains a non-exclusive list of functions that are deemed to be governmental, and provides a waiver of immunity for certain -5-  04-20-00077-CV tort claims arising out of the performance of such functions. TEX. CIV. PRAC. & REM. CODE ANN. §§ 101.021, 101.0215; see Wasson, 559 S.W.3d at 147. Section 101.0215 specifically identifies “operation of emergency ambulance service” as a governmental function for which a municipality has governmental immunity, unless waived. TEX. CIV. PRAC. & REM. CODE ANN. § 101.0215(a)(18). And section 101.021 identifies the circumstances in which that immunity is waived. TEX. CIV. PRAC. & REM. CODE ANN. § 101.021. As applicable to this case, those waivers are the “operation or use of a motor vehicle” waiver and the “use or condition of tangible personal property” waiver. Appellees asserted both in their joint response to the City’s plea to the jurisdiction. “Operation or use of a motor vehicle” waiver The TTCA first provides that a governmental unit is liable for (1) property damage, personal injury, and death proximately caused by the wrongful act or omission or the negligence of an employee acting within his scope of employment if: (A) the property damage, personal injury, or death arises from the operation or use of a motor-driven vehicle or motor-driven equipment; and (B) the employee would be personally liable to the claimant according to Texas law. TEX. CIV. PRAC. & REM. CODE ANN. § 101.021(1). The City asserts in its first issue on appeal that this waiver does not apply because Appellees’ injuries did not arise from the operation or use of the ambulance by a City employee. See Ryder Integrated Logistics, Inc. v. Fayette Cty., 453 S.W.3d 922 , 927 (Tex. 2015) (“a government employee must have been actively operating the vehicle at the time of the incident”). Rather, it is undisputed that the ambulance was being operated and used at the time of the accident by a thief. -6-  04-20-00077-CV Although Appellees asserted the “operation or use of a motor vehicle” waiver in the court below, they do not pursue that theory on appeal. In fact, they affirmatively state: • “neither Miller nor Tamez was operating the vehicle”; • “a stationary, unattended ambulance would not constitute a waiver of immunity under TTCA 101.021(1) – ‘operation or use of a motor-driven vehicle’”; and • Miller and Tamez could not have been held to be operating the ambulance for purposes of waiver in TTCA §101.021(1) at the time it was stolen. (All emphasis by Appellees.) Appellees have conceded on appeal that subject matter jurisdiction cannot be supported under section 101.021(1), and we agree. Accordingly, the City’s first issue is sustained without further discussion. The question remains, though, whether jurisdiction is supported under section 101.021(2). “Use or condition of tangible personal property” waiver The TTCA also provides that a governmental unit is liable for (2) personal injury and death so caused by a condition or use of tangible personal or real property if the governmental unit would, were it a private person, be liable to the claimant according to Texas law. TEX. CIV. PRAC. & REM. CODE ANN. § 101.021(2). In its second issue, the City contends that this waiver does not apply because Appellees’ injuries were not caused by a condition or use of tangible personal property. If the property at issue is considered to be the ambulance, it is undisputed that a thief, rather than the City, was using the property at the time of the accident causing Appellees’ injuries. That fact is not altered by assigning any fault to the City for the thief’s ability to steal the ambulance. “[A] governmental unit does not ‘use’ personal property merely by allowing someone else to use it.” Tex. Dep’t of Criminal Justice v. Rangel, 595 S.W.3d 198 , 206 (Tex. 2020) (internal quotation marks omitted). If the City does not “use” property by allowing another to use it with permission, logic dictates that it also does -7-  04-20-00077-CV not “use” property when another uses it without permission. Under the undisputed facts of this case, the City did not “use” the ambulance at the time Appellees were injured. It is possible to read Appellees’ pleadings as alleging that their injuries were caused by a condition of the ambulance—the fact that it was left unlocked. See Miranda, 133 S.W.3d at 226 (directing courts to construe plaintiff’s pleadings liberally). However, the “condition” of being unlocked is nothing more than the nonuse of locks, an issue to which we now turn. “It is well-settled that mere nonuse of property does not suffice to invoke section 101.021(2)’s waiver” of immunity. City of N. Richland Hills v. Friend, 370 S.W.3d 369 , 372 (Tex. 2012). The City argues that Appellees allege only a classic case of nonuse—the failure to equip the ambulance with a particular anti-theft device. 2 Appellees respond that the section 101.021(2) waiver does apply because the City provided property—the ambulance—that lacked an integral safety component—a specific anti-theft device. As Appellees rely on Lowe v. Texas Tech University, 540 S.W.2d 297 (Tex. 1976), and Robinson v. Central Texas MHMR Center, 780 S.W.2d 169 (Tex. 1989), for this argument, we will briefly address each of those cases. The plaintiff in Lowe sustained a knee injury during a football game and subsequently sued Texas Tech University, alleging a negligent failure to provide proper protective gear (i.e., a knee brace) as part of his uniform. Lowe, 540 S.W.2d at 298. The supreme court held that that allegation brought Lowe’s case “within the statutory waiver of immunity arising from some condition or some use of personal property.” Id. at 300. The plaintiff in Robinson alleged that a patient who was known to suffer from epileptic seizures drowned because MHMR employees, who were responsible for seeing that the patient was dressed in appropriate swimming attire, did not provide him with a life preserver. Robinson, 2 In this analysis, the relevant personal property is the anti-theft device rather than the ambulance itself. -8-  04-20-00077-CV 780 S.W.2d at 169. The supreme court concluded that “[a] life preserver was just as much a part of Robinson’s swimming attire as the knee brace was part of the uniform in Lowe.” Id. at 171. It held that the allegation of liability based on the failure to provide a life preserver brought the claim within the “use or condition of personal property” waiver of immunity. Id. In a later case, however, the supreme court explained the limitations of Lowe and Robinson: These cases represent perhaps the outer bounds of what we have defined as use of tangible personal property. We did not intend, in deciding these cases, to allow both use and non-use of property to result in waiver of immunity under the Act. Such a result would be tantamount to abolishing governmental immunity, contrary to the limited waiver the Legislature clearly intended. The precedential value of these cases is therefore limited to claims in which a plaintiff alleges that a state actor has provided property that lacks an integral safety component and that the lack of this integral component led to the plaintiff’s injuries. Kerrville State Hosp. v. Clark, 923 S.W.2d 582 , 585 (Tex. 1996). The plaintiffs in Clark did not allege that the hospital provided property lacking an integral safety component. Rather, they alleged that the treatment the hospital provided was not as effective as another treatment would have been. Id. at 585 . The court rejected the application of Lowe and Robinson based on this factual distinction: For Lowe to apply to the Clarks’ claims, we must assume that the university would have waived its immunity even if it had provided Lowe with a knee brace as long as Lowe could show that another type of knee brace would have better protected him. Likewise, for Robinson to apply, we must assume that MHMR would have waived its sovereign immunity even if it had provided Robinson a life preserver if Robinson could show that MHMR should have provided him with a better one. Thus, the facts of this case are different than those in Lowe and Robinson. Id. In a subsequent case, the court emphasized that Lowe and Robinson apply “only when an integral safety component is entirely lacking rather than merely inadequate.” Tex. A&M Univ. v. Bishop, 156 S.W.3d 580 , 584 (Tex. 2005). More recently, in Friend, the supreme court reversed the denial of a plea to the jurisdiction in a case in which the plaintiffs asserted the lack of an integral safety component theory. Friend, -9-  04-20-00077-CV 370 S.W.3d at 370. Friend collapsed at a city-owned water park. City employees treated her with oxygen masks and other airway equipment, but did not retrieve an Automatic External Defibrillator device (AED) from a storage closet in another part of the park. Id. As a result, Friend did not receive defibrillation until the fire department arrived some twenty-one minutes later. Id. She was taken to the hospital where she later died. Id. Plaintiffs sued the city, alleging that their claim fell within the “condition or use of personal property” waiver because the city “used emergency equipment but omitted an integral component of that equipment, the AED.” Id. at 372-73. The supreme court disagreed: Such a formulation threatens to eviscerate any limiting principle on “condition or use” entirely. It would enable plaintiffs, through artful pleading, to enlarge the scope of the waiver provided by section 101.021(2) by alleging that a governmental actor failed to use one particular type of equipment among a broadly defined class of property that may have been employed. Id. at 373. The court concluded that plaintiffs “essentially allege no more than a failure to use an AED, which does not fall within the waiver of immunity in section 101.021(2) of the Tort Claims Act.” Id. In the present case, Appellees allege that the ambulance was not equipped with a specific anti-theft device that may have prevented it from being stolen even though it was left running. They argue that the City thus used or provided property (the ambulance) that lacked an integral safety feature (a particular anti-theft device), thus bringing their claims within the “use or condition of personal property” waiver pursuant to Lowe and Robinson. The City counters that Appellees’ claims do not fall within that waiver because the ambulance was equipped with anti-theft devices—door locks and an alarm—and Appellees’ contention that it should also have been equipped with a different device is not cognizable under the integral safety component theory. See Bishop, 156 S.W.3d at 584 (theory applies “only when an integral safety component is entirely lacking rather than merely inadequate”). We agree with the City. - 10 -  04-20-00077-CV Appellees’ argument, like that made in Friend, is that the City failed to use a particular type of equipment among a broadly defined class of property—anti-theft devices—that may have been employed. See Friend, 370 S.W.3d at 373. It is also like the argument made in Clark in that Appellees essentially urge that the particular anti-theft device with which they believe the ambulance should have been equipped would have been more effective in preventing theft than the locks and alarm with which the ambulance actually was equipped. 3 See Clark, 923 S.W.3d at 585. In short, the assertion is not that an integral safety component was entirely lacking, but rather that it was inadequate. 4 This is insufficient to bring the case within the narrow parameters of Lowe and Robinson. See Bishop, 156 S.W.3d at 584. Because the integral safety component theory does not apply to this case, Appellees “essentially allege no more than a failure to use [a particular anti-theft device], which does not fall within the waiver of immunity in section 101.021(2) of the Tort Claims Act.” Friend, 370 S.W.3d at 373; see Clark, 923 S.W.2d at 585 (failure to use different drug is nonuse of property that does not fall within waiver of immunity). The City’s second issue on appeal is sustained. Because our resolution of issues one and two is dispositive of this appeal, we need not address the City’s remaining issues. CONCLUSION The undisputed facts establish that Appellees’ claims against the City do not fall within either waiver of governmental immunity provided by section 101.021 of the TTCA. As a result, the City retains immunity and the trial court lacks subject matter jurisdiction over Appellees’ 3 Insofar as Appellees challenge the City’s decision not to equip its ambulances with the particular anti-theft device they favor, which they contend is a safety feature, we note that “decisions about installing safety features are discretionary decisions for which the [City] may not be sued.” Tex. Dep’t of Transp. v. Ramirez, 74 S.W.3d 864 , 867 (Tex. 2002). 4 Indeed, Appellees’ analysis of the section 101.021(2) issue on appeal depends in large part on their assertion that the paramedics were negligent or reckless in leaving the ambulance unlocked, i.e., failing to use the anti-theft device with which the ambulance was equipped. - 11 -  04-20-00077-CV claims. We reverse the order denying the City’s plea to the jurisdiction and render judgment dismissing Appellees’ lawsuit for lack of jurisdiction. Sandee Bryan Marion, Chief Justice - 12 -

2021-03-18 20:02:35.761544+00

https://www.courts.ca.gov/opinions/nonpub/B307076.PDF

Filed 3/18/21 P. v. Ferguson 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, B307076 Plaintiff and Respondent, (Los Angeles County Super. Ct. No. KA074337) v. RUDOLPH FERGUSON, Defendant and Appellant. APPEAL from an order of the Superior Court of Los Angeles County, Mike Camacho, Judge. Affirmed. A. William Bartz, Jr., under appointment by the Court of Appeal, for Defendant and Appellant. No appearance for Plaintiff and Respondent. ___________________________________  In 2009, Rudolph Ferguson pleaded guilty to grand theft of property valued at more than $50,000. (Pen. Code, §§ 487, subd. (a), 12022.6.) He was sentenced to two years four months in prison and ordered to pay $56,000 plus interest in restitution to the victim pursuant to Penal Code section 1202.4, subdivision (f). Ferguson served out his sentence but did nothing about the restitution until the Franchise Tax Board notified him in 2018 that he owed $122,996.20. In 2020, Ferguson moved to revise the restitution order to exclude interest, which he argued he had not agreed to pay. The trial court denied the motion and entered a civil judgment payable to the victim Ferguson appeals from the order denying his motion to revise the restitution order. We appointed counsel to represent Ferguson on appeal. After examination of the record, appointed counsel filed an opening brief raising no issues and asking this court to review the record independently. (People v. Wende (1979) 25 Cal.3d 436 , 441-442.) On January 11, 2021, we sent letters to Ferguson and appointed counsel, directing counsel to forward the appellate record to Ferguson and advising him that within 30 days he could personally submit any contentions or issues that he wished us to consider. He has not responded. We have examined the entire record and find no arguable issue exists, and are therefore satisfied Ferguson’s attorney complied with his responsibilities. (Id. at p. 441.) 2  DISPOSITION The order is affirmed. NOT TO BE PUBLISHED CHANEY, J. We concur: ROTHSCHILD, P. J. BENDIX, J. 3

2020-11-20 19:32:30.845274+00

APPEAL OF W. C. LANGLEY & CO. W. C. Langley & Co. v. Commissioner Docket No. 2567. United States Board of Tax Appeals 2 B.T.A. 199; 1925 BTA LEXIS 2475; June 30, 1925, Decided Submitted May 15, 1925. *2475 Where a seat on the New York Stock Exchange is received by a partnership at an agreed valuation as the partner's capital contribution and it is sold at a loss in 1917, the partnership may deduct such loss in computing its taxable income. Henry J. Richardson, Esq., and Franklin C. Parks, Esq., for the taxpayer. Lee I. Park, Esq., for the Commissioner. GREEN *199 Before STERNHAGEN, LANSDON, GREEN, and LOVE. This appeal involves a deficiency in profits taxes for the calendar year 1917 in the sum of $4,408.26. The Commissioner has disallowed a loss in the sum of $25,000, alleged to have been sustained by the taxpayer as the result of the purchase and sale of a seat on the New York Stock Exchange. FINDINGS OF FACT. The taxpayer is a partnership organized on or about the 15th day of May, 1915, and dissolved on the 31st day of December, 1917. At the time of its organization one of the partners contributed to its *200 capital the sum of $100,000 in cash and another contributed a seat on the New York Stock Exchange at an agreed valuation of $75,000. There was also a third partner, the amount of whose contribution does not appear. *2476 Partnerships were not permitted to be the record owners of seats on the Stock Exchange, but the taxpayer became the beneficial owner of the seat contributed by one of the partners. The partnership was dissolved on December 31, 1917, and shortly prior thereto the seat was sold by the partnership for $50,000 to an individual who was to become a partner in a new partnership which was to succeed the taxpayer. The transfer of the seat was duly made on the books of the Stock Exchange. It was definitely understood and agreed between the partners that the seat was the property of the partnership, and that any gain or loss resulting therefrom would be the gain or loss of the partnership. A seat on the Exchange was essential to the successful conduct of the business of both the taxpayer and its successor. The loss sustained as the result of the purchase and sale was $25,000. DECISION. The deficiency determined by the Commissioner is disallowed. OPINION. GREEN: The Commissioner contends that a partnership can have no interest in a seat on the New York Stock Exchange. In the case of *2477 O'Dell v. Boyden,150 Fed. 731, the Circuit Court of Appeals, Sixth Circuit, had before it a very similar set of facts. A partner, the legal owner of a seat on the New York Stock Exchange, sold to the partnership a one-fourth interest in the seat and contributed the remainder thereof to the partnership as his proportion of its capital. The partnership was declared a bankrupt and the trustee took possession of and sold the partnership's beneficial interest in the seat. Judge Lurton, speaking for the court, said: The New York Stock Exchange is an unincorporated association having a limited membership. No formal certificate of membership is issued, and, aside from repute, Henrotin's only evidence of membership consists in a letter notifying him of his election and asking him to sign the constitution and by-laws. This letter is the document referred to as the "certificate" assigned to O'Dell. Though the membership is personal, it is transferable, subject to the conditions imposed by the articles of the association already referred to. But the transfer is not made except by the acceptance of a candidate for membership who is elected in the room and stead of*2478 the retiring member. When a "transfer" of membership is made according to the terms which clog such transfers, the transferee becomes a member and the transferror ceases to be one. It follows, therefore, that the mere execution of a paper preparatory to transferring or assigning a membership works no change in *201 membership whatever. Thus in 1892, this same membership which was personal to Henrotin was transferred or assigned to a partnership of which he was a member. That did not deprive Henrotin of his "seat" or "membership." He continued to be a member and to exercise all of the privileges of a member. In May, 1905, he again joined one of his partners in transferring or assigning this same membership to the appellant, O'Dell. Nevertheless, he continued to be and act as a member, and O'Dell did not thereby become a member. What was, then, the effect of these transfers or assignments made of this "seat," first to Holzman & Co. and then to O'Dell? Though possessing none of the qualities of a negotiable or even a nonnegotiable instrument, this membership has a pecuniary market value and constitutes a property right, which, under the settled principles of the law, is*2479 capable of passing by will or inheritance. In re Hellman,174 N.Y. 254">174 N.Y. 254, 66 N.E. 809">66 N.E. 809, 95 Am. St. Rep. 582">95 Am.St.Rep. 582. Though its sale and transfer are clogged with onerous conditions and the property one of a narrow character, these conditions and characteristics go only to the reduction of the pecuniary market value, and do not deprive it of its character as property. Powell v. Waldron,89 N.Y. 328">89 N.Y. 328, 42 Am. Rep. 301">42 Am.Rep. 301. As a valuable property right, incorporeal in character, it may be reached and subjected as property by a creditor through the flexible remedies of equity. A court of chancery through a decree in personam may compel the co-operation of the member in steps necessary to consummate a sale and transfer under the rules of the association. See Massie v. Watts, 6 Cranch, 148-157, 3 L. Ed. 181">3 L.Ed. 181, as to the general powers of a court of equity through jurisdiction over the person, Ager v. Murray,105 U.S. 126">105 U.S. 126-131, 26 L. Ed. 942">26 L.Ed. 942, where a patent right was subjected, and *2480 In re Emrich (D.C.) 101 Fed. 231. Such a seat constitutes a property right which is not only descendible, taxable and assignable, but is one which passes to the trustee of a bankrupt member, and the bankrupt court may compel the bankrupt to sign all transfers or consents essential to bring about its sale under the rules of the exchange. In re Ketchum (D.C.) 1 Fed. 840; In re Werder (C.C.) 15 Fed. 789; Hyde v. Woods,94 U.S. 523">94 U.S. 523, 24 L. Ed. 264">24 L.Ed. 264; Sparhawk v. Yerkes,142 U.S. 1">142 U.S. 1; 12 Sup.Ct. 104, 35 L. Ed. 915">35 L.Ed. 915; Page v. Edmunds,187 U.S. 596">187 U.S. 596, 23 Sup.Ct. 200, 47 L. Ed. 318">47 L.Ed. 318. The taxpayer partnership was in fact the beneficial owner of the seat on the Exchange. The seat was acquired not by actual purchase but through the contribution of a partner. The valuation thereon had been agreed upon by the partners. The situation is exactly the same as if the partner had contributed, instead of the seat, the sum of $75,000, and such sum so contributed had been expended in the purchase of a seat on the Exchange.

2021-03-18 20:02:36.218544+00

https://www.courts.ca.gov/opinions/nonpub/E074049.PDF

Filed 3/18/21 P. v. Byrd CA4/2 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION TWO THE PEOPLE, Plaintiff and Respondent, E074049 v. (Super.Ct.No. FVI1303433) LAMAR JERMAIN BYRD, OPINION Defendant and Appellant. APPEAL from the Superior Court of San Bernardino County. John M. Tomberlin, Judge. Affirmed with directions. Heather L. Beugen, under appointment by the Court of Appeal, for Defendant and Appellant. Xavier Becerra, Attorney General, Lance E. Winters, Chief Assistant Attorney General, Julie L. Garland, Assistant Attorney General, Michael Pulos and Nora S. Weyl, Deputy Attorneys General, for Plaintiff and Respondent. 1  INTRODUCTION Defendant and appellant Lamar Jermain Byrd appeals from an order denying his petition pursuant to Penal Code1 section 1170.91, subdivision (b), which provides for resentencing of military members or veterans suffering from certain mental health and substance abuse problems as a result of military service if the sentencing court did not consider such problems as factors in mitigation. Defendant argues that the trial court erred in denying his petition without actually determining his eligibility for relief first. He also contends he was denied his federal due process right to be present at the hearing on the petition and requests a remand for another hearing in his presence. We affirm with directions. PROCEDURAL BACKGROUND Defendant was charged by information with attempted murder (§§ 664, 187, subd. (a), count 1), second degree robbery (§ 211, count 2), and assault with a deadly weapon (§ 245, subd. (a)(1), count 3). As to counts 1 and 2, the information alleged that he personally used a firearm within the meaning of section 12022.53, subdivisions (b) and (c). It also alleged as to counts 1 through 3 that defendant personally used a firearm within the meaning of section 12022.5, subdivision (a). On October 31, 2014, defendant entered a plea agreement and pled no contest to counts 1 and 2 and admitted the firearm allegation under section 12022.5, subdivision (a), as to count 1. Defendant asked to be sentenced immediately. The court proceeded to 1 All further statutory references will be to the Penal Code unless otherwise indicated. 2 pronounce judgment according to the agreed upon terms, stating that it was “making all of [its] rulings based on the fact that this is a negotiated plea agreement.” Accordingly, the court sentenced him to the midterm of seven years on count 1, the midterm of three years on count 2 to be served concurrently, and a consecutive 10 years on the firearm enhancement, for a total term of 17 years in state prison. On June 18, 2019, defendant filed a petition for resentencing pursuant to section 1170.91, subdivision (b). He attached evidence establishing he had served in the military and a psychological assessment that concluded he suffered from posttraumatic stress disorder (PTSD), alcohol abuse, and depression as a result of his military service. The psychologist who evaluated him opined that his PTSD and substance abuse “factored into his decision” to commit the current offenses. The People filed an opposition to the petition. On October 18, 2019, the trial court held a hearing on the petition. Defendant was not present but was represented by counsel. Defense counsel asked for a formal hearing. However, he then requested the court to “reduce the use of the firearm enhancement from the ten-year aggravated gun charge, which the Court now has discretion to strike.” Defense counsel stated, “we can avoid [the] 1170.91 issue and strike the gun enhancement.” The court replied, “This is a case that was a plea agreement. As you pointed out[,] the case was a life case. And [defendant] took the opportunity to enter into a plea agreement, which was highly advantageous to him. . . . [¶] . . . [¶] We had no way of anticipating the law would change, but I wouldn’t in any way, had [sic] reason to have deviated from the course that I previously indicated. And that is that I would not 3 have accepted less time. I would not have accepted a plea agreement that did not offer the substantial period of incarceration for someone who is otherwise facing the possibility of 25 years to life and perhaps never getting out.” The court then denied the petition “on the basis that [it] wouldn’t grant the relief under any circumstances.” DISCUSSION I. Defendant is Not Eligible for Relief Under Section 1170.91, Subdivision (b) Defendant contends the court abused its discretion in summarily denying his resentencing petition without first determining whether he met the criteria in section 1170.91, subdivision (b). He claims that his acceptance of a plea deal was irrelevant to his eligibility for resentencing, and there was “no credible way for the trial court to guess that it would not have granted relief to [him] under any circumstances, now that [it] was required to accept [his] mental health diagnoses stemming from his combat service as a mitigating factor.” We conclude that defendant is not eligible for relief. A. Section 1170.91 “When the Legislature first enacted section 1170.91, effective January 1, 2015, it contained a single paragraph creating a requirement that a sentencing court consider mental health and substance abuse problems stemming from military service as a mitigating factor when imposing a determinate term under section 1170, subdivision (b). (Stats. 2014, ch. 163, § 2.) Specifically, the statute provided, ‘If the court concludes that a defendant convicted of a felony offense is, or was, a member of the United States military who may be suffering from sexual trauma, traumatic brain injury, post-traumatic stress disorder, substance abuse, or mental health problems as a result of his or her 4 military service, the court shall consider the circumstance as a factor in mitigation when imposing a term under subdivision (b) of Section 1170.’ [Citation.] As relevant here, section 1170.91 required the trial court to consider mental health and substance abuse problems as factors in mitigation only ‘when imposing a term under subdivision (b) of Section 1170.’ [Citation.]” (People v. King (2020) 52 Cal.App.5th 783 , 788 (King).) Section 1170, subdivision (b) “describes the trial court’s exercise of sentencing discretion to choose an upper, middle or lower determinate term based on factors in mitigation and aggravation.” (King, at p. 788, fn. omitted; see § 1170, subd. (b).) “In 2018, the Legislature amended section 1170.91 to provide relief for former or current members of the military who were sentenced before January 1, 2015, and did not have their mental health and substance abuse problems considered as factors in mitigation during sentencing.” (King, supra, 52 Cal.App.5th at p. 788.) Section 1170.91, subdivision (b)(1), provides in relevant part: “A person currently serving a sentence for a felony conviction, whether by trial or plea, who is, or was, a member of the United States military and who may be suffering from . . . post-traumatic stress disorder, substance abuse, or mental health problems as a result of his or her military service may petition for a recall of sentence, before the trial court that entered the judgment of conviction in his or her case, to request resentencing pursuant to subdivision (a) if the person meets both of the following conditions: [¶] (A) The circumstance of suffering from . . . post-traumatic stress disorder, substance abuse, or mental health problems as a result of the person’s military service was not considered as a factor in mitigation at the time of sentencing. [¶] (B) The person was sentenced prior to January 1, 2015.” (§ 1170.91, subd. (b)(1).) 5  B. Defendant is Not Entitled to Relief Defendant seeks reversal of the court’s denial order and requests that we remand the matter for another resentencing hearing to determine if he meets the eligibility criteria in section 1170.91, subdivision (b)(1)(A) and (b)(1)(B). The People contend that the court implicitly found him eligible “by reaching the merits and stating that it would not have sentenced [him] to anything less,” so remand would be futile. Defendant’s eligibility for relief under section 1170.91 raises questions of statutory construction. Questions of statutory construction present questions of law and are reviewed de novo. (People v. VanVleck (2016) 2 Cal.App.5th 355 , 362; Jones v. Pierce (1988) 199 Cal.App.3d 736 , 741 [“Questions of statutory interpretation are, of course, pure matters of law upon which we may exercise our independent judgment.”].) A petitioner who meets the requirements set forth in section 1170.91, subdivision (b), obtains the remedy of “resentencing pursuant to subdivision (a).” (§ 1170.91, subd. (b)(1).) Section 1170.91, subdivision (a), provides that the trial court shall take into account the defendant’s mental health and substance abuse problems “when imposing a term under subdivision (b) of Section 1170.” (§ 1170.91, subd. (a), italics added.) “A trial court that sentences under subdivision (b) of section 1170, exercises its discretion to choose an upper, middle or lower determinate term based on its consideration of factors in mitigation and aggravation. However, when a trial court sentences a defendant who has agreed to a stipulated sentence for a term of years, the trial court exercises no discretion to decide between an upper, middle and lower term and may not consider factors in mitigation and aggravation. Therefore, the trial court is not ‘imposing a term 6 under subdivision (b) of Section 1170.’ ” (King, supra, 52 Cal.App.5th at p. 791.) Furthermore, when a defendant enters into a plea and agrees to a stipulated sentence, “upon accepting the plea, the trial court may not proceed as to the plea other than as specified in the plea.” (King, supra, 52 Cal.App.5th at pp. 790-791.) “ ‘ “While no bargain or agreement can divest the court of the sentencing discretion it inherently possesses [citation], a judge who has accepted a plea bargain is bound to impose a sentence within the limits of that bargain. [Citation.] ‘A plea agreement is, in essence, a contract between the defendant and the prosecutor to which the court consents to be bound.’ [Citations.]” ’ ” (People v. Stamps (2020) 9 Cal.5th 685 , 701.) Here, defendant entered into a plea and agreed to a specific term of 17 years, which was comprised of the midterm of seven years on count 1, a concurrent three years on count 2, and a consecutive 10 years on the firearm enhancement. The court accepted the plea agreement and imposed the agreed-upon term. As such, it did not consider factors in mitigation and aggravation or exercise discretion to decide between an upper, middle and lower term. In other words, it did not impose a term under section 1170, subdivision (b). (King, supra, 52 Cal.App.5th at p. 791.) Therefore, defendant is not eligible for the relief afforded under section 1170.91, subdivision (b)(1), since he cannot be resentenced to an upper, middle or lower term based on factors in mitigation and aggravation. (King, at p. 791.) In sum, the court was required to impose the stipulated sentence of 17 years in prison pursuant to the plea agreement. It did not impose a term under section 1170, subdivision (b). Thus, under the plain language of the statute, defendant is not eligible 7 for relief under section 1170.91, subdivision (b). (King, supra, 52 Cal.App.5th at p. 791.) Although the court did not expressly state that defendant was ineligible for relief under the statute, it noted that he entered a plea agreement and denied his petition “on the basis that [it] wouldn’t grant the relief under any circumstances.” We affirm the court’s ruling. (People v. Geier (2007) 41 Cal.4th 555 , 582 [“we review the ruling, not the court’s reasoning and, if the ruling was correct on any ground, we affirm.”].) II. Any Error in Holding the Hearing Without Defendant’s Personal Presence Was Harmless Defendant argues he was denied the right to due process because he was not personally present at the hearing when the court denied his section 1170.91 petition. Thus, he seeks a remand for another hearing to be held in his presence. The People agree that a defendant has a right to be present at a resentencing hearing, but contend that any error in denying defendant’s petition in defendant’s absence was harmless beyond a reasonable doubt. We agree with the People. It is undisputed that defendant was entitled to be present at the hearing on the resentencing petition. (People v. Cutting (2019) 42 Cal.App.5th 344 , 347-348.) However, any error in the court proceeding with the hearing in his absence was harmless beyond a reasonable doubt. (Ibid. [“the error ‘may be deemed harmless only if we can conclude beyond a reasonable doubt that the deprivation did not affect the outcome of the proceeding.’ ”].) Because defendant is ineligible for relief under section 1170.91, his presence at the hearing would not have made any difference. (See ante, § I.) 8  III. Clerical Errors Should Be Corrected Although not raised by the parties, we note an apparent clerical error. Generally, a clerical error is one inadvertently made. (People v. Schultz (1965) 238 Cal.App.2d 804 , 808.) Clerical error can be made by a clerk, by counsel, or by the court itself. (Ibid. [judge misspoke].) A court “has the inherent power to correct clerical errors in its records so as to make these records reflect the true facts. [Citations.]” (In re Candelario (1970) 3 Cal.3d 702 , 705.) Defendant was charged with attempted murder (§§ 664, 187, subd. (a), count 1), second degree robbery (§ 211, count 2), and assault with a deadly weapon (§ 245, subd. (a)(1), count 3). As to counts 1 and 2, it was alleged that he personally used a firearm within the meaning of section 12022.53, subdivisions (b) and (c). As to counts 1 through 3, it was alleged that he personally used a firearm within the meaning of section 12022.5, subdivision (a). Defendant pled no contest to counts 1 and 2 and admitted the allegation under section 12022.5, subdivision (a) as to count 1. However, we note that the court did not dispose of count 3 or the remaining firearm allegations in its oral pronouncement of judgment. Notwithstanding the oral pronouncement of judgment, the minute order states that the court ordered count 3 and the remaining firearm allegations dismissed. In the interest of clarity and accuracy, we will remand the matter with directions for the trial court to dispose of the remaining count and allegations. 9  DISPOSITION The matter is remanded with directions for the trial court to dispose of count 3 and the remaining allegations defendant did not admit. In all other respects, the judgment is affirmed. NOT TO BE PUBLISHED IN OFFICIAL REPORTS FIELDS J. We concur: MILLER Acting P. J. SLOUGH J. 10

2021-03-18 20:02:36.637177+00

https://www.courts.ca.gov/opinions/nonpub/B306915.PDF

Filed 3/18/21 P. v. Brown 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, B306915 Plaintiff and Respondent, (Los Angeles County Super. Ct. No. MA065269) v. JOHN CHRISTOPHER BROWN, Defendant and Appellant. APPEAL from an order of the Superior Court of Los Angeles County, Shannon Knight, Judge. Affirmed. Thomas T. Ono, 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, Paul M. Roadmarel, Jr., and Stephanie A. Miyoshi, Deputy Attorneys General, for Plaintiff and Respondent. __________________________________  In John Christopher Brown’s direct appeal of his convictions for first degree murder and willful, deliberate, and premeditated attempted murder, we affirmed the convictions and remanded the matter for the trial court to determine whether to strike any enhancements imposed under Penal Code sections 667, subdivision (a)(1) and 12022.53, pursuant to newly-enacted statutory provisions allowing courts to strike such enhancements. (People v. Ballard (Feb. 26, 2019, B282339) [nonpub. opn.], pp. 27-28, 30.)1 Brown now appeals from the order entered after a hearing upon remand, at which a judge who did not preside at trial declined to exercise the court’s discretion to strike any enhancements. Brown contends we must remand the matter for a new sentencing hearing, arguing (1) he was entitled to a hearing before the same judge who presided at trial, and (2) the court did not exercise informed discretion because it relied on “misinformation” about the facts and circumstances of his case. We reject Brown’s arguments and affirm. BACKGROUND I. Trial and Verdicts The following facts regarding the murder and attempted murder are quoted from our opinion in Brown’s direct appeal of his convictions. (People v. Ballard, supra, B282339.) Brown was nearly 35 years old at the time he committed the current offenses. Brown’s codefendant “Ballard was at one time in a romantic relationship with Faviana Richardson [the attempted murder victim], who by January 2015 was engaged to Johnny 1 Brown was tried with his codefendant, William Lamar Ballard. 2 Jones [the murder victim]. In January 2015, Ballard posted negative comments about Richardson on social media. “On the evening of January 17, 2015, Richardson and several friends went to the home of Ballard’s current girlfriend, Toni Cook, and demanded to see Ballard, who was asleep in a back room. Cassie Jones (no relation to the [murder] victim) and Shakira W. answered the door and said Ballard was not home. After Richardson left, Jones informed Ballard about the confrontation, and he telephoned [appellant] Brown and asked him to come to Cook’s house. “Later that evening Ballard attended a neighborhood barbeque event. Richardson and her group arrived and she and Ballard argued, and at one point Ballard told her, ‘Fuck you. I’ll get you popped. I’ll kill you.’ “Richardson left the event but later returned and again argued with Ballard, who again said, ‘I’ll kill you.’ “Ballard left the event and walked back to Cook’s residence, where Brown arrived a short time later. Ballard and Brown then returned to the barbeque, where they confronted Richardson. “With Brown standing next to Ballard and Johnny Jones behind Richardson, Ballard and Brown called Richardson ‘bitch’ several times, to which Jones strongly objected. As he and Ballard prepared to fight, Ballard passed a revolver to Brown and said, ‘Kill that bitch.’ “Brown fired a shot at Richardson just as Johnny Jones pushed her out of the way. The bullet struck Jones, killing him.” (People v. Ballard, supra, B282339, pp. 2-3.) “The jury found Ballard and Brown guilty of first degree murder and willful, deliberate and premeditated attempted murder (Pen. Code, §§ 187, subd. (a), 664, subd. (a)), and found 3 firearm enhancements to be true. (Pen. Code, §§ 12022, subd. (a)(1), 12022.53, subds. (b)-(d).)[2]” (People v. Ballard, supra, B282339, p. 5.) II. Sentencing Hearing and Direct Appeal At the sentencing hearing on April 27, 2017, the trial court (Judge Frank M. Tavelman) found true the special allegations that Brown had a prior serious felony robbery conviction within the meaning of section 667, subdivision (a)(1) and the “Three Strikes” law (§§ 667, subds. (b)-(j), 1170.12). The court sentenced Brown to 114 years to life in prison: for the first degree murder, 25 years to life, doubled to 50 years to life for the second strike, plus 25 years to life for the firearm enhancement under section 12022.53, subdivision (d) (personal and intentional discharge of a firearm proximately causing great bodily injury or death), and five years for the prior serious felony enhancement under section 667, subdivision (a)(1); and for the willful, deliberate, and premeditated attempted murder, seven years to life, doubled to 14 years to life for the second strike, plus 20 years for the firearm enhancement under section 12022.53, subdivision (c) (personal and intentional discharge of a firearm). Defense counsel objected to the trial court’s imposition of the firearm enhancement on the attempted murder count “on the basis . . . it constitutes double punishment for one act, that there should only be one armed for use allegation for the case since it was one act that was also in two charges.” The court responded: “I understand your argument; however, the law is that each victim is a separate act for which the weapon allegation can be imposed, which it is in this particular case.” “2 All further statutory references are to the Penal Code unless otherwise indicated.” 4  The trial court imposed a $10,000 restitution fine under section 1202.4, subdivision (b), “based upon the nature of the offense and the severity of it,” noting it could have imposed a $20,000 restitution fine, $10,000 for each count.3 Brown (and Ballard) appealed, challenging the sufficiency of the evidence supporting the convictions and raising various errors not germane to this appeal. (People v. Ballard, supra, B282339, p. 2.) Brown also contended he was entitled to a new sentencing hearing in light of Senate Bill No. 620 (Stats. 2017, ch. 682, § 2), which amended section 12022.53, effective January 1, 2018, to give trial courts discretion to strike certain firearm enhancements, and Senate Bill No. 1393 (Stats. 2018, ch. 1013, §§ 1-2), which amended section 1385, effective January 1, 2019, to give trial courts discretion to strike prior serious felony enhancements. (Ballard, at pp. 27-28.) We affirmed the convictions and remanded the matter to allow the trial court an opportunity to exercise discretion it did not have at the time it sentenced Brown, and to determine whether to strike any enhancements imposed under sections 667, subdivision (a)(1) and 12022.53. (Ballard, at pp. 28, 30.) III. Hearing Upon Remand Upon remand, the matter was assigned by case number matrix to a different judge because Judge Tavelman, the trial judge, was no longer sitting in the North District where the 3We include these facts regarding the restitution fine because, as discussed below, Brown indicates these facts demonstrate the trial judge showed him leniency and would have been more likely to strike enhancements than the judge who heard his case upon remand and declined to strike any enhancements. 5 matter was tried. The prosecution filed a Code of Civil Procedure section 170.6 peremptory challenge against the new judge, and the matter was reassigned by case number matrix to another judge. The defense then filed a peremptory challenge against the new judge, and the matter was reassigned by case number matrix to Judge Shannon Knight. At the hearing before Judge Knight on July 17, 2020, the following exchange occurred between the court and defense counsel: “The court has read and considered the probation report as well as the Court of Appeal opinion and the remittitur, and at this time we are here for the court to decide whether it would be appropriate since the law has changed to give the court discretion to strike the five-year serious felony prior as well as the firearm enhancements -- or the firearm enhancement, I should say, as to each count. “Did you wish to be heard here, [defense counsel]? “[Defense counsel]: I did, Your Honor. It sounds like the court is ready to rule, and I’m surprised because the court -- the court knows the broad outlines of the case but not the particularities of the case, and I would be surprised that the court can exercise discretion on such a weighty issue without knowing the finer points of the case. “The Court: All right. If you’d like to enlighten me as to anything, feel free to do so; but as I said, the court did review the relevant materials. “It is often the case that we do get cases returned to us and the trial court, the trial judge, is no longer assigned to the district so it is not at all uncommon to have to make these decisions not 6 having heard all of the evidence in the trial but relying on the information that we have in the court file. “[Defense counsel]: May I inquire, has the court read a transcript? “The Court: No, I have not read a transcript. “[Defense counsel]: So I will object to the court proceeding based on lack of preparation and submit. “The Court: All right. The court does feel that the court has sufficient information about the facts of the case as well as the factors pertaining to the defendant to be able to proceed. If there was anything, [defense counsel], that you feel in particular that needs to be brought to the court’s attention that was not part of the Court of Appeal recitation of the facts and the trial proceedings as well as the probation report, I’ll certainly hear from you. “[Defense counsel]: Okay. Having made my objection, what I would -- what I wanted to say both to the prior bench officer and presently now is that the court has several places to go in the exercise of its discretion. The court can resentence Mr. Brown to 25 years to life on the gun use or the court can impose the lesser 20 year or 10 year or not impose the time on the allegation at all. “What I want [to] urge the court to do is not impose the 25 years to life. It’s redundant and sort of pointless. He’s got a life term now. The idea of serving two life terms, one being consecutive to the other, doesn’t make sense and to me feels somewhat -- and I don’t mean this personally, but it feels dishonest. “I would argue that what’s appropriate here is the exercise of discretion that would leave -- that would have the court impose 7 something less than 25 to life. Simply because the fact that the Legislature has gone from no discretion to granting the court the exercise of discretion suggests that even the Legislature thinks that 25 to life in this situation as an allegation can be too much. “So I’d ask the court to think about the logic of imposing another 25 to life and urge the court to impose one of the lesser, 20, 10 years -- I’d ask the court to not impose at all. If the court feels it must impose, to start at ten years and justify going up to itself and to the record to the point where the court finally goes. “The other issue that is before the court -- and I don’t know if the court wants to hear from this now or separately -- the five- year prior. “The Court: Go ahead. “[Defense counsel]: My client is hit with that same prior conviction twice here. He’s sentenced as a strike and as a five- year prior. I know that the bench before was a prosecutor; but on the defense side, that has always been an outrageous double charging of defendants in our view. “He’s been punished significantly by having that prior and having everything doubled. To add an extra 5 years -- again, on top of what is 50 years to life for the main charge and would be 75 to life if the court imposes the full gun allegation -- and make it 80 to life, just seems sort of pointless, and I’d ask the court to exercise that bit of discretion just to save time. “I would also note that at the time that this occurred, my client -- I haven’t been able to get into the facts of that prior case [the serious felony/strike conviction for robbery], but I do note my client was on probation. That tells me there was something very soft in that case. “And submit it.” 8  After hearing from the prosecutor, who urged the court not to strike any of the enhancements, the court ruled as follows: “The court notes that the crimes involved in this case involved a high degree of callousness. This was a cold, calculated act on the part of Mr. Brown and his co-defendant. Really it seems like primarily the co-defendant was the party who would have been more emotionally involved in the situation. Mr. Brown seems to simply have acted out of pure callousness and a desire to kill one or more of these individuals. “And although it appears that the primary target, her life was spared, in the process, Mr. Brown -- it was not for lack of trying by Mr. Brown, it appears that the second victim lost his life in an effort to protect the original intended victim. And this was extraordinarily violent, extraordinarily callous and calculated on the part of Mr. Brown. “The court also notes that Mr. Brown has a very lengthy criminal history including multiple felony convictions. He has a history going back actually to -- looks like age 14 is when his criminal history began, and since then, it has been rather consistent. Going back from 1994 through the conviction in this case, I don’t see any significant break in the time between criminal cases, criminal activity. And he was on probation. It looks like the grant of probation in the robbery case was January 7 of 2014, and the current offense -- offenses in this case were January 17 of 2015 so barely a year has he been on formal probation for robbery. “So with all that, while the court certainly does recognize that there may be times when it is appropriate to strike the firearm enhancement and it may be appropriate to strike the five-year serious felony enhancement, the court does not believe 9 that it would be in the interest of justice to do so in this case as to any of these counts or allegations and the court does not believe that it would be appropriate. “The court believes that the sentence that was imposed by Judge Tavelman remains the appropriate sentence, even in the presence of the newly authorized discretion to strike the enhancement and the prior, so the court declines to do so. “And with that, no change in sentence is required so nothing changes with regard to the sentence at this time.” DISCUSSION Brown contends we must remand the matter for a new sentencing hearing, arguing (1) he was entitled to a hearing before the judge who presided at trial, and (2) the court did not exercise informed discretion because it relied on “misinformation” about the facts and circumstances of his case. As explained below, we reject his arguments. I. Brown’s Claim He Was Entitled to a Hearing Before the Trial Judge is Forfeited and Without Merit At the July 17, 2020 hearing upon remand, Brown objected to Judge Knight proceeding based on her purported “lack of preparation” in not reading the reporter’s transcripts of the proceedings. He never asserted he was entitled to a hearing before the trial judge. Thus, Brown forfeited this contention on appeal. (People v. Brooks (2020) 53 Cal.App.5th 919 , 924-925 (Brooks) [by failing to raise the issue below, defendant forfeited the contention he was entitled to a hearing before the trial/original sentencing judge upon remand for determination whether to strike a prior serious felony enhancement under the court’s new statutory discretion].) Even if Brown had preserved this contention for review, we have already considered the issue 10 and held, in a published opinion, that a defendant is not entitled to a hearing before the trial/original sentencing judge when the Court of Appeal remands the matter for a determination whether to strike an enhancement under the court’s new statutory discretion. (Id. at pp. 924-926.) As we explained in Brooks, “the hearing on remand was not a resentencing,” and “we are aware of no authority creating an entitlement to have the same judge that [presided at trial and] sentenced a defendant hear a motion to strike enhancements if a case is remanded for that purpose.” (Brooks, supra, 53 Cal.App.5th at p. 925.) Brown has cited no such authority here. His reliance on People v. Arbuckle (1978) 22 Cal.3d 749 is misplaced. There, our Supreme Court concluded, “[a]s a general principal, . . . whenever a judge accepts a plea bargain and retains sentencing discretion under the agreement, an implied term of the bargain is that sentence will be imposed by that judge.” (Id. at pp. 756-757.) As we concluded in Brooks, “[r]emand here did not involve the considerations present in Arbuckle” concerning guilty pleas. (Brooks, at p. 926.) Brown has expressed on appeal a preference for the trial judge to determine whether to strike an enhancement because he believes the trial judge would be more lenient than Judge Knight. He cites as an example the trial judge’s decision to impose a $10,000 restitution fine rather than a $20,000 restitution fine. While a defendant may prefer to have the trial judge determine upon remand whether to strike an enhancement—a preference Brown did not express below—there are “countervailing considerations. A trial judge’s reassignment within a large county’s superior court, for example, may leave a trial judge in a facility with no temporary detention capacity. Judges may be 11 technically available, then, to handle motions on remand, but not practically available.” (Brooks, supra, 53 Cal.App.5th at p. 926.) For all these reasons, as we explained in Brooks, “we decline to create the rule [Brown] has requested of us here.” (Brooks, supra, 53 Cal.App.5th at p. 926.) We reject his contention he was entitled to hearing before the trial judge upon remand. II. The Court Did Not Abuse Its Discretion in Declining to Strike an Enhancement “ ‘ “A court’s discretionary decision to dismiss or to strike a sentencing allegation under section 1385 is” reviewable for abuse of discretion.’ [Citation.] ‘In reviewing for abuse of discretion, we are guided by two fundamental precepts. First, “ ‘[t]he burden is on the party attacking the sentence to clearly show that the sentencing decision was irrational or arbitrary. [Citation.] In the absence of such a showing, the trial court is presumed to have acted to achieve legitimate sentencing objectives, and its discretionary determination to impose a particular sentence will not be set aside on review.’ ” [Citations.] Second, a “ ‘decision will not be reversed merely because reasonable people might disagree. “An appellate tribunal is neither authorized nor warranted in substituting its judgment for the judgment of the trial judge.” ’ ” [Citations.] Taken together, these precepts establish that a trial court does not abuse its discretion unless its decision is so irrational or arbitrary that no reasonable person could agree with it.’ ” (People v. Pearson (2019) 38 Cal.App.5th 112 , 116.) Brown contends the court “failed to exercise its informed discretion due to misinformation,” in declining to strike an 12 enhancement. As explained below, the record does not support this contention. Brown faults the court for not reading the reporter’s transcripts of the proceedings before declining to strike an enhancement. As set forth above, the court gave Brown ample opportunity to provide the court with information he believed was not included in the documents the court reviewed, and Brown disclosed no such information. Brown challenges the court’s reasons for declining to strike an enhancement. He argues the court was somehow misinformed when it found his offenses “involved a high degree of callousness” and his conduct “was extraordinarily violent, extraordinarily callous and calculated.” During a verbal altercation with Ballard’s ex-girlfriend, Faviana Richardson, Ballard handed Brown a revolver and said, “Kill that bitch.” (People v. Ballard, supra, B282339, p. 3.) Brown fired a shot with the intent to kill Richardson, but he shot and killed Richardson’s fiancé instead. Based on these facts and circumstances of the murder and attempted murder—which Brown does not dispute on appeal—we reject Brown’s assertion there was an insufficient “factual basis for the court’s repeated use of ‘callousness’ to describe his culpable conduct herein.” He points out he “did not bring the gun to the barbecue and that he fired [only] one shot.” We disagree with his assertion that these facts “undermine” the court’s findings regarding the violent, callous, and calculated nature of his conduct. We also disagree with his characterization of the court’s findings as “hyperbolic.” Brown also argues the court should not have relied on his lengthy criminal history in declining to strike an enhancement because he “had already been repeatedly punished specifically for 13 his lengthy criminal record” in that the term imposed for each offense was doubled under the Three Strikes law. Brown cites no authority supporting this argument, and we are aware of none. The court did not abuse its discretion in citing Brown’s 20-year criminal history as a reason it declined to strike an enhancement. In his reply brief on appeal, Brown asserts: “Possibly due to the recency of SB 620 and SB 1393, the court may not have been fully informed on the nature and scope of its discretion in resentencing appellant under the amended statutes.” The court’s comments about the nature and scope of its discretion, as quoted above, belie Brown’s assertion. Moreover, Brown pointed out to the court that it had discretion to strike the 25-year firearm enhancement and impose a 10-year or 20-year firearm enhancement, based on the jury’s true findings on the various firearm enhancements. Nothing in the record before us demonstrates error. Based on the facts and circumstances of the case and Brown’s lengthy criminal history, the court found it was not in the interests of justice to strike any enhancement, and the court concluded the sentence originally imposed was the appropriate sentence. The court did not abuse its discretion. 14  DISPOSITION The order is affirmed. NOT TO BE PUBLISHED CHANEY, J. We concur: ROTHSCHILD, P. J. BENDIX, J. 15

2020-12-01 12:13:30.08191+00

http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=19328&Index=%5c%5c10%2e20%2e4%2e7%5cTamesIndexes%5ccoa04%5cOpinion

Fourth Court of Appeals San Antonio, Texas MEMORANDUM OPINION No. 04-20-00081-CV IN THE INTEREST OF E.C.G., J.C.G., J.J.G., J.A.G., J.Z.G., and E.R.G., Children From the 438th Judicial District Court, Bexar County, Texas Trial Court No. 2018PA01841 Honorable John D. Gabriel, Judge Presiding 1 Opinion by: Luz Elena D. Chapa, Justice Sitting: Sandee Bryan Marion, Chief Justice Luz Elena D. Chapa, Justice Beth Watkins, Justice Delivered and Filed: November 25, 2020 AFFIRMED D.T. 2 appeals the trial court’s order, rendered after a bench trial, that terminated the parent- child relationship between D.T. and six children. We conclude the evidence is legally and factually sufficient to support the trial court’s finding that termination is in the children’s best interest, and we affirm the trial court’s order. I. BACKGROUND The Texas Department of Family and Protective Services filed an original petition in August 2018, seeking emergency orders, conservatorship, and termination of parental rights. The trial court rendered an emergency order for the protection of six children, who were then between 1 Senior Judge, sitting by assignment 2 To protect the identity of the minor children, we refer to the parents and the children by their initials. See TEX. FAM. CODE § 109.002(d); TEX. R. APP. P. 9.8(b)(2).  04-20-00081-CV the ages of one month and five years: E.C.G., J.C.G., J.J.G., J.A.G., J.Z.G., and E.R.G. The Department was made the children’s temporary managing conservator. The trial court extended the mandatory dismissal date, and the case remained on the court’s docket for over seventeen months before it proceeded to a three-day trial to the court in January 2020. The trial included testimony from eighteen witnesses, including the parents and mother’s new boyfriend, the children’s therapists (Manuel Davis and Donna Carrasco), D.T.’s therapists (Carlos Nunez, Suzanne Martinez Campos, and Christina Gracia), Department witnesses (caseworkers Briana Lane, Rebecca Salinas, and Kristen Torres, and investigation supervisor Marvin Ferris), two parents who fostered the children while the case was pending (K.T. and L.K.), the CASA volunteer, an SAPD detective, and two visitation monitors. At the conclusion of the trial, the court found by clear and convincing evidence that D.T. knowingly placed the children in or allowed the children to remain in conditions that endangered their physical or emotional well-being, engaged in conduct or knowingly placed the children with persons who engaged in conduct that endangered the children, and failed to comply with court- ordered provisions of the family service plan. See TEX. FAM. CODE § 161.001(b)(1)(D), (E), & (O). The trial court also found by clear and convincing evidence that termination of her parental rights is in the children’s best interest. See id. § 161.001(b)(2). The trial court rendered judgment terminating the children’s relationship with both their parents and appointed the Department to be their permanent managing conservator. D.T. timely appealed the termination order. She does not contest the trial court’s findings of grounds to terminate her parental rights. She argues only that the evidence is legally and factually insufficient to support the trial court’s finding that termination of her rights is in the children’s best interest. -2-  04-20-00081-CV II. STANDARD OF REVIEW AND APPLICABLE LAW To terminate parental rights under section 161.001 of the Texas Family Code, the Department must prove by clear and convincing evidence one of the grounds in subsection 161.001(b)(1) and that termination is in the best interest of the child. See id. § 161.001(b). In assessing the sufficiency of the evidence to support the trial court’s findings, we employ a heightened standard of review to determine whether the trial court could have formed a firm belief or conviction about the truth of the Department’s allegations. In re J.F.C., 96 S.W.3d 256 , 266– 67 (Tex. 2002). We review for legal sufficiency by examining the entire record in the light most favorable to the findings, assuming any disputed facts were resolved in favor of the findings if a reasonable factfinder could do so and disregarding any evidence the factfinder reasonably could have disbelieved. See id. at 256 . We review for factual sufficiency by evaluating the disputed evidence to determine if it is so significant that a factfinder could not reasonably have formed a firm belief of or conviction on the challenged finding. Id. In our review, we remain mindful that the factfinder is the sole judge of the credibility of the witnesses and the weight to be given their testimony, and we may not substitute the trial court’s judgment with our own. In re J.O.A., 283 S.W.3d 336 , 346 (Tex. 2009); In re H.R.M., 209 S.W.3d 105 , 108 (Tex. 2006) (per curiam). Under Texas law, there is a strong presumption that the best interest of a child is served by keeping the child with a parent. In re R.R., 209 S.W.3d 112 , 116 (Tex. 2006) (per curiam). However, a court must also presume that “the prompt and permanent placement of the child in a safe environment is . . . in the child’s best interest.” TEX. FAM. CODE § 263.307(a). In making a best-interest determination, the factfinder looks at the entire record and considers all relevant circumstances. See In re C.H., 89 S.W.3d 17 , 27 (Tex. 2002). In determining what is in the child’s best interest, the court may consider evidence about the desires of the child; the emotional and physical needs of the child now and in the future; the emotional and physical danger to the child -3-  04-20-00081-CV now and in the future; the parental abilities of the individuals seeking custody; the programs available to assist these individuals to promote the best interest of the child; the plans for the child by these individuals or by the agency seeking custody; the stability of the home or proposed placement; the acts or omissions of the parent which may indicate that the existing parent-child relationship is not a proper one; and any excuse for the acts or omissions of the parent. Holley v. Adams, 544 S.W.2d 367 , 372 (Tex. 1976); see C.H., 89 S.W.3d at 27. These factors are not exhaustive, and not every factor must be proved to find that termination is in the child’s best interest. C.H., 89 S.W.3d at 27. Evidence of only one factor may be sufficient for a factfinder to form a reasonable belief or conviction that termination is in the child’s best interest—especially when undisputed evidence shows that the parental relationship endangered the child’s safety. Id. at 28. And, although the mere fact that an act or omission occurred in the past does not establish that termination is currently in the child’s best interest, a parent’s past conduct is probative of her future conduct when evaluating the child’s best interest. See In re O.N.H., 401 S.W.3d 681 , 684 (Tex. App.—San Antonio 2013, no pet.). III. THE CHILDREN’S BEST INTERESTS A. The history of abuse and neglect At the time of trial, D.T. was twenty-four years old, with six children aged seven and under. D.T. and her children had been continuously involved with the Department for almost two and one-half years, and the children had been in foster care for over seventeen months. The Department received a referral in August 2017, after D.T. called the police to report the children’s father, C.G., had struck her in the face, chased her around the apartment with a machete, and hit one of the children’s head against the tile floor. No criminal charges were filed, but a Department case was opened. A Department investigation supervisor and caseworker Briana Lane testified the Department was concerned about domestic violence, parenting, stability of the -4-  04-20-00081-CV living situation, drug use, and the children’s hygiene. D.T. signed a safety plan agreeing not to allow C.G. to have any contact with the children, and the Department began providing family- based services. Caseworker Lane testified that during the year D.T. was receiving family-based services, D.T. continued to allow the children to have contact with C.G., but she would not tell the Department where C.G. was or how to contact him. Lane testified D.T. failed to complete a domestic violence course and failed to obtain stable housing. During the course of that year, D.T. and the children had lived in an overcrowded apartment with D.T.’s mother, who had an extensive history with the Department, with D.T.’s grandparents, who were not able to accommodate all of them, and at Haven for Hope. There continued to be hygiene problems, with daycare workers reporting the children arrived dirty, smelling of urine, and wearing dirty diapers. C.G. testified he and D.T. had been in a violent relationship since 2012. He testified he would curse at the children when he disciplined them, but he invoked his Fifth Amendment rights when asked questions about physical discipline of his children and violence between him and D.T. C.G. admitted that he continued to use drugs after the Department became involved, he did not engage in services, and he avoided the caseworker because he was still doing drugs. He also testified that D.T. allowed him to visit with the children even though there was a safety plan in place. Sometimes D.T. dropped the children off with C.G. at his girlfriend’s apartment where they would play with his girlfriend’s six children. In August 2018, C.G. was arrested after he severely beat his girlfriend’s one-year-old child, who suffered a lacerated liver, multiple rib fractures, and other injuries. A San Antonio Police Department detective testified that during the investigation, visible injuries were found on the girlfriend’s other children. In July 2019, C.G. was convicted in five separate cases of intentionally -5-  04-20-00081-CV and knowingly causing bodily injury to a child, and he was sentenced to ten years in prison pursuant to a plea bargain. Caseworker Lane testified D.T.’s children were removed from her in August 2018, after the children disclosed that they had been present when C.G. was abusing his girlfriend’s children. C.G. confirmed at trial his children had witnessed him hitting the other children. Besides witnessing C.G.’s abuse of his girlfriend’s children, the three oldest children, E.C.G., J.C.G., and J.J.G. (who were seven, five, and four at the time of trial), told caseworkers, their therapists, and their foster mothers about violence they had suffered at C.G.’s hands and seen their siblings suffer. All three of them made outcries about C.G. hitting one of the boy’s head against the wall. One of the foster parents testified E.C.G. told her C.G. had done this because he was angry they were jumping on the bed. E.C.G. told his therapist he had watched C.G. “pounding” another of the boy’s head into the ground. E.C.G. and J.C.G. further reported that C.G. would slap them and hit them with a belt. The children reported that D.T. was present in the home when much of this happened. B. D.T.’s ability to protect the children from emotional and physical danger D.T.’s caseworkers testified that for more than a year after the case was filed and two years after the Department opened its case, D.T. made very little progress. She refused to believe C.G. would harm any child, even though she had once reported him to the police for assaulting her and harming one of their children. She continued to deny his abusive behavior after he was arrested and even after he was sentenced. The caseworkers testified D.T. would not acknowledge her children had suffered any trauma or that she or C.G. had done anything wrong. D.T. also continued having contact with C.G. and lied about it. She told her caseworker and testified at a hearing that she had no contact with him. Yet, the Department introduced tapes of telephone conversations between C.G. in jail and D.T. At trial she admitted she had lied about not having contact with him, -6-  04-20-00081-CV and testified she visited him, talked to him on the telephone, and put money in his account. She also paid for a post office box, believing they could correspond in writing without the Department finding out. Caseworker Torres testified that halfway through the case, D.T. had completed most of the service plan and was engaged in therapy, but the case was not progressing. She testified D.T. was going through the motions, but had not gained any understanding of what the Department’s concerns were, what the children had suffered, or her role in it. Torres testified D.T. had learned what words to say, but did not follow through. For example, D.T. would verbalize that she needed to learn to control and redirect the children, but did not do so at the visits. Torres testified D.T. had also learned to say she knew that her children had suffered trauma and that she needs to listen to them, but when one of the children tried to talk to her about his anger, D.T. would not listen to him, and that harmed him more. D.T. testified she had lied to caseworkers and therapists through the first year of the case; she pretended to believe C.G. had committed the acts he was accused of and pretended to understand her children had been harmed and she had a role in it. She admitted she had not been truthful about the domestic violence she had suffered. She testified she had lied so she could get her children back. D.T. was treated by three therapists during the case. The first therapist testified D.T. minimized any domestic violence and was very loyal to C.G. D.T. firmly did not believe the criminal allegations against him. The therapist testified D.T. also did not believe she needed counseling and denied the children had behavioral issues other than being upset because of the Department’s involvement. D.T. was discharged for missing sessions. D.T.’s second therapist testified D.T. progressed in terms of being engaged, staying in contact, and remaining employed. But she continued her relationship with C.G. and remained confident he had not abused the -7-  04-20-00081-CV children. D.T. wanted him to be able to Facetime with the children and seemed to be angrier at C.G.’s girlfriend than at C.G. D.T. was last seen by the second therapist in June 2019. D.T. then began seeing a specialist, Christina Gracia, in August 2019. Gracia testified D.T. has been fully engaged in therapy with a positive attitude, and is making slow, incremental progress. She testified D.T. had been in a domestically violent relationship since she was fifteen years old and she internalized it, believing it to be “normal.” Gracia testified D.T. had only recently acknowledged that C.G. abused the children and begun to understand that it is not “normal.” Gracia testified D.T. still does not appreciate the trauma the children went through and has not yet acknowledged the part she played in allowing the trauma to occur. She testified D.T. does not understand her role as a perpetrator of violence because of her failure to protect the children from it. She stated D.T. is not yet able to identify what she failed to do that would have prevented removal of her children. Gracia was also engaged to do family therapy when the children were ready. At the time of trial, she had seen the three oldest children and had one individual therapy session with each of them and D.T. Gracia believes the family sessions are helping D.T. to get an idea of the children’s trauma, although she has not yet fully demonstrated an understanding. Gracia testified D.T. is committed to healing and loves her children very much. However, the therapist believes it will take much more time for D.T. to process everything and to reestablish bonds with the children. Gracia also testified D.T. does not have a support system that would allow her to adequately care for the children. She understands that D.T. has a new boyfriend, but she had not met him before trial, and Gracia believes that putting the children in a home with an unknown man would be traumatizing. -8-  04-20-00081-CV Gracia does not believe D.T. is ready to be reunited with the children or that it would be in the children’s best interest. She testified D.T. might be ready after six months to a year of continued therapy. D.T. testified that sometime around September 2019, after the case had been pending more than a year, she realized she “needed to get serious and step up.” She testified that her new therapist, Gracia, and her new boyfriend helped her to see things differently. She testified she now understands her children trusted her and she did not protect them. D.T. says she is taking an additional parenting class targeted to parents of children with certain mental health diagnoses and her new boyfriend has been going with her. However, she testified she also understands that if the children are returned to her, it may be a long time before they can meet her boyfriend. Although the evidence supports D.T. is no longer in contact with C.G., it also supports D.T. does not yet understand that failing to protect the children from violence is itself abusive and she has not demonstrated she is able to be protective. The evidence also establishes D.T. does not yet understand the trauma the children have suffered, much less know how to address it or prevent it in the future. The trial court reasonably could have concluded from the evidence that returning the children to D.T. would pose a risk to their physical and emotional well-being. Thus, these factors support the trial court’s best interest finding. C. D.T.’s stability and ability to meet children’s physical needs D.T. testified she can meet the children’s physical needs. She testified she has a good job, earning $570 a week, and anticipates a raise. She has been working afternoon and evening shifts, but is trying to change to the morning shift. D.T. stated if the children were returned to her now, her sister would pick the children up from day care and care for them until she got home with help from D.T.’s grandmother. Caseworker Torres agreed that D.T.’s current employment is a good job. However, she pointed out D.T. had five different jobs during the case and had only just -9-  04-20-00081-CV recently completed her on-the-job training period for her current job. Torres testified D.T. also has not shown she is able to maintain a home, budget, and pay the bills to manage a household. And Torres also disagreed that D.T.’s support system is adequate. As D.T. acknowledged at trial, both her sister and her grandmother have stated that they are unable to care for all the children at once. D.T. also testified she was getting a new three-bedroom apartment the weekend following the trial. She stated it took her a long time to find one because she had previous evictions and had not previously earned enough money. At the time of trial, D.T. was staying at her mother’s house and sleeping at her new boyfriend’s house three or four nights a week. Caseworker Torres testified she was first made aware during trial that D.T. may have a new apartment. Torres made some inquiries and learned D.T. did not yet have a lease and D.T. would need to qualify for some programs and provide requested documentation regarding her previous evictions before they would rent to her. Torres testified the Department would need to see the apartment and D.T. would need to ensure it is appropriately furnished. The children would not be allowed to live at D.T.’s mother’s house because it has only two bedrooms for ten people and because of the mother’s extensive history with the Department. Torres testified the Department had not evaluated D.T.’s boyfriend’s home because the address had not been provided before trial. The evidence supports D.T. has taken steps toward stability. However, at the time of trial, she did not have the income, housing, or support system necessary to provide for the children’s physical needs. This factor also weighs in support of the trial court’s finding. D. Family visits and D.T.’s parenting abilities D.T. had weekly supervised visits with the children for over a year. Two visitation monitors, two caseworkers, two foster mothers, and the CASA volunteer all testified the visits were chaotic. The children would physically fight, jump on the furniture, be too rough with the baby, and disrupt other families’ visits. D.T. would either not redirect them or would try to, but - 10 -  04-20-00081-CV fail to follow through when the children ignored her. Even after asked not to, D.T. also repeatedly brought the children large sugary drinks and bags of candy for snacks. Caseworker Torres testified she met with D.T. after the visits and would discuss strategies to manage the children. Torres testified D.T. listened and was receptive, but the next visit nothing would change. Torres testified she was concerned that if D.T. was unable to have them listen and respond to her in a one hour visit once a week, she would not be able to take them to the grocery store or on the bus and keep them safe. The CASA volunteer was appointed the month after the case was filed. She visited the children in their foster placements at least once a month. She testified that although the children were excited to see her, they did not climb on furniture or throw toys and were not frantic, as they were at visits with D.T. The older children also responded to redirection in their foster homes. When the volunteer visited the baby in his foster home, he was very playful and animated; whereas, he was “just blank” during visits with D.T. L.K. and K.T., the foster mothers who parented the children through most of the case testified the children became very anxious when they were told a visit was approaching. Foster mother L.K. testified J.A.G., who was toilet trained, would urinate inappropriately and smear feces on the wall if he knew a visit was coming. K.T. testified she stopped telling the children a visit was approaching, but then things were much worse after the visits, stating, “We paid for visits for days.” K.T. and L.K. testified the children would revert in their behavior after visits: they started hitting, kicking, spitting, and screaming again; J.J.G. would have nightmares and be unable to sleep; J.A.G. would have night terrors; J.C.G. would wet the bed; and E.C.G. and J.C.G. would have increased impulse control and behavioral issues at school. After the case had been pending about ten months, the children’s therapists jointly recommended temporarily suspending the visits because of the anxiety the visits caused the - 11 -  04-20-00081-CV children. The therapists and foster mothers testified that when the visits were suspended, the children’s behavior improved significantly. The court ordered several additional family visits, the last of which was in August 2019, and which was observed by both of the children’s therapists. Caseworker Torres testified it was the best visit D.T. had with her children. However, the children’s therapists testified the visit was chaotic and did not go well at all because D.T. was unable to keep the children calm or focused. D.T. moved to resume visits, but the motion was opposed by the children’s attorney ad litem. In October 2019, the trial court ordered that visits could occur only as part of family therapy sessions with Gracia. Those sessions were to begin only when the children’s individual therapist believed the child was ready. At the time of trial, the three oldest children had each had one individual therapeutic session with D.T. and family therapist Gracia. The two youngest children, J.Z.G. and E.R.G. continued to have visits alone with D.T. The CASA volunteer observed the last three of these visits. The volunteer testified J.Z.G., who was two and one-half years old, was happy to see D.T.; they interacted well. However, the volunteer believed this was in large part because the visit was at the Department with both the volunteer and a monitor present, and the baby, E.R.G., was not moving around. She testified that the entire time, either D.T. was holding the baby in one arm or he was strapped in a highchair. This allowed D.T. to focus solely on J.Z.G., and, even then, D.T. periodically disengaged throughout the visit. The volunteer testified although D.T. was working to improve her parenting skills, she still struggled. She testified D.T. had shown she was not able to keep more than three of the children at a time physically and emotionally safe. The CASA volunteer also testified that in her opinion, D.T. was not ready to care for even just the two youngest children full time. - 12 -  04-20-00081-CV The evidence established that at the time of trial, D.T. had yet to learn the skills needed to safely parent the children outside of a controlled environment, and therefore this factor weighs in favor of the finding that termination of D.T.’s rights is in the children’s best interest. E. The children’s emotional well-being and emotional needs When the children were removed from their parents, the four older children were extremely aggressive with each other and with other children. These four received trauma-focused cognitive behavioral therapy throughout the case. Their therapists, Manuel Terry Davis and Donna Carrasco, testified the children have suffered trauma and are afraid, which manifests as anger, aggression, and issues with impulse control. The therapists testified the children have expressed fear and feeling unsafe around their parents. They are primarily afraid of their father, but expressed fear their mother will take them where their father is, as she had in the past, and will not protect them. The therapists testified the children need continued therapy, in which they are learning relaxation and calming techniques to help them with impulse control. 1. E.C.G. (seven years old at time of trial) K.T. fostered E.C.G. for about six months during the case. She testified E.C.G. and J.J.G. were placed with her at the same time and had significant behavioral issues when they arrived. They threw things across the room, cursed, and screamed. She could not send them to their room because they would slam their heads and bodies against the wall, scratch themselves, and destroy their schoolwork and backpacks. After working with them to learn how to calm themselves for a few months, the behaviors improved. In July 2019, E.C.G. moved into L.K.’s foster home where his two sisters and brother J.A.G. were living. L.K. testified E.C.G.’s behavioral problems continued to lessen, especially after the family visits were suspended. L.K. and therapist Carrasco testified E.C.G. is very angry with his mother for having allowed his father to hurt him and his siblings and he did not want to go to family visits. - 13 -  04-20-00081-CV Caseworker Torres testified E.C.G. struggles with security, confidence, and ability to trust. Therapist Davis testified E.C.G. has a high need for positive reinforcement. E.C.G. had a therapeutic visit with D.T. and family therapist Gracia in November 2019. According to L.K., the visit did not go well, and E.C.G. regressed to being very impulsive and aggressive afterward. He shoved a child into a fence at school, hit another in the face, and would repeatedly turn the lights on and off. Gracia’s impression from the therapeutic visits was that E.C.G. was aloof and uninterested, and he did not appear to have a bond with D.T. 2. J.C.G. (five years old at time of trial) J.C.G.’s foster mother for most of the case, L.K., testified J.C.G. was very angry with her parents. She testified J.C.G. was initially very aggressive with her younger siblings, throwing things at them and hitting them, but that behavior had improved over time. Several of the witnesses testified J.C.G. is also “bossy” to the younger children and tries to tell them what to do, in an attempt to parent them. L.K. also testified J.C.G. had a problem with bed-wetting after family visits. The bed wetting stopped when the visits were suspended and the problem had not resurfaced. J.C.G.’s therapist, Davis, testified J.C.G. is hyperactive and has impulse control issues, but at the time of trial, did not exhibit seriously concerning behaviors. He testified J.C.G. loves her mother, but still feels afraid and unsafe with her. Gracia testified she had one therapeutic visit with J.C.G. and D.T. Gracia believed J.C.G. was apprehensive during the session. 3. J.J.G. (four years old at time of trial) As discussed above, foster parent K.T. testified J.J.G. was extremely impulsive and destructive when he and E.C.G. were placed in her home. She testified he also had significant behavioral challenges at day care. He climbed on things and was unable to stay seated. He hit, spit, and yelled at people. He once hit a child in the face with a rock because the child did not want to - 14 -  04-20-00081-CV play with him. K.T. testified the behavior improved when E.C.G. moved to another foster home and the baby, E.R.G., was placed with J.J.G. in her home. J.J.G. and the baby had been together since July 2019, and K.T. testified J.J.G. is very protective of the baby and they have a good bond. Therapist Donna Carrasco treated J.J.G. throughout the case. Carrasco testified J.J.G. both witnessed and experienced abuse. She testified J.J.G. had nightmares nightly for several months. At the time of trial, they had become less frequent, but he still had them when he was triggered or anxious. Carrasco testified J.J.G.’s anxiety and physical aggression was so bad in mid-2019 she was afraid he might need to be hospitalized. Carrasco testified it took a long time for J.J.G. to feel safe enough to begin talking. They engaged in play therapy because J.J.G. was aggressive with other children, frequently hitting them in the head with blocks and other toys. He engaged in the same behavior in his play therapy and, when Carrasco asked him about it, J.J.G. said, “That’s what my daddy did to me and [J.A.G.].” J.J.G. told Carrasco several times his father hit his head against the wall and “there was blood.” The therapist testified J.J.G. was, and still is, very angry with his mother. He feels she was present for the abuse, aware of it, and did not stop it. Carrasco and J.J.G. worked in therapy towards J.J.G. using his words to tell D.T. he was angry at her for not protecting him. She testified J.J.G. finally tried to talk to D.T. about the physical abuse at a visit, but he returned from the visit even angrier, saying D.T. would not listen to him. Carrasco testified J.J.G. usually became more aggressive after visits with D.T., but that time it was much worse. He was angry for months and did not want to see D.T. anymore. J.J.G.’s therapist also testified he has a “trauma bond” with his older siblings. That means they can act as a trigger for each other. For J.J.G., his siblings are a trigger because they were present when C.G. physically abused him, and when they are all together, he feels he is back in that situation. On the other hand, the youngest child E.R.G. does not act as a trigger for him and - 15 -  04-20-00081-CV J.J.G. sees his role as E.R.G.’s protector. Carrasco opined that visits with D.T. were a bigger trigger than those with his siblings. Carrasco testified J.J.G. started making significant progress after he was put on a mood stabilizer to help with his anxiety and after the family visits were suspended. She testified that in the several months before trial when there were no family visits, J.J.G. had been calmer and less aggressive overall, he started to talk more openly, and was making progress learning to control his anger. J.J.G. had one therapeutic visit with D.T. and family therapist Gracia in January 2020, shortly before trial. Carrasco testified J.J.G. would not talk to her about the visit afterward. Gracia testified J.J.G. was dismissive of D.T. at the visit and said “I want to go” several times during the last twenty or thirty minutes of the session. She testified J.J.G. was “very, very adamant about going back to the caregiver.” Carrasco recommended J.J.G. not be placed in a home with his siblings (other than the baby) or with D.T. She testified that for J.J.G. to continue making progress, he needs a stable home where he feels safe and a structured environment in which his behavior and anxiety can be managed. 4. J.A.G. (three years old at time of trial) During the case, E.C.G., the oldest, told his therapist and the CASA volunteer that the children had watched C.G. “pound” J.A.G.’s head against a hard surface. J.A.G.’s foster mother, L.K., testified he suffers from night terrors. He also exhibited disturbing behaviors, such as urinating inappropriately and smearing feces on the walls when he knew a visit was approaching. These behaviors stopped when the family visits stopped. J.A.G.’s therapist, Manuel Davis, testified J.A.G. has diagnoses of speech delay, sensory processing disorder, and ADHD. Davis testified J.A.G. is extremely hyperactive and has a problem - 16 -  04-20-00081-CV with impulse control. He said that it can take up to fifteen minutes in their sessions just to calm J.A.G. down enough to proceed. Davis testified he was working with J.A.G. on self-regulation and deep breathing. Caseworker Torres testified J.A.G. is receiving speech and occupational therapy. 5. J.Z.G. (two years old at time of trial) J.Z.G.’s foster mother, L.K., testified J.Z.G. had problems with night terrors and aggression. She stated the terrors occurred both at night and during naps, and at times she would wake up during naps screaming as if she were being severely harmed. L.K. and caseworker Torres also testified J.Z.G. is very aggressive with other children, hitting them with toys and biting them hard, leaving large bruises. The caseworker acknowledged aggression and biting are not unusual in toddlers, but testified J.Z.G. had exhibited these behaviors since she was removed from her parents and the behaviors worsened around family visits. 6. E.R.G. (seventeen months old at time of trial) E.R.G. was only three weeks old when he was removed from his parents. His foster mother, K.T., and the caseworker testified E.R.G. suffers separation and stranger anxiety. He is very clingy and loving with his primary caregiver, but screams when she leaves the room or drops him off at daycare and cries when someone he is not close to touches him or tries to pick him up. Caseworker Torres testified E.R.G. is the child least bonded with D.T. and she does not think he recognizes D.T. as his mother. She testified that when he saw D.T. at visits, he reacted as if she were a stranger, wincing, turning away, and crying. Torres testified this had improved over time, but it still happened sometimes. The CASA volunteer testified E.R.G. does not move around during the visits. Either D.T. holds him or he simply sits and sucks on his cup or a piece of food. The CASA volunteer testified this is in significant contrast to the behavior she observed in his foster home, where E.R.G. was very active. - 17 -  04-20-00081-CV The evidence established these children suffered trauma that manifests in different ways and they need continued therapy and individual attention to address their anxiety and particular behavioral challenges. They also need stability and to feel protected. D.T. does not yet fully understand their trauma or her role in causing it and does not know how to address it. This factor therefore also supports the finding that termination is in the children’s best interest. F. Desires of the children D.T. testified she talked to all of the children and they all told her they wanted to go home with her. However, there was conflicting evidence from other witnesses. Gracia agreed that each of the three oldest children, in their individual family therapy sessions with D.T., told D.T. that “it would be okay to go home.” Gracia testified she believes the children said this because they did not want to hurt D.T.’s feelings. She testified that her observation of the children’s behavior with D.T. during the sessions and then their behavior with their caregivers after the sessions, leads her to have serious concerns about whether the children actually have any desire to live with D.T. full time. Caseworker Torres and E.C.G.’s foster mother testified they each had a conversation with E.C.G. in the two weeks before the trial. E.C.G. told them he did not want to go live with D.T., and he wanted to stay with his siblings in a foster home and ultimately be adopted. The CASA volunteer met with the four oldest children the Sunday before trial. She testified E.C.G. told her he wanted her to tell the judge he wants to be adopted because his mom did not keep them safe. E.C.G.’s therapist, Manuel Davis, testified E.C.G. had told him multiple times he did not feel safe with his mother and he wants to stay in his foster home. Davis acknowledged that after his therapeutic visit with D.T., E.C.G. said he wanted to go live with her because she was getting a new apartment. Davis testified that E.C.G. subsequently told him he wanted to stay in his foster home. - 18 -  04-20-00081-CV Five-year-old J.C.G.’s foster mother testified that two weeks before trial, J.C.G. told her she wanted to be adopted and did not express a desire to go back and live with D.T. J.C.G. did not express a preference when the CASA volunteer met with her before trial. Four-year-old J.J.G. told both the caseworker and the CASA volunteer that he misses D.T. He told caseworker Torres he likes where he is living and wants to stay there. The CASA volunteer testified three-year-old J.A.G. told her that he likes the house where he is. None of the witnesses, other than D.T., testified about the desires of the two youngest children, J.Z.G. and E.R.G. The evidence supports that the older children love and miss D.T. It also supports that the oldest child, E.C.G., wants to remain with his siblings in his foster home. The evidence regarding the other children’s desires is not as strong and we do not give it much weight because they are so young. We conclude that as to E.C.G., this factor supports the trial court’s finding, but this factor is neutral regarding the other children. G. The Department’s plans for children The caseworkers testified they attempted to place the children with family members, but either the homes were unsuitable or the relatives were unwilling or unable to care for the children. At the time of trial, four of the children, E.C.G., J.C.G., J.A.G., and J.Z.G., had been in a foster home together for seven months and had recently moved together to a foster-to-adopt home. The other two children, J.J.G. and the baby, E.R.G., are together in a different foster-to-adopt home. J.J.G.’s therapist, Carrasco, believes it is in his best interest for him not to be in a home with his other siblings because of the trauma bond they have. However, J.J.G. has a strong positive bond with E.R.G. Caseworker Torres testified the two foster families are in communication with each other and have committed to allowing the siblings to have contact with each other. She testified she believes the placements will lead to permanency for all of the children and is in their best interest. - 19 -  04-20-00081-CV Family therapist Gracia testified the children are “very well placed, … well adjusted, and they are thriving.” This consideration supports the trial court’s finding that termination of D.T.’s parental rights is in the children’s best interest. IV. CONCLUSION The evidence presented by the parties on the Holley factors weighs strongly in favor of the trial court’s best-interest finding. The evidence established that late in the case—over a year after the children were removed and placed in foster care and over two years after the Department began providing services—D.T. began to take the matter seriously and began making slow, incremental progress toward acknowledging and understanding the effects of many years of domestic violence. The evidence also established that at the time of trial, D.T. did not yet fully understand the trauma her children suffered, her role in causing the trauma, or how to prevent her children from suffering future trauma. The children were still distrustful and did not believe she could be protective of them. D.T. was not yet able yet to meet their emotional needs or their physical needs. The evidence further established D.T. was not able to control, direct, or effectively discipline the children. Gracia believed it would take at least an additional six months to a year of continued therapy before D.T. might be ready to reunite with the children. The children are in foster-to-adopt homes with their siblings, making good progress in their therapy, and thriving. Caseworker Torres, the CASA volunteer, and the family therapist all testified the children need permanency and stability, and that it would not be in their best interest to delay finalizing their permanent placements while waiting for D.T. to learn how to parent them and to be able to meet their emotional and physical needs. The children’s attorney ad litem argued likewise to the trial court. The trial court agreed. Having reviewed all of the evidence, we conclude the trial court could have reasonably formed a firm belief or conviction that termination of D.T.’s parental rights is in children’s best - 20 -  04-20-00081-CV interest. The evidence is both legally and factually sufficient to support the trial court’s finding. See J.F.C., 96 S.W.3d at 266. We therefore affirm the trial court’s order terminating D.T.’s parental rights. Luz Elena D. Chapa, Justice - 21 -

2020-12-01 12:13:31.019579+00

http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=19294&Index=%5c%5c10%2e20%2e4%2e7%5cTamesIndexes%5ccoa04%5cOpinion

Fourth Court of Appeals San Antonio, Texas MEMORANDUM OPINION No. 04-19-00844-CV IN THE INTEREST OF C.C., a Minor Child From the 229th Judicial District Court, Duval County, Texas Trial Court No. DC-18-53 Honorable Selina Nava Mireles, Judge Presiding Opinion by: Beth Watkins, Justice Sitting: Patricia O. Alvarez, Justice Luz Elena D. Chapa, Justice Beth Watkins, Justice Delivered and Filed: November 25, 2020 AFFIRMED IN PART; REVERSED AND RENDERED IN PART Appellant L.C. appeals the trial court’s judgment terminating his parental rights to his child, C.C.1 We reverse the portion of the trial court’s order terminating L.C.’s parental rights and render judgment denying the Texas Department of Family and Protective Services’s termination petition with regard to L.C. We affirm the portion of the trial court’s order appointing the Department as C.C.’s temporary managing conservator. BACKGROUND On March 20, 2018, the Department filed a petition seeking termination of L.C.’s parental rights to C.C. At the time, L.C. was incarcerated. At trial, the sole termination ground the 1 To protect the privacy of the minor child, we refer to the child and the parent by their initials. TEX. R. APP. P. 9.8(b)(2).  04-19-00844-CV Department sought to prove with regard to L.C. was its contention he “knowingly engaged in criminal conduct that has resulted in [his] (i) conviction of an offense; and (ii) confinement or imprisonment and inability to care for the child for not less than two years from the date of filing the petition.” See TEX. FAM. CODE ANN. § 161.001(b)(1)(Q). On November 13, 2019, the trial court signed an order terminating L.C.’s parental rights on that ground. Because the trial court terminated the parental rights of both L.C. and C.C.’s mother, it appointed the Department as C.C.’s temporary managing conservator. L.C. timely appealed. Pursuant to Anders v. California, 386 U.S. 738 (1967), L.C.’s first court-appointed appellate attorney filed a brief containing a professional evaluation of the record and stating he “was unable to identify any non-frivolous grounds for appeal.” After reviewing the Anders brief and the record, we determined a non-frivolous ground for appeal existed. Specifically, we concluded the record raised questions about whether the evidence supported a finding that L.C. knowingly engaged in criminal conduct for which he was convicted and imprisoned, as required by subsection Q. We therefore abated the appeal and remanded this case to the trial court for appointment of new appellate counsel. L.C.’s newly appointed appellate counsel filed a brief arguing the evidence is legally insufficient to support the trial court’s termination of L.C.’s parental rights under subsection Q. In his brief, L.C. explains the record shows “[t]he State failed to introduce a copy of the judgement [sic] of conviction, offense reports, officer testimony, or any other evidence which would show that [L.C.] has ‘knowing[ly] committed’ an offense which resulted in his confinement.” He further notes, “It is not clear from the record what offense led to [L.C.’s] confinement.” In the prayer of his brief, he asks us to reverse the portion of the order terminating his parental rights and “remand the case to trial for conservatorship, possession, and access by L.C.” -2-  04-19-00844-CV In response, the Department concedes “that there is insufficient evidence to support the trial court’s finding that [L.C.] knowingly engaged in criminal conduct that resulted in his incarceration and that this constitutes reversible error.” It argues, however, that we should affirm the portion of the order appointing it as C.C.’s conservator because L.C. did not challenge the factual findings underlying that appointment. ANALYSIS Termination of L.C.’s Parental Rights Standard of Review and Applicable Law The involuntary termination of a natural parent’s rights implicates fundamental constitutional rights and “divests the parent and child of all legal rights, privileges, duties, and powers normally existing between them, except for the child’s right to inherit from the parent.” In re S.J.R.-Z., 537 S.W.3d 677 , 683 (Tex. App.—San Antonio 2017, pet. denied) (internal quotation marks omitted). At trial, the Department had the burden to show, by clear and convincing evidence, both a statutory ground to terminate L.C.’s parental rights and that termination was in C.C.’s best interest. TEX. FAM. CODE ANN. § 161.001; In re A.H., 414 S.W.3d 802 , 806 (Tex. App.—San Antonio 2013, no pet.). When reviewing the legal sufficiency of the evidence, we apply well-established standards of review. See TEX. FAM. CODE §§ 101.007, 161.206(a); In re J.F.C., 96 S.W.3d 256 , 263 (Tex. 2002). To determine whether the Department produced clear and convincing evidence, a legal sufficiency review requires us to “‘look at all the evidence in the light most favorable to the finding to determine whether a reasonable trier of fact could have formed a firm belief or conviction that its finding was true.’” In re J.L., 163 S.W.3d 79 , 85 (Tex. 2005) (quoting In re J.F.C., 96 S.W.3d at 266). “If, after conducting its legal sufficiency review of the record evidence, a court determines that no reasonable factfinder could form a firm belief or conviction that the matter that must be -3-  04-19-00844-CV proven is true, then that court must conclude that the evidence is legally insufficient.” In re J.F.C., 96 S.W.3d at 266. If the evidence is legally insufficient to support the order of termination, “[r]endition of judgment in favor of the parent would generally be required.” Id. Application The Department concedes it did not meet its burden of proof to show termination of L.C.’s parental rights was warranted under subsection Q. After reviewing the record, we agree. There is no evidence identifying the offense that resulted in L.C.’s conviction and subsequent incarceration. As a result, there is no evidence upon which the trial court could have relied to form a firm belief or conviction that L.C. “‘knowingly [as opposed to negligently] engaged in criminal conduct’ . . . that resulted in his conviction.” In re C.D.E., 391 S.W.3d 287 , 300–01 (Tex. App.— Fort Worth 2012, no pet.) (emphasis and alteration in original). Accordingly, we reverse the portion of the trial court’s judgment that terminates L.C.’s parental rights under subsection Q. See id.; see also In re A.B.R., No. 04-18-00634-CV, 2019 WL 287349 , at *1 (Tex. App.—San Antonio Jan. 23, 2019, no pet.) (mem. op.). Because the evidence is legally insufficient to support termination, we render judgment denying the Department’s petition as to L.C. In re J.F.C., 96 S.W.3d at 266; In re A.B.R., 2019 WL 287349 , at *1. Appointment of Department as C.C.’s Conservator The Department contends that even though “the portion of the judgment terminating [L.C.’s] parental rights should be reversed,” we should affirm the order appointing the Department as C.C.’s temporary managing conservator because L.C. did not challenge the trial court’s factual findings on conservatorship. We agree. See In re J.A.J., 243 S.W.3d 611 , 612–13 (Tex. 2007). While L.C. requests a remand on the issue of conservatorship in the prayer of his appellate brief, he does not specifically challenge the findings underlying the trial court’s conservatorship ruling. See id. at 615 (concluding challenge to conservatorship findings was not subsumed in challenge -4-  04-19-00844-CV of termination order); see also In re J.M.T., No. 04-19-00807-CV, 2020 WL 3547971 , at *7 n.6 (Tex. App.—San Antonio July 1, 2020, no pet. h.) (refusing to disturb a trial court’s conservatorship ruling because parent only challenged termination). Nor does he present any argument or authority showing that ruling was erroneous. See TEX. R. APP. P. 38.1. As a result, we affirm the portion of the trial court’s order appointing the Department as C.C.’s temporary managing conservator. CONCLUSION We reverse the portion of the trial court’s order terminating L.C.’s parental rights to C.C. and render judgment denying the Department’s termination petition with regard to L.C. We affirm the portion of the trial court’s order appointing the Department as C.C.’s temporary managing conservator. Beth Watkins, Justice -5-

2020-12-01 12:13:31.365507+00

http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=19314&Index=%5c%5c10%2e20%2e4%2e7%5cTamesIndexes%5ccoa04%5cOpinion

Fourth Court of Appeals San Antonio, Texas MEMORANDUM OPINION No. 04-20-00216-CV IN THE INTEREST OF A.F., J.J.L., and J.A.R., Children From the 73rd Judicial District Court, Bexar County, Texas Trial Court No. 2018-PA-02310 Honorable Charles E. Montemayor, Judge Presiding Opinion by: Beth Watkins, Justice Sitting: Patricia O. Alvarez, Justice Beth Watkins, Justice Liza A. Rodriguez, Justice Delivered and Filed: November 25, 2020 AFFIRMED Appellants M.F. and L.R. appeal the trial court’s order terminating M.F.’s parental rights to A.F., J.J.L., and J.A.R. and L.R.’s parental rights to J.A.R. 1 Both parents argue the evidence is legally and factually insufficient to support the trial court’s finding that termination is in the children’s best interest. We affirm the trial court’s order. BACKGROUND In October of 2018, the Texas Department of Family and Protective Services (“the Department”) removed the children from the parents’ care after receiving a report of physical abuse and concerns that M.F. used drugs while caring for the children. M.F. had recently tested positive 1 To protect the privacy of the minor children, we use initials to refer to the children and their biological parents. TEX. R. APP. P. 9.8(b)(2); TEX. FAM. CODE ANN. § 109.002(d).  04-20-00216-CV for methamphetamines while on federal probation. After removing the children, the Department filed a petition to terminate M.F.’s and L.R.’s parental rights, obtained temporary managing conservatorship over the children, and placed them in foster care together. The Department also created a service plan for both parents. The service plan required both M.F. and L.R. to complete a drug assessment and drug treatment program, complete a psychosocial evaluation, engage in individual counseling, and complete parenting classes. The service plan also required M.F. to obtain a safe and stable home. Due to ongoing concerns, the Department pursued termination of their parental rights. The trial court held a one-day bench trial at which counsel for both parents and M.F. appeared. At the time of trial, A.F. was fourteen years old, J.J.L. was seven, and J.A.R. was six. The trial court heard testimony from the following witnesses: (1) M.F.; (2) M.F.’s federal probation officer; (3) Department Caseworker Monica Garcia; (4) Department Caseworker Tracie Ann Barrera; (5) the children’s foster mother; and (6) the CASA volunteer assigned to this case. The court signed an order terminating M.F.’s parental rights under 161.001(b)(1)(N), (O), and (P) and terminating L.R.’s parental rights under section 161.001(b)(1)(N) and (O). The trial court also found that termination of M.F.’s and L.R.’s parental rights was in the best interest of the children. Both M.F. and L.R. appealed, arguing the evidence is legally and factually insufficient to support the trial court’s finding that termination is in the children’s best interest. ANALYSIS Standard of Review The involuntary termination of a natural parent’s rights implicates fundamental constitutional rights and “divests the parent and child of all legal rights, privileges, duties, and powers normally existing between them, except for the child’s right to inherit from the parent.” In re S.J.R.-Z., 537 S.W.3d 677 , 683 (Tex. App.—San Antonio 2017, pet. denied) (internal quotation -2-  04-20-00216-CV marks omitted). “As a result, appellate courts must strictly scrutinize involuntary termination proceedings in favor of the parent.” Id. The Department had the burden to prove, by clear and convincing evidence, both that a statutory ground existed to terminate J.D.’s parental rights and that termination was in the best interest of the children. TEX. FAM. CODE ANN. § 161.206; In re A.V., 113 S.W.3d 355 , 362 (Tex. 2003). “‘Clear and convincing evidence’ means the measure or degree of proof that will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established.” TEX. FAM. CODE ANN. § 101.007; In re S.J.R.-Z., 537 S.W.3d at 683 . When reviewing the legal and factual sufficiency of evidence supporting a trial court’s termination order, we apply well-established standards of review. See TEX. FAM. CODE §§ 101.007, 161.206(a); In re J.F.C., 96 S.W.3d 256 , 263 (Tex. 2002). To determine whether the Department presented clear and convincing evidence, a legal sufficiency review requires us to “look at all the evidence in the light most favorable to the finding to determine whether a reasonable trier of fact could have formed a firm belief or conviction that its finding was true.” In re J.F.C., 96 S.W.3d at 266. We “assume that the factfinder resolved disputed facts in favor of its finding if a reasonable factfinder could do so.” In re R.S.-T., 522 S.W.3d 92 , 98 (Tex. App.—San Antonio 2017, no pet.). “A corollary to this requirement is that a court should disregard all evidence that a reasonable factfinder could have disbelieved or found to have been incredible.” In re J.F.C., 96 S.W.3d at 266. Nevertheless, “we may not simply disregard undisputed facts that do not support the finding; to do so would not comport with the heightened burden of proof by clear and convincing evidence.” In re S.L.M., 513 S.W.3d 746 , 748 (Tex. App.—San Antonio 2017, no pet.). If a reasonable factfinder could “form a firm belief or conviction” that the matter is true, then the evidence is legally sufficient. Id. at 747 . -3-  04-20-00216-CV In contrast, in conducting a factual sufficiency review, we must review and weigh all the evidence, including evidence contrary to the trial court’s findings. In re J.O.A., 283 S.W.3d 336 , 345 (Tex. 2009). We consider whether the disputed evidence is such that a reasonable factfinder could not have resolved it in favor of the challenged finding. In re J.F.C., 96 S.W.3d at 266. The evidence is factually insufficient only if “in light of the entire record, the disputed evidence that a reasonable factfinder could not have credited in favor of the finding is so significant that a factfinder could not reasonably have formed a firm belief or conviction.” Id. In both a legal and a factual sufficiency review, the trial court, as factfinder, is the sole judge of the weight and credibility of the evidence. In re E.X.G., No. 04-18-00659-CV, 2018 WL 6516057 , at *1 (Tex. App.—San Antonio Dec. 12, 2018, pet. denied) (mem. op.). We must defer to the factfinder’s resolution of disputed evidentiary issues and cannot substitute our judgment for that of the factfinder. See, e.g., In re H.R.M., 209 S.W.3d 105 , 108 (Tex. 2006) (per curiam) (factual sufficiency); In re J.P.B., 180 S.W.3d 570 , 573 (Tex. 2005) (legal sufficiency). Best Interest Applicable Law There is a strong presumption that a child’s best interest is served by maintaining the relationship with the natural parent, and the Department has the burden to rebut that presumption. See, e.g., In re R.S.-T., 522 S.W.3d at 97 . In determining whether the Department satisfied this burden, the legislature has provided several factors for courts to consider regarding a parent’s willingness and ability to provide a child with a safe environment. 2 TEX. FAM. CODE ANN. 2 These factors include, inter alia: “(1) the child’s age and physical and mental vulnerabilities; (2) the frequency and nature of out-of-home placements; (3) the magnitude, frequency, and circumstances of the harm to the child; (4) whether the child has been the victim of repeated harm after the initial report and intervention by the department or other agency; (5) whether the child is fearful of living in or returning to the child’s home; (6) the results of psychiatric, psychological, or developmental evaluations of the child, the child’s parents, other family members, or others who have access to the child’s home; (7) whether there is a history of abusive or assaultive conduct by the child’s family or others who have access to the child’s home; (8) whether there is a history of substance abuse by the child’s family -4-  04-20-00216-CV § 263.307(b). Courts may also apply the list of factors promulgated by the Texas Supreme Court in Holley v. Adams, 544 S.W.2d 367 , 371–72 (Tex. 1976). 3 A best interest finding, however, does not require proof of any particular factors. See In re G.C.D., No. 04-14-00769-CV, 2015 WL 1938435 , at *5 (Tex. App.—San Antonio Apr. 29, 2015, no pet.) (mem. op.). Neither the statutory factors nor the Holley factors are exhaustive. See In re J.B.-F., No. 04-18-00181-CV, 2018 WL 3551208 , at *3 (Tex. App.—San Antonio July 25, 2018, pet. denied) (mem. op.). Additionally, evidence that proves a statutory ground for termination is probative on the issue of best interest. In re C.H., 89 S.W.3d 17 , 28 (Tex. 2002). Finally, “[a] trier of fact may measure a parent’s future conduct by his past conduct [in] determin[ing] whether termination of parental rights is in the child’s best interest.” In re E.D., 419 S.W.3d 615 , 620 (Tex. App.—San Antonio 2013, pet. denied). M.F. The Department produced evidence it removed the children from M.F.’s care because she tested positive for methamphetamines while on federal probation. The evidence shows that M.F. was arrested in May of 2018 and sentenced to federal probation for twenty-four months. M.F. admitted that while she was on probation, she tested positive for methamphetamines and went “on the run.” See In re R.S., No. 01-20-00126-CV, 2020 WL 4289978 , at *8 (Tex. App.—Houston [1st Dist.] July 28, 2020, no pet.) (mem. op.) (noting parent’s failure to abide by terms of probation or others who have access to the child’s home; (9) whether the perpetrator of the harm to the child is identified; (10) the willingness and ability of the child’s family to seek out, accept, and complete counseling services and to cooperate with and facilitate an appropriate agency’s close supervision; (11) the willingness and ability of the child’s family to effect positive environmental and personal changes within a reasonable period of time; (12) whether the child’s family demonstrates adequate parenting skills [. . .]; and (13) whether an adequate social support system consisting of an extended family and friends is available to the child.” TEX. FAM. CODE ANN. § 263.307(b). 3 Those factors include: (1) the desires of the child; (2) the emotional and physical needs of the child now and in the future; (3) the emotional and physical danger to the child now and in the future; (4) the parental abilities of the individuals seeking custody; (5) the programs available to assist those individuals to promote the best interest of the child; (6) the plans for the child by these individuals or the agency seeking custody; (7) the stability of the home or proposed placement; (8) the acts or omissions of the parent that may indicate the existing parent-child relationship is not a proper one; and (9) any excuse for the acts or omissions of the parent. Id. -5-  04-20-00216-CV supports best interest finding). After the Department took possession of the children, M.F. was arrested again and incarcerated for ten months. M.F. testified that when she was released in December of 2019, she used drugs again because she had been “struggling with an addiction” since she was twelve years old. She tested positive for methamphetamines in January of 2020, and both caseworkers expressed concern with M.F.’s inability to stay sober. This court has recognized that a parent’s frequent or long-term drug use is relevant to a best interest determination, and it can support a factfinder’s firm belief or conviction that termination of M.F.’s parental rights is in the children’s best interest. See In re Z.R.M., No. 04-15-00063-CV, 2015 WL 4116049 , at *6 (Tex. App.—San Antonio July 8, 2015, no pet.) (mem. op.). The Department also produced evidence that M.F. failed to complete her service plan. The evidence showed that when the Department took custody of the children, Caseworker Garcia called M.F. to set up a meeting so that she could go over her service plan and set up a visitation schedule. Garcia testified M.F. did not show up to the meeting and M.F. later said she was not going to visit the children because there was a warrant outstanding for her arrest. Garcia further testified that once M.F. was arrested, she had difficulty communicating with her. See TEX. FAM. CODE § 263.307(b)(10) (listing parent’s willingness to cooperate with the Department goes to a best interest determination). The second caseworker assigned to the case, Barrera, also testified she had difficulty communicating with M.F. See id. The evidence also shows that M.F. attempted to comply with her service plan only after she was arrested the second time. See In re S.R., No. 07-19-00164-CV, 2019 WL 4726205 , at *6 (Tex. App.—Amarillo Sept. 26, 2019, no pet.) (mem. op.) (considering a parent’s late attempt to start services in a best interest determination). Both caseworkers testified M.F. attended parenting classes while incarcerated, and when released on probation, she started an inpatient drug treatment program where she continued parenting classes and also attended anger management classes and -6-  04-20-00216-CV group counseling. Barrera testified that although M.F. was currently engaging in those services, it was unclear whether M.F. could maintain sobriety outside of a controlled setting. M.F. testified that she planned to pursue an outpatient drug treatment program for four months and an after-care program for one year after completing inpatient treatment. M.F. admits, however, she has not completed her service plan because she has not completed individual therapy and she does not have the ability to provide the children with a safe and stable home. See In re A.M.S., No. 04-18- 00973-CV, 2019 WL 2194067 , at *5 (Tex. App.—San Antonio May 22, 2019, no pet.) (noting parent’s inability to provide stable home supports best interest finding). The court also heard evidence regarding M.F.’s lack of parenting abilities. Specifically, Barrera testified that when M.F. was released from prison in December of 2019, she began attending scheduled visits with the children, and during these visits, she noticed M.F.’s relationship with the children was more of a friendship. See In re J.D., 436 S.W.3d 105 , 119 (Tex. App.— Houston [14th Dist.] 2014, no pet.) (providing parent’s lack of parenting skills may be considered when looking at children’s best interest). Barrera testified that when she observed M.F. interact with the children, she treated the children “like equals” and sometimes, made fun of them or told them negative comments about the caseworkers. The court also heard testimony from the CASA volunteer that M.F. snuck a cell phone to A.F. at a visit, and then used it to send her daughter an inappropriate text message. The Department also produced evidence that the children were thriving in their foster home. See In re I.N.D., No. 04-20-00121-CV, 2020 WL 2441375 , at *6 (Tex. App.—San Antonio May 13, 2020, no pet.) (considering evidence that children were doing well in foster placements in best interest analysis); see also In re C.H., 89 S.W.3d at 28 (“Evidence about placement plans and adoption are, of course, relevant to best interest.”). Specifically, Barrera testified the children were “flourishing” in their foster home and they were engaged in school and outside activities. -7-  04-20-00216-CV They also had a close bond with not only their foster parents, but also their extended foster family. Barrera further testified the foster parents placed the children in therapy. Specifically, J.J.L. was receiving treatment for his anger issues and A.F. was receiving treatment for separation anxiety, abandonment issues, and depression. The trial court also heard testimony from the children’s foster mother, who testified she and her husband plan to adopt the children. The foster mother described how the children changed from being disengaged to being happy, enjoying school, and having fun. The foster mother added she wanted to do everything she could to ensure the children were successful. After reviewing all the evidence, we conclude a reasonable factfinder could have formed a firm belief or conviction that termination of M.F.’s parental rights was in the best interest of her children. See In re S.L.M., 513 S.W.3d at 750 . And although M.F. contends the evidence shows she is making sincere efforts to complete her service plan and reunite with her children, the evidence also shows M.F. has continued to engage in drug use, has not completed her service plan, and does not have the ability to provide a safe and stable home environment for the children. See In re M.R., 243 S.W.3d 807 , 821 (Tex. App.—Fort Worth 2007, no pet.) (“A parent’s drug use, inability to provide a stable home, and failure to comply with a family service plan support a finding that termination is in the best interest of the child.”). We therefore overrule M.F.’s arguments to the contrary and hold that legally and factually sufficient evidence supports the trial court’s findings, by clear and convincing evidence, that termination of M.F.’s parental rights was in the best interest of her children. L.R. Turning to L.R., Garcia testified that when the Department took custody of the children, she met with L.R., outlined his service plan requirements, and explained to him that failure to complete his service plan could result in termination of his parental rights. She testified L.R. -8-  04-20-00216-CV “made some appointments, but he never followed through,” and in February of 2019, U.S. Marshals arrested L.R. while he was on probation for human trafficking. See In re R.S., 2020 WL 4289978 , *6. After his arrest, she was unable to contact him. Garcia testified that at the time of trial, L.R. was not in compliance with his service plan. See In re S.B., 207 S.W.3d 877 , 887–88 (Tex. App.—Fort Worth 2006, no pet.) (holding evidence of parent’s failure to comply with family service plan supports finding that termination is in child’s best interest). In addition, Barrera testified L.R. had not made any effort to comply with his service plan. See id. She testified that after L.R. was released from prison, he moved to Harlingen with his girlfriend. She contacted L.R. and expressed the importance of complying with the service plan, but L.R. told her that he did not want to work with the Department until he confirmed J.A.R. was his child. However, when asked to take a paternity test, L.R. refused. See TEX. FAM. CODE § 263.307(b)(10). Barrera further testified that she attempted to set up services for L.R. in Harlingen, but he did not engage. See id. She specified that she sent a courtesy worker to Harlingen to meet with L.R., but every time the courtesy worker visited his home, L.R. was not there. Barrera told the court that based on L.R.’s lack of interest, she believed termination of his parental rights was in J.A.R.’s best interest. L.R. argues, however, this evidence is legally and factually insufficient because the Department did not produce evidence regarding a majority of the best interest factors. However, evidence of a majority of the statutory or Holley factors is not required. In re J.B.-F., 2018 WL 3551208 , at *3 (noting, “[e]vidence of a single factor may be sufficient for a factfinder to form a reasonable belief or conviction that termination is in the child’s best interest.”). L.R. further argues he regularly visited the children, and the record shows that L.R. regularly visited the children while they were placed with his parents. But after the Department removed the children from L.R.’s -9-  04-20-00216-CV parents’ care, L.R. no longer expressed an interest in working with the Department. Instead, L.R. insisted on a paternity test, yet failed to take one when the Department offered. After reviewing all the evidence, we conclude a reasonable factfinder could have formed a firm belief or conviction that termination of L.R.’s parental rights was in J.A.R.’s best interest. See In re S.L.M., 513 S.W.3d at 750 . Accordingly, we overrule L.R.’s arguments to the contrary and hold that legally and factually sufficient evidence supports the trial court’s findings, by clear and convincing evidence, that termination of L.R.’s parental rights was in the best interest of J.A.R. CONCLUSION We affirm the trial court’s order of termination. Beth Watkins, Justice - 10 -

2013-10-30 07:12:57.408697+00

358 So. 2d 763 (1978) In re Randolph HARRISON v. STATE. Ex parte Randolph Harrison. 77-46. Supreme Court of Alabama. February 10, 1978. As Corrected on Denial of Rehearing March 10, 1978. *764 Myron H. Thompson, Dothan, for petitioner. William J. Baxley, Atty. Gen. and Mary Jane LeCroy, Asst. Atty. Gen., for the State. BLOODWORTH, Justice. The question presented to us by this petition for writ of certiorari is: "Did the Court of Criminal Appeals err in affirming the trial court which allowed into evidence petitioner's inculpatory statement without his first having been given the Miranda[1] warnings?" We answer in the affirmative and reverse and remand. The facts are that petitioner and another allegedly stole a car. When the car stalled, they allegedly attempted to steal a battery from a Mr. Faison, who saw them and called police. The police came and took the two "into custody" because one of them fit the description given by Mr. Faison. The arresting officer asked if they knew anything about the stalled stolen car. They replied they did not. The Court of Criminal Appeals made a finding that what then took place was a "custodial interrogation," viz: "Q. Did they tell you what their names were? "MR. THOMPSON: I object to what the defendant said, Your Honor. "THE COURT: About what his name was or what are you objecting to? "MR. THOMPSON: Any statement, unless he lays a predicate. "THE COURT: I understand he asked him what his name was and I overrule you as to that." * * * * * * "Q. Okay. Did you ask them what their names were? "MR. THOMPSON: I continue my objection. "THE COURT: I overrule you. "THE WITNESS: I don't believe I asked their name until we got back to the vehicle." * * * * * * "Q. Did you find anything in the vehicle? "A. Yes, Sir. I found two cards, Alabama State Employment Cards that I have here. "Q. Do they have any name on them? "A. Yes, Sir. They have the name of Johnny Smith. "Q. All right. After you found the cards in the car, did you ask anything regarding the names on the cards? "A. Yes. I pulled the card in my hand and walked up to the car and asked who Johnny Smith was. "Q. All right. Did anyone reply to that question? "A. Yes, Sir. Randolph Harrison said he was Johnny Smith. "MR. THOMPSON: I maintain that general objection. "MR. SORRELLS: We submit it was an investigation and he was under custodial interrogation. "THE COURT: Yes. I overrule the objection." The Court of Criminal Appeals held that the statement was "inadmissible" and that the giving of a false name at the time might be looked to by the jury "as indicating a consciousness of guilt" or "an attempt to escape detection" and was "clearly prejudicial" to petitioner. The court went on to hold, however, that because the objection came after the question was answered it came too late, and, *765 further, that it was not specific. The court held the trial court should not be put in error absent a motion to exclude and an adverse ruling thereon, i. e., "waiver." The Miranda Rule clearly mandates that the prosecution may not use statements, inculpatory or exculpatory, stemming from a "custodial interrogation" of a defendant unless it proves that the Miranda warnings were given prior to questioning. The burden on the prosecution is heavy, Miranda holds, to prove that the defendant "knowingly and intelligently waived his privilege against self-incrimination." Miranda v. Arizona, supra; see also Johnson v. Zerbst, 304 U.S. 458, 58 S. Ct. 1019, 82 L. Ed. 1461 (1938); Lewis v. State, 295 Ala. 350, 329 So. 2d 599 (1976). In view of the heavy burden on the prosecution to prove waiver, the mandatory character of the Miranda Rule, and the uncontroverted finding of the Court of Criminal Appeals that this was a custodial interrogation, we think the Court of Criminal Appeals erred in holding "waiver" under the circumstances of this case. We think that portion of the record from which we have quoted does not support such a holding. It is thus that we hold that, in any "custodial interrogation," the duty is on the state to prove, in accordance with the mandates of Miranda, that the Miranda warnings were given, in order to use, at trial, any statements, exculpatory or inculpatory, where, as here, there was an objection thereto. We do not hold that general-on-the-scene questioning of suspects may not take place without the giving of Miranda warnings. See Miranda, supra, which speaks to that issue. REVERSED AND REMANDED. All the Justices concur. On Rehearing OPINION CORRECTED. APPLICATION FOR REHEARING OVERRULED. TORBERT, C. J., and BLOODWORTH, FAULKNER, JONES, ALMON, SHORES, EMBRY and BEATTY, JJ., concur. MADDOX, J., concurs specially. MADDOX, Justice (concurring specially). In view of the fact that the opinion has been modified to hold that the State has to prove the mandates of Miranda, "where. . . there was an objection thereto," I concur in the result of the remand for the reasons I later state. I hope that the Court of Criminal Appeals, on remand, will re-examine its finding that Harrison was "under custodial interrogation." If this finding of custodial interrogation was influenced, as it appears it was, by the statement in the record by Mr. Sorrells to the effect, "We submit it was an investigation and he was under custodial interrogation"—then I call that court's attention to the fact that the State contended here—and it apparently is a fact—that what Sorrells actually said was: "We submit it was an investigation and he was not under custodial interrogation." Harrison is entitled to a fair trial, but he is not entitled to have the Court of Criminal Appeals base its finding of "in custody" on an incorrect record, if that is the case. The new appellate rules of practice, specifically Rule 10(f), are flexible enough to permit that court, on remand, to allow the State to get a corrected record. This Court has allowed a similar procedure for a defendant, even on certiorari. Ex parte: State of Alabama, ex rel. Attorney General, In re: Milton H. Satterwhite, Jr. (1977), Ala.Sup., 357 So. 2d 819. In short, if this appeal turns on whether the defendant was or was not in custody, that determination should not be made on an erroneous record, when the court has the power to get a correct one, on motion of the parties, or on its own motion, under Rule 10(f), A.R.A.P. NOTES [1] Miranda v. Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966).

2020-01-17 22:01:33.236541+00

Smith

*278OPINION. Smith : The petitioner alleges in its petition that, (1) the Commissioner erred in disallowing Central Teresa Sugar Co., a New Jersey corporation, and a subsidiary of the petitioner, the Central Teresa Sugar Co. of Maryland, a deduction from gross income of $167,-425.05 paid by Central Teresa Sugar Co. of New Jersey to Alfred W. Gi eslíe, the endorser of and pledgor under certain of its notes, to reimburse the said Gieske for losses suffered by reason of the sale of certain collateral pledged by him; and (2) the Commissioner erred in reducing invested capital of the taxpayer by $167,425.05 on the assumption that Alfred W. Gieske withdrew the said amount, presumably as a stockholder when he was not, except for one qualifying share. The petitioner claims in this proceeding that the New Jersey Co., a company affiliated with the petitioner, sustained a deductible loss for the fiscal year ended July 31, 1920, in the amount of $167,425.05 representing the enhancement in value of the Cosden & Co. stock from the date of sale by the Fidelity Trust Co., trustee, in December, 1918, and January, 1919, to September 29, 1919, the date upon which Gieske made demand upon the New Jersey Co. for the payment of damages and interest. The petitioner- claims the benefit of the deduction by reason of the fact that it filed a consolidated return with the New Jersey Co. The deduction is claimed as a loss sustained by the New Jersey Co. in the year 1919. The deduction of the loss is resisted by the respondent upon various grounds, one being that the evidence does not prove the fair market value of the Cos-den & Co. stock either at the date of sale by the trustee or on September 29, 1919, the date upon which Gieske made a demand for damages. It is not necessary, however, for us to decide the question upon the point of lack of evidence: The petitioner contends that Gieske entered into a contract with the New Jersey Co. in support of the agreement of June 12, 1918, referred to in the findings of fact; that under this agreement the *279New Jersey Co. was obligated to return to Gieske the collateral put up by Gieske with the Fidelity Trust Co. for the benefit of the New Jersey Co. The evidence does not, however, support the contention that Gieske under a separate contract lent his stock to the New Jersey Co. The record contains no evidence of any separate contract or agreement between Gieske and the New Jersey Co. relating to the pledging of the stock. The minutes of a meeting of the board of directors of the New Jersey Co., at which the payment of Gieske’s claim was authorized, stated: At this point Mr. Gieske called Mr. France to the chair and retired from the meeting. The Treasurer presented a statement received from Mr. Gieske showing the amount due him by this Company on account of 30,000 shares of the capital stock of Cosden and Company loaned to it as security under an Indenture dated June 12, 1918, to The Fidelity Trust Company, Trustee, which stock had been sold by said Trustee in accordance with the provisions of said Indenture. * * * (Italics ours.) There is no testimony or other evidence that there was any agreement involved other than the deed of trust executed June 12,1918. The evidence does not show the cost of the Cosden & Co. stock to Gieske. It does show, however, that the trustee sold this stock in December, 1918, and January, 1919, and that the net proceeds therefrom were $210,447.95. This amount was credited to the New Jersey Co. in respect of its indebtedness on the notes. Gieske knew of the sales of this stock at the time they were being made. There is no evidence that the shares of stock were not sold by the trustee at market price. Gieske consulted his own attorney, who was likewise the attorney of the New Jersey Co., at the time that the sales were being made as to his rights in the matter. He was advised that inasmuch as the company did not have sufficient funds at that time he should delay making his demand until such time as the company did possess sufficient funds. Gieske, accordingly, delayed making his demand until September 29, 1919. What is the measure of the damages which may be claimed by bailor or surety in respect of pledged property which has been sold by the bailee or principal in accordance with the terms of the contract under which the property was pledged? It is stated in 32 Cyc. 272 that: Prima facie the amount due from the principal to the surety is the face value of the claim of the creditor; but the surety is not allowed to speculate on his principal, and can not collect any more than the amount actually paid by him, although he may have taken an assignment of the claim. The same rule governs between a supplemental surety and a surety. The surety can not recover for remote and indirect losses suffered by him which could have been avoided by payment of the debt. See Martindale v. Brock. 41 Md. 571. *280In Stone v. Hammell, 83 Cal. 541; 23 Pac. 103, it was stated: The general rule is, undoubtedly, that a surety can recover of the principal only the amount or value which the surety has actually paid. If he has paid in depreciated bank-notes taken at par, he can recover only actual value of the bank-notes so paid and received. If he has paid in property, he can recover only the value of the property. If he has compromised, he can recover only what the compromise has cost him. The rule is that he shall not be allowed to “ speculate out of his principal.” * * * Upon the conversion of chattels the measure of the pledgor’s damages is the market value of the chattel^ at the time of conversion. Dimock v. United States Nat. Bank, 55 N. J. L. 296; 25 Atl. 926; Kilpatrick v. Dean, 3 N. J. Supp. 60. In the case of a sale of stocks the pledgor is ordinarily entitled to receive the highest value reached by the stocks between the date of sale and a reasonable time after he has received notice of it so as to enable him to replace the stocks. Griggs v. Day, 158 N. Y. 1; 52 N. E. 692. In Maryland, however, the rule is that the measure of damages is the value of the stock at the time of its conversion and this is the rule whether the action is an action in tort or one in assumpsit. Franklin Bank of Baltimore v. Harris, 77 Md. 423; 26 Atl. 523; Baltimore Md. Ins. Co. v. Dalrymple, 25 Md. 269. Gieske clearly had notice of the sale of his Cosden & Co. stock at the time it was sold and the evidence indicates that it would not have been difficult for him to replace the stock at the market price in December, 1918, or January, 1919. The mea£ure of the damages to which he was entitled was therefore not in excess of the price at which the stock was sold by the trustee. That price was $210,447.95 and the petitioner is making no claim with respect to any loss upon that amount. Nor could such claim be made, because the New Jersey Co. was credited with that amount upon the books of the trustee. Nor is there any claim for interest in respect of the amount realized by the trustee upon the sale of the Cosden & Co. stock. Any claim for interest that Gieske might have made against that company was settled by the agreement of June 12,1919, whereby Gieske received notes of the West India Co. in the amount of $549,-120.28. We can not find that there is any merit in the petitioner’s claim for the deduction of the $167,425.05. The amount was not a liability of the New Jersey Co. Why the company paid the amount to Gieske ⅛ not clear from the evidence. The relationship of Gieske to the petitioner and the West India Co. is not shown by the record. Gieske was president of both the West India Co. and the New Jersey Co., and during the year 1919 received a salary from each. The record indicates that the transaction between Gieske and the several corporations which he controlled were not arm’s-length transactions. The payment bjr the New Jersey Co. to Gierke of $167,425.05 may have been nothing more than a distribution to Gieske of a portion of the profits of that company for the taxable year involved, the dis*281tribution being made directly to Gieske rather than through the West India Co. The action of the respondent in disallowing the deduction of $167,425.05 from the gross income of the New Jersey Co. for the fiscal year ended July 31, 1920, is sustained. The Commissioner has reduced the consolidated invested capital of the petitioner and affiliated companies for the taxable year ended July 31, 1920, by the amount paid to Gieske in October of that year by the New Jersey Co. from the beginning of the fiscal year. This was error, since, as we found, there existed no liability on the part of the New Jersey Co. at the beginning of the year in respect of the amount later paid to Gieske. The invested capital of the consolidated group should be reduced from the date the payment was made. Reviewed by the Board. Judgment will be entered under Rule 50.

2020-01-17 22:01:33.271275+00

Susfkin

*286OPINION. Susfkin : The petition alleges numerous errors on the part of the respondent but at the hearing some of these were abandoned and the questions remaining to be decided as to the year 1920 are whether the respondent erred in: *287(1) Holding that the cost to Clyde G. Hewett of certain property which was later turned over to the corporations was the basis to be used for depreciation, and not the amount at which such property was entered upon the books of the corporations when they acquired such property at April 1, 1920; (2) Excluding from invested capital a note in the amount of $10,971.30, given to the Hewett Grain & Provision Co. of Manistique in payment for stock; (3) Holding that premiums paid by the corporations on Hewett’s life insurance policies were not deductible from gross income; and (4) Holding that the corporations were affiliated during the years in controversy. The last question to be decided applies to both 1920 and 1921. (1) At the time the corporations were organized, April 1, 1920, Hewett turned over to them certain real properties which he had theretofore owned, in exchange for capital stock. Some of the property was entered on the books of the corporations at higher figures than the amounts which Hewett had paid for it. The values at which the property was set up on the books of the corporations, the date at which Hewett acquired the property, and the reductions of values thereof for invested capital purposes by the respondent are set forth below: [[Image here]] Capital stock was issued for the real property in the amount of the value of such property as set up on the books of the corporations. The respondent'has held that the proper basis for computing depreciation on this property is the cost of such property to Hewett. Section 214 (a) (8) of the Revenue Act of 1918 provides: Seo. 214. (a) Tliat in computing net income there shall be allowed as deductions: # * * * * * * (8) A reasonable allowance for the exhaustion, wear and tear of property used in the trade or business, including a reasonable allowance for obsolescence. * * *. The basis for calculation of depreciation is the cost of the property to the taxpayer. See Brevoort Hotel Co., 1 B. T. A. 132, and Louis Titus, 2 B. T. A. 754. *288No question is raised as to the cost of the assets to Hewett or as to the rates of depreciation used by the respondent. Hewett, who was familiar with real estate values at April 1, 1920, testified that the values of the properties at Manistique, Sault Ste. Marie, Ishpeming and Iron River, at the time acquired by the corporations, were truly reflected by the values carried upon the corporate books. The evidence disclosed that these values were used for local tax purposes. We hold that these were the fair market values of the properties as of April 1, 1920, and that depreciation should be calculated upon those values. The respondent erred in holding that depreciation should be based upon the costs of properties to Hewett. The holding of the respondent with regard to the Escanaba property will not be disturbed, since no evidence was adduced by the petitioner as to the April 1,1920, value of such property. (2) The Hewett Grain & Provision Co. of Manistique on April 1, 1920, turned over to Hewett the full amount of its authorized capital stock, par value, $30,000, for all merchandise, bills and accounts receivable, good will, etc., office furniture and fixtures, etc., a warehouse and a lease on the premises occupied by the warehouse, all of the agreed valuation of $29,860, Hewett’s note for $10,911.30 and $140 in cash. The note was excluded by the respondent, from the invested capital of the corporation for 1920. The note has not been paid, but Plewett testified that it would be paid. The evidence disclosed that at the time Plewett gave the note to the Manistique Company he was worth approximately $191,000. We believe that the note was bona fide paid in for stock of the Manistique Co., and find that it was worth its face value. It is, therefore, includable in invested capital at that value, under section 326 (a) (2) of the Revenue Act of 1918. See Hewitt Rubber Co., 1 B. T. A. 424. (3) It was necessary for the corporations to borrow money to carry on their business and before the banks would loan them money, they required Hewett to take out insurance on his life. Some of the policies were made payable to his wife and some to his estate The premiums were paid by the corporations and the policies were used in the banks as collateral to the corporate loans. The respondent disallowed such payment as deductions from gross income. Section 215 of the Revenue Act of 1918 provides: That in computing net income no deduction shall in any case be allowed In respect of— ******* (d) Premiums paid on any life insurance policy covering the life of any officer or employee, or of any person financially interested in any trade or business carried on by the taxpayer, when the taxpayer is directly or indirectly a beneficiary under such policy. *289In a similar case, Williamson Veneer Co., 10 B. T. A. 1259, we stated: The insurance involved here was upon the life of petitioner’s president and in our opinion the petitioner was indirectly a beneficiary during the time the policies were being used as collateral to its loan. It was because of this assignment and pledge to the bank that petitioner was enabled to obtain credit and funds for the operation of its business, which it sorely needed. The respondent did not err in refusing the deductions claimed for the years in question. See also Ruth v. Heiner, 20 Fed. (2d) 208. In the instant preceeding we must affirm the holding of the respondent. (4) The evidence discloses that in 1920 and 1921 Hewett owned 76.6 per cent of stock of the Escanaba Company and that his wife owned 23.2 per cent in 1920 and 1921. In 1920 and 1921 Hewett owned 56½ per cent of stock of the Manistique corporation and his wife owned 33½ per cent. In 1920 and 1921, Hewett owned 56½ per cent of stock in the corporation at Sanlt Ste. Marie, and his wife owned 33½ per cent. In 1920 and 1921, Hewett owned 61½ per cent of the stock of the Iron River corporation and his wife owned 33½ per cent. In 1920 and 1921, Hewett owned 54¾ per cent of the stock in the Ishpeming Company and his wife owned 25 per cent. Section 240 (b) of the Revenue Act of 1918 and section 240 (c) of the Revenue Act of 1921 provide: For the purpose of this section two or more domestic corporations shall be deemed to be affiliated (1) if one corporation owns directly or controls through closely affiliated interests or by a nominee or nominees substantially all the stock of the other or others, or (2) if substantially all the stock of two or more corporations is owned or controlled by the same interests. All of the stock was issued to Hewett at the organization of the corporations and he caused some of the stock to be transferred to others. Hewett sold stock to the managers and assistant managers of the various corporations. Four of them paid for this stock in full and two purchased under a working arrangement and gave Hewett notes. Under this arrangement Hewett had the right to have the stock returned to him whenever the purchaser severed his connections with the corporations, or whenever Hewitt desired, upon his returning the amounts paid by the purchaser. The stock was left with Hewett as security for payment of the notes. Three of those who paid in full for their stock, left the corporation and returned the stock to Hewett in accordance with a previous agreement. No evidence was introduced as to the other person who paid *290in full, but we assume that he purchased under some similar agreement with Hewett. We conclude that Hewett and his wife constituted the same interest that controlled substantially all the stock of the various corporations here involved. We hold that the corporations were affiliated during the years 1920 and 1921. Reviewed by the Board. Judgment will be entered under Rule 50.

2020-01-17 22:01:33.304248+00

Siefkin

*297OPINION, Siefkin : The principal question to be decided is whether the respondent erred in failing to hold that the petitioner, during the year 1921, was within the provisions of section 327 (a), (c) and (d) of the Revenue Act of 1921, and was, therefore, entitled to have its excess-profits tax computed under section 328 of that Act. The petitioner also alleges that the respondent improperly determined its invested capital. Section 327 of the Revenue Act of 1921 provides: That in the following cases the tax shall be determined as provided in section 328: (a) Where the Commissioner is unable to determine the invested capital as provided in section 326; * * * * * * * (c) Where a mixed aggregate of tangible property and intangible property has been paid in for stock or for stock and bonds and the Commissioner is unable satisfactorily to determine the respective values of the several classes of property at the time of payment, or to distinguish the classes of property paid in for stock and for bonds, respectively; (d) Where upon application by the corporation the Commissioner finds and so declares of record that the tax if determined without benefit of this section would, owing to abnormal conditions affecting the capital or income of the corporation, work upon the corporation an exceptional hardship evidenced by gross disproportion between the tax computed without benefit of this section and the tax computed by reference to the representative corporations specified in section 328. This subdivision shall not apply to any case (1) in which the tax (computed without benefit of this section) is high merely because the corporation earned within the taxable year a high rate of profit upon a normal invested capital, nor (2) in which 50 per centum or more of the gross income of the corporation for the taxable year (computed under section 233 of Title II) consists of gains, profits, commissions, or other income, derived on a cost-plus basis from a Government contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive. The evidence in this case discloses that the petitioner was organized on October 2, 1915, and that it took over the assets of a predecessor corporation of the same name whose charter had expired on January 7, 1915, and assumed the liabilities of the old corporation. In consideration thereof, the petitioner issued the full amount of its capital stock, par value $75,000, to the stockholders of the old corporation. The minutes of a meeting of the stockholders of petitioner recited that the said stockholders were of the opinion that all the property was of the fair cash value of $75,000. *298Part of the assets taken over as evidenced by the books of the old corporation were as follows: Merchandise-$68, 425. 87 Gash_ 3, 731. 80 Real estate_ 60, 555. 28 Cottages- 2. 500. 00 Fixtures_ 46, 311. 50 Live stock_ 15, 460. 00 Wagons_ 15, 565. 00 Harness_ 1, 094. 00 Bills receivable_ 4, 277. 24 Accounts receivable_ 3,431. 66 Routes — 1 to 28 (accounts receivable)- 12,263.93 233, 616. 28 The petitioner assumed bills payable in the amount of $15,000. and accounts payable in the amount of $33,811.11. The assets taken over by the petitioner were carried on the books of petitioner at the same values as they appeared on the books of the old corporation, no attempt being made at that time to revalue them. Charles H. Moody, who was a director of both the old corporation and the petitioner, and who ivas president of the petitioner in 1921, testified at the hearing that the assets at .the time taken over, with the exception of bills receivable, accounts receivable and possibly merchandise, were of twice the value that they were carried on the books of the old corporation. He stated that the figures on the old corporation’s books represented cost of assets less depreciation, but on cross-examination stated that he did not know that depreciation was taken on any of the assets, with the possible exception of horses and wagons two years before they were transferred to the petitioner. The real estate taken over included land carried on the books of the old corporation at $23,000, which represented its cost in 1889. Included in the real estate was also a building on this land, part of which was constructed in 1890 and a part of which was constructed in 1910. It was carried on the books at cost. No evidence was submitted to show the value of the land or the buildings taken over, the testimony being only that the land had increased in value between 1890 and 1915, without any definite indication of the extent of such increase. Live stock taken over by the petitioner represented 90 horses. Moody testified that in 1915, when acquired by the petitioner, their value was 50 per cent greater than the value at which they were carried on the books of the old corporation. The wagons taken over by the petitioner had been in use for a varying number of years. Repairs had been made and charged tc *299expense on the books of the old corporation, and the cost of the new wagons purchased had been charged to expense. The petitioner took over between 2,000 and 2,500 pie cases which the old corporation had manufactured, the cost of which had been charged to expense on the books. The petitioner never carried these cases on its books at any value. Moody testified that their fair market value in October, 1915, was $5 each. The petitioner also took over about 100 shipping pie cases which it did not enter on its books. The cost of these had been charged to expense on the books of tire old corporation. Moody testified that in October, 1915, they were worth $10 each. The petitioner also continued to use the trade-mark “ Home Made Pies ” which had been in use by the predecessor corporation and its predecessor partnership. The petitioner alleges and we find that in 1915, when the petitioner was organized, there was paid in to it an aggregate of tangible and intangible property for stock. The intangible property was good will which, upon the books, was not assigned any value. The minutes of a meeting of the stockholders recited that the value of all the property received Avas $75,000, and this value was used by the respondent in computing invested capital of the petitioner. Charles H. Moody testified that the books did not represent the true value of the assets. No attempt was made by the petitioner to show Avhat the value of the real estate was in 1915, nor Avas any evidence adduced to show that it Avas impossible to prove what the value was. Moody testified that the horses were worth 50 per cent more in 1915 than their cost, which was the figure at which the horses were entered on the books of the old corporation. Moody testified also that the pie cases acquired by the petitioner at organization numbered between 2,000 and 2,500 and that they had a value in October, 1915, of $5 each, and that the petitioner also acquired about 100 shipping pie cases having a value at the time of acquisition of $10 each. The petitioner contends that since the exact number of cases acquired is not known, the invested capital of the petitioner for 1921 can not be determined as provided in section 326 of the Revenue Act of 1921. However, if we took these approximate figures at the Avalúes shoAvn by the petitioner, it is our opinion that the invested capital of the petitioner would not be greatly misrepresented. Good will was never entered on the books of the petitioner at any value, nor has the petitioner shown what the value thereof Avas at the time acquired, or that it had any value at all. Evidence of earnings and gross sales for the five years prior to the organization of the petitioner was adduced, but the tangible assets and their value for those years were not shown. *300From all the evidence we conclude that the petitioner has failed to show that it comes within the provisions of subdivision (c) of section 327. Nor does the testimony of Charles H. Moody, president of the petitioner, to the effect that it can not now be determined what property in use by the petitioner in 1921, had been acquired at organization in 1915, bring the petitioner within the provisions of subdivision (a) of section 327. In 1921, Moody received a salary of $14,000. He testified that he would not have worked for any other corporation for this salary and statqd that he believed his services were worth $25,000. This alone does not entitle petitioner to special assessment under the provisions of subdivision (d) of section 327, no showing having been made that the Jow salary creates such an abnormality as would work an exceptional hardship upon the petitioner. See United Shoe Stores Co., 2 B. T. A. 73, and Eagle Piece Dye Works, 10 B. T. A. 1360. It is our conclusion that the petitioner is not entitled to' special assessment for the year 1921 on that ground. 'VThe petitioner also assigns as error that the respondent improperly determined petitioner’s invested capital for the year 1921. However, the petitioner has failed to submit sufficient proof to overthrow the presumption of the correctness of the respondent’s determination in this respect. Judgment will be entered for the respondent.

2020-01-17 22:01:33.336261+00

Morris

*306OPINION. MoRRis: The first allegation herein pertains to special relief for the years 1919, 1920, and 1921 under the provisions of sections 327 and 328 of the Reverme Acts of 1918 and 1921. The rate of tax for 1919 having been agreed to by stipulation between the parties, thereby disposing of the first allegation of error in respect to that year and counsel for the petitioner having moved to postpone consideration of the remaining years included in that allegation until we have determined the questions raised by the other allegations of error, as provided for in Rule 62 of the rules of the Board, we shall address ourselves to the second and third allegations of error urged by the petitioner and the affirmative allegation of error urged by the respondent by amendment to his answer. At the hearing respondent’s counsel moved to amend his answer to allege error on his part in allowing amortization for 1920 on the Broadway Theater building prior to its completion in November of that year, and he further moved to increase the deficiency as found for that year by reason of any adjustment which may be occasioned by a final determination of this question. It was agreed between the parties, however, that the petitioner is entitled to amortization on the difference between the amount of any loss which we may find for 1920 and the total cost of the building and equipment as destroyed by fire and, furthermore, that if petitioner is entitled to-no loss then it will be entitled to amortize the total cost over the remaining life of the lease. We shall determine first, therefore, whether the petitioner is entitled to any loss at all. Section 234 of the Revenue Act of 1918, which controls the question in controversy, provides that in the computation of net income there should be allowed as deductions: (1) All tlie ordinary and. necessary expenses paid or incurred during the taxable year in carrying on any trade or business, * * * including rentals or other payments required to be made as a condition to the continued use or possession of property to which the corporation has not taken or is not taking title, or in which it has no equity. [[Image here]] *307(4) Losses sustained during tlie taxable year and not compensated for by insurance or otherwise. Section 235 of the same Act provides: That in computing net income no deduction shall in any case be allowed in respect of any of the items specified in section 215. Section 215, in so far as applicable here, provides: That in computing net income no deduction shall in any case be allowed in respect of— ******* (b) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. The petitioner contends that where a lessee is compelled to restore a building burned, the cost of replacement of that building at the time of its destruction by fire constitutes a loss to the lessee which is deductible from its gross income for the year in which such destruction takes place and the replacement made. Assuming for the purpose of a preliminary examination of the question involved that an obligation on a lessee to restore improvements when destroyed by fire establishes the right of said lessee to a loss, we can not agree that the petitioner was obligated to rebuild at any time prior to February 14, 1920, when it voluntarily agreed with the owners in writing to do so. In the lease on the premises covering the period January 1, 1915, to January 1, 1925, the terms of which the petitioner assumed as sublessee of said premises, it was provided that it would deliver up the premises at the end of the term in as good order and condition, “ fire and other unavoidable accidents and ordinary wear and tear excepted as at the time of the commencement of this lease.” This language without more would seem to clearly establish the fact that the petitioner as sublessee was expressly released from any obligation to rebuild in the event of fire. The petitioner, however, relies strongly upon the further provision of the lease, set forth herein in our findings of fact, which provides that the lessors shall pay all taxes and legal assessments and “ that they will keep the building on said lot insured for its fair value, and that in event of loss by fire they will apply the proceeds from the fire insurance policies towards the restoration of said building to its condition prior to the fire, * * We do not regard this covenant as requiring the lessees to perform any act or acts whatsoever. As we construe the language used there, the lessors themselves are obligated to keep the premises msured in the event of loss by fire and apply the proceeds from the fire insurance policies toward restoring the building to its condition prior to any fire that may occur in order that the lessees’ period of occupancy under the lease may not be terminated by fire destruction. *308We are further convinced that the petitioner was not obligated under its lease to rebuild the destroyed building by the fact that it entered into an agreement on February 14, 1920, by which it agreed to rebuild. Why, if it was obligated under the original lease to replace the destroyed premises, should it have entered into a further agreement for the doing of something which it was already required to do under the former covenants in the lease ? Petitioner introduced evidence to the effect that it was the understanding of the parties to the lease that the lessee would rebuild in case of fire and counsel argued that the new building was in course of construction when the contract of February 14, 1920, was entered into. If such were the fact it would lend considerable weight to the testimony as to the understanding of the parties and their interpretation of. the instrument, but we are unable to make any such definite finding from the record. In fact in the contract of February 14, 1920, it is provided that “ the amusement company agrees to let the contract to rebuild said theater at once.” In this connection it is perhaps noteworthy that section 5179 of the Code of Virginia, 1919, provides that a covenant that a lessee will leave the premises in good repair is, subject to the qualifications of section 5180, to the same effect as a covenant that the premises will, at the expiration of the term, “ be peaceably surrendered and yielded up unto the lessor, his representatives, or assigns, in good and substantial repair and condition, reasonable wear and tear excepted.” Section 5180 of the Virginia Code provides: Reduction of rent, if buildings destroyed or lessee deprived of possession.— No covenant or promise by a lessee to pay the rent, or that he will keep or leave the premises in good repair, shall have the effect, if the buildings thereon be destroyed by fire or otherwise, in whole or in part, without fault or negligence on his part, or if he be deprived of the possession of the premises by the public enemy, of binding him to make such payment or repair or erect such buildings again, unless there he other words showing it to he the intent of the parties that he should he so hound. But in case of such destruction, there shall be a reasonable reduction of the rent, for such time as may elapse until there be again upon the premises buildings of as much value to the tenant for his purposes as what may have been so destroyed; and, in case of such deprivation of possession, a like reduction until possession of the premises be restored to him. (Code 1887, par. 2455.) (Italics supplied.) We are satisfied, therefore, from the facts which we have briefly discussed and from all the other surrounding circumstances that the petitioner was not, as it contends, obligated under its lease to rebuild the destroyed premises and we shall dismiss that factor from our further consideration of the question. In National City Bank of Seattle, 1 B. T. A. 139, the petitioner through its agents entered into a verbal agreement to lease certain *309premises for a period of five years, under which the lessor was required to make certain improvements to the outside of the building and the petitioner was required to install certain permanent improvements on the inside. The petitioner there took possession of the premises and expended $33,413.99 in making the required improvements during the year 1918, and in its tax return for that year it deducted that sum in the computation of its net income, which sum was disallowed by the respondent. The Board there sustained the respondent’s disallowance of the deduction claimed and the allowance of an amount representing such portion of the exhaustion of the taxpayer’s investment as was properly allocable to the year 1918. Thus it will be seen from the foregoing opinion that notwithstanding the contractual obligation of the lessee to improve the premises as a condition to the enjoyment of its lease, that factor is not determinative of the question at issue. Considering the National City Bank of Seattle, supra; Texarkana Cotton Oil Co., 1 B. T. A. 1142; Simmons & Hammond Manufacturing Co., 1 B. T. A. 803; Gladding Dry Goods Co., 2 B. T. A. 336, and Louis C. Levy, 2 B. T. A. 361, we are of the opinion, that the deduction which the petitioner claims by reason of the reconstruction of the Broadway Theater building, which it occupied as lessee, is not allowable in the computation of net income for 1920. Having concluded that there was no loss as contended for by the petitioner, within the year 1920, and it having been agreed between the parties that it is entitled to amortize the total cost over the remaining life of the lease, we have the further question of when the amortization period actually began. In Texarkana Cotton Oil Co., supra, the Board, after determining that the expenditures made for improvements upon leased premises, were not deductible from gross income for the fiscal year in which they were made, held that the amount in controversy should be distributed over the period from the time the petitioner “ definitely committed itself to the expenditures ” to the date of termination of the lease. The petitioner here definitely committed itself to rebuild the Broadway Theater on February 14, 1920, and we, therefore, hold that it is entitled to amortize the total cost of its expenditures, less the amounts recovered by way of salvage and insurance, over the remaining life of the lease beginning with February 14, 1920. In recomputing the amount of the deficiency by reason of the foregoing conclusion the amounts of amortization already claimed by the petitioner and allowed by the respondent shall, of course, be considered as a part of said recomputation. *310The foregoing disposes of the petitioner’s second allegation of error and also the affirmative allegation of error urged by the respondent. The last allegation of error urged by the petitioner is with respect to the deductibility of the loss occasioned by demolishing the improvements upon the so-called Williamson lot. The petitioner contends that when the said property was acquired in 1920 it had no intention whatsoever of demolishing the building thereon and that, therefore, under section 234 (a) (4) of the Revenue Act of 1921 and article 142 of Regulations 62, promulgated thereunder, it is entitled to deduct the loss claimed. Section 234 of that Act provides in part as follows: That irx computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions: ******* (4) Losses sustained during the taxable year and not compensated for by insurance or otherwise; * * * Article 142 of Regulations 62 reads as follows: Voluntary removal of buildings. — Loss due to the voluntary removal or demolition of old buildings, the scrapping of old machinery, equipment, etc., incident to renewals and replacements will be deductible from gross income in a sum representing the difference between the cost of such property demolished or scrapped and the amount of depreciation sustained with respect to the property prior to its demolition or scrapping, and allowable as a deduction in computing net income. When a taxpayer buys real estate upon which is located a building which he proceeds to raze with a view to erecting thereon another building, it will be considered that the taxpayer has sustained no deductible loss by reason of the demolition of the old building, and no deductible expense on account of the cost of such removal, the value of the real estate, exclusive of old improvements, being presumably equal to the purchase price of the land and building plus the cost of removing the useless building. In The Winter Garden, Inc., 10 B. T. A. 71, the petitioner took possession of a restaurant on or about December 1, 1921, and after having operated it for three days, it closed its doors because of insufficient patronage, and within a few days thereafter began remodeling. The kitchen and dining room were practically made over and the guest capacity nearly doubled. The various changes made necessitated' discarding most of the equipment, estimated by the petitioner to have a value of $15,0.00, which was a total loss. The cost of remaking and equipping the café was approximately $36,000. In that case we found as a fact that it was the intention of the petitioner to operate the restaurant as it then stood without extensive alterations. In preparing its income-tax return for the year 1921, the petitioner there deducted (he $15,000 in computing its net taxable *311income, which was disallowed by the respondent. The Board having found that it was not the intention of the petitioner to remodel ihe premises when purchased, and that the said remodeling was an afterthought following three days of experience in operation, held that the loss claimed by the petitioner was actually sustained and, therefore, deductible under section 234 (a) (4) of the Revenue Act of 1921. The record shows that the petitioner here enjoyed a monopoly on motion pictures for white patrons in the City of Danville at the time when the Williamson property was acquired; that in 1920 there was a threatened invasion of its monopoly by certain interests then operating amusements in Richmond and Norfolk, Va.; that these interests were seeking property in the City of Danville for the purpose of erecting a motion picture theater to operate in competition with the petitioner’s shows; that said interests attempted to purchase the Williamson property; that the Williamson property was at that time valuable and also growing more valuable as business conditions progressed in that city; and that it was the only available property in Danville suitable for the operation of a moving picture theater; that the petitioner, realizing the situation and fearing the conditions which competition might bring about, purchased the Williamson lot with improvements thereon on May 15, 1920, and paid therefor $60,000. The record satisfactorily discloses that the petitioner had no intention whatsoever when it purchased this property of demolishing the building and erecting improvements thereon. On the contrary, the testimony is conclusive that the principal reason for purchasing said property was that it would prevent encroachment upon its monopoly by outside interests and for the further purpose of renting or selling the property at a profit. The acquisition of the Williamson property, as the record shows, was an effective measure, and that the Norfolk and Richmond interests did not carry out their plans of operation' in Danville. It was not until 1921 when other and more persistent competitive interests attempted to invade the motion picture field in the City of Danville that the petitioner was required to demolish the building, publish the erection of an up-to-date moving picture theater, and finally carry out its threat by beginning the erection of a building, ostensibly a theater, but in fact, stores and offices. We are satisfied that the petitioner is entitled to the loss sustained by reason of the demolition of the improvements on the Williamson property. Further proceedings for the years 1920 and 1921 may he had under Buie 62 (5) and (e).

2020-01-17 22:01:33.369485+00

Tettssell

*316OPINION. Tettssell: Section 402 (c) of the Revenue Act of 1921 provides that there shall be included in the gross estate of a decedent at the time of his death: * * * Any interest therein of which the decedent has at any time made a transfer, or with respect to which he has any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death (whether such transfer or trust is made or created before or after the passage of this Act), except in case of a bona fide sale for a fair consideration in money or money’s worth. Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such a consideration, shall, unless shown to the contrary, be deemed to have been made In contemplation of death within the meaning of this title. This provision, which is the same in the Revenue Acts of 1918 and 1924, has been before the Board and the courts in many cases and the construction uniformly applied is that by the term “ contemplation of death ” is meant an apprehension of death within the reasonably near future from some existing bodily or mental condition, and not the general expectation of ultimate death entertained by everyone, and that such contemplation of death must be the motive which prompted the transfer and without which the transfer would not have been made, in order to include the transferred property in the estate of the decedent subject to tax. Illinois Merchants Trust Co., Executor, 12 B. T. A. 818; Isaac Gimbel, et al., Executors, 11 B. T. A. 214; Philip T. Starck, Executor, 3 B. T. A. 514; Hannah M. Spofford, Administratrix, 3 B. T. A. 1016; Spencer Borden, Jr., Executor, 6 B. T. A. 255; Anna Serrien, Executrix, 7 B. T. A. 1129; Spreckels v. State, 158 Pac. 549; 36 Cal. App. 363; Rea v. Reiner, 6 Fed. (2d) 389; Meyer v. United States, 60 Ct. Cls. 474. In the case before us the decedent, three months before his death, transferred to his daughter certain property. It is not questioned that the transfer was a gift, intended to take effect in praesenti and the sole question presented is whether or not the proof adduced is sufficient to show affirmatively that decedent’s action was induced by some motive other than contemplation of death as above defined, such affirmative showing being necessary to rebut the presumption created by the section of the statute quoted. It is a difficult thing at best to determine definitely the motive actuating a person now dead, in the performance of some act. The *317lips of the one witness who could speak with actual knowledge are silent, and we must seek our conclusion from evidence of the facts in connection with and leading up to the transfer, and the physical condition and state of mind of decedent at the time. In the present case the decedent is shown to have been a man of fine intelligence, possessed of a large estate, and who had up to within a few months of his death enjoyed exceptionally fine health and bodily vigor. For his widowed daughter and her two children he had a deep affection. He had always given his daughter a very generous allowance, which was continued after her marriage, and following her husband’s death he had been the sole support of herself and children, giving her for that purpose from $25,000 to $30,000 a year. He had made his will by which she would succeed to the total income from Ms estate upon his death. He had on several occasions in the past discussed with his attorney and with a close friend and business adviser, the matter of transferring to his daughter securities sufficient to give her an independent income and had expressed his intention to do so, and had so advised his daughter. The record shows that during his illness in the spring of 1922 his daughter had been embarrassed by lack of funds, due to his temporary inability to attend to his affairs, and that during his convalescence he was advised of this, and stated that he had long intended to make a transfer to her of some securities and would do so upon his next visit to his bank box. Shortly thereafter upon his return to New York he walked with his daughter to his bank and personally selected certain securities and had them transferred to her. This testimony shows a definite motive for the transfer other than contemplation of death — a determination arrived at long prior to his illness. On the other hand, the record indicates that at this time, decedent was ignorant of his serious physical condition and was not anticipating his death in the near future, as evidenced by his constant discussions of his plans for the resuming of his normal outdoor activities, and the transfer itself suggests that he did not anticipate that death was imminent as the reason for it, in so far as provision for his daughter was concerned, would not have existed in that case, as his death would have placed abundant funds at her disposal. The only reason which a contemplation of death would have suggested for his action would be to permit his estate to escape the payment of tax on the transferred property and the evidence in our opinion does not support such a conclusion. The property transferred was less than 10 per cent of decedent’s estate and he had during the past years paid a high surtax rate on income although he had expressed his intention of making this transfer to his daughter and *318the saving in his taxes in such case was fully realized by him. The facts in this case justify such a conclusion even lefss than those in Vaughan v. Riordan, 280 Fed. 742, in which the court said: The idea of. defrauding tile Government out of a comparatively small amount of the inheritance tax, when presumably he knew that his estate would be required to pay a very large sum, to-wit: $249,475.51, to my mind is inconceivable, and any presumption arising under the statute that the gift was made in contemplation of death is, I think, fairly overcome by the existing facts and circumstances. We hold that the transfer of the securities by decedent to his daughter on September 6, 1922, was not made in contemplation of death and accordingly the property transferred should not be included in decedent’s gross estate. The second issue is upon the value of two promissory notes which were included by respondent in decedent’s gross estate at a valuation of $12,350. Petitioner contends that these notes were wholly worthless and uncollectible at the time of decedent’s death. The burden is upon him to establish this. The notes are not in evidence, petitioner’s attorney testifying that they were “ probably destroyed.” It is testified, however, that they were due September 20 and 25,1911, respectively, and petitioner insists that this proof is sufficient to show that they were barred of collection by the statute of limitations of New York State (New York Civil Practice Act, sec. 48) and that the right to satisfy the indebtedness evidenced by the note for $20,000 was limited at best to the enforcement of the lien against the collateral, as the conditions of the pledge gave no right to sell, and that not only was this collateral without market value, but a suit to foreclose the lien was barred by the 10-year limitation of the statute (New York Civil Practice Act, sec. 53). It is also insisted that even though the notes were not barred by the statute of limitations they had no value, as the maker, State Senator Louis F. Good-sell, had died prior to the death of General Roe, and his estate was insolvent. We can not conclude from the fact that the due date on the face of the notes was more than six years prior to the death of decedent that these notes were barred at that time from collection. There may have been payments of interest subsequent to maturity or other conditions which extended the time. The burden is upon petitioner and he has merely proved a due date on each note which may or may not be the one from which the statute runs. Nor is the mere fact of insolvency of the estate of the maker proof that the notes were wholly worthless. The record does not show what were the assets and liabilities of the Goodsell estate. It is merely testified that it was insolvent, which may mean that it had no assets or that it could pay a large percentage upon its indebtedness. *319However, aside from the questions of the bar of the statute of limitations and the ability of the Goodsell estate to pay any amount, it is shown that the note for $20,000 was secured by a pledge of collateral consisting of 494 shares of stock of the Citizens Water Works Co. of Highlands, N. Y., of the par value of $25 per share. Petitioner insists that the right of the pledgee to enforce his lien was doubtful, when suit upon the debt was barred by the limitations of section 48 of the New York Civil Practice Act and that, in any event, the lienor could not sell the property to satisfy the debt, as no specific right of sale was given in the pledge, but was limited to a suit to enforce the lien and that such suit was barred by the 10-year statute referred to. With this Ave can not agree. The rule appears to be well settled in New York that the lien of a pledgee holding possession of the property is not subject to the statutory limitations and may be enforced even though suit upon the debt is barred, and that the lienor may, by complying with the provisions of sections 200-210 of the lien law, sell the pledged property to satisfy the lien without bringing suit to foreclose. Hudson v. Title Guarantee & Trust Co., 195 N. Y. Supp. 316. The record shows moreover, that the stock of the Citizens Water Works Co. had a very substantial value at the time of decedent’s death. The property was in good condition and operating and a surplus had accumulated. Its value was in excess of its liabilities including stock. It had not paid dividends on its stock, its earnings having been paid out as salaries to its two stockholders. The testimony in respect to this company by its president, who with Senator Goodsell owned all-of the stock, shows that he considered the stock as having a very substantial value. The fact that stock with a very substantial intrinsic value had never been placed on the market because it was closely held by two men, and consequently had no determined market value, does not mean that it was wholly without market value or without actual value as collateral upon a note, as petitioner insists. The record is silent as to what disposition was actually made of this stock by petitioner, but we can assume from petitioner’s general denial of market value that there was no enforcement of his lien by sale and from the statement that the notes were probably destroyed we presume that some settlement was effected which must have been either by petitioner retaining the stock, or by releasing it to the Goodsell estate. If the first was done, a value in the note is thereby demonstrated and if the latter, then a voluntary release was made of something with a substantial asset value upon which petitioner held an enforceable lien. The action of respondent with respect to this item is approved. Judgment will T>e entered pursuant to Rule 50.

2021-03-18 20:03:18.657888+00

https://www.courts.state.hi.us/wp-content/uploads/2021/03/CAAP-20-0000746dsm.pdf

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 18-MAR-2021 08:18 AM Dkt. 14 ODSLJ NO. CAAP-XX-XXXXXXX IN THE INTERMEDIATE COURT OF APPEALS OF THE STATE OF HAWAI#I MELINDA M. MOUQUIN TRUST, THROUGH ITS TRUSTEE, MELINDA M. MOUQUIN, Plaintiff/Counterclaim Defendant-Appellant, v. HALLIENE R. WALKER, Defendant/Counterclaim Plaintiff-Appellee, DOES 1-20, Defendants APPEAL FROM THE CIRCUIT COURT OF THE SECOND CIRCUIT (CASE NO. 2CC191000039) ORDER DISMISSING APPEAL FOR LACK OF APPELLATE JURISDICTION (By: Hiraoka, Presiding Judge, Wadsworth and Nakasone, JJ.) Upon review of the record, it appears we lack appellate jurisdiction over Plaintiff/Counterclaim Defendant-Appellant Melinda M. Mouquin Trust, Through its Trustee, Melinda M. Mouquin's (Mouquin) appeal from Civil No. 2CC191000039 because the Circuit Court of the Second Circuit (circuit court) has not entered a final, appealable judgment. An aggrieved party cannot obtain appellate review of a circuit court's interlocutory orders in a civil case, under Hawaii Revised Statutes (HRS) § 641-1(a) (2016), until the circuit court has reduced its dispositive rulings to an appealable, final judgment under Hawai#i Rules of Civil Procedure (HRCP) Rule 58. Jenkins v. Cades Schutte Fleming & Wright, 76 Hawai#i 115, 119, 869 P.2d 1334 , 1338 (1994) ("An appeal may be taken . . . only after the orders have been reduced to a judgment and the judgment has been entered in favor of and against the appropriate parties pursuant to HRCP [Rule] 58[.]" ).  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER Here, the February 8, 2021 Judgment is not final and appealable under HRS § 641-1(a) because it expressly does not resolve Defendant/Counterclaimant-Appellee Halliene R. Walker's (Walker) counterclaim (Counterclaim): "In light of the outstanding issues, . . . [Walker's] Counterclaim for specific performance is not fully or completely adjudicated." The Judgment also does not include certification under HRCP Rule 54(b). Because the circuit court has explicitly indicated it has not resolved all claims against all parties,1 Waikiki does not apply to require a temporary remand for the entry of an appealable, final judgment. Further, the Judgment does not fall within an exception to the final-judgment rule under the Forgay doctrine, collateral- order doctrine, or HRS § 641-1(b) (2016). See Greer v. Baker, 137 Hawai#i 249, 253, 369 P.3d 832 , 836 (2016) (reciting the requirements for appeals under the collateral order doctrine and the Forgay doctrine); HRS § 641-1(b) (requirements for leave to file an interlocutory appeal). Therefore, IT IS HEREBY ORDERED that the appeal is dismissed for lack of jurisdiction. DATED: Honolulu, Hawai#i, March 18, 2021. /s/ Keith K. Hiraoka Presiding Judge /s/ Clyde J. Wadsworth Associate Judge /s/ Karen T. Nakasone Associate Judge 1 On January 14, 2021, the court temporarily remanded the case for entry of a final, appealable judgment under Waikiki v. Ho #omaka Village Ass'n of Apartment Owners, 140 Hawai#i 197, 204, 398 P.3d 786 , 793 (2017), because it appeared the circuit court had resolved all claims as to all parties in its November 9, 2020 Order Granting [Walker's] Motion for Summary Judgment Against [Mouquin], Filed July 17, 2020. 2

2021-01-26 17:08:56.809588+00

http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00387.htm

HSBC Bank USA, N.A. v Proctor (2021 NY Slip Op 00387) HSBC Bank USA, N.A. v Proctor 2021 NY Slip Op 00387 Decided on January 26, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 26, 2021 Before: Gische, J.P., Kern, Moulton, Shulman, JJ. Index No. 850039/15 Appeal No. 12959 Case No. 2020-02634 [*1]HSBC Bank USA, National Association, etc., Plaintiff-Respondent, v Susan Proctor et al., Defendants, Ron Hillman, Defendant-Appellant. Ronald D. Weiss, P.C., Melville (Rosemarie Klie of counsel), for appellant. Reed Smith LLP, New York (Joseph B. Teig of counsel), for respondent. Order, Supreme Court, New York County (Arlene P. Bluth, J.) entered December 18, 2019, which, to the extent appealed from as limited by the briefs, denied the motion of defendant Ron Hillman to dismiss the complaint in its entirety, unanimously affirmed, without costs. The claims were severed and dismissed as against Hillman because HSBC failed to obtain personal jurisdiction over him. Hillman's argument, that he is a necessary and indispensable party to the foreclosure action pursuant to RPAPL 1311, and that the action cannot continue without him, has been improperly raised for the first time on appeal (see HSBC Bank USA v Kirschenbaum, 159 AD3d 506, 507 [1st Dept 2018]). In any event, the argument is unavailing since "the absence of a necessary party in a mortgage foreclosure action simply leaves that party's rights unaffected by the judgment of foreclosure and sale" (Central Mtge. Co. v Davis, 149 AD3d 898, 900 [2d Dept 2017] [internal quotation marks and brackets omitted]; see JPMorgan Chase Bank, N.A. v Salvage, 171 AD3d 438, 439 [1st Dept 2019]).THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 26, 2021

2021-01-26 17:08:57.096816+00

http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00386.htm

Golden Star Imports, Ltd. v Abramov & Sons, Inc. (2021 NY Slip Op 00386) Golden Star Imports, Ltd. v Abramov & Sons, Inc. 2021 NY Slip Op 00386 Decided on January 26, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 26, 2021 Before: Gische, J.P., Kern, Moulton, Shulman, JJ. Index No. 158996/14 Appeal No. 12962 Case No. 2020-00040 [*1]Golden Star Imports, Ltd., Plaintiff-Appellant, v Abramov & Sons, Inc., et al., Defendants-Respondents. Stein & Stein, LLP, Haverstraw (Ari J. Stein of counsel), for appellant. Bernard F. Ferrera, Maspeth, for respondents. Order, Supreme Court, New York County (Carol Ruth Feinman, J.), entered November 14, 2019, which, after a nonjury trial, dismissed the complaint, unanimously affirmed, with costs. Plaintiff was unable to relate with specificity which items sold were the source of the balance allegedly owed by defendants to plaintiff (see CPLR 3016[f]; Epstein, Levinsohn, Bodine, Hurwitz & Weinstein, LLP v Shakedown Records, Ltd., 8 AD3d 34, 35 [1st Dept 2008]). The parties agreed at trial that plaintiff did not apply defendants' payments to specific items on the invoices, but rather, that plaintiff simply credited the payments toward the oldest invoice. Moreover, plaintiff never presented any evidence showing how it arrived at a sum of $140,093.40 owed to it when the invoice stated that $243,328.05 was the actual amount due. Plaintiff also failed to prove an account stated by a preponderance of the evidence. Plaintiff's evidence failed to show any agreement by defendants to pay the sum of money plaintiff claimed was due on the account (see Federated Fire Protection Sys. Corp. v 56 Leonard St., LLC, 170 AD3d 432, 433 [1st Dept 2019]; Morrison Cohen Singer & Weinstein, LLP v Ackerman, 280 AD2d 355, 356 [1st Dept 2001]).THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 26, 2021

2020-12-01 12:13:40.364016+00

http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=19327&Index=%5c%5c10%2e20%2e4%2e7%5cTamesIndexes%5ccoa04%5cOpinion

Fourth Court of Appeals San Antonio, Texas MEMORANDUM OPINION No. 04-19-00893-CV Judy BARRERA, Appellant v. BEXAR COUNTY HOSPITAL DISTRICT d/b/a University Health System and Charles Reed, Appellees From the 37th Judicial District Court, Bexar County, Texas Trial Court No. 2017CI22275 Honorable Michael E. Mery, Judge Presiding Opinion by: Beth Watkins, Justice Sitting: Sandee Bryan Marion, Chief Justice Luz Elena D. Chapa, Justice Beth Watkins, Justice Delivered and Filed: November 25, 2020 MODIFIED; AFFIRMED AS MODIFIED Appellant Judy Barrera appeals a summary judgment in favor of appellees Bexar County Hospital District d/b/a University Health System and Charles Reed. We modify the trial court’s judgment to dismiss Barrera’s lawsuit for lack of subject matter jurisdiction and affirm as modified. BACKGROUND Barrera formerly worked as a nurse educator for Bexar County Hospital District, a political subdivision of the State of Texas. It is undisputed that the Hospital District conducts business  04-19-00893-CV under the name “University Health System.” After an employment dispute with the Hospital District, Barrera sought and received right-to-sue letters from the Equal Opportunity Employment Commission (“EEOC”) and the Texas Workforce Commission (“TWC”). Those letters, which were dated October 31, 2017 and November 15, 2017, respectively, informed Barrera that she had 90 days from her receipt of the EEOC letter to file a lawsuit under the Americans with Disabilities Act (“ADA”) and 60 days from her receipt of the TWC letter to file a lawsuit under the Texas Labor Code. The EEOC and TWC forwarded those notices to the Hospital District. On November 22, 2017, Barrera filed suit not against the Hospital District, but against a different entity, University Health System Services of Texas, Inc. (“Services”), alleging claims under the Texas Labor Code. Services is a non-profit corporation that was known as “Laundry Services of Texas, Inc.” until June of 2017. While the style of Barrera’s petition listed Services as the only name of the defendant, the petition “complain[ed] of and about University Health System Services of Texas, Inc. d/b/a University Health System” and referred to “Defendant, UHS” as a “Domestic Nonprofit Corporation.” On December 21, 2017, Services filed a verified answer denying “that it currently employs or has ever employed [Barrera] in any capacity.” On January 17, 2018, Services sent discovery responses stating it “never employed [Barrera].” On April 18, 2018—169 days after the issuance of the EEOC’s right-to-sue letter and 154 days after the issuance of the TWC letter—Barrera filed her first amended petition. She dropped Services as a defendant and, in its place, sued “Bexar County Hospital District d/b/a University Health System” and Charles Reed, an employee of the Hospital District. She abandoned her claims under the Texas Labor Code and asserted claims under the ADA, the ADA Amendments Act (“ADAAA”), and 42 U.S.C. section 1983. She also alleged Reed had defamed her. The Hospital District and Reed filed motions for partial summary judgment on Barrera’s ADA and ADAAA claims against Reed, as well as her section 1983 and defamation claims. When Barrera did not -2-  04-19-00893-CV respond to those motions, the trial court granted them and awarded the Hospital District and Reed a take-nothing judgment on the section 1983 and defamation claims. Barrera does not challenge those rulings in this appeal. The Hospital District and Reed also filed a traditional motion for summary judgment, arguing Barrera did not timely file suit against them because only her original petition was filed within the deadlines established in the EEOC right-to-sue letter and that petition asserted claims against Services, not the Hospital District. They argued that because the Hospital District is a governmental entity and Reed is its employee, Barrera’s failure to timely sue the correct entity deprived the trial court of subject matter jurisdiction over her claims. As support for the motion, the Hospital District and Reed presented the EEOC right-to-sue letter, file-stamped copies of Barrera’s original and first amended petitions, and evidence showing the Hospital District is a political subdivision of the State. In response, Barrera argued that under Texas Rule of Civil Procedure 28, her original petition should be construed as a lawsuit against the Hospital District in its assumed name. She contended: University Health System Services of Texas, Inc. and Bexar County Hospital District are separate but related entities (University Health System Services of Texas, Inc. is the parent corporation of Bexar County Hospital District) and both use the trade name University Health System. She also argued the Hospital District had actual notice of her original petition because she served it on George Hernandez, Jr., who she claimed was “the President and Chief Executive Officer of University Health System.” As support for these contentions, Barrera presented her own affidavit. Paragraph 8 of that affidavit stated, inter alia, “Through my employment at [the Hospital District] I have learned that there are many entities and locations that all use the trade name University Health System. George B. Hernandez, Jr. is the President and Chief Executive Officer for UHS.” -3-  04-19-00893-CV After Barrera filed her summary judgment response, the Hospital District filed an affidavit from Services’s secretary, Michael Roussos, which stated Services “is not a parent corporation of the Bexar County Hospital District d/b/a University Health System.” The Hospital District and Reed objected to Paragraph 8 of Barrera’s affidavit on the ground that it failed to establish the basis for her stated knowledge. The trial court sustained that objection and did not consider Paragraph 8 in reviewing the motion for summary judgment. After a hearing, the trial court granted the motion for summary judgment. Barrera filed a motion for reconsideration, which the trial court denied. On December 2, 2019, the trial court signed a “Final Summary Judgment” that incorporated all three summary judgment rulings, reiterated the trial court’s ruling on the objection to Paragraph 8 of Barrera’s affidavit, and ordered that Barrera “take nothing of and from Bexar County Hospital District d/b/a University Health System and Charles Reed.” Barrera then filed this appeal. ANALYSIS Standard of Review and Applicable Law We review a trial court’s ruling on a traditional motion for summary judgment de novo. Vela v. GRC Land Holdings, Ltd., 383 S.W.3d 248 , 250 (Tex. App.—San Antonio 2012, no pet.). A traditional summary judgment movant must show that no genuine issue of material fact exists and it is therefore entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); Vela, 383 S.W.3d at 250. In determining whether a fact issue exists, we take as true all evidence favorable to the nonmovant and resolve all doubts in the nonmovant’s favor. Valence Operating Co. v. Dorsett, 164 S.W.3d 656 , 661 (Tex. 2005). “Sovereign immunity bars suits against the state and its entities, and this immunity remains intact unless surrendered” by a clear and unambiguous statutory waiver. Prairie View A&M Univ. v. Chatha, 381 S.W.3d 500 , 512 (Tex. 2012). When a defendant is a governmental entity, -4-  04-19-00893-CV compliance with applicable statutory prerequisites to suit are jurisdictional, and a plaintiff’s failure to adhere to those prerequisites will bar her suit. TEX. GOV’T CODE ANN. § 311.034; Chatha, 381 S.W.3d at 512. A governmental entity’s immunity from suit deprives the trial court of subject matter jurisdiction. Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217 , 224 (Tex. 2004). Whether a court has subject matter jurisdiction is a question of law. Id. at 226. When the trial court lacks jurisdiction, it “should not render judgment that the plaintiffs take nothing; it should simply dismiss the case.” DaimlerChrysler Corp. v. Inman, 252 S.W.3d 299 , 304 (Tex. 2008). Application Texas Rule of Civil Procedure 28 In her first two issues, Barrera challenges the trial court’s conclusion that the summary judgment evidence did not raise a fact issue about whether Barrera timely filed suit against the Hospital District and its employee, Reed. TEX. R. CIV. P. 166a(c); Miranda, 133 S.W.3d at 226. Barrera does not dispute that the Hospital District is a governmental entity. See Bexar Cty. Hosp. Dist. v. Crosby, 327 S.W.2d 445 , 446 (Tex. 1959) (describing the Hospital District as “a political subdivision of the State”). She does not dispute that compliance with the deadline in the EEOC’s right-to-sue letter constituted a statutory prerequisite to her suit against the Hospital District, nor does she contend that she filed her first amended petition—the first petition in which she sued the Hospital District in its correct name—by that deadline. See 42 U.S.C.A. § 2000e-5(f)(1) (private actions under Title VII of the Civil Rights Act of 1964 must be filed within 90 days of receiving right-to-sue letter); Baldwin v. Northrop Grumman Info. Tech., No. 03-09-00654-CV, 2011 WL182880, at *1 (Tex. App.—Austin Jan. 21, 2011, no pet.) (mem. op.) (same). Finally, Barrera does not dispute that a failure to comply with this statutory deadline would jurisdictionally bar her claims. See TEX. GOV’T CODE § 311.034; Chatha, 381 S.W.3d at 512. -5-  04-19-00893-CV Instead, Barrera relies on Texas Rule of Civil Procedure 28 to argue her suit against the Hospital District was timely filed. Rule 28 provides: Any partnership, unincorporated association, private corporation, or individual doing business under an assumed name may sue or be sued in its partnership, assumed or common name for the purpose of enforcing for or against it a substantive right, but on a motion by any party or on the court’s own motion the true name may be substituted. TEX. R. CIV. P. 28. Barrera contends her original petition naming Services as defendant “sued University Health System, as an assumed or common name” and, as a result, the summary judgment evidence raises a genuine issue of material fact about whether Rule 28 precludes the Hospital District’s claim that her lawsuit is time-barred. The Hospital District responds that Barrera has not shown Rule 28 applies to suits against governmental entities. We agree with the Hospital District. Although we must liberally construe the Rules of Civil Procedure, we cannot disregard their plain language. See Beam v. A.H. Chaney, Inc., 56 S.W.3d 920 , 923 (Tex. App.—Fort Worth 2001, pet. denied). Barrera’s brief cites no authority holding that a governmental entity is a “partnership, unincorporated association, private corporation, or individual” for the purposes of Rule 28, and we have found none. 1 While Barrera’s reply brief cites a 1959 Texas Supreme Court opinion that refers to the Hospital District as a “corporation,” nothing in that opinion supports a conclusion that the Hospital District is a private corporation, as required by Rule 28. See Crosby, 327 S.W.2d at 446–49. As a result, we overrule Barrera’s contention that Rule 28 raises a fact question about whether she timely sued the Hospital District. See TEX. R. CIV. P. 28, 166a(c); Miranda, 133 S.W.3d at 234. 1 While the word “person” includes a governmental entity “unless the statute or context in which the word . . . is used requires a different definition,” we have found no authority that defines the word “individual” to include a governmental entity. See TEX. GOV’T CODE ANN. § 311.005(2) (defining “person”). To the contrary, the Texas Business Organizations Code defines “individual” as “a natural person.” TEX. BUS. ORGS. CODE ANN. § 1.002(38). -6-  04-19-00893-CV Misidentification “The statute of limitations will be tolled in mis-identification cases if there are two separate, but related, entities that use a similar trade name and the correct entity had notice of the suit and was not misled or disadvantaged by the mistake.” Flour Bluff Indep. Sch. Dist. v. Bass, 133 S.W.3d 272 , 274 (Tex. 2004). During the summary judgment hearing, the trial court told Barrera it believed “Rule 28 does not govern this matter” and asked if she instead intended to challenge the Hospital District’s motion for summary judgment under a common law misidentification theory. Barrera responded to that question affirmatively, and some of the arguments she presented in the trial court and in her brief touch on the elements of a misidentification theory. However, Barrera’s brief, even liberally construed, does not present any authority or substantive analysis on whether the summary judgment evidence raised a fact issue on each required element of misidentification. See id.; see also Cammack v. Bank of N.Y. Mellon, No. 04-18-00278-CV, 2019 WL 2014852 , at *1 (Tex. App.—San Antonio May 8, 2019, no pet.) (mem. op.). As a result, to the extent that Barrera intended to rely on a misidentification theory on appeal, she waived that issue. TEX. R. APP. P. 38.1; Cammack, 2019 WL 2014852 , at *1. Paragraph 8 of Barrera’s Affidavit In her third issue, Barrera argues the trial court erred by sustaining the Hospital District’s objection that Paragraph 8 of her affidavit is conclusory and does not show a basis for Barrera’s personal knowledge of the facts it recites. Barrera contends that “as an employee of University Health System, [she] was in a position to have personal knowledge” of the alleged facts at issue. Although Barrera cited allegedly applicable authority in her brief to support this proposition, she did not apply that authority to the facts of this case or otherwise “present sufficient argument [or] provide basis to support a conclusion the trial court erred.” Lowry v. Tarbox, 537 S.W.3d 599 , 619–20 (Tex. App.—San Antonio 2017, pet. denied); see also Milteer v. W. Rim Corp., 303 -7-  04-19-00893-CV S.W.3d 334, 336 (Tex. App.—El Paso 2009, no pet.) (argument inadequately briefed where citation to legal authority “provided no discussion or argument of the cases cited or explanation of how those cases supported [appellant’s] specific contentions”). As a result, Barrera’s third issue is inadequately briefed and she waived it. See Milteer, 303 S.W.3d at 336. Barrera’s Motion for Reconsideration The final issue listed in the issues presented section of Barrera’s brief challenges the trial court’s ruling on documents attached to her motion for reconsideration. However, she raises no argument on this point in the body of her brief. Because this issue is inadequately briefed, Barrera waived it. TEX. R. APP. P. 38.1; Water Expl. Co., Ltd. v. Bexar Metro. Water Dist., 345 S.W.3d 492 , 495 n.2 (Tex. App.—San Antonio 2011, no pet.). CONCLUSION Barrera has not presented any argument or authority showing the trial court reversibly erred by concluding she did not satisfy her summary judgment burden on the Hospital District’s jurisdictional arguments. However, because the trial court concluded it lacked subject matter jurisdiction over Barrera’s claims, it should have dismissed her lawsuit instead of rendering judgment that she take nothing. See Inman, 252 S.W.3d at 304. We therefore modify the trial court’s December 2, 2019 Final Summary Judgment to dismiss Barrera’s lawsuit for lack of subject matter jurisdiction and affirm it as modified. TEX. R. APP. P. 43.2(b). Beth Watkins, Justice -8-

2020-03-05 20:00:18.617488+00

http://www.ca4.uscourts.gov/Opinions/191905.U.pdf

UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 19-1905 MIGUEL ANGEL DIAZ RUIZ, a/k/a Miguel Angel Moran Diaz, a/k/a Miguel Angel Ruiz, Petitioner, v. WILLIAM P. BARR, Attorney General, Respondent. On Petition for Review of an Order of the Board of Immigration Appeals. Submitted: February 19, 2020 Decided: March 5, 2020 Before NIEMEYER and KING, Circuit Judges, and TRAXLER, Senior Circuit Judge. Petition denied by unpublished per curiam opinion. Jorge E. Artieda, JORGE E. ARTIEDA LAW OFFICE P.C., Falls Church, Virginia, for Petitioner. Joseph H. Hunt, Assistant Attorney General, Margot L. Carter, Senior Litigation Counsel, Leslie McKay, Senior Litigation Counsel, Office of Immigration Litigation, Civil Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Respondent. Unpublished opinions are not binding precedent in this circuit. PER CURIAM: Miguel Angel Diaz Ruiz, a native and citizen of Guatemala, petitions for review of an order of the Board of Immigration Appeals (Board) dismissing his appeal from the immigration judge’s denial of his requests for withholding of removal and protection under the Convention Against Torture (CAT). For the reasons set forth below, we deny the petition for review. “Withholding of removal is available under 8 U.S.C. § 1231 (b)(3) [2018] if the alien shows that it is more likely than not that h[is] life or freedom would be threatened in the country of removal because of h[is] race, religion, nationality, membership in a particular social group, or political opinion.” Gomis v. Holder, 571 F.3d 353 , 359 (4th Cir. 2009) (internal quotation marks omitted). An alien “must show a ‘clear probability of persecution’ on account of a protected ground.” Djadjou v. Holder, 662 F.3d 265 , 272 (4th Cir. 2011) (quoting INS v. Stevic, 467 U.S. 407 , 430 (1984)). We afford “a high degree of deference” to a determination that an alien is not eligible for withholding of removal and review administrative findings of fact under the substantial evidence standard. Gomis, 571 F.3d at 359 . Under the substantial evidence test, affirmance is mandated “if the evidence is not so compelling that no reasonable factfinder could agree with the [Board]’s factual conclusions.” Gandziami-Mickhou v. Gonzales, 445 F.3d 351 , 354 (4th Cir. 2006) (internal quotation marks omitted). We conclude that substantial evidence supports the agency’s finding that Diaz Ruiz failed to establish a nexus between his claimed harm and his proposed particular social group and that the record does not compel a different result. See Velasquez v. Sessions, 2  866 F.3d 188 , 194 (4th Cir. 2017) (“Aliens with a well-founded fear of persecution supported by concrete facts are not eligible for asylum if those facts indicate only that the alien fears retribution over purely personal matters.” (alterations and internal quotation marks omitted)); Huaman-Cornelio v. BIA, 979 F.2d 995 , 1000 (4th Cir. 1992) (same). Because this finding is dispositive of Diaz Ruiz’s claim for withholding of removal, we need not consider Diaz Ruiz’s arguments as to the viability of his particular social group or the reasonableness of relocation. See INS v. Bagamasbad, 429 U.S. 24 , 25 (1976) (“As a general rule courts and agencies are not required to make findings on issues the decision of which is unnecessary to the results they reach.”). Diaz Ruiz also raises challenges to the agency’s denial of his request for CAT relief. To qualify for protection under the CAT, a petitioner bears the burden of proof of showing “it is more likely than not that he or she would be tortured if removed to the proposed country of removal.” 8 C.F.R. § 1208.16 (c)(2) (2019). To state a prima facie case for relief, a petitioner must show that he or she will be subject to “severe pain or suffering, whether physical or mental . . . by or at the instigation of or with the consent or acquiescence of a public official or other person acting in an official capacity.” 8 C.F.R. § 1208.18 (a)(1) (2019); see Saintha v. Mukasey, 516 F.3d 243 , 246 & n.2 (4th Cir. 2008). The applicant need not prove the torture would be inflicted on account of a protected ground. Dankam v. Gonzales, 495 F.3d 113 , 115 (4th Cir. 2007). We review for substantial evidence the denial of CAT relief. Id. at 124 . The Board’s legal determinations are subject to de novo review. See Turkson v. Holder, 667 F.3d 523 , 527 (4th Cir. 2012). 3  Although Diaz Ruiz raises challenges to the agency’s finding that he failed to meet the acquiescence component of 8 C.F.R. § 1208.18 (a)(1), he fails to challenge the agency’s independent and dispositive finding that he failed to demonstrate that it is more likely than not that he would be tortured if returned to Guatemala. Because we conclude that substantial evidence supports this finding, we uphold the agency’s denial of protection under the CAT. We therefore deny the petition for review. In re Diaz Ruiz, (B.I.A. July 22, 2019). 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. PETITION DENIED 4

2020-03-05 20:00:18.252078+00

http://www.ca4.uscourts.gov/Opinions/194393.U.pdf

UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 19-4393 UNITED STATES OF AMERICA, Plaintiff - Appellee, v. ABEL CARLOS ANGELES-MORALES, Defendant - Appellant. Appeal from the United States District Court for the Eastern District of North Carolina, at Raleigh. Louise W. Flanagan, District Judge. (5:18-cr-00255-FL-1) Submitted: February 28, 2020 Decided: March 5, 2020 Before GREGORY, Chief Judge, NIEMEYER, Circuit Judge, and SHEDD, Senior Circuit Judge. Affirmed by unpublished per curiam opinion. G. Alan Dubois, Federal Public Defender, Stephen C. Gordon, Assistant Federal Public Defender, OFFICE OF THE FEDERAL PUBLIC DEFENDER, Raleigh, North Carolina, for Appellant. Robert J. Higdon, Jr., United States Attorney, Jennifer P. May-Parker, Assistant United States Attorney, Kristine L. Fritz, Assistant United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Raleigh, North Carolina, for Appellee. Unpublished opinions are not binding precedent in this circuit. PER CURIAM: Abel Carlos Angeles-Morales pleaded guilty to illegally reentering the United States after having previously been deported, in violation of 8 U.S.C. § 1326 (a) (2018). The district court sentenced Angeles-Morales to 21 months of imprisonment and he now appeals. On appeal, Angeles-Morales argues that his sentence is procedurally unreasonable because the district court failed to address his arguments in support of a downward variance. We review criminal sentences for reasonableness “under a deferential abuse-of- discretion standard.” United States v. Lynn, 912 F.3d 212 , 216 (4th Cir.) (internal quotation marks omitted), cert. denied, 140 S. Ct. 86 (2019). “In determining procedural reasonableness, we consider, among other things, whether the court . . . sufficiently explained the selected sentence.” Id. “The sentencing judge should set forth enough to satisfy the appellate court that he has considered the parties’ arguments and has a reasoned basis for exercising his own legal decisionmaking authority.” Rita v. United States, 551 U.S. 338 , 356 (2007). Accordingly, the sentencing court must “address or consider all non- frivolous reasons presented for imposing a different sentence and explain why he has rejected those arguments.” United States v. Ross, 912 F.3d 740 , 744 (4th Cir.), cert. denied, 140 S. Ct. 206 (2019). We have reviewed the record and conclude that the district court sufficiently considered Angeles-Morales’ arguments for a downward variance and adequately explained its reasons for rejecting them. Accordingly, we affirm the judgment of the district court. We dispense with oral argument because the facts and legal contentions are 2 adequately presented in the materials before this court and argument would not aid the decisional process. AFFIRMED 3

2020-01-17 22:01:33.645341+00

Mujqiken

*353OPINION. Mujqiken : The issues raised in Docket Nos. 8007, 8008, 8009, and 28985 will be disposed of first. These petitioners complain of respondent’s action in including in net income of the years in controversy as ordinary dividends subject to the tax, the entire amounts received in those years as distributions from the Trumble Refining Co. of Arizona. It is contended that a portion, if all, of such distributions were in fact liquidating dividends or a return of capital not subject to tax. The allegations of the petitions are specifically denied by the respondent in his answers. No evidence was offered by the petitioners in support of those allegations. Under the circumstances, we may not disturb the action of the respondent of which petitioners complain. In the case of M. J. Trumble, Docket No. 28985, it is further alleged that respondent erred in disallowing $600 of a total deduction of $1,200 claimed in the return for 1922, as expense of operating an automobile for business purposes. No evidence was offered by the petitioner in support of the material averments of his petition. We are unable, therefore, to find error in respondent’s action. In the appeals of the Trumble Refining Co. of Arizona, Docket Nos. 11763, 17492, 26434, and 32151, the sole question raised is the value of certain license contracts at March 1, 1913, for the purpose of computing the annual deduction for exhaustion. The petitioner claims a total value for these contracts at March 1,1913, of $1,400,000. The respondent has computed the annual deductions for exhaustion upon the basis of a March 1,1913, value for the contracts of $160,000. In an amended answer, respondent alleges error in the value previously determined by him, and asserts that they were without any *354value at the basic date which might be made the subject of an allowance for exhaustion. We are not certain of the position of the respondent in this proceeding. At the hearing, counsel filed an amended answer alleging error in allowing a March 1, 1913, value for the contracts of $160,000 and that the contracts had no value as of March 1, 1913, which was or is subject to exhaustion allowances under the Revenue Acts of 1918 and 1921. We will proceed upon the understanding that only a question of fact is involved, i. e., the March 1, 1913, value of the contracts in question. Counsel for respondent in brief filed does not contest the legal right to an exhaustion allowance if the contracts did in fact have an ascertainable value on March 1, 1913, or the long line of Board decisions wherein allowances have been claimed before and allowed by us. Petitioner has offered proof of the value claimed for the contracts along three lines: First, evidence as to a certain transaction which occurred in February 1913, in which 1,000 shares of its common capital stock was exchanged between two individuals for a cash consideration; secondly, evidence of existing circumstances and conditions at March 1, 1913, as the basis of prognosticating the future earnings under these agreements; and, thirdly, the actual results obtained under these contracts to the beginning of the present year. The stock transaction referred to is that in which Francis M. Townsend, president of petitioner company, sold to A. L. Weil, a director of petitioner and general counsel of the General Petroleum Co., in February 1913, 1,000 shares of petitioner’s common capital stock for $500 cash. The petitioner relies upon this transaction as establishing a value of 50 cents per share for the entire 3,200,000 shares of common stock outstanding at March-1, 1913, and then reasons that “ If the common stock had a value of 50 cents a share, the preferred shares were necessarily worth par [$800,000], and therefore the value of the outstanding stock at the time of the sale, which was just prior to March 1,1913, was $2,400,000.” From this sum, the petitioner deducts $1,000,000, the selling price of the patents in 1915, leaving $1,400,000 which it claims represents the March 1,1913, value of the rights under the license contracts. The obstacles to accepting this line of reasoning or method of valuation are insurmountable, for the reasoning or method lacks the support pf proven facts and takes too much for granted. The stock involved in this transaction was but one thirty-second of 1 per cent of the common stock, and only one-fortieth of 1 per cent of all the stock, outstanding at the basic date. To conclude that the selling price of this negligible quantity of stock fixes the fair market value of all the stock, both common and preferred, notwithstanding the utter lack of proof in that direction, requires the indulgence in assumptions as to diverse factors affecting *355the marketability of 4,000,000 shares of stock and the rights of pre ferred shareholders, which we are unwilling to make. The method requires the further assumptions, wholly without proof of facts upon which to premise them, that the March 1, 1913, value of the patents was neither greater nor less than the selling price in 1915, and that the petitioner, though apparently manufacturing all of the patented apparatus for its licensees, had no assets of value other than the patents and license contracts. Further, it is a matter of common knowledge that the selling price or fair market value of the capital stock of a corporation frequently bears no relation to, and is not a reliable index of, the intrinsic value of the assets behind it; and, for aught that we may know, this case offers no departure from such a situation. Other methods of valuing the rights under the license agreements as of March 1, 1913, are suggested by the petitioner, but, like the first, they depend too greatly upon the most optimistic speculation and their bases lack the essential support of proven facts. One of these is based upon the total number of barrels of oil which the licensees, with the facilities in use or in course of construction at March 1,1913, would be able to treat between that date and the termination of their respective agreements, that is, 281,648,625 barrels. The petitioner deducts from this number 25 per cent thereof to take care of probable losses from casualties, strikes, fires, and the risks of operation, and by prorating the remainder, 211,236,469 barrels, among the 16 agreements and applying the applicable royalty rates, it determines that the anticipated future earnings, at March 1, 1913, were $3,208,222.03. This sum is then discounted to its present value, at March 1, 1913, by the application of Hoskold’s formula, the petitioner finally arriving at a value of $2,175,078.29. This method is offered to us with the suggestion that “ It is well known that refinery units are expensive to erect, and it cannot be presumed that parties will actually build plants that are larger than they have an economic use for.” Nevertheless, the record shows that the plants of the 16 licensees were capable of treating a total of 281,648,625 barrels between March 1, 1913, and the termination of their agreements, but that they actually treated up to January 1,1928, only 9 months prior to the expiration of the patents and termination of all agreements, only 157,852,587 barrels, just 56 per cent of their possible capacity; and, if we leave out of the reckoning the two plants of the General Petroleum Co. at Los Angeles and Mojave, which were not completed until after the basic date, we find that as against a total rated capacity for the 14 plants of the other licensees, of 117,398,625 barrels, those plants, with but 9 months remaining for their agreements *356to run, actually treated only 7,513,249 barrels, just approximately 7 per cent of possible production. It does not appear that this wide difference between possible production and actual production is entirely due to the result of conditions which arose after March 1, 1913, and which could not have been foreseen at that date. In the case of the Pacific Crude Oil Co., the possible production with the facilities at hand at March 1, 1913, to the termination of its license agreement, amounted to 28,297,000 barrels, but the record shows that not a single barrel of oil was treated by this company to the beginning of 1928, although it was obligated under its agreement to use the petitioners’ patented apparatus for the treatment of oil to the exclusion of all other methods and processes. The American Union Oil Co. had facilities at March 1, 1913, capable of treating, from then to the termination of its agreement, 5,657,500 barrels of oil, but up to the beginning of 1928 it had actually treated only 9,632 barrels of oil, approximately one-sixth of 1 per cent of possible production, though it too was obligated to use the petitioner’s patented apparatus for treating oil exclusively. Hardly less striking is the case of the Petroleum Development Co., with facilities at March 1, 1913, capable of treating, to the termination of its agreement, 50,640,875 barrels, though up to the beginning of the present year it has actually treated only 3,601,622 barrels, approximately 7 per cent of possible production. The Pacific Crude Oil Co., without production of a single barrel of oil during its agreement, could not have been treating, or have been in a position to treat oil with petitioner’s patented apparatus at March 1, 1913; while the American Union Oil Co. and the Petroleum Development Co., with facilities of a rated capacity of approximately 1,200 barrels and 11,000 barrels per day, respectively, have had an approximate average daily production of but 3 and 770 barrels, respectively; and there is not a bit of evidence that the facilities of the last two mentioned companies were being used to any great extent at March 1, 1913, or that there was any prospect, at that date, of any greater use in the future. Another method suggested by petitioner is based upon the'quantity of oil being handled by the General Petroleum Co. at March 1, 1913, as the result of production from its own wells and oil acquired under purchase contracts, and the net oil reserves of the Chancellor-Canfield Midway Oil Co. with which the Petroleum Development Co. was merged, though the time of the merger does not appear in the record. At March 1,1913, the General Petroleum Company was producing about 8,500 barrels of oil per day from its own wells and was handling an additional 7,000 barrels per day under purchase contracts. At the same date, the net oil reserves of the *357Chancellor-Canfield Midway Oil Co. amounted to 55,519,171 barrels. Based on these facts, the petitioner suggests that an estimate at March 1, 1913, of the total amount of oil which the General Petroleum Co. and the Petroleum Development Co. would treat until the expiration of their agreements would have been 143,210,421 barrels. To this quantity the petitioner applies a royalty rate of 1½ cents per barrel, and thereby determines that the expected future royalties from these companies amounted to $2,148,156.31. This sum is then discounted to its present value, at March 1, 1913, by the application of Hoskold’s formula, the petitioner finally arriving at a value of $1,456,385.53. There are several objections to the suggested method. There was placed in evidence a reswme of the 12 contracts under which the General Petroleum Co. was purchasing oil at March 1, 1913. Of these 12 contracts, 6 expired during 1913, 3 expired during 1914, 1 expired in 1916, the term of another is not shown, and 1, the contract with the Ohio Valley Construction Co., does not expire until June 16, 1930. Whether there have been renewals of the contracts which have expired, or what the prospects for such renewals were at March 1, 1913, does not appear in the record. The contract with the Ohio Valley Construction Co. calls for the purchase of 500,000 barrels of oil and all production thereafter to the termination of the contract. There is no evidence as to the probable amount of oil which the General Petroleum Co. would acquire under this contract. The estimate of the total quantity of oil which would be treated by the General Petroleum Co. and the Petroleum Development Co. includes 55,519,171 barrels for the Petroleum Development Co., which represent the net oil reserves of the Chancellor-Canfield Midway Oil Co. at March 1, 1913. There is no evidence whether the merger of the Petroleum Development Co. with the Chancellor-Canfield Midway Oil Co. took place before or after March 1, 1913, or, if after, whether such a merger was contemplated at that date. Further, there is nothing to show that there was any probability, at March 1, 1913, that the entire oil reserves of the Chancellor-Canfield Midway Oil Co. would be extracted and treated prior to the expiration of the license agreement. With the foregoing observations we reject the several methods of valuation suggested by the petitioner. There is much, however, in the evidence which convinces us that the license contracts had a considerable value at March 1, 1913. Both the president of the General Petroleum Co. and the president of petitioner, who represented their respective companies in the negotiations, testified that the General Petroleum Co., then known *358as the Esperanza Consolidated Oil Co., as an inducement to the petitioner to enter into the agreement of April 12, 1911, by which for a nominal cash consideration the Petroleum Company acquired a one-third interest in the petitioner, represented to the petitioner that it was entering upon the development of a large acreage of new oil land, that it was building a pipe line to deliver 30,000 barrels of oil per day at Los Angeles, that it proposed to use the patented apparatus of the petitioner exclusively for the treatment of this oil, and that license agreements for the use of such patented apparatus by its individual refining plants would be obtained as such plants were erected. The agreement itself supports the testimony of these two witnesses that the cash consideration stipulated therein was not the sole consideration, for it makes specific reference to representations made by the parties to each other; and the subsequent actions of the Petroleum Company, which are entirely in line with these representations, corroborates the testimony of these witnesses. There can be little doubt that out of these representations there arose obligations on the part of the General Petroleum Co. and rights to the petitioner which were just as binding and enforceable as though they had been specified in detail in the agreement, and not the least of these was the obligation of the Petroleum Company to use the apparatus covered by petitioner’s patents exclusively in the treatment of crude oil. At March 1, 1913, the General Petroleum Co. held in fee simple, by lease and by contract, 23,694.04 acres of oil lands in California, and 24,493.68 acres of such lands in the Eepublic of Mexico. All of these lands were being developed as rapidly as it was possible to do so. Already 160 producing wells had been brought in on the California lands, 6 more were being brought in, and 26 additional wells were being drilled, but all of this represented the development of only 900 acres of its lands. From these producing wells alone, the company was realizing an average daily production of 8,500 barrels of crude oil. In addition to this daily production, the company had approximately 202,000 barrels of oil in storage, and was handling under purchase contracts approximately 7,000 barrels of oil per day. An investigation of its lands by the Income Tax Unit led to the determination that the company’s oil reserves at July 11, 1916, in lands which it held at March 1,1913, was 32,986,058 barrels, but in arriving at this figure there were deducted royalty oils of 3,789,004 barrels. Between March 1, 1913, and July 11,1916, there were extracted from these same lands 13,314,841 barrels of oil. Thus, at March 1, 1913, the General Petroleum Co. was in possession of oil reserves amounting to 49,999,903 barrels, which it was then bringing to the surface at the *359rate of 8,500 barrels per day; but it had already adopted the policy of rapid development of its other lands, a policy which was being carried into effect at the date stated. As a matter of fact, the average daily production between March 1, 1913, and July 1, 1916, amounted to approximately 14,000 barrels. The company already had in operation five plants, the patented facilities of which were capable of treating to the termination of the agreements approximately 10,000,000 barrels of oil. The pipe line had been completed to Los Angeles, where, and at Mojave, refineries were under construction. Both of these refineries were located in accordance with petitioner’s recommendations, were designed by the petitioner, and were being constructed under petitioner’s supervision. The combined facilities of these two refineries when completed were capable of treating, during the life of the license agreements, approximately 164,000,000 barrels of oil, and there were actually treated in those plants up to the beginning of 1928, when the agreements had approximately nine months to run, 157,852,587 barrels of oil, which yielded to petitioner royalties of $2,161,907.92. There is little of evidence as concerns existing conditions at March 1,1913, in the case of the other licensees. As to them we know nothing more than the possible production of their facilities from March 1, 1913, to the termination of their agreements, the actual production up to the beginning of the present year, and the royalties paid to petitioner by those licensees. The facts given to us are not readily adaptable to the application of any mathematical formula as a means of checking the reasonableness of our own judgment. Recognizing all the facts in existence or in contemplation on March 1, 1913, we have sought to determine what a willing buyer and willing seller, without any compulsion to act in the matter but purely in their own mercenary interests, would fix upon as a fair price for these agreements at the date stated. We have disregarded none of the evidence, but have given all of it due consideration, and have reached the conclusion that these license agreements had a fair market value at March 1, 1913, of $850,000. Since the average life of these agreements, at March 1, 1913, was 11 years, 8 months, 20 days, the petitioner is entitled to a deduction for exhaustion for each of the years in controversy, in the amount of $72,511.90. Judgment will be entered under Bule 50.

2020-01-17 22:01:33.6802+00

Lansdon

*361OPINION. Lansdon: In the statement accompanying the deficiency notices which are the bases of these proceedings, the Commissioner says: It is conceded that the assessment of a deficiency in tax on the basis of a fiscal year ended March 81, 1921, is precluded by the pi-ovisions of Section 278(e) of the Revenue Act of 1926. You are advised, however, that a report of the Internal Revenue Agent in Charge at St. Paul Minnesota, dated November 5, 1926, covering an investigation of your books of account and records has been received. The examining officer has changed the method of filing your returns from a fiscal year to a calendar year basis, inasmuch as your only income for the fiscal year was income from the partnership. The examining oificer’s report has been accepted by this office. In the light of the above, it appears that the only question submitted for our decision is whether the Commissioner was authorized by law to change the income reporting period of these petitioners from a fiscal to a calendar year basis. If there is any statutory authority for such action it is found in the following provision of section 212 of the Revenue Act of 1921: (b) The net income shall be computed upon the basis of the taxpayer’s annual accounting period (fiscal year or calendar year, as the case may be) 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. If the taxpayer’s annual accounting period is other than a fiscal year as defined in section 200 or if the taxpayer has no annual accounting period or does not keep books, the net income shall be computed on the basis of the calendar year. It is clear that if the taxpayers had no established accounting period within the meaning of the law, or kept no books, the action of *362the Commissioner was authorized and probably required. In support of their contention that by filing their returns on the basis of a fiscal year ended March 31, in the previous and other prior years, the petitioners rely on article 25 of Regulations 45, from which they quote the following: * * * Except in the cases of a return for the taxable year 1918 and of a first return for income tax a taxpayer shall make his return on the basis (fiscal or calendar year) upon which he made his return for the taxable year immediately preceding unless, with the approval of the Commissioner, he has changed the basis of computing his net income. We can not agree that this language determines the question. It must be presumed that this regulation applies only to returns that have been made and filed in conformity with law. The respondent has determined that the petitioners had no right to file returns on a fiscal year basis. Erroneous action of taxpayers in one year establishes no right to commit the same error in the next year. We are of the opinion that nothing in the record proves that the taxpayers herein had established any regular annual accounting period for reporting their respective incomes. As the parties have stipulated that none of the taxpayers kept any personal books of account, we conclude that the Commissioner properly changed the basis of the accounting periods of these several petitioners from a fiscal to a calendar year. Since the returns filed in May, 1921, covered only three months of the calendar year before us, the period within which the tax for that year must be assessed did not begin to run from the date of such filing. At January 14, 1927, the Commissioner had authority to assess and collect additional taxes against each of these petitioners for the calendar year 1921. Cf. Mabel Elevator Co., 2 B. T. A. 517; Beck Engraving Co., 8 B. T. A. 897; Paso Robles Mercantile Co., 12 B. T. A. 750. Decision will be entered for the respondent.

2020-01-17 22:01:33.711962+00

Lansdon

*365OPINION. Lansdon: The first contention of the petitioner is that it is an exempt corporation under the following provision of the Revenue Act of 1926: Seo. 231. The following organizations shall be exempt from taxation under this title— ******* (7) Business leagues, chambers of commerce, or boards of trade, not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual. It is well established that taxpayers seeking the benefits of exemptions must prove strict compliance with all the statutory conditions authorizing the classification claimed. Waynesboro Manufacturers Assn., 1 B. T. A. 911; Charles A. Collin, 1 B. T. A. 305. It follows, therefore, that to prevail here this petitioner, even if it be conceded that it is a business league, must prove that it is not organized for profit, and that no part of its net earnings inures to the benefit of any private shareholder or individual. The second, third, and fourth paragraphs of article I of the petitioner’s articles of incorporation set forth three categories of purposes for which it was incorporated. The second paragraph outlines activities that certainly are not of interest to all the stockholders except as to the profits that may flow from them, since there is no evidence that the petitioner limited this phase of its business to concerns that were indebted to its shareholders. The general purposes there enumerated authorize operations from which profit is usually realized. The evidence herein discloses that in the taxable year the petitioner received more than $65,000 as fees and commissions for the services it rendered to firms and individuals, none of whom are shown to have been stockholders. *366The petitioner is aware of this situation and argues that it is not the source but the destination of income that must be considered. It admits that its activities in some departments of its business result in profit but contends that this alone is not sufficient to bar it from classification as an exempt corporation. In support of this position it relies largely on Trinidad v. Sagrada Orden, 263 U. S. 518. In that case the Supreme Court held that profit resulting from certain commercial transactions was a negligible factor, since gain therefrom was not the end to which they were directed. In this proceeding something like two-thirds of the total income of the petitioner is derived from transactions from which profits flow, and which were not incidental to other activities. This is a situation entirely diverse from that in the Trinidad case, supra, in which a negligible amount of income was derived from transactions purely incidental to the real purposes of the corporation. In our opinion that decision establishes no rule that is controlling here. Even if we accept the petitioner’s theory that it is destination, and not origin, that governs, we are not satisfied that the facts here show that no part of the net earnings of the petitioner inures to the benefit of any private shareholder or individual. It is true that there have been no distributions of cash to any stockholders, but all the net income and surplus are held for use in the furtherance of the purposes set forth in paragraphs 3 and 4 of article I of the articles of incorporation and such purposes are manifestly and avowedly for the service, benefit and advantage of every stockholder. Without the earnings and the accumulated surplus from the activities authorized in paragraph 2, each stockholder would be required to pay substantial fees or assessments in order to secure the services enumerated in paragraphs 3 and 4. In these circumstances we think the net earnings of this petitioner inure to the benefit of each one of its individual shareholders as effectually as if there were actual distributions of cash dividends from surplus. Hutterische Bruder Gemeinde, 1 B. T. A. 1208. The petitioner’s second contention is that the Commissioner erroneously included the amount of $4,746.83 in its taxable income for the year involved. In the conduct of its activities enumerated in paragraph 2 of the first article of its articles of incorporation, the petitioner has constantly on deposit in certain banks substantial sums which are the property of its clients or of the various firms that it serves in an advisory capacity, on which it receives interest based on monthly credit balances. The parties agree that such deposits are trust funds. The petitioner insists that the interest on such deposits is nothing more than an addition to funds held in trust and therefore not income to it but to the beneficial owners of the deposits. The *367respondent has determined that such interest is income to the petitioner. The evidence discloses that clients’ accounts have not been credited with the interest in question and that there is no way to determine what amount thereof, if any, should be allocated to any particular firm. No client has ever claimed or received any part of such interest. The directors of the petitioner have ordered that the interest so received shall be used in business operations. There is no showing that either by contract or in law the petitioner is liable to its clients for the interest. Certainly the amount here in controversy falls within the statutory definition of income and as such is taxable. The petitioner received the interest in question, which it used for its own purposes. In these circumstances we are of the opinion that such interest was income to it in the taxable year. The determination of the Commissioner on this point is approved. Decision will be entered for the respondent.

2021-01-26 17:08:57.701901+00

http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00383.htm

Bank of N.Y. Mellon v O'Callahan (2021 NY Slip Op 00383) Bank of N.Y. Mellon v O'Callahan 2021 NY Slip Op 00383 Decided on January 26, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 26, 2021 Before: Gische, J.P., Kern, Moulton, Shulman, JJ. Index No. 850096/15 Appeal No. 12947-12947A Case No. 2020-02666 [*1]The Bank of New York Mellon, Formerly Known as The Bank of New York, etc., Plaintiff-Respondent, v Susan O'Callahan, Defendant-Appellant, New York City Parking Violations Bureau, et al., Defendants. Law Offices of Christopher Thompson, West Islip (Christopher Thompson of counsel), for appellant. Davidson Fink LLP, Rochester (Ashley E. Ragan of counsel), for respondent. Amended order, Supreme Court, New York County (Arlene P. Bluth, J.), entered December 2, 2019, which to the extent appealed from as limited by the briefs, granted plaintiff bank's cross motion for summary judgment as against defendant Susan O'Callahan, unanimously affirmed, without costs. Appeal from order, same court and Justice, entered November 7, 2019, which ordered that the court was preparing an order with respect to the hearing and summary judgment motion, unanimously dismissed, without costs. Plaintiff established standing to commence this foreclosure action by submitting a copy of the mortgage, a copy of the note, indorsed in blank, on which it is undisputed that defendant defaulted, and a copy of the mortgage assignment, all of which were attached to the complaint (see U.S. Bank N.A. v Hossain, 177 AD3d 547, 548 [1st Dept 2019]; Wilmington Sav. Fund Socy., FSB v Moran, 175 AD3d 1196 [1st Dept 2019]). Contrary to defendant's contention, the indorsement in blank was not affixed to an allonge but was instead "Page 4 of 4" of the subject note. By defendant's own admission, the mortgaged property was not her primary residence, and thus the mortgage was not a "home loan" for purposes of RPAPL 1304(6)(a)(1)(iii). Plaintiff demonstrated its compliance with the notice provisions contained in the mortgage. "[T]he record affords no non-speculative ground" for defendant's belief that further discovery would "yield evidence supportive of a different conclusion" (Turbel v SociÉtÉ Generale, 276 AD2d 446, 447 [1st Dept 2000]).THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 26, 2021

2021-01-26 17:08:57.937017+00

http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00382.htm

American Youth Dance Theater, Inc. v 4000 E. 102nd St. Corp. (2021 NY Slip Op 00382) American Youth Dance Theater, Inc. v 4000 E. 102nd St. Corp. 2021 NY Slip Op 00382 Decided on January 26, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 26, 2021 Before: Gische, J.P., Kern, Moulton, Shulman, JJ. Index No. 650052/17 Appeal No. 12963 Case No. 2020-01869 [*1]American Youth Dance Theater, Inc., Plaintiff-Respondent, v 4000 East 102nd Street Corp., Defendant-Appellant. Cyruli Shanks Hart & Zizmor, LLP, New York (James E. Schwartz of counsel), for appellant. Barclay Damon LLP, New York (Lauren J. Wachtler of counsel), for respondent. Order, Supreme Court, New York County (Jennifer G. Schecter, J.), entered on or about March 4, 2020, which, to the extent appealed from as limited by the briefs, denied defendant's motion for summary judgment and granted plaintiff's renewed motion for summary judgment permanently enjoining defendant from terminating the parties' commercial lease and from seeking to recover possession of the demised premises, unanimously modified, on the law, to deny plaintiff's motion, and otherwise affirmed, without costs. Defendant is not entitled to summary judgment because plaintiff's failure to secure a certificate of occupancy (C/O) that would permit use of the leased premises as a physical cultural establishment is curable (see American Youth Dance Theater, Inc. v 4000 E. 102nd St. Corp., 140 AD3d 630 [1st Dept 2016]). Plaintiff proceeded diligently and secured a building permit for the necessary renovations, and the time set by the Board of Standards and Appeals to secure a C/O upon completion of these renovations in accordance with the granted variance has not expired. Thus, plaintiff is still "able to bring itself into compliance with the lease without vacating the premises" (Empire State Bldg. Assoc. v Trump Empire State Partners, 245 AD2d 225, 229 [1st Dept 1997]). However, plaintiff is not entitled to summary judgment, because it has not shown that its renovation project has been completed or that the Department of Buildings has certified completion and issued a C/O. Contrary to plaintiff's contention, under the lease rider and lease amendment, it is required to obtain the C/O and, if it fails to do so, defendant has the right to complete construction and obtain the C/O as plaintiff's agent and at plaintiff's expense, unless defendant caused the failure to obtain a C/O. Plaintiff's interpretation would render the relevant provisions meaningless (see Two Guys from Harrison-N.Y. v S.F.R. Realty Assoc., 63 NY2d 396, 403 [1984]). Further, under applicable law, a new C/O is required, because the approved plans change the use and occupancy and are inconsistent with the current C/O (Administrative Code of City of NY §§ 28-118.3.1; 28-118.3.2), plaintiff is permitted to apply for a C/O as authorized by defendant (Administrative Code § 28-118.4.1), and, in the circumstances, a partial C/O is not permitted (Administrative Code §§ 28-118.3.4.2; 28-118.16.1; 28-118.16.2; 28-118.20). THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 26, 2021

2021-01-26 17:08:58.163395+00

http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00381.htm

149-51 Sullivan St. Co. v Lopez (2021 NY Slip Op 00381) 149-51 Sullivan St. Co. v Lopez 2021 NY Slip Op 00381 Decided on January 26, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 26, 2021 Before: Gische, J.P., Kern, Moulton, Shulman, JJ. Index No. 652656/18 Appeal No. 12950 Case No. 2020-02911 [*1]149-51 Sullivan St. Co., Plaintiff-Respondent, v Ivan Lopez, Defendant-Appellant. Smith, Gambrell & Russell, L.L.P., Nominal Defendant. Gozde Hobstetter, Long Island City, for appellant. Schnader Harrison Segal & Lewis LLP, New York (Mathew B. West of counsel), for respondent. Order, Supreme Court, New York County (Melissa A. Crane, J.), entered September 26, 2019, which granted plaintiff's motion for summary judgment and denied defendant's cross motion for summary judgment, unanimously affirmed, without costs. Defendant argues that his claims and counterclaims against plaintiff seller are predicated on the behavior of Luba Cohen, a real estate broker on the transaction and the listing agent Lizmar Asset management (collectively Cohen). Defendant's theory of liability is that Cohen is the alter ego of the plaintiff seller, a partnership. There is no factual dispute that a corporation, 127 Holdings, Inc. is the majority partner in the seller or that Luba Cohen is a shareholder and officer of 127 Holdings, Inc. There is no allegation that the seller itself engaged in any misconduct. We reject, as legally incorrect, defendant's argument that he may sue plaintiff based upon Cohen's conduct, because a partnership itself cannot sue or be sued. CPLR 1025 expressly states to the contrary. More pointedly, defendant's claims fail because there are no facts supporting a conclusion that plaintiff was the alter ego of a broker simply by virtue of Cohen's status as a shareholder in a corporation that was plaintiff's majority partner. All defendant showed was that the broker was a shareholder and officer of the corporation, that the corporation and plaintiff shared offices and addresses and that the corporation was a partner in the seller. These allegations are insufficient for the reverse veil piercing defendant seeks in this case (see Board of Mgrs. of the Gansevoort Condominium v 325 W. 13th, LLC, 121 AD3d 554, 554—555 [1st Dept 2014]). In view of our conclusion that there is no alter ego liability, we do not reach defendant's claims that Cohen engaged in wrongdoing.THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 26, 2021

2021-01-26 17:08:58.395976+00

http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00378.htm

Wilmington Sav. Fund Socy., FSB v Scaffidi (2021 NY Slip Op 00378) Wilmington Sav. Fund Socy., FSB v Scaffidi 2021 NY Slip Op 00378 Decided on January 21, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 21, 2021 Before: Renwick, J.P., Manzanet-Daniels, Kapnick, Kern, Kennedy, JJ. Index No. 35032/13E Appeal No. 12927 Case No. 2020-01362 [*1]Wilmington Savings Fund Society, FSB, Doing Business as Christiana Trust for PNPMS Trust, II Sued Herein as Pennymac Corp, Plaintiff-Respondent, v Carmelo Scaffidi, as Heir and Administrator of the Estate of Blanca Scaffidi Also Known as Blanca R. Scaffidi Also Known as Blanca Rodriguez, Defendant-Appellant, United States of America et al., Defendants. Michael Kennedy Karlson, New York, for appellant. Frenkel, Lambert, Weiss, Weisman & Gordon, LLP, Bay Shore (Keith Abramson of counsel), for respondent. Order and judgment of foreclosure and sale (one paper), Supreme Court, Bronx County (Doris M. Gonzalez, J.), entered February 12, 2020, upon confirmation of a Referee's report, unanimously modified, on the facts, to remand for recomputation of the judgment amount consistent herewith, and otherwise affirmed, without costs. The order that granted summary judgment to plaintiff against defendant Carmelo Scaffidi, upon reargument, was entered on defendant's default, which he never remedied (see e.g. Aurora Loan Servs., LLC v Ahmed, 122 AD3d 557 [2d Dept 2014]). No appeal lies from an order entered on default (CPLR 5511; HSBC Mtge. Corp. [USA] v MacPherson, 89 AD3d 1061 [2d Dept 2011]; Citibank, N.A. v Kallman, 172 AD3d 489 [1st Dept 2019]). However, in confirming the Referee's report, the court failed to take into consideration the fact that plaintiff had agreed to forgo collection of $172,607.15 in escrow advances and $381.00 in property inspection fees. Accordingly, we remand the matter for recomputation of the judgment amount. We have considered defendant's remaining arguments and find them unavailing. THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 21, 2021

2021-01-26 17:08:58.647862+00

http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00374.htm

People v Thomas (2021 NY Slip Op 00374) People v Thomas 2021 NY Slip Op 00374 Decided on January 21, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 21, 2021 Before: Renwick, J.P., Manzanet-Daniels, Kapnick, Kern, Kennedy, JJ. Ind No. 903/16 Appeal No. 12936 Case No. 2018-4721 [*1]The People of the State of New York, Respondent, v Dwight Thomas, Defendant-Appellant. Robert S. Dean, Center for Appellate Litigation, New York (Anjali Pathmanathan of counsel), for appellant. Cyrus R. Vance, Jr., District Attorney, New York (Diana Wang of counsel), for respondent. Judgment, Supreme Court, New York County (James M. Burke, J. at suppression motion; Gilbert C. Hong, J. at plea and sentencing), rendered July 11, 2017, convicting defendant of criminal possession of a weapon in the third degree, and sentencing him, as a second felony offender, to a term of 3½ to 7 years, unanimously affirmed. We agree with defendant that his appeal waiver is unenforceable. However, we find that the court properly denied defendant's motion to suppress identification testimony without conducting a hearing pursuant to People v Rodriguez (79 NY2d 445 [1992]). Defendant did not set forth any facts to dispute the People's assertion that he and the identifying witness had a prior relationship familiarity that rendered the photo identification confirmatory. Therefore, there was no factual issue requiring a hearing (see e.g. People v Marte, 103 AD3d 470, 470 [1st Dept 2013], lv denied 22 NY3d 1140 [2014]). The court also properly relied on its own review of the grand jury minutes in confirming the People's uncontroverted assertions about the prior relationship between defendant and the witness (see People v Rodriguez, 47 AD3d 417 [1st Dept 2008], lv denied 10 NY3d 816 [2008]), particularly where, in his own grand jury testimony, defendant admitted that he knew and frequently conversed with the witness. Thus, although defendant asserted that the issue of familiarity "need[ed] to be explored at a hearing," he provided no basis for doing so. The record establishes that defendant's guilty plea was knowing, intelligent and voluntary, and the court providently exercised its discretion in denying defendant's motion to withdraw the plea. During the plea allocution, defendant specifically admitted that he had possessed a dangerous instrument with the intent to use it unlawfully against another, and nothing in the allocution negated any element of the crime. The item that defendant admitted to having possessed for the purpose of threatening or scaring others was capable of being a dangerous instrument under the circumstances of its use (see generally People v Carter, 53 NY2d 113, 116 [1981]), and defendant said nothing to the contrary when he admitted possessing a dangerous instrument. We perceive no basis for reducing the sentence. THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 21, 2021

2021-01-26 17:08:58.975545+00

http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00375.htm

People v Stroud (2021 NY Slip Op 00375) People v Stroud 2021 NY Slip Op 00375 Decided on January 21, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 21, 2021 Before: Renwick, J.P., Manzanet-Daniels, Kapnick, Kern, Kennedy, JJ. Ind No. 1674/17 Appeal No. 12932 Case No. 2019-4553 [*1]The People of the State of New York, Respondent, v Nysia Stroud, Defendant-Appellant. Robert S. Dean, Center for Appellate Litigation, New York (Mark W. Zeno of counsel), for appellant. Cyrus R. Vance, Jr., District Attorney, New York (Christopher P. Marinelli of counsel), for respondent. Judgment, New York County (Ruth Pickholz, J.), rendered June 26, 2018, as amended June 27, 2018, convicting defendant, after a jury trial, of criminal possession of a controlled substance in the first degree (two counts) and official misconduct (four counts), and sentencing her to an aggregate term of eight years, unanimously affirmed. Defendant was convicted of several charges stemming from the delivery of large quantities of cocaine and marihuana for side cash, which turned out to be an undercover sting operation. In this appeal, defendant argues, inter alia, that she proved her statutory and due process entrapment defense as a matter of law based primarily upon her own testimony, as well as the People's evidence. Alternatively, defendant argues that the court erred in denying her request at the close of the People's case for a jury charge on the entrapment defense. Defendant argues that the court's erroneous decision compelled her to testify at trial, and that this Court should therefore order a new trial. Defendant also alleges that her convictions were marred by other errors at trial relating to her entrapment defense. Defendant did not preserve her claim that she proved as a matter of law that she was entrapped into transporting drugs, and we decline to review it in the interest of justice. As an alternative holding, we reject it on the merits. We also find that the verdict was not against the weight of the evidence (see People v Danielson, 9 NY3d 342, 348-349 [2007]). There is no basis for disturbing the jury's credibility determinations, including those related to defendant's testimony in support of her entrapment claim. Entrapment, an affirmative defense, requires a defendant to prove by a preponderance of the evidence that she engaged in the proscribed conduct because a public servant actively induced or encouraged her to do so, and that this inducement created a substantial risk that the defendant would commit the crime although not otherwise disposed to do so (see Penal Law § 40.05; People v Brown, 82 NY2d 869, 871-872 [1993]). We find that an undercover officer did not pressure or actively induce defendant to commit a crime, but simply asked defendant if she wanted to make money by assisting her with drug deliveries, and defendant readily agreed. Defendant herself initiated the fourth delivery by sending a text message to the undercover officer, and several times explained that she needed the money to pay bills. While defendant argues that the officer applied undue pressure emotionally, by developing a romantic relationship to lure defendant into criminal activity, this did not constitute the type of active inducement necessary for entrapment, because the officer merely afforded defendant the opportunity to commit crimes (see People v Blunt, 110 AD3d 635, 636 [1st Dept 2013], lv denied 22 NY3d 1087 [2014]). Furthermore, the evidence failed to prove that defendant was not predisposed to possessing drugs, where defendant immediately [*2]agreed to deliver drugs each time the officer asked, and was never reluctant to engage in criminal activity (see People v Butts, 72 NY2d 746, 750-751 [1988]). Although defendant, who was a police officer herself, revealed her status to the undercover officer and expressed concerns about being caught, defendant needed no persuasion to engage in criminal activity. The evidence warrants the conclusion that defendant transported drugs to make money, and not merely to help a person to whom she was romantically attracted. Defendant did not preserve her claims that the investigators violated her due process rights (see People v Isaacson, 44 NY2d 511, 521-522 [1978]) and that she was entrapped into committing drug crimes of a higher degree than she was predisposed to commit, as well as her challenges to the court's jury instructions on entrapment and accessorial liability, and we decline to review them in the interest of justice. As an alternative holding, we find no basis for reversal. Defendant's argument concerning the timing of the court's decision to charge the jury on entrapment is unavailing. Defendant asserts that the court should have granted this request at the close of the People's case, and that doing so would have made it unnecessary for defendant to testify. However, a reasonable view of the People's evidence, viewed most favorably to defendant, failed to support an entrapment defense (see Butts, 72 NY2d at 750). In any event, defendant has not established any prejudice. While the court at the close of the defense case did decide to instruct the jury on the entrapment defense, such decision was based primarily on defendant's testimony that essentially claimed that she truly had no interest in transporting drugs but consented to do it because of a desperate desire to spend time with the undercover. However, as in any case, the jury was free to reject defendant's testimony purporting to support an entrapment defense. The court providently exercised its discretion in admitting testimony about a prior incident in which defendant was present when the police executed a search warrant and recovered drugs at her aunt's apartment. This evidence was highly probative to explain how defendant, a police officer, became the target of an undercover drug operation, and to prevent unfair speculation by the jury in that regard (see People v Morris, 21 NY3d 588 [2013]). The probative value of the evidence outweighed any prejudicial effect. THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 21, 2021

2021-01-26 17:08:59.214593+00

http://www.courts.state.ny.us/reporter/3dseries/2021/2021_00376.htm

People v DeBlasio (2021 NY Slip Op 00376) People v DeBlasio 2021 NY Slip Op 00376 Decided on January 21, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: January 21, 2021 Before: Renwick, J.P., Manzanet-Daniels, Kapnick, Kern, Kennedy, JJ. Ind No. 895/18 Appeal No. 12924 Case No. 2019-2099 [*1]The People of the State of New York, Respondent, v Philip DeBlasio, Defendant-Appellant. Stephen Chu, Interim Attorney-in-Charge, Office of the Appellate Defender, New York (Margaret E. Knight of counsel), for appellant. Cyrus R. Vance, Jr., District Attorney, New York (Beth Fisch Cohen of counsel), for respondent. Judgment, Supreme Court, New York County (James M. Burke, J.), rendered January 2, 2019, convicting defendant, after a nonjury trial, of making a terroristic threat, and sentencing him, as a second felony offender, to a term of four years, unanimously reversed, on the law, and the indictment dismissed. The evidence of defendant's "intent to intimidate or coerce a civilian population" (Penal Law § 490.20[1]) was legally insufficient to support the conviction (see People v Danielson, 9 NY3d 342, 349 [2007]). We also find that the verdict was against the weight of the evidence in that respect (see id.). At the end of an altercation, defendant, a Muslim, threatened to shoot "you guys," referring to several Bangladeshi worshippers at defendant's mosque. Although there was evidence presented at trial that defendant bore animus toward Bangladeshi people, the threat mentioned no group or population and instead appears to have been based on a personal dispute defendant had with one or more of his fellow worshippers over money or a missing phone. Accordingly, this threat was not directed at a "civilian population" as that term was explained by the Court of Appeals in People v Morales (20 NY3d 240, 247 [2012]). To find that defendant's act amounted to a terroristic threat would trivialize the definition of terrorism by applying it "loosely in situations that do not match our collective understanding of what constitutes a terrorist act" (id.; see also Penal Law § 490.00). In light of the foregoing, we do not reach defendant's remaining contentions. THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: January 21, 2021

2020-12-01 14:01:15.18241+00

http://www.uscourts.cavc.gov/documents/HolmesMC_19-2495.pdf

UNITED STATES COURT OF APPEALS FOR VETERANS CLAIMS No. 19-2495 MURETO C. HOLM ES, APPELLANT , V. ROBERT L. WILKIE, SECRETARY OF VETERANS AFFAIRS, APPELLEE. On Appeal from the Board of Veterans' Appeals (Decided November 25, 2020) Zachary M. Stolz and Kaitlyn C. Degnan, who was on the brief, both of Providence, Rhode Island, for the appellant. William A. Hudson, Jr., Acting General Counsel; Mary Ann Flynn, Chief Counsel; Anna Whited, Deputy Chief Counsel; and Amanda M. Radke, all of Washington, D.C., were on the brief for the appellee. Before PIETSCH, MEREDITH, and FALVEY, Judges. FALVEY, Judge: The appellant, Mureto C. Holmes, through counsel appeals a March 1, 2019, Board of Veterans' Appeals (Board) decision denying a rating above 50% for migraines. Mr. Holmes's appeal is timely and within our jurisdiction. See 38 U.S.C. §§ 7252 (a), 7266(a). This matter was submitted to a panel of this Court to address whether the rating criteria for migraines governed by 38 C.F.R. § 4 .124a, Diagnostic Code (DC) 8100, contemplate non- headache symptoms. We hold that they do. As we explain, because DC 8100 rates migraines, a broader term than headaches, the DC contemplates more than just headache symptoms. Thus, the criteria require that VA consider all the symptoms the veteran experiences as a result of his migraine attacks, and then rate those symptoms based on the frequency, severity, and economic impact of the attacks. And so, we affirm the Board decision because Mr. Holmes fails to show that the Board clearly erred in finding that the rating criteria adequately compensate him for his migraine attacks.  I. BACKGROUND Mr. Holmes served in the Army from June 1994 to August 1996. In September 2009, he sought service connection for migraines, depression, anxiety, and stress. Record (R.) at 2090-92. In June 2010, a VA regional office (RO) granted service connection for migraine headaches, with a 50% disability rating, but denied service connection for depression, post-traumatic stress disorder, and a sleep disorder. R. at 1676-81. In the same rating decision, VA denied service connection for several other disabilities that are not relevant to this appeal. Mr. Holmes did not appeal this decision. In July 2015, VA requested a medical examination to determine the status of Mr. Holmes's migraines. At an August 2015 examination, Mr. Holmes reported symptoms including headache pain, nausea, and sensitivity to light. R. at 1059. That same month, the RO issued a decision continuing the assigned 50% rating. R. at 993-96. Mr. Holmes disagreed with the 50% rating. R. at 982-83. He noted that he experiences sensitivity to light and blurred vision, and wore sunglasses as a preventive measure. Id. During his agency appellate process, Mr. Holmes sent in more documents reflecting that he suffers from light-headedness, mood swings, and nausea, and that his migraines lead to him experiencing dizziness, depression, and anxiety. R. at 794, 976. In March 2017, Mr. Holmes underwent another VA medical examination, confirming symptoms of head pain and sensitivity to light. R. at 830-31. Following the examination, the RO issued a Statement of the Case continuing denial of a rating above 50%. R. at 807-28. Mr. Holmes perfected his appeal, thus bringing his case to the Board. In the decision on appeal, the Board found that Mr. Holmes's 50% rating under DC 8100— the diagnostic code for migraines—left him adequately compensated. R. at 7. The Board explained that this DC "contemplate[s] very frequent completely prostrating and prolonged attacks productive of severe economic inadaptability." Id. Thus, it reasoned that "any symptoms related to the [v]eteran's headaches that are productive of economic inadaptability and/or that cause prostrating attacks are taken into consideration." Id. The Board arrived at this conclusion by delving into the meaning of migraines. It noted that "a 'migraine' is defined as familial symptom complex of periodic attacks preceded by prodromal sensory symptoms and commonly associated with irritability, nausea, vomiting[,] constipation or diarrhea, and photophobia." R. at 8 (citing DORLAND'S ILLUSTRATED MEDICAL DICTIONARY 1166 (32d ed. 2012)). Based on this understanding, the Board concluded 2 that "[t]he rating criteria for migraines, by [their] very nature, contemplate the various manifestations of such disability by focusing on the overall functional impairment, rather than a demonstration of particular symptoms." R. at 8. Thus, it found the veteran's 50% rating was adequate because it "was assigned based on the severity, frequency, and duration of the symptoms reported by the [v]eteran and the resulting impairment of earning capacity." Id. And "[t]he [v]eteran has not specified any particular symptoms that are not contemplated by the relevant diagnostic criteria, as effects such as dizziness, anxiety, depression, isolation, nausea, etc., all address the nature of the headaches and effects on employment." Id. II. ANALYSIS On appeal, the veteran argues that the Board clearly erred in finding that all his symptoms were contemplated by the rating criteria. Under his reading of the regulation, DC 8100 does not contemplate non-headache symptoms such as nausea, vertigo, mood swings, sleep impairment, anxiety, isolation, or depression. He also faults the Board for not considering separate ratings for those symptoms and argues that this stemmed from the Board abdicating its duty to maximize benefits. In response, the Secretary challenges the factual basis of the appellant's argument. He disagrees that the Board found that all the symptoms the veteran attributes to his migraines were caused by the migraines. As the Secretary sees it, the Board only listed symptoms the veteran reported but did not decide that they are all caused by his migraines. Instead, the Board found that the symptoms at issue are all contemplated by the rating criteria, which consider whether the veteran's migraines cause prostrating attacks and then consider the frequency and duration of the prostrating attacks and whether they lead to severe economic inadaptability. The Secretary backs the Board's interpretation of DC 8100. Separately, the Secretary argues that the Board could not award separate ratings for all the alleged symptoms. A. Legal Landscape We begin by addressing whether the Board correctly found that the 50% rating for DC 8100 adequately compensated the veteran. If the Board was correct that this rating adequately compensated the veteran for his migraines, that would be the end of this matter. Because this is a question of regulatory interpretation, we begin with the text of the regulation. See Good Samaritan Hosp. v. Shalala, 508 U.S. 402 , 409 (1993). If the plain meaning of the regulation is clear from its 3 language, then that meaning controls and "that is 'the end of the matter.'" Tropf v. Nicholson, 20 Vet.App. 317 , 320 (2006) (quoting Brown v. Gardner, 513 U.S. 115 , 120 (1994)). Put another way, if the regulation is not ambiguous, the "regulation then just means what it means—and the court must give it effect." Kisor v. Wilkie, 139 S. Ct. 2400 , 2415 (2019). We thus turn to the text of DC 8100, the code that governs disability ratings for migraines. "With less frequent attacks," a veteran should be awarded a 0% rating. 38 C.F.R. § 4 .124a, DC 8100 (2020). "With characteristic prostrating attacks averaging one in 2 months over last several months," the veteran receives a 10% rating. Id. "With characteristic prostrating attacks occurring on an average once a month over last several months," a veteran is entitled to a 30% rating. Id. A 50% rating—the rating at issue—is awarded "[w]ith very frequent completely prostrating and prolonged attacks productive of severe economic inadaptability." Id. The Court has previously analyzed the meaning of this DC when we held that DC 8100's criteria are successive—meaning that each level of the DC requires that the veteran also satisfy the lower levels. Johnson v. Wilkie, 30 Vet.App. 245 , 247 (2018). On our way to that holding, we defined many terms in this regulation. "'Prostrating' means 'lacking in vitality or will: powerless to rise: laid low.'" Id. at 252 (citing WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY OF THE ENGLISH LANGUAGE UNABRIDGED 1822 (1966)). Thus, we explained that, "[b]ecause DC 8100 specifically governs migraine headaches, the phrase 'characteristic prostrating attacks' plainly describes migraine attacks that typically produce powerlessness or a lack of vitality." Id. at 252 . We then explained that the modifier "completely," as used before "prostrating" in the 50% criteria , meant that the veteran must be rendered entirely powerless and that "productive of severe economic inadaptability" means either producing or capable of producing severe economic inadaptability. Id. at 253 . Putting all this together, we see that the 50% rating for migraines is appropriate with very frequent, prolonged attacks that render the veteran entirely powerless and either cause or can cause severe economic inadaptability. This definition does not get us an answer here. To be sure, we can see that the rating criteria focus on attacks and differentiate between the different levels of disability based on the frequency, duration, and severity of those attacks, as well as whether they lead to or could lead to economic inadaptability. The rating criteria say nothing about headaches, nor do they focus only on the symptom of head pain. In fact, no specific symptoms are listed in the DC. But if migraines—the thing the veteran experiences during the attacks—refers solely to 4 headaches, this would mean that the regulation looks only to the severity, duration, frequency, and economic result of the veteran's headaches. In other words, the regulation would consider only headaches and not any other symptoms. Thus, at its core, this case is about whether headaches and migraines mean the same thing. DC 8100 lays out the criteria for migraines, but if migraines mean only headaches, the DC just gives the criteria for headache attacks. And if they do mean the same thing, then the Board erred when it found that the veteran's rating compensated him for more than headaches. But if migraines include more than headaches, the Board was on the right track. Thus, we turn to deciding the meaning of migraines. B. Defining Migraines As with any regulatory interpretation where the terms are not defined in the regulation, we presume those terms carry their ordinary dictionary meaning. See Moody v. Wilkie, 30 Vet.App. 329 , 336 (2018) (per curiam). To this end, the Board used Dorland's Medical Dictionary to define migraines as "familial symptom complex of periodic attacks preceded by prodromal sensory symptoms and commonly associated with irritability, nausea, vomiting[,] constipation or diarrhea, and photophobia." R. at 8. This definition dovetails with other sources. For example, a dictionary that straddles the time between when VA first created the rating schedule with DC 8100 in 1945 and then formally published in the Federal Register in 1964, defines migraine as "[a] nervous, pathological affection characterized by increasingly severe headache which is usually confined to one side of the head and is accompanied by nausea, vomiting and sensory disturbances." Migraine, WEBSTER'S NEW TWENTIETH CENTURY DICTIONARY: SECOND EDITION UNABRIDGED 1071 (1957); see also 29 Fed. Reg. 6718 , 6719 (May 22, 1964) (explaining the history behind VA's adopting the rating schedule). The understanding of a migraine as including more than headaches has continued up to today. The online version of Merriam-Webster defines migraine as "a condition marked by recurring moderate to severe headache with throbbing pain that usually lasts from four hours to three days [and] is often accompanied by nausea, vomiting, and sensitivity to light or sound, and is sometimes preceded by an aura and is often followed by fatigue." Migraine, Merriam- Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/ migraine; see also Migraine, Mayo Clinic, https://www.mayoclinic.org/diseases - conditions/migraineheadache/ symptoms-causes/syc-20360201 (explaining that "[a] migraine can 5 cause severe throbbing pain or a pulsing sensation, usually on one side of the head. [And is] often accompanied by nausea, vomiting, and extreme sensitivity to light and sound"). All these sources reflect that a migraine is a broad term that covers more than headaches. This presents an opportune time to explain our reliance on dictionaries and address Mr. Holmes's concern with the Board's use of Dorland's. Mr. Holmes argues that the Board erred by relying on a dictionary to conclude that the migraine rating contemplates more than headaches because this means that the Board made its own impermissible medical determination. See Colvin v. Derwinski, 1 Vet.App. 171 , 172 (1991), overruled on other grounds by Hodge v. West, 155 F.3d 1356 (Fed. Cir. 1998). This is not correct. Neither the Board, nor this Court, is turning to a dictionary to decide whether something is a symptom of migraines. Instead, we look to a dictionary to determine whether migraines include more than headaches. To be sure, it would be improper for the Board or this Court to look at a dictionary or treatise and use that to make a medical decision about whether a particular symptom results from the veteran's service-connected disability. See Delrio v. Wilkie, 32 Vet.App. 232 , 242 (2019) (noting that VA adjudicators "generally lack the expertise or competence to opine on medical matters"). But that's not what's happening here. Our goal is not to replace a medical professional, but to determine what VA meant when it said that "migraines" "[w]ith very frequent completely prostrating and prolonged attacks productive of severe economic inadaptability" should be rated as 50% disabling. 38 C.F.R. § 4 .124a, DC 8100 (emphasis added). Did VA simply mean that headaches with very frequent, prolonged, and prostrating attacks and causing economic inadaptability should be rated at 50%? Or was VA referring to more than headaches? Answering this question is no different from what we did in Johnson when we defined the other terms in DC 8100. See 30 Vet.App. at 252-53; see also Marbury v. Madison, 5 U.S. 137 , 177 (1803) ("It is emphatically the province and duty of the judicial department to say what the law is. Those who apply the rule to particular cases, must of necessity expound and interpret that rule."); 38 U.S.C. § 7261 (a)(1) (authorizing this Court to "decide all relevant questions of law, interpret constitutional, statutory, and regulatory provisions, and determine the meaning or applicability of the terms of an action of the Secretary"). Thus, let us then return to our task of interpreting DC 8100. Recall that we just confirmed that migraine is a broader term than headache. With this piece of DC 8100 in place, we break down each element of the 50% rating. First, we have "migraines"— 6 the thing being rated and which we now know includes symptoms besides simply headaches. Next, we also already know that the 50% rating requires "very frequent completely prostrating and prolonged attacks." 38 C.F.R. § 4 .124a, DC 8100. Or, in other words, the attacks must be frequent, prolonged, and render the veteran entirely powerless. Finally, the attacks must result or potentially lead to severe economic inadaptability. Id.; Johnson, 30 Vet.App. at 253. Putting this together, we see what VA looks to when it rates migraines and how it differentiates symptoms. As we explained, the rating focuses on "attacks." It is the frequency, duration, severity, and economic impact of these attacks that differentiate the levels of disability in DC 8100. And because migraines include more than just headaches, we can see that the rating criteria must not be concerned merely with one symptom—the veteran's headaches, but also other things that he or she experiences because of migraine attacks. Thus, VA must look at everything the veteran experiences as a result of migraine attacks and then consider the frequency, duration, severity, and economic impact of those symptoms. Or as the Board put it, "[t]he rating criteria for migraines, by [their] very nature, contemplate the various manifestations of such disability by focusing on the overall functional impairment, rather than a demonstration of particular symptoms." R. at 8. The bottom line is that the rating criteria for migraines contemplate all migraine symptoms. And so, we hold that DC 8100 contemplates more than just headache symptoms and requires that VA consider all the symptoms the veteran experiences as a result of migraine attacks, and then rate those symptoms based on the frequency, duration, severity, and economic impact of the attacks. See 38 C.F.R. § 4 .124a, DC 8100. In other words, whatever symptoms the veteran experiences associated with migraine attacks, VA must consider when assigning a schedular disability rating. This is much like the severity, frequency, and duration analysis relevant to evaluating a psychiatric disorder under 38 C.F.R. § 4.130 . See Vazquez-Claudio v. Shinseki, 713 F.3d 112 , 116 (Fed. Cir. 2013). The disability levels for psychiatric disorders are "distinguished from one another by the frequency, severity, and duration of their associated symptoms." Id. Mr. Holmes resists this reading by asking us not to defer to the Secretary's interpretation— which agrees with our own reading of the regulation. But we do not defer to the Secretary. We resolve this case based on the plain language of the regulation, thus leaving no room for ambiguity - resolving canons or deference to the Secretary's interpretation of his regulation. See Kisor, 139 S. Ct. at 2415 . Mr. Holmes is also mistaken when he argues that this reading of the regulation 7 reads out the possibility of additional compensation for manifestations of migraines and the application of VA's duty to maximize benefits. Our reading of the regulation does not foreclose the possibility that a veteran's migraines could cause or aggravate a separate disability that would then need to be compensated through other means, such as secondary service connection under 38 C.F.R. § 3.310 (a). For instance, if a manifestation was noted to be constant, as opposed to just during migraine attacks, this may raise the possibility of a secondary disability. Likewise, if the veteran's migraines go beyond economic inadaptability and lead to the veteran being unable to secure substantially gainful employment, a total rating based on individual unemployability remains an option. See 38 C.F.R. § 4.16 (2020). And of course, the veteran's symptoms may raise extraschedular considerations if they present an exceptional case with symptoms more severe, frequent, or long-lasting than what is contemplated in the rating criteria—very frequent, completely prostrating and prolonged attacks, leading to economic inadaptability. See 38 C.F.R. §§ 3.321 (2020), 4.124a, DC 8100. Besides, any difficulty of awarding additional compensation that may result does not render unreasonable VA's interpretation of the diagnostic code. Recall the rating for psychiatric disabilities. The Federal Circuit has read § 4.130 to encompass all psychiatric symptoms. See Vazquez-Claudio, 713 F.3d at 115-16. Yet there is no question that this does not render unreasonable the Secretary's rating criteria. In the end, we may not strike down a valid interpretation of a diagnostic code simply because we find its plain text to be less favorable than other diagnostic codes. This Court "may not review the schedule of ratings for disabilities adopted under section 1155 . . . or any action of the Secretary in adopting or revising the schedule." 38 U.S.C. § 7252 (b). The Federal Circuit has made clear that, absent a constitutional claim, we are prohibited from reviewing the validity of the rating schedule. See Wanner v. Principi, 370 F.3d 1124 , 1131 (Fed. Cir. 2004). Thus, even if we found that the plain language of DC 8100 is less favorable to veterans than other diagnostic codes, we lack the authority to rewrite it to a more favorable one. C. Application to Mr. Holmes Having found that DC 8100 contemplates more than headaches, we turn to the Board's decision as applied to Mr. Holmes's case. This ultimately proves a short inquiry. At the outset, we agree with Mr. Holmes that "[t]he Board associated several of [his] non- headache symptoms, including dizziness, anxiety, depression, isolation, and nausea, with his 8 migraine headaches." Appellant's Br. at 6. 1 The Board laid out the evidence of the veteran's symptoms that it considered when assigning his rating. R. at 7-8. As part of this analysis, the Board did not make any unfavorable determinations that the symptoms did not result from appellant's migraines. Id. This is a favorable finding that we may not disturb. See 38 U.S.C. § 7261 (a)(4) (permitting review only of "adverse" material findings). At the same time, the Board did not find that Mr. Holmes has separate disabilities that are caused or aggravated by his migraines. Instead, the Board accepted the veteran's statements that when he has migraines, he experiences symptoms like nausea, dizziness, or "mood swings from okay, to depressed" and not wanting to be around people. R. at 795. We understand both the Board's finding and Mr. Holmes's primary position to be that he suffers from feelings of depression or anxiety associated with his migraines, not that he has separate diagnosed disabilities secondary to his migraine disability. 2 After laying out Mr. Holmes's symptoms, the Board found that all the symptoms were adequately compensated by a 50% rating because the rating is "based on the severity, frequency, and duration of the symptoms reported by the [v]eteran and the resulting impairment of earning capacity." R. at 8. We have explained that the Board's conclusion—that the rating criteria contemplate more than just headaches—was correct. This largely controls the result of this case. Mr. Holmes focused his argument on fighting the definition used by the Board; he did not explain 1 As we explained, it is the role of the factfinder to decide whether something is a symptom of migraines based on the evidence before it. Our decision should not be read as establishing a list of migraine symptoms; we do not decide whether something is a symptom of a migraine. Our role is to review that finding. Here, Mr. Holmes agrees with the Board about what is a symptom of his migraines. 2 To the extent that Mr. Holmes may be arguing that the Board erred in failing to consider whether his migraines cause separate disabilities that may be compensated on a secondary basis, he has not demonstrated that any error on the part of the Board was prejudicial. See 38 U.S.C. § 7261 (b)(2) (requiring the Court to "take due account of the rule of prejudicial error"); Shinseki v. Sanders, 556 U.S. 396 , 409 (2009). In his principal brief, he argued only that, under Saunders v. Wilkie, 886 F.3d 1356 , 1364 (Fed. Cir. 2018), undiagnosed conditions—including vertigo, mood swings, sleep impairment, anxiety, isolation, and depression—could be compensated as separate disabilities. But the Court recently held that separate ratings for psychiatric symptoms are not warranted absent a diagnosis that conforms to the Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition. Martinez-Bodon v. Wilkie, 32 Vet.App. 393 , 404 (2020). Further, Mr. Holmes has identified no evidence, other than his lay assertions, indicating an association between any diagnosed psychiatric conditions and migraines. And he has not explained how any undiagnosed non-psychiatric impairments "rise to a level to affect earning capacity." Wait v. Wilkie, __ Vet.App. __, __, 2020 WL 5200689 , at *6 (Vet. App. Aug. 26, 2020). Rather, he points to diagnostic codes that reference those non-psychiatric impairments, without demonstrating the severity, duration, and frequency of his own manifestations of those conditions. Cf. id. at *7 ("Although the appellant may rely generally on VA's regulations to assert that VA recognizes [certain manifestations] as the types of manifestations that can cause functional impairment in earning capacity, he must also show that his manifestations are of sufficient severity, duration, and frequency that they effect his ability to function under the ordinary conditions of life."). 9 how he prevails if the Board's definition was correct. "[A]s a general rule, our system 'is designed around the premise that [parties represented by competent counsel] know what is best for them, and are responsible for advancing the facts and argument entitling them to relief.'" United States v. Sineneng-Smith, 140 S. Ct. 1575 , 1579 (2020) (second alteration in original) (quoting Castro v. United States, 540 U.S. 375 , 386 (2003) (Scalia, J., concurring in part and concurring in judgment)). In other words, Mr. Holmes does not explain how the alleged symptoms of his migraines exceed the severity contemplated by the rating criteria. That is, he does not show that the Board erred by finding that his symptoms are not more severe than "very frequent completely prostrating and prolonged attacks productive of severe economic inadaptability." 38 C.F.R. § 4 .124a, DC 8100. Essentially, Mr. Holmes argued that the Board erred because the regulation considers only headaches. But, as the regulation considers more than just headaches—it considers all symptoms of a migraine—Mr. Holmes would have to prove that his symptoms are either more severe, frequent, or disabling; are longer lasting; or cause greater economic inadaptability than what the 50% rating in DC 8100 contemplates. He has not done so. Yet it is his burden to do so. See Hilkert v. West, 12 Vet.App. 145 , 151 (1999) (en banc) (finding that the appellant bears the burden of proving error on appeal), aff'd per curiam, 232 F.3d 908 (Fed. Cir. 2000). The closest he gets is to argue that he has symptoms that are not listed in the dictionary definition used by the Board, thus leaving him uncompensated for those symptoms by the rating criteria. But he misunderstands what the Board did when it referenced the dictionary. The Board did not use the dictionary definition to establish an exclusive list of symptoms. Instead, it used that definition to conclude that DC 8100 "by its very nature, contemplate[s] the various manifestations of such disability by focusing on the overall functional impairment, rather than a demonstration of particular symptoms." R. at 8. Thus, we return to the fact that Mr. Holmes has not met his burden of showing error in the Board decision. His failure to do so leads us to affirm the Board decision and to leave the limits of DC 8100 to another day. 3 3 Because DC 8100 speaks of "attacks" and their frequency, secondary service connection or separate ratings may be a real possibility when some of a veteran's symptoms are constant. If something is always happening, it may no longer be reasonably measured by frequency of attacks. Would it simply be a single, long attack? At that point the Board may need to consider separate ratings or secondary service connection. Mr. Holmes has not argued that his symptoms cannot be characterized as very frequent and that their incidence is not tied to his migraine attacks. Nor do we discern clear error on the part of the Board as the veteran described his symptoms in relation to his migraine attacks. R. at 794-95. This is particularly true when we consider that Mr. Holmes has already been denied service connection 10  What's more, his remaining argument—that the Board failed to exhaust all schedular alternatives before proceeding to an extraschedular analysis—fares no better than his challenge to the Board's regulatory interpretation. Mr. Holmes relies on our decision in Morgan v. Wilkie, 31 Vet.App. 162 (2019), to support his argument. 4 In Morgan, we "h[eld] that VA's duty to maximize benefits requires it to first exhaust all schedular alternatives for rating a disability before the extraschedular analysis is triggered." Id. at 168 . But we also explained that "[t]he Board is not required to discuss each of these tools in every case, but it must do so when possible schedular alternatives for rating a disability are either raised by the claimant or reasonably raised by the record." Id. And the "rating schedule must be deemed inadequate before extraschedular consideration is warranted." Sowers v. McDonald, 27 Vet.App. 472 , 478 (2016) (emphasis added). Thus, if the Board was correct that all of Mr. Holmes's symptoms are adequately contemplated by the rating criteria, there is nothing for the Board to compensate on an extraschedular basis or through alternate means. Id. To this end, because Mr. Holmes fails to show error in the Board's conclusion that his schedular rating was adequate, he cannot prove prejudicial error from the Board's extraschedular analysis. See 38 U.S.C. § 7261 (b)(1) (requiring that when the Court concludes the Board errs, the Court must "take due account of the rule of prejudicial error"). As Mr. Holmes appears to recognize, if the Court finds no error in the Board's decision about his schedular rating, the issue of additional compensation for these symptoms becomes moot and the rule against pyramiding would kick in to prohibit separate compensation. See Appellant's Reply Brief at 14 (citing 38 C.F.R. § 4.14 (2019)). If the Board correctly found that DC 8100 compensates the symptoms that he alleges stem from his migraines, the Board had no more compensating left to do. 5 for sleep issues and psychiatric problems. 4 Neither party has asked us to stay this matter pending the outcome of Long v. Wilkie, U.S. Vet. App. No. 16-1537 (argued Aug. 28, 2019). And we note that Mr. Holmes is represented by the same counsel as Mr. Long. Because our resolution of this issue is resolved by noncontroversial precedent and the basic principle of the regulatory framework that extraschedular considerations arise only "where the schedular evaluation is inadequate," 38 C.F.R. § 3.321 (b)(1), we find it appropriate to resolve this case while Long remains pending. See Smiddy v. Wilkie, 32 Vet.App. 350 , 355 (2020). 5 We stress that separate ratings, secondary service connection, or other schedular and extraschedular tools remain a viable option to adequately compensate those veterans with migraine symptoms that exceed the severity, duration, frequency, and economic impact covered by DC 8100. In Mr. Holmes's case, those options were unavailable because the Board found that all the symptoms are adequately compensated and he has not established erro r in that finding. 11  In the end, we affirm the Board decision. This is because we hold that DC 8100 requires that VA consider all the symptoms the veteran experiences because of his migraine attacks, and then rate those symptoms based on the frequency, duration, severity, and economic impact of those attacks. As Mr. Holmes has not shown that the Board clearly erred in finding that his migraine s lead to very frequent completely prostrating and prolonged attacks productive of severe economic inadaptability and that he is thus adequately compensated, he fails to meet his burden on appeal. See Hilkert, 12 Vet.App. at 151. We leave for another day the question of how frequent or severe a veteran's symptoms must be to fall outside what's contemplated by DC 8100. III. CONCLUSION On consideration of the above and our review of the record, the Board's March 1, 2019, decision is AFFIRMED. 12

2020-12-01 14:01:31.908383+00

https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2019cv0496-42-0

In the United States Court of Federal Claims No. 19-496C (E-Filed: November 30, 2020) ) ACADIANA MANAGEMENT GROUP, ) LLC, et al., ) ) Plaintiffs, ) ) Motion to Dismiss; RCFC v. ) 12(b)(1); RCFC 12(b)(6); ) Bankruptcy Fees; Illegal THE UNITED STATES, ) Exaction; No Means of ) Transfer. Defendant. ) ) Bradley L. Drell, Alexandria, LA, for plaintiff. August Rantz, IV, Heather M. Matthews, Chelsea M. Tanner, of counsel. Shari A. Rose, Trial Attorney, with whom were Joseph H. Hunt,1 Assistant Attorney General, Robert E. Kirschman, Jr., Director, and Claudia Burke, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, for defendant. OPINION CAMPBELL-SMITH, Judge. Before the court is defendant’s motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6) of the Rules of the United States Court of Federal Claims (RCFC). See ECF No. 18. Defendant filed its motion on October 7, 2019, and plaintiffs filed their response on 1 Defendant’s response to plaintiff’s supplemental brief in this matter, ECF No. 40, substitutes Acting Assistant Attorney General Ethan P. Davis for Joseph H. Hunt. Mr. Hunt appears on all defendant’s briefing up to that point. November 26, 2019. See ECF No. 21. Defendant filed a reply on January 31, 2020, see ECF No. 26. Plaintiffs filed a sur-reply pursuant to the court’s order granting their request, see ECF No. 32, on April 21, 2020. See ECF No. 33. And, defendant filed a response to plaintiffs’ sur-reply on May 12, 2020. See ECF No. 36. Plaintiffs then filed a supplemental brief in support of their response to defendant’s motion on August 21, 2020. See ECF No. 39. Defendant filed a response to plaintiffs’ supplemental brief on August 28, 2020. See ECF No. 40. Briefing is now complete and the motion is ripe for decision.2 For the reasons set forth below, defendant’s motion to dismiss plaintiffs’ complaint is GRANTED. I. Background3 Plaintiffs filed their complaint in this court on April 3, 2019, alleging that the fees they paid during their Chapter 11 bankruptcy proceedings were higher than they would have been had plaintiffs filed their bankruptcies in a different jurisdiction, thus making the bankruptcy system non-uniform in violation of the United States Constitution. See ECF No. 1 at 3. Plaintiffs have since amended their complaint twice to add information and plaintiffs. See ECF No. 8 (first amended complaint); ECF No. 17 (second amended complaint). Plaintiffs’ complaint arises out of the United States Trustee Program (USTP) under the United States Department of Justice, which appoints and supervises bankruptcy trustees to undertake many of the administrative responsibilities of the bankruptcy system. See ECF No. 17 at 7. All bankruptcy jurisdictions participate in the program, with the exception of those in Alabama and North Carolina. See id. Those states instead implemented the Bankruptcy Administrator Program (BAP) under the Administrative Office of the United States Courts and the Judicial Conference of the United States, 2 On November 30, 2020, defendant filed an unopposed motion for leave to file a supplemental brief in this matter. See ECF No. 41. Defendant seeks leave to file a brief drawing the court’s attention to a recent decision of the United States Court of Appeals for the Fifth Circuit, In re Buffets, LLC, 979 F.3d 366 (5th Cir. 2020), “which involved parallel challenges to the amended quarterly-fee statute at issue in this case.” ECF No. 41-1 at 2. For good cause, defendant’s motion is GRANTED. Defendant’s brief reinforces the conclusions that the court reaches herein. 3 The facts are taken from plaintiffs’ complaint and are undisputed by defendant in its motion to dismiss. The court makes no findings of fact here. 2 which performs a similar function to the USTP.4 See id. Both programs are funded by the debtors who utilize the bankruptcy system through the payment of quarterly fees. See id. at 7-8 (citing 28 U.S.C. § 1930 ). In 2017, Congress increased the quarterly fees owed by debtors who filed for bankruptcy pursuant to Chapter 11 of the bankruptcy code, 11 U.S.C. §§ 1101-1195 , and had disbursements greater than $1,000,000, to “‘the lesser of 1 percent of such disbursements or $250,000.’” Id. at 8 (quoting and citing 28 U.S.C. § 1930 (a)(6)(B)). The increased fees were to go into effect for “each of fiscal years 2018 through the first quarter of 2018, “in bankruptcy cases filed before October 1, 2018, inclusive of cases filed before October 26, 2017.” Id. at 8-9. The BAP, however, did not implement the increased fee until the fourth quarter of 2018 and did not apply it to cases filed prior to October 1, 2018. See id. at 9. Plaintiffs are two groups of companies that filed Chapter 11 bankruptcy cases in 2017. See id. at 4-6, 9. The first group is Acadiana Management Group, LLC; Albuquerque-AMG Specialty Hospital, LLC; Central Indiana-AMG Specialty Hospital, LLC; LTAC Hospital of Edmond, LLC; Houma-AMG Specialty Hospital, LLC; LTAC of Louisiana, LLC; and Las Vegas-AMG Specialty Hospital, LLC (AMG plaintiffs). See id. at 4-5. The AMG plaintiffs filed their bankruptcy cases on June 23, 2017, “with a joint plan of reorganization,” in the United States District Court for the Western District of Louisiana. Id. at 4-5, 9. The second group of plaintiffs includes Mr. Warren L. Boegel; Boegel Farms, LLC; and Three Bo’s, Inc., (Boegel plaintiffs), which each filed their Chapter 11 bankruptcy cases on February 23, 2017 in the United States District Court for the District of Kansas. See id. at 5-6, 9. The bankruptcy court entered final decrees in the AMG plaintiffs’ cases on June 15, 2018, and issued structural dismissals in the Boegel plaintiffs’ cases on June 18, 2018, and June 21, 2018. See id. at 9. Plaintiffs paid the increased quarterly fees in the first and second quarters of 2018. See id. at 9-11. Had plaintiffs filed their bankruptcy cases in the BAP jurisdictions— Alabama or North Carolina—the AMG plaintiffs would have paid $216,784.69 less in fees, and the Boegel plaintiffs would have paid $140,845 less in fees, because those 4 The United States Trustee Program (USTP) was established as a pilot program by the Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549 (1978), in 18 districts to “further the public interest in the just, speedy and economical resolution of cases filed under the Bankruptcy Code.” Department of Justice, United States Trustee Program: About the Program, https://www.justice.gov/ust/about-program (last updated Dec. 6, 2019). Congress then expanded the program by enactment of the Bankruptcy Judges, U.S. Trustees & Family Farmer Bankruptcy Act of 1986, Pub. L. No. 99-554, 100 Stat. 3088 (1986), to cover all jurisdictions except North Carolina and Alabama, in which the Bankruptcy Administrator Program (BAP) was established that same year. See id.; United States Courts, Trustees and Administrators, https://www.uscourts.gov/services-forms/bankruptcy/trustees-and-administrators (last visited Nov. 24, 2020). 3 jurisdictions did not implement the increased fees for cases filed prior to October 1, 2018. See id. at 9, 11. Plaintiffs therefore filed suit in this court alleging that the difference amounted to an illegal exaction in violation of the Constitution and by way of a misapplication of the fee statute. See id. at 11. Plaintiffs seek class certification for similarly situated plaintiffs. See id. at 11-19. Defendant moved to dismiss plaintiffs’ complaint for lack of jurisdiction and, in the alternative, for failure to state a claim. See ECF No. 18. After extensive briefing, this matter is ripe for decision by the court. II. Legal Standards A. Subject Matter Jurisdiction Plaintiffs bear the burden of establishing the court’s subject matter jurisdiction by a preponderance of the evidence. See Brandt v. United States, 710 F.3d 1369 , 1373 (Fed. Cir. 2013). To determine whether plaintiffs have carried this burden, the court must accept “as true all undisputed facts asserted in the plaintiff’s complaint and draw all reasonable inferences in favor of the plaintiff.” Trusted Integration, Inc. v. United States, 659 F.3d 1159 , 1163 (Fed. Cir. 2011) (citing Henke v. United States, 60 F.3d 795 , 797 (Fed. Cir. 1995)). If the court does not have jurisdiction over the matter, the court must dismiss it, see RCFC 12(h)(3), or, if it is in the interests of justice, transfer the case to a court that has jurisdiction, see 28 U.S.C. § 1631 . The Tucker Act delineates this court’s jurisdiction. See 28 U.S.C. § 1491 . That statute “confers jurisdiction upon the Court of Federal Claims over the specified categories of actions brought against the United States.” Fisher v. United States, 402 F.3d 1167 , 1172 (Fed. Cir. 2005) (en banc) (citations omitted). Specifically, the statute provides: The United States Court of Federal Claims shall have jurisdiction to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort. 28 U.S.C. § 1491 (a)(1). The Tucker Act “waives the Government’s sovereign immunity for those actions.” See Fisher, 402 F.3d at 1172. The statute does not, however, create a substantive cause of action or right to recover money damages in the Court of Federal Claims. See id. “[T]o come within the jurisdictional reach and the [sovereign immunity] waiver of the Tucker Act, a plaintiff must identify a separate source of substantive law that creates the right to money damages.” Id. (citations omitted). In other words, the source underlying the cause of action must be money mandating, in that it “‘can fairly be 4 interpreted as mandating compensation by the Federal Government for the damage sustained.’” United States v. Testan, 424 U.S. 392 , 400 (1976) (quoting Eastport S.S. Corp. v. United States, 372 F.2d 1002 , 1009 (Ct. Cl. 1967), and citing Mosca v. United States, 417 F.2d 1382 , 1386 (Ct. Cl. 1969)). B. Failure to State a Claim When considering a motion to dismiss brought under RCFC 12(b)(6), the court “must presume that the facts are as alleged in the complaint, and make all reasonable inferences in favor of the plaintiff.” Cary v. United States, 552 F.3d 1373 , 1376 (Fed. Cir. 2009) (citing Gould, Inc. v. United States, 935 F.2d 1271 , 1274 (Fed. Cir. 1991)). It is well-settled that a complaint should be dismissed under RCFC 12(b)(6) “when the facts asserted by the claimant do not entitle him to a legal remedy.” Lindsay v. United States, 295 F.3d 1252 , 1257 (Fed. Cir. 2002). “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)). III. Analysis A. This Court Has Jurisdiction to Hear Plaintiffs’ Claims In its motion to dismiss, defendant argues that this court does not have jurisdiction over this matter: (1) because plaintiffs’ claims arise under Title 11, which is committed to the bankruptcy courts; (2) because this court may not review bankruptcy court orders; and (3) because the statute at issue is not money mandating. See ECF No. 18 at 10-11. Plaintiffs respond that this court does have jurisdiction: (1) because the fee issue arises in a case brought pursuant to Title 11, but not directly under Title 11, and therefore is not committed to the bankruptcy court’s exclusive jurisdiction, see ECF No. 21 at 12-16; (2) because the court does not need to review any bankruptcy court orders to resolve the complaint, see id. at 16-19; and (3) because the United States Court of Appeals for the Federal Circuit determined that “there is no need to find a separate, express money damages provision in a fee-authorizing statute for plaintiffs to proceed under the Tucker Act,” ECF No. 39 at 1. 1. Concurrent Jurisdiction with the Bankruptcy Courts Plaintiffs assert a claim for illegal exaction based on their contention that the statute authorizing the bankruptcy fees they paid was unconstitutional. See ECF No. 17 at 12, 15, 17. Specifically, plaintiffs allege that the statute, 28 U.S.C. § 1930 (a)(6)-(7), as applied to themselves and other debtors like them, violated the uniformity requirement of Article 1 § 8 of the Constitution and the Due Process clause of the Fifth Amendment. See id. at 11; see also U.S. CONST. art. 1, § 8 (giving Congress the power to “establish . . . 5 uniform Laws on the subject of Bankruptcies throughout the United States”). Therefore, plaintiffs argue, this court has concurrent jurisdiction with the district courts to hear their claim. See ECF No. 21 at 12-16. Defendant, however, argues that this court does not have jurisdiction to hear cases arising under Title 11, or arising in or related to cases under Title 11. See ECF No. 18 at 21. Accordingly, because cases involving the quarterly fees mandated by 28 U.S.C. § 1930 arise in bankruptcy, this court lacks jurisdiction to consider them. See ECF No. 18 at 21. The parties did not point out, nor could this court find, case law from either this court or the Federal Circuit squarely addressing this court’s jurisdiction to hear claims related to the fees paid in bankruptcy matters. Therefore, the court must review both its own jurisdiction and that of the bankruptcy courts to decide this matter. Congress, through legislation, has conferred specific jurisdiction on both this court and the bankruptcy court. A case coming before this court must involve a “claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort,” and the substantive law forming the basis of the claim must be money mandating. 28 U.S.C. § 1491 (a)(1); see also Testan, 424 U.S. at 400 . Likewise, only the bankruptcy courts, by designation from the district courts, may hear cases brought “under title 11”— the bankruptcy code. 28 U.S.C. § 1334 (a); see also 28 U.S.C. § 157 (a). As a general matter, then, this court does not have jurisdiction to hear cases arising under bankruptcy law even if they involve claims against the United States. See, e.g., Allustiarte v. United States, 256 F.3d 1349 , 1352 (Fed. Cir. 2001) (holding that permitting collateral attacks on bankruptcy court decisions in the guise of takings claims in this court is not permitted); Hufford v. United States, 87 Fed. Cl. 696 , 703 (2009) (noting that cases arising under Title 11 “concern bankruptcy, which is committed either to the district courts or to bankruptcy courts”). Jurisdiction of this court and jurisdiction of the bankruptcy courts overlap only under particular circumstances. The bankruptcy courts do not have exclusive jurisdiction over “civil proceedings arising under title 11, or arising in or related to cases under title 11.” 28 U.S.C. § 1334 (b). Thus, where a party brings a civil proceeding against the United States “arising under title 11, or arising in or related to cases under title 11” this court may have concurrent jurisdiction with the bankruptcy courts to decide the case. Id.; 28 U.S.C. § 1491 (a)(1); Quality Tooling, Inc. v. United States, 47 F.3d 1569 , 1572-73 (Fed. Cir. 1995). The court must, therefore, determine whether plaintiffs’ claims constitute “civil proceedings arising under title 11, or arising in or related to cases under title 11” such that they may fall within the concurrent jurisdiction of this court and the bankruptcy court. 28 U.S.C. § 1334 (b). A claim “arises under” Title 11 if it “involve[s] a cause of action created or determined by a statutory provision of title 11.” In re Wood, 825 F.2d 6 90, 96 (5th Cir. 1987). Similarly, a claim “arises in” Title 11 if it is “not based on any right expressly created by title 11, but nevertheless, would have no existence outside of the bankruptcy.” Id. at 97. If the claim could only arise in bankruptcy, it is a core proceeding—one which the bankruptcy court may hear and on which it may enter orders and judgments. See id.; 28 U.S.C. § 157 (b). Plaintiffs’ claims here stem from 28 U.S.C. § 1930 , which sets the fees to be paid by debtors making use of the bankruptcy system. See generally ECF No. 17. In the context of determining whether a claim to enforce § 1930 was a core proceeding, and therefore within the bankruptcy court’s jurisdiction, the United States Court of Appeals for the Third Circuit determined that “by definition, an action for trustee’s fees pursuant to § 1930(a)(6) applies only in chapter 11 cases,” and therefore must “arise in” bankruptcy. United States Tr. v. Gryphon at Stone Mansion, Inc., 166 F.3d 552 , 556 (3d Cir. 1999); see also In re Boulders on the River, Inc., 218 B.R. 528 , 543 (D. Or. 1997) (finding that a § 1930 claim “arises in a title 11 case and is therefore a core proceeding squarely within the jurisdiction of the bankruptcy court”). Thus, the Third Circuit concluded that the bankruptcy courts have jurisdiction to hear a claim under § 1930 pursuant to 28 U.S.C. § 1334 (b) and 28 U.S.C. § 157 (b). See Gryphon at Stone Mansion, Inc., 166 F.3d at 555-56 . The Third Circuit did not, however, explicitly consider the question of whether a claim under § 1930 arises under Title 11, and thereby falls within the exclusive jurisdiction of the district courts sitting in bankruptcy. See id. In determining the limits of this court’s jurisdiction, the court looks to its own controlling precedent. In Quality Tooling, the Federal Circuit addressed this court’s concurrent jurisdiction with the bankruptcy courts. See 47 F.3d at 1572-73 . In that case, the plaintiff brought a contract dispute before this court and subsequently filed for protection under Chapter 11 of the Bankruptcy Act, 11 U.S.C. §§ 1101-1195 . See id. at 1571. After several procedural moves by the parties, the plaintiff’s contract claim landed in the bankruptcy court and the defendant moved to transfer it back to this court, arguing that the bankruptcy court did not have jurisdiction to hear the claim. See id. at 1571-72. The Federal Circuit considered the jurisdiction of both courts and concluded that “[t]here can be little doubt that, by statute, both the District Court, sitting in bankruptcy, and the Court of Federal Claims are empowered with subject matter jurisdiction over this contract dispute.” Id. at 1573. The Circuit Court did not end its analysis there, however; it went on to consider the “prudential problem” of “which court should hear the case, and why?” Id. at 1579 (emphasis in original). After reviewing the case law, the court held that “‘a bankruptcy court should defer a complicated, technical dispute to a specialized forum,’” although it was up to the discretion of the bankruptcy judge to determine whether a particular case presented the complicated, technical disputes meriting transfer. Id. at 1580 (quoting Gary 7 Aircraft Corp. v. United States, 698 F.2d 775 , 783 (5th Cir. 1983)). The Federal Circuit then concluded that “by and large” government contract claims should be transferred to this court for resolution. Id. The court finds the Federal Circuit’s ruling in Quality Tooling to be persuasive, which might counsel against this court making a determination about the “complicated, technical dispute” over the constitutionality of a bankruptcy law. Id. at 1580; cf. Allustiarte, 256 F.3d at 1352 . Of note, plaintiffs’ claims do not stand-alone; rather, their claims are derivative of plaintiffs’ bankruptcy proceedings. The claims also involve a question about the law authorizing the funding for a program that is integral to the bankruptcy courts—the USTP—which has been inextricably intertwined with the bankruptcy courts since its founding in 1978. See Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2686 (1978); Department of Justice, United States Trustee Program: About the Program, https://www.justice.gov/ust/about-program (last updated Dec. 6, 2019). Were the court to apply the Circuit’s reasoning in Quality Tooling here, it might find that the tribunal in the best position to evaluate the constitutionality of § 1930, which has been deemed to represent a core proceeding to bankruptcy and authorizes the funding for program that is integral to the bankruptcy courts, is the forum built for review of bankruptcy matters—the district courts, sitting in bankruptcy. Like this court’s particular expertise in government contracting matters, the bankruptcy court has particular expertise in bankruptcy matters. The rub in such circumstance, however, is that the court can discern no ready means to transfer this case to the district court. The court’s review of the case law reveals that plaintiffs’ claims likely arise in bankruptcy for purposes of the bankruptcy court’s jurisdiction. See Gryphon at Stone Mansion, Inc., 166 F.3d at 556 . Without sufficient guidance as to whether such a claim could appropriately be transferred to another court of specific jurisdiction, the court must conclude that a claim against the United States premised on § 1930 falls under the concurrent jurisdiction of the bankruptcy court and this court. Therefore, the court cannot transfer this matter to the district court pursuant to 28 U.S.C. § 1631 , which only provides a means of transfer when the court lacks jurisdiction. See Fisherman’s Harvest, Inc. v. PBS&J, 490 F.3d 1371 , 1375 (Fed. Cir. 2007) (“Because there was no ‘want of jurisdiction’ . . . , a transfer under section 1631 is not proper.”). Likewise, transfer in the interests of justice pursuant to 28 U.S.C. § 1404 (a) is limited to transfers between district courts. See id. at 1378. The court therefore, concludes that, despite any prudential considerations that might weigh against its deciding this matter, it has concurrent jurisdiction in this case and must so decide. 8  2. Bankruptcy Court Orders Defendant asserts that this court lacks jurisdiction over plaintiffs’ claims because to render a decision in this matter the court must review orders entered by the bankruptcy court. See ECF No. 18 at 22. Defendant argues that the AMG plaintiffs’ bankruptcy plan and confirmation order included direction that plaintiffs “‘shall be responsible for timely payment of United States Trustee quarterly fees incurred pursuant to 28 U.S.C. § 1930 (a)(6) through the second quarter of 2018.’” Id. at 23 (quoting bankruptcy court order confirming AMG plaintiffs’ plan). Likewise, defendant notes that the Boegel plaintiffs’ dismissal order stated that there were “‘very limited assets for reorganization purposes,’” but argues that plaintiffs now assert that an additional $140,845 would have been available to creditors before dismissal. Id. at 24-25 (quoting bankruptcy court dismissal order for the Boegel plaintiffs). These orders, defendant contends, occurred after Congress’ amendment to § 1930, and would require review by this court in making a decision in this matter. See id. at 23-25. Plaintiffs respond that “this Court need not review, much less interpret, any order of any bankruptcy court to rule on the allegations set forth in this action.” ECF No. 21 at 16-17. It is well-settled that this court may not review the orders of a district court. See Joshua v. United States, 17 F.3d 378 , 380 (Fed. Cir. 1994) (“[T]he Court of Federal Claims does not have jurisdiction to review the decisions of district courts.”). The court agrees with plaintiffs, however, that this case requires no such review. Plaintiffs have alleged an illegal exaction premised on the unconstitutionality of § 1930(a)(6) and its application to their bankruptcy cases. The orders quoted by defendant refer generally to the necessity that plaintiffs pay fees and the amount of assets available for dispersal, while plaintiffs’ claims allege the illegal exaction of fees based on the constitutionality of the statute authorizing their imposition. This does not constitute a collateral attack on the judgment issued by the bankruptcy court. Cf. Allustiarte, 256 F.3d at 1351 (reasoning that reviewing a takings claim premised on the actions approved by a bankruptcy court constituted an improper collateral attack on that court’s judgment). The court need not review any bankruptcy court orders to determine whether the statute is constitutional, and, thereby, determine whether its application constituted an illegal exaction. 3. Money Mandating Statute Finally, defendant asserts that this court lacks jurisdiction because § 1930 is not a money-mandating statute, as it does not provide “a money remedy for an allegedly unlawful assessment of quarterly fees.” ECF No. 18 at 25. Defendant contends that plaintiffs cannot demonstrate that the statute provides that the remedy for its violation is 9 the return of money because there is “no language” in § 1930 that provides debtors with a “right to compensation” for unlawfully assessed fees.5 Id. at 26. Plaintiffs respond that, in an claim for illegal exaction, it must demonstrate only that it paid money to the government that was improperly paid and “‘by necessary implication’” the statute provides for the return of those fees. ECF No. 21 at 19-20 (quoting Norman v. United States, 429 F.3d 1081 , 1095 (Fed. Cir. 2005), and citing Nat’l Veterans Legal Servs. Program v. United States, 235 F. Supp. 3d 32 , 37 n.2 (D.D.C. 2017)). As the parties discussed in their supplemental briefs, the Federal Circuit recently addressed whether an illegal exaction claim premised on a fee-authorizing statute must be accompanied by a separate money-mandating statute to establish this court’s jurisdiction. See ECF No. 39; ECF No. 40. As plaintiffs point out, the Federal Circuit distinguished illegal exaction claims from claims requiring a money-mandating statute and held that a fee authorizing statute “by necessary implication” provides that “the remedy for its violation is the return of money unlawfully exacted,” thereby ensuring jurisdiction in this court. Nat’l Veterans Legal Servs. Program v. United States, 968 F.3d 1340 , 1348 (Fed. Cir. 2020); see also ECF No. 39 at 4-5. The Federal Circuit also recently determined that the court may “assume[] jurisdiction over statutory illegal exaction claims with no regard for whether the statutes were ‘money-mandating.’” Boeing Co. v. United States, 968 F.3d 1371 , 1384 (Fed. Cir. 2020). The statute at issue here, 28 U.S.C. § 1930 , is clearly a fee authorizing statute and plaintiffs have alleged an illegal exaction claim based on the fees they paid pursuant to the statute. Therefore, consistent with Federal Circuit precedent, this court has jurisdiction to hear plaintiffs’ illegal exaction claims regardless of whether the statute itself contains a remedy requiring the return of fees paid in violation of the statute. See Nat’l Veterans Legal Servs. Program, 968 F.3d at 1348; Boeing Co., 968 F.3d at 1384. B. Plaintiffs Have Failed to State a Claim Upon Which Relief Can Be Granted Defendant argues that plaintiffs’ claims must be dismissed because they cannot state an illegal exaction claim and therefore have failed to state a claim upon which relief can be granted. See ECF No. 18 at 29-34. Defendant contends that plaintiffs cannot state a claim because § 1930 does not violate the Constitution—the second prong of an illegal exaction claim. See id. at 29. Specifically, defendant asserts that the fee statute is not subject to the uniformity requirement of the Bankruptcy clause of the Constitution, is 5 Defendant withdrew this argument in light of the precedent discussed herein in its late- filed supplemental brief. See ECF No. 41-1 at 1 (defendant’s supplemental brief in support of its motion to dismiss). 10 uniform on its face in any event, and is not impermissibly retroactive or violative of the Due Process clause. See id. at 29-34. Plaintiffs respond that they have stated claims upon which relief can be granted because § 1930 violates the uniformity requirement of the Bankruptcy clause in its application—which is the relevant inquiry. See ECF No. 21 at 24-28, 30-36. The non- uniformity stems, according to plaintiffs, from the separate USTP and BAP systems. See id. at 28-29. Further, plaintiffs contend, the statute violates the Due Process clause of the Fifth Amendment by applying unequally across geographic areas and applying retroactively. See id. at 36-47. To state an illegal exaction claim, plaintiffs must demonstrate that they “ha[ve] paid money over to the Government, directly or in effect,” that was “improperly paid, exacted, or taken from the claimant in contravention of the Constitution, a statute, or a regulation.” Eastport S.S. Corp., 372 F.2d at 1007 . “An illegal exaction involves a deprivation of property without due process of law, in violation of the Due Process Clause of the Fifth Amendment to the Constitution.” Norman, 429 F.3d at 1095 . While this court typically lacks jurisdiction over due process claims, where “the government ha[s] illegally exacted money by enforcement of a regulation that was contrary to statute, the court ha[s] jurisdiction under the Tucker Act to render judgment against the United States for recovery of that money.” Aerolineas Argentinas v. United States, 77 F.3d 1564 , 1573 (Fed. Cir. 1996). Although in deciding a motion to dismiss for failure to state a claim this court must presume that the facts alleged are true, the court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555 (citations and quotations omitted). In this case, the second prong of plaintiffs’ illegal exaction claim—that the statute at issue is a violation of the Constitution—is a legal inquiry rather than a factual one. Id. Therefore, plaintiffs’ allegations related to the unconstitutionality of 28 U.S.C. § 1930 are legal conclusions that the court is not bound to accept as true. The United States Court of Appeals for the Fifth Circuit recently addressed the constitutionality of § 1930’s fee increase and its varying application to debtors in USTP districts and BAP districts. See In re Buffets, LLC, 979 F.3d 366 (5th Cir. 2020). In Buffets, the plaintiffs filed their bankruptcies in 2016, and they were still pending in 2018 when the increased fee went into effect. See id. at 372 . Plaintiffs refused to pay the increased fees, disputed the payments that the bankruptcy court classified as disbursements and challenged the constitutionality of the amendment. See id. The bankruptcy court agreed with the plaintiffs and held that the amendment was unconstitutional. See id. The trustee appealed that ruling to the district court and the district court certified the question to the Fifth Circuit for decision. See id. at 372-73 . 11  After settling the plaintiffs’ disbursement issue, the Fifth Circuit addressed the plaintiffs’ argument that the increased fees were impermissibly retroactive. See id. at 374-76 . The court noted that the statute on its face applies to disbursements made after the amendment’s enactment, rather than turning on when the debtors’ bankruptcy cases were filed. See id. at 374 . The court reviewed the congressional history of applying fee increases to disbursements made after an effective date and concluded that Congress had always made fee increases so applicable. See id. It compared the increased fees to property taxes that increase after the purchase of a home and held that the fee increase is not impermissibly retroactive because it does not “impair rights” that the debtors had at the time they filed bankruptcy or “increase . . . liability” for conduct that had already occurred. Id. at 375-76 . Rather, the increase merely upsets debtors’ “expectations as to amounts owed based on future distributions”—a permissible application. Id. (emphasis in original). The court then addressed “the main event: whether [the] fee increase violates constitutional uniformity requirements.” Id. at 376-80 . After concluding that the uniformity requirement of the Bankruptcy clause likely applies to the fee statute, the court held that, even if it did not, there is “no uniformity problem” with the statute. Id. at 377 . In coming to that conclusion, the Fifth Circuit reviewed United States Supreme Court precedent and reasoned that the concept that arbitrary geographical differences in the bankruptcy code are impermissible “‘does not deny Congress power to take into account differences that exist between different parts of the country, and to fashion legislation to resolve geographically isolated problems.’” Id. at 378 (quoting Reg’l R.R. Reorganization Act Cases, 419 U.S. 102 , 159 (1974)). Therefore, when Congress determined that it needed to remedy a shortfall in the USTP’s funding, it could “solve ‘the evil to be remedied’ with a fee increase in just the underfunded districts.” Id. (quoting Reg’l R.R. Reorganization Act Cases, 419 U.S. at 160-61 ). Thus, the Fifth Circuit concluded that “[i]t is reasonable for Congress to have those who benefit from the Trustee Program fill the hole in its finances.” Id. at 380. Finally, the Fifth Circuit turned to the plaintiffs’ argument that the increased fees presented a due process violation. See id. at 380-82. The court concluded that “[t]he fee increase easily survives rational basis review,” because it clearly addresses a funding shortfall in the USTP and is tied directly to the deficit. Id. at 380. Likewise, it concluded that the increased fee could not be a taking under the Fifth Amendment because “[t]axes and user fees are not takings under the Fifth Amendment” nor are “[f]ees that strengthen the program [from which] debtors benefit” a taking. Id. at 381. The court ultimately concluded that “[t]he fee increase applies to those disbursements even though the case was pending before the increase became law. And the fee increase is constitutional.” Id. at 382. 12  In the court’s view, the Fifth Circuit’s reasoning is considered and offers persuasive legal guidance. The court therefore applies the Fifth Circuit’s reasoning to each of plaintiffs’ claims in this case. Plaintiffs first allege that the amendment to § 1930 violated the uniformity requirement of Article 1 § 8 of the Constitution and the Due Process clause by not applying uniformly across all jurisdictions. See ECF No. 17 at 12. The Fifth Circuit reasoned that in solving a dilemma specific to the USTP program, Congress acted within its authority to craft a law taking into account regional differences—the USTP and BAP jurisdictions—and applying the solution to only the affected jurisdictions.6 See Buffets, 979 F.3d at 376-80. It further concluded that the fee increase “easily survives rational basis review” given that it addresses the funding shortfall in the USTP and is directly tied to the deficit in the program. Id. at 380. The court agrees; the amendment to § 1930 is not a violation of the uniformity requirement of the Bankruptcy clause of the Constitution or the Due Process clause. Plaintiffs next allege that the amendment violated the Due Process clause because it applied retroactively. See ECF No. 17 at 15, 17-18. The Fifth Circuit concluded that the fee increase is not impermissibly retroactive because it does not “impair rights” that the debtors had at the time they filed bankruptcy or “increase liability” for conduct that had already occurred; rather, the increase merely upsets debtors’ “expectations as to amounts owed based on future distributions.” Id. at 375 (emphasis in original). The court, again, agrees. The increased fee, like an increased property tax, does not implicate or affect a past right—rather, it changes plaintiffs’ expectations about the amount of fees owed on future distributions. See id. Therefore, the amendment to § 1930 is not a violation of the Due Process clause or a misapplication of the statute. Because plaintiff has not—and cannot—plead that the increased fees authorized by the amendment to § 1930 violated “the Constitution, a statute, or a regulation,” plaintiffs cannot state an illegal exaction claim upon which relief can be granted. Eastport S.S. Corp., 372 F.2d at 1007 ; RCFC 12(b)(6). Therefore, plaintiffs’ complaint must be dismissed. 6 The existence of these separate systems has been challenged previously. See St. Angelo v. Victoria Farms, Inc., 38 F.3d 1525 , 1531-32 (9th Cir. 1994) (holding that Congress’ 1990 extension of the deadline for Alabama and North Carolina to join to the USTP was unconstitutional). But, as in Buffets, the plaintiffs in this case do not ask the court to hold that the division of the bankruptcy program into USTP and BAP districts is unconstitutional. See 979 F.3d at 379. Therefore, the court’s “normal reluctance to hold unconstitutional a decades-old feature of federal bankruptcy law should grow into a refusal when no party is asking us to do so.” Id. 13 IV. Conclusion Accordingly, for the foregoing reasons: (1) Defendant’s unopposed motion for leave to file a supplemental brief in support of its motion to dismiss, ECF No. 40, is GRANTED; (2) On or before December 2, 2020, defendant is directed to FILE its proposed supplemental brief, ECF No. 41-1, as a separate entry on the docket in this matter; and (3) Defendant’s motion to dismiss for failure to state a claim, ECF No. 18, is GRANTED. The clerk’s office is directed to ENTER final judgment in defendant’s favor, and DISMISS plaintiffs’ complaint with prejudice. IT IS SO ORDERED. s/Patricia E. Campbell-Smith PATRICIA E. CAMPBELL-SMITH Judge 14